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Comprehensive Merchandising Catalogs Inc. v. Madison Sales Corp.

decided: August 20, 1975.

COMPREHENSIVE MERCHANDISING CATALOGS, INC., A NEW YORK CORPORATION, PLAINTIFF-APPELLEE,
v.
MADISON SALES CORP., AN ILLINOIS CORPORATION, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. (74 C 312) JAMES B. PARSONS, Judge.

Castle, Senior Circuit Judge, Bauer, Circuit Judge, and William G. East,*fn* Senior District Judge. Bauer, Circuit Judge, dissenting.

Author: Castle

CASTLE, Senior Circuit Judge.

Plaintiff Comprehensive Merchandising Catalogs, Inc., a New York corporation, brought a diversity action in the district court to enforce a default judgment for $10,302.47 obtained against the defendant Madison Sales Corporation, an Illinois corporation, in the Supreme Court of the State of New York. The defendant moved to enjoin enforcement of that judgment, contending that the New York court's judgment was void for lack of personal jurisdiction and therefore was not entitled to full faith and credit under Article IV, § 1 of the Constitution and its supporting legislation, 28 U.S.C. § 1738.*fn1 The district court concluded that the New York court did have jurisdiction over the defendant, and ordered enforcement of the judgment. We affirm, although for reasons different from those relied on by the district court.

I.

The controversy stems from a purchase order form used by customers to purchase catalogs from the plaintiff. The purchase order form sets forth the price of each catalog depending on the number of catalogs ordered, and provides a space to indicate the number of catalogs desired. The purchase order form, dated January 20, 1971, was signed by the defendant's Vice-President, Jack Perlstein, but the space for indicating the quantity of catalogs needed was left blank.

The purchase order form also contains paragraphs numbered from one to eighteen and grouped under the heading "Conditions Covering All Orders." Two of the paragraphs are relevant to this dispute. Paragraph 10.A. provides:

Any controversy or claim arising or relating to this contract or the breach thereof, (or in connection with other work or services utilizing materials produced or used in the performance of the contract), shall be settled by arbitration, in accordance with the rules then obtaining of the American Arbitration Association, and judgement [sic] upon the award rendered may be entered in an appropriate court of the forum, state or federal, having jurisdiction. The arbitration hearing shall be held at the main office of the American Arbitration Association in Manhattan, City and State of New York.

Paragraph 10.B. provides:

In any legal proceeding relating to this arbitration, including (but not limited to) proceeding to institute the said arbitration or to confirm, vacate or modify the arbitration award or to appeal an order or judgment relating thereto, the parties waive personal service and agree that in such case personal service may be made by registered or certified mail directed to either party at its address herein set forth or to any later address known to the other. In such case, said proceeding shall be returnable at least thirty days (but not more than forty days except by agreement of the parties) after the mailing of the papers instituting said proceeding and should the party so served fail to answer or respond to said proceeding in the time limited and set forth in said papers, it shall be deemed to be in default. If, however, the party instituting said legal proceedings relating to said arbitration chooses to make service in the manner provided by the Civil Practice Law and Rules of the State of New York, the time limited in said Civil Practice Law and Rules as to the return date of said proceeding, shall prevail.

In March 1971, the defendant denied that it had ordered or authorized the purchase of any catalogs, and the plaintiff consequently instituted arbitration proceedings in New York. The defendant apparently received proper notice of the demand for arbitration, but did not appear at the hearing. An award was entered by the arbitrator in favor of the plaintiff. In accordance with paragraph 10.B., the plaintiff then sent to the defendant by certified mail notice of the New York court proceeding to confirm the award, but the letter was returned to the plaintiff marked "refused." The defendant did not appear at the New York Supreme Court proceeding to confirm the arbitrator's award, and a default judgment was entered in favor of the plaintiff.

II.

It is well-settled that parties to a contract may agree to submit to the jurisdiction of a particular court and may also agree as to the manner and method of notice.*fn2 D. H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185, 31 L. Ed. 2d 124, 92 S. Ct. 775 (1972); National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-316, 11 L. Ed. 2d 354, 84 S. Ct. 411 (1964); Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706 (1931). In this case, the personal jurisdiction of the New York court depends upon paragraphs 10.A. and 10.B. of the contract.*fn3 There is no contention that the plaintiff did not comply with those provisions.

It is also well-established, however, that a state court judgment is not entitled to full faith and credit in a second forum if that judgment was rendered without jurisdiction over either the person or the subject matter, and whether there was such jurisdiction is open to inquiry in the second forum. Milliken v. Meyer, 311 U.S. 457, 462, 85 L. Ed. 278, 61 S. Ct. 339 (1940). Arguing from the premise that personal jurisdiction over it depends upon validity of the entire contract, the defendant contends that we are therefore required to ascertain the validity of that contract in order to determine whether the New York court had jurisdiction. In essence, the defendant argues that the question of personal jurisdiction merges into an ...


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