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Klein v. Sunbeam Corp.

Superior Court of Delaware, New Castle County

November 27, 1951


Action against a foreign corporation for libel. On special appearance by defendant upon a motion to quash service of process, the Superior Court, Layton, J., held that defendant's corporate presence in the state for the purpose of service of process was sufficiently established.

Motion to quash service denied.

Substantial volume of interstate business done within state by foreign corporation over a long period and sales promotion and supervisory and policing activities conducted in state by agents of corporation were sufficient to establish corporate presence in state for purpose of service of process in action against corporation by former retail distributor for libel allegedly published in connection with such policing activities. 43 Del.Laws, c. 201; U.S.C.A. Const.Amend. 14, § 1.

[47 Del. 487] Defendant's motion to quash is based upon the ground that it is a foreign corporation not doing business in this state and, thus, not amenable to service in this jurisdiction. For a number of years, the defendant, an Illinois corporation, has been marketing its electrical appliances in Delaware through wholesale and retail outlets. A traveling sales agent of defendant, not resident in this state, takes orders from the wholesalers which are filled in Illinois and shipped directly to the wholesaler. The needs of the retailer are filled by the wholesaler and sold by the latter directly to the public at marked up prices. On May 29, 1950, a Sunbeam vice-president wrote a letter to all Sunbeam distributors in the country criticizing, inter alia, alleged tricky practices of two of its distributors in connection

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with their sales of the company's products. This plaintiff, then one of defendant's retail distributors in Delaware, conceiving himself to have been libeled by this letter, filed the present action for damages in this Court and, as a result of the service of process upon it in this state, this motion to quash has been filed.

Defendant contends that it is an Illinois corporation, not qualified to do business in Delaware; that it maintains no office or agents in the state and, with insignificant exceptions, is engaged wholly within interstate commerce.

To the contrary, plaintiff points to numerous instances wherein he alleges that defendant has engaged in acts of business [47 Del. 488] in this jurisdiction of a kind and character manifesting its continued presence and sufficient, it is argued, to render it amenable to process within the meaning of Article 14, Sec. 1 of the Federal Constitution. In the main these activities consisted of the solicitation by defendant in Delaware of a substantial volume of business for a long period, sales by defendant directly from inventory shipped here, continuous supervision and ‘ policing’ by defendant of its wholesalers and retailers and the fact that this action itself was a direct outgrowth of the business which it carried on in this state.

John Van Brunt, Jr., and David Snellenberg, II. (of Killoran & Van Brunt), Wilmington, for plaintiff.

David F. Anderson (of Berl, Potter & Anderson), Wilmington, for defendant.

LAYTON, Judge.

The question here presented concerns due process of law and should be resolved in accordance with decisions of the Federal Courts. Atlas Mut. Ben. Ass'n v. Portscheller, 4 Terry 298, 46 A.2d 643. To be distinguished are those numerous cases, both state and federal, involving the subject of the doing of business by a foreign corporation in violation of state statutes requiring the registration and qualification of such corporations as a condition precedent to engaging in business, for it is obvious that while an unlicensed corporation may be doing business to the extent of bringing it within the jurisdiction of a given forum, yet it might not have reached a status requiring its qualification under a registration statute of that same forum. Liquid Veneer Corp. v. Smuckler, 9 Cir., 90 F.2d 196.

In general, it may be said that a foreign corporation becomes amenable to process to enforce a personal liability, in the absence of consent, when its business activities within a given state are of such an extent as to warrant the inference that it is present there. Philadelphia & Reading R.R. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710. An examination of the decisions of the Supreme Court of the United States indicates, however, that much confusion has resulted from the application of this general principle. See Columbia Law Review, Vol. 29, p. 187. For instance, in Commercial Mutual Accident Co. v. Davis, 213 U.S. 245, 29 S.Ct. 445, 53 L.Ed. 782, service [47 Del. 489] upon an agent of the defendant insurance company was upheld upon little more than an isolated instance where, at plaintiff's request, defendant sent its agent into a state for the purpose of examining and settling an accident claim, at which time defendant's agent was served with process. Except for the incident just related, the business of the company seems to have been confined to mere solicitation of insurance by its agents and, moreover, there was a substantial suspicion that the letter requesting defendant to send its agent into Missouri was a ruse to enable service to be made upon the company. On the other hand, in Green v. Chicago, Burlington & Quincy R.R. Co., 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916, the defendant had for many years maintained an office in Pennsylvania staffed with full time agents who, though their work was largely confined to mere solicitation, nevertheless, in given cases had authority to sell tickets and transact business in connection with bills of lading. Despite this, the Supreme Court struck down as invalid the service of process upon this defendant upon the ground that its business activities in Pennsylvania amounted to no more than solicitation.

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