No. 81-288 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

FRED REED, 

Petitioner, 

AMERICAN AIRLINES, INC., 

Respondent. 

ORIGINAL PROCEEDING: 

Counsel of Record: 

For Petitioner: 

William Boggs argued, Missoula, Montana 

For Respondent: 

Keller, Reynolds, Drake, Sternhagen and Johnson, 

Helena, Montana 

Kieth Keller argued, Helena, Montana 

Submitted: December 7, 1981 

Decided: February 18, 1982 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

This case is certified from U.S. District Court, the 

District of Montana, Missoula Division. Petitioner had 

filed a diversity action based upon the alleged negligence 

of American Airlines, Inc., in the handling and subsequent 

loss of petitioner's luggage in New York City. In that 

complaint, plaintiff Reed affirmatively alleged that the 

defendant corporation was "found within Montana." Defendant, 

American Airlines, filed a motion to dismiss the complaint 

for the reason that the United States District Court lacked 

personal jurisdiction over the defendant. The certification 

followed. 

Certification presents the following issues: 

"(1) Was the defendant American Airlines 

found in Montana? 

" (2) If not, do the lettered subdivisions 

of Rule 4B(1) extend that jurisdiction to 

cases where the claim does not arise out 

of the doing of the acts mentioned in the 

lettered subdivisions?" 

We find issue 1 to be dispositive. 

Resolution of the first issue depends upon the facts 

found in this record. We therefore set them forth in detail. 

Plaintiff traveled to New York City from Missoula, 

Montana, via Northwest Airlines on December 5, 1978. Plaintiff 

intended to transfer flights and continue to Nepal on 

British Airways. During the process of transfer, the plaintiff 

lost a case containing in excess of $2,000 worth of professional 

camera equipment. The case ultimately arrived in Nepal several 

weeks later but was found to be empty. The damages attendant 

this loss formed the basis of plaintiff's claim. 

Except for an infrequent charter flight, American 
~irlines does not fly into or out of Montana. It has no 

property nor personnel in Montana. It pays no taxes in 

Montana. American Airlines does solicit business in Montana 

by listings in 19 Montana telephone directories, by television 

advertising broadcast in Montana, and by furnishing material 

to travel agents in Montana. Occasionally American Airlines' 

personnel come to Montana to instruct Montana travel agents. 

The airlines has provided a service enabling Montana residents 

to call toll free, scheduling flights on American Airlines. 

Defendant's business originating through calls from Montana 

direct to American Airlines or through Montana-based travel 

agencies approximated $803,000 in 1980 and $992,000 from 

March to December of 1979. 

The plaintiff is a citizen of the State of Montana. 

American Airlines is a Delaware corporation principally 

domiciled in Texas. The conduct of which plaintiff complains 

of defendant occurred in New York. 

Under the facts above set forth, we hold that American 

Airlines was "found within Montana" and that there is jurisdiction 

in the United States ~istrict Court for the ~istrict of 

Montana. 

Before the activities of a foreign corporation can 

create a physical presence within Montana, those activities 

must be substantial, continuous, and systematic as opposed 

to isolated, casual, or incidental. The activities must 

comprise a significant component of the company's business, 

although the percentage as related to total business may be 

small. See, e.g., O'Neal v. Hicks Brokerage Company (4th 

Cir. 1976), 537 F.2d 1266; Ratliff v. Cooper Laboratories, 

Inc. (4th Cir. 1971), 444 F.2d 745; Lee v. Walworth Valve 

Co. (4th Cir. 1973), 482 F.2d 297. 
We must decide where American Airlines, under the facts 

here before us, fits within the legal framework provided. A 

strikingly similar fact situation was presented in Ladd v. 

KLM ~oyal ~utch ~irlines (S.D. N.Y. 1978), 456 F.Supp. 422. 

In that case, plaintiff brought an action in Federal Court in 

Tennessee and the case was heard by a federal district judge 

in New York State pursuant to 28 U.S.C. 1407. The issue was 

whether the Tennessee court had jurisdiction. Defendant 

airline had its principal place of business in the Netherlands. 

It was not authorized to fly into or out of any place within 

Tennessee. It was not authorized to do business in Tennessee 

and paid no taxes in that state. The airline had no office 

or bank account in Tennessee and did not own or lease any 

property there. However, the airline did maintain toll free 

numbers within the state and advertised in six major telephone 

directories. The airline supplied promotional materials to 

Tennessee travel agents and periodically sent personnel into 

Tennessee for the purpose of instructing those travel agents. 

Travel agencies in Tennessee accounted for total business 

volume in 1976 of $323,304. On these facts, the court found 

the defendant airline to be present in Tennessee for purpose 

of conferring in personam jurisdiction. 

