### IN THE COURT OF APP EALS OF TENNESS EE AT KNOXVI LLE June 8, 200 4 S es sio n ROBE RT L. EUBANKS , JR., ET AL 

### . v. PROCRAFT, INC., ET AL 

### . Interlocutor y Appeal f

romthe Circ uit Court for Knox County No. 1-569-02 D ale Workm an, Jud ge

No. E2003-02602-COA- R9-CV - F ILED AUGU ST 3, 2004

An applied liquid siding damag ed the Plaintiffs’ house. B y amende d complaint the Plaintiffs joined the purporte d manufa cture r, a Cana dian cor poration, pursua nt to the Hag ue Convention. Held, not subject to jurisdiction in Tennessee

. Tenn. R. App . P . 9 Interlocutor y Appeal; Jud gm ent of the Circuit Court Reve rsed
W I L L I AM H. INMAN , S R
. J ., delivere d the opinion of the court, in which H ER SCH EL P. F RAN KS , P.J ., and C H A RLES D. S US ANO , J R ., J ., joined.
Martin B . Bailey , Knoxvi lle, Tenne ssee, attorney for a ppellants, Kryton Canada C o rp oration and Kryton I nternational, I nc. Chris Ralls, Mary ville, Tennesse e, attorne y for a ppellees, R o b er t L

. Eubanks, Jr., and Pamela E. Eu ba nk s. OP IN ION This Rule 9, Tenn. R. App. P. interlocutory appeal was g rante d to de termine the sole issue of whe ther the tria l court er red w h en it denied the motion of the a ppellants to dismis s for lac k of pe rs on a l ju ri sd ic tio n. We c on c lud e that th e tr ia l c ou rt e rr e d, a ndthe re fo re re ve rs e the jud g me nt.
Bac kgr ound
Th e ini tia l c omp la int

joi ne d Pr oc ra ft , I

n c
. an d K r y t o nM ark e tin g Di vis ion , Inc . a s d e fe nd a nts , all egi ng that eac h is eng ag ed in marke ting a nd installing a pr oduct known as Multi-Ga rd R-10 Pe rm a ne nt C oatin g Sy ste ms [liq uid sid ing ] w hic h wa s ma nu fa c tur e d by the de fe nd a nt Kry ton . T his liquid siding was applied on the plaintiffs’ residenc e with unsatisfactory results, resul t i n g i n an alleg ed bre ach of

contra ct. The pla intiffs further alleg ed that the pr oduct offe red no insulation value contra ry to repr es en t at i ons, and that the de fendants thereby violated the Te nnessee ConsumerProc r af t , I n c. , an d K r y t on M ar k et i n g D i v i s i on , d/ b/ a K r y t on Coat i n g s I n t er n at i on al , I n c. , a r e al l eg ed t o be 1 T enness ee co rpo rat io n s. D ef aul t judgm ent was t aken agains t t hem fo r $1 , 5 0 0 , 0 0 0

. 0 0

. T he p l ai nt i f f s al l eged t hat t he l i qui d s i di ng damaged t he woo den e xt er i or of t hei r 200 0 s quar e f

eet hous e. T he r ecor d does not r eve al wh at ev i dence , i f a n y , w as pr es en t ed t o s u ppor t t h e aw ar d. -2- Protecti o n Ac t , Tenn. Code Ann. § 47- 18-101 et seq., a ndfu rthe r a lle g e d th a t th e de fe nd a nts int e nti on a lly

or ne g lig e ntl y

mis re pr e se nte d th e ir

pr od uc t.
The c omplaint was amende d to join two additional defe ndants, Kryton Canada Corpor ation [“KCC”] and Kry ton I n t er n at i o n al , I nc [“KI I ”]. The plaintiffs alleg ed that the liquid siding wa s ma nu fa c tur e d b y “ Kry ton Ca na da of the de fe nd a nt Kry ton I nte rn a tio na l, I nc .” a nd is dis tr ibu te d to Kryton Coating throug hout the United States, and that Kryton Coating and Procra ft I nc. are in effe ct o n e e n t i t y. 1
The de fendants K CC and KI I moved to dismi ss the complaint for lac k of jurisdiction. The motion was s u p p o rt ed by an af fidavit of Ka

