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Matched Legal Cases: ['Art. 1', 'Art. 6', 'Art. 30', 'art. 1', 'arts 45', 'art. 8', 'art. 8']

United States 9 March 1999 State District Court [Minnesota] (KSTP-FM v. Specialized Communications)
[Cite as: http://cisgw3.law.pace.edu/cases/990309u1.html]
Case text and related material
DATE OF DECISIONS: 19990309 (9 March 1999)
TRIBUNAL: State of Minnesota, County of Hennepin District Court, Fourth Judicial District
JUDGE(S): Patricia Kerr Karasov
CASE NUMBER/DOCKET NUMBER: CT 98-013101
CASE NAME: KSTP-FM, LLC v. Specialized Communications, Inc. and Adtronics Signs, Ltd
CASE HISTORY: 2d instance State of Minnesota, Court of Appeal 14 December 1999 (C7-99-770) [affirmed, CISG issue not rules upon in appellate opinion]
SELLER'S COUNTRY: U.S.A. (defendant) [co-defendant a Canadian firm from whom U.S. seller sourced the goods]
GOODS INVOLVED: Music board systems, electronic displays and software
United States: Minnesota State District Court 9 March 1999
Case Law on UNCITRAL texts (CLOUT) abstract no. 416
A U.S. buyer, plaintiff, bought music board systems and electronic displays from a U.S. seller, first defendant. To fulfill this sales contract the U.S. seller bought some of the items from a Canadian supplier, second defendant. The supplier sent these items directly to the plaintiff. The items did not work satisfactorily and the supplier attempted unsuccessfully to fix the items it supplied. The plaintiff brought a court action for breach of contract against both the first and second defendants. The plaintiff's claim against the Canadian supplier was for breach of an express or implied representation made by the supplier to the buyer's seller.
The District Court ordered the plaintiff to submit its claim against the first defendant to arbitration in accordance with an arbitration agreement in the sales contract. As for the plaintiff's claim against the second defendant, the District Court held that the CISG governed the relationship between the plaintiff and the second defendant but dismissed the claim because the CISG does not contain provisions with respect to the rights of parties that are not in contractual privity.
On appeal, the State Court of Appeals affirmed dismissal of the plaintiff's action against the second defendant on the ground that the state courts did not have personal jurisdiction over the second defendant. The Appellate Court did not address the reasoning of the District Court.
APPLICATION OF CISG: Court held CISG applicable to co-defendant [Article 1(1)(a)]
Key CISG provisions at issue: Articles 4 ; 6
4B [issues excluded: Convention limited to rights and obligations of the seller and the buyer]
6B [Agreements to apply Convention: Convention applies where no evidence that its applicability was disclaimed]
Descriptors: Applicability ; Scope of Convention ; Privity of contract
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=517&step=Abstract>
Original language (English): Unreported [text available at Institute of International Commercial Law, Pace University School of Law, excerpt from text presented below]; see also	Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=517&step=FullText>
Hennepin County District Court [excerpt from unpublished Memorandum Opinion]
Appellate Brief [excerpt from Appellate Brief filed by respondent Adtronics Signs, Ltd.]
Court of Appeals, State of Minnesota [summary of ruling]
KSTP-FM, LLC vs. Specialized Communications, Inc.
and Adtronics Signs, Ltd
File No. CT 98-013101
Excerpt from unpublished Memorandum Opinion
The above-entitled matter came on for hearing on December 14, 1998 before the undersigned Judge of District Court pursuant to defendants' separate Motions to Dismiss.
Magid Creighton, Esq., appeared on behalf of plaintiff KSTP-FM, LLC [buyer]
Alan Demmer, Esq. appeared on behalf of defendant Specialized Communications, Inc. [seller]
Duane Krohnke, Esq., appeared on behalf of defendant Adtronics Signs, Ltd.
Based upon the evidence adduced, the argument of counsel and all of the files, records, and proceedings herein,
1.	That defendant [seller's] Motion to Dismiss is hereby GRANTED and that plaintiff [buyer] and defendant [seller] are hereby ordered to binding arbitration in Bellevue, Washington.
