HAROLD HEINS vs. WILHELM LOH WETZLAR OPTICAL MACHINERY GMBH & CO. KG.

WARNER, J. The plaintiff appeals from a judgment entered in the Superior Court, pursuant to Mass.R.Civ.P. 54(b), 365 Mass. 821 (1974), dismissing his action for lack of personal jurisdiction over the defendant. See Mass.R.Civ.P. 12(b)(2), 365 Mass. 755 (1974).

The defendant is a West German corporation which designed and manufactured an optical lens grinding machine purchased by the plaintiff's employer, a Massachusetts corporation. The plaintiff, on theories of negligent design and manufacture and breach of warranty, sought damages for injuries sustained by him while setting up the machine in Sturbridge, Massachusetts.

On the defendant's motion to dismiss under rule 12(b)(2), the parties submitted affidavits, answers to interrogatories and excerpts of the deposition testimony of the plaintiff. After argument, the judge filed a memorandum of decision and order and allowed the motion.

As he did before the Superior Court, the plaintiff argues on appeal that assertion of jurisdiction is authorized by certain provisions of our long arm statute (G. L. c. 223A) and is consistent with basic due process requirements. In particular, as to the statutory ground, the plaintiff says that the exercise

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of personal jurisdiction over the defendant is proper under either of the following two provisions of G. L. c. 223A, Section 3, as amended by St. 1969, c. 623: "A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's (a) transacting any business in this commonwealth; [or] . . . (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth."

"General Laws c. 223A, Section 3 cannot authorize jurisdiction which is constitutionally unacceptable, even though the fact pattern asserted in support of jurisdiction apparently satisfies the statute's literal requirements. Likewise, G. L. c. 223A, Section 3, asserts jurisdiction over the person to the constitutional limit [see `Automatic' Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 443 (1972)] only when some basis for jurisdiction enumerated in the statute has been established." Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 6 (1979). The inquiry is twofold. We look first to see whether the plaintiff has satisfied his burden of establishing sufficient facts to support the assertion of personal jurisdiction over the defendant under the long arm statute. See id. at 3; Carlson Corp. v. University of Vermont, 380 Mass. 102, 105 (1980). In resolving the issue, we accept as true only the uncontroverted facts as they appear in the materials which were before the Superior Court judge. See id. at 104 n.4; C.H. Babb Co. v. A.M. Mfg. Co., 14 Mass. App. Ct. 291, 293 (1982).

1. The plaintiff first contends that his cause of action arises out of the defendant's transaction of business in Massachusetts and, therefore, personal jurisdiction attached under G. L. c. 223A, Section 3(a). The focus of the plaintiff's argument, as well as of the defendant's, is blurred by a mix of considerations relevant to the statutory standard and those relevant to due process requirements. See Good Hope Indus., supra at 6-7, and cases cited; Bond Leather Co. v. Q.T. Shoe Mfg., Co., 764 F.2d 928, 932 (1st Cir. 1985). The inquiry, however, under

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G. L. c. 223A, 3(a), is confined by the statutory language, although the "transacting any business" clause has been construed broadly. See Good Hope Indus., supra; Nova Biomedical Corp. v. Moller, 629 F.2d 190, 193-194 (1st Cir. 1980). "General Laws c. 223A, Section 3(a), gives rise to jurisdiction if the defendant either directly or through an agent transacted any business in the Commonwealth, and if the alleged cause of action arose from such transaction of business" (emphasis supplied). Good Hope Indus., supra at 6.