ri Yuer s, President of ea ch of the se def endant corpor ations. He testified that eac h corpor ation was org anized under th e laws of the Province of British C olumbia where their off ices a re ma intained, and that neither cor poration has a n office nor pla c e of bu sin e ss i n th e Un ite d Stat e s. KC C sell s a nddis tr ibu te s p ro du c ts m a nu fa c tur e d b y KII on ly in C a na da a ndha s n e ve r c on du c te d bu sin e ss in the Un ite d State s. He te sti fi e d th a t K I I e nte re d in to a d i s t r i b u t i o n agr ee m en twi t h Kr y t o n M ar k et i n g Di v i s i o n [ “K M D” ] d/ b / a K ry t o n C o at i n gs I nternational, I nc., pursuant to which KII shipped products dire ctly to KMD in Tennesse e, and that in 1999 KII

as s i gn ed t h e D i s tri b u t i o n Agr ee m en tt o an o t h erco rp o ra tion, Kry ton-Ba rbados, or g anized un de r the la ws of

B arb a do s. Mr . Yue rs fu rthe r te sti fi e d tha t K I I on se ve ra l oc c a sio ns so ld p ro du c ts to Kryton-Ba

rbados whic h wer e shipped to KMD in Te nnessee pursuant t o t he instructions of Kryton-Ba

rbados, a nd that at no time did KI I make a ny

war ranty to KMD.
The motions of KCC and KI I to dismi ss (Rule 12.02(2)) for lac k of per sonal jurisdiction were de niedwi tho ut c omm e nt. Ap pe llate re vie w i s de novo on the re cord. Waldron v. Delffs , 988 S.W. 2d18 2 ( Te nn . Ct . A pp . 1 99 8) ; Sims v . St e war t , 973 S.W .2d 597 (Tenn. Ct. App. 1998) . The tri al c o u r t c o n s id e r e d matters outside the plea dings w hich wer e prope rly prese nted. See, Nic hol

sto ne Boo k Binding, Inc . v . Che lse a Ho use Pub lis he rs , 621 S.W .2d 560 (Tenn. 1981)

. Ana lys is
T e n n e s s e e Co d e A n n o tate d § 2 0

- 2

- 2 1 4 et seq. , the L ong Arm Statute, provides that Tenne s see may

exercise pe rsonal jurisdiction over f oreig n or alien de fendants as to any action or c la im f or re lie f a ri sin g fr om: (1) The tra nsaction of a ny business within the state; (2) Any

tortious act or omission within t his state;-3- (3 ) Th e ow ne rs hip or po sse ssi on of any

int e re st i n p ro pe rt y located w ithin thi s state;

* * * * * (5) Entering into a contra ct for se rvice s to be rende red or for materia ls to be furnished in this state; (6 ) An y

ba si s no t inc on sis te nt w ith the c on sti tut ionof thi s st a te or of the Un ite d St a te s.
I t is undisput ed that KCC has neve r transa cted a ny business in the United States but eng ag es so le ly in the bu si ness of

dis tr ibu tin g c on str

uc tio n p ro du c ts thr ou g ho ut C a na da . T he bu sin e ss tr a ns a c tio ns wh ic h the plaint if fs a ttribu te to KC C a nd KII we re no t c on du c te d b y

the se c or po ratio ns , but by Procra ft and KMD.
KI I shipped g oods to T ennesse e from time to time f or, and at the reque st of, Kr y t o nBa rbados, with whom it had ente red into a worldwide distribution ag ree ment. These shipments ar e not e vidence that KI I

intended to serve the Tenne ssee mar ket. See Gibbons v. Schwartz-Nobel , 928 S.W .2d 922, 925 (Tenn. Ct. App. 1996) (shipping videos to Davidson Countylibraries w ithout more was not ev idence of intent to serve Tenne ssee mar ket). Gi bb ons establishes that mere ly shipping a product to Tenne ssee at the di rec tion of Kryton-Ba rbados is not “tra nsacting business” within the S t a t e o f T e n n e s s e e b y

