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August Opinion of the Supreme Court of Alabama (30,) (1962)

Circulation

The Times sends about 390 daily, and 2,500 Sunday editions into Alabama.

Shipments are made by mail, rail, and air, with transportation charges being prepaid by The Times. Dealers are charged for the papers.

Credit is given for unsold papers and any loss in transit is paid by The Times.

Claims for losses are handled by baggagemen in Alabama, and The Times furnished claim cards to dealers who bring them to the baggagemen, The Times paying for losses or incomplete copies upon substantiation by the local Alabama baggagemen.

Account cards of various Alabama Times dealers show that credit was thus given for unsold merchandise.

We are here confronted with the question of in personal jurisdiction acquired by service upon an alleged representative of a foreign corporation.

The severe limitations of the doctrine of Bank of Augusta v. Earle (1839) 13 Pet. 519, 13 U.S. 519, 10 L.Ed.2d 274, that a corporation "must dwell in the place of its creation, and cannot migrate to another sovereignty," proving unsatisfactory, the courts, by resort to fictions of "presence," "consent," and "doing business," attempted to find answers compatible with social and economic needs. Until comparatively recent years these bases of jurisdictions have tended only to confuse rather than clarify, leading the late Judge Learned Hand to remark that it was impossible to determine any established rule, but that "we must step from tuft to tuft across the morass." Htuchinson v. Chase and Gilbert, (2 Cir.) 45 F.2d 139.

In Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, the court held that the Fourteenth Amendment to the Federal Constitution required a relationship between the State and the person jurisdiction, and there must be a reasonable notification to the person upon whom the state seeks to exercise its jurisdiction. The required relationship between the State and the person was held to be presence within the State, and as a corollary, no state could "extend its process beyond that territory so as to subject either persons or property to its decisions."

In Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71, L.Ed. 1091 (1927), the United States Supreme Court sustained the validity of a non-resident motorist statute which provided that the mere act of driving an automobile in a state should be deemed an appointment of a named state official as agent to receive service in a suit arising out of the operation of the motor vehicle on the highway of such state. The dangerous nature of motor vehicle was deemed to justify the statute as a reasonable exercise of police power to preserve the safety of the citizens of the state, and the consent for service exacted by the State for use of its highways was reasonable.

In 1935 the same reasoning was applied in upholding a state statute permitting service on an agent of a non-resident individual engaged in the sale of corporate securities in the state in claims arising out of such business. Henry L. Doherty and Co. v. Goodman,

Corporations being mere legal entities and incapable of having physical presence as such in a foreign state, and its agents being limited by the scope of their employment, neither the "presence" theory nor the "consent" theory could satisfactorily be applied as a basis for personal jurisdiction.

As to personal jurisdiction over non-resident corporation, the rule therefore evolved that such jurisdiction could be based upon the act of such corporations "doing business" in a state, though echoes of the "presence" and "consent" doctrines may be found in some decisions purportedly applying the "doing business" doctrine in suits against foreign corporations. See Greenv. Chicago Burlington and Quincy Ry., 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916, when "presence" of a corporation was found to exist from business done in a state, and Old Wayne Mutual Life Ass'n. of Indianapolis v. McDonough, 204 U.S. 8, 27 S.Ct. 236, 51 L.Ed. 345, where implied consent to jurisdiction was said to arise from business done in the state of the forum.

The term "doing business" carries no inherent criteria. It is a concept dependent upon each court's reaction to facts. These reactions were varied, and the conflicting decisions evoked the observation of Judge Learned Hand, then fully justified, but no longer apt since the "morass" has been considerably firmed up by subsequent decisions of the United States Supreme Court.

In International Shoe v. State of Washington et al., 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the old bases of personal jurisdiction were re-cast, the court saying:

"To say that the corporation is so far 'present' there as to satisfy due process requirements * * * is to beg the question to be decided. 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. * * * Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there. An 'estimate of the inconveniences' which would result to the corporation from a trial away from its 'home' or principal place a business is relevant in this connection.

That the new test enunciated is dependent upon the degree of contacts and activities exercised in the forum state is made clear, the court saying:

"* * * due process requires only that in order to subject a defendant to a judgment in personal, if he be not present within the territory of the forum, we have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'"

In accord with the above doctrine is our case of Boyd v. Warren Paint and Color Co., 254 Ala. 687, 49 So.2d 559.

In 1957 the United States Supreme Court handed down its opinion in McCoy v. International Life Insurance Co., 355 U.S. 220, 78S.Ct. 199, 2 L.Ed.2d 223. This case involved the validity of a California judgment rendered in a processing where service was had upon the defendant company by registered mail addressed to the respondent at its principal place of business in Texas. A California statute subjecting foreign corporations to suit in California on insurance contracts with California residents even though such corporations could not be served with process within its borders.

The facts show that petitioner's son, a resident of California, bought a life insurance policy from an Arizona corporation, naming petitioner as beneficiary. Later, respondent, a Texas corporation, agreed to assume the insurance obligations of the Arizona company, and mailed a re-insurance certificate to the son in California, offering to insure him in accordance with his policy. He accepted the offer and paid premiums by mail from California to the company's office in Texas. Neither corporation ever had any office in California, nor any agent therein, nor had solicited or done any other business in the state. Petitioner sent proofs of her son's death to respondent, but it refused to pay the claim.

The Texas court refused to enforce the California judgment holding it void under the Fourteenth Amendment because of lack of valid service. McGee v. International Life Insurance Company, Tex.Civ.App., 288 S.W.2d 579.

In reversing the Texas Court, the United States Supreme Court wrote:

"Since Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, this Court has held that Due Process Clause of the Fourteenth Amendment places some limit on the power of state courts to enter binding judgments against persons not served with process within their boundaries. But just where this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations. In a continuing process of evolution this Court accepted and then abandoned 'consent,' 'doing business,' and 'presence' as the standard for measuring the extent of state judicial power over such corporations. See Henderson, The Position of Foreign Corporations in American Constitutional Law, c. V. Mores recently in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the Court decided that 'due process requires only that order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum. he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" 326 U.S. at 316, 66 S.Ct. at 158.

"Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents. In part this attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.

[1] Under the above and more recent doctrines, we are clear to the conclusion that the activities of The New York Times as heretofore set out, are amply sufficient to more than meet the minimal standards required for service upon its representative McKee.

The adjective "string" in McKee's designation is redundant, and in no wise lessens his status as a correspondent and agent of The New York Times in Alabama. Justice demands that Alabama be permitted to protect its citizens from tortious libels, the effects of such libels certainly occurring to a substantial degree in this State.

Additional topics

Law Library - American Law and Legal InformationNotable Trials and Court Cases - 1954 to 1962August Opinion of the Supreme Court of Alabama (30,) (1962) - New York Times Company V. Sullivan, Advertising, Circulation, Substituted Service, General Appearance By The Times