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Amercoat Corp. v. Reagent Chemical & Research Inc.

Decided: January 29, 1970.

AMERCOAT CORPORATION, PLAINTIFF,
v.
REAGENT CHEMICAL & RESEARCH, INC., DEFENDANT AND THIRD-PARTY PLAINTIFF-RESPONDENT, V. KANSAS CITY SOUTHERN RAILWAY COMPANY AND ATCHISON, TOPEKA AND SANTE FE RAILWAY COMPANY, THIRD-PARTY DEFENDANTS-APPELLANTS



Goldmann, Lewis and Matthews. The opinion of the court was delivered by Goldmann, P.J.A.D.

Goldmann

Third-party defendants Kansas City Southern Railway Company (Kansas City) and Atchison, Topeka and Santa Fe Railway Company (Santa Fe) have, pursuant to leave granted, each appealed from a denial of their motions to dismiss a third-party complaint brought by defendant Reagent Chemical & Research, Inc. (Reagent), or to quash service of process. The appeals were consolidated.

Plaintiff Amercoat Corporation (Amercoat), a California corporation registered to do business in New Jersey, is a manufacturer of chemical storage tanks. Defendant Reagent, a New Jersey corporation having its principal place of

business at Middlesex, N.J., stores and sells chemicals. Amercoat instituted an action against Reagent in the Law Division on a book account to recover $6,418.90, the purchase price of two chemical storage tanks sold and delivered. The sales contract called for delivery of the tanks from Amercoat's plant in Ardmore, Oklahoma, to Reagent's operation at Port Arthur, Texas.

Reagent's answer denied the debt and asserted a breach of contract in that the tanks were damaged and unfit for use when delivered. By way of counterclaim Reagent claimed damages directly resulting from plaintiff's breach because it had been obliged to purchase replacement tanks at higher prices and to transport chemicals from a distance at great expense during the period when no tanks were available to replace those plaintiff had agreed to sell and deliver.

Reagent also filed a third-party complaint in two counts against Kansas City and Santa Fe, over whose lines the tanks had been shipped by Amercoat, the theory being that if delivery to Reagent was completed upon Amercoat's depositing the tanks with the railroad at Ardmore, Oklahoma, one or both carriers would be liable to Reagent for the losses incurred through their breach of the carriage contract and for negligence. The first count demanded judgment for all sums that might be adjudged against Reagent in favor of Amercoat; the second count sought recovery from the third-party defendants should it be determined that Amercoat was not liable for damages under Reagent's counterclaim.

Kansas City is a Missouri corporation having its principal place of business in Kansas City, Mo., and operates directly in Missouri, Kansas, Arkansas, Louisiana, Oklahoma and Texas. Santa Fe is a Kansas corporation having its principal place of business in Chicago, Ill., and operates directly in Illinois, Missouri, Kansas, Oklahoma, Louisiana, California, New Mexico and Kentucky. Defendant Reagent attempted service of process on the carriers in two ways: (1) by serving the registered agent of Penn-Central Company in New Jersey as agent for the third-party defendants,

and (2) by sending copies of the summons and third-party complaint by registered mail to Kansas City at its Missouri office and to Santa Fe at Ardmore, Okla. -- this pursuant to R.R. 4:4-4(d), now R. 4:4-4(c)(1).

Kansas City and Santa Fe successfully challenged the attempted service on Penn-Central Company, defendant Reagent conceding that there was no basis for such service. However, they were unsuccessful in quashing the substituted service of process made under the cited rule. They had moved to dismiss the third-party complaint or to quash the service for the reason that they lacked sufficient "minimum contacts" with New Jersey and for the further reason that the doctrine of forum non conveniens militated against Reagent maintaining its suit in New Jersey.

On this appeal the third-party defendants claim error in that (1) the assertion of jurisdiction over them would violate due process of law and constitute an unreasonable burden on interstate commerce, and (2) regardless of the resolution of the jurisdictional issue, the third-party suit should have been dismissed on the basis of forum non conveniens.

