Court Opinion

ID: 9420492
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:54:47.985482+00
Date Added: 2024-06-11T17:22:25.338654
License: Public Domain

Mr. Justice Douglas,
concurring.
Since the formula adopted by the Court is adequate to dispose of this case, I have joined in the opinion. But I feel that the type of problem presented requires a more selective treatment. Hence my separate opinion.
*652Virginia’s Blue Sky Law1 is a comprehensive scheme for the protection of the state’s investors. Securities can be offered for sale in the state only after the issuer obtains a permit.2 To get it, the applicant must supply detailed information about its solvency, its earning record, and the nature of the securities.3 Promoters may be required to supply a bond.4 Applicants must appoint an agent, the Secretary of the Commonwealth, to receive service of process.5 Only after proof of their good character and financial responsibility are security salesmen licensed.6 After issuance, the state Corporation Commission is authorized again to investigate the issuer with an eye to possible revocation of its permit.7 These are the high points of the comprehensive regulation which Virginia seeks to apply to appellants.
That the business of insurance is interstate commerce is established by United States v. South-Eastern Underwriters Assn., 322 U. S. 533. Any doubts about the power of a state to exclude an interstate insurance company which refuses to comply with its regulatory laws were dispelled by the passage of the McCarran Act. 59 Stat. 33, 15 U. S. C. §§ 1011-1015. See Robertson v. California, 328 U. S. 440, 461, 462.
The requirements of due process do not, in my opinion, preclude the extension of Virginia’s regulatory scheme to appellant. I put to one side the case where a policyholder seeks to sue the out-of-state company in Virginia. *653His ability to sue is not necessarily the measure of Virginia’s power to regulate, as the Court said in Old Wayne Life Assn. v. McDonough, 204 U. S. 8, 21. It is the nature of the state’s action that determines the kind or degree of activity in the state necessary for satisfying the requirements of due process. What is necessary to sustain a tax or to maintain a suit by a creditor (see Old Wayne Life Assn. v. McDonough, supra; Provident Savings Assn. v. Kentucky, 239 U. S. 103, 114-116; Isaacs, An Analysis of Doing Business, 25 Col. L. Rev. 1018, 1024) is not in my view determinative when the state seeks to regulate solicitation within its borders.
Blue Sky Laws are a well-recognized exercise of the police power of the states. See Hall v. Geiger-Jones Co., 242 U. S. 539, 552. The wiles of the salesman have been many; the devices to avoid state regulation have been clever and calculated. One of those who contested the constitutionality of the Michigan Blue Sky Law in Merrick v. Halsey & Co., 242 U. S. 568, 573, had no place of business in the state and was not sending agents into it. The history of the various methods used to evade state regulation is too recent to require extended comment. Instrumentalities of interstate and foreign commerce were extensively employed by those beyond the reach of a state to sell securities to its citizens. See H. R. Rep. No. 85, 73d Cong., 1st Sess. 10. The Securities Act of 1933 (48 Stat. 74, 15 U. S. C. § 77a et seq.) was passed to fill the gap.8
A state is helpless when the out-of-state company operates beyond the borders, establishes no office in the state, and has no agents, salesmen, or solicitors to obtain *654business for it within the state. Then it is beyond the reach of process. In the present case, however, that is only the formal arrangement. The actual arrangement shows a method of soliciting business within Virginia as active, continuous, and methodical as it would be if regular agents or solicitors were employed. Cf. Hoopeston Co. v. Cullen, 318 U. S. 313.
Practically all of appellants’ business in Virginia originates with and is the result of the activities of its Virginia members. The recommendation of a member relieves an applicant of the duty of furnishing any reference. Though the old members are not designated as “agents,” it “clearly appears,” as stated by the Supreme Court of Appeals, “that the association relies almost exclusively on these activities of its Virginia members to bring about an expansion of its Virginia business.” Travelers Health Assn. v. Virginia, 188 Va. 877, 887; 51 S. E. 2d 263, 267. This device for soliciting business in Virginia may be unconventional and unorthodox; but it operates functionally precisely as though appellants had formally designated the Virginia members as their agents. Through these people appellants have realistically entered the state, looking for and obtaining business. Whether such solicitation is isolated or continuous, it is activity which Virginia can regulate. See Hooper v. California, 155 U. S. 648, 658. The requirements of due process may demand more or less9 minimal contacts than are present here, depending on what the pinch of the decision is or what it requires of the foreign corporation. See International Shoe Co. v. Washington, 326 U. S. 310, 316-319. Where *655the corporate project entails the use of one or more people in the state for the solicitation of business, in my view it does no violence to the traditional concept of due process to allow the state to provide protective measures governing that solicitation. That is all that is done here.
