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Moon Carrier v. Reliance Insurance Co.

Decided: September 16, 1977.


Young, J.c.c., Temporarily Assigned.


[153 NJSuper Page 314] New York Telephone Company, third-party defendant, moves for an order

setting aside service of process at its New York office by certified mail pursuant to R. 4:4-4(c)(1), commonly known as the "long arm" rule. The movant also prays for an order dismissing the third-party complaint. The motion, originally heard on September 17, 1976, was stayed pursuant to a letter opinion and order of this court allowing defendant and third-party plaintiff, Reliance Insurance Company, to pursue discovery directed to the issue of whether the courts of New Jersey have in personam jurisdiction over the telephone company. At the continued hearing date of the motion on February 25, 1977 the court requested that counsel for third-party defendant provide further information regarding the nature and extent of the relationship of New York Telephone Company to the parties, the forum and the litigation. Discovery having now been completed, and the requested additional information having been received by this court, the motion is ready for determination.

Plaintiff Moon Carrier filed suit against its insurance carrier, Reliance Insurance Company, to recover under its policy for losses arising from interruption of business. That interruption is allegedly traceable to a fire on February 27, 1975 on the premises of the New York Telephone Company. Defendant Reliance Insurance Company impleaded the New York Telephone Company, asserting a right of subrogation to recover any sums paid to plaintiff, contending that the losses, if any, were caused by the negligence of the New York Telephone Company. In its answer the telephone company pleaded as a Second Separate Defense lack of jurisdiction, which defense is tested by the pending motion.

The parties agree, and the court concurs, that the law of New Jersey regarding in personam jurisdiction over foreign corporations is predicated upon a refinement and elaboration of the principles enunciated by the Supreme Court of the United States in International Shoe Co. v. Washington , 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), and McGee v. International Life Ins. Co. , 355 U.S. 220, 78 S. Ct. 199, 2 L. Ed. 2d 223 (1957). New Jersey,

by the adoption of R. 4:4-4 and judicial construction thereof, has opted for an exercise of jurisdiction over nonresidents, both corporate and individual, and in respect of both commercial and noncommercial litigation, to the utmost limits permitted by the due process requirements of the United States Constitution. J.I. Kislak, Inc. v. Trumbull Shopping Park, Inc. , 150 N.J. Super. 96 (App. Div. 1977).

International Shoe established that the central concern of the inquiry into personal jurisdiction is the relationship among defendant, the forum, and the litigation. "Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure." Id. 326 U.S. at 319, 66 S. Ct. at 160. The most recent decision of the United States Supreme Court not only reaffirmed these principles but held them applicable to all assertions of state court jurisdiction, whether in personam, in rem or quasi in rem. Shaffer v. Heitner , U.S. , , 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977).

The initial determination for the court is whether the cause of action sued upon is related to the contacts. However, International Shoe, supra , 326 U.S. at 318, 66 S. Ct. 154, and subsequent pronouncements such as reported in Perkins v. Benquet Consolidated Mining Co. , 342 U.S. 437, 72 S. Ct. 413, 96 L. Ed. 485 (1952), have established that corporate activities in the forum state may be sufficiently "continuous and systematic" to permit the forum to entertain the cause of action even when unrelated to the "contacts." In the more typical case, where the cause of action arises from the foreign corporation's "activity" in the forum state, a single or isolated act within the forum may suffice to satisfy due process if the act has a "substantial connection" with the forum state. See McGee, supra , 355 U.S. at 223, 78 S. Ct. 199; Gelineau v. New York Univ. Hospital , 375 F. Supp. 661, 665 (D.N.J. 1974).

The resolution of challenges to jurisdiction over nonresidents is particularly fact-sensitive. The opinion of Judge Conford, writing for the Appellate Division in Corporate Dev. Spe., Inc. v. Warren-Teed Pharm., Inc. , 102 N.J. Super. 143 (1968), illustrates in the passage which follows the judicial approach to such challenges:

Chief Justice Traynor of the California Supreme Court has in Fisher Governor Company v. Superior Court , 53 Cal. 2d 222, 1 Cal. Rptr. 1, 347 P. 2d 1, 3 (Sup. Ct. 1959), provided a useful catalogue of some of the considerations which may pertinently be weighed in the assessment of due process in this area. Those so listed which are or may be relevant here are: (a) the interest of the state in providing a forum for its residents; (b) the relative availability of evidence and the burden of prosecution and defense in one place rather than another; (c) the ease of access to an alternative forum; and (d) the extent to which the cause of action arose out of defendant's local activities. To these must be added, for present purposes: (a) the substantiality of business activities of defendant in the State and how systematic and continuous they are; see Essential Const. Co. v. Royal Concrete Fireproofers , 84 N.J. Super. 289 (App. Div. 1964); cf. Sanders Associates, Inc. v. Galion Iron Works & Mfg. Co. , 304 F.2d 915 (1 Cir. 1962); as well as (b) the independence or exclusivity of its selling agents in the state in relation to the defendant, Fisher Governor Company v. Superior Court, supra; and (c) whether any isolated or casual activities of the defendant have caused expectable consequences of significant concern in the state, see Haldeman-Homme Mfg. Co. v. Texacon Industries, Inc. , 236 F. Supp. 99 (D.C. Minn. 1964). [at 149]

Having explored the pertinent factors to be considered in determining the scope of due process in this area, this court proceeds to an examination of the relationship between the telephone company and plaintiff Moon Carrier, as well as the contacts between the utility and the State of New Jersey in general.

From the affidavits supplied by New York Telephone it appears that in February 1975 Moon Carrier was provided with "foreign exchange telephone service," which is described as essentially a private line between the customer's premises in Clifton, New Jersey, and the New York Telephone Company Central office in New York. Plaintiff was

provided with three subscriber numbers in the Manhattan Telephone Directory, all of which were New York City numbers. When persons called the telephone numbers in New York the telephones in Moon Carrier's Clifton office would ring. Thus, the Clifton subscriber was furnished service in Clifton as if it were physically present in New York.

Although Moon Carrier's original request for foreign exchange service was solicited by or handled by a New Jersey Bell Telephone salesman, who transmitted the order through a New Jersey "intergroup" to a counterpart "inter-group" in New York, Moon Carrier became a customer of the New York Telephone Company. There is an economic inducement for salesmen of New Jersey Bell to solicit subscribers for the foreign exchange service offered by New York Telephone in that the revenues derivative therefrom are shared with New Jersey Bell. New York Telephone's billheads were mailed directly from New York to Moon Carrier's Clifton office. If unpaid, New York Telephone would first terminate the service and then sue. If jurisdiction over the customer could not be obtained in New York, then New Jersey counsel would be retained to file suit in New Jersey.

Turning to the second factual question, what are the points of contact between New York Telephone and the forum state? New York Telephone was incorporated in 1896 in the State of New York and is qualified to transact business in ...

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