320 F.2d 219, 221 (2d Cir.1963) (en banc) (Friendly, J.).
On October 17, 1958, United Press International transmitted a news dispatch under an Atlanta, Georgia, dateline reporting the dynamiting of an Atlanta synagogue and referring to a so-called "fat cat" financier of anti-Semitic terrorist activity.1 On October 13, 1961, plaintiff Harold Noel Arrowsmith, Jr., a resident of Maryland, filed this libel action against UPI, a New York corporation, in the United States District Court for the District of Vermont.2 The complaint sought general damages of $56,280,000 calculated at $10,000 for each of UPI's 5,628 subscribers worldwide, but did not allege that the dispatch was printed or broadcast in Vermont, that Arrowsmith was known to anyone in Vermont, that he had any reputation there, or that any publication in Vermont caused him injury.3
UPI moved under Federal Rule of Civil Procedure 12(b) to dismiss on grounds of lack of personal jurisdiction, improper venue, and failure to state a claim upon which relief could be granted, primarily because the complaint alleged no special damages.4 Judge Gibson sustained the failure-to-state-a-claim ground and did not reach the jurisdictional or venue questions.5 Plaintiff appealed from the resulting judgment of dismissal.6
Affidavits submitted by UPI showed that it had eleven subscribers in Vermont, consisting of two newspapers, eight radio stations, and one radio-television station.7 UPI maintained one employee in the state, Isabelle McCaig, who managed a Montpelier news bureau from desk space in the State House and transmitted Vermont news stories over a wire to UPI's Boston office.8 UPI had no office in Vermont.9 Its gross billings to Vermont subscribers in 1960 represented less than 0.14 percent of its total gross billings.10 The allegedly libelous dispatch originated outside Vermont and was transmitted to Vermont subscribers from outside the state.11
The case was initially heard by a three-judge panel that requested in banc consideration because the alternative ground of decision in Jaftex Corporation v. Randolph Mills, Inc., 282 F.2d 508 (2d Cir. 1960), was causing confusion in the district courts.12 The request for in banc review was granted, and the court considered the case on the briefs already before it.13 The district court opinion appears at 205 F.Supp. 56 (D. Vt. 1962).14
Whether the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits?15
In a diversity action, the amenability of a foreign corporation to suit in a federal court is determined in accordance with the law of the state where the court sits, subject only to constitutional limitations.16 No federal statute or Rule of Civil Procedure authorizes a federal standard independent of state law.17 State statutes represent a considered balancing of plaintiff, defendant, and state interests that diversity jurisdiction does not override.18
Yes. The court reaches this conclusion because neither 28 U.S.C. § 1391(c) nor Federal Rule of Civil Procedure 4(d)(3) and (7) supplies any directive to create a federal jurisdictional standard.19 Supreme Court decisions such as Angel v. Bullington and Woods v. Interstate Realty Co. require federal courts to respect state door-closing policies in diversity cases.20 Applying the rule to the established facts, UPI's eleven Vermont subscribers, single employee Isabelle McCaig, and minimal billings must be measured against Vermont statutes such as 12 V.S.A. §§ 853-855 rather than any independent federal test of doing business or presence.21
The amenability of a foreign corporation to suit in a federal diversity action is governed by the law of the forum state.22
Related opinions on this issue
Circuit Judge Clark dissents from the majority's adoption of state-law standards for personal jurisdiction over foreign corporations in diversity cases.23 He maintains that a federal statutory policy traceable to the First Judiciary Act and embodied in 28 U.S.C. § 1693 requires service within the district unless a specific exception applies.24 This policy supplies a uniform federal standard for determining when a corporation is subject to suit.25
Clark contends that the standard should not be displaced by varying state rules.26 He emphasizes that federal courts possess their own organizational integrity that the Erie doctrine does not require subordinating to state procedural choices.27 Clark further argues that the majority's approach invites states to enact discriminatory legislation against nonresidents.28
Circuit Judge Smith concurs that state standards govern amenability to suit in diversity cases.29 He cites Angel v. Bullington and Woods v. Interstate Realty Co. as pointing toward application of state law.30 Smith expresses the view that Vermont would probably assert jurisdiction on the facts presented.31
He agrees that the District Judge experienced in Vermont law should pass upon the Vermont-law issue in the first instance.32 Smith also agrees that the court should dispose of jurisdiction and venue before considering whether a claim has been stated on which relief may be granted.33
Circuit Judge Waterman concurs in the result that state standards control.34 He joins the remand so that the district judge experienced in Vermont law may first address jurisdiction and venue before reaching the merits.35 Waterman shares with Judge Smith the belief that Vermont has constitutional power to give its courts jurisdiction over this claim.36
He is of the opinion that such jurisdiction would have been asserted here if the case had been brought in a Vermont state court.37
Whether a district court must address questions of personal jurisdiction and venue before considering whether a complaint states a claim upon which relief can be granted?38
A district court must address questions of personal jurisdiction and venue before considering whether a complaint states a claim upon which relief can be granted.39 A court lacking jurisdiction has no power to adjudicate the merits.40 A dismissal for failure to state a claim is with prejudice while a jurisdictional dismissal permits refiling in an appropriate forum.41
Yes. The court explains that logic and the functional consequences of the chosen ground of dismissal both require priority for jurisdictional inquiries.42 Judge Gibson erred by reaching the merits without first determining whether the court possessed power over the defendant.43 Applying the rule to the established facts, the district court's dismissal on the pleadings for lack of special damages must be vacated.44
The court can first decide whether Vermont law and the Constitution permit jurisdiction over UPI given its eleven subscribers and single employee in the state.45
A district court must decide personal jurisdiction and venue before reaching the sufficiency of the complaint.46
Whether Vermont law authorizes the exercise of personal jurisdiction over United Press International on the facts alleged in this complaint?47
Vermont law authorizes jurisdiction over a foreign corporation only when the corporation has appointed a process agent, falls within one of the specific statutes governing insurance or similar companies, or satisfies the long-arm statute limited to contracts or torts involving Vermont residents.48 Any assertion of jurisdiction must also satisfy the due-process requirements of minimum contacts and fairness articulated in International Shoe Co. v. Washington and Hanson v. Denckla.49
No. The court determines that the present record does not clearly bring UPI within Vermont's existing statutes.50 The minimal contacts shown—eleven subscribers, one employee collecting local news, and less than 0.14 percent of billings—may not satisfy due process when the claim arises entirely outside Vermont and the plaintiff alleges no reputation or injury there. The transmission of the Atlanta-originated dispatch to Vermont subscribers and the activities of Isabelle McCaig do not appear to constitute the commission of a tort in Vermont against a Vermont resident as required by 12 V.S.A. § 855. Jurisdiction is at best uncertain on the current pleadings and affidavits.51
On the facts presently alleged, Vermont law does not clearly authorize personal jurisdiction over United Press International, and the issue requires further consideration on remand.52
Related opinions on this issue
Circuit Judge Clark would find jurisdiction proper under either federal or state law.53 Miss McCaig's full-time news-gathering and distribution activities constitute an integral part of UPI's business sufficient to satisfy any reasonable test of doing business.54 Clark views the Vermont statutes as an attempt to meet constitutional requirements rather than a discriminatory door-closing policy.55
He believes the service is good under either federal or state law.56 Clark would not object to a remand for the taking of evidence as to the defendant's doing business in Vermont.57