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Hendrickson v. Reg O Co.

decided: August 3, 1981.



Before Adams, Weis and Garth, Circuit Judges.

Author: Weis


In this products liability case, we measure the length of the Virgin Islands long arm statute by its own terms, as well as by those of constitutional dimension. Although not physically present in the Islands, the defendant, an Illinois corporation, made various small but continuing direct sales in the Islands over a period of years. It maintained relationships with its Virgin Islands customers by mailing catalogues and price lists, as well as through long distance telephone calls that provided counseling on proper servicing of its equipment. We agree with the district court's conclusion that the corporation's activities constituted sufficient contacts to satisfy both statutory and due process considerations. Accordingly, we affirm.

In November 1979, the plaintiff, a resident of St. Croix, brought suit in the District Court of the Virgin Islands to recover for injuries from an explosion caused by an allegedly defective valve on a propane tank. The valve was manufactured by the defendant Reg O Company, a Delaware corporation with its principal office in Chicago, Illinois. Jurisdiction was based on the Virgin Islands long arm statute, 5 V.I.C. § 4903 (Equity 1967). The district court denied the defendant's motion to dismiss for lack of personal jurisdiction, and then certified the issue for appeal under 28 U.S.C. § 1292(b) (1976).

For the purpose of resolving the jurisdictional question, two uncontested affidavits were submitted to the court. These, together with the complaint, established that the accident occurred on St. Croix in December 1978 during the course of plaintiff's employment with the Carib Gas Corporation, when propane gas escaped from one of Carib's tanks through a valve manufactured by the defendant.

Reg O Company manufactures, distributes, and sells component parts for propane cylinders. The company's total annual sales are in excess of 35 million dollars. It has no offices, agents, or distributors in the Virgin Islands, and is not registered to do business there.

At the time suit was instituted, the Gas Company had about $221,500 worth of Reg O equipment either in use or in inventory, and Carib's competitors in the territory had at least that much. The Gas Company purchased most of this equipment from two of Reg O's independent distributors, as well as from Carib's parent corporation, National Propane Company.

Carib also made some direct purchases from Reg O in previous years. In calendar 1978, for example, there were seven separate direct sales to the Virgin Islands with an aggregate value of $1,292.73. These parts were shipped to the Islands by air parcel post or air freight. In 1979, there was one no charge transaction with Carib. In fiscal year May 1977 through May 1978, however, direct purchases by the Gas Company totaled $3,197.32.

In addition to direct and indirect sales, Reg O regularly sent catalogues, bulletins, and price sheets to Carib Gas, as well as blue prints of the equipment to assist the user. There was substantial correspondence between the two companies, and on various occasions Carib would call Reg O's customer representatives to discuss repair and servicing of its equipment.

The district court determined that Reg O had engaged in a persistent course of conduct within the meaning of the Virgin Islands long arm statute, and had also derived substantial revenue from goods used in the Virgin Islands. 5 V.I.C. § 4903(a)(4). In rejecting the constitutional challenge, the court held that Reg O purposefully served the territory and that its direct and indirect activities were such that it could reasonably anticipate being amenable to the Islands' jurisdiction.

On appeal, the defendant contends that the court ignored the statute's requirement that the persistent conduct occur "in this territory." Instead, it is argued, the court focused on Reg O's action in placing its goods in interstate commerce, and found this sufficient to permit the exercise of the court's jurisdiction. The defendant also asserts that its average annual direct sales in the territory for the preceding five years $1,800 did not constitute substantial revenues, and that the existence of over $200,000 worth of equipment there did not justify an inference of receipt of other revenues. Finally, the defendant argues that there were no constitutionally cognizable contacts with the jurisdiction.

The challenges to the district court's order are based on both statutory and constitutional grounds. Because it would not be necessary to reach the constitutional issue if the defendant's position on the statutory question is upheld, we will discuss that matter first. ...

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