National Equipment Rental, Ltd. v. Szukhent
Opinion of the Court
delivered the opinion of the Court.
The Federal Rules of Civil Procedure provide that service of process upon an individual may be made “by delivering a copy of the summons and of the complaint to an agent authorized by appointment ... to receive service of process.”
The respondents obtained certain farm equipment from the petitioner under a lease executed in 1961. The lease was on a printed form less than a page and a half in length, and consisted of 18 numbered paragraphs. The last numbered paragraph, appearing just above the respondents’ signatures and printed in the same type used in the remainder of the instrument, provided that “the Lessee hereby designates Florence Weinberg, 47-21 Forty-first Street, Long Island City, N. Y., as agent for the purpose of accepting service of any process within the State of New York.”
Upon motion of the respondents, the District Court quashed service of the summons and complaint, holding that, although Florence Weinberg had promptly notified the respondents of the service of process and mailed copies of the summons and complaint to them, the lease agreement itself had not explicitly required her to do so, and there was therefore a “failure of the agency arrangement to achieve intrinsic and continuing reality.” 30 F. R. D. 3, 5. The Court of Appeals affirmed, 311 F. 2d 79, and we granted certiorari, 372 U. S. 974. For the reasons stated in this opinion, we have concluded that Florence Weinberg was “an agent authorized by appointment . . . to receive service of process,” and accordingly we reverse the judgment before us.
The purpose underlying the contractual provision here at issue seems clear. The clause was inserted by the petitioner and agreed to by the respondents in order to assure that any litigation under the lease should be conducted in the State of New York. The contract specifically provided that “This agreement shall be deemed to have been made in Nassau County, New York, regardless, of the order in which the signatures of the parties shall be affixed hereto, and shall' be interpreted, and the rights and liabilities of the parties here determined, in accordance with the laws of the State of New York.” And it is settled,
Under well-settled general principles of the law of agency, Florence Weinberg’s prompt acceptance and transmittal to the respondents of the summons and complaint pursuant to the authorization was itself sufficient to validate the agency, even though there was no explicit previous promise on her part to do so. “The principal’s authorization may neither expressly nor impliedly request any expression of assent by the agent as a condition of the authority, and in such a case any exercise of power by the agent within the scope of the authorization, during the term for which it was given, or within a reasonable time if no fixed term was mentioned, will bind the principal.” 2 Williston on Contracts (3d ed. 1959), § 274.
We deal here with a Federal Rule, applicable to federal courts in all 50 States. But even if we were to assume that this uniform federal standard should give way to contrary local policies, there is no relevant concept of state law which would invalidate the agency here at issue. In Michigan, where the respondents reside, the statute which validates service of process under the circumstances present in this case contains no provision requiring that the appointed agent expressly undertake to notify the principal of the service of process.
It is argued, finally, that the agency sought to be created in this case was invalid because Florence Weinberg may have had a conflict of interest. This argument is based upon the fact that she was not personally known to the respondents at the time of her appointment and upon a suggestion in the record that she may be related to an officer of the petitioner corporation. But such a contention ignores the narrowly limited nature of the agency here involved. Florence Weinberg was appointed the respondents’ agent for the single purpose of receiving service of process. An agent with authority so limited can in no meaningful sense be deemed to have had an interest antagonistic to the respondents, since both the
A different case would be presented if Florence Weinberg had not given prompt notice to the.respondents, for then the claim might well be made that her failure to do so had operated to invalidate the agency. We hold only that, prompt notice to the respondents having been given, Florence Weinberg was their “agent authorized by appointment” to receive process within the meaning of Federal Rule of Civil Procedure 4 (d)(1).
The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Federal Rule of Civil Procedure 4 (d) provides, in pertinent part:
“(d) Summons: Personal Service. The summons and complaint shall be served together. The plaintiff shall furnish the person making service with such copies as are necessary. Service shall be made as follows:
“(1) Upon an individual other than an infant or an • incompetent person, by delivering a copy of the summons and of the complaint to him personally or by leaving copies thereof at his dwelling house or usual place of abode with some person of suitable age and discretion*313 then residing therein or by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process.”
No questions of subject matter jurisdiction or of venue are presented. Federal jurisdiction exists by reason of diversity of citizenship. 28 U. S. C. § 1332. Venue in the United States District Court for the Eastern District of New York has not been contested. 28 U. S. C. § 1391.
