Petition for Writ of Certiorari — Centricut, LLC v. ESAB Group, Inc.

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No. GU FILED =

37134.

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OCTOBER TERM, 1997

CENTRICUT, INCORPORATED and THOMAS ALEY,

Petitioners,

ESAB GROUP, INCORPORATED,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

John P. Linton*

*Counsel of Record

Manton M. Grier

James L. Ward, Jr.

SINKLER & BOYD, P.A.

Post Office Box 340

Charleston, SC 29402

(803) 722-3366

Of Counsel:

Robert B. Wallace

WALLACE & TINKLER

Post Office Box 388

Charleston, SC 29402

\) \

LAWYERS PRINTING COMPANY 7th & Franklin Bidg. Richmond. Virginia 23219 (804) 648-3664 ‘ y

QUESTIONS PRESENTED FOR REVIEW

Are petitioners amenable to service of process (as

the Court of Appeals concluded) under 18 U.S.C. § 1965(d)

of the RICO statute, which expressly authorizes the service

of "[a]ll other process" but not a summons, where RICO’s

§ 1965(b) expressly authorizes the nationwide service of a

summons but only if "it is shown that the ends of justice

require," and no such showing has been made or judicially

determined in this case?

Does assertion of nationwide service of process

under RICO’s § 1965(d) violate the due process clause of

the Fifth Amendment -- if, as the Court of Appeals

concluded, it may be used to require petitioners to defend

a federal RICO claim (and related non-federal claims) in a

forum in which the Court of Appeals concluded petitioners

lack sufficient minimum contacts to satisfy due process

under the Fourteenth Amendment, and assertion of

jurisdiction is not needed to carry forth the congressional

purpose for nationwide service?

PARTIES TO PROCEEDING

Centricut, LLC is incorrectly identified in the

caption as Centricut, Incorporated. John Bergen is a co-

defendant but is not a petitioner.

RULE 29.6 LISTING

Centricut, LLC is a New Hampshire Limited

Liability Company which is owned 99% by Haverford

Industries, also a New Hampshire Limited Liability

Company, and 1% by Haverford Valley LC, a Utah Limited

Company. Neither company is publicly owned. Centricut,

LLC has no subsidiaries.

ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ........ i

PARTIES TO PROCEEDING .........-.--+0-: il

RULE 29.6 LISTING ........cccceccvecevees il

TABLE OF CONTENTS ........--- ee seeeees iil

TABLE OF AUTHORITIES ..........---+-+-: Vv

OPINIONS BELOW ..... tener e eee teenies ]

a 5 te Se a ie ]

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED .........---+e+e55 l

I ee os a he bates Saree eee FRc e eee 3

REASONS FOR GRANTING THE PETITION ..... 9

J. QUESTION ONE .......---++++ee4> 9

A. The Fourth Circuit’s Opinion Conflicts

With Decisions From The Seventh and

a ew eeees ss 10

B. The Question Is Important ......... 16

i GY BEY cs eae ise 6 bee ee 18

CE hook ees pr aoa se ean 22

APPENDIX

Opinion of the United States Court Appeals for

the Fourth Circuit filed November 14, 1997 ... App. 1

Order of the United States District Court,

Ge ER. PEE ee ae App. 30

Oral Order of the United States District Court,’

Gan Deke TE FG 5 TEE HAS App. 33

Order of the United States Court of Appeals for

the Fourth Circuit, dated November 14, 1996 . App. 47

° sahiandinabislates finders: ewan at

aan

ab abe

TABLE OF AUTHORITIES

Cases:

Anchor Gl tainer v ergy Corp.

711 F. Supp. 325 (S.D. Miss. 1989) ........... 15

BankAtlantic v. Coast to Coast Contractors

Inc., 947 F. Supp. 480 (S.D. Fla. 1996) ....... 11,17

Bridge v. Invest America, Inc., 748 F. Supp.

Se Laks RE Bh Chie is Brie be SNA) Wine Sr 0% 11,17

Burger King Corp. v. Rudzewicz, 471 U.S.

SEE CRO RF ee craiss ak s Gla ivrae ales woe 21

Butcher’s Union Local No. 498

v. SDC Inv. Inc., 788 F.2d 535 (9th Cir. 19869,11,14,22

Caterpillar, Inc. v. Jerryco Footwear, Inc.,

880 F. Supp. 578 (C.D. Ill. 1994) ............. 17

Dooley v. United Tech. Corp., 786 F. Supp. 65

CAPE BD ks bred Rae Gh 20% owas. Bes 17

ESAB Group, Inc. v. Centricut, Inc.

126 F.3d 687 'G6Gh Cir. BO9T) occ oo cele es 5,7,8,11

Hawkins v. Upjohn Co., 890 F. Supp. 601

CERRO. FIs bs SS leis. be abe 15,16

Headwear, U.S.A., Inc. v. Stange, 166 F.R.D. 36

ee Se I GoW eae 5 Lak Coe a eae’ ees 17

V Wi ’

ge bites, 2 A. :. Se 19,20

Insurance Corp. of Ireland, Ltd.

ae ie des Rauxites de Gui

SSS Ts Se FS CAEN oa cs eon eden 18

Kondrath v. Arum, 881 F. Supp. 925 (D. Del.

SIGE 6. bp PASS EEA Sx Cale een an 4 bees 17

Lisak v. Mercantile Bancorp, Inc., 834 F.2d

rt ts Se ae 9,11,14,22

Magic Toyota, Inc. v. Southeast Toyota

Distribs., Inc., 784 F. Supp. 306 (D.S.C.

SDE) oo. s 6:GN cee Ad edn che Chie ed 15

Normandy Square Assocs. Ltd. Partnership,

817 F. Supp. 896 (D. Kan. 1993) ............. 17

PT United Can Co., Ltd. v. Crown Cork &

Seal Co., No. 96-C-3669, 1997 WL 31194

(RINDLY. Bt Wh Os es kee ccas 14,16

Republic of P v. BCCI Holdi

(Luxembourg) S. A., 119 F.3d 935 (11th Cir.

ISU T) so verse ed 0 -Tdiee a pe eth al. <8 9,11,20

vii

Cases (Continued):

Stauffacher v. Bennett, 969 F.2d 455 (7th Cir.

Pe rete Ses er ree Re OTT eR 9,11

Constitutional Provisions:

U.S. Cam, BRR 56 vias crew eS int oma passim

i: EE TEEN dio 6.0 wieiwe'ele ba 0 -¥:9 passim

Statutes and Regulations:

Se Se 6 Nw Vee ert eee e tess 2,4

Ce Ree EE bop escececsecewnsees passim

SEG PUMIND vi 5 pint winin' e's Swe e's eyeeiece passim

DERG ES ccsucwesscveosetewedes's l

nh Se hb se 46.4540 oa eae wee asa 3,4

Legislative History:

H. Rep. No. 91-1549, 1970 U.S.C.C.A.N.

Viii

Other Authorities Cited:

4 Charles A. Wright and Arthur R. Miller,

Federal Practice & Procedure, § 1067.1

A. Darby Dickerson, Curtailing Civil RICO’s _

wr. o oe

a, epee peg mn ay iP | Jurisdiction Und

18 U.S.C. § 1965, 75 Neb. L. Rev. 476 (1996) . passim

Remarks of the Chief Justice, 21 St. Mary’s

Le WE oe a UR Ce we 16,17

]

PETITION FOR WRIT OF CERTIORARI

Centricut, LLC and Thomas Aley respectfully

petition for a writ of certiorari to review the judgment of

the United States Court of Appeals for the Fourth Circuit.

OPINIONS BELOW

The opinion of the Fourth Circuit (App. 1) is

reported at 126 F.3d 617. The opinion of the United States

District Court for the District of South Carolina was issued

orally from the bench and is unreported. (App. 33.)

JURISDICTION

The Fourth Circuit issued its opinion on October 17,

1997. (App. 1.) The petitioners’ timely motion for a

rehearing was denied on November 14, 1997. (App. 47.)

The jurisdiction of this court is invoked under 28 U.S.C. §

1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fifth Amendment to the United States

Constitution provides in pertinent part that "[n]o person

shall be . . . deprived of life, liberty, or property, without

due process of law... ."

The Racketeer Influenced and Corrupt Organizations

Act (RICO) was enacted as Title IX of the Organized Crime

Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922

(codified as amended at 18 U.S.C. § 1961, et seg. (1989 &

Supp. 1997)).

Section 1965, which is titled "venue and process",

provides in pertinent part as follows:

(a) Any civil action or proceeding under this

chapter against any person may be instituted

in the district court of the United States for

any district in which such person resides, is

found, has an agent, or transacts his affairs.

(b) In any action under section 1964 of this

chapter in any district court of the United

States in which it is shown that the ends of

justice require that other parties residing in

any other district be brought before the

court, the court may cause such parties to be

summoned, and process for that purpose may

be served in any judicial district of the

United States by the marshal thereof.

proceeding instituted by the United States

under this chapter in the district court of the

United States for any judicial district,

subpoenas issued by such court to compel

the attendance of witnesses may be served in

any other judicial district, except that in any

civil action or proceeding no such subpoena

shall be issued for service upon any

individual who resides in another district at

a place more than one hundred miles from

the place at which such court is held without

approval given by a judge of such court

upon a showing of good cause.

(d) All other process in any action or

proceeding under this chapter may be served

on any person in any judicial district in

which such person resides, is found, has an

agent, or transacts his affairs.

STATEMENT

This action was commenced in United States District

Court based upon diversity of citizenship jurisdiction, 28

U.S.C. § 1332, and federal question jurisdiction based upon

a cause of action under 18 U.S.C. § 1965 (RICO).

The plaintiff is a Delaware corporation engaged in

the worldwide manufacturing and sale of welding and

cutting devices, with its current principal place of business

in Florence, South Carolina. It has 2200 employees and

hundreds of millions of dollars in annual sales.