The facts, as found by the judge and supplemented by uncontroverted statements in the materials before her, which relate to the defendant's transaction of business in Massachusetts are as follows. The defendant is a West German corporation with a principal place of business in West Germany, engaged in the design, manufacture and sale of optical machinery. Sales of the defendant's machines in the United States are accomplished in the following manner. The defendant sells its machines outright to Loh Optikmaschinen, a Swiss corporation with a principal place of business in Switzerland which manufactures and trades in optical machinery. Loh Optical Machinery, Inc. (Loh Optical), an Illinois corporation with a principal place of business in Illinois, is the exclusive distributor of the defendant's machines in the United States. Loh Optical purchases machines directly from Loh Optikmaschinen for resale to United States customers. The defendant has no control over or ownership interest in Loh Optical. The defendant does not have any control over the marketing, price or sales of its machines in the United States. [Note 1]

The plaintiff's employer inquired of Loh Optical regarding purchase of the machine which allegedly caused the plaintiff's injuries. The plaintiff and another employee made the recommendation to purchase the machine after dealing exclusively with one Hans Mack, the president of Loh Optical, who visited

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Massachusetts to discuss the purchase. The machine was delivered to the plaintiff's employer in Sturbridge in July of 1982. [Note 2]

On these facts, the plaintiff has failed to sustain his burden of showing a rational nexus between his cause of action and the transaction of any business in Massachusetts by the defendant within the literal meaning of G. L. c. 223A, Section 3(a). See Good Hope Indus., supra at 6-7. Compare Nichols Associates, Inc. v. Starr, 4 Mass. App. Ct. 91, 96-97 (1976) (plaintiff's choice to do some work in Massachusetts office and occasionally to take deliveries there is not "transacting any business" within meaning of Section 3[a]); Walsh v. National Seating Co., 411 F. Supp. 564, 569-570 (D. Mass. 1976) (sporadic shipment of spare parts into Massachusetts does not meet requirement of a cause of action arising out of "transacting any business" within meaning of Section 3[a]); Catrone v. Ogden Suffolk Downs, Inc., 647 F. Supp. 850, 858-859 (D. Mass. 1986) (plaintiff's injury does not arise out of defendant's contacts with Massachusetts within meaning of Section 3[a]). [Note 3] Cf. Carlson Corp. v. University of Vermont, 380 Mass. at 105 (signing contract in Massachusetts, if cause of action arises from contract, is literally transacting business under Section 3[a]); C.H. Babb Co. v. A.M. Mfg. Co., 14 Mass. App. Ct. at 292-293 (transacting business when nonresident defendant actively and purposefully acquires business in Massachusetts); Bond Leather Co. v. Q.T. Shoe Mfg. Co., 764 F.2d at 932 (transacting business when nonresident defendant negotiates by mailing letters and placing call

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to Massachusetts); Hahn v. Vermont Law School, 698 F.2d 48, 50 (1st Cir. 1983) (transacting business when nonresident defendant mails application and acceptance letter to Massachusetts); Nova Biomedical Corp. v. Moller, 629 F.2d at 195-196 (transacting business when nonresident defendant conducts or plans patent-related business in Massachusetts); Boston Super Tools, Inc. v. RW Technologies, Inc., 467 F. Supp. 558, 561-562 (D. Mass. 1979) (transacting business when foreign corporation sells many products to Massachusetts distributor over more than a year and frequently communicates with distributorship); Little Brown and Co. v. Bourne, 493 F. Supp. 544, 546-548 (D. Mass. 1980) (transacting business when nonresident defendant enters into contract with plaintiff publisher and mails chapters to Massachusetts, setting in motion complicated series of editing and printing steps); Eatable Greetable Products, Inc. v. Sweet Stop, Inc., 627 F. Supp. 777, 780-782 (D. Mass. 1986) (transacting business when nonresident defendant attempts to retake Massachusetts territory from plaintiff).

2. We turn to consideration of the plaintiff's claim that he has established sufficient facts to support personal jurisdiction under G. L. c. 223A, Section 3(d). There is no dispute that the requirement of the first prong of clause (d) has been met, namely, that the plaintiff has alleged a tortious injury in Massachusetts arising out of the claimed negligent design and manufacture of the optical grinding machine in West Germany.

