state. Keeton, 465 U.S. at 775.
After a jurisdictional defense is raised, the plaintiff bears the burden of demonstrating that the defendant's affiliating contacts with the forum state are sufficient to give the court personal jurisdiction. Compagnie des Bauxites de Guinee v. L'Union Atlantique S.A. D'Assurances, 723 F.2d 357, 362 (3d Cir. 1983). To meet this burden, the plaintiff must establish either that the particular cause of action arose from the defendant's activities within the forum state ("specific jurisdiction") or that the defendant has "continuous and systematic" contacts with the forum state ("general jurisdiction"). Provident National Bank, 819 F.2d at 437 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 416, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984)). If the cause of action is not related to the defendant's contacts with the forum state, the plaintiff must make a stronger showing that the defendant has maintained "continuous and systematic" forum contacts. Reliance Steel Products Company v. Watson, Ess, Marshall & Enggas, 675 F.2d 587, 588-89 (3d Cir. 1982).
The sequence of events giving rise to the instant suit touched many states. Beech apparently manufactured the airplane in Kansas. It sold the airplane to its Indiana subsidiary, which sold it to a New York subsidiary. After a brief presence in Florida, the airplane was sold to Jen Rob in New Jersey. Component parts, produced by King Radio and Bendix, may have originated in Kansas, King Radio's principal place of business, or in Delaware or in Virginia, allegedly Bendix's places of business. Jen Rob bought and maintained the airplane in New Jersey. Linden maintained the airplane in New Jersey. The airplane took off from New Jersey and crashed in Rhode Island.
Eason does not allege that there is specific jurisdiction over Beech. Rather, Eason asserts that Beech's "continuous and systematic" business contacts with New Jersey provide the basis for asserting general jurisdiction over the corporation.
In a similar case brought in the Southern District of Texas, survivors of parties killed in a crash of a Beech airplane attempted to assert general jurisdiction over Beech on the basis of its business contacts with Texas. The Fifth Circuit concluded that Beech's carefully structured business activities only tangentially influenced the Texas economy and were not sufficient to confer general jurisdiction. Bearry v. Beech Aircraft Corp., 818 F.2d 370 (5th Cir. 1987).
The Beech airplane in Bearry was sold in Texas, but the contracts for the sale of Beech airplanes to Texas residents were negotiated in Kansas through Texas dealers and the airplanes were sold by independent retailers. The court noted: "Beech exercised its right to structure its affairs in a manner calculated to shield it from the general jurisdiction of the courts of other states such as Texas, carefully requiring the negotiation, completion and performance of all contracts in Kansas." Id. at 375-76. Concluding Beech had not availed itself of the "benefits and protections of the laws of Texas," but had instead "calculatedly avoided them," the court dismissed the case for lack of personal jurisdiction.
Although Bearry is persuasive precedent, it is not dispositive as to whether Beech's corporate calculus was equally as successful in maintaining immunity from the jurisdiction of New Jersey and whether there are other counterveiling considerations distinguishing this case. No single factor is determinative in evaluating the sufficiency of Beech's contacts with New Jersey. It is the "total factual setting" which will establish whether the combined strength of those contacts satisfies the requirements of due process. Young v. Gilbert, 121 N.J. Super. 78, 296 A.2d 87 (Law Div. 1972).
Maintaining that it lacks "minimum contacts" with New Jersey sufficient to justify the exercise of general jurisdiction, Beech points largely to its physical presence outside of the state. Beech is incorporated in Delaware, with its principal place of business in Kansas. It owns no property in New Jersey, maintains no bank accounts here, and has no employees in the state.
Defendants' Brief at 34-35. Beech characterizes its advertising as "intermittent" and concentrated in aviation and business magazines with national and international circulation. Id. at 35. The locus of Beech's business transactions is Kansas: money and products change hands there. Id.
Eason conducted extensive discovery into Beech's contacts with New Jersey and developed certain data. From 1984 through 1988, Beech sold thirty-one airplanes to aviation centers in New Jersey. Plaintiff's Exhibit 1, Attachment A. Eight of those planes were later sold in New Jersey to New Jersey residents. Plaintiff's Exhibit 3. Eason contends that because airplanes are a high cost, low volume product, these sales represent a significant quantity of business. During the course of its business in New Jersey in the past five years, Beech did specifically send employees into New Jersey more than one hundred times. These employees entered New Jersey for management assignments, to visit prospective customers, for sales promotion and to demonstrate airplanes.
In its Supplemental Response to Interrogatory No. 8, Beech admitted that its employees entered New Jersey specifically to assist distributors or demonstrate Beech products on twenty-four occasions from 1984 to date.
