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TORRES v. TOWMOTOR DIV. OF CATERPILLAR

November 18, 1977

Bernardino TORRES and Irma Torres, Plaintiffs,
v.
TOWMOTOR DIVISION OF CATERPILLAR, INC. and Foley Towlift Inc., Defendants



The opinion of the court was delivered by: BRAMWELL

MEMORANDUM AND ORDER

The within matter comes before this Court by way of plaintiffs' contested motion seeking an order of attachment pursuant to section 6201 of the Civil Practice Laws and Rules. *fn1" In requesting the attachment of defendant Foley Towlift Inc.'s insurance policy for the sole purpose of obtaining quasi in rem jurisdiction under Rule 4(e) of the Federal Rules of Civil Procedure, *fn2" plaintiffs rely on Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966), and its progeny.

 An attachment order granted pursuant to Seider permits a New York plaintiff to assert quasi in rem jurisdiction over a nonresident defendant by attaching the defendant's insurer's contractual obligation to defend him against the resident plaintiff's claim. In Seider, such an obligation was deemed an attachable debt which is present in New York if the insurer does business in New York. The Seider procedure is usually employed when the nonresident defendant is not otherwise amenable to jurisdiction. Since it was recently held by the Supreme Court in the landmark decision of Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) that the assertion of any jurisdiction, irrespective of its form, must comport with the minimum contacts test pronounced in International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), the question of the continued vitality of Seider based jurisdiction is thus squarely confronted. For the reasons to follow, the Court concludes that Shaffer mandates a denial of the attachment order requested herein and marks the demise of the jurisdictional attachment procedure condoned in Seider absent an additional showing that a nonresident defendant had minimum contacts with New York.

 FACTS

 The plaintiffs in this action are residents of New York. On June 15, 1977, plaintiff Bernardino Torres was pursuing his regular employment for Republic Container Corporation in Jersey City, New Jersey. On that day, he was operating a fork lift truck manufactured by defendant Towmotor Division of Caterpillar, Inc. This truck had been purchased by plaintiff's employer from defendant Foley Towlift, Inc. (hereinafter "Foley") on August 18, 1976 and was later delivered to Republic in New Jersey on February 25, 1977. On the morning of June 15th, Foley had allegedly serviced this truck.

 After completing his work assignment, plaintiff claims that he first placed the truck in neutral gear and then alighted from it. It is plaintiff's contention that while he was standing beside the unattended truck, it began to move and proceeded to roll over his foot causing him injuries which initially required hospital treatment in New Jersey and later required additional medical attention in New York. Plaintiff maintains that when an operator alights from the seat of this type of truck after it has been placed in neutral gear, the truck's ignition should automatically disconnect and its brakes should self-engage. Plaintiff claims that his injuries are a direct consequence of the failure of the truck in issue to function in this manner.

 Mr. Torres subsequently commenced this diversity action seeking damages resulting from these injuries. Irma Torres, his wife, joined him as co-plaintiff in a claim for loss of his services. The claims against Towmotor Division of Caterpillar Inc. sound in negligence in manufacture, sale, design and failure to warn of a dangerous condition as well as in breach of express and implied warranties and strict liability in tort. The gravamen of plaintiffs' complaint against defendant Foley are negligence in sale, maintenance and service of the truck in issue, breach of express and implied warranties and strict liability in tort.

 Defendant Towmotor Division of Caterpillar, Inc. is an Ohio Corporation that is authorized to do business in New York. Thus, there exists no jurisdictional problem as to them. Defendant Foley, however, is a New Jersey Corporation which is not authorized to do business in New York. Foley contends that not only does it not transact or do business in New York, it asserts that it has had no contacts with New York whatsoever. Nowhere have the plaintiffs asserted the existence of a relationship between defendant Towmotor Division of Caterpillar and Foley that would make Foley amenable to jurisdiction through the New York actions of Towmotor Division of Caterpillar, Inc. Plaintiffs base their request for an attachment order for jurisdictional purposes solely on the ground that Foley was issued a liability insurance policy by Liberty Mutual Insurance Company which maintains a business office in New York.

