IN THE WORKERS' COMPENSATION COURT OF THE STATE OF MONTANA

1999 MTWCC 83

WCC No. 9906-8257

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JOHN BALLARD

Petitioner

vs.
STILLWATER MINING COMPANY

Respondent/Insurer/Employer.

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ORDER GRANTING MOTION TO JOIN THIRD PARTY

Summary: Claimant suffered a serious ankle injury working in Alaska during 1994. In 1997, he went to work as a miner in Montana. He alleges a reinjury to his ankle during January 1998. He had ankle surgery later that same month. Near the end of 1998, Alaska National, the workers' compensation carrier for the Alaska employer, terminated the TTD benefits it had been paying claimant on the ground that his January 1998 injury in Montana constituted a substantial aggravation of the preexisting injury. The Alaska insurer (Alaska National) demanded reimbursement from respondent Stillwater, which moved to join the Alaska National into this proceeding, which was filed by claimant, who asserts disability and a need for compensation and medical benefits from one of the two insurers. Alaska National argues the Montana WCC has no jurisdiction over it because it has only done minimal business in Montana.

Held: Where Alaska National has been authorized to sell insurance in Montana, and registered to do business in the state, since 1982, the WCC has personal jurisdiction over it under the doctrine of express consent through registration and/or appointment of an agent for service of process in the state. Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95, 37 S.Ct. 344, 344, 61 L.Ed. 610 (1917); Sternberg v. O'Neil, 550 A.2s 1105 (Del. 1988). Joinder is appropriate because of common issues of law and fact in the various parties' claims against each other.

Topics:

¶1 The matter before the Court is respondent's (Stillwater's) motion to join Alaska National Insurance Company (Alaska National) as a party. Claimant (Ballard) joins in the motion.

¶2 Alaska National opposes the motion on the ground that Montana courts lack personal jurisdiction over it. For the reasons that follow, I find this Court does have personal jurisdiction over Alaska National and that it should be, and is, joined as a party-respondent.

Factual Background

¶3 For purposes of the motion for joinder, it appears that the parties and Alaska National do not dispute the following basic facts.

¶4 Claimant alleges that at present he remains unable to work, suffers substantial economic hardship, and is caught between the two insurers which both deny liability for his disability and further medical expenses.

DISCUSSION

¶5 The Court is faced with several issues. Initially, Stillwater argues that Alaska National has waived any right to object to jurisdiction by failing to file a special appearance. Second, it argues that its brief regarding jurisdiction is untimely, therefore it should not be considered. Third, in the event I overrule these objections, I must then consider the merits of Alaska National's jurisdictional arguments. Finally, assuming I find jurisdiction, I must determine whether Alaska National should be joined as a party.

I. Waiver of Objection to Jurisdiction

¶6 Alaska National is represented by Robert J. McLaughlin, who is admitted to practice in the State of Washington but not in Montana. Mr. McLaughlin therefore petitioned the Court to appear in this matter pro hac vice. Stillwater contends that Mr. McLaughlin's application did not mention or reserve the personal jurisdiction defense, therefore the issue was waived. Alaska National replies that Mr. McLaughlin's application for admission was a prerequisite to his appearance and that its initial appearance came through a Special Appearance to Provide Notice of Representation Filed by Mr. Michael P. Heringer, a Montana attorney associated with Mr. McLaughlin in this case. See, rules for Admission to the Bar of the State of Montana, Section IV, Pro Hac Vice, (A) and (D). Mr. Heringer's initial appearance, like the Special Appearance to Provide Notice of Representation later filed by Mr. McLaughlin, indicates his appearance was made "without waiving and expressly reserving any and all rights to assert that this Court lacks personal jurisdiction over the Employer and/or Insurer."

¶7 Stillwater's argument is without merit. The initial appearance was filed by Mr. Heringer and constituted a special appearance contesting personal jurisdiction of the Court.

II. Timeliness

¶8 Stillwater contends that Alaska National's objection to joinder is untimely since it was filed 48 days after the Commissioner of Insurance mailed notice of service to it. § 31-1-603, MCA (requiring a response to be filed within 30 days of mailing). It further argues that the response was not timely under this Court's rule for responding to motions, ARM 24.5.308, which allows for only 10 days.

¶9 The time for Alaska National's response was 30 days, not 10. The statute for service on Alaska National supercedes the Court's shorter time frame.

