Robert L. Eubanks, Jr. v. Procraft, Inc.

Citation: Not availableDocket: E2003-02602-COA-R9-CV

Court: Court of Appeals of Tennessee; August 3, 2004; Tennessee; State Appellate Court

Original Court Document: View Document

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An interlocutory appeal was filed regarding the denial of a motion to dismiss for lack of personal jurisdiction over the defendants, Kryton Canada Corporation (KCC) and Kryton International, Inc. (KII), in a case stemming from damage to the plaintiffs' home caused by an applied liquid siding product. The plaintiffs, Robert L. Eubanks, Jr. and Pamela E. Eubanks, initially sued Procraft, Inc. and Kryton Marketing Division, Inc., alleging breach of contract, misrepresentation, and violations of the Tennessee Consumer Protection Act due to the unsatisfactory performance of the Multi-Gard R-10 Permanent Coating System.

The plaintiffs later amended their complaint to include KCC and KII, asserting that the product was manufactured by KII and alleging an intertwined relationship between the defendants. In response, KCC and KII moved to dismiss the case, asserting that they were incorporated in British Columbia with no business presence in the U.S. and had not conducted business in Tennessee. Their motion was supported by an affidavit from KII's president, indicating that KII had previously entered into a distribution agreement with Kryton Marketing Division, which facilitated shipments to Tennessee but did not establish personal jurisdiction.

The trial court's denial of the dismissal motion was found to be in error upon appellate review, leading to the reversal of the lower court's judgment. The appellate court noted that the review was de novo, emphasizing the absence of jurisdiction.

The trial court evaluated proper evidence beyond the initial pleadings, referencing Nicholstone Book Binding, Inc. v. Chelsea House Publishers. Under Tennessee's Long Arm Statute, personal jurisdiction over foreign defendants can arise from specific actions: conducting business in the state, committing tortious acts within the state, owning or possessing property in the state, entering contracts for services or materials in the state, or other constitutionally permissible bases. Procraft, Inc. and Kryton Marketing Division, known as Kryton Coatings International, Inc., are identified as Tennessee corporations against which a default judgment of $1,500,000 was obtained due to alleged damage from liquid siding to a house.

KCC has not conducted any business in the U.S., focusing instead on distributing construction products in Canada. The transactions attributed to KCC and KII were actually performed by Procraft and KMD. KII's sporadic shipments to Tennessee were made for Kryton-Barbados under a distribution agreement and do not constitute evidence of intent to engage in business in Tennessee, as established in Gibbons v. Schwartz-Nobel. The plaintiffs claimed misrepresentations by Procraft and KMD, asserting KMD acted as an agent for KCC and KII, but the court noted this was a legal conclusion rather than a factual allegation.

The Long-Arm Statute allows for jurisdiction over foreign corporations owning real property in Tennessee, which KCC and KII do not. It also permits jurisdiction for contracts involving materials to be furnished in Tennessee; however, only Procraft was named in the relevant transaction regarding the liquid siding. The statute aligns with the Fourteenth Amendment's due process requirements, necessitating that a defendant must have sufficient contacts with Tennessee such that the lawsuit does not violate traditional notions of fair play and substantial justice.

Due process necessitates that individuals or entities have "fair warning" that their activities may expose them to jurisdiction in a foreign court. Increased scrutiny is required when the defendant is from another country, as highlighted in *Asahi Metal Industry Co. Ltd. v. Superior Court of California*. In the case at hand, KII sold products to Kryton-Barbados, with the expectation of resale in Tennessee, but this alone does not establish personal jurisdiction. The court referenced *Mullins v. Harley-Davidson Yamaha BMW of Memphis, Inc.*, where personal jurisdiction over a foreign manufacturer was denied because it did not maintain a presence in the U.S., did not sell directly to Tennessee dealers, and did not engage in advertising or solicitation within the state. The decisions from *Asahi* and *Davis Kidd Booksellers, Inc. v. Day-Impex, Ltd.* reinforce that merely placing a product into the stream of commerce is insufficient for personal jurisdiction. In *World-Wide Volkswagen v. Woodson*, the Supreme Court emphasized that foreseeability of goods reaching a forum does not equate to personal jurisdiction, cautioning against viewing products as agents for service of process. The amended complaint failed to invoke the Long Arm Statute, asserting only that KCC and KII are Canadian corporations subject to the Hague Convention, which the court deemed inadequate for establishing jurisdiction. Consequently, the judgment was reversed, and the complaint against KCC and KII was dismissed, with costs assigned to the appellees.