2.	That defendant Adtronics Signs' Motion to Dismiss is hereby GRANTED.
3.	The plaintiff [buyer's] Complaint is hereby DISMISSED.
4.	That the attached memorandum be made part of this Order.
This case arises from a contract dispute between plaintiff [buyer], a Minnesota corporation, and defendant [seller], a Washington corporation. The contract, entitled "Musicboard TM Rental Agreement" ("Agreement"), was for the purchase by plaintiff [buyer] of two music board systems, electronic displays and software from defendant [seller] (Ex. A attached to Demmer Aff.). This Agreement was executed by the parties on March 29, 1995. (Id.).
The third section of the Agreement entitled "Terms of agreement" sets forth, inter alia, the rental fee for each system. The fifth paragraph of the third section covers eventually applying all rental fees paid to the purchase price of the systems. A hand-written provision following the fifth paragraph states "KS-95 [buyer] agrees to purchase two systems for $32,600 (Thirty-two Thousand Six-hundred dollars) at the end of this lease." The last section of the Agreement, labeled "Legal remedies", states that both parties agree to settle any legal disputes arising out of this contract through binding arbitration in Bellevue, Washington. On May 8, 1995, Pam Silverman, Director of Marketing for plaintiff [buyer] during the time in question, sent a letter to Allen Hartle, owner of defendant [seller], purporting to modify the Agreement to reflect plaintiff [buyer's] outright purchase of the equipment. (Ex. A attached to Silverman Aff.).
On April 27, 1995, defendant [buyer] contracted with defendant Adtronics Signs, Ltd. ("Adtronics"), a Canadian corporation, to purchase the two billboards and remote controls as ordered by plaintiff [buyer] from defendant [seller] in the Agreement. (Armitage Aff. �� 6-7). The order did not provide for a shipping destination. (Id. at � 8). After August 18, 1995, defendant Adtronics delivered the merchandise to plaintiff [buyer] in Minnesota at defendant [seller's] request and at defendant [seller's] cost. (Id.). On August 31, 1995, defendant Adtronics delivered to defendant [seller] an invoice for payment of the merchandise shipped to plaintiff [buyer]. (Id.).
Plaintiff [buyer] was unsatisfied with the performance of the billboards. After it was determined that the billboards did not work properly, defendant Adtronics either hired a technician in Minnesota or sent a technician to Minnesota to make repairs. (Kazada Aff. �4; Armitage Second Aff. �� 3-5). Subsequently, at the request of defendant [seller], defendant Adtronics delivered a replacement cental processing unit (CPU") to defendant [seller] in Washington. (Id. at � 6; Kazada Aff. � 5). Defendant [seller] subsequently sent the CPU to plaintiff [buyer] in Minnesota. (Id.). At plaintiff [buyer's] request, defendant Adtronics sent billboard schematics to plaintiff [buyer] in Minnesota in an effort to make it possible for the billboards to be repaired by others. (Id. at � 6). Still unsatisfied, plaintiff [buyer] sent two letters, dated July 1, 1996 and August 22, 1996, from James Barnum, plaintiff [buyer's] Deputy General Counsel, to David Sprinkle, attorney for defendant [seller], which indicated plaintiff [buyer's] intent to pursue an arbitration proceeding against defendant [buyer] and civil litigation against defendant Adtronics. (Attached as Ex. A and B).
Defendants [seller] and Adtronics have brought separate motions to dismiss plaintiff [buyer's] Complaint.
Defendant [seller] asserts that plaintiff [buyer's] complaint should be dismissed because there is an enforceable binding arbitration clause. [The Court granted this Motion to Dismiss. This portion of the Court's opinion, Section I, is not quoted below.]
Defendant Adtronics asserts that this Court lacks personal jurisdiction over defendant Adtronics [The Court ruled that "the exercise of personal jurisdiction over defendant Adtronics would be violative of due process. Therefore, the plaintiff [buyer's] claims against defendant Adtronics are hereby dismissed." This portion of the Court's opinion, Section II.A, is not quoted below.]
[Defendant Adtronics [further] asserts that plaintiff [buyer's] Complaint fails to state a claim upon which relief can be granted. [As it is relevant to the CISG, this portion of the Court's opinion, Section II.B., is quoted below.]
