Data

Date:: 09-03-1999
Country:: USA
Number:: CT 98 - 013101
Court:: State of Minnesota, County of Hennepin District Court, Fourth Judicial District
Parties:: KSTP-FM, LLC v. Specialized Communications, Inc. and Adtronics Signs, Ltd

Keywords

SCOPE OF CISG (ART. 1 CISG)- CISG GOVERNING ONLY RIGHTS AND OBLIGATIONS OF SELLER AND BUYER ARISING FROM CONTRACT OF SALE - CISG DOES NOT DEAL WITH THE RIGHTS OF THOSE WHO LACK PRIVITY OF CONTRACT (ART. 4 CISG)

Abstract

An American buyer (the plaintiff) concluded a contract with an American seller (first defendant) for the purchase of music board systems, electronic displays and software. According to the agreement between the parties, any legal disputes arising out of the contract should be settled by binding arbitration in Washington State. The seller itself contracted with a Canadian corporation (second defendant) to purchase the requested goods. The Canadian corporation delivered the merchandise to the buyer at the seller's request and at the seller's cost. The buyer was unsatisfied with the performance of the billboards, and therefore the Canadian corporation tried to repair the keyboards in Minnesota and furthermore sent some spareparts and diagrams to the buyer. As the keyboards still did not perform properly, the buyer commenced an arbitral proceeding against the seller and civil litigation against the Canadian corporation.
The Canadian corporation asserted that the court in Minnesota lacked personal jurisdiction over the corporation. Secondly, it asserted that the buyer's complaint failed to state a claim upon which relief could be granted, as the CISG is controlling, not the Minnesota Uniform Commercial Code (UCC) as alleged by the buyer, and that, under the CISG, the required privity between the buyer and the Canadian corporation was lacking.

As to the Canadian corporations notion, the court noted first of all, that the exercise of personal jurisdiction over the corporation would be violative of due process. Secondly the court stated that even though the court would have had jurisdiction, the buyer's claim against the Canadian corporation failed to state a claim upon which relief can be granted pursuant to Minnesota Rules of Civil Procedure 12.02. The court stated that the applicable law was CISG, since the buyer was located in the United States, and the Canadian Corporation in Canada, both of which were contracting states to CISG and because there was no evidence that the parties had excluded the applicability of the CISG.

The court further stated that in Minnesota the UCC expressly allows certain parties the right to sue for breach of implied warranties in the absense of contractual privity. However, the court noted the CISG makes no such express provision, and all buyer's remedies and seller's obligations under the convention fail to mention the rights of those lacking contractual privity, Art. 30-52 CISG.

As the buyer never contracted with the Canadian corporation, and as the CISG does not contain an express provision allowing a party to sue absent a showing of privity, the buyer lacked contractual privity with the Canadian Corporation.

The State of Minnesota, Court of Appeals affirmed the District Courts decision stating, that "a foreign corporation did not have sufficient minimum contacts with Minnesota to satisfy due proces requirements and permit the exercise of personal jurisdiction where contacts consisted of (1) an isolated shipment, but not sale, of goods, and (2) subsequent efforts to resolve problems associated with those particular goods".

Fulltext

[...]KSTP-FM, LLC vs. Specialized Communications, Inc. and Adtronics Signs, Ltd File No. CT 98-013101 State of Minnesota, County of Hennepin District Court, Fourth Judicial District March 9, 1999
Excerpt from unpublished Memorandum Opinion
[...]

IT IS ORDERED:
1. That defendant [seller's] Motion to Dismiss is hereby GRANTED and that plaintiff [buyer] and defendant [seller] are hereby ordered to binding arbitration in Bellevue, Washington.
2. That defendant Adtronics Signs' Motion to Dismiss is hereby GRANTED.
3. The plaintiff [buyer's] Complaint is hereby DISMISSED.
4. That the attached memorandum be made part of this Order.
LET JUDGMENT BE ENTERED ACCORDINGLY BY THE COURT:
Patricia Kerr Karasov Judge of District Court
Dated: March 9, 1999
Memorandum

This case arises from a contract dispute between plaintiff [buyer], a Minnesota corporation, and defendant [seller], a Washington corporation. The contract, entitled "Musicboard TM Rental Agreement" ("Agreement"), was for the purchase by plaintiff [buyer] of two music board systems, electronic displays and software from defendant [seller] (Ex. A attached to Demmer Aff.). This Agreement was executed by the parties on March 29, 1995. (Id.).

The third section of the Agreement entitled "Terms of agreement" sets forth, inter alia, the rental fee for each system. The fifth paragraph of the third section covers eventually applying all rental fees paid to the purchase price of the systems. A hand-written provision following the fifth paragraph states "KS-95 [buyer] agrees to purchase two systems for $32,600 (Thirty-two Thousand Six-hundred dollars) at the end of this lease." The last section of the Agreement, labeled "Legal remedies", states that both parties agree to settle any legal disputes arising out of this contract through binding arbitration in Bellevue, Washington. On May 8, 1995, Pam Silverman, Director of Marketing for plaintiff [buyer] during the time in question, sent a letter to Allen Hartle, owner of defendant [seller], purporting to modify the Agreement to reflect plaintiff [buyer's] outright purchase of the equipment. (Ex. A attached to Silverman Aff.).