The paragraph in its entirety read as follows:
“This agreement shall be deemed to have been made in Nassau County, New York, regardless of the order in which the signatures of the parties shall be affixed hereto, and shall be interpreted, and the rights and liabilities of the parties here determined, in accordance with the laws of the State of New York; and the Lessee hereby designates Florence Weinberg, 47-21 Forty-first Street, Long Island City, N. Y., as agent for the purpose of accepting service of any process within the State of New York.”
The complaint, summons, and covering letter were sent by certified mail, and the letter read as follows:
“Gentlemen:
“Please take notice that the enclosed Summons and Complaint was duly served upon me this day by the United States Marshal, as your agent for the purpose of accepting service of process within the State of New York, in accordance with your contract with National Equipment Rental, Ltd.
“Very truly yours,
“Florence Weinberg”
Mich. Stat. Ann., 1962, § 27A.1930.
McKinney’s N. Y. Laws, General Business Law, § 229 (6).
McKinney’s N. Y. Laws, General Business Law, § 220.
It is argued that the state court decisions upholding the agency designation here at issue would have been different if the case of Rosenthal v. United Transp. Co., 196 App. Div. 540, 188 N. Y. S. 154, had been brought to the attention of the courts. Rosenthal interpreted the forerunner of § 227 of the Civil Practice Act, Gilbert-Bliss’ N. Y. Civ. Prac., Vol. 3A, 1942, §227 (1963 Supp.), which creates a procedure whereby a resident of New York may appoint an agent for the receipt of process by designation of a person to receive service and the filing thereof with the County Clerk. The Rosenthal case is entirely inapposite, because § 227 clearly applies only to residents of New York who leave the State, and even as to them, the provision is permissive rather than exclusive. Phillips v. Garramone, 36 Misc. 2d 1041, 233 N. Y. S. 2d 842; Torre v. Grasso, 11 Misc. 2d 275, 173 N. Y. S. 2d 828.
There is no allegation that Weinberg had any pecuniary interest in the subject matter of the litigation. Nor is the issue here the applicability of a statute which permits service on a foreign corporation by service on persons who are generally authorized to act as agents of the corporation, when the agent upon whom service is made has a personal interest in suppressing notice of service: see, e. g., John W. Masury & Son v. Lowther, 299 Mich. 516, 300 N. W. 866 (1941) (involving a garnishment proceeding in which service under such a statute was attempted upon that employee of the foreign corporation who had incurred the debt on which the suit was based, who therefore had a personal interest in concealing from his employer the fact of service, and who did not notify the employer that service had been made). See Hartsock v. Commodity Credit Corp., 10 F. R. D. 181, also involving a situation where the agent “sustains such a relation to plaintiff or the claim in suit as to make it to his interest to suppress the fact of service ...” 10 F. R. D., at 184.
Dissenting Opinion
dissenting.
The petitioner, National Equipment Rental, Ltd., is a Delaware corporation with its principal place of business in greater New York City. From that location it does a nationwide equipment rental business. The respondents,
“. . . the Lessee hereby designates Florence Weinberg, 47-21 Forty-first Street, Long Island City, N. Y., as agent for the purpose of accepting service of any process within the State of New York.”
The New York company later brought this suit for breach of the lease in the United States District Court for the Eastern District of New York. Rule 4 (d) (1) of the Federal Rules of Civil Procedure authorizes service of process for suits in federal courts to be made on “an agent authorized by appointment or by law to receive service of process.” Process was served on Mrs. Weinberg as “agent” of the Michigan farmers. She mailed notice of this service to the Szukhents. A New York lawyer appeared especially for them and moved to quash the service on the ground that Mrs. Weinberg was not their agent but was in reality the agent of the New York company.
The record on the motion to quash shows that the Szukhents had never had any dealings with Mrs. Weinberg, their supposed agent. They had never met, seen, or heard of her. She did not sign the lease, was not a party to it, received no compensation from the Szukhents, and undertook no obligation to them. In fact, she was handpicked by the New York company to accept service of process in any suits that might thereafter be filed by the company. Only after this suit was brought was it reluctantly revealed that Mrs. Weinberg was in truth the wife of one of the company’s officers. The district judge, applying New York law to these facts, held that there had been no effective appointment of Mrs. Weinberg as agent of the Szukhents, that the service on her as their
I.