The petitioner Centricut is a small, New Hampshire

limited liability company, with its principal place of

business in New Hampshire. It sells consumable parts

exclusively by mail order for some equipment manufactured

by the plaintiff and competitors of the plaintiff. The

petitioner Thomas Aley is the former chief executive officer

of Centricut who started the company operating out of his

house in 1986 and who is now retired and resides in New

Hampshire and Florida. The defendant John Bergen (not a

petitioner) is a former employee of the plaintiff, and at all

times was a citizen and resident of Florida.

The plaintiff asserted eight causes of action seeking

damages and equitable relief. The essence of these claims

is that Centricut, through its former president, Thomas

Aley, located in New Hampshire, arranged to secure

customer lists of plaintiff through John Bergen, a former

employee and sales representative of the plaintiff who

resided in Florida. Plaintiff asserts that the customer lists

and trade information were confidential. The United States

District Court concluded that petitioners’ contacts with

South Carolina were sufficient to confer diversity of

citizenship jurisdiction because the effects of its conduct

could be felt in South Carolina since the plaintiff

corporation was now headquartered in South Carolina. The

district court did not reach the issue of whether jurisdiction

was present under the RICO count.

The Fourth Circuit Court of Appeals granted an

interlocutory appeal and reversed the district court. The

Fourth Circuit concluded that neither general nor specific

jurisdiction was established by the plaintiff, and that the due

process clause of the Fourteenth Amendment prevented the

exercise of jurisdiction pursuant to South Carolina’s long

arm statute. The court concluded that petitioners’ contacts

in this case were "too attenuated and insubstantial to

provide a constitutionally sufficient basis for South Carolina

courts to exercise either specific or general in personam

jurisdiction over Centricut . . . " 126 F.3d at 626 (App.

18.)

ECC nnn ee

The Fourth Circuit concluded that because the

plaintiff had asserted a claim under RICO, the nationwide

service of process provisions of RICO invoked jurisdiction,

and that although the exercise of jurisdiction based upon the

petitioners’ contacts with the State of South Carolina would

offend the due process clause of the Fourteenth

Amendment, the Fifth Amendment due process provisions

did not constrain the exercise of jurisdiction based upon a

'e<eral claim. The court also permitted the remaining seven

causes of action to be adjudicated based upon pendent

jurisdiction.

The facts recited by the Fourth Circuit explain how

attenuated the petitioners’ contacts are with the District of

South Carolina. The court acknowledged that Ceniricut’s

business was conducted entirely through mail order, and

that it has no offices or sales representatives in South

Carolina, no property in South Carolina, no phone listings,

and has never paid South Carolina taxes. No Centricut

employee has ever even travelled to South Carolina for any

business purpose. In 1995, Centricut had | twenty-six

customers who resided in South Carolina, for a gross sales

dollar amount of $66,552, which represented less than one

percent of its annual sales of $8,459,000.

Sd ER oh

The Fourth Circuit also concluded that all dealings

between the petitioners Centricut and Aley with Bergen, a

Florida resident, took place in New Hampshire and Florida.

The only South Carolina ’contact’ related to

this suit is that Centricut and Aley knew that

the sales leads that Bergen supplied might, if

fruitful, ultimately result in less sales to the

ESAB Group, which was headquartered in

South Carolina. 126 F.3d at 625 (App. 16).

The Fourth Circuit also concluded that the evidence

revealed that leads provided by Bergen were located

throughout the United States and Canada, but

only one such company appears to have been

located in South Carolina, and the evidence

presented indicates that no sales in South

Carolina were ever made based upon

Bergen’s leads. This activity, standing

alone, does not support proof of an intent by

Centricut to avail itself of the privilege of

conducting activities in South Carolina. Id.

Indeed, when the relationship began with Bergen in 1986,

he was not even associated with the plaintiff. When Bergen

_ ae

was employed by the plaintiff in 1987, he reported to

Colorado, and continued to do so until 1993.

The Fourth Circuit recognized that the Fifth

Amendment due process clause "protects the liberty interests

of individuals against unfair burden and inconvenience."

126 F.3d at 626 (App. 21). It suggests that the defendant

must prove extreme inconvenience or unfairness to

outweigh the congressional policy of nationwide service of

process. 126 F.3d at 627 (App. 22).

The defendants’ lack of meaningful conduct with

South Carolina, the defendants’ small sales, the distance

from New Hampshire to South Carolina, the fact that the

court had concluded the petitioners did not purposefully

avail themselves of the benefits of South Carolina, or the

fact that the petitioners would be required to engage South

Carolina counsel to defend the eight broadly alleged causes

of action did not establish to the court’s satisfaction "such

extreme inconvenience or unfairness as would outweigh the

congressionally articulated policy of allowing the assertion

of in personam jurisdiction in South Carolina." Id. The

Fourth Circuit failed to consider that rights conferred to the

plaintiff in the RICO statute could be fully vindicated in

districts in which the center of the alleged wrongful activity

occurred.

REASONS FOR GRANTING THE PETITION

I. QUESTION ONE.

The Court of Appeals held that RICO’s nationwide

service of process provision is embodied in 18 U.S.C. §

1965(d), which provides that "[aJll other process . . . may

be served on any person in any judicial district in which

such person resides, is found, has an agent or transacts his

affairs." Id. The court’s decision is in accord with the

Eleventh Circuit’s decision in Republic of Panama v. BCCI

Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir.

1997), but is in direct conflict with decisions of the Seventh

and Ninth Circuits that hold that RICO’s nationwide service

of process provision is contained in § 1965(b). See

Stauffacher v. Bennett, 969 F.2d 455, 460 (7th Cir. 1992);

Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671-73

(7th Cir. 1987); Butcher’s Union Local No. 498 v. SDC

Inv.. Inc., 788 F.2d 535, 539 (9th Cir. 1986). The

difference is significant. Section 1965(b) authorizes the

service of a summons by "any district court of the United

States in which it is shown that the ends of justice require."

Section 1965(d) expressly authorizes service of "[all] other

process" but not a summons. To allow § 1965(d) to be

used to serve a summons and thereby acquire personal

jurisdiction over a defendant would render superfluous §

1965(b) and circumvent the "ends of justice" safeguard on

nationwide service of process on a party.

The question is also important. A number of district

courts have also split on the question and some—have

allowed § 1965(d) to be used to acquire personal

jurisdiction over RICO defendants. The abuse of civil

RICO is well known and this jurisdictional issue needs to

be resolved to avoid further needless abuse of RICO by

litigants using § 1965(d) to forum shop or piggyback non-

federal claims into courts of the United States that would

otherwise lack jurisdictional basis to adjudicate such claims.

A. THE FOURTH CIRCUIT’S - OPINION

CONFLICTS WITH DECISIONS FROM THE SEVENTH

AND NINTH CIRCUITS

In enacting RICO, Congress provided a civil remedy

for private litigants and a provision for nationwide service

of process on parties. Section 1965 contains RICO’s venue

and service of process provisions. The question petitioners

seek to have the Court resolve is whether national service

of a summons is authorized by § 1965(b), as the Seventh

and Ninth Circuits have held, or by 1965(d), as the Fourth

and Eleventh Circuits have held. See Stauffacher_v.

Bennett, 969 F.2d 455, 460 (7th Cir. 1992); Lisak v.

Mercantile Bancorp, Inc., 834 F.2d 668, 671-73 (7th Cir.

1987); Butcher’s Union Local No. 498 v. SDC Inv., Inc.,

788 F.2d 535, 539 (9th Cir. 1986); ESAB Group, Inc. v.

€entricut, Inc., 126 F.3d 617, 626 (4th Cir. 1997); Republic

of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d

935, 942 (11th Cir. 1997).

The Fourth Circuit apparently construed 1965(b) to

be a supplemental venue provision, (126 F.3d at 627) (App.

23), a view articulated by a number of district courts. See,

e.g., BankAtlantic v. Coast to Coast Contractors, Inc., 947

F. Supp. 480, 485-91 (S.D. Fla. 1996); Bridge v. Invest

America, Inc., 748 F. Supp. 948, 950-53 (D.R.I. 1990). For

the reasons that follow, this reading of § 1965(b) is

erroneous.

According to RICO’s legislative history:

Section 1965 contains broad provisions

regarding venue and process, ....

Subsection (a) establishes venue for civil

proceedings ....

Subsection (b) provides nationwide service

of process on parties, if the ends of justice

require it, in actions under Section 1964.

Subsection (c) provides nationwide subpoena

power for witnesses in civil or criminal

proceedings....

Subsection (d) provides that all other process

in actions under the chapter may be served

wherever the person resides, is found, has an

agent, or transacts his affairs.

H. Rep. No. 91-1549, at 28 (1970), reprinted in 1970

U.S.C.C.A.N. 4007, 4034.

RICO’s legislative history thus supports the views of

the Seventh and Ninth Circuits that § 1965(b) and not §

1965(d) authorizes "nationwide service of process on

parties, if the ends of justice require it." 1970

U.S.C.C.A.N. at 4034 (emphasis added). The language of

the statute also supports this view.

Section 1965(a) is a venue provision that permits

venue in RICO actions to be located in any district in which

the defendant "resides, is found, has an agent, Or transacts

his affairs." A. Darby Dickerson, Curtailing Civil RICO’s

Long Reach: Establishing New Boundaries for Venue and

Personal Jurisdiction Under 18 U.S.C. § 1965, 75 Neb. L.

Rev. 476, 495 (1996) ("Neither the language of nor

legislative history explaining [§ 1965(a)] can be used to

transform it into a jurisdictional provision."). Accordingly,

§ 1965(a) may not be used to establish personal jurisdiction

over petitioners in South Carolina.

Section 1965(b) expressly authorizes a district court

to issue process for the purpose of summoning additional

parties to be brought before the court if the ends of justice

require it:

In any [RICO] action under section 1964 of

this chapter in any district court... in

which it is shown that the ends of justice

require that other parties residing in any

other district be brought before the court, the

court may cause such parties to be

summoned, and process for that purpose may

be served in any judicial district... .

