International Harvester Co. of America v. Kentucky
34 S. Ct. 944, 234 U.S. 579, 1914 U.S. LEXIS 1109 (1914)
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Rule of Law:
A foreign corporation is considered to be "doing business" within a state for the purposes of service of process and jurisdiction if it maintains a continuous and systematic course of business, even if those activities are exclusively interstate in character.
Facts:
- International Harvester Company, a corporation foreign to Kentucky, previously conducted business in the state with a designated agent but had since revoked that agent's authority.
- The company implemented a new business model where its agents, residing in Kentucky, would solicit orders for its machinery.
- All orders taken by these agents were subject to approval by a general agent located outside of Kentucky.
- Following approval, the company shipped its machines from outside Kentucky directly to the purchasers, with contracts specifying the sales were f.o.b. from a point outside Kentucky.
- Despite the out-of-state contract approval, the company's agents within Kentucky were authorized to receive payments from customers in the form of money, checks, or drafts.
- The agents could also take promissory notes from customers for the purchase price, and these notes were made payable at banks within Kentucky.
- This pattern of soliciting orders, shipping goods, and collecting payments represented a continuous course of business, not merely isolated or sporadic transactions.
Procedural Posture:
- International Harvester Company was indicted in a criminal proceeding in Breckenridge County Court, Kentucky, for allegedly violating the state's anti-trust laws.
- The company was served process through an alleged agent.
- The company appeared in the Kentucky trial court to file a motion to quash the service of process, arguing it was not 'doing business' in Kentucky and that jurisdiction would violate the Due Process and Commerce Clauses.
- The trial court overruled the company's motion.
- International Harvester Company failed to appear or plead at trial, resulting in a default judgment of a $500 penalty entered against it.
- The company (appellant) appealed the judgment to the Court of Appeals of Kentucky.
- The Court of Appeals of Kentucky affirmed the trial court's judgment.
- International Harvester Company then sought review from the Supreme Court of the United States.
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Issue:
Does a foreign corporation's continuous solicitation of orders, shipment of goods into a state, and collection of payments within that state constitute 'doing business' sufficient for the state's courts to exercise jurisdiction, even if all contracts are formally approved and executed outside the state?
Opinions:
Majority - Mr. Justice Day
Yes, a foreign corporation's continuous business activities within a state subject it to the jurisdiction of that state's courts. The International Harvester Company was engaged in a continuous course of business in Kentucky that went beyond mere solicitation. The court reasoned that the combination of activities—persistent solicitation by resident agents, a constant flow of the company's machines into the state, and the authority of agents to receive payments and take notes payable in Kentucky—demonstrated that the company was present and 'doing business' there. The court distinguished this case from Green v. Chicago, Burlington & Quincy Ry., where the activities were found to be mere solicitation. The court rejected the argument that engaging solely in interstate commerce grants immunity from state court jurisdiction, stating that while states cannot burden interstate commerce, they can subject corporations benefiting from their laws and markets to the ordinary process of their courts.
Analysis:
This decision clarifies that the 'doing business' standard for personal jurisdiction is a practical one, focused on the substance of a company's activities within a state, not just the formalities of where contracts are signed. It establishes that the Commerce Clause does not provide a shield against jurisdiction for companies that have a continuous and systematic commercial presence in a state. This prevents foreign corporations from structuring their operations to evade legal accountability in states where they derive significant business, thereby ensuring states can provide a forum for resolving disputes involving companies that are actively and continuously operating within their borders.