A party may bring a motion to dismiss for, inter alia, lack of jurisdiction and failure to state a claim upon which relief can be granted. Minn. R. Civ. P. 12.02. The court may only consider the pleadings and any inferences drawn must favor the non-moving party. Pederson v. American Lutheran Church, 404 N.W.2d 887, 888 (Minn. Ct. App. 1987), citing Northern States Power Co. v. Franklin, 265 Minn. 391, 122 N.W.2d 26 (1963). In making its determination the court may consider a written contract that is referenced in the complaint that is central to the claims alleged. In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 497 (Minn. 1995).
II.	Adtronics Signs, Ltd.
B.	Failure to State a Claim Pursuant to Minnesota Rules of Civil Procedure 12.02
Even if this Court had jurisdiction, the plaintiff [buyer's] claims against defendant Adtronics fail to state a claim upon which relief can be granted pursuant to Minn. R. Civ. P. 1202(e). The only question when considering a Rule 12.02(e) motion is whether the complaint sets forth a legally sufficient claim for relief. Terwilliger v. Hennepin County, 542 N.W.2d 675, 676-77. Defendant Adtronics asserts that plaintiff [buyer's] claims fail because the United Nations Convention on Contracts for the International Sale of Goods "CISG") is controlling, not the Minnesota Uniform Commercial Code ("UCC") as alleged by plaintiff [buyer], and that, under the CISG, the required privity between plaintiff [buyer] and defendant Adtronics is lacking.
The CISG applies to contracts for the international sale of goods between parties of different countries participating in the Convention. CISG, Art. 1. Parties to a contract governed by the CISG may disclaim its application and choose what law to follow. CISG, Art. 6; Mitchell Aircraft Spares, Inc. v. European Aircraft Serv. AB, 1998 WL 754801, *3 (N.D.Ill. Oct. 28, 1998). Here, the CISG is the applicable law in the instant situation because defendant [buyer], located in the United States, and defendant Adtronics, located in Canada, are incorporated within participating countries of the CISG and because there is no evidence that defendants disclaimed the applicability of the CISG.
In Minnesota, the UCC expressly allows certain parties the right to sue for breach of implied warranties in the absence of contractual privity. Minn. Stat. � 336.2-318; Church of the Nativity of Our Lord v. WatPro, Inc., 474 N.W.2d 605 (Minn. Ct. App. 1991), aff'd 491 N.W.2d 1. However, the CISG makes no such express provision. In fact, all buyer's remedies and seller's obligations under the CISG fail to mention the rights of those lacking contractual privity. CISG, Art. 30-52.
In the instant case, plaintiff [buyer] never contracted with defendant Adtronics. Since the CISG does not contain an express provision allowing a party to sue absent a showing of privity, plaintiff [buyer], lacking contractual privity with defendant Adtronics, has failed to state a claim upon which relief can be granted.
KSTP-FM, LLC [Appellant] vs. Specialized Communications,
Inc. [Defendant] and Adtronics Signs, Ltd [Respondent]
Excerpt from Appellate Brief filed by Respondent Adtronics Signs, Ltd
II.	The District Court correctly concluded that [buyer's] breach of implied warranty claims failed under the United Nations Convention on Contracts for the International Sale of Goods [1]
[Buyer's] Complaint alleged, upon information and belief, that [seller] of Washington State, U.S.A., had obtained certain components for the billboards in question from Adtronics of Canada. (. . .) That contract between [seller] and Adtronics is now in the record. (. . .) Thus, any warranties by Adtronics, expressed or implied, which are the purported basis for [buyer's] claims against Adtronics, must be found in that very same contract. Similarly, whether or not a stranger to that contract has any standing to sue for alleged breach of such warranties must be determined by the law applicable to that contract.