18 U.S.C. § 1965(b). "Section 1965(b) was enacted to

enable a plaintiff to bring before a single court, in a single

trial, all members of an alleged nationwide RICO

conspiracy." Dickerson, supra, at 502 (footnotes omitted).

It can only be used when the "ends of justice" require:

ett LLL LLL ALL

Two factors upon which many courts agree

are that § 1965(b) cannot be triggered unless

(1) at least one RICO defendant is amenable

to venue under § 1965(a) or § 1391 and (2)

no other federal district court can exercise

venue or jurisdiction over all RICO

defendants. Courts use these factors to close

a potential "jurisdictional gap" that would

require the same RICO action to be tried

piecemeal in several judicial districts.

Dickerson, supra, at 517-18. Likewise, as the Ninth Circuit

stated in its Butcher’s Union opinion, |

[fJor nationwide service to be imposed under

section 1965(b), the court must have |

personal jurisdiction over at least one of the /

participants in the alleged multidistrict

conspiracy and the plaintiff must show that \

there is no other district in which a court

will have personal jurisdiction over all of the

alleged co-conspirators.

788 F.2d at 539; see, e. g., Lisak, 834 F.2d at 672; PT

United Can Co., Ltd. v. Crown Cork & Seal Co., No. 96-C-

3669, 1997 WL 31194, at *3 (S.D.N.Y. Jan. 28, 1997); |

Hawkins v. Upjohn Co., 90 F. Supp. 601, 605 (E.D. Tex.

1994); LeDuc v. Kentucky Cent. Life Ins. Co., 814 F.

Supp. 820, 826 (N.D. Cal. 1992); Magic Toyota, Inc. v.

Southeast Toyota Distribs., Inc., 784 F. Supp. 306, 310-12

(D.S.C. 1992); Anchor Glass Container_v. Stand Energy

Corp., 711 F. Supp. 325, 330 (S.D. Miss. 1989).

In the present case, § 1965(b) may not be used to

acquire personal jurisdiction over petitioners in South

Carolina because there exists another district, New

Hampshire, where all defendants are amenable to service of

a summons and are subject to the court’s in personam

jurisdiction.

In contrast to § 1965(b), § 1965(d) does not speak

to the power of a court to summon parties to appear before

it. "Subsection (d) is merely a service of process provision

for process other than a summons. To read subsection (d)

in any other way would render subsection (b) superfluous."

Dickerson, supra, at 496 (footnotes omitted).

If a plaintiff can rely on § 1965(d) without

any prerequisites, why would a plaintiff ever

rely on § 1965(), when that section requires

them to establish venue over at least one

other RICO defendant under § 1965(a) and

ne ee eR

to pass the "ends of justice" test?

Accordingly, § 1965(d) should be used not

as a venue statute, but as a service statute for

process other than a summons, such as

subpoenas issued by private parties.

Therefore, the only RICO provision that can

be used to establish personal jurisdiction

over a defendant is 1965(b).

Dickerson, supra, at 515 (footnotes omitted); see also PT

United Can, 1997 WL 31194, at *3; Hawkins, 890 F. Supp.

at 606 n.8. Accordingly 1965(d) may not be used to

summon petitioners to appear in South Carolina and the

Fourth Circuit’s conclusion to the contrary is erroneous.

B. THE QUESTION IS IMPORTANT

The question on which petitioners seek review is

also important. "Virtually everyone who has addressed the

question agrees that civil RICO is now being used in ways

that Congress never intended when it enacted the statute in

1970." Remarks of the Chief Justice, 21 St. Mary’s L.J. 5,

9 (1989). RICO has been used to federalize garden variety

commercial fraud cases that heretofore were the province of

the state courts. Id. at 10. RICO filings have become a

significant factor impacting on the work loads of federal

trial and appellate judges. See id. at 9.

The number of district courts that have erroneously

read § 1965(d) to permit nationwide service of a summons

is substantial. See, e.g., BankAtlantic v. Coast to Coast

Contractors, Inc., 947 F. Supp. 480, 485 (S.D. Fla. 1996);

Headwear, U.S.A., Inc. v. Stange, 166 F.R.D. 36, 38 (D.

Kan. 1996); Kondrath v. Arum, 881 F. Supp. 925, 929 (D.

Del. 1995); Caterpillar, Inc. v. Jerryco Footwear, Inc., 880

F. Supp. 578, 586 (C.D. Ill. 1994); Monarch Normandy

Square Partners __v. Normandy Square Assocs. Ltd.

Partnership, 817 F. Supp. 896, 898 (D. Kan. 1993); Dooley

y. United Tech. Corp., 786 F. Supp. 65, 70-71 (D.D.C.

1992) (collecting cases); Bridge v. Invest America, Inc., 748

F. Supp. 948, 951 (D.R.I. 1990) (collecting cases).

The amount of national wealth that has been

destroyed by these erroneous decisions is unknown, but it

is, without a doubt, enormous. This misreading of §

1965(d) by district courts, the Eleventh Circuit and now the

Fourth Circuit has resulted, and will continue to result, in

unwarranted forum shopping by RICO plaintiffs. This

misreading of § 1965(d) has resulted, and will continue to

result, in an additional and unwarranted burden on private

VV ae

litigants forced to defend RICO and non-federal pendent

claims in federal forums that would otherwise lack in

personam jurisdiction. This misreading of § 1965(d) also

circumvents safeguards on nationwide service of a process

on parties that Congress built into § 1965(b). In so doing,

the various district courts cited above, the Eleventh Circuit,

and now the Fourth Circuit have raised serious

constitutional questions under this application of § 1965(d)

that are discussed under Question Two in this petition.

II. QUESTION TWO.

The Fourth Circuit’s opinion is in direct conflict

with this Court’s discussion in Insurance Corp. of Ireland,

Ltd. v. Compagnie des Bauxites, 456 U.S. 694 (1982).

There this Court stated:

The personal jurisdiction requirement

recognizes and protects an individual liberty

interest. It represents a restriction on

judicial power not as a matter of

sovereignty, but as a matter of individual

liberty. Thus, the test for personal

jurisdiction requires that "the maintenance of

the suit. . .not offend ‘traditional notions of

fair play and substantial justice.’"

456 U.S. at 702 (footnotes omitted).

The Fourth Circuit concluded that the petitioners did

not purposefully avail themselves of the benefits of

conducting their affairs in South Carolina, and any conduct

with South Carolina was too attenuated to confer personal

jurisdiction. The individual liberty :nterest defined above

cannot be commandeered by Congress declaring a

generalized need for nationwide service of process.

Certainly, with the financial resources of the plaintiff, any

congressional policy can be served by the action proceeding

in New Hampshire.

This case is of national importance because, based

upon the Fourth Circuit’s opinion, a plaintiff in a routine

commercial tort claim can allege a RICO count and

piggyback seven claims over which the court otherwise

admittedly could not assert jurisdiction without offending

the due process clause of the Fourteenth Amendment. This

is particularly important since the due process clauses of

each amendment have at their core the protection of

individual liberty and fairness. See, e.g., Honeywell, Inc.

v. Metz Apparatewerke, 509 F.2d 1137 (7th Cir. 1975).

[W]e can perceive no operative difference

between the concept of due process as

applied to the states and as applied to the

federal government. This and other courts

have reached this result, explicitly or tacitly,

and have applied the *ininimum contacts’

standard to federal question cases in which

in personam jurisdiction was at issue, and

we deem it appropriate to do so here.

509 F.2d at 1143.

While a thoroughly developed body of case law

exists regarding the due process limitations upon the

assertion of extra territorial jurisdiction for state law claims,

“the Supreme Court has never addressed the scope of due

process protection under the Fifth Amendment in the

jurisdictional context." Republic of Panama v. BCCI

Holdings (Luxembourg) S. A., 119 F.3d 935, 944 (11th Cir.

1997).

Professors Wright and Miller observe _ that

Congress’s supposed power to provide for nationwide

service of process does not settle the issue. Moreover, the

authors aptly observe:

[I]f the Due Process Clause truly places no

restrictions on the proliferation and use of

federal service statutes, the defendant’s right

to a fair forum could be rendered entirely

meaningless. If due process is to have any

application at all in federal cases--and the

Fifth Amendment requires that it does--it

seems impossible that Congress could

empower a plaintiff to force a defendant to

litigate any claim, no matter how trifling, in

whatever forum the plaintiff chooses,

regardless of the burden on the defendant.

4 Charles A. Wright and Arthur R. Miller, Federal Practice

& Procedure § 1067.1, at 328-29 (1987).

The Fourth Circuit opinion simply ignores the liberty

interest protected by the due process clause. Moreover, it

establishes an improper test, that the defendant must

establish "extreme inconvenience," for the tests historically

used to define traditional notions of fair play and substantial

justice. See Burger King Corp. v. Rudzewicz, 471 U.S. 462

(1985). Moreover, the Fourth Circuit reached this

conclusion without the benefit of a finding of fact by the

district court since the district court had not reached the

issue of RICO based jurisdiction.

The national importance of this issue is best

articulated in Dickerson, supra, at 478-80. There the author

notes the frequency that RICO is added as a claim for

forum shopping purposes and

to circumvent the stricter venue and

jurisdictional rules that would otherwise

apply to their clients’ *garden variety’

claims; and to corral defendants into an

inconvenient jurisdiction with which they

may have no contacts.

Id. at 480 (footnotes omitted).

The author points out the different tests used by at

least two other circuits. Compare Lisak v. Mercantile

Bancorp. Inc., 834 F.2d 668 (7th Cir. 1987), with Butcher’s

Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535 (9th

Cir. 1986).

CONCLUSION

The Fourth Circuit opinion misapplies the RICO

statute, and does so under circumstances that violate

Petitioners’ Fifth Amendment due process rights. The

decision should be reversed and vacated, and remanded. In

the alternative, the petition for writ of certiorari should be

granted.

