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Corporate Development Specialists Inc. v. Warren-Teed Pharmaceuticals Inc.

Decided: July 15, 1968.


Conford, Collester and Labrecque. The opinion of the court was delivered by Conford, S.j.a.d.


In this action by a New Jersey corporation for breach of contract against a Delaware corporation with principal place of business in Ohio, we remanded for the taking of testimony to supplement the affidavits on the basis of which the Law Division had granted a motion to dismiss the action for lack of jurisdiction over defendant, and for findings of fact thereon. 99 N.J. Super. 493 (Law Div. 1968). The remand has been executed, additional testimony having been taken and fact-findings made. We herewith determine the appeal on the basis of the entire record, as thus expanded, and the original and supplemental briefs filed by the parties.

We incorporate our former opinion herein by reference, to avoid repetition of those facts established prior to the remand and the limited exposition of the applicable law set forth therein.

The origination of the transaction giving rise to this action is material to our determination of the appeal, and we relate the undisputed facts pertaining thereto developed on the remand.

Plaintiff, a New Jersey corporation with principal office in Newark at the time the contract in suit was negotiated, was in the business of sale, merger and acquisitions of corporations in the health and allied fields. Prior to January 14, 1966 Mr. Hirschberg, head of the plaintiff corporation, had had some discussions with defendant's people in reference to selling defendant a business. Thereafter Mr. Workman, associated with defendant, telephoned Hirschberg and arranged to meet him in New York City, where, on the date mentioned, they discussed defendant's interest in selling Phar-Med, a small company it owned situated in Michigan, and the possibility of plaintiff effecting such a sale.

Workman tried to reach Hirschberg at Newark by telephone January 27, 1966, but was told he was in Los Angeles, and called him there. The sale of Phar-Med was discussed again. Hirschberg said plaintiff would require a retainer of $500 a month for three months while attempting to find a purchaser, with the understanding it would be paid an additional $3,500 if it were successful. This arrangement was agreed to, and was confirmed by a letter from defendant dated January 28, 1966 (presumably from Columbus, Ohio) to plaintiff's Newark office.

From January 28, 1966 through May 27, 1966, there was voluminous correspondence between the parties relating to the matter, all of this being conducted between the respective offices of the parties in Columbus, Ohio and Newark, New Jersey. In the course of plaintiff's efforts to find a purchaser, it had correspondence with 22 firms, all of this being to and from the Newark office. All of plaintiff's work in attempted performance of the contract was done at Newark, including a search through some 2,000 names in plaintiff's files of potential prospects for the purchase of a small pharmaceutical enterprise.

The trial judge found that there was no "agreement or understanding" between the parties as to where it was contemplated that plaintiff would perform the retainer contract. As to this we disagree. We conceive there is every probability from the proofs that defendant realized at all times that all or most of plaintiff's efforts to perform the contract would be expended at or out of its Newark office, and we so find. The fact that on May 1, 1966 plaintiff opened a branch office in New York City (which later became its main office) does not derogate from the foregoing.

From at least October 1962 to the time of the defendant's transaction with plaintiff defendant had employed from three to six full-time salesmen operating for it in New Jersey. Testimony by two of these salesmen showed the following. Defendant gives these men a five-day training program. One such program was conducted in New Jersey; others have been given out of the State. Training materials are sent the men by defendant addressed to their homes in New Jersey. The home office provides the men with a business card giving their name, home address and telephone number, and also the name of defendant, with its Columbus address, as well as the name of its parent, Rohm & Haas (a foreign corporation authorized to do business in New Jersey). Defendant reimburses the men for telephone calls made in connection with Warren-Teed business and pays their hotel and gasoline expenses. Their compensation is by straight salary plus commission. The salesmen solicit business from physicians. Defendant furnishes the men with reprints of advertisements of its products to use in their solicitations. It is inferable from the proofs, and we so find, that these men are exclusive representatives of defendant in the state and handle no other accounts. All orders obtained by the salesmen are subject to acceptance at the home office, but rarely is an order rejected. The company fills the order by mailing the product directly to the customer in New Jersey.

Defendant's gross sales nationally from 1964 to 1966 ranged from about $6,600,000 to $7,056,000 annually. Gross

sales in New Jersey ran from about $90,000 to $101,000 annually. The New Jersey salesmen accounted for about $55,000 of this. Defendant places advertisements in national periodicals circulating in New Jersey and conducts direct promotional mailing to the New Jersey trade.

Rohm & Haas, the defendant's parent, has some common officers and directors with defendant. Otherwise their respective business operations are entirely separate and distinct.

We approach the question whether the service of process on defendant by mail out of the State in the manner permitted by R.R. 4:4-4(d) and the exercise of in personam jurisdiction over it by this State in this action is offensive to federal ...

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