Letter of June 24, 1988, Supplementing Beech's Response to Jurisdiction Interrogatories, Exhibit 10 (Supplemental Interrogatory Response) ("Beech employees on the occasions of their visits demonstrated Beech products, provided miscellaneous franchise support services and assisted owners or dealers with respect to service difficulties on particular aircraft.")
Beech advertised in publications such as The Wall Street Journal, Forbes magazine, Business and Commercial Aviation, AOPA Pilot, and other nationally circulated magazines. Beech also regularly entered into contracts for the purchase of goods from New Jersey companies. Beech has provided a current list of over 250 New Jersey companies from which it has purchased goods. Id. at Exhibit 11. From 1984 to the present, Beech has made 2,239 purchases from companies located in New Jersey. Beech parts and airplanes were sold to residents of New Jersey through Ronson Aviation in Trenton, New Jersey.
In its Sales and Service Agreement with Ronson Aviation, Inc. (doing business as Ronson Beechcraft),
Beech set market sales objectives, prescribed an inventory of parts and equipment, mandated that only Beech parts and equipment may be sold for Beech airplanes, set standards for the size and maintenance of Ronson's facilities, and set minimum order requirements and working stock levels. Beech influenced the marketing of its airplanes at every level from controlling the signs erected by Ronson to directing that Ronson participate in Beech's promotional, merchandising and advertising programs and requiring that Ronson disseminate Beech's performance data. Beech also monitored Ronson's monthly and annual financial, operational and management reports and retained the right to inspect Ronson's facilities, records, supplies and personnel. This involvement with the intricacies of the sale of Beech airplanes in New Jersey is significant.
Eason argues that Beech's network of distribution is sufficiently concentrated in New Jersey to satisfy the constitutional requirements of minimum contacts and to make the exercise of personal jurisdiction both reasonable and forseeable. Based on the information provided by Beech, it appears that it has made economic entry into New Jersey. See Ketcham v. Charles R. Lister International, Inc., 167 N.J. Super. 5, 9, 400 A.2d 487 (1979).
Some courts have found sufficient contacts for personal jurisdiction "where virtually any form of economic entry into the state was evident." Id. (quoting Amercoat Corp. v. Reagent Chem & Research, Inc., 108 N.J. Super. 331, 342, 261 A.2d 380 (App. Div. 1970)). Indeed, New Jersey has adopted an especially permissive approach to minimum contacts analysis: "jurisdiction has been exercised wherever possible when a liberal and indulgent view of the facts reasonably support the presence of the flexible concepts of 'fair play and substantial justice.'" Id. at 7.
Assessing the nature, continuity and regularity of a corporation's economic entry or presence into a state is no simple task. In New Jersey, the continuity of a defendant's activities is accorded more significance than the quantum of activities. Amercoat Corp., 108 N.J. Super. at 342. This approach avoids the potential for the due process calculus deteriorating into an arithmetic balancing of how many products a manufacturer sold in a given forum. Although Beech has sold only eight airplanes in New Jersey during the past five years, these transactions are not as insignificant as Beech seeks to imply. The manufacture of airplanes, unlike television sets, is not a high volume industry. Further, as Beech's contacts with local independent distributors reveal, the sale of its products in a distant state "is not simply an isolated event, but the result of the corporation's efforts to cultivate the largest possible market for its product." Charles Gendler & Co., 102 N.J. at 477-8.
Although World-Wide Volkswagen rejected the stream of commerce theory as an independent basis for finding personal jurisdiction over a non-resident distributor and dealer, it did not rule out the consideration of a manufacturer's commercial activities aimed at generating business within the forum state as a factor supporting jurisdiction. See Carty v. Beech Aircraft Corp., 679 F.2d 1051, 1062 (3d Cir. 1982). A modified stream of commerce theory, adopted by the New Jersey Supreme Court in Gendler, places the manufacture and distribution of a product at the start of a distribution chain and interprets the continuing links in that chain as involving purposeful conduct intended to make a product available for purchase in as many fora as possible. Gendler, 102 N.J. at 477 (quoting Nelson by Carson v. Park Indus., Inc., 717 F.2d 1120, 1125 (7th Cir. 1983)), cert. denied, 465 U.S. 1024, 79 L. Ed. 2d 682, 104 S. Ct. 1278 (1984). This jurisdictional theory developed "as a means of sustaining jurisdiction in products liability cases in which the product has travelled through an extensive chain of distribution before reaching the ultimate consumer." DeJames, 654 F.2d at 285; see also Daetwyler, 762 F.2d at 298.
In Asahi, decided after Gendler and Amercoat, the Supreme Court further refined the stream of commerce theory: "The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum state," and hence no longer suffices to establish the requisite minimum contacts for personal jurisdiction. 480 U.S. at 112. The Court continued: "Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum state," for example, designing the product for the market, advertising, establishing channels for providing advice to customers or marketing through a distributor or agent. Id.