Respectfully submitted,

Manton M. Grier, Esq.

James L. Ward, Jr., Esq.

Sinkler & Boyd, P.A.

160 East Bay Street

Charleston, SC 29401

(803) 722-3366

Counsel for Petitioners

Of Counsel:

Robert B. Wallace, Esq.

Wallace & Tinkler

PO Box 388

Charleston, SC 29402

February, 1998

App. 1

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

96-2504

ESAB GROUP, INCORPORATED,

Plaintiff-Appellee,

CENTRICUT, INCORPORATED;

Thomas Aley, Defendants-Appellants,

and

John Bergen; Thomas Fitzpatrick; Gordon Thomas Aley;

Linda Aley, d/b/a Corbin Consulting; Mark Lindberg,

Defendants.

Decided: October 17, 1997.

Before NIEMEYER, MICHAEL, and MOTZ, Circuit

Judges.

OPINION

NIEMEYER, Circuit Judge:

In this case we must determine whether the district court in

South Carolina obtained personal jurisdiction over New

Hampshire defendants pursuant to a complaint alleging a

civil RICO claim and related state law claims. The district

court, relying on South Carolina’s long-arm statute, found

that the defendants’ intentional tortious conduct directed at

the South Carolina plaintiff supplied sufficient minimum

App. 2

contacts to satisfy the requirements of the South Carolina

Statute and the Fourteenth Amendment.

For reasons that follow, we disagree with the district court’s

rationale. But we nonetheless affirm the district court’s

finding of personal jurisdiction over the defendants because

of the nationwide service of process authorized by the

RICO statute and the doctrine of pendent personal

jurisdiction.

The ESAB Group, Inc. is a Delaware corporation located in

Florence, South Carolina, which engages in the business of

developing and manufacturing welding and cutting systems.

In its amended complaint against Centricut, Inc., Thomas

Aley, and others, the ESAB Group alleged that Centricut

and Aley participated in a conspiracy to appropriate the

ESAB Group’s trade secrets and customer lists. The

complaint alleged that they accomplished this with the

assistance of John Bergen, a Florida resident who served as

an ESAB Group sales representative in Florida from 1980

to 1984 and as the ESAB Group’s regional sales manager

in Florida from 1987 to 1995. The ESAB Group charged

in its amended complaint that the misappropriation was

effected “pursuant to an intentional plan ... to appropriate

App. 3

Plaintiff's business" and by means of a "scheme or artifice

to defraud." The complaint contains six counts based on

state law, alleging conspiracy, intentional interference with

economic relations, breach of contract accompanied by a

fraudulent act, South Carolina Unfair Trade Practices Act

violations, misappropriation of trade secrets, intentional

interference with prospective contractual relations, and

entitlement to equitable relief. It also contains a count for

civil RICO based on 18 U.S.C. § 1962.

Centricut is a New Hampshire limited liability company that

manufactures and sells replacement parts for cutting

machines, and arguably competes to some degree with the

ESAB Group. Centricut conducts its business entirely

through mail order. It has no offices or sales

representatives in South Carolina; it has no property in

South Carolina; it has no phone listings there; and it has

never paid South Carolina taxes. Moreover, it claims that

no employee has ever traveled to South Carolina "for any

purpose." As of 1995, Centricut did have 26 customers

who resided in South Carolina, constituting 1% of all of its

customers and representing .079% of its gross annual sales.

It also purchased on one occasion between $10,000 and

$20,000 worth of parts from a South Carolina supplier.

App. 4

Centricut stated that it had never targeted formal advertising

at South Carolina, having only once published formal

advertising in a trade journal of national circulation.

Aley, Centricut’s CEO at the time, stated in an affidavit that

he was a New Hampshire resident until November 1995 and

a Florida resident thereafter. He stated that for the past 25

to 30 years he has never been in South Carolina and that he

has conducted no business and owns no property there.

Centricut and Aley filed several motions, one of which

sought to dismiss the complaint under Federal Rule of Civil

Procedure 12(b)(2), alleging that their contacts with South

Carolina were insufficient to subject them to personal

jurisdiction there. The ESAB Group responded that the

defendants "purposefully directed their activities toward the

State of South Carolina and its corporate citizens, and this

litigation arises from those activities." The ESAB Group

claimed alternatively that the court had personal jurisdiction

over the defendants by reason of the nationwide service of

process in RICO actions permitted by 18 U.S.C. § 1965(b).

The district court denied the motion to dismiss, holding that

it had personal jurisdiction over Centricut and Aley, based

App. 5

on "the effects test" drawn from Calder v. Jones, 465 U.S.

783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). The district

court said that because Centricut’s actions “were designed

to damage the [South Carolina] plaintiff ... and did damage

the plaintiff," it was fair to hale Centricut into a South

Carolina court. The district court granted leave to the

defendants to file an interlocutory appeal under 28 U.S.C.

§ 1292(b), and we did likewise.

Federal district courts may exercise in personam jurisdiction

only to the degree authorized by Congress acting under its

constitutional power to "ordain and establish" the lower

federal courts. U.S. Const. art. III, § 1; see also id. art.

I, § 8, cl. 9. The exercise of personal jurisdiction is also

constrained by the Due Process Clause of the Fifth

Amendment. See j "Ly W

Co., 484 U.S. 97, 103-04, 108 S.Ct. 404, 409, 98 L.Ed.2d

415 (1987). As prerequisites to exercising personal

jurisdiction over a defendant, a federal court must have

jurisdiction over the subject matter of the suit, venue, "a

constitutionally sufficient relationship between the defendant

and the forum," and “authorization for service of a

summons on the person." Id. at 104, 108 S.Ct. at 409.

———E—————

App. 6

Thus, a federal court’s exercise of jurisdiction over a person

is closely linked to effective service of process.

Federal Rule of Civil Procedure 4(k)(1) provides that

"[s]ervice of a summons or filing a waiver of service is

effective to establish [a federal court’s] jurisdiction over the

person of a defendant" if such service is accomplished on

a defendant whom the law has made amenable to the

court’s process. See also Omni Capital, 484 U.S. at 104,

108 S.Ct. at 409. Rule 4(k) enumerates five sources

authorizing service to effect in personam jurisdiction: (1)

state law; (2) Federal Rules of Civil Procedure 14 and 19

(relating to third party practice and joinder), provided

service is effected "not more than 100 miles from the place

from which the summons issues"; (3) the federal

interpleader statute, 28 U.S.C. § 1335; (4) federal statute;

and (5) Federal Rule of Civil Procedure 4(k)(2) itself, to

enforce claims “arising under federal law" on defendants

who are not subject to the jurisdiction of any state.

In the district court, the ESAB Group argued that it had

served the defendants in the manner specified by South

Carolina’s long-arm statute, S.C.Code Ann. §§

36-2-803(1)(c) & (d), and by RICO, 18 U.S.C. § 1965.

App. 7

Because the district court held that the ESAB Group had

effectively served the defendants under South Carolina’s

long-arm statute, the court did not address whether service

was effective under the RICO statute.

When authorized by Federal Rule of Civil Procedure

4(k)(1)(A), service of process sufficient to exercise

jurisdiction over a defendant is limited by state law, so that

any challenge to the personal jurisdiction requires us to

assess the jurisdiction of the courts in the state where the

district court is located. Centricut and Aley contend that

service on them under South Carolina’s long-arm statute

crossed the boundaries of that statute as constrained by the

Fourteenth Amendment and that the district court erred in

finding such service effective.

Since in personam jurisdiction of a state court is limited by

that state’s laws and by the Fourteenth Amendment, we first

inquire whether the state long-arm statute authorizes the

exercise of jurisdiction over the defendant. See Wolf v.

Richmond County Hosp. Auth., 745 F.2d 904, 909 (4th

Cir.1984). If it does, we must then determine whether the

state court’s exercise of such jurisdiction is consistent with

the Due Process Clause of the Fourteenth Amendment. See

ee ee

App. 8

id. Because Rule 4(k)(1)(A) delimits the scope of effective

federal service in terms of the limits on state court

jurisdiction, our inquiry into the federal court’s jurisdiction

pursuant to Rule 4(k)(1)(A) incorporates the Fourteenth

Amendment due process standard, even though that

Amendment applies of its own force only to states. See U.S.

Const. amend. XIV, § 1 ("No State shall ...."); see

generally 4 Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure § 1067.1 (Supp.1997)

(implicit in Rule 4(k)(2) "is the concept that a federal

district court must employ a state long-arm statute and use

a Fourteenth Amendment due process analysis to assess the

exercise of personal jurisdiction over a non-resident of the

forum state").

South Carolina’s long-arm statute provides in relevant part:

A court may exercise personal jurisdiction

over a person who acts directly or by an

agent as to a cause of action arising from the

person’s ... (c) commission of a tortious act

in whole or in part in the State; [or] (d)

causing tortious injury or death in this State

by an act or omission outside this State if he

regularly does or solicits business, or

App. 9

engages in any other persistent course of

conduct, or derives substantial revenue from

goods used or consumed or services

rendered, in this State.

S.C.Code Ann. §§ 36-2-803(1)(c) & (d). South Carolina’s

long-arm statute has been interpreted to reach the outer

bounds permitted by the Due Process Clause. See Southern

Plastics Co. v. Southern Commerce Bank, 310 S.C. 256,

423 S.E.2d 128, 130 (1992); Hammond v, Cummins

Engine Co., 287 S.C. 200, 336 S.E.2d 867, 868 (1985);

Triplett v. R.M. Wade & Co., 261 S.C. 419, 200 S.E.2d

375, 379 (1973); see also Federal Ins. Co. v. Lake Shore,

Inc., 886 F.2d 654, 657 n. 2 (4th Cir.1989). Consequently,

"the statutory inquiry necessarily merges with the

constitutional inquiry, and the two inquiries essentially

become one.” Stover v. O’Connell Assocs., Inc., 84 F.3d

132, 135-36 (4th Cir.1996). We thus turn to the

constitutional question of whether Centricut and Aley have

established "minimum contacts with [South Carolina] such

that the maintenance of the suit does not offend ’traditional

notions of fair play and substantial justice.’ " International

Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154,

158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311

U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)).