I cannot agree that this appeal is premature. Virginia has placed an injunction on appellants, an injunction which may have numerous consequences, e. g., contempt proceedings. There is an existing controversy — real and vital to appellants.
Mr. Justice Minton,
with whom
Mr. Justice Jackson joins, dissenting.
The State Corporation Commission of Virginia instituted the proceedings leading to the cease and desist order entered in the instant case under § 6 of the Virginia Securities Law. Michie’s Va. Code, 1942, § 3848 (52). That section provides for service by registered mail upon persons or corporations offering securities through the mails or by other means of communication. After hearing, the Commission is authorized to issue the order and to give it such publicity as the Commission considers desirable.
In this case no action has been taken under § 15 of the Law which provides that violation of the statute is a misdemeanor and punishable by fine, or under § 17 which provides for the imposition of a fine upon failure to comply with a lawful order of the Commission. Michie’s Va. Code, 1942, § 3848 (61) (63). The Commission has in no way attempted to enforce the order issued by the Commission against appellants. Therefore appellants have not been hurt, and the question of due process is not reached. In the scheme of the statute, publicity appears to be the sole sanction of § 6. I know of no reason why Virginia may not go through this *656shadow-boxing performance in order to publicize the activities of appellants in Virginia and notify its citizens that appellants have not qualified under the Securities Law. That is all the Commission says that it is doing or has the power to do under § 6. The Commission’s view of the nature of this proceeding — a view reiterated by Virginia in its brief on the appeal to this Court— was stated in its opinion:
“Respondents rely on the fact that their contacts with citizens of Virginia are by mail, that they are not doing business in Virginia and that they do not enter Virginia either personally or by agents. In setting up this defense they lose sight of the nature of this action. They are not charged with doing business in Virginia but with offering and advertising for sale and promoting the sale of insurance contracts in Virginia by mail and the action is to foreclose them from these activities. Whether the action will suffice to actually stop them is beside the point. It will suffice to put them on notice of pertinent laws of Virginia, to give them an opportunity to be heard and the state an opportunity to determine the facts, and, if, after hearing, a cease and desist order is issued, the Commission will then be authorized to give such publicity to the order as it sees fit for the ‘information and protection of the public.’ ”
“No word found in or inference derived from Section 6, aforesaid, may properly, in our judgment, be said to impose penalties upon the respondents. . .
“There is no element of compulsion except such as may flow from a dread of the publicity attending such an order. In such cases, the only weapon available to the Commonwealth is to publicly advise that the *657securities of the respondent do not bear the stamp of the state’s approval and are being presented to the public without regard to the regulatory laws enacted to protect them. Section 6, supra, imposes no penalties, exacts no direct toll from those against whom its orders proceed. . .
The question of substituted service on the Secretary of the Commonwealth is not here in any aspect. As far as appears, service in this manner is not authorized by the Virginia statutes except where the nonresident has opened and is conducting a place of business within the State. Michie’s Va. Code, 1942, § 3848 (55)a. Up to this date Virginia has not claimed the power to require appellants, who do business in Virginia only by mail, to appoint the Secretary of the Commonwealth as their agent for service of process, nor have the courts of Virginia rendered judgment in a suit where service was made in that manner. I do not understand, therefore, what possible application the Court’s reference to substituted service on the Secretary of the Commonwealth could have in this case. I would answer the question of due process when Virginia has attempted to apply its process to appellants in a proceeding that has consequences of a nature which entitle a person to the protection of the Due Process Clause. See Parker v. Los Angeles County, 338 U. S. 327. I would, therefore, dismiss the appeal.