No federal statute has undertaken to regulate the sort of agency transaction here involved.
I agree with the district judge that this agency is invalid under the laws of New York. The highest state court that has passed on the question has held that, because of New York statutes, the designation by a nonresident of New York of an agent to receive service of process is ineffective; the court, in denying an order for interpleader, held that only residents of New York can make such an appointment, and even then only in compliance with the terms of the controlling statute. Rosenthal v. United Transp. Co., 196 App. Div. 540, 188 N. Y. S. 154. Even the dissenting judge in the Court of Appeals in the present case acknowledged that the purported appointment of
If Rule 4 (d) (1) is to be read as requiring this Court to formulate new federal standards of agency to be resolved in each case as a federal question, rather than as leaving the question to state law, I think the standards we formulate should clearly and unequivocally denounce as invalid any alleged service of process on nonresidents based on purported agency contracts having no more substance than that naming Mrs. Weinberg.
A. In the first place, we should interpret the federal rule as contemplating a genuine agent, not a sham.
B. But even if this contract had named a disinterested agent and required that notice of service be given to the Szukhents, I think that any federal standards we formulate under Rule 4(d)(1) should invalidate purported service of process in the circumstances of cases like this one. To give effect to the clause about service of process in this standardized form contract amounts to a holding that when the Szukhents leased these incubators they then and there, long in advance of any existing justiciable dispute or controversy, effectively waived all objection to the jurisdiction of a court in a distant State the process of which could not otherwise reach them. Both the nature of the right given up and the nature of the contractual
C. Where one party, at its leisure and drawing upon expert legal advice, drafts a form contract, complete with waivers of rights and privileges by the other, it seems to me to defy common sense for this Court to formulate a federal rule designed to treat this as an agreement coolly negotiated and hammered out by equals. With respect to insurance contracts drawn this way this Court long ago said:
“The phraseology of contracts of insurance is that chosen by the insurer and the contract in fixed form is tendered to the prospective policy holder who is often without technical training, and who rarely accepts it with a lawyer at his elbow.” Aschenbrenner v. United States Fidelity & Guaranty Co., 292 U. S. 80, 84-85.17
It is hardly likely that these Michigan farmers, hiring farm equipment, were in any position to dicker over what terms went into the contract they signed. Yet holding this service effective inevitably will mean that the Szukhents must go nearly a thousand miles to a strange city, hire New York counsel, pay witnesses to travel there, pay their own and their witnesses’ hotel bills, try to explain a dispute over a farm equipment lease to a New York judge or jury, and in other ways bear the burdens of litigation in a distant, and likely a strange, city. The company, of course, must have had this in mind when it put the clause in the contract. It doubtless hoped, by easing into its contract this innocent-looking provision for service of process in New York, to succeed in making it
It should be understood that the effect of the Court’s holding is not simply to give courts sitting in New York jurisdiction over these Michigan farmers. It is also, as a practical matter, to guarantee that whenever the company wishes to sue someone who has contracted with it, it can, by force of this clause, confine all such suits to courts sitting in New York. This Court and others have frequently refused to hold valid a contract which, before any controversy has arisen, attempts to restrict jurisdiction to a single court or courts. See Doyle v. Continental Ins. Co., 94 U. S. 535; Insurance Co. v. Morse, 20 Wall. 445, 451; Nute v. Hamilton Mut. Ins. Co., 6 Gray (72 Mass.) 174; 6A Corbin, Contracts § 1445. Here this contract as effectively ousts the Michigan courts of jurisdiction as if it had said ¡30. Today’s holding disregards Michigan’s interest in supervising the protection of rights of its citizens who never leave the State but are sued by foreign companies with which they have done business. Cf. Travelers Health Assn. v. Virginia ex rel. State Corp. Comm’n, 339 U. S. 643; McGee v. International Life Ins. Co., 355 U. S. 220.
“[N]o act has come to our attention in which such power has been conferred in a proceeding in a circuit or district court where a private citizen is the sole defendant and where the plaintiff is at liberty to commence the suit in the district of which the defendant is an inhabitant or in which he can be found.” Robertson v. Railroad Labor Board, 268 U. S. 619, 624-625. (Footnotes omitted.)
This Court should reject any construction of Rule 4(d)(1) or formulation of federal standards under it to help powerful litigants to achieve by unbargained take-it-or-leave-it contracts what Congress has consistently refused to permit by legislation.