App. 10

As we explained more fully in Lesnick v. Hollingsworth &

Vose_Co., 35 F.3d 939, 941-46 (4th Cir.1994), and

reiterated in Stover, 84 F.3d at 136, the jurisprudence of

minimum contacts has developed as a surrogate for presence

in the state because "[a] state’s sovereignty remains

territorial, and its judicial power extends over only those

persons, property, and activities within its borders." Id. A

state’s laws "have no operation in other states except as

allowed by those states or by comity." Id. The question,

then, is whether a defendant’s contacts with the forum state

are so substantial that they amount to a surrogate for

presence and thus render the exercise of sovereignty just,

notwithstanding the lack of physical presence in the state.

"[I}t is essential in each case that there be some act by

which the defendant purposefully avails itself of the

privilege of conducting activities within the forum State,

thus invoking the benefits and protections of its laws."

Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228,

1240, 2 L.Ed.2d 1283 (1958). Such activities need not

involve physical presence in the state, but must still be

"purposefully directed toward the forum state." Lesnick, 35

F.3d at 945; see also Burger King Corp. v. Rudzewicz, 471

U.S. 462, 475-76, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528

(1985).

App. 11

It is now generally accepted that when the plaintiff's cause

of action does not arise from the defendant’s contacts with

the forum state so as to provide "specific jurisdiction" for

the claim based on the " ’relationship among the defendant,

the forum, and the litigation,’ " Helicopteros Nacionales de

Colombia v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872,

80 L.Ed.2d 404 (1984) (quoting Shaffer v. Heitner, 433

U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683

(1977)), "general jurisdiction" may nevertheless be asserted

over a defendant whose activities in the forum state have

been "continuous and systematic." Id. at 414-15, 104 S.Ct.

at 1872 (citations omitted) But the threshold level of

minimum contacts to confer general jurisdiction is

significantly higher than for specific jurisdiction. See

generally 4 Charles Alan Wright & Arthur R. Miller,

e Practice and § 1067, at 295-98

(1987)("threshold contacts required for general jurisdiction

are very substantial, indeed"). In the case before us, the

ESAB Group argues that standards for both general and

specific jurisdiction have been met. We will address each

in order.

The ESAB Group contends that Centricut and Aley have

sufficiently "continuous and systematic” contacts with

App. 12

South Carolina to justify its exercise of general in personam

jurisdiction, presumably under S.C.Code Ann. §

36-2-803(1)(d). We disagree.

Although 26 of Centricut’s customers reside in South

Carolina, all are mail order customers and Centricut does

not service them in South Carolina. It maintains no sales

representatives or other agents there, and the business

attributable to Centricut’s South Carolina customers

constitutes less than one- tenth of one percent of its

nationwide sales volume. These contacts, we believe, fall

far short of the more extensive contacts that we have found

sufficient in our general jurisdiction cases.

In Ratliff v. Cooper Labs., Inc., 444 F.2d 745, 748 (4th

Cir.1971), we held that where a defendant does no more

than advertise and employ salesmen in a forum state, such

contacts are not sufficient to justify general jurisdiction. We

followed Ratliff with our decision in Lee v. Walworth

Valve Co., 482 F.2d 297 (4th Cir.1973), in which we

upheld general jurisdiction over a company whose annual

sales in the forum were approximately $200,000 and where

sales representatives spent approximately 80 days per year

in the forum state. But the exercise of jurisdiction there

App. 13

was unusual because it was supported in part by the fact

that the cause of action arose on the high seas and thus did

not arise within the sovereign boundaries of any of the

United States. Our decisions since Lee make clear that

even the contacts in Lee were marginal.

In Wolf, for example, we found no general jurisdiction

based on a Georgia hospital’s substantial, though largely

unsolicited contacts with South Carolina. We explained that

Lee was informed by the consideration of "whether there

[was] ’any other state whose courts might provide a more

likely forum.’ " 745 F.2d at 912 (quoting Lee, 482 F.2d at

299). Finally, in Nichols v. G.D. Searle & Co., 991 F.2d

1195 (4th Cir.1993), we followed Ratliff and held that a

court in Maryland could not assert general jurisdiction over

a company that employed 13 Maryland residents as sales

representatives and one Maryland resident as a district

manager. Moreover, the defendant held district meetings

three times annually in Maryland, held regional and national

meetings twice annually, and had between $9 million and

$13 million annual sales in Maryland, constituting two

percent of its total sales. In addition, the defendant

contracted with the Maryland firm for pharmaceutical

research and made roughly one percent of its annual

App. 14

purchases in Maryland. Although the fact that none of the

plaintiffs in Nichols were Maryland residents entered into

our analysis, see id. at 1199 n. 3, residency alone was not

dispositive of the issue of whether the defendant had

sufficient contacts to warrant jurisdiction. See Keeton v.

Hustler Magazine, Inc., 465 U.S. 770, 779-80, 104 S.Ct.

1473, 1481, 79 L.Ed.2d 790 (1984) ("[p]laintiff’s residence

in the forum State is not a separate requirement, and lack of

residence will not defeat jurisdiction established on the basis

of defendant’s contacts"). Indeed, a forum state’s interest

in adjudicating the claims is merely one factor to consider

once the defendant’s contacts with the state have been

established. See, e.g., id.

When compared with the level of contacts that we found

insufficient in both Ratliff and Nichols, Centricut’s contacts

with South Carolina are far less extensive. Moreover, we

do not find Centricut’s contacts to be constitutionally

sufficient even when we consider that, unlike Nichols,

South Carolina courts in this case would be seeking to

vindicate the interests of their own citizens. Centricut’s

South Carolina contacts are not even as extensive as those

present in Lee, where there was the additional consideration

that no state had an obvious connection with the cause of

a erence cere eee

App. 15

action. In sum, we conclude that South Carolina may not

exercise general jurisdiction over Centricut and Aley

consistent with the constitutional guarantee of due process.

Accordingly, a federal district court cannot do so pursuant

to Federal Rule Civil Procedure 4(k)(1)(A).

Even if Centricut’s contacts with South Carolina are not

sufficiently continuous and systematic to justify general

jurisdiction, the ESAB Group contends that specific

jurisdiction may nonetheless be exercised as to the causes

of action before the court. With respect to specific

jurisdiction, "[tJhe touchstone ... remains that an out-of-state

person have engaged in some activity purposefully directed

toward the forum state." Lesnick, 35 F.3d at 945. The

contacts related to the cause of action must create a

"substantial connection” with the forum state, see McGee v.

International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199,

201, 2 L.Ed.2d 223 (1957), although this connection need

not be as extensive as is necessary for general jurisdiction.

As with general jurisdiction, however, the defendant’s

actions must be directed at the forum state in more than a

random, fortuitous, or attenuated way. See Burger King,

471 U.S. at 475, 105 S.Ct. at 2183-84; Keeton, 465 U.S.

at 774, 104 S.Ct. at 1478; World-Wide Volkswagen Corp.

App. 16

v. Woodson, 444 U.S. 286, 299, 100 S.Ct. 559, 568, 62

L.Ed.2d 490 (1980).

In the case before us, New Hampshire residents Centricut

and Aley allegedly entered into a relationship with Bergen,

a resident of Florida. All relations among the three were

carried out in and between New Hampshire and Florida.

The only South Carolina "contact" related to this suit is that

Centricut and Aley knew that the sales leads that Bergen

supplied might, if fruitful, ultimately result in less sales to

the ESAB Group, which was headquartered in South

Carolina. Indeed, at the very most, it can be said that

Centricut intended to gain a competitive advantage

(allegedly tortiously) over the ESAB Group by making sales

which the ESAB Group might otherwise have made. We

believe, however, that such knowledge and intent is too

attenuated to constitute a "substantial connection" with

South Carolina. The evidence presented indicates that

Bergen’s leads were for companies located across the

United States and Canada. Only one such company appears

to have been located in South Carolina, and the evidence

presented indicates that no sales in South Carolina were

ever made based upon Bergen’s leads. This activity,

standing alone, does not support proof of an intent by

App. 17

Centricut to avail itself of the privilege of conducting

activities in South Carolina. See Hanson, 357 U.S. at 253,

78 S.Ct. at 1239-40 ("The unilateral activity of those who

claim some relationship with a nonresident defendant cannot

satisfy the requirement of contact with the forum state”).

Nor does it manifest behavior intentionally targeted at and

focused on South Carolina, see Calder v. Jones, 465 U.S.

783, 789-90, 104 S.Ct. 1482, 1486-87, 79 L.Ed.2d 804

(1984) (jurisdiction of forum state upheld where libel

“expressly aimed" at forum state with knowledge that

"potentially devastating impact" would be felt there), such

that Centricut can be said to have "entered" South Carolina

in some fashion, see Indianapolis Colts, Inc. v. Metropolitan

Baltimore Football Club Ltd. Partnership, 34 F.3d 410, 412

(7th Cir.1994) (discussing Calder). Instead, Centricut

focused its activities more generally on customers located

throughout the United States and Canada without focusing

on and targeting South Carolina. Cf. Calder, 465 U.S. at

789, 104 S.Ct. at 1486 (distinguishing case before it from

“untargeted" conduct).