¶10 The pleadings and motion were mailed to Alaska National's Senior Vice President on September 8, 1999. On September 30, 1999, this Court received and filed Mr. McLaughlin's Application for Admission Pro Hac Vice and Motion for Order Admitting Robert J. Mclaughlin Pro Hac Vice. Prior to granting the motion, the Court required additional information to ensure compliance with Montana rules governing pro hac vice practice. Mr. McLaughlin satisfied the Court's concerns and the Court's order granting admittance pro hac vice issued October 6, 1999. Meanwhile, on October 3, 1999, Mr. Heringer filed his appearance on behalf of Alaska National "without waiving and expressly reserving any and all rights to assert that this Court lacks personal jurisdiction over the Employer and/or Insurer." (Special Appearance to Provide Notice of Representation (received October 6, 1999 and deemed filed October 3, 1999). The notice was filed within 30 days of service and provided fair notice of Alaska National's objection to being joined as a party.

III. In Personam Jurisdiction

¶11 Alaska National contends it has insufficient contacts with Montana to authorize Montana's exercise of personal jurisdiction over it. In support of its position, it has filed an Affidavit of Richard Suddock, a Senior Vice President for the company. The affidavit states in relevant part:

(Affidavit of Richard Suddock at 1-2.)

¶12 Stillwater provides additional information which it obtained from the office of the Montana Commissioner of Insurance. Those additional facts, which are not contested by Alaska National, are:

¶13 Alaska National admits it is licensed to sell insurance within Montana, but insists it has not solicited insurance business within the state and therefore is not subject to Montana jurisdiction except as to the two insurance policies it sold. Counsel for Alaska National represents as follows:

(Memorandum in Support of Request for Oral Argument on Motion to Join Indispensable Party at 2.)

¶14 Rule 4(B)(1) of the Montana Rules of Civil Procedure provides, "All persons found within the state of Montana are subject to the jurisdiction of the courts of this state." [Emphasis added.] The rule goes on to provide:

¶15 Personal jurisdiction may be acquired under Rule 4(B) in two ways: by general jurisdiction ("all persons found within the state of Montana") or by long arm jurisdiction (subsections (a) through (f) of Rule 4(b)(a)). As explained in Simmons Oil Corp. v. Holly Corp., 244 Mont. 75, 83, 796 P.2d 189, 194 (1990):

The remainder of Rule 4B(1), M.R.Civ.P. addresses the concept of specific jurisdiction. Under this theory, jurisdiction may be established even though a defendant maintains minimum contacts with the forum as long as the plaintiff's cause of action arises from any of the activities enumerated in Rule 4B(1), M.R.Civ.P. and the exercise of jurisdiction does not offend due process. Simmons, 206 Mont. at 276, 670 P.2d at 1378 (1983). [Emphasis added.]

¶16 Under Rule 4B, general jurisdiction exists over persons "found within the state of Montana." Corporations are "persons" for purposes of the rules of civil procedure. Rule 4A, M.R.Civ.P. In determining whether a person is "found within the state of Montana," Montana cases have focused upon whether the party "is physically present in the state or [whether] his or her contacts with the state are so pervasive that he or she may be deemed to be physically present there." Simmons Oil Corp. Holly Corp., supra, 244 Mont. 75, 83, 796 P.2d 189, 194; Simmons v. State, 206 Mont. 264, 276-77, 670 P.2d 1372, 1379 (1983). In the case of a foreign corporation, one decision has said:

Reed v. American Airlines, 197 Mont. 34, 36, 640 P.2d 912, 914 (1982).

¶17 The focus on "substantial, continuous and systematic" activities, as set forth in Simmons and the laundry list found in Rule 4B(1) is derived from due process considerations outlined by the Supreme Court of the United States in International Shoe Co. v. Washington, 326 U.S. 310 (1945), and subsequent cases. See, Edsall Const. Co., Inc. v. Robinson, 246 Mont. 378, 382, 804 P.2d 1039, 1042 (1992); Matter of the Estate of Ducey, 241 Mont. 419, 423, 787 P.2d 749, 751 (1990); Simmons v. State, supra, 206 Mont. at 272-73, 670 P.2d at 1377. Those considerations do not apply to persons' served with process while physically within a State, Burhnam v. Superior Court, 495 U.S. 604, 110 S.Ct. 2105, 109 L.Ed.2d 631 (1990) or to corporations registered to do business in the state, Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95, 37 S.Ct. 344, 344, 61 L.Ed. 610 (1917).