Therefore, the District Court properly turned to the United Nations Convention on Contracts for the International Sale of Goods ("CISG"), which applies to contracts of sale of goods between parties whose places of business are in different States that are parties to the Convention and where the contract is silent as to choice of law. CISG, art. 1 (reprinted at 15 U.S.C.A. Appendix (West Supp. 1998); MCC-Marble Ceramic Ctr., Inc. v. Ceramica Nuova D'Agostino S.p.A., 144 F.3d 1384, 1386-87 (11th Cir. 1998); Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024, 1028 (2nd Cir. 1995); Mitchell Aircraft Spaces, Inc. v. European Aircraft Serv. AB, 23 F. Supp. 2d 915, 918 (N.D. Ill. 1998); Claudia v. Oliveri Footwear Ltd., 1998 WL 164824, at 4 (S.D.N.Y. 1998); Filanto, S.p.A. v. Chilewich Int'l. Corp., 789 F. Supp. 1229, 1237 (S.D.N.Y. 1992), appeal dismissed, 984 F.2d 58 (2nd Cir. 1993).
Here, as the District Court properly found, the CISG applies because both Canada and the United States are parties to the CISG,[2] because the relevant contract for the sale of goods is between Adtronics of Canada and [seller] of the United States, and because the contract between Adtronics and [seller] does not disclaim the CISG. (App. 132.) The District Court reached the further correct conclusion that under the CISG, the warranties of a seller like Adtronics of Canada do not extend to a third party in the absence of privity of contract and that, therefore, [buyer] failed to state a claim against Adtronics upon which relief could be granted. (App. 132-33.) CISG arts 45-52; Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d at 1027-28 (. . .); cf. Beard Plumbing and Heating, Inc. v. Thompson Plastics, Inc., 152 F.3d 313, 316-17 (4th Cir. 1998); All West Elect., Inc. v. M-B-W, Inc., 64 Cal. App. 4th 717, 725, 75 Cal. Rptr.2d 509, 514 (Cal. App. 1998); Baughn v. Honda Motor Co., 107 Wash.2d 127, 727 P.2d 655; Chance v. Richards Mfg. Co., 499 F. Supp. 102 (E.D.Wa. 1980).
[Buyer] now admits that it "does not state actionable claims [against Adtronics] under the UN Convention." (Brief at 15.) [Buyer] then tries to avoid the legal consequences of that admission (affirmance of dismissal for failure to state a claim) by fallaciously arguing that a special provision of the Minnesota Uniform Code (Minn. State. � 336.2-318 (1998)) applies to the contract between Adtronics of Canada and [seller] of Washington State.
Any reliance upon Minnesota law for determining the rights and liabilities to the Adtronics/[seller] contract, as suggested by [buyer], is barred because the CISG is the supreme law of the land, thereby invalidating any application of U.S. state or federal law. U.S. Const., Art. II, � 2 (treaty power); U.S. Const., Art. VI (supremacy clause); Missouri v. Holland, 252 U.S. 416 (1920) (Holmes, J.); Hauenstein v. Lynham, 100 U.S. 483 (1880); MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino S.p.A., 144 F.3d at 1387-91 (CISG art. 8 (1) allowing evidence of party's intent validates application of U.S. parole evidence rule); Mitchell Aircraft Spaces, Inc. v. European Aircraft Serv. AB, 23 F. Supp. 2d at 919-20 (CISG art. 8 (1) preempts U.S. parole evidence rule); Claudia v. Oliveri Footwear Ltd., 1998 WL 164824, at 4-6 (CISG preempts U.S. parole evidence rule); Filanto, S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. at 1237 (CISG is supreme law of land and preempts federal or state law); id. at 1236 (Convention on Enforcement of Foreign Arbitral Awards is supreme law of land and preempts federal or state law); Orbisphere Corp. v. United States, 726 F. Supp. 1344, 1355, n.7 (CIT 1989); cf. Golub v. Isuzu Motors, 924 F. Supp. 324, 326 (D. Mass. 1996) (Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters is supreme law of land and preempted Massachusetts service of process rule).