K II. The pl a in ti f

f s a ll e g e d a

h o s t o f mi s r e p r e s e n tati o n s a n d o mi s s io n s b y Pr o c r a f t an d K M D, wh ic h th e y

imp art to KI I a ndKC C, b y

a ve rring that KMD is the a g e nt o f b othKC C a ndKII “ fo r a ll purposes.” This is a conclusory assertion. Cf. Ruf

fi n- Ste inb ac k v. de Pa sse , 267 F.3d 457, 461 ( 6 th Cir . 2 00 1) (i n c on te xt of 12 (b )( 6) mot ionc ou rt

c on str ue s w e ll- plead ed alle g a tio ns in l ig ht m os t favor ab le to p lain ti f

f a n d a c c e p ts f

a c tu a l a ll e g a ti o n s a s tr

u e b u t is n o t r e q u ir e d to a c c e pt leg al conclusions).
The L ong -Arm Statute permits t he exerc ise of persona l jur isdiction ove r a fore ign or alien defe ndant that owns an interest in rea l property in the S tate of Tenne ssee. Te nn. Code Ann. § 20-2- 214(a) (3). Ne ither of these alien cor porations owns any

rea l property

in Tennesse e. Section 20-2-214( a)( 5) permits persona l jurisdiction over a for eig n or alien c orporation that en t er s i n t o a co n tra ct fo r m at er i al s t o b e fu rn i s h ed i n t h e S t at e o f T en n es s ee
. T h e p l ai n t i ffs al l ege in the ir Complaint a nd Am e nd e d Co mpl a int that th e y pu rc ha se d “ liq uidsid ing ” fr om P ro c ra ft . T his is the on ly c on tr a c t me nti on e d in the re c or d. Th e y a lso ob ta ine d wa rr a nti e s fr om KM D a ndPr oc ra ft

. Th e L on g -A rm

Sta tut e ha s b e e n c on str

ue d to re a c h a s f

ar a s p e rm itt e d b y

the du e pr oc e ss clause of the F ourtee nth Amendment to the Constit ution of the United States. Tenn. Code Ann. § 20-2-214( a)( 6). J

. J
. C a s e C o r p o r a ti o n v . W

i l l i a ms , 832 S.W .2d 530, 531-32 (Te nn. 1992). B ut due-4-

p r o c e s s i m p o s e s s i g n i f

i c a n tc o n s tr a i n t s o n t h e e x e r c i s e o f p e r s o n a l j u r i s d i c t i o n o v e r K C C a n d K II. T o b e s u b j ec tt o s u i ti n T en n es s ee , a d ef en d an tm u s th av e “ s u ch m i n i m u mco n t ac t s wi t h t h e f o re i gn state that the maintenance of the suit does not offend tr aditional notions of fair play and substantial justice.”

“ Du e pr oc e ss r e qu ir e s th a t to su bje c t a defe nd a nt t o a jud g me nt in personam if he be not prese nt within the territory of the for

um, he have certain mini m u m co n t ac t s with it such that the m ai n t enanc e of the suit does not offend ‘ traditional notions of fair play and substantial justice.’” Internat ional S hoe Co. v. Washin gton , 3 2 6 U

. S

. 3 1 0 , 3 1 6 ( 1 9 4 5 )