The end result of today’s holding is not difficult to foresee. Clauses like the one used against the Szuk-hents — clauses which companies have not inserted, I suspect, because they never dreamed a court would uphold them — will soon find their way into the “boilerplate” of everything from an equipment lease to a conditional sales contract. Today’s holding gives a green light to every large company in this country to contrive contracts which declare with force of law that when such a company wants to sue someone with whom it does business, that individual must go and try to defend himself in some place, no matter how distant, where big business enterprises are
III.
The Court’s holding that these Michigan residents are compelled to go to New York to defend themselves in a New York court brings sharply into focus constitutional questions as to whether they will thereby be denied due process of law in violation of the Fifth and Fourteenth Amendments. While implicit in much of the oral arguments and in the briefs, these questions have not been adequately discussed. The questions are serious and involve matters of both historical and practical importance. These things lead me to believe that this case should be
It has been established constitutional doctrine since Pennoyer v. Neff, 96 U. S. 714, was decided in 1878, that a state court is without power to serve its process outside the State’s boundaries so as to compel a resident of another State against his will to appear as a defendant in a case where a personal judgment is sought against him. This rule means that an individual has a constitutional right not to be sued on such claims in the courts of any State except his own without his consent. The prime value of this constitutional right has not diminished since Pennoyer v. Neff was decided. Our States have increased from 38 to 50. Although improved methods of travel have increased its speed and ameliorated its discomforts, it can hardly be said that these almost miraculous improvements would make more palatable or constitutional now than in 1878 a system of law that would compel a man or woman from Hawaii, Alaska, or even Michigan to travel to New York to defend against civil lawsuits claiming a few hundred or thousand dollars growing out of an ordinary commercial contract.
It can of course be argued with plausibility that the Pennoyer constitutional rule has no applicability here because the process served on the Szukhents ran from a
The Court relies on the printed provision of the contract as a consent of the Szukhents to be sued in New York, making the Pennoyer rule inapplicable. In effect the Court treats the provision as a waiver of the Szuk-hents’ constitutional right not to be compelled to go to a New York court to defend themselves against the company’s claims.
I would affirm the judgment.
Both the District Court and the Court of Appeals also rested their decisions on the contract’s lack of provision for notice of the service of process.
Of course, Congress would not lack power to regulate at least some aspects of contracts like this one. Cf. United States v. South-Eastern Underwriters Assn., 322 U. S. 533.
This is not to suggest that a contractual stipulation as to what state law should govern would necessarily be binding on state courts which did not choose to recognize it, including the courts of Michigan, where the Szukhents lived, signed the lease contract, and received the leased property. See Watson v. Employers Liability Assurance Corp., 348 U. S. 66; see also Clay v. Sun Ins. Office Ltd., 363 U. S. 207, 213 (dissenting opinion); Order of United Commercial Travelers of America v. Wolfe, 331 U. S. 586, 625 (dissenting opinion).
If New York would look in turn to the law of Michigan, the place where the contract was signed by the Szukhents and was to be performed, then we should do the same. Cf. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U. S. 487.
National Equipment Rental, Ltd., v. Graphic Art Designers, Inc., 36 Misc. 2d 442, 234 N. Y. S. 2d 61 (Sup. Ct., Nassau County); National Equipment Rental, Ltd., v. Boright, N. Y. L. J., July 17, 1962, p. 8, col. 8 (Sup. Ct., Nassau County); Emerson Radio & Phonograph Corp. v. Eskind, 32 Misc. 2d 1038, 228 N. Y. S. 2d 841 (Sup. Ct., N. Y. County).
Helvering v. Stuart, 317 U. S. 154, 164; see also United States v. Durham Lumber Co., 363 U. S. 522, 526-527; Propper v. Clark, 337 U. S. 472, 486-487.
Since New York would not hold Mrs. Weinberg a valid agent to receive service of process, service cannot be upheld as authorized by that part of Rule 4 (d) (7) which validates service “in the manner prescribed by the law of the state.”
See Szabo v. Keeshin Motor Express Co., 10 F. R. D. 275 (D. C. N. D. Ohio); Fleming v. Malouf, 7 F. R. D. 56 (D. C. W. D. N. Y.).
Apparently the district judge asked the company to supply particulars of Mrs. Weinberg’s relationship to the company, but this information was never furnished. For all that appears, she may be a stockholder or director of the company.