 Since jurisdiction in this matter is based on diversity of citizenship, a federal court will normally follow the decisions of the highest court of the state in which it sits. Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). However, where a state court decision on the issue of jurisdiction is challenged as constitutionally infirm, the Court must be guided by the relevant decisions of the Supreme Court. Aftanase v. Economy Baler Co., 343 F.2d 187, 192 (8th Cir. 1965) (Blackmun, J.); See Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963); Cf. Smayda v. United States, 352 F.2d 251, 253 (9th Cir. 1965), Cert. denied, 382 U.S. 981, 86 S. Ct. 555, 15 L. Ed. 2d 471 (1966).

 THE DEVELOPMENT OF SEIDER v. ROTH

 In order to decide the issue of the applicability of the Supreme Court's holding in Shaffer to the case at bar, it is necessary to examine the judicial development of the use of an order attaching the insurer's contractual obligations to defend and indemnify as a means of obtaining quasi in rem jurisdiction. The legal storm created by such a use of the attachment procedure *fn3" first appeared on the New York horizon in the 1966 Court of Appeals' decision in Seider v. Roth. Over eleven years and numerous federal and state decisions later, Seider's dark clouds of confusion continue to loom large over New York law.

 The Seider case entailed the propriety of the attachment of a Canadian motorist's liability insurance policy as a mechanism to obtain quasi in rem jurisdiction. The attached policy was issued by an insurer who did business in New York. The cause of action arose from injuries sustained by a New York resident in a Vermont automobile accident. In a four to three decision, the Court of Appeals held that in a personal injury action against a nonresident defendant, the defendant's insurer's contractual obligation to defend and indemnify was a "debt" owing to the defendant within the purview of C.P.L.R. §§ 5201 and 6202, *fn4" and, as such, was subject to attachment under C.P.L.R. § 6201. Seider, supra at 112, 216 N.E.2d at 313, 269 N.Y.S.2d at 100.

 The constitutional issues circumvented in Seider were squarely presented to the Court of Appeals in Simpson v. Loehmann, 21 N.Y.2d 305, 234 N.E.2d 669, 287 N.Y.S.2d 633, (1967). There, plaintiff was unable to obtain personal jurisdiction over a Connecticut resident in an action for injuries sustained by a New York infant while boating in Connecticut waters. Therefore, the plaintiff obtained an ex parte order of attachment of defendant's insurance policy which was held with an insurance company doing business in New York. The Connecticut defendant strenuously objected to the contention that quasi in rem jurisdiction had thereby been properly required, urging, Inter alia, that this procedure offended due process. In rejecting this contention, the Court of Appeals relied on the then settled authority of Harris v. Balk, 198 U.S. 215, 25 S. Ct. 625, 49 L. Ed. 1023 (1905):

 
It was our opinion when we decided (Seider), and it still is, that jurisdiction in rem was acquired by the attachment in view of the fact that the policy obligation was a debt to the defendant. And we perceive no denial of due process since the presence of that debt in this State (see, e.g., Harris v. Balk) contingent or inchoate though it may be represents sufficient of a property right in the defendant to furnish the nexus with, and the interest in, New York to empower its courts to exercise an in rem jurisdiction over him. It is, of course, hardly necessary to add that neither the Seider Decision nor the present one purports to expand the basis for in personam jurisdiction in view of the fact that the recovery is necessarily limited to the value of the asset attached, that is, the liability insurance policy.

 Simpson, supra at 310, 234 N.E.2d at 671, 287 N.Y.S.2d at 636 (emphasis added and citations omitted).

 The decision of Harris v. Balk, supra marked the birth of the strain of quasi in rem jurisdiction employed in Seider. In Harris, supra at 227, 25 S. Ct. 625, the Supreme Court held that the situs of a debt follows the debtor and is subject to garnishment wherever the debtor may be found. *fn5" Prior to Shaffer, it was uncontroverted that this was the test for the assertion of this class of quasi in rem jurisdiction and, accordingly, no assertion of the defendant's minimum contacts with the forum was necessary. Adhering to Seider's Conclusion that jurisdiction could be properly based on the presence of the insured's debt in New York, the Simpson Court relied on the continued constitutional validity of Harris.

 It is to be noted, however, that the Court's affirmance of Seider was not without an awareness that future legal developments might compel an antithetic determination to the one then reached in Simpson. In concluding its opinion, the Simpson Court stated:

 
Absent new data suggesting the desirability of a departure from the general principles underlying in rem jurisdiction, as reflected in Seider, we find neither basis nor justification for departing from our holding in that case.

