McKown v. Criser's Sales & Service

Thompson, J., delivered the opinion of the Court. The principal issue before us is whether, under the Maryland long-arm statute, and consistent with the Due Process Clause of the Fourteenth Amendment, a Maryland court may exercise personal jurisdiction over the appellee, a Virginia car dealer who sold a vehicle to a Maryland resident, in an action brought by a Maryland resident to recover for injuries allegedly caused in Maryland by defects in that vehicle. The Circuit Court for Baltimore County held that no basis existed for the assertion of personal jurisdiction and dismissed the action as to the appellee. We agree that jurisdiction is lacking and affirm.

In 1975, the appellant, Kathryn McKown, was injured when the vehicle in which she was riding, a 1972 jeep stationwagon owned by Katherine Marshall Washburne and driven by her son, Richard Janney Washburne, ran off the road, overturned twice, and caught fire. The vehicle had been purchased new in 1971 by Mrs. Washburne, a Maryland resident, from the appellee, Clarence C. Criser, t/a Criser’s Sales and Service (Criser), at Criser’s place of business in Hot Springs, Virginia. The purchase price of the jeep was $5,642.00. At the time of the accident, McKown was a resident of Maryland; the accident occurred on a highway in Maryland.

McKown subsequently filed a negligence and products liability action in the Circuit Court for Baltimore County against Criser and others, alleging that the jeep had been sold in a dangerously defective condition, that Criser had been negligent in selling the vehicle and in failing to discover and correct the defects, and that the defects had, at least in part, caused her injuries. 1 Criser responded by filing ⁷⁴¹ a motion raising preliminary objection, pursuant to Md. Rule 323, in which he contended that the Maryland court lacked jurisdiction ov.er his person. Along with his motion, he filed an affidavit which stated, in pertinent part, that Criser: "LM]aintains its principal place of business in . . . Virginia, and does not sell any motor vehicle or any other goods in . .. Maryland!;] ... does not nor has it ever done or solicited business in .. .

Maryland nor does it or has it ever engaged in any course of conduct in . .. Maryland!;] .. . does not nor has it ever maintained any office . .. Lor] .. . personal property in Maryland, and does not nor has it ever had any ... employees living and/or working in Maryland!;] • •. does not nor has it ever derived any substantial revenue from goods, services, or manufactured products used or consumed in .. . Maryland.

On very infrequent occasions, a resident of Maryland purchases a vehicle from LCriser], If this occurs, as it did with the Washburne vehicle [Criser] ... prepares the appropriate form so that the vehicle can be registered in Maryland. However, LCriser] ... never solicits such business, never advertises in Maryland, but merely sells a vehicle to a purchaser who, on very infrequent occasions happens fortuitously to be a resident of Maryland.” At the hearing on Criser’s motion, held on January 2, 1979, before Judge Paul E. Alpert, this affidavit was the only evidence presented by either side. On April 24, 1979, Judge ⁷⁴² Alpert granted the motion raising preliminary objection and ordered that judgment for costs be entered in Criser’s favor. The order did not contain an express determination that there was no just reason for delay in entering judgment.

On February 11, 1980, McKown filed an application to stay execution of Judge Alpert’s order, under Md. Rule 1019. Criser responded with a motion ne recipiatur, pursuant to Md. Rule 322. On June 2, 1980, a hearing was held before Judge Buchanan, who, on that same day, signed an order which stated that, having considered the motion raising preliminary objection, the motion ne recipiatur, and the arguments of counsel, he found there to be no just reason for delay in the entry of judgment and directed the entry of judgment for costs in favor of Criser. This appeal followed.

McKown argues that Criser is subject to the jurisdiction of the courts of this state under the Maryland long-arm statute, Md. Cts. and Jud. Proc. Code Ann. § 6-103, and that the court below therefore erred in dismissing the action as to Criser. Application of the long-arm statute involves a two step process.