The appearance of Beech products in New Jersey alone may be an insufficient foundation for personal jurisdiction. However, when a corporation arranges to have its products sold in a state, even though independent agents, a more substantial relationship envisioned by Asahi has evolved. Beech cannot avoid being subject to the jurisdiction of a state simply by arranging for the indirect distribution of its goods rather than entering a local market independently. In the modern business context commercial transactions are sufficiently complex that the assistance of middle level distributors is frequently utilized. Foreign manufacturers cannot insulate themselves from jurisdiction by erecting a sophisticated web of distribution. Gendler, 102 N.J. at 478.
Beech's careful supervision of its local distributor Ronson Aviation underscores its interest in soliciting a New Jersey market for its products. By sending Beech representatives into New Jersey, Beech provided direct service to local customers and further developed its business relationship with this state. The placement of an intermediary agent between Beech and the ultimate consumer of its products does not disable Beech from enjoying the benefits of New Jersey's legal forum and protections. The "purposeful availment" analysis of Burger King, 471 U.S. at 475, "turns upon whether the defendant's contacts are attributable to his own actions or solely to the actions of the plaintiff." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 840 (9th Cir. 1986). Eason did nothing to enhance Beech's contacts with New Jersey. By soliciting business in New Jersey, Beech affirmatively and independently invoked the benefits of the laws of the forum state. Id.
Beech, by virtue of its sales and employee visits to the state, did make efforts to solicit New Jersey business. Further, the control it exerted over its sales affiliates in New Jersey and the support services it provided to local aviation centers are consistent with business entry into the state of New Jersey. Beech expected that its products would be sold in New Jersey and its purposeful contacts with this state contributed to the orchestration of those sales. Id. at 840. Accordingly, Beech is subject to jurisdiction in the District of New Jersey.
Beech also argues that venue is not proper in this district. Restrictions upon the venue in which a plaintiff may sue in federal court are statutory in origin. Congress, in passing venue statutes, has limited a plaintiff's choice of venue in order to protect defendants from the inconvenience and expense of having to defend actions in distant fora. Denver & Rio Grande Western R.R. Co. v. Brotherhood of R.R. Trainmen, 387 U.S. 556, 560, 18 L. Ed. 2d 954, 87 S. Ct. 1746 (1987). Congress created venue requirements "primarily [as] a matter of convenience of litigants and witnesses." Id. A plaintiff is generally conceded the choice of forum "so long as the requirements of personal and subject matter jurisdiction, as well as venue, are satisfied." Reyno v. Piper Aircraft, 630 F.2d 149, 159 (3d Cir.), rev'd on other grounds, 454 U.S. 235, 70 L. Ed. 2d 419, 102 S. Ct. 252 (1981) (citing Koster v. Lumbermen's Mutuality Casualty Co., 330 U.S. 518, 524, 91 L. Ed. 1067, 67 S. Ct. 828 (1947)). Although the plaintiff's preference is accorded weight, it will not be determinative if the defendant establishes "such oppressiveness and vexation . . . as to be out of all proportion to plaintiff's convenience" or if trial in the chosen forum is inappropriate because of "considerations affecting the court's own administrative and legal problems." Id. Accordingly, in contrast with jurisdiction, the burden of proving that venue is improper rests with the movant. Myers v. American Dental Ass'n, 695 F.2d 716, 724 (3d Cir. 1982), cert. denied, 462 U.S. 1106, 77 L. Ed. 2d 1333, 103 S. Ct. 2453 (1983).
Subject matter jurisdiction over this case is based upon diversity of citizenship, 28 U.S.C. § 1332. Venue in diversity actions is governed by 28 U.S.C. § 1391. Subsection (a) states:
A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all plaintiffs or all defendants reside, or in which the claim arose.
Venue may be found in the District of New Jersey on two grounds: first, that all defendants reside in New Jersey and second, that the cause of action arose in New Jersey.
1. Corporate Residence
Defendants Jen Rob, Linden Avionics, King Radio, Bendix and Allied Signal have not contested submitting to venue in the District of New Jersey. Beech argues that it does not reside in New Jersey within the meaning of § 1391(c). 28 U.S.C. § 1391(c) states:
A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.
There has been much dispute among the district courts regarding the parameters of corporate residency. Most courts construe the three-pronged definition of residence in section 1391(c) literally, holding that the corporation is a resident subject to suit "in each division of the district where any of the three alternatives are met." England v. ITT Thompson Industries, Inc., 856 F.2d 1518, 1519 (11th Cir. 1988). Beech is neither incorporated nor licensed to do business in New Jersey. At issue, then, is whether Beech properly can be considered to be "doing business" in New Jersey.