Another similar case was decided by a federal district 

judge in Gullett v. Qantas Airways, Ltd. (M.D. Ten. 19751, 

417 F.Supp. 490. In the Gullett case, the airline maintained 

toll free telephone listings in major urban centers within 

the state; it placed advertisements in national media circulating in the forum state; it supplied travel agents located 

in the forum with promotional materials; infrequently it 

sent its employees to the forum state for purposes of servicing 

the travel agents; total dollar volume of ticket sales in 

the subject state was a maximum of $91,529 for a twelve 

month period. The airline owned no property within the 

state nor maintained any offices in the state. under these 
facts, the Federal District Court held that the airline was 

present within the state for purposes of conferring in 

personam jurisdiction. 

The plaintiff relies upon North Dakota v. Newberger 

(1980), 37 St.Rep. 1119, 613 P.2d 1002. Suit was instituted 

against defendant in the Missoula County District Court. 

Defendant had promoted a rock concert at the University of 

North Dakota, but because of illness of one of the performers, 

failed to go ahead with the concert. An action was commenced 

in Missoula, Montana, for the reason that defendant was 

engaged in promoting a subsequent concert at the University 

of Montana and since defendant had certain monies resulting 

from that promotion, plaintiff sought to institute the 

action in Missoula for purposes of acquiring control of 

those proceeds. The court in Newberger at p. 1123 said: 

"Appellant purposely avails himself of the 

privileges and benefits of the laws of this 

state by conducting his business of promoting rock concerts in Montana and throughout 

the Northwest. The record reveals that 

appellant has promoted concerts in Montana 

prior to the one in Missoula at which the 

proceeds were attached. As part of his business transactions, appellant also enters into contracts for services to be provided in 

this state. It is out of a similar and related contract that respondent's claim for 

relief or course of action arises. . . Further, at the time of this action, appellant 

was in possession of monies or personal 

property in this state which were alleged 

to have rightfully belonged to respondent. 

It was for this reason that respondent chose 

to file this action in Missoula. 

"It appears, therefore, that appellant has 

'minimum contacts' with this state; appellant 

was found in Montana, transacts business in 

Montana, had an interest in proceeds in Montana which were attached, and contracts for 

services to be provided in Montana. The facts 

of this case satisfy the requirements of Rule 

4B (1) (a), (c) and (e) , M.R.Civ.P." 

The record shows that the defendant in Newberger maintained 

his business in California. However, as indicated in the 
facts described above, Newberger had physical presence in 

Montana different from that found in the case before us. 

Furthermore, the language in Newberger is dictum as the 

court said at p. 1123: 

"In any event appellant through his counsel 

appeared without objection to jurisdiction 

over his person. He thereby waived any objection under rule 12, M.R.Civ.P." 

There is no contention that traditional concepts of 

"due process" are offended by the assertion of jurisdiction 

here. The due process requirements articulated in International 

Shoe Co. v. State of Washington (1945), 326 U.S. 310, 66 

S.Ct. 154, 90 L.Ed. 95, are satisfied. 

The question here is whether defendant's activities are 

so substantial, continuous, and systematic that they constitute 

a physical presence within the State of Montana. We hold 

that under the facts in this record the defendant, American 

Airlines, was "found in Montana" for purposes of conferring 

in personam jurisdiction upon the United States District 

Court for the District of Montana. We feel that such holding 

comports with the trend of authority and with the spirit of 

Rule 4B (1) . 

We Concur: 

Chief Justice 

A 5 
Mr. Justice Gene B. Daly dissenting: 

I respectfully dissent from the majority opinion. 

Under the law presently in effect in Montana, American Airlines (AA) cannot be considered "found within" 

Montana and therefore cannot be subject to the in personam 

jurisdiction of this State. 

It is important, in the first instance, to emphasize 

the special facts of this case. The plaintiff flew from 

Montana to New York City on Northwest Airlines. he planned 

to transfer to British Airways and continue to Nepal. While 

at the New York airport, plaintiff alleges that somehow AA 

came into possession of his camera case, refused to give it 

back to him upon request, and insulted him. The plaintiff 

had not traveled on AA; there was no privity of contract 

between them. The plaintiff Is claim of relief, therefore, 

is in no way related to AA's contacts with this state. 

The issue here is how to interpret the words "found 

within" as they are used in Rule 4B, M.R.Civ.P. The pertinent part of Rule 4B reads: "All persons found within the 

state of Montana are subject to the jurisdiction of the 

courts of this state." The remaining lettered subdivisions 

of Rule 4B are not applicable here since they apply only 

when a plaintiff's claim of relief arises out of the 

activities of the nonresident defendant in the forum state. 