¶18 In a long line of federal and state cases, foreign corporations have been "found within" a state for purposes of general jurisdiction based solely upon registration to do business and/or appointment of an agent for service of process in the state. The most significant of those cases is Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95, 37 S.Ct. 344, 344, 61 L.Ed. 610 (1917), in which the United States Supreme Court held that an out-of-state insurance company, which authorized an agent to receive service of process in compliance with a state registration statute, consented to the exercise of general personal jurisdiction in that state. The unanimous opinion, written by Justice Holmes, held that Missouri could constitutionally exercise general jurisdiction over the insurer even though the insurance company's only apparent contact with Missouri was its designation of the Missouri Superintendent of Insurance as its registered agent. The Court found jurisdiction even though the action involved a Colorado policy insuring an Arizona corporation with respect to buildings located in Colorado. Id. 243 U.S. at 95, 61 L.Ed. at 616. Similarly, in Neirbo Company v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 175, 60 S.Ct. 153, 84 L.Ed. 167, 174 (1939), the Supreme Court held that New York had personal jurisdiction over a foreign corporation which had registered to do business and appointed an agent for service of process. It noted that New York jurisdiction was "part of the bargain by which Bethlehem enjoys the business freedom of the State of New York."

¶19 If Pennsylvania Fire and Neirbo are good law, then Alaska National's registration to sell insurance in Montana, and its concomitant appointment of the Montana Secretary of State as its agent for service of Montana process, give Montana and this Court general jurisdiction over it. However, both cases preceded International Shoe.

¶20 Numerous courts have considered the effect of International Shoe and its progeny upon the holding in Pennsylvania Fire. While some of the cases have found that International Shoe modified or impliedly overruled Pennsylvania Fire, e.g., Conner v. Conticarriers and Terminals, Inc., 944 S.W.2d 405, 417 (Tex.App. 1997); Armstrong v. Aramco Services Co., 155 Ariz. 345, 746 P.2d 917, 924 (Ariz. App. 1987); Washington Equipment Mfg. v. Concrete Placing, 85 Wash.App. 240, 245, 931 P.2d 170, 172 (1997); Bellepointe, Inc. v. Kohl's Department Stores, Inc., 975 F.Supp. 562, 564 (S.D.N.Y. 1997); there is substantial, better reasoned authority holding otherwise, e.g.,Sternberg v. O'Neil, 550 A.2d 1105 (Del. 1988); Knowlton v. Allied Van Lines, 900 F.2d 1196 (8^th Cir. 1990); Sondergard v. Miles, Inc., 985 F.2d 1389 (8^th Cir. 1993); Sharkey v. Washington National Ins. Co., 373 N.W. 421 (S.D. 1985); Dombroff v. Eagle-Picher Industries, Inc., 450 So.2d 923, rev. den. 458 So.2d 272 (1984); Continental Casualty Co. v. American Home Assurance Co., 61 F.Supp.2d 128 (D.Del. 1999); Augsbury Corp. v. Petrokey Corp., 97 A.D.2d 173, 175, 470 N.Y.S.2d 787, 789 (1983); In re DES Cases, 789 F.Supp. 552, 569 (E.D.N.Y. 1992).

¶21 As an initial matter, Pennsylvania Fire has never been expressly overruled or even questioned by the United States Supreme Court. A good discussion of its continued viability is set out in Sternberg v. O'Neil, 550 A.2d 1105 (Del. 1988), wherein the Delaware Supreme Court considered "whether Delaware courts may assert general personal jurisdiction over a foreign corporation upon the basis of that corporation's qualification to do business in Delaware and its appointment of an agent to receive service of process in Delaware pursuant to a registration statute." Id. at 1109. The Court found that Delaware indeed had jurisdiction based upon the concept of the "express consent" of the corporation, as shown by its registration to do business in Delaware. The Court distinguished International Shoe, which it characterized as predicated on implied consent to personal jurisdiction arising from contacts with the forum state, Sternberg, supra, 550 A.2d at 1110, and followed Pensylvania Fire.

¶22 The Sternberg court found no contradiction between the express consent doctrine in Pennsylvania Fire and the implied consent analysis of International Shoe. In the words of the Court, "It would appear that the due process holdings of Pennsylvania Fire Ins. Co. (express consent by registration) and International Shoe (implied consent by minimum contact) complement one another and are neither inconsistent nor mutually exclusive." Sternberg, supra, 550 A.2d at 1110. The court recognized that some legal scholars, and some state and lower federal courts, have questioned whether express consent through registration may form the basis for personal jurisdiction without satisfying the minimum contacts analysis of International Shoe and later cases. Sternberg, supra, 550 A.2d at 1110 n.8. After reviewing United States Supreme Court cases decided after International Shoe, it concluded Pensylvania Fire is still good law.