As stated, it seems to me that the majority opinion is saying that Virginia has more power than it claims in the instant proceeding. While Virginia has not attempted to do more than publicize the activities of appellants in the State, I read the majority opinion to intimate that under the service by registered letter Virginia might go further. The cease and desist order issued cannot validly compel appellants to designate the Secretary of the Commonwealth as their agent for service of process, any more than *658it can constitutionally be considered as automatically accomplishing that result. An in personam judgment cannot be based upon service by registered letter on a nonresident corporation or a natural person, neither of whom has ever been within the State of Virginia. Pennoyer v. Neff, 95 U. S. 714; Old Wayne Life Assn. v. McDonough, 204 U. S. 8, 22-23. If that may not be done directly, it may not be done indirectly. Certainly such service cannot be justified where its purpose is to make substituted service legal in the future. These nonresidents cannot be brought in through service by registered mail and compelled to designate the Secretary of the Commonwealth as their agent for service of process so that thereafter service may be effected upon such nonresidents by serving the Secretary. So to hold would allow the State to pull itself up by its own bootstraps.
Service by registered mail is said by the majority to be sufficient where the corporation has “minimum contacts” with the state of the forum. How many “contacts” a corporation or person must have before being subjected to suit we are not informed. Here all of appellants’ contacts with the residents of Virginia were by mail. No agent of appellant corporation has entered the State, nor has the individual appellant. The contracts were made wholly in Nebraska. Under these circumstances, I would hold that appellants were never “present” in Virginia.
“For the terms ‘present’ or ‘presence’ are used merely to symbolize those activities of the corporation’s agent within the state which courts will deem to be sufficient to satisfy the demands of due process.” International Shoe Co. v. Washington, 326 U. S. 310, 316-317.
As I understand the International Shoe Co. case, the minimum contacts which a corporation has in the State *659must be “activities of the corporation’s agent within the state.” There were such contacts by agents within the State in that case. Service was made, in addition to notice by registered letter, by personal service within the State upon one of those agents. Service on an agent within the jurisdiction would seem to me indispensable to a judgment against a corporation. It would seem to be an a fortiori proposition that judgment could not be obtained against a natural person who was not available for personal service.
We are not dealing here with the power of Virginia to regulate the transaction of insurance business with its citizens, as was the case in Osborn v. Ozlin, 310 U. S. 53, and Hoopeston Co. v. Cullen, 318 U. S. 313. In the case at bar we are concerned only with how Virginia may enforce such power as it has. No question of the sufficiency of service was involved in either the Osborn or the Hoopeston case, both of which were brought against some officer of a state. The question in those cases was whether the State had power, and not whether, having the power, it had also acquired jurisdiction of a defendant against whom a judgment could be rendered enforcing that power.
I would not attempt to instruct Virginia as to how to protect its citizens from these intruders from Nebraska. But I do not believe we should even intimate that judgments in personam may be obtained, by the simple process of sending a registered letter, against a corporation whose agents have never been in the forum where suit is brought, or against a natural person who is not personally served within the State.
Mr. Justice Reed and Mr. Justice Frankfurter, agreeing with the Court in reaching the merits, on the merits join this dissent.

Acts of the General Assembly of Virginia, 1928, c.,529, p. 1373, as amended, Acts of 1932, c. 236, p. 434; Michie’s 1942 Code of Virginia, § 3848 (47) et seq.

 Michie §3848 (47).

 Michie §3848 (51).

 Michie § 3848 (51) (r).

 Michie §3848 (55).

 Michie § 3848 (50) (m).

 Michie §3848 (53).

 By § 3 (a) (8) insurance policies issued by a corporation subject to the supervision of specified state agencies are exempt from this federal regulation. Section 18 provides that the Act does not affect the jurisdiction of any state agency over a security or a person.

 As Mr. Justice Rutledge said in Frene v. Louisville Cement Co., 77 U. S. App. D. C. 129, 134, 134 F. 2d 511, 516, “. . . some casual or even single acts done within the borders of the sovereignty may confer power to acquire jurisdiction of the person, provided there is also reasonable provision for giving notice of the suit in accordance with minimal due process requirements.”