 Simpson, supra at 312, 234 N.E.2d at 672-73, 287 N.Y.S.2d at 638.

 In concurring with the majority, Judge Breitel did not reach the constitutional issues posed. Instead, in an apparently begrudged opinion in which Judge Bergan concurred, Judge Breitel affirmed Seider "only because the institutional stability of a court is more important than any single tolerable error which I believe it has committed." Simpson, supra at 316, 287 N.Y.S.2d at 642, 234 N.E.2d at 675. In so holding, Judge Breitel stated:

 
Only a major reappraisal by the court, rather than the accident of a change in its composition, would justify the overruling of (Seider). Yet the theoretical unsoundness of the Seider case and the undesirable practical consequences of its rule require some comment if only, perhaps, to hasten the day of its overruling or its annulment by legislation.

 Simpson, supra at 314, 234 N.E.2d at 674, 287 N.Y.S.2d at 640 (Breitel, J., concurring).

 Soon after the New York Court's decision in Simpson, the overcast of Seider enveloped the federal courts. Minichiello v. Rosenberg, 410 F.2d 106 (2d Cir. 1968), adhered to En banc, 410 F.2d at 117 (2d Cir.), Cert. denied, 396 U.S. 844, 90 S. Ct. 69, 24 L. Ed. 2d 94 (1969), involved two cases in which the nonresident defendants argued that the attachment of their insurance policies pursuant to Seider was an unconstitutional assertion of jurisdiction. Although the Second Circuit upheld the constitutionality of Seider, its welcome of that decision into the realm of judicial precedent was marred by an apparent reluctance. Initially, the Second Circuit took note of the unfavorable reception that Seider had received from the legal community and went on to note Judge Breitel's unenthusiastic remarks in his concurring opinion in Simpson. Minichiello, supra at 108-109. In upholding Seider, the Second Circuit focused on New York's interest in protecting its residents. The Court concluded that the guarantee of due process was not jeopardized and that the security of a contractual obligation was not impaired by use of the Seider procedure. Minichiello, supra at 113.

 It is clear from a reading of Minichiello, however, that the underpinnings of that decision rested upon the then existing judicial precedent regarding the assertion of quasi in rem jurisdiction. Following a reconsideration En banc of the defendant's claim that compelling him to defend an action in New York solely because his liability insurer does business there is violative of due process, the Court stated, "(w)e Find this argument unpersuasive so long as Harris v. Balk stands." Minichiello, supra at 118 (emphasis added and citations omitted).

 The thrust of Judge Anderson's vigorous dissent from the panel decision was that such an assertion of jurisdiction without an additional showing of contacts by the defendant with the forum contravenes due process:

 
It must first be determined whether the plaintiff has the right to require defendant's presence in plaintiff's forum and the resolution of this question depends upon the fairness and reasonableness of the device as it affects all of the parties involved, the functioning of the courts, and the administration of justice in such an action. Watson Employers Liability Assurance Corp., 348 U.S. 66, 75 S. Ct. 166, 99 L. Ed. 74 (1954)) and the long-arm statutes are plainly grounded in fairness because the nonresident defendant has of his own volition brought himself within the bounds and jurisdiction of the state where the accident occurred. But, for example, for a resident of Alaska, as the accident state, who had never resided elsewhere and who had never entered the State of New York or had any business there, suddenly to discover that he is under the jurisdiction of the State of New York and must go there to defend himself is quite a different matter. . . .
 
The legislatures which have enacted long-arm statutes and courts which have interpreted them have been motivated and restrained by considerations of fairness and reasonableness. In deciding the due process issue, as it relates to the Seider procedure, "traditional notions of fair play and substantial justice," International Shoe Co. v. Washington, must be used to determine whether or not it falls within permissible bounds. Weighed in this light, it seems to me that only the long-arm statutes asserting jurisdiction of the state where the accident occurred qualify as due process whereas the assertion of jurisdiction by the state of the plaintiff's residence does not.

 Minichiello, supra at 115-116 (Anderson, J., dissenting) (footnotes and citations omitted). In response to the majority's dependence ...


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