Foxco Industries, Ltd. v. Fabric World, Inc. - 595 F.2d 976 (5th Cir. 1979)

Rule:

The determination of whether a foreign corporation is doing business within the state of Alabama involves a mixed question of law and fact. Consequently, the facts of each case are quite important in determining whether or not a sufficient nexus exists for finding that the nonresident corporation is doing business within the state.

Facts:

Foxco Industries, Ltd., the appellee seller, was manufacturing knitted fabrics for sale to retail fabric stores and the garment industry. Its principal place of business is in New York City. Fabric World, the appellant buyer, was engaged in the retail fabric business and operates a chain of stores in several states; its headquarters is in Alabama. Appellee sold some of its goods to retail fabric stores through manufacturers' representatives, operating on a commission basis, who sell the lines of numerous manufacturers. Larger retail store customers, such as the appellant, are handled personally by the appellee’s sales manager. In this diversity action, the appellee seller, following a jury trial, recovered a $ 26,000 judgment against the appellant buyer for breaching a contract to purchase certain knitted fabric goods and refusing to pay for merchandise previously purchased. The Appellant buyer sought a review of a decision from the district court of Alabama. Appellant raised in its appeal that appellee seller was doing business in the state of Alabama without having qualified to do so and thus was precluded from enforcing its claim in court.

Issue:

Was the appellant’s appeal correct that the appellee seller doing business in the state of Alabama without having qualified to do so and thus was precluded from enforcing its claim in court?

Answer:

Yes.

Conclusion:

The court affirmed the judgment against the appellant for breach of contract because the appellant breached its contract with appellee. The jury was entitled to a charge, which gave appellee the full benefit of its original bargain. The court also held that the district court did not err when it applied precedent and other relevant Alabama case law. Moreover, the court stated that the basic facts did not establish the elements necessary to bar the appellee from district court under Alabama law in the case. The court then concluded that the appellee was acting only in interstate commerce. The court also stated that the jury was appropriately instructed, and appellee's damage award must have been approved. Thus, the court ruled that the jury decided that the appellee acted in a commercially reasonable manner when it decided to process to a conclusion the manufacture of the already substantially completed order of the appellant.