Title: Ford Motor Co. v. Atwood Vacuum MacHine Co.

State: florida

Issuer: Florida Supreme Court

Document:

392 So. 2d 1305 (1981)
FORD MOTOR COMPANY, Appellant,
v.
ATWOOD VACUUM MACHINE COMPANY, Appellee.
No. 56238.

Supreme Court of Florida.
January 8, 1981.
*1306 Monroe E. McDonald of Sanders, McEwan, Mims & McDonald, Orlando, for appellant.
Elmo R. Hoffman and Stephen C. Sawicki of Hoffman, Hendry, Stoner, Sims & Sawicki, Orlando, for appellee.
BOYD, Justice.
This cause is before the Court on appeal from a circuit court order granting Atwood Vacuum Machine Company's motion to dismiss Ford Motor Company's third party complaint for lack of jurisdiction. Because the original plaintiffs reached a settlement with Ford Motor Company after the filing of the third party complaint, the order of dismissal terminated the litigation below and had the effect of a final judgment. In dismissing the Atwood company from the product liability action, the trial court held a portion of the Florida "long arm" jurisdiction *1307 statute unconstitutional as sought to be applied. Ford Motor Company, defendant and third party plaintiff below, appeals. We have jurisdiction under article V, section 3(b)(1), Florida Constitution, as it existed prior to the 1980 amendment. We reverse.
Elizabeth L. Westerling and her husband brought an action for damages against Ford Motor Company and Holiday Ford, Inc., a Volusia County automobile dealer, alleging that she was injured by the faulty operation of the rear door hinge of a new Ford station wagon. It was alleged that while Mrs. Westerling was unloading the station wagon at the rear door, a detention spring in the hinge broke, causing the door to swing shut and strike the plaintiff on her back. The plaintiff alleged that the faulty operation was the result of defective manufacture of the car.
Ford Motor Company filed a third party complaint against Atwood Vacuum Machine Company, a foreign corporation headquartered at Rockford, Illinois. Ford alleged that Atwood had manufactured the door hinge assembly; that the incident alleged by the plaintiffs, if it occurred as alleged, was caused by a defect in the manufacture or material of the door hinge assembly; that Atwood had warranted the product to be free of defects; and that Atwood supplied door hinge assemblies to Ford knowing that they were to be incorporated into automobiles manufactured by Ford and knew that some of these automobiles would be shipped to Florida and sold.
The Atwood company moved to dismiss the complaint on the ground that section 48.193, Florida Statutes (1977), which enumerates the acts subjecting persons to the jurisdiction of Florida courts, does not provide for jurisdiction in a situation such as the one alleged in the third party complaint. The motion to dismiss did not dispute the factual allegations or otherwise attempt to demonstrate the inapplicability of the "long arm" statute.
The trial court did not explicitly rule on Atwood's contention that the statute was not intended to apply to the facts alleged. Implicit in the trial court's order, however, is a holding that the statute is intended to apply, because the court proceeded to rule on the question  not presented by the motion to dismiss  of the statute's constitutionality. The court held section 48.193(1)(f)2., Florida Statutes (1977), "unconstitutional as applied to the facts of this case," citing Harlo Products Corp. v. J.I. Case Co., 360 So. 2d 1328 (Fla. 1st DCA 1978). Thus, there are two issues in this case: first, whether the statute was intended to apply; second, whether it may be applied consistently with due process.
Section 48.193(1), Florida Statutes (1977), provides for jurisdiction of Florida courts over persons, including nonresidents, who perform certain enumerated acts:
The third party complaint asserted that jurisdiction could be exercised over Atwood pursuant to paragraph (f), subparagraph 2. In support of this assertion, Ford alleged, as discussed above, that Atwood manufactured spring latch assemblies and sold them to Ford to be incorporated into automobiles and that the plaintiff's injuries were caused by one of these components incorporated into an automobile and shipped to Florida where it was purchased by the plaintiff. These allegations placed Atwood within the reach of the statute on the ground that the defendant's act or omission outside the state caused injury within the state; and that the defendant manufactured products outside the state that were used within the state "in the ordinary course of commerce." Thus, the undisputed allegations were sufficient to invoke the statute. We hold that it was intended to be applied to such a situation. See Electro Engineering Products Co. v. Lewis, 352 So. 2d 862 (Fla. 1977).