See cases collected in 72 C. J. S., Process § 50.
John W. Masury & Son v. Lowther, 299 Mich. 516, 525, 300 N. W. 866, 870.
Canon of Ethics 6.
Magna Charta, cc. 17-19:
"17. Common Pleas shall not follow our Court, but shall be held in any certain place.
“18. Trials upon the Writs of Novel Disseisin, of Mort d’Ancestre (death of the ancestor), and Darrien Presentment (last presentation) shall not be taken but in their proper counties, and in this manner:— We, or our Chief Justiciary, if we are out of the kingdom, will send two Justiciaries into each county, four times in the year, who, with four Knights of each county, chosen by the county, shall hold the aforesaid assizes, within the county on the day, and at the place appointed.
“19. And if the aforesaid assizes cannot be taken on the day of the county-court, let as many knights and freeholders, of those who were present at the county-court remain behind, as shall be sufficient to do justice, according to the great or less importance of the business.” Reprinted in S. Doc. No. 232, 66th Cong., 2d Sess.
E. g., Ind. Stat., 1933, §2-2904; Mass. Gen. Laws, 1956, c. 231, § 13A.
E. g., Farquhar & Co. v. Dehaven, 70 W. Va. 738, 75 S. E. 65; see also Hamilton v. Schoenberger, 47 Iowa 385.
E. g., Nute v. Hamilton Mut. Ins. Co., 6 Gray (72 Mass.) 174; Slocum v. Western Assur. Co., 42 F. 235 (D. C. S. D. N. Y.); see cases collected in 56 A. L. R. 2d 300, 312-316,
See also, e. g., Bisso v. Inland Waterways Corp., 349 U. S. 85, 90-91; Railroad Co. v. Lockwood, 17 Wall. 357, 379-382.
Cf. Guaranty Trust Co. v. York, 326 U. S. 99.
It may be that the Court intends its disclaimer of passing on venue of the New York Federal District Court to imply that the service on the Szukhents’ “agent” might not after all compel them to go to New York to defend themselves against a default judgment, should they prevail on the discretion of the judge in New York to grant them a transfer of venue under 28 U. S. C. § 1404 (a). If so, apart from disregarding the trouble and expense which defendants would undergo in appearing and answering the complaint in New York and presenting evidence in hope of obtaining a discretionary change of venue, the Court’s holding really would have no practical effect whatever. But the Court carefully refrains from holding that venue in New York could be successfully challenged, and consequently I must consider the statement in text to be correct.
Johnson v. Zerbst, 304 U. S. 458, 464. See also, e. g., Fay v. Noia, 372 U. S. 391, 439; Emspak v. United States, 349 U. S. 190, 197-198; Aetna Ins. Co. v. Kennedy ex rel. Bogash, 301 U. S. 389, 393; Hodges v. Easton, 106 U. S. 408, 412.
Dissenting Opinion
dissenting.
I would affirm. In my view, federal standards and not state law must define who is “an agent authorized by appointment” within the meaning of Rule 4 (d)(1). See Mississippi Pub. Corp. v. Murphree, 326 U. S. 438, 445-446; Bowles v. Schmitt & Co., 170 F. 2d 617, 620; 1 Barron and Holtzoff, Federal Practice (Wright rev. 1960), at 701. In formulating these standards I would, first, construe Rule 4 (d)(1) to deny validity to the appointment of a purported agent whose interests conflict with those of his supposed principal, see Hartsock v. Commodity Credit Corp., 10 F. R. D. 181, 183. Second, I would require that the appointment include an explicit condition that the agent after service transmit the process forthwith to the principal. Although our decision in Wuchter v. Pizzutti, 276 U. S. 13, dealt with the constitutionality of a state statute, the reasoning of that case is persuasive that, in fashioning a federal agency rule, we should engraft the same requirement upon Rule 4 (d)(1). Third, since the corporate plaintiff prepared the printed form contract, I would not hold the individual purchaser bound by the appointment without proof, in addition to his mere signature on the form, that the individual understandingly consented to be sued in a State not that of his residence. We must bear in mind what was said in United States v.
Since these standards were not satisfied in this case, the service of the summons and complaint was .properly quashed.
Reference
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- NATIONAL EQUIPMENT RENTAL, LTD., v. SZUKHENT Et Al.
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