On April 27, 1995, defendant [buyer] contracted with defendant Adtronics Signs, Ltd. ("Adtronics"), a Canadian corporation, to purchase the two billboards and remote controls as ordered by plaintiff [buyer] from defendant [seller] in the Agreement. (Armitage Aff. 6-7). The order did not provide for a shipping destination. (Id. at 8). After August 18, 1995, defendant Adtronics delivered the merchandise to plaintiff [buyer] in Minnesota at defendant [seller's] request and at defendant [seller's] cost. (Id.). On August 31, 1995, defendant Adtronics delivered to defendant [seller] an invoice for payment of the merchandise shipped to plaintiff [buyer]. (Id.).
Plaintiff [buyer] was unsatisfied with the performance of the billboards. After it was determined that the billboards did not work properly, defendant Adtronics either hired a technician in Minnesota or sent a technician to Minnesota to make repairs. (Kazada Aff. 4; Armitage Second Aff. 3-5). Subsequently, at the request of defendant [seller], defendant Adtronics delivered a replacement cental processing unit (CPU") to defendant [seller] in Washington. (Id. at 6; Kazada Aff. 5). Defendant [seller] subsequently sent the CPU to plaintiff [buyer] in Minnesota. (Id.). At plaintiff [buyer's] request, defendant Adtronics sent billboard schematics to plaintiff [buyer] in Minnesota in an effort to make it possible for the billboards to be repaired by others. (Id. at 6). Still unsatisfied, plaintiff [buyer] sent two letters, dated July 1, 1996 and August 22, 1996, from James Barnum, plaintiff [buyer's] Deputy General Counsel, to David Sprinkle, attorney for defendant [seller], which indicated plaintiff [buyer's] intent to pursue an arbitration proceeding against defendant [buyer] and civil litigation against defendant Adtronics. (Attached as Ex. A and B).

Defendants [seller] and Adtronics have brought separate motions to dismiss plaintiff [buyer's] Complaint.
Defendant [seller] asserts that plaintiff [buyer's] complaint should be dismissed because there is an enforceable binding arbitration clause.
Defendant Adtronics asserts that this Court lacks personal jurisdiction over defendant Adtronics. Defendant Adtronics asserts that plaintiff Complaint fails to state a claim upon which relief can be granted.
[...]

A party may bring a motion to dismiss for, inter alia, lack of jurisdiction and failure to state a claim upon which relief can be granted. Minn. R. Civ. P. 12.02. The court may only consider the pleadings and any inferences drawn must favor the non-moving party. Pederson v. American Lutheran Church, 404 N.W.2d 887, 888 (Minn. Ct. App. 1987), citing Northern States Power Co. v. Franklin, 265 Minn. 391, 122 N.W.2d 26 (1963). In making its determination the court may consider a written contract that is referenced in the complaint that is central to the claims alleged. In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 497 (Minn. 1995).
[...]

II. Adtronics Signs, Ltd.
B. Failure to State a Claim Pursuant to Minnesota Rules of Civil Procedure 12.02
Even if this Court had jurisdiction, the plaintiff [buyer's] claims against defendant Adtronics fail to state a claim upon which relief can be granted pursuant to Minn. R. Civ. P. 1202(e). The only question when considering a Rule 12.02(e) motion is whether the complaint sets forth a legally sufficient claim for relief. Terwilliger v. Hennepin County, 542 N.W.2d 675, 676-77. Defendant Adtronics asserts that plaintiff [buyer's] claims fail because the United Nations Convention on Contracts for the International Sale of Goods "CISG") is controlling, not the Minnesota Uniform Commercial Code ("UCC") as alleged by plaintiff [buyer], and that, under the CISG, the required privity between plaintiff [buyer] and defendant Adtronics is lacking.

The CISG applies to contracts for the international sale of goods between parties of different countries participating in the Convention. CISG, Art. 1. Parties to a contract governed by the CISG may disclaim its application and choose what law to follow. CISG, Art. 6; Mitchell Aircraft Spares, Inc. v. European Aircraft Serv. AB, 1998 WL 754801, *3 (N.D.Ill. Oct. 28, 1998). Here, the CISG is the applicable law in the instant situation because defendant [buyer], located in the United States, and defendant Adtronics, located in Canada, are incorporated within participating countries of the CISG and because there is no evidence that defendants disclaimed the applicability of the CISG.

In Minnesota, the UCC expressly allows certain parties the right to sue for breach of implied warranties in the absence of contractual privity. Minn. Stat. § 336.2-318; Church of the Nativity of Our Lord v. WatPro, Inc., 474 N.W.2d 605 (Minn. Ct. App. 1991), aff'd 491 N.W.2d 1. However, the CISG makes no such express provision. In fact, all buyer's remedies and seller's obligations under the CISG fail to mention the rights of those lacking contractual privity. CISG, Art. 30-52.

In the instant case, plaintiff [buyer] never contracted with defendant Adtronics. Since the CISG does not contain an express provision allowing a party to sue absent a showing of privity, plaintiff [buyer], lacking contractual privity with defendant Adtronics, has failed to state a claim upon which relief can be granted.

Court of Appeals (summary of ruling)
KSTP-FM, LLC [Appellant] vs. Specialized Communications, Inc. [Defendant] and Adtronics Signs, Ltd [Respondent]
C7-99-770
State of Minnesota, Court of Appeals
December 14, 1999

Summary of ruling
A foreign corporation did not have sufficient minimum contacts with Minnesota to satisfy due process requirements and permit the exercise of personal jurisdiction where contacts consisted of (1) an isolated shipment, but not sale, of goods, and (2) subsequent efforts to resolve problems associated with those particular goods.
Affirmed.}}

Source

Originalin English:
Unpublished

Source:
University of Pace Website (http://cisgw3.law.pace.edu/)}}