While this Court has extended in personam jurisdiction over 

nonresident defendants to its constitutional limits under 

the lettered subdivisions of Rule 4B, Prentice Lumber v. 

Spahn (1970), 156 Mont. 68, 474 P.2d 141, we have never done 

so under the first sentence of Rule 4B. But, we have 

applied the "two-step" test. The effect of the majority 
opinion is to institute a change in the existing law by 

extending jurisdiction under "found within" to that 

allowable under due process and reducing the l.aw to a onestep test. By this expansion of jurisdiction, the majority 

has ignored both the importance of the words "found within" 

and the two-step test we have used for determining in 

personam jurisdiction. 

The well.-established two-step test for interpreting 

Rule 4B provides that the court must, as a first step, look 

to whether the statute provides for the exercise of jurisdiction under the particular facts of the case, and applying 

the second step, the court must determine whether it would 

offend due process to assert jurisdiction. State of North 

Dakota v. Newberger (1980), Mont. , 613 P.2d 1002, 

1004, 37 St.Rep. 11-19, 11.21; May v. Figgins (1980), - 

Mont. - , 607 P.2d 1132, 1134, 37 St.Rep. 493, 495, quoting 

2 Moore's Federal. Practice q14.41-l[l] at 4-421. 

The first question here, then, is whether AA is 

"found within" the State of Montana, and the second question 

is whether the assertion of jurisdiction offends due process 

--that is, the "traditional notions of fair play and substantial justice." International Shoe v. Washington (1945), 

326 U.S. 310, 31.6, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102, 

quoting Pllillikin v. Meyer (1940), 311 U.S. 457, 463, 61 

S.Ct. 339, 343, 85 L.Ed. 278, 283. It is important to note 

at this point that the "minimum contacts" test of 

International Shoe and its progeny is used only to determine 

whether due process has been offended. 

The majority has meshed this two-step test into one 

step by looking only to whether the traditional notions of 
"due process" are offended by asserting jurisdiction here. 

The effect of its ruling is that "found within" must be 

interpreted, in the first instance, in terms of the most 

liberal constructions allowed to the "minimum contacts" 

test. 

The major problem of applying the more liberal 

"minimum contacts" test, in the first instance, is the fact 

that there is no connection between plaintiff's claim of 

relief and AA's contacts with this state. Plaintiff did not 

buy a ticket to fly on AA and had no contact with AA prior 

to the alleged conversion of his camera case in New York. 

If he had bought a ticket from AA, it may have been possib1.e 

to apply the more liberal "minimum contacts" interpretation 

to subdivision (a) of Rule 4~$j\"transacting business." 

In Newberger this Court acknowledged that jurisdiction over a nonresident defendant may be asserted even 

though the cause of action did not arise out of the 

defendant's contacts with the forum state. Neverthel.ess, 

both this Court and the United States Supreme Court have 

recognized that, "[tlhe contacts required upon which to base 

jurisdiction, consistent with due process, would be greater 

where the action is brouqht upon a claim not arising from 

these contacts with the state, than where the action does 

arise from the state's contacts." (Emphasis added.) May_, 

supra, 607 P.2d at 1137, quoting 2 Moore's Federal Practice 

714.41-1[1] at 4-414; International Shoe, 326 U.S. at 317- 

318. The majority has ignored the case law that sets a 

restrictive test for personal jurisdiction when the claim of 

relief does not arise from the nonresident's contacts with 

this state. 
By ignoring this case law, the lnajority has failed to 

recognize the true issue of this case: how much more "substantial, continuous and systematic" must the nonresident's 

activity be under "found within" than under the lettered 

subdivisions of Rule 4B. 

The majority relies upon two cases, Gullett v. Qantas 

Airways Ltd. (M.D. Tenn. 1975), 417 F.Supp. 490, and Ladd v. 

KLM Royal Dutch Airlines (S.D. N.Y. 1978), 456 F.Supp. 422, 

to support its conclusion that AA has sufficient contacts 

with this state to support the assertion of in personam 

jurisdiction. The precedential value of these cases is 

highly questionable here. In Gullett the plaintiffs had a 

contractual relationship with Qantas Airways that gave rise 

to the claim of relief, and in Ladd the New York federal 

court was construing a Tennessee statute which provided for 

the exercise of in personam jurisdiction over any person on 

" [a] ny basis not inconsistent with the Constitution of this 

State or the United States." TCA S20-235(f). Here, there 

is no contractual relationship between the parties, and we 

are not dealing with statutory language in any way similar 

to Tennessee's statute, Tennessee being a typical one-step 

state. 