I

R.R. 4:4-4(d), now part of R. 4:4-4(c)(1), authorized substituted service of process on a foreign corporation, where service could not be made upon it in any of the other ways listed in that section of the rule, "subject to due process of law, by mailing, registered mail return receipt requested, a copy of the summons and complaint to a registered agent for service, or to its principal place of business, or to its registered office." The clear purpose of the rule is "to vest our courts with jurisdiction over foreign corporations to the outer limits permitted by due process." Corporate Development Specialists, Inc. v. Warren-Tecd Pharmaceuticals, Inc. , 102 N.J. Super. 143, 148 (App. Div. 1968). By affidavit both Kansas City and Santa Fe contended that they are not New Jersey corporations, maintain

no office and employ no personnel in New Jersey, own no property here and do no business in this State. They concede, however, that they have representatives in their respective New York City offices, who regularly call upon shippers in New Jersey to point out the advantages of routing their shipments, where practical, over their lines, and to acquaint shippers with the facilities and equipment available to them. They claim that their only connection with New Jersey is their bailment of cars to local railroads. This is explained as follows: When Kansas City or Santa Fe, or any other out-of-state connecting carrier, accepts a freight load which is ultimately to be routed into New Jersey for delivery there, the out-of-state connecting carrier charges the shipper the full price of the start-to-finish haul, carries the load over its tracks, delivers it to the railroad with tracks in New Jersey at a point where the local railroad's tracks meet those of the out-of-state railroad, and pays the local railroad on a pro rata basis for that fraction of the total mileage which its hauling constitutes. Thus, if a Kansas City or Santa Fe freight car traverses the New Jersey tracks of the Penn-Central Railroad, for example, then Penn-Central would be paid a rental fee in accordance with the industry-wide custom and practice laid down by the Association of American Railroads.

In support of their argument, the third-party defendants refer to federal holdings to the effect that "mere solicitation" in a state by a nonresident corporation is an insufficient relationship to support the exercise of extraterritorial jurisdiction over that company, e.g., Green v. Chicago, Burlington & Quincy Ry. , 205 U.S. 530, 27 S. Ct. 595, 51 L. Ed. 916 (1907); Michigan Central R. Co. v. Mix , 278 U.S. 492, 49 S. Ct. 207, 73 L. Ed. 470 (1929). They also cite later cases which entrenched and extrapolated the Green holding into the so-called "solicitation plus" doctrine, which basically establishes that something more is required than just solicitation by a nonresident corporation, e.g., Philadelphia & Reading Ry. Co. v. McKibbin , 243 U.S. 264, 37 S. Ct. 280,

61 L. Ed. 710 (1917); Fannin v. Chesapeake & Ohio Ry. Co. , 204 F. Supp. 154 (D.W.D. Pa. 1962). However, just what may constitute the "plus" is not defined, but is resolved on the facts of the particular case. Moreover, the carriers urge that Reagent's claim is unrelated to their "tenuous" business relationship with New Jersey, and therefore a "greater magnitude and/or continuity" of "contacts" with the state is required for the reasonable and fair exercise of jurisdiction than if the claim grew directly out of "doing business" here, citing the Corporate Development Specialists case, above. But the court there went on to say:

"* * * However, the concept of substantiality is clearly not an absolute, but rather a relative one. The notion is one of sufficient substantiality (given continuity) of the forum business to make it reasonable to exert jurisdiction as against the countering influence of non-relation of the cause of action. This, however, must be measured in the light of the attendant circumstances and any other factors exerting an influence toward justification for assertion of jurisdiction. * * * [102 N.J. Super. , at 152]

It must be recognized that the "mere solicitation" test (or "solicitation plus" doctrine), as articulated by succeeding courts, relies basically on the Green and McKibbin holdings. Their present applicability depends on the current viability of the underlying holdings. Decided during the infancy of extraterritorial jurisdiction, those cases, like others, proceeded essentially on an out-dated view of the requisites for jurisdiction. Early in the century jurisdiction was thought to be based on "power" as strictly delimited by state boundaries. Accordingly, a state was without jurisdiction to hail a nonresident corporation into the local courts unless that state was physically able to exert its sovereign power over it. The concept of power revolved closely around the concurrent concept of "physical presence" within the jurisdiction. Since the ...


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