We recite undisputed facts relevant to the additional statutory conditions which permit assertion of personal jurisdiction in an action for compensation for such an injury, namely, "if [a defendant] regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth." G. L. c. 223A Section 3(d). During the seven-year period from 1977 through 1983 (records were not available for prior periods), an employee (three in all) of the defendant made eight visits (in the years 1977, 1978, 1979, 1981 and 1983, covering a total of eleven days) to companies located in Massachusetts. Five of the visits were for the purpose

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of discussing delivered machines, two were "courtesy visits" to discuss a particular system manufactured by the defendant, and one was to discuss that system and "the market situation in the opthalmic [sic] field." Two of the visits were made, in 1983, by the defendant's managing director after the date, August 11, 1982, of the plaintiff's injuries. During almost all of these eight Massachusetts visits to "customers or potential customers" (so described in the defendant's answers to interrogatories), the defendant's employee attempted to sell the defendant's products.

The machine in question was purchased by the plaintiff's employer for about $56,000.00. The employer had previously bought three or four machines manufactured by the defendant. At a Massachusetts plant to which the plaintiff had been referred by Hans Mack, the plaintiff saw "dozens" of machines manufactured by the defendant.

Passing the question whether the defendant's visits and solicitations could be considered as regularly doing or soliciting business or as a persistent course of conduct within the literal meaning of clause (d) of G. L. c. 223A, cf. Gunner v. Elmwood Dodge, Inc., 24 Mass. App. Ct. 96, 99-100 (1987), we hold that the plaintiff has shown sufficient facts to satisfy the clause's literal disjunctive requirement that the defendant "derives substantial revenue from goods used . . . in this commonwealth." Literal satisfaction of the explicit statutory requirements is sufficient to support the assertion of jurisdiction provided that the statute's implicit due process limitations are not offended. See Good Hope Indus., supra at 6-7; Carlson Corp. v. University of Vermont, supra at 105.

The Superior Court judge concluded that, as the defendant sold its machines to Loh Optikmaschinen, the defendant did not derive substantial revenue from goods used in Massachusetts. That reasoning ignores economic reality and, for purposes of statutory construction, elevates form over substance. [Note 4] The

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evidence of the sale price of the machine in question and the presence of many others in Massachusetts permits the inference that the defendant derives substantial revenue from the use of its machines here. [Note 5]

3. We now consider whether the assertion of jurisdiction over the defendant would offend due process requirements. "The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful `contacts, ties, or relations.' International Shoe Co. v. Washington, 326 U.S. [310], 319 [1945]. By requiring that individuals have `fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign,' Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J., concurring in judgment), the Due Process Clause `gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit,'

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World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-472 (1985).

"Where a forum seeks to assert specific jurisdiction [ [Note 6]] over an out-of-state defendant who has not consented to suit there, this `fair warning' requirement is satisfied if the defendant has `purposefully directed' his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984), and the litigation results from alleged injuries that `arise out of or relate to' those activities, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). Thus `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' and those products subsequently injure forum consumers. World-Wide Volkswagen Corp. v. Woodson, supra, at 297-298." Burger King Corp. v. Rudzewicz, 471 U.S. at 472-473. (Footnotes omitted.) [Note 7]

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In World-Wide Volkswagen, the Court held that the "foreseeability" of persons who purchased an automobile in New York being involved in an accident in Oklahoma was an insufficient basis to support the exercise of special jurisdiction by an Oklahoma State court over the New York retailer and wholesale distributor in a products liability action where the defendants had no contacts whatever with Oklahoma. Citing Hanson v. Denckla, 357 U.S. 235, 253 (1958), the Court said that the "unilateral activity" of the purchasers in taking the automobile to Oklahoma could not satisfy the defendant's "contacts" requirement with Oklahoma. 444 U.S. at 298.

The Court went on, however, to address a stream-of-commerce theory of specific personal jurisdiction which had been previously recognized by lower courts. See 4 Wright & Miller, Federal Practice and Procedure Section 1067, at 283-290 (2d ed. 1987), and the cases there discussed. "This is not to say, of course, that foreseeability is wholly irrelevant. 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." 444 U.S. at 297.

"When a corporation `purposefully avails itself of the privilege of conducting activities within the forum State,' Hanson v. Denckla, 357 U.S. at 253, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the 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

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product in other States, it 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." 444 U.S. at 297-298.

In Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987), Justice O'Connor, in a portion of the opinion (Part II-A) in which she was joined by three Justices, wrote: "The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State. But a defendant's awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State." Justice Brennan, joined by three Justices, disagreed, taking the position that due process concerns are met where a defendant places a product in the stream of commerce and is aware that the product is being marketed in the forum State. Id. at 116. Justice Brennan characterized the plurality's view as a "marked retreat" from the analysis in World-Wide Volkswagen. Id. at 118. [Note 8]

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"[T]he constitutional touchstone remains whether the defendant purposefully established `minimum contacts' in the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. at 474. The apparent differences of the majority in World-Wide Volkswagen and the plurality in Asahi Metal Indus. are not regarding the validity of the stream of commerce theory of specific personal jurisdiction but concern subtleties in elusive definitions of the minimum contacts necessary to satisfy due process. Whichever view is assumed to be controlling, we think that Massachusetts may constitutionally assert jurisdiction over the defendant in this case.

There is no question on the facts presented that the defendant was aware that its products had been purchased by Massachusetts customers for use here. The sale of the machine in question was not an isolated occurrence. There were "dozens" of the defendant's machines in one Massachusetts plant and three or four in the plaintiff's employer's place of business prior to the purchase of the machine in question. While the sales of the defendant's products may have been accomplished indirectly, the defendant also acted directly to serve the Massachusetts market. The defendant sent its employees to Massachusetts to visit existing or prospective customers at three different companies to provide advice on delivered machines and to cultivate a market for the defendant's products. The defendant derived substantial revenue from its products used in Massachusetts. Cf. World-Wide Volkswagen v. Woodson, 444 U.S. at 299. When considered cumulatively, we think these facts support a finding of sufficient minimum contacts brought about by the purposeful acts of the defendant directed toward Massachusetts, so that the assertion of specific personal jurisdiction over the defendant by the Superior Court is consonant with due process. See Burger King Corp. v. Rudzewicz, 471 U.S. at 475-476; Asahi Metal Indus. v. Superior Court, 480 U.S. at 112, and cases cited.

The remaining inquiry is whether, considering defendant's minimum contacts along with other factors, the assertion of specific personal jurisdiction over the defendant would comport with "fair play and substantial justice." International Shoe Co.

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v. Washington, 326 U.S. at 320. Burger King Corp. v. Rudzewicz, supra at 476. Among the other factors are the burden on the defendant in defending the claim in Massachusetts, "the plaintiff's interest in obtaining convenient and effective relief," and the interest of Massachusetts in "furthering fundamental substantive social policies." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 292. "These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. On the other hand, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable" (citations omitted). Burger King Corp. v. Rudzewicz, supra at 477.

The defendant has made no argument that it would be unduly burdened by having to defend the plaintiff's suit in Massachusetts. In the past, the defendant has sent its representatives, including its managing director, here to visit existing and prospective customers in order to advise and to solicit new business. Many of the defendant's machines are located in Massachusetts. The allegedly defective machine was located here, and the plaintiff's injuries were sustained here. It is likely that witnesses to the incident and medical witnesses are located in Massachusetts. It is plain that jurisdiction in the Massachusetts courts serves the interest of the plaintiff in obtaining convenient and efficient relief. The only alternative which would seem open to the plaintiff would be to submit to the jurisdiction of a foreign country's dispute resolution mechanism and choice of law rules. On the record before us, economic considerations in prosecuting and defending any action tip heavily in favor of the plaintiff. Finally, Massachusetts has a strong expressed interest in "furthering fundamental substantive social policies" which have shaped our rules of law governing products liability actions. [Note 9] Thus, we conclude, the assertion of specific personal

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jurisdiction over the defendant in this case would be harmonious with fair play and substantial justice.

4. In summary, we hold that (1) the literal requirement of the long arm statute that the defendant "derive[ ] substantial revenue from goods used . . . in this commonwealth," G. L. c. 223A, Section 3(d), has been satisfied, and (2) the "minimum contacts" of the defendant with Massachusetts are, when balanced with other factors, sufficient to permit the assertion of specific personal jurisdiction over the defendant under the due process clause.

Judgment reversed.