¶23 As noted by Sternberg, even though most contemporary cases have involved a "minimum contacts" analysis, the United States Supreme Court has continued to indicate that registration to do business in a state is a sufficient bases to confer jurisdiction upon the state under the Due Process Clause: The Sternberg Court explained:

Perkins v. Benguet Consol. Mining Co., 342 U.S. at 444, 72 S.Ct. at 417. [Ft. omitted.]

Sternberg, supra, 550 A.2d at 1111-1112.

¶24 The Sternberg Court also considered Bendix Autolite Corp. v. Midwesco Enterprises, 486 U.S. 888 (1988):

Sternberg v O'Neil, supra, 550 A.2d at 1112-1113.

¶25 Based upon its analysis of the Supreme Court cases, the Sternberg Court found "the holdings of the United States Supreme Court which involved foreign corporations, following International Shoe, are entirely consistent with the continued viability of its earlier holding in Pennsylvania Fire Ins. Co." Sternberg, supra, 550 A.2d at 1113. Thus, according to Sternberg, the modern rule may be summarized as follows:

Sternberg, supra, 550 A.2d at 1113,

¶26 Sternberg was decided in 1988. Two years later, the United States Supreme Court decided a case which supports the conclusion that it still adheres to the express consent doctrine of Pennsylvania Fire. The case was Burhnam v. Superior Court, 495 U.S. 604, 110 S.Ct. 2105, 109 L.Ed.2d 631 (1990), which involved an action for dissolution of marriage filed in California by a woman whose husband continued to reside in New Jersey, where the couple had lived. The husband was served personally while on a business trip and visiting his children in California. Relying upon International Shoe and its progeny, he argued he had insufficient contacts with California to satisfy the due process. The Supreme Court unanimously rejected his argument. All of the Justices found that personal service upon the husband while physically present in California was by itself sufficient for California to exercise general jurisdiction over him. Writing for a plurality, Justice Scalia cited precedents holding that, without any showing of minimum contacts, a state has personal jurisdiction over a person physically found and served within its borders. He rejected the notion that International Shoe annuls its prior decisions concerning jurisdiction conferred by personal service in a state:

Id. at 619. The concurring opinions, while diverging from some statements made by Justice Scalia, agreed that voluntary physical presence in a state is a sufficient basis for the state to exercise general jurisdiction.

¶27 A corporation has no physical presence other than through its employees and agents. It is a creature of law, and its rights are determined by state law. In Montana, a foreign insurance company may do business in the state only if it is registered to do business within the state and appoints the Montana Secretary of State its agent to accept service of process. Section 33-2-101, MCA, requires a certificate of authority to act as an insurer within the state, except in specified circumstances not relevant here. Section 33-1-601, MCA, requires insurers applying for such authority to designate the Montana Commissioner of Insurance as their agent for receipt of service of process, providing:

Alaska National requested and obtained authority to sell insurance in Montana and thereby designated the Montana Secretary of State as its agent for service of process. In fact, in each of 1998 and 1999 it sold a Montana policy, thus availing itself of its privilege to do business in the State.

¶28 Under Montana insurance law, there is no provision limiting claims to those arising within Montana. The statute provides that insurers "applying for authority to transact insurance in this state shall appoint the commissioner and his successors in office as its attorney to receive service of legal process issued against it in Montana." § 33-1-601, MCA. Stillwater asks the Court to compare this wording with section 33-1-612, MCA, which concerns service of process upon unauthorized insurers doing business in the state. In pertinent part, that statute provides that unauthorized insurance activity in Montana "shall be deemed to constitute an appointment by such insurer of the commissioner . . . in any action or proceeding against such insurer arising out of any such contract or transaction . . . ." The comparison is persuasive. Had the legislature intended to limit jurisdiction of Montana Court's to claims arising out of a Montana insurance contract, it plainly knew how to do so, and in fact did so with respect to unregistered companies.

¶29 Applying Pennsylvania Fire, I find that this Court may exercise personal jurisdiction over the Company.

IV. Appropriateness of Joinder

¶30 Rule 24.5.308(1) provides that "joinder of parties shall be governed by the considerations set forth in Rules 19, 20 and 21 of the Mont.R.Civ.P." Rule 19 governs necessary parties, providing in relevant part:

Rule 20 provides for permissive joinder, providing in relevant part: