Appear form an order of the United States District Court for the Eastern District of New York, I. Leo Glasser, Judge, conditionally dismissing products liability action against Japanese manufacturer of sledge heads for third-party plaintiffs' failure to effect proper service of process, and dismissing action against Pennsylvania distributor of sledge heads for lack of in personam jurisdiction.
Oakes, Meskill, and Pierce, Circuit Judges.
This is a products liability case on appeal taken under Fed. R. Civ. P. 54(b) from an interlocutory order of the United States District Court for the Eastern District of New York, I. Leo Glasser, Judge, dismissing defendants OH Industries ("OH"), a Japanese manufacturer of forgings for striking tool (sledge hammers, mauls) heads, and Nannen American Manufacturing Corporation (Nannen), a Pennsylvania distributor of such forgings. OH was dismissed because it had never been properly served with process, and Nannen was dismissed because it lacked the minimum forum-state contacts necessary to sustain in personam jurisdiction under New York law or federal constitutional law. We affirm the dismissal of OH; we reverse and remand for further findings in respect to the dismissal of Nannen.
The action was brought by plaintiff Joseph Montalbano to recover damages for personal injuries allegedly sustained on or about November 3, 1981, while using a sledge hammer in combination with a wood-splitting maul. The suit alleges negligence, breach of warranty and strict liability on the part of the original defendants Easco Tool, Inc. ("Easco"), and The Moore Company ("Moore"), an affiliate of Easco, which were alleged to be the manufacturers of the sledge hammer. Easco and Moore filed third-party complaints to implead OH Industries ("OH"), the alleged manufacturer of the sledge head; Nannen, the alleged distributor of the sledge head; The Stanley Works ("Stanley"), also a distributor of striking tools and the alleged manufacturer of the wood-splitting maul; and Rickles Home Centers ("Rickles"), the alleged New York vendor of the sledge hammer. Eventually, the plaintiff amended his complaint to assert direct claims against the four third-party defendants, and all of the defendants have asserted cross-claims against each other.
Pursuant to Fed. R. Civ. P. 4(c)(2)(C)(ii) and (d) (3),*fn1 Easco attempted to serve process upon OH by mailing a copy of the summons and complaint to Nannen, which was assumed by Easco to be OH's agent. Responding to Easco's third-party complaint, as well as to Montalbano's amended direct complaint and the cross-claims of the other defendants, OH and Nannen pleaded as affirmative defenses a lack of personal jurisdiction, with OH also pleading improper service.*fn2
After reviewing the procedural background of the case and the respective activities of OH and Nannen, the district court concluded that the service on OH by mail in care of Nannen was not sufficient to subject OH to the jurisdiction of the court and therefore found it unnecessary to decide whether OH's contacts with the forum state rendered it amenable to the in personam jurisdiction of the District Court for the Eastern District of New York. The court dismissed the claims against OH conditionally, "until such time as Easco or another party has perfected service upon it of a summons and complaint."
With respect to Nannen, the district court reviewed each provision of N.Y. Civ. Prac. Law § 302 (McKinney 1972 & Supp. 1984),*fn3 the New York long-arm statute, that was alleged as a basis for jurisdiction. It summarily rejected claims for jurisdiction based upon transaction of business within the state, and upon ownership, use, or possession of real property within the state. It also rejected Easco's claim for jurisdiction based upon the commission outside the state of a tort that causes injury within the state, where the tortfeasor regularly does or solicits business in New York or derives substantial revenue from goods used or consumed within the state; the court found no basis for jurisdiction on this ground even though Nannen's principal, Jack Nannen, had been affiliated with other corporations that solicited business in New York, because none of those corporations had marketed tools while in New York and none were currently transacting business of any kind in New York. Finally, the court refused to grant jurisdiction based upon the commission of a tort outside the state which causes injury within the state, where the tortfeasor expects or should reasonably expect such act to have consequences in New York and derived substantial revenue from interstate or international commerce. Although finding that Nannen did derive substantial revenue from interstate commerce, the court concluded that Easco had "failed to allege facts to suggest that Nannen could reasonably anticipate being haled into a New York court as a consequence of the sale of its product to Easco's plant in Pennsylvania."
OH, a corporation organized under the laws of Japan, maintains its offices and manufacturing plant at Higaski-Osaka, Japan. It makes forged steel products, including sledge heads, for sale in Japan and in the international market. It has no office, manufacturing plant, manufacturer's representatives or other facilities in the United States, no bank accounts or other assets in New York or any other state, and does not advertise in any United States publication or maintain a telephone listing in the United States; furthermore, OH has no corporate subsidiaries in the United States, nor is it affiliated with other corporate organizations doing business in the United States. It sells exclusively through Japanese trading companies located in Japan and ships by water to various ports other than the port of New York.
Easco's principal argument as to OH is that, where there are other means to effect proper service pursuant to Fed. R. Civ. P. 4(i),*fn4 an action should not be dismissed for failure to serve. See Alexander v. Unification Church of America, 634 F.2d 673, 675 (2d Cir. 1980); Hill v. W. Bruns & Co., 498 F.2d 565, 568 (2d Cir. 1974); Grammenos v. Lemos, 457 F.2d 1067, 1071 (2d Cir. 1972). Easco also points out that the recently adopted Fed. R. Civ. P. 4(j),*fn5 which requires dismissal without prejudice if service is not made within 120 days after the filing of the complaint, expressly states that it "shall not apply to service in a foreign country pursuant to subdivision (i)" of the same rule. It argues that, given Rules 4(i) and 4(j), dismissal was inappropriate since it reasonably believed that it had served OH's American agent.
We cannot agree with either of Easco's arguments. Where service of process is insufficient, "the courts have broad discretion to dismiss the action or to retain the case but quash the service that has been made on defendant," 5 C. Wright & A. Miller, Federal Practice and Procedure § 1354, 585 (1969) (footnote omitted), even though service will ordinarily be quashed and the action preserved where "there is a reasonable prospect that plaintiff ultimately will be able to serve defendant properly," id. at 586 (footnote omitted). Accord Novak v. World Bank, 227 U.S. App. D.C. 83, 703 F.2d 1305, 1310 (D.C. Cir. 1983); Alexander, 634 F.2d at 675. Here, the district court did not contravene subdivision 4(j), even though it did not preserve the action. Subdivision 4(j), with its foreign country exception to the 120-day period for service, is simply inapplicable here, because Easco never attempted to serve process in a foreign country under subdivision (i); the 120-day time limit imposed by Rule 4(j) seems therefore perfectly proper,*fn6 especially since Easco has not exactly ...