The ESAB Group contends, however, that, wherever the

sales were made by Centricut, and thus lost by the ESAB

Group, they were ultimately felt in South Carolina at the

App. 18

ESAB Group’s headquarters. While this is undoubtedly

true, when unaccompanied by other contacts, it is ultimately

too unfocused to justify personal jurisdiction. See

Indianapolis Colts, 34 F.3d at 412 (noting that in cases

upholding jurisdiction based on injury in the forum state to

intellectual property or reputation, "(t]he defendant had

also’entered’ the state in some fashion"). Instead of

grounding jurisdiction on a defendant’s decision to

"purposely avail[ ] itself of the privilege of conducting

activities within the forum state," Hanson, 357 U.S. at 253,

78 S.Ct. at 1240, or on a defendant’s activities "expressly

aimed" at the forum state, Calder, 465 U.S. at 789, 104

S.Ct. at 1487, jurisdiction would depend on a plaintiff's

decision about where to establish residence. Such a theory

would always make jurisdiction appropriate in a plaintiff's

home state, for the plaintiff always feels the impact of the

harm there. Although the place that the plaintiff feels the

alleged injury is plainly relevant to the inquiry, it must

ultimately be accompanied by the defendant’s own contacts

with the state if jurisdiction over the defendant is to be

upheld. Because those contacts in this case were too

attenuated and insubstantial to provide a constitutionally

sufficient basis for South Carolina courts to exercise either

specific or general in personam jurisdiction over Centricut,

ee See en ee eae ee ee i

App. 19

the district court could not exercise in personam

jurisdiction pursuant to service under Rule 4(k)(1)(A).

Ill

Although we conclude that personal jurisdiction may not be

exercised over Centricut and Aley under Federal Rule of

Civil Procedure 4(k)(1)(A) because a South Carolina court

could not assert such jurisdiction, we must now address the

ESAB Group’s alternative basis for personal jurisdiction

based on 18 U.S.C. § 1965(b).

One of the sources enumerated in Federal Rule of Civil

Procedure 4(k) for service that effectively enables the

exercise of personal jurisdiction over a defendant is "a

statute of the United States." See Fed.R.Civ.P. 4(k)(1)(D).

In this case, a federal statute does authorize such service.

In enacting the Organized Crime Control Act of 1970,

Pub.L. No. 91-452, 84 Stat. 922 (1970), reprinted in 1970

U.S.C.C.A.N. 1073, Congress prohibited various activities

generally associated with organized crime. See 18 U.S.C.

§ 1962. In addition to providing criminal penalties, see 18

U.S.C. § 1963, Congress granted a private civil right of

action to "[a]ny person injured in his business or property

by reason of a violation of" the RICO provisions. 18

App. 20

U.S.C. § 1964(c). The RICO statute authorizes venue for

civil actions in any district in which the defendant "resides,

is found, has an agent, or transacts his affairs." 18 U.S.C.

§ 1965(a). And it authorizes service of process "in any

judicial district in which such person resides, is found, has

an agent, or transacts his affairs," 18 U.S.C. § 1965(d),

evidencing Congress’ desire that "[p]rovision [be] made for

nationwide venue and service of process." H. Rep. No.

91-1549, at 4 (1970), reprinted in 1970 U.S.C.C.A.N. 4007,

4010. Although 18 U.S.C. § 1965 is entitled "Venue and

process,” the fact that it also authorizes service of process

makes it relevant to personal jurisdiction because of Federal

Rule of Civil Procedure 4(k)(1)(D). "Where," as here,

"Congress has authorized nationwide service of process ...

so long as the assertion of jurisdiction over the defendant is

compatible with due process, the service of process is

sufficient to establish the jurisdiction of the federal court

over the person of the defendant." v._ Mil

RICO statute, providing for service in any judicial district

in which defendant is found, provides statutory basis for

personal jurisdiction).

App. 21

The due process constraint on service under Federal Rule of

Civil Procedure 4(k)(1)(D), is not, however, grounded in

the Fourteenth Amendment, which circumscribes service

under state process pursuant to Rule 4(k)(1)(A). See

Republic of Panama, 119 F.3d at 942; Hogue, 736 F.2d at

991. Rather, it is the Due Process Clause of the Fifth

Amendment which constrains the exercise of the federal

government’s sovereign powers. See id.; Omni Capital,

484 U.S. at 103-04, 108 S.Ct. at 409; Insurance Corp. of

Ireland, Ltd. v. Compagnie des Bauxites, 456 U.S. 694, 702

n. 10, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982).

The Fifth Amendment’s Due Process Clause not only limits

the extraterritorial scope of federal sovereign power, but

also protects the liberty interests of individuals against

unfair burden and inconvenience. See, e.g., Republic of

Panama, 119 F.3d at 945- 48; cf. World-Wi

Volkswagen, 444 U.S. at 291-92, 100 S.Ct. at 564 (noting

that the minimum contacts test under the Fourteenth

Amendment’s Due Process Clause functions both to protect

states in their status as equal sovereigns and to protect

individuals against unfair burden and inconvenience).

However, when the defendant is located within the United

States, he "must look primarily to federal venue

requirements for protection from onerous litigation," Hogue,

App. 22

736 F.2d at 991, because "it is only in highly unusual cases

that inconvenience will rise to a level of constitutional

concern,” Republic of Panama, 119 F.3d at 947.

In this case, both Centricut and Aley have been served with

process in a judicial district where they respectively reside,

are found, or transact their affairs. Because they have been

validly served pursuant to RICO’s nationwide service

provision, 18 U.S.C. § 1965(d), in personam jurisdiction

over them is established, provided that such jurisdiction

comports with the Fifth Amendment. We believe that it

does, discerning no evidence from the record in this case of

such extreme inconvenience or unfairness as would

outweigh the congressionally articulated policy of allowing ;

the assertion of in personam jurisdiction in South Carolina. )

See 4 Wright & Miller, § 1067.1, at 331 (1987)

(congressional policy choice that includes nationwide

service of process "should be afforded substantial weight");

see also Republic of Panama, 119 F.3d at 948 (noting that

"the burden is on the defendant" to show that the burden of

distant litigation is so great as to put him at a "severe

disadvantage"). Nor do we believe the dictates of judicial

efficiency counsel so strongly against a federal forum in

South Carolina that constitutional due process is offended.

App. 23

While there is no doubt some inconvenience to the

defendants in having to defend this action in South

Carolina, it is not so extreme as to defeat the exercise of

personal jurisdiction pursuant to valid service of process,

although it may certainly factor into a transfer decision. See

id. at 947 n. 25. Accordingly, we hold that the district court -

in South Carolina may constitutionally exercise in personam

jurisdiction over both Centricut and Aley.

In so holding, we do not decide any issues of venue raised

by the defendants. We note that although the district court

essentially found that Centricut transacts its affairs in South

Carolina by virtue of having suppliers and customers there,

it made no findings as to whether Aley "transacts his

affairs" (emphasis added) in South Carolina, as is required

by 28 U.S.C. § 1965(a). That may mean that with respect

to Aley venue is not proper in South Carolina under §

1965(a). The district court may ultimately have to decide

whether venue is proper, either under 18 U.S.C. § 1965(a)

or (b), or under the general venue statutes. The question of

in personam jurisdiction, however, depends on whether

service of process has been authorized. Section 1965(d)

authorizes service of process "in any judicial district in

which such person ... is found." Because service was

App. 24

accomplished on the defendants where they were found,

personal jurisdiction was established.

Even though the district court has personal jurisdiction over

the defendants to adjudicate the RICO claim because of its

authorization for nationwide service of process, the question

remains whether that service authorizes the district court to

assert personal jurisdiction over the defendants to adjudicate

the state law claims against them. If a defendant’s conduct

in the forum state provides insufficient contacts with the

state to justify specific long-arm jurisdiction, two questions

arise: First, whether the defendant has reasonable

expectations not to be tried there on the state claims, which

may not even arise under the laws of the forum state; and

second, whether the defendant in these circumstances has a

constitutional protection against adjudication of the state

claims against him in a state which is not authorized to

assert personal jurisdiction over him. These questions have

not been answered in this circuit.

The existence of these questions highlights the substantial

variations in authorization provided by the sources |

enumerated in Federal Rule of Civil Procedure 4(k) for

service of process. Even for federal claims, the effective

App. 25

territorial authority of the federal court may differ

significantly from case to case, depending on the federal

statute involved. For example, if the claim is based on a

federal statute authorizing nationwide service of process,

personal jurisdiction may be asserted over a defendant

anywhere in the country, whereas if the statute creating the

federal claim does not provide for nationwide service of

process, process may extend only to the boundaries of the

state in which the district lies. This poses an infrequently

presented question: If a case includes a claim brought

under a federal statute authorizing a nationwide service of

process and another claim under a statute or under state law

for which nationwide service of process is not available,

does the court have personal jurisdiction over the defendant

to adjudicate the entire case?

A somewhat analogous problem arose in the context of

subject matter jurisdiction, which, of course, is quite distinct

in principle from personal jurisdiction. See Compagnie des

Bauxites, 456 U.S. at 701-05, 102 S.Ct. at 2103-06.

Nevertheless, the analogy is useful. To resolve the problem

of whether a federal court which is presented with the

resolution of a federal claim may also resolve state claims

arising out of the same nucleus of operative fact, the

0 i IZ Isr

App. 26

Supreme Court developed the doctrine of pendent

jurisdiction. See, e.g., United Mine Workers v. Gibbs, 383

U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Under

that doctrine, when a claim authorized by federal law and

by Article III of the Constitution is properly in a federal

court, and that claim is so related to a state claim not

independently subject to federal jurisdiction that the two

may be considered “one constitutional case," the federal

court has pendent jurisdiction to adjudicate the state claim.

Id. at 725, 86 S.Ct.at 1138. The Court articulated the

necessary and proper relationship between the claims that

they "must derive from a common nucleus of operative

fact." Id . But even so, pendent jurisdiction is a

discretionary power which is exercised in furtherance of

"judicial economy, convenience and fairness to the

litigants." Id. at 726, 86 S.Ct. at 1139. The doctrine has

since been codified at 28 U.S.C. § 1367.

We believe that similar considerations urge that we

recognize pendent personal jurisdiction of a district court

which has obtained personal jurisdiction over a defendant

by reason of a federal claim to adjudicate state claims

properly within the court’s subject matter jurisdiction, even

App. 27

though that state’s long-arm statute could not authorize

service over the defendants with respect to the state claims.

