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UNCW BLA 361 - Rice V Oriental Appeal

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GREGORY A. RICE, Appellant, v. ORIENTAL FIREWORKS COMPANY; HORSEBRAND FIREWORKS CO.; TEMPLE OF HEAVEN BRAND FIREWORKS CO.,Defendants, J. C. CHOU and J.C. ORIENTAL FIREWORKS, INC., a Maryland corporation,Respondents, ROY NE & COMPANY FIREWORKS, Defendant CA No. A32672 COURT OF APPEALS OF OREGON 75 Ore. App. 627; 707 P.2d 1250; 1985 Ore. App. LEXIS 3928 March 15, 1985, Argued and submitted October 9, 1985, Filed SUBSEQUENT HISTORY: [***1] Argued and submitted March 15, 1985; Reconsideration Denied November 22, 1985; petition for review denied February 19, 1986 Reconsideration Denied November 22, 1985. Petition for Review Denied February 19, 1986 (300 Or 546). PRIOR HISTORY: Appeal from Circuit Court, Multnomah County. Clifford B. Olsen, Judge. No. 8206-03933. DISPOSITION: Reversed and remanded. COUNSEL: Larry N. Sokol, Portland, argued the cause for appellant. With him on the briefs was Jolles, Sokol & Bernstein, P.C., Portland. Peter R. Chamberlain, Portland, argued the cause for respondents. With him on the brief was Bodyfelt Mount Stroup & Chamberlain, Portland. JUDGES: Buttler, Presiding Judge, and Warren and Rossman, Judges. OPINIONBY: WARREN OPINION: [*629] [**1253] Plaintiff appeals from a judgment dismissing his claim against J. C. Chou (Chou) for lack of personal jurisdiction. Plaintiff filed this claim against, inter alia, n1 J.C. Oriental Fireworks, Inc., (Oriental) a Maryland corporation, and Chou, a Maryland resident, for personal injuries he suffered while discharging fireworks distributed by Oriental orChou. n2 In a pretrial order, ultimately reduced to the judgment appealed from, the trial court granted Chou's [***2] motion to dismiss for lack of personal jurisdiction. Oriental then dismissed local counsel and allowed an uncontested judgment to be taken against it in the amount of approximately $ 432,000. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n1 Defendants Oriental Fireworks Company, Horse Brand Fireworks Co., Temple of Heaven Brand Fireworks Co. and Roy Ne & Company Fireworks were never served and therefore are not involved in this case. n2 Defendant argues that plaintiff did not allege that Chou was personally liable for plaintiff's injuries. The complaint is broad enough to admit proof that Chou, in his personal capacity, did all the acts alleged. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - We reject plaintiff's contention that jurisdiction over Chou could also be based on a single visit to Oregon in 1979 during which he promoted his business. A nonresident individual, not served in Oregon, is subject to the jurisdiction of an Oregon court only when he has had sufficientcontacts with the state to satisfy the requirements of due process. ORCP 4L; see, e.g., Helicopteros Nacionales de Colombia [***3] v. Hall, 466 U.S. 408, 104 S Ct 1868, 80 L Ed 2d 404 (1984); International Shoe Co. v. Washington, 326 U.S. 310, 66 S Ct 154, 90 L Ed 95 (1945). If an individual's contacts are substantial, then he has a relationship with the state whichwarrants jurisdiction for all causes of action asserted against him. Helicopteros Nacionales de Colombia v. Hall, supra, 80 L Ed 2d at 411. However, if, as in this case, the individual's activities are not so pervasive as to justify the exercise of general jurisdiction over him, then jurisdiction depends on whether the action is "related to" or "arises out of" an individual's contacts with the state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S Ct 559, 62 L Ed 2d 490 (1980); State ex rel Michelin v. Wells, 294 Or 296, 657 P2d 207 (1982). Although the Supreme Court has never determined what it means to say that a cause of action is"related to" or [*630] "arises out of" a defendant's activities in the state, Helicopteros Nacionales de Colombia v. Hall, supra, 80 L Ed 2d at 414-20 (Brennan, J., dissenting), the Oregon Supreme Court, in State ex rel Michelin v. Wells, supra, 294 Or at 302-03, held that [***4] a cause of action is "related to" or "arises out of" a defendant's contact with the state, if that contact is substantively relevant to the cause of action. In this case, it is clear that, although Chou's single visit to Oregon related to his business, that visit was not substantively relevant to plaintiff's cause of action and, therefore, does not satisfy the requirements of due process. Plaintiff also contends, however, that the trial court should have disregarded the corporate form of Chou's "alter ego," Oriental, over which the court had undisputed jurisdiction and found personal jurisdiction over Chou. We agree with that contention and reverse the judgment dismissing the claim against Chou. The sole business of Oriental is to act as broker and distributor of professional display fireworks. The corporation has grossed from $ 230,000 to $ 400,000 annually. However, its assets have never exceeded $ 13,182, and it has never obtained liability insurance, even though, as Chou stated, accidents do occur, and lawsuits arise "as a general rule, right after July 4th." Chou also indicated that the lack of liability insurance motivates injured customers to bring actions against other [***5] defendants. Chou is the president and treasurer of Oriental. His wife is vice president of the corporation, and his Maryland attorney is its secretary. Those officers, who also [**1254] comprise the corporation's board of directors, have held their respective positions since the inception of the corporation in 1979. Chou stated that 5,000 shares of stock were authorized and issued when the corporation was formed, with 45 percent going to himself, 45 percent to his wife and 10 percent to his attorney. However, the record indicates that Chou owns 45 of the 90 shares issuedby the corporation and his wife owns the other 45. There is no indication that the attorney was actually issued any shares. There is also no evidence that any consideration was given for the shares issued. Finally, there are no records or minutes of meetings of the shareholders or directors of the corporation, except for a signed form of unanimous consent by the board of directors in lieu of an organizational meeting. [*631] The first issue is whether the trial court's jurisdiction over Chou may be premised on itsundisputed jurisdiction over Oriental and effected by disregarding the corporation [***6] as a separate entity. Three Supreme Court cases have indicated a


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UNCW BLA 361 - Rice V Oriental Appeal

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