The second issue we must decide is whether the courts of Florida have jurisdiction to adjudicate Ford Motor Company's claim against the Atwood company. This issue arises because the due process clause of the fourteenth amendment to the United States Constitution imposes limits on the jurisdiction of state courts to adjudicate the rights, interests, and obligations of defendants not resident in the forum state. E.g., Rush v. Savchuk, 444 U.S. 320, 100 S. Ct. 571, 62 L. Ed. 2d 516 (1980); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980); Kulko v. Superior Court of California, 436 U.S. 84, 98 S. Ct. 1690, 56 L. Ed. 2d 132 (1978); Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977); Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958); Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565 (1877).
The principle underlying the limitations imposed by the due process clause was once seen as a strict concept of territoriality, based on the states' physical power as independent sovereigns over persons and property within their borders. In Pennoyer v. Neff, the Court said:
Pennoyer v. Neff, 95 U.S.  at 720. See also McDonald v. Mabee, 243 U.S. 90, 91, 37 S. Ct. 343, 344, 61 L. Ed. 608 (1917) ("The foundation of jurisdiction is physical power... ."). Pennoyer did not completely close the door to extraterritorial exertion of personal jurisdiction by state courts, however. The opinion contained a dictum to the effect that foreign corporations could be required to appoint agents for service of process as a condition of the privilege of doing business in the state. The opening in the door thus left ajar provided a basis for the exercise of jurisdiction over absent persons. While the permissibility of such extraterritorial exercises of power was often discussed in terms of legal fictions such as constructive presence, implied consent, and the like, the justification in retrospect can be found, in most cases, in the relations or ties between the defendant and the forum state, which rendered the exercise of power *1309 just and reasonable. See, e.g., Milliken v. Meyer, 311 U.S. 457, 61 S. Ct. 339, 85 L. Ed. 278 (1940) (domicile, citizenship); Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S. Ct. 553, 79 L. Ed. 1097 (1935) (implied consent, doing business); Hess v. Pawloski, 274 U.S. 352, 47 S. Ct. 632, 71 L. Ed. 1091 (1927) (implied consent, use of automobile).
The Pennoyer system dealt with the problem of the extraterritorial power of state courts by considering the states of the Union as analogous to independent nations. Economic relations among citizens of the several states, however, do not stop at the state boundaries, and the existence of the full faith and credit clause indicates that the framers of the constitution never expected them to do so.
Hazard, A General Theory of State-Court Jurisdiction, 1965 Sup.Ct.Rev. 241, 246-247 (citations omitted). The "unitary" nature of the Union economically and socially gave rise not only to a need for extraterritorial recognition of state court decrees but also *1310 to a need for limitations on the recognized extent of state court power. This points up one feature of the Pennoyer decision that retains its vitality: a state court decision that may rightfully be refused recognition by a sister state is also void in the state where rendered.
Note, Developments in the Law: State-Court Jurisdiction 73 Harv.L.Rev. 909, 912 (1960). The problem of state court jurisdiction has thus come to be seen not in terms of the mutually exclusive territorial power of independent sovereigns, but rather as a question of the "rational allocation" of judicial business based on an analysis that focuses on consideration of fairness to the defendant in light of the forum state's legitimate concerns. Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977); International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945).
The shift in emphasis from the territorial view to a view emphasizing reasonableness in the context of relations among interdependent states as members of a federated union was made explicit in International Shoe Co. v. Washington:
326 U.S.  at 316, 66 S. Ct.  at 158. The inquiry into whether there are "minimum contacts" between the forum state and a nonresident business enterprise must look at the nature of the defendant's activities in the state. Continuous and systematic activities provide a reasonable basis for the assertion of jurisdiction. Single, isolated acts are viewed differently.
Id. at 319, 66 S. Ct.  at 159.
The United States Supreme Court's most recent pronouncement on the subject of state court jurisdiction in personam came in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980). In that case the plaintiffs purchased an automobile in New York and were injured in an accident in Oklahoma. *1311 They brought a product liability action in Oklahoma, naming as defendants the car's manufacturer, the importer, a regional distributor and the seller, a retail dealer. The regional distributor and the retail dealer entered special appearances, contesting the Oklahoma court's jurisdiction over them. The trial court held that it had jurisdiction and the Supreme Court of Oklahoma affirmed. On certiorari, the United States Supreme Court reversed. The majority opinion emphasized the protective function of the due process clause:
Id. at 291-92, 100 S. Ct.  at 564.
In support of its conclusion that there was no jurisdiction because the defendants had no contacts, ties, or relations with the State of Oklahoma, the Court majority made the following observation:
444 U.S.  at 295, 100 S. Ct.  at 566 (emphasis added). Thus the record in Woodson did not establish facts such as those which have been alleged (without being refuted) in this case. The Court, in deciding Woodson, did not deal with the issue in the case at bar: whether a manufacturer who by continuous and systematic activity indirectly through others serves or seeks to serve a state's market is subject to the jurisdiction of that state's courts. The majority's opinion contains dicta, however, suggesting that jurisdiction may properly be asserted in such a case:
Id. 444 U.S.  at 297-98, 100 S. Ct.  at 567. The Court's citation of Gray v. American Radiator & Standard Sanitary Corp., as a distinguishable case is significant in that it indicates how the Court might be expected to rule in a case such as ours here.