It, therefore, is unnecessary to note that the Minnesota statutory provision in question (Minn. Stat. � 336.2-318) does not apply because the Adtronics/[seller] contract does not bear "an appropriate relation" to Minnesota. Minn. Stat. � 336.1-105 (1) (1998). It was a contract between a Canadian company and a Washington State company; no Minnesota company was a party to that contract; the contract called for performance in Canada, which is where it was in fact performed; and the Canadian party had no contact with Minnesota in initiating the separate contract between the Minnesota person ([buyer]) and the Washington State person ([seller]).[3]
Moreover, the Minnesota statute in question (Minn. Stat. � 336.2-318) is inconsistent with the CISG's stated objective of unifying and simplifying the law applicable to the international sale of goods. MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino S.p.A., 144 F.3d at 1391. The Minnesota statute regarding third-party beneficiaries of warranties (Minn. Stat. � 336.2-318) is relatively unique in the U.S. and at least the common law legal systems in the world. Minnesota is only one of five states that have adopted such a provision that would enable a legal entity like [buyer] to assert such a claim. See 1A Uniform Laws Annotated-Uniform Commercial Code � 2-318, at 556-58 (1989). In contrast, Washington State, where one of the parties to the contract ([seller]) was located, along with 29 other states have adopted the following alternative version of section 2-318 that would not permit such a claim by a legal entity like [buyer]: "A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section." Id. (emphasis added); Rev. Code of Washington � 62A.2-318 (1999).[4] Even the Washington statute is broader than the law of British Columbia, where the other party to the contract (Adtronics) was located. 1996 Rev. Stat. of British Columbia ch. 410, � 56 (only buyer has remedy for breach of warranty by seller of goods).
For the foregoing reasons, Adtronics respectfully requests that this Court affirm the District Court's dismissal of [buyer's] Complaint for . . . failure to state a claim upon which relief can be granted.
Dated: August 11, 1999 Respectfully submitted,
Duane W. Krohnke (#58452)
Eunice P. de Carvalho (#257473)
Attorneys for Respondent Adtronics Signs, Ltd.
1. [Buyer] appeals from the judgment entered pursuant to the order of the trial court granting Adtronics' motion to dismiss. In reviewing the decision of the trial court, this Court is to consider "'whether the complaint sets forth a legally sufficient claim for relief.'" Elzie v. Commissioner of Public Safety, 298 N.W.2d 29, 32 (Minn. 1980) (quoting Royal Realty Co. v. Levin, 244 Minn. 288, 290, 69 N.W.2d. 667, 670 (1955)). The Court "may independently review the sufficiency of the complaint under [Rule 12]." Pederson v. American Lutheran Church, 404 N.W.2d 887, 889 (Minn. Ct. App. 1987). This Court may determine, as the trial court did, that the facts as alleged by [buyer] in the Complaint are as a matter of law insufficient to state a claim upon which relief can be granted.
2. The United States Senate ratified the CISG in 1986, and the United States deposited its instrument of ratification at the United Nations Headquarters in New York on December 11, 1986. The Convention entered into force between the United States and other "States Parties," including Canada, on January 1, 1988. See Filanto S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. at 1237.
3. Minn. Stat � 336.1-105, Comment 2 ("The mere fact that suit is brought in a state does not make it appropriate to apply the substantive law of that state.); Providence & Worcester R. Co. v. Sargent & Greenleaf, Inc., 802 F. Supp. 680 (D.R.I. 1992) (Kentucky had an "appropriate relation" to transaction since Kentucky was the seller's principal place of business; the goods were designed and manufactured in Kentucky; and they were shipped from Kentucky to the buyer in Rhode Island); Minnesota Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d 733, 736 (Tex. 1997) (Minnesota law applied in suit in Texas since the parties had negotiated and entered into the contract in Minnesota; the seller's domicile and principal place of business were in Minnesota; and the product in question was manufactured in Minnesota); Restatement (Second) of Conflicts of Laws � 188(1) 1971.
4. Interestingly, from 1965 to 1969, Minnesota's version of 2-318 was the same as the one currently in effect in Washington and 29 other states. Compare Minn. Laws, ch. 811, � 336.2-318 (1965) with Minn. Laws, ch. 621, � 6 (1969).
Court of Appeals (summary of ruling)
C7-99-770
State of Minnesota, Court of Appeals
A foreign corporation did not have sufficient minimum contacts with Minnesota to satisfy due process requirements and permit the exercise of personal jurisdiction where contacts consisted of (1) an isolated shipment, but not sale, of goods, and (2) subsequent efforts to resolve problems associated with those particular goods.