No uniform definition of "doing business" has been adopted by this circuit or by other circuit courts. Vivadent (USA), Inc. v. Darby Dental Supply, 655 F. Supp. 1359, 1361 (D.N.J. 1987). Many courts have construed "doing business" for venue purposes as coextensive with the constitutional test for minimum contacts associated with service of process. See 15 Federal Practice and Procedure § 3811 at 117-118; Du-Al Corp. v. Rudolph Beaver, Inc., 540 F.2d 1230, 1233 (4th Cir. 1976); Houston Fearless Corp. v. Teter, 318 F.2d 822, 825 (10th Cir. 1963); Transload & Transport, Inc. v. Tennessee Valley Towing, Inc., 609 F. Supp. 185, 186 (D.La. 1985); Galonis v. National Broadcasting Co., Inc., 498 F. Supp. 789, 791 (D.N.H. 1980).
Venue and jurisdiction, however, are distinct concepts addressed to very different concerns. As discussed above, personal jurisdiction involves a court's power over a party. Venue, in contrast, concerns "not whether the court has authority to hear the case" but simply determines "the proper place where the power to adjudicate may be exercised." Myers v. American Dental Assoc., 695 F.2d 716, 723, 725 (1982).
Other courts have construed "doing business" for venue purposes to require a closer relationship between the defendant and the forum than the minimum contacts analysis for personal jurisdiction. See J.L. Clark Mfg Co. v. Gold Bond Corp., 629 F. Supp. 788 (E.D.Pa. 1985); Honda Associates, Inc. v. Nozawa Trading, Inc., 374 F. Supp. 886, 889-890 (S.D.N.Y. 1974); Scott Paper Co. v. Scott's Liquid Gold, Inc., 374 F. Supp. 184, 189 (D.Del. 1974); Medicenters of America, Inc. v. T&V Realty & Equipment Corp., 371 F. Supp. 1180, 1182 (D.Va. 1974); see also Note, Federal Venue Over Corporations Under Section 1391(c): Plaintiff Corporations, the Judicial District Litigation, and "Doing Business," 12 Ga. L.Rev. 296, 308, 322 (1978).
This circuit has not directly addressed the interaction of minimum contacts analysis and venue considerations for the purposes of clarifying "doing business" under § 1391(c). In Fraley v. Chesapeake Ohio Railway Company, 397 F.2d 1, 4 (3d Cir. 1968), on remand, 294 F. Supp. 1193 (W.D. Pa. 1969), the Third Circuit seemed to equate "doing business" under § 1391(c) with the minimum contacts analysis for personal jurisdiction. Fraley involved a complaint filed under the Federal Employers' Liability Act ("FELA") which contained a venue provision adopting the "doing business" language of § 1391(c).
However, the court in Fraley did not specifically rule on the issue and remanded the case for further factual determinations. Noting the absence of controlling precedent, one court in this district adopted the reasoning set forth by the First Circuit in Johnson Creative Arts v. Wool Masters, 743 F.2d 947 (1st Cir. 1984).
Vivadent, 655 F. Supp. at 1361.
Wool Masters involved both a federal trademark infringement action pursuant to 15 U.S.C. § 1125(a) and claims for breach of contract and unfair competition. Because the court's federal question jurisdiction was invoked, § 1391(b), governing venue in cases not based solely on diversity, was implicated. The Wool Masters court emphasized the distinctions between jurisdiction and venue, concluding that the policy objectives of minimum contacts analysis (due process/fairness) were not synonomous with those of venue (convenience/fairness). This emphasis, however, appears to have been influenced by the existence of a federal trademark question.
It seems the Wool Masters court was concerned that equating these two concepts (venue and personal jurisdiction/minimum contacts) in a case founded on federal question jurisdiction would lead to the anomolous result of venue being proper in any district in which a corporate defendant constitutionally could be subjected to service. 743 F.2d at 950. Distinguishing the constitutional and statutory analysis required to decide a personal jurisdiction issue in a diversity action from the distinct constitutional inquiry raised by a federal question case, the court explained:
[Fed R. Civ. P.] Rule 4(e) allows for service outside the state when authorized by a statute of the United States or when a statute or rule of court of the state in which the district court is held provides for such service. The state statutes referred to cannot provide for service of process on a defendant outside the respective states unless the defendant has had contact with that state that is required by the fourteenth amendment. . . . It is the reference to the "long arm" statutes of the various states that incorporates the requirement of minimum contacts as a precondition for extraterritorial service of process.
Since due process would allow a federal court in a federal question case to issue service of process nationwide, and does not require that a corporation have any contact with a particular district in order to be sued there, we cannot accept the proposition that venue is proper in any district in which a corporate defendant constitutionally could be subject to service. Under this argument, venue would be proper in any district in the United States in a case where a defendant has had "minimum contacts" with any part of the United States.