In Gray the plaintiff alleged that she had been injured by the explosion of a water *1312 heater caused by the negligent manufacture of a safety valve. From the allegations of the complaint and the statements in the valve manufacturer's affidavit in support of its motion to quash service of process, it appeared that the safety valve was manufactured in Ohio by a company headquartered there; that in the course of its business the manufacturer sold the valve to the water heater manufacturer, which incorporated the valve, in Pennsylvania, into a water heater; that in the ordinary course of commerce the water heater was sold to a consumer in Illinois; and that the valve manufacturer had no agent and conducted no business in Illinois. The Supreme Court of Illinois reversed the trial court's dismissal of the claim against the valve manufacturer, saying:
Id., 22 Ill. 2d  at 441-42, 176 N.E.2d  at 766.
A number of courts have cited the Gray case as authority for the proposition that a manufacturer engaged in interstate commerce, which expects its products to be used in other states, can reasonably expect to be held subject to the jurisdiction of those other states' courts. Coulter v. Sears, Roebuck & Co., 426 F.2d 1315 (5th Cir.1970); Mann v. Frank Hrubetz & Co., 361 So. 2d 1021 (Ala. 1978); Doggett v. Electronics Corp. of America, 93 Idaho 26, 454 P.2d 63 (1969); Andersen v. National Presto Industries, Inc., 257 Iowa 911, 135 N.W.2d 639 (1965); Ehlers v. U.S. Heating and Cooling Mfg. Corp., 267 Minn. 56, 124 N.W.2d 824 (1963); Metal-Matic, Inc. v. Eighth Judicial Dist. Court, 82 Nev. 263, 415 P.2d 617 (1966); see State ex rel. Deere & Co. v. Pinnell, 454 S.W.2d 889 (Mo. 1970).
If a manufacturer is responding to the opportunities created by the existence of an interstate or nationwide market, then the reasonableness of requiring it to defend an action, arising out of its business activity, in another state, is a question not entirely divorced from the substantive question of the manufacturer's liability for the consequences of defects. The manufacturer is the person in the best position to insure against such consequences, and it is less burdensome to require the manufacturer to defend in the state of the injured consumer's residence than to require the plaintiff to travel to the state of the manufacturer's domicile. In Phillips v. Anchor Hocking Glass Corp., 100 Ariz. 251, 413 P.2d 732 (1966), the only relation of the defendant to the forum state that could be established was the presence of its defective product there. The defendant argued that there had not been shown any conduct constituting a purposeful availment of the privilege of having its products sold in the forum state. The court responded:
Id. at 259-60, 413 P.2d  at 737-38. Other cases have held that the occurrence of a single injury in the state is a sufficient basis upon which to conclude that the nonresident manufacturer's product got there through normal commercial channels, thus justifying the conclusion that sufficient contacts existed. E.g., Continental Oil Co. v. Atwood & Morrill Co., 265 F. Supp. 692 (D.Mont. 1967); Duignan v. A.H. Robins Co., 98 Idaho 134, 559 P.2d 750 (1977).
As Gray v. American Radiator and Standard Sanitary Corp. indicates, the fact that a nonresident manufactures a component part outside the state and takes no part in the sale, distribution, or marketing of the finished product in the state is no basis for a limitation on jurisdiction. See, e.g., Deveny v. Rheem Mfg. Co., 319 F.2d 124 (2d Cir.1963); Doggett v. Electronics Corp. of America; Fisher v. Albany Machine & Supply Co., 261 La. 747, 260 So. 2d 691 (1972); State ex rel. Deere & Co. v. Pinnell; Metal-Matic, Inc. v. Eighth Judicial Dist. Court; Hodge v. Sands Mfg. Co., 151 W. Va. 133, 150 S.E.2d 793 (1966); Hasley v. Black, Sivales & Bryson, Inc., 70 Wis.2d 562, 235 N.W.2d 446 (1975). The Atwood company benefits from the protection Florida law provides Ford Motor Company in the marketing of its automobiles in Florida.
We conclude that the Atwood Vacuum Machine Company's lack of direct presence and activity within the borders of Florida is no bar to our holding that the minimum contacts test of International Shoe is met. Furthermore, even though the injured Florida plaintiffs are out of the lawsuit, the remaining dispute being between Ford and Atwood, we hold that Florida as the place of injury has a sufficient interest in the litigation to assert jurisdiction over the nonresident part manufacturer.