When a federal statute authorizes a federal district court to

exercise personal jurisdiction over a defendant beyond the

borders of the district and the defendant is effectively

brought before the court, we can find little reason not to

authorize the court to adjudicate a state claim properly

within the court’s subject matter jurisdiction so long as the

facts of the federal and state claims arise from a common

nucleus of operative fact. The defendant will have to

adjudicate the facts of the federal claim, and it could

impose only a minimal burden to require the defendant to

provide a defense on the factually- related state claim. We

agree with the observation that

judicial economy and convenience of the

parties is best facilitated by a consideration

of all legal theories arising from a single set

of operative facts.... Once that set of facts

and defendants are legitimately before th[e]

court ... little would be gained by not

requiring a defendant to defend against a

certain type of theory superimposed upon

those facts.

App. 28

Sohns_v. Dahl, 392 F.Supp. 1208, 1218 (W.D.Va.1975).

Accordingly, we conclude that under the doctrine of

pendent personal jurisdiction, the district court has authority

over the defendants to decide both the federal and the state

claims alleged against them. In recognizing pendent

personal jurisdiction, we join the other circuits that have

done so. See IVE AFL-CIO Pension Fund v. Herrmann, 9

F.3d 1049, 1056 (2d Cir.1993); see also Oetiker v. Jurid

Werke, G.m.b.H., 556 F.2d 1, 4-5 (D.C.Cir.1977);

Robinson _v. Penn Central Co., 484 F.2d 553, 555 (3d

Cir.1973).

Our recognition of pendent personal jurisdiction should

present no constitutional objection any more serious than

did pendent jurisdiction involving the court’s subject matter

jurisdiction. Once a court has a constitutional case, in the

Article III sense, properly before it, service by a court

sufficient to assert personal jurisdiction over a defendant by

any authorized mechanism consistent with due process may

be held to apply to the entire constitutional case. In this

case, the parties agree that the federal court has subject

matter jurisdiction over the ESAB Group’s claims and is

thus competent to adjudicate them. They also agree that the

factual nucleus for the state claims and the RICO claim is

App. 29

the same. Since the court has personal jurisdiction over the

defendants under service of process authorized by the

Federal Rule of Civil Procedure 4(k)(1)(D) and by the

RICO statute, we can find no constitutional bar to requiring

the defendants to defend the entire constitutional case,

which includes both federal and state claims arising from

the same nucleus of facts, so long as the federal claim is

not wholly immaterial or insubstantial. See Republic of

Panama, 119 F.3d at 942, 951 & n. 26.

For the reasons provided in this opinion, we reverse the

ruling of the district court that the defendants were properly

served under South Carolina’s long-arm statute but affirm

its conclusion that the district court has personal jurisdiction

over Centricut and Aley. The case is remanded for further

proceedings.

IT IS SO ORDERED.

App. 30

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

The ESAB Group, Inc., ) C.A. 4:96-168-2

) Filed

Plaintiff, ) October 1, 1996

) Larry W. Propes, Clerk

v. ) Florence, S.C.

) Entered

Centricut, Incorporated, ) 10-3-96 AMC

Thomas Aley and John )

Bergen, ) ORDER

)

Defendants. )

)

The defendants, Centricut, Incorporated and Thomas

Aley, filed a motion on July 26, 1996, moving the court to

amend its oral Order of July 18, 1996, which denied the

defendants’ motion to dismiss for lack of personal

jurisdiction. Defendant John Bergen joins in this motion.

The plaintiff, The ESAB Group, Inc., filed a memorandum

in opposition to the defendants’ motion on August 23, 1996.

The defendants contend that the court’s order

involves a controlling question of law as to which there is

@ substantial ground for difference of opinion and that an

immediate appeal from the order may materially advance

App. 31

the ultimate termination of the litigation, and, therefore, that

the court should authorize the defendants to file a petition

for interlocutory appeal to the Fourth Circuit Court of

Appeals. See 28 U.S.C. § 1292(b). The plaintiff argues

that the court’s order was based on a reasonable and correct

interpretation of the case law and that there is no need for

an interlocutory appeal of the jurisdictional issue.

The court relied on the reasoning set forth in Calder

v. Jones, 465 U.S. 783, 104 S.Ct. 1482 (1984) and Burger

King Corp.v. Rudzewicz, 471 U.S. 462, 104 S.Ct. 2174

(1985), in assuming personal jurisdiction over the

defendants. The defendants contend that the court’s ruling

is contrary to the Fourth Circuit’s analysis in Stover _v.

O’Connell, 84 F.3d 132 (4th Cir. 1996) and Federal

Insurance Co. v. Lakeshore, Inc., 886 F.2d 654 (4th Cir.

1989).

After reviewing the record and the applicable law,

the court concludes that there are substantial grounds for

difference of opinion about whether jurisdiction exists, and

that an immediate appeal may materially advance the

ultimate termination of the litigation. Accordingly, the

court hereby amends its oral Order of July 18, 1996, to

App. 32

include the same, and grants the defendants authorization to

file a petition for an interlocutory appeal.’

AND IT IS SO ORDERED. |

s/'_ C. Weston Houck

C. Weston Houck

Chief United States

District Judge

October 1, 1996.

Florence, South Carolina

circuit allows an appeal to be taken of the

_ the proceedings in this court will not be

outcome of that appeal.

App. 33

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

ESAB GROUP., INC.,

Plaintiffs, No. 4:96-168-2

CENTRICUT, INCORPORATED

ET AL

Nem Nee Ne Ne Ne Nee Nee ee ee” ee”

Defendants.

ORAL ORDER

EXCERPT FROM TRANSCRIPT OF

HEARING, JULY 18, 1996

The Court: This, of course is civil action 96-168,

The ESAB Group, Inc. Plaintiff, against Centricut,

Incorporated, Thomas Aley, John Bergen, Gordon Thomas

Aley, Linda Aley, DBA Corbin Consulting, and Mark

Lindberg, Defendants.

This matter is now before the court on motion of the

defendants made pursuant to Rule 12(B)(6) of the Federal

Rules of Civil Procedure to dismiss for lack of personal

jurisdiction of the defendants.

When such a motion comes before the court by

affidavit and the filing of other documents, a decision is

App. 34

made by the court when it determines whether or not the

plaintiff has made a prima facie case showing personal

jurisdiction. When, however, we have an evidentiary

hearing such as we've had in this case, and added to that

certain documents filed by the parties, the court is called

upon to determine whether or not the plaintiff, the person

asserting jurisdiction, has shown the existence of such

jurisdiction by a preponderance of the evidence.

It is pursuant to that obligation that the court

examines the record in this case as it has been made and

attempts to consider whether or not based thereon the

plaintiff has carried its burden.

Obviously, any findings of fact that are made by the

court at this time are made for the purposes of determining

jurisdiction. The court may at a later date, if it’s called

upon to consider the evidence on the merits, or by way of

some other motion that may be made, look at the facts in a

different light, and certainly it’s not obligated to adhere to

its finding here today made at some later date. Any later

findings of fact, whether that be made necessary at trial, or

the consideration of the weight of the evidence or the

existence of genuine issues of fact in motions for summary

judgment will be considered de novo based upon what is

before the court at that time. But because the motion to

App. 35

dismiss, as outlined previously, is now before the court, it

is compelled to make some findings of fact based upon the

record, and it makes the following:

The plaintiff, ESAB Group, Inc., is a Delaware

corporation with its home office and principal place of

business in the County of Florence, State of South Carolina.

The defendant Centricut, Incorporated, is a limited

liability company incorporated in the State of New

Hampshire and having its principal place of business in that

State.

The defendant Thomas Aley is now or was at all

times relevant to this cause of action the CEO of the

defendant, Centricut, and its president.

The defendant John Bergen was employed as a

salesman for the plaintiff from on or about 1980 until on or

about 1984, and again from on or about 1987 until on or

about 1995. He has at all pertinent times been a resident of

the State of Florida.

The plaintiff manufactures and sells welding and

cutting products. It has been one of the major companies

involved in that business for a number of years, is a

worldwide company, and is at the present time the largest

manufacturer and seller of welding and cutting products in

the world. As has previously been found, its headquarters

App. 36

are in the County of Florence, State of South Carolina. It

has 800 employees in that office and 2200 employees in

North America.

The defendant Centricut sells replacement parts that

are used in welding machines manufactured by the plaintiff

and others. The record indicates that it has some

contractual relationship with the plaintiff, but that

contractual relationship appears to be very minimal, and

they are a competitor of the plaintiff in the business of

manufacturing and selling replacement parts for the type

equipment manufactured by the plaintiff.

Though the plaintiff has not always been a resident

of South Carolina and has not always maintained

headquarters and main manufacturing facilities there, it does

at the present time and did at the time of the

commencement of this action.

During the time that John Bergen was employed by

the plaintiff, he was subject to certain confidentiality

agreements, which, in general terms, prohibited him from

disclosing outside of his business activities for the plaintiff

certain confidential information that he came in possession

of as a result of his employment by the plaintiff.

At some times during his period of employment by

the plaintiff, the defendant John Bergen furnished to the

App. 37

defendant Centricut, Incorporated, and its president and

CEO, Thomas Aley, certain customer lists obtained by him

from the plaintiff as a direct result of his employment by

the plaintiff. And the defendants Centricut, Incorporated,

and Thomas Aley used those customer lists to their

advantage and to the disadvantage of the plaintiff in selling

its products in competition with the plaintiff.

At all times when said customer lists were being

furnished to the defendants Centricut, Incorporated, and

Thomas Aley by John Bergen, all three said defendants

knew that said customer lists were the property of the

plaintiff and that their use as above described by Centricut,

Incorporated, and Thomas Aley in competition with the

plaintiff would cause the plaintiff damage. In fact, the

purpose of obtaining said lists and using the same was

principally to increase the competitive advantage of

Centricut, Incorporated, over the plaintiff in the sale of

replacement parts that both sold.

