Opinion ID: 543819
Heading Depth: 2
Heading Rank: 2

Heading: Establishing A Permanent Presence.

Text: 51 In SAR Mfg. v. Dumas Bros. Mfg., 526 F.2d 1283 (5th Cir.1976), the court concluded that the state's forum closing statute did not work an impermissible burden on interstate commerce when applied to the activities and transactions conducted by Sar in Alabama. Sar was engaged in the sale of polyurethane foam which it manufactured in plants located in Texas, Georgia and Mississippi. Sar leased a warehouse in Alabama to receive and store the foam for processing and subsequent sale to in-state concerns. Sar employed seven full or part-time employees at the warehouse and maintained two vehicles at the warehouse on a full-time basis. On appeal, the court concluded that subjecting Sar to the state's forum closing laws did not impermissibly burden interstate commerce. 52 The court relied on two Supreme Court cases 4 and concluded that Sar's intrastate foam sales were very much like Eli Lily's intrastate drug sales. The court distinguished Allenberg Cotton, on the notion that under the facts in SAR, no nationwide marketing system would be impeded. 526 F.2d at 1285. The distinction drawn by the court turns on the connection between intrastate and interstate portions of the transaction. The issue is whether the intrastate portion has taken on an independent character of its own that separates it from the interstate portion. Stated differently, if the out-of-state entity has performed sufficient in-state acts to render the two aspects of the overall transaction distinct, then the entity is subject to the forum closing laws. One factor which the court found to be probative of this independent character is whether the out-of-state entity has set up a permanent in-state presence. However, the focus of the court's analysis remained whether the intrastate transaction is an essential element of a unitary interstate transaction. 53 The next case is Diversacon Industries v. Nat'l Bank of Commerce, 629 F.2d 1030, 1034-35 (5th Cir.1980), where the plaintiff, a highway construction contractor, contracted to build a portion of interstate highway in Louisiana. Diversacon, a Florida corporation, set up its administrative support personnel in its parent company's Jackson, Mississippi office. One of Diversacon's subcontractors defaulted and the defendant Bank refused to honor its construction surety agreement because Diversacon had failed to qualify to do business in the state. The court of appeals concluded that the scope of Diversacon's activities extended beyond the Mississippi border for the consummation of a definite interstate project, thus it would be an impermissible burden on interstate commerce to give effect to denial of access through this qualification statute. Id. at 1034. The subcontract between Diversacon and the subcontractor did not lose its interstate character simply because the general contractor established a presence in the subcontractor's home state. The court noted that the Supreme Court included in a federal definition of interstate commerce any activity of an intrastate nature which was an integral part of the overall interstate pattern or transaction. Id. at 1033. The court further observed that the agreement upon which Diversacon is suing the Bank is clearly the single business transaction to which all of diversacon's activities related--the construction of the Louisiana highway. Id. at 1034. This case is highly relevant to the present inquiry, where the out-of-state entity, S & H, contracted with local workers to work on a project that is in interstate commerce. The record in this case shows that S & H has not established a presence in the state, any more permanent than was Diversacon's. Both S & H and Diversacon were present in the state for the sole purpose of completing a project which was in interstate commerce. The Diversacon court acknowledged the probative value of Diversacon's presence in the state, but remained focused on the work performed and whether it was part of a unitary interstate transaction. 54 Because I believe assembly of the 1300-W was an essential element of an interstate transaction and nothing under the facts of this case removes the transaction's interstate character, I would hold that application of Alabama's forum closing law effects an impermissible burden on interstate commerce. Since the majority has concluded otherwise, however, I respectfully DISSENT.