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AVIATION SALES CORP. v. CANADA ITW LTD.

August 7, 1972

AVIATION SALES CORPORATION, Plaintiff,
v.
CANADA ITW LIMITED and Illinois Tool Works Inc., Defendants


Neaher, District Judge.


The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

NEAHER, District Judge.

 Plaintiff Aviation Sales Corporation, a New York corporation having its place of business in this district, commenced this action for alleged breach of contract seeking recovery of damages in excess of the federal jurisdictional amount. Defendant Canada ITW Limited ("CITW") is a Canadian corporation having its place of business in Ontario, Canada. CITW was incorporated as a wholly-owned subsidiary of co-defendant Illinois Tool Works, Inc. ("ITW"), a Delaware corporation having its principal office in Chicago, Illinois, and a regional sales office in New York. Jurisdiction is grounded on diversity of citizenship, 28 U.S.C. § 1332.

 Defendant ITW has accepted jurisdiction by appearing generally and filing its answer to the complaint. Defendant CITW, however, challenges the existence of jurisdiction over its person by motion before answer under Rule 12(b)(2) and (5), F.R. Civ. P., seeking dismissal of the complaint as against it and quashing of the service of process made by mail to its office in Ontario, Canada. That challenge requires the court to undertake the never easy task of predicting how a New York State court would apply the relevant State jurisdictional statute to the particular facts and circumstances relating to CITW, a nondomiciliary corporation which does not itself appear to be doing business in New York in the traditional sense.

 The relevant statute, N.Y. CPLR § 302(a)(1) (McKinney 1972), provides in pertinent part that:

 
As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary, or his executor or administrator, who in person or through an agent:
 
1. transacts any business within the state.

 If CITW is subject to personal jurisdiction under § 302(a)(1), service of process upon it in Canada by mail dispatched by the clerk of the court -- which was done here -- would be proper under Rule 4(e) and (f), (i), F.R. Civ. P., and the motion addressed to the sufficiency of service would fail. The critical question for decision is whether under New York law CITW transacted "any business" in New York out of which plaintiff's causes of action may fairly be said to have arisen. The answer to that question requires consideration of the entire transaction between the parties. See Collateral Factors Corp. v. Meyers, 39 A.D. 2d 27, 330 N.Y.S. 2d 833 (1st Dept. 1972).

 Admittedly there were transactions between plaintiff in New York and CITW in Canada growing out of a business agreement between them which began around September 1967 and endured some four years until the agreement was finally terminated by CITW in September 1971. Plaintiff, whose place of business is in Richmond Hill, Queens, has for some years been engaged in selling parts for military and commercial aircraft to customers here and abroad. CITW, through its Licon Division, sells electric switches and components which it manufactures at its plant in Don Mills, Ontario (Toronto). These include a landing gear switch supplied to the Canadian manufacturer of the F-104 airplane used by the Canadian Air Force.

 Plaintiff, having received an inquiry from a German customer responsible for technical procurement data for the German Air Force, and learning of CITW's manufacture of the F-104 landing gear switch, made contact with CITW with a view to promoting the use of that switch on the German F-104 and by other foreign governments and foreign aircraft manufacturers. Plaintiff's president, Jack Dadourian, visited CITW's plant in Ontario in August 1967 and placed an initial order for the manufacture of a supply of the F-104 landing gear switches. As a result of a meeting between him and CITW's then vice president and managing director, Fred Ballentine, an agreement was admittedly made at that time whereby CITW appointed plaintiff its exclusive sales representative for designated F-104 landing gear switches outside of Canada, excluding business with Fiat of Italy. The agreement was confirmed by a letter from Mr. Ballentine to plaintiff in New York, dated September 1, 1967, which stated:

 
"You will establish a credit to Canada Illinois Tools, Ltd. of twenty-two thousand U.S. dollars ($22,000.00) at the Canadian Imperial Bank of Commerce within two weeks. When that credit is established, we will purchase the balance of materials required to complete your entire order. Shipment of finished products to the amount of $22,000. U.S.F. will apply against that credit. The balance of the order to be shipped on the usual terms, net 30 days.
 
"Further, we will agree to protect your exclusive sales interest outside of Canada, excluding our business with Fiat of Italy on F104 landing gear switches # 740045 and # 740046. Orders or inquiries on these parts, other than the exceptions mentioned, will be forwarded to your company for handling.
 
"During our talks, I suggested a working arrangement with Licon Division of I.T.W. which would give you a broad range of approved military and aircraft switches. As such, I have talked with Gene Connelly, General Manager of that division who would be interested in talking with you." (Emphasis supplied.)

 In early January 1968, after having sent sets of parts drawings to plaintiff, Mr. Ballentine visited plaintiff's place of business in New York for a meeting with Mr. Dadourian and other employees of plaintiff. He brought with him sample units of the parts involved "done up like jewels" so that plaintiff "can demonstrate and the customer can see the inner workings being actuated." The meeting lasted four hours and Mr. Ballentine returned to ...


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