Only two cases give any guidance for the interpretation of "found within" as it is used in Rule 4B. McIntosh 

v. Heil Company (D. Mont. 1972), 350 F.Supp. 866, speaks 

directly to this point; and Newberger, 613 P.2d at 1.005, 

speaks only indirectly. 

In Heil, the nonresident corporation advertised in 

Montana, sent agents into Montana to bid on municipal 

contracts, and distributed products through a distributor 
located in Billings. The corporation had no registered 

agent in Montana, owned no property, and maintained no 

office. Most importantly, the pl.aintiffls claim of relief 

arose out of the use of one of the corporation's trucks in 

wyoming, so there was no connection between the claim for 

relief and the corporation's contacts with Montana. The 

sole question was whether the corporation was "found within" 

Montana. 

In reasoning that "found within" must be distinguished from the test of minimum contacts and transacting 

business, the District Court in - Heil said: 

"In People's Tobacco Company, Ltd. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 

62 L.Ed.587 (1918), the Supreme Court said 

that 'to be found' within a district a corporation must be present in the district by 

its officers and agents carrying on the business of the corporation. In United States v. 

Scophony Corp. of America, 333 U.S. 795, 68 

S.Ct. 855, 92 L.Ed. 1091 (1948), the Supreme 

Court said that t.he word 'found' denoted the 

concept of 'carrying on business' and that 

the words 'transact business' had a meaning 

broader than the words 'carrying on business. ' The words ' found, ' 'doing business, ' 

'transaction of any business' were at the 

time the Montana rules were adopted words of 

art the meanings of which were known to the 

bench and bar. The scholarly committee drafting the Montana rules used these words, and 

it is apparent that they were used as words 

of art. The all-encompassing phrase 'the 

transaction of any business' was used to provide a maximum protection to persons injured 

by reason of activity in Montana. As to 

those actions arising in other jurisdictions 

or torts accruinq in other jurisdictions the 

--------- committee used the more restrictive words 

-- 'found within.'-(~rn~hasis -- added.) 350 

F.Supp. at 868. 

'The court in - Heil then went on to put its own 

limitations on the words "found within": 

"A corporation is not 'found within the state 

- of Montana' unless it has agents or officers 

here uEqn------ whom Erocess --------- may -------------- be served or 

--- unless its business has been of such charac- 
ter and extent as to warrant the inference 

that it has subjected -- itself -- to the jurisdiction of the state. It is aenerallv 2 - -.' held 

that such an inference cannot arise where a 

corporation merely sol icits for business and 

ships its products into the state and occasionally sends an officer or agent into the 

state for solicitation purposes. [Citations 

omitted.]" (Emphasis added.) 350 F.Supp. at 

868-869. 

The plaintiff argues that Newberger is the main 

controlling authority. In Newberger this Court found that 

the defendant was "found within" this state. The defendant's 

contacts with this state in Newberger, however, were much 

more substantial. than those of AA in this case. In 

Newberger, the defendant was "found within" Montana because 

of the following activity: 

"The record reveals that appellant has promoted concerts in Montana prior to the one in 

Missoula at which the proceeds were attached. 

As part of his business transactions, appellant also enters into contracts for services 

to be provided in this state. It is out of a 

similar and related contract that respondent's claim for relief or course of action 

arises. The basis of respondent's claim is, 

therefore, not totally unrelated to or distinct from the activities of appellant in 

this state. Further, at the time of this 

action, appellant was in possession of monies 

or personal property in this state which were 

alleged to have rightfully belonged to 

respondent . . ." 613 P.2d at 1005. 

Most importantly, the nonresident defendant was actually 

present in Missou1.a at the time the action was commenced. 

The acts of solicitation by AA are clearly less 

substantial than those contacts of the nonresident defendant 

in Newberqer. 

Given the higher degree of "substantial" and "continuous and systematic" activity necessary for a nonresident 

corporation to be "found within" this state, it seems that 

the acts of mere solicitation are not sufficient. While 
International Shoe clearly held that mere solicitation would 

be enough to satisfy "presence" for due process purposes, or 

the one-step type of test, that is not what we are concerned 

with here. It was recognized in International Shoe, itself, 

that where the claim of relief is not connected with the 

nonresident corporation's activity in a forum state, the 

extent and quality of corporate contacts must be greater. 

International Shoe, 326 U.S. at 317-318; see also prior 

reference to x, 607 P.2d at 1137. 

Given this greater standard of "found within," mere 

solicitation does not constitute the "substantial" activity 

necessary to find in personam jurisdiction where the claim 

of rel-ief is in no way connected to the solicitation in the 

forum state. I would, therefore, dismiss this case on the 

grounds that AA is not subject to the in personam jurisdiction of the State of Montana. 

I concur in the foregoing dissent. 

m--&k$sade Chief Justice