The circuit court erred in holding section 48.193(1)(f)2 unconstitutional under the facts of this case. The order of dismissal is reversed and the case is remanded with directions that the complaint be reinstated.
It is so ordered.
ADKINS, OVERTON and ALDERMAN, JJ., concur.
SUNDBERG, C.J., dissents with an opinion with which ENGLAND, J., concurs.
SUNDBERG, Chief Justice, dissenting.
I do not believe that utilization of Florida's "long arm" statute, section 48.193(1)(f)(2), Florida Statutes (1977), to assert jurisdiction over the Atwood company, a foreign car components manufacturer, meets with due process requirements as delineated in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980), and Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977). The necessary predicate for exercise of this state's jurisdiction is lacking because Atwood carries on no discernable activity in this state. Atwood closes no sales and performs no services in Florida. Its only connections with this state are that it is foreseeable that some of Atwood's components *1314 might end up in cars sold by Ford in Florida, and the indirect economic benefit derived from such sales.
The United States Supreme Court has repudiated foreseeability as a sufficient contact to satisfy due process requirements for the jurisdictional predicate: "`[F]oreseeability' alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause." World-Wide Volkswagen, 444 U.S.  at 295, 100 S. Ct.  at 566. Atwood has simply failed to "purposefully [avail] itself of the privilege of conducting activities within the forum State." Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1239, 2 L. Ed. 2d 1283 (1958). See also Harlo Products Corp. v. J.I. Case Co., 360 So. 2d 1328 (Fla. 1st DCA 1978). To accept that foreseeability of product use in this state is the sole requirement for establishing a sufficient jurisdictional nexus between a component manufacturer and this state, is to accept the following:
World-Wide Volkswagen, 444 U.S.  at 296, 100 S. Ct.  at 567 (citations omitted). Likewise, the supplier of raw materials would be subject to litigation anywhere in the states. The United States Supreme Court could not accept this, nor can I.[*]
The only manner in which foreseeability is relevant is in terms of a party's reasonable expectation that he may be subject to a state's jurisdiction:
Id. at 297, 100 S. Ct.  at 567. I cannot fathom how this Court can reasonably expect Atwood to anticipate litigation in every jurisdiction throughout this country.
The second part of the asserted connection with this state, the indirect economic benefits derived by Atwood from Ford car sales in Florida, has also been rejected by the Supreme Court:
Id. at 299, 100 S. Ct.  at 568 (citation omitted). Indirect economic benefit, therefore, is too tenuous a connection to establish sufficient contact between a foreign components manufacturer and Florida, since Atwood is only economically present in this state due to Ford's marketing of the finished product.
Extraterritorial assertion of jurisdiction cannot here be justified on public policy grounds of providing to Florida resident consumers a remedy against foreign component manufacturers. Florida consumers will invariably be able to reach a pecunious manufacturer-distributor of the finished product because of significant business contacts that a manufacturer-distributor necessarily incurs through his commercial efforts.
Ford would also have this Court cast it in the role of the original consumer plaintiff. *1315 But Ford is not a Florida consumer. It seeks indemnity against Atwood based mainly on claims of breach of warranty that occurred in other states. This indemnity action will concern design, manufacture, sale, transportation, control, custody, and installation of the product, all of which took place in either Illinois or Michigan. The relationship between Atwood and Ford, the heart of the instant controversy, is centered in Illinois and Michigan, and it is much more rational for a Florida court to allocate this litigation to those states. This would be fairer to Atwood and no less so to Ford, whose only relationship with Atwood is in those states.
Today's decision does not really increase protection for the Florida consumer. Rather, it allocates the burden of litigating in a foreign forum against components manufacturers, and gives unfair advantage to a national manufacturing and distributing company such as Ford, which is well established in all states and which can litigate with equal facility in any state. Shaffer v. Heitner teaches us that we must look at the foreign defendant's contacts with out state to determine whether the contacts meet due process standards for asserting jurisdiction, and not at the resident plaintiff's contacts. Because the defendant Atwood carries on no activity in this state and its presence is not materially manifest, the majority has failed to heed the lesson of Shaffer v. Heitner.
I would affirm the order of the trial court.
ENGLAND, J., concurs.
[*]  Foreseeability as a test for constitutional minimum contacts becomes all the more meaningless when one recognizes that the majority admits most manufacturers of components are always presumed to foresee the use of their products throughout the country. See Phillips v. Anchor Hocking Glass Corp., 100 Ariz. 251, 413 P.2d 732 (1966) (cited by the majority).