. D u e p r o c e s s r e qu ir e s “ fa ir warni n g t h at a particular a ctivity may subject [them] to the jurisdiction of a for eig n sovere ign.” Burger Ki ng Corpor

ation v. Ru dzewicz , 471 U.S. 462, 472 (1985). The se consider ations require he ig hte ne d atte nti on wh e n th e de fe nd a nt s ou g ht t o b e haled in to a Te nn e sse e c ou rt

c ome s f ro m a fore ign c ountry

and not just another state

. See, e .g., Asahi Met a l I n d u s t r y Co ., Ltd. v. Superior Cour t of Cal if or nia , 480 U.S.102 (1987) (g reat car e and r eser ve should be e x erc ised w h e ne xtending notions of personal jurisdiction into the international fie ld.)
KI I sold products to Kryton-Ba rbados in the West I ndies with the pre sumed knowledg e that the products would be sold in Tennessee . This fac t confe rs no in personam jurisdiction. Mull ins v. Harley-Davidson Y

am aha BMW

of Memph is, Inc. , 924 S.W .2d 907 (Tenn. Ct. App. 1996).
I n M u lli ns , the plaintiff’s de cede nt was injured in a motorc y cle a ccide nt. His death wa s a ttribu te d to a

de fe c tiv e he lme t. Th e Ko re a n man uf a c tur e r of the he lme t wa s n a me d a s a de fe nd a nt. We held that Tenne ssee’ s exercise of persona l jurisdiction ove r that defe ndant would not comport with due proc ess, be ca u s e the manufa cture r established that it maintained no office or plac e of business in the Unit ed S tates, and sold helmets to distributors, who were “fre e to sell to any deale r of the ir c ho os ing in the Un ite d St a te s. ” 92 4 S. W.2 d at 90 9. Th e ma nu fa c tur e r didno t se ll d ir e c tly to dealer s, did not sell mot orcy cle he lmets or any other products directly into Tennessee , and did not cre ate or control the distribution sy stem that broug ht the helm et s i n t o the state. Nor did the manufa cture r adve rtise in Tenne ssee or solicit business in Tennessee. This Court principally

relied upon two decisions, one by the Supreme Court for

the United States in Asa hi Me tal

Ind ustr ie s Co mpany v . Sup e rio r Co urt , 4 80 U. S. 1 02 (1 98 7) , a ndon e by thi s Court in Davis Kidd Booksellers, In c. v. D ay-Impex, Ltd. , 832 S.W . 2d 572, 575 (Tenn. Ct. App. 1992). These case s establish that simplyplacing a manufacture d item into the “stream of c ommerce ” does not suffice to establish personal jurisdiction. As the Supreme Court stated: “[t] he plac ement of a pr od uc t int o the str e a m of c omm e rc e , wi tho ut mor e , is no t a n a c t of the de fe nd a nt p ur po se fu lly direc ted towar d the forum State.” 480 U.S. at 112. The Mull ins c o u r t, a nd the Da vi s Kidd court be fo re it, c on c lud e d th a t Asa hi did no t re pr e se nt a n e xce pti on to the tr a dit ion a l “ min imu m c on ta c ts” a na ly sis a ndhe ld that th e e xer c ise of pe rs on a l ju ri sd ic tio n in tho se c a se s w ou ld v iol a te du e pr oc e ss. The holding of Mull

ins is c on sis te nt w ith lon g re c ognize d c on sti tut ion a l du e pr oc e ss jurisprudenc e. In World-Wide V olkswagen v. Woodson , 444 U.S. 286 (1980), the Supre me Court reje cted the notion that a se ller of g oods was subj ect to personal jurisdiction simpl y beca use it was-5-

fore seea ble that the seller ’s goods could be transporte d to a forum state. As the C ourt noted, if that wer e so, “[e]very

seller of chattels would in ef

fec t app o i n t t h e chattel his age nt for service of proce ss.” The mere fac t that liquid siding could be, or w as, shipped to Tenne ssee doe s not subject KI I to personal jurisdiction. Finally , we note that the amende d complaint makes no re fer ence to the L ong Arm Statute but simplyrec ites that KCC and KI I are Canadian c orporations subject to pr o ce s s u n der the Hag ue Convention. The appellants arg ue that this is insufficient to establish jurisdiction. We ag ree
. See, Gibbons v. Schwar

tz-Nobel, supra.
Th e jud g me nt i s r e ve rs e d a ndthe c omp laint , a s to KC C a ndKII is d is mi ss ed, wi th co sts a sse sse d to the app e lle e s.

___________________________________ WI LL I AM H. INMAN, SENI OR J UDGE