The result of the aforementioned acts on the part of

the defendants Thomas Aley, John Bergen, and Centricut,

Incorporated, in using the customer lists of the plaintiff was

to cause the plaintiff substantial damage.

(The court conferred with his law clerk.)

App. 38

The Court: Approximately one percent of the

business of the defendant Centricut, Incorporated, is carried

on in the State of South Carolina. They do not, however,

have any offices or agents residing in the State of South

Carolina and all of said business is service via telephone or

other type interstate communication.

The defendant Bergen is, as stated, a resident of the

State of Florida and was a resident of said state at all

pertinent times. He does from time to time visit South

Carolina. He is supervised out of the plaintiff's South

Carolina offices, comes to South Carolina for sales

meetings, as well as to bring customers to the

manufacturing site of the plaintiff. It is estimated that he

visits Florence between six and eight times per year. All of

his sales are placed through the Florence office for

manufacture and shipment.

In analyzing a challenge to the court’s personal

jurisdiction, we are called upon to first consider whether or

not the state’s long arm statute authorizes the exercise of

jurisdiction over the defendants. If we conclude it does, we

then determine whether the exercise of jurisdiction

thereunder comports with the Fourteenth Amendment’s due

process requirements, so that the exercise of jurisdiction

App. 39

does not offend traditional notions of fair play and

substantial justice.

It has been repeatedly held that the South Carolina

long arm statute authorizes jurisdiction to the limits of the

due process clause.

Therefore, when considering a jurisdictional case

such as this in South Carolina, the first question, the extent

to which the long arm statute extends jurisdiction, folds into

the second, a determination of whether or not the exercise

of that jurisdiction violated the due process clause.

The due process clause protects an individual or

corporation’s liberty interest in not being subject to the

binding judgments of a forum with which it has established

no meaningful contacts, ties or relationships.

By requiring the existence of such contacts, ties or

relations before jurisdiction will attach, the due process

clause gives fair warning to individuals that a particular

activity may subject them to the jurisdiction of a foreign

state. It gives a degree of predictability to the legal system

that allows potential defendants to structure their primary

conduct with some minimum assurance as to where they

may have to answer for their acts in court.

Our search, of course, is to determine what contacts,

ties or relations the defendants have with the State of South

App. 40

Carolina. But that search is always made with the

underlying consideration of fairness and justice as dictated

by the due process clause.

As has been stated and as is stated in the case of

Burger King Corporation against Rudzewicz, 105 S. Ct.

2174 at page 2183, the constitutional touchstone remains

whether the defendant purposely established minimum

contacts in the forum state. Although it has been argued

that foreseeability of causing injury in another state should

be sufficient to establish such contacts there, when policy

considerations so require, the court has consistently held

that this kind of foreseeability is not a sufficient benchmark

for exercising personal jurisdiction.

Instead the foreseeability that is crucial to due

process analysis is that the defendant’s conduct and

connection with the forum state are such that he should

reasonably anticipate being haled into court there.

Obviously, in such an analysis as has been outlined

by our courts, we must in this case, as in all cases, focus on

the relationship among the defendants, the forum, and the

litigation in question. We must also look to precedent to

tell us what the constitution demands by way of contact

with a foreign state before the person making that contact

App. 41 ’

can in fairness and under the requirements of due process

be required to defend an action in the foreign forum.

We believe that the best guide in this case is

provided by the Supreme Court decision of Calder v. Jones,

a 1984 case, reported in 104 S.Ct. at page 1482; 465 U. S.

790.

That case involved two individuals, an editor, and a

writer, the latter of whom wrote an allegedly defamatory

article about a California resident, and the former who

authorized the writing of that article, proofed the same and

permitted it to be published.

The subject of the article was, of course, the plaintiff

in a defamation action brought in California against those

two individuals and, of course, the publication. The

publication was not involved in this jurisdictional dispute in

the Supreme Court.

They questioned jurisdiction in the California court

on the grounds that they were residents of Florida and came

to California on very infrequent occasions, either to visit, or

in one case to investigate the article that was written on one

occasion and several telephone calls to California for further

investigation.

Under many of the cases that we read that deal with

the question of what minimum contacts are necessary to

App. 42

provide due process to a foreign defendant, these contacts

would not be considered sufficient. Granted, our courts

have held on many occasions that it is not necessary for a

defendant to come into a state to be subject to its

jurisdiction, but I know of no case that has held that the

contacts found here to have been made with the forum state

by the defendant South, who wrote the article, and the

defendant Calder, who edited the same, would be sufficient

to impose jurisdiction on them in California.

The Calder v. Jones case, however, did just that.

And in doing so, it apparently adopted what it calls an

effects test. In adopting that test, it made the following

statement at page 1486:

In sum, California is the focal point both of the

story and of the harm suffered. Jurisdiction over petitioners

is, therefore, proper in California based on the "effects" of

their Florida conduct in California.

Continuing, their intentional, and alledgedly tortious,

actions were expressly aimed at California. Petitioner South

wrote and petitioner Calder edited an article that they knew

would have a potentially devastating impact upon the

respondent Jones. An individual injured in California need

not go to Florida to seek redress from persons who, though

]

(ea

App. 43

remaining in Florida, knowingly cause the injury in

California.

I think the situation that we are faced with in the

instant case is, if not identical, strikingly similar to the one

that the Court faced in Calder v. Jones.

The actions of the defendants were designed to

damage the plaintiff, a South Carolina corporation, and did

damage the plaintiff, just as the article in Calder v. Jones

damaged a California resident and was designed to damage

a California resident. It seems to the Court that it would be

grossly unfair, and it would offend traditional notions of

fair play and substantial justice to permit someone from

outside a state to intentionally do acts designed to injure

someone within that state, and then to somehow be able to

say that they had no contacts with that state. And it,

likewise, seems obvious to me that someone who commits

such acts should foresee that such conduct will cause them

to come into the state where the harm is done and have to

answer for those wrongs.

I believe, therefore, that the plaintiff has established

by a preponderance of the evidence that the defendants did

commit purposeful acts which constituted contact with this

state so as to impose upon them personal jurisdiction in this

App. 44

state. I say that as to the defendant Centricut, Incorporated,

the defendant Thomas Aley, and the defendant John Bergen.

There’s no evidence that any of the other defendants

had any knowledge of where the so-called lists came from,

what the damage was, or who it damaged or where the

damage may have been felt or imposed. I do not see how

they could under any interpretation of the evidence before

the court anticipate that they would be called into South

Carolina to defend this action.

So the contacts that I believe are necessary to

impose upon the defendants Centricut, Aley and Bergen,

under the effects test are applicable only to those three

named defendants and not the others.

To return to Burger King Corporation against

Rudzewicz again, it recognizes in my judgment that the

search for purposeful contacts with a state is most important

in attaching personal jurisdiction, but that it does not always

cause personal jurisdiction to attach. It teaches us that we

should consider those contacts in the light of other factors |

to determine whether the assertion of personal jurisdiction |

would comport with fair play and substantial justice. |

Some of the factors that Burger King refers to on |

page 2184 of that opinion are the burden on the defendant. |

The forum state’s interest in adjudicating the dispute, the

App. 45

plaintiff's interest in obtaining convenient and effective

relief, the interstate judicial system’s interest in obtaining

the most efficient resolution of controversies, and I don’t

claim to know what that means, and the shared interest of

the several states in furthering fundamental substantive

social policies.

In considering those factors, I see nothing that would

cause me to find that fair play and substantial justice would

not be accomplished by attaching personal jurisdiction to

the three defendants named.

The Burger King case goes on and says that even

after the court finds constitutional contacts and even after it

considers these other factors that I have named in

determining whether or not the attachment of personal

jurisdiction would comport with fair play and substantial

justice, the defendants have the right and the court should

give them a right to show that because of other

considerations, personal jurisdiction should not attach. The

Court talks about that they must not only show, they must

make a compelling case that the presence of these other

factors, or some of them, would render jurisdiction

unreasonable, unfair and not in the interests of substantial

justice. Those facts, as discussed on page 2185 of that

opinion, are enumerated as follows:

) ST” Ht ZT

App. 46

The potential clash of the forum’s law with the

fundamental substantive social policies of another state may

be accommodated, et cetera. Similarly, a defendant could

show a substantial inconvenience if required to submit to

jurisdiction in a foreign state.

I have looked at the requirements, or the

considerations that the court gave there. I see none that

cause the court to hesitate in attaching personal jurisdiction

to this case. I see no unfairness. I see no substantial

injustice that will be caused to any of the defendants if we

attach personal jurisdiction. To the contrary, I believe that

the plaintiff has shown by a preponderance of the evidence

that the defendants Centricut, Incorporated, Thomas Aley

and John Bergen have the necessary contacts with the State

of South Carolina to comply with the requirements of due

process and cause personal jurisdiction to attach to them in

this action.

Therefore, as to those three defendants the motion of

the defendant to dismiss is denied.

That motion is granted as to the defendants Gordon

Thomas Aley, Linda Aley, DBA Corbin Consulting, and

Mark Lindberg.

And it is so ordered.

EES '''?2ZS

App. 47

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 96-2504

ESAB GROUP, INCORPORATED,

Plaintiff - Appellee,

Vv.

CENTRICUT, INCORPORATED; THOMAS ALEY,

Defendants - Appellants,

and

JOHN BERGEN; THOMAS FITZPATRICK:

GORDON THOMAS ALEY; LINDA ALEY, d/b/a

Corbin Consulting; MARK LINDBERG,

Defendants.

Filed November 14, 1997

The appellants’ petition for rehearing and suggestion

for rehearing in banc were submitted to this Court. As no

member of this Court or the panel requested a poll on the

Suggestion for rehearing in banc, and

As the panel considered the petition for rehearing

and is of the opinion that it should be denied,

App. 48

IT IS ORDERED that the petition for rehearing and

suggestion for rehearing in banc are denied.

For the Court,

/s/ Patricia S. Connor

Clerk

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.