First, it must be determined whether the language of the statute authorizes jurisdiction; second, because the Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant, Kulko v. Superior Court, 436 U.S. 84, 91 , 98 S. Ct. 1690 , 56 L. Ed. 2d 132 (1978), it must be determined whether the exercise of jurisdiction, if authorized by the statute, would be consistent with Fourteenth Amendment Due Process. See, Mohamed v. Michael, 279 Md. 653, 657 , 370 A.2d 551 (1977); Geelhoed v. Jensen, 277 Md. 220, 224 , 352 A.2d 818 (1976). The two determinations are inter-related "as it was the intent of the Legislature in enacting the long-arm statute to expand the personal jurisdiction of the courts to the extent permitted by the Fourteenth Amendment,” Mohamed v. Michael, 279 Md. at 657 , and thus "the reach of the statute will largely depend upon whether Maryland in personam jurisdiction may be asserted under the Fourteenth Amendment.” Krashes v. White, 275 Md. 549, 559 , 341 A.2d 798 (1975). ⁷⁴³ McKown asserts that jurisdiction is present under § 6-103 (b) (4), 2 which authorizes the exercise of personal jurisdiction over one who: "Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the State.” She claims that Criser caused tortious injury in Maryland by an act or omission outside of Maryland, i.e., the injuries she allegedly suffered in Maryland as a result of Criser’s negligence in inspecting and selling the jeep in Virginia, and that Criser derived substantial revenue from goods or manufactured products used in Maryland. Criser obviously derived some revenue from goods or products used in Maryland; he was paid $5,642 for the Washburne jeep, which was used in Maryland, and it may be assumed that the other vehicles he admittedly sold to Maryland residents were used ⁷⁴⁴ in Maryland as well and that he derived additional revenue from their sale.

The critical inquiry then is whether the revenue derived by Criser from vehicles used in Maryland is "substantial.” Inasmuch as the purpose of the long-arm statute is to extend the jurisdiction of the Maryland courts to the limits of the Constitution, the term necessarily takes its meaning from the requirements of due process, i.e., "substantial revenue” is that amount of revenue which gives the defendant the required "minimum contacts” 3 with the forum state. See, Geelhoed v. Jensen, 277 Md. at 226-27 . Significant guidance in this area is found in the recent decision of the U.S. Supreme Court in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 , 100 S. Ct. 559 , 62 L. Ed. 2d 490 (1980), where the Court addressed the question of "[WJhether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products-liability action, when the defendants’ only connection with Oklahoma is the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma.” Id. at 287 . In that case, New York residents purchased a new car from a New York dealer; the car had been distributed to the dealer by a regional distributor which served the states of New York, New Jersey, and Connecticut.

A year later, while they were traveling through Oklahoma on their way to their new home in Arizona, the purchasers were involved in an accident and seriously injured. They subsequently brought suit in Oklahoma against the dealer and the distributor, among others, alleging the car had been defectively designed ⁷⁴⁵ and manufactured. The Oklahoma Supreme Court held that the exercise of jurisdiction over the defendants, under a provision of the Oklahoma long-arm statute which was, in pertinent part, identical to subsection (b) (4) of the Maryland statute, was proper; the Court reasoned that, due to the mobile nature of automobiles, it was foreseeable that vehicles sold in New York would be used in Oklahoma, that vehicles sold by the defendants obviously were used in Oklahoma, and that, given the value of the automobile, it was reasonable to infer that the defendants derived substantial revenue from cars which were, from time to time, used in Oklahoma. The U.S. Supreme Court held that the exercise of jurisdiction over the defendants by the Oklahoma courts violated due process and reversed.

Reaffirming the principle that a state may exercise personal jurisdiction over a nonresident defendant only when there exists "minimum contacts” between the defendant and the forum state, the court stated: "[W]e find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state-court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law.

They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: The fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma.” Id. at 295 . ⁷⁴⁶ The Court distinguished these circumstances from those where "sale of a product of a manufacturer or distributor ... is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States .. under the latter circumstances, the Court wrote: "[I]t is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” Id. at 297-98 .

The Court also rejected the argument that, because the automobile is by its very nature mobile, it was foreseeable that the cars sold in New York would enter Oklahoma and cause injury there, stating: "But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” Id. at 297 . See also, Granite States Volkswagen, Inc. v. District Court, 492 P.2d 624 (Colo. 1972); Tilley v. Keller Truck & Implement Corp., 438 P.2d 128 (Kan. 1968); Pellegrini v. Sachs & Sons, 522 P.2d 704 (Utah 1974); Oliver v. American Motors Corp., 425 P.2d 647 (Wash. 1967). (All holding that jurisdiction may not be exercised over a nonresident car dealer, where only connection between dealer and the forum state was the occurrence of the injury and the foreseeability that the vehicle in question would be used in the forum state). ⁷⁴⁷ Finally, while not directly addressing the question of what constitutes "substantial revenue,” under the Oklahoma long-arm statute, the Supreme Court rejected the Oklahoma court’s reasoning that, because one vehicle sold by the defendants had been used in Oklahoma, others might have been used there as well, and that the defendants derived substantial revenue from those vehicles.

The Court said: "LFlinancial benefits accruing to the defendant from a collateral relation to the forum State will not support