Essay Question 1.
D lives in New York. He owns and runs a business, under the name “D Diamonds,” which sells diamonds over the internet. D Diamonds is not incorporated. (As a result, D is personally liable for D Diamonds’ debts.) D runs D Diamonds out of an office in New Jersey. He has one employee, X, who, like D, lives in New York and works in the New Jersey office. D describes X as an “assistant manager.”
The P Corp, a large diamond distributing company, is incorporated in Delaware. Its main office and headquarters are in New Jersey, but all its diamonds are kept in a number of safes in a small guarded storeroom in New York. The P Corp has appointed the New Jersey Secretary of State as its agent for service of process, as a condition for a license to do business in the state.
D has had a long-standing relationship with the P Corp and D commonly orders diamonds directly from the P Corp’s New York storeroom. In a phone call from D’s home in New York to the P Corp’s storeroom, D ordered $200,000 worth of diamonds. D paid a $100,000 deposit by phone, using his personal credit card. Delivery was to be to the D Diamonds office in New Jersey. The P Corp shipped the diamonds, but they were stolen in New York soon afterward, before they made it to New Jersey. D refused to pay the remaining $100,000 for the diamonds.
The P Corp filed a complaint in the Federal District Court for the District of New Jersey for state-law breach of contract, naming “D, doing business as D Diamonds” as the defendant. The complaint asked for the remaining $100,000 owed for the diamonds. The P Corp argued that D Diamonds had ownership of the diamonds at the moment they left the P Corp storeroom in New York. Since ownership was transferred, D Diamonds (and therefore D) was obliged to pay in full.
Service of the summons and complaint was upon X at X’s home in New York. D answered, alleging that he was not liable for the remaining $100,000, because ownership of the diamonds was never transferred. Transfer would have occurred only if there had been successful delivery of the diamonds to D Diamonds’s New Jersey office. D also included in the answer the defenses of lack of personal jurisdiction, lack of subject matter jurisdiction, and insufficient service of process, and a counterclaim for the return of the $100,000 deposit.
In its reply, the P Corp offered the following defense to D’s counterclaim: The counterclaim could not succeed, the P Corp argued, because D had failed to satisfy a New Jersey statute that states that any company doing business in New Jersey “may maintain an action in any of the courts of this state” only if it has appointed the New Jersey Secretary of State as its agent for service of process. D had never appointed the New Jersey Secretary of State as its agent for service of process. Should the P Corp’s defense to D’s counterclaim succeed? Should D’s defenses of lack of personal jurisdiction, subject matter jurisdiction, and improper service succeed?