Ruston Gas Turbines, Inc. v. Donaldson Co., Inc.

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 22, 1993
• Docket: 93-2035
• Status: Published

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 93-2035.

RUSTON GAS TURBINES, INC., Plaintiff,

v.

DONALDSON COMPANY, INC., Defendant-Third Party, Plaintiff-Appellant,

CORCHRAN, INC., Third-Party Defendant-Appellee.

Dec. 22, 1993.

Appeal from the United States District Court for the Southern District of Texas.

Before REYNALDO G. GARZA, KING and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Appellant Donaldson Company, Inc. ("Donaldson") is appealing the decision of the court

below to dismiss its third-party claim against appellee Corchran, Inc. ("Corchran"), for lack of

personal jurisdiction. Because we find that the federal district court in Texas did have personal

jurisdiction over Corchran, we REVERSE and REMAND.

I. BACKGROUND

Ruston Gas Turbines, Inc. ("Ruston") originally filed this action against Donaldson in Texas

state court for breach of contract, breach of warranty and strict products liability in connection with

a contract between the two companies for the manufacture and sale of two gas-turbine engine

systems. Donaldson removed to federal court on the basis of diversity; Ruston is a Texas

corporation and Do naldson is a Delaware corporation with its principal place of business in

Minnesota. Donaldson then filed a third-party complaint for contribution or indemnity against

appellee Corchran, a Minnesota corporation that had subcontracted with Donaldson to manufacture

certain component parts of the systems sold by Donaldson to Ruston.

Corchran filed a motion to dismiss the third-party claim for lack of personal jurisdiction. In

the motion to dismiss, supported by the affidavit of its president, Corchran stated the following: Corchran is a Minnesota corporation with its principal place of business in Waseca, Minnesota.

Corchran does not conduct business or maintain a place of business in Texas. It does not employ or

maintain a sales representative or manufacturer representative in Texas. It has not recruited any

employees in Texas. Corchran has not designated a registered agent for service of process in Texas,

and is not required by Texas law to do so. Corchran has not contracted by mail with any Texas

resident whereby the contract was to be performed in whole or part in Texas. Corchran has not

committed a tort in Texas.

Corchran claims that all of its actions related to its contract with Donaldson occurred in

Minnesota. The items sold by Corchran under that contract were shipped FOB Waseca, Minnesota.

Corchran claims it had no direct contract with Ruston and no verbal, written, or any other

communication with Ruston regarding the sale of the equipment at issue. Corchran says its only

communications were with Donaldson. Corchran says none of its employees communicated with or

performed any work with persons in Texas in fabricating, manufacturing or delivering the equipment.

In its responses to Corchran's motion to dismiss, supported by the affidavits of Donaldson and

Ruston employees, Donaldson lists the following facts: (1) Corchran agreed in its contract with

Donaldson to manufacture two air-infiltration systems that would be purchased by Ruston; (2)

Corchran was aware that the parts it was manufacturing would be shipped to Texas; (3) The

purchase order issued by Donaldson to Corchran specifically indicated that the air infiltration systems

were to be sold to Ruston in Houston; (4) Corchran delivered the equipment it manufactured into

the hands of a common carrier for direct shipment to Ruston in Houston; (5) The bills of lading

covering the goods Corchran shipped identified the consignee and destination as "Ruston Gas

Turbines, Inc." with Ruston's Houston address; (6) On 211 different occasions between December

1, 1977 and June 17, 1992, Corchran shipped equipment directly from its plant in Minnesota to

locations in Texas; (7) These 211 shipments were to 44 different entities and locations in Texas; (8)

On several occasions during this 15-year period, Corchran employees accompanied Donaldson

employees to Texas to assist and meet with Donaldson's customers in Texas who were purchasing

products containing Corchran components; and (9) Corchran's practice of shipping items directly to Ruston continued even after the transaction that was made the subject of this lawsuit.

The district court found that it did not have personal jurisdiction over Corchran. It granted

Corchran's motion and dismissed Donaldson's claim against Corchran.

Upon motion by Donaldson, the trial court determined under Federal Rule of Civil Procedure

54(b) that its dismissal of the third-party claim against Corchran was a final, appealable order.1

Donaldson appealed to this Court, arguing t hat the trial court erred in dismissing its claim against

Corchran for lack of personal jurisdiction.

II. ANALYSIS

A. Applicable Law on Personal Jurisdiction

Absent any dispute as to the relevant facts, the issue of whether personal jurisdiction may be

exercised over a nonresident defendant is a question of law to be determined de novo by this Court.2

When alleged jurisdictional facts are disputed, we must reso lve all conflicts in favor of the party

seeking to invoke the court's jurisdiction.3 A federal district court sitting in diversity may exercise

personal jurisdiction over a nonresident defendant if (1) the long-arm statute of the forum state

confers personal jurisdiction over that defendant; and (2) exercise of such jurisdiction by the forum

state is consistent with due process under the United States Constitution.4 These two steps collapse

into one for our purposes because the Texas Supreme Court has established that the Texas long-arm

1 On or about October 15, 1993, the district court in this action granted summary judgment in favor of defendant Donaldson on all claims brought by plaintiff Ruston. Ruston has appealed the summary judgment to this Court, therefore the issue of personal jurisdiction over Corchran is not moot. 2 E.g., Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir.1993); Command-Aire v. Ontario Mechanical Sales & Service, 963 F.2d 90, 93 (5th Cir.1992). 3 Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir.1990) ("[O]n a motion to dismiss for lack of jurisdiction, uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purposes of determining whether a prima facie case for personal jurisdiction exists.") (quoting D.J. Investments, Inc. v. Metzler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 546 (5th Cir.1985).). 4 E.g., Ham, 4 F.3d at 415; Irving v. Owens-Corning Fiberglas Corp., 864 F.2d 383, 385 (5th Cir.), cert. denied sub nom. Jugometal Enterprise for Import and Export of Ores and Metals v. Irving, 493 U.S. 823, 110 S.Ct. 83, 107 L.Ed.2d 49 (1989). statute5 extends to the limits of federal due process.6

The due process clause of the Fourteenth Amendment, as interpreted by the Supreme Court,

permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has

established "minimum contacts" with the forum state; and (2) the exercise of jurisdiction over that

defendant does not offend "traditional notions of fair play and substantial justice."7 Both prongs of

the due process test must be met in this case if the United States Distri ct Court for the Southern

District of Texas is to exercise personal jurisdiction over Corchran.

B. Minimum Contacts

The "minimum contacts" prong of the test is perhaps the most difficult to ascertain and has

been refined to determine two types of personal jurisdiction—specific or general. A state exercises

"specific jurisdiction" over a non-resident defendant when the lawsuit arises from or relates to the

defendant's contact with the forum state.8 A single act by the defendant directed at the forum state,

therefore, can be enough to confer personal jurisdiction if that act gives rise to the claim being

asserted.9 In contrast, when the act or transaction being sued upon is unrelated to the defendant's

contacts with the forum state, personal jurisdiction does not exist unless the defendant has sufficient

"continuous and systematic cont acts" with the forum state to support an exercise of "general

jurisdiction."10

In this case, appellant Donaldson's claim against appellee Corchran arises out of Corchran's

5 TEX.CIV.PRAC. & REM.CODE §§ 17.041-045 (Vernon 1986). 6 E.g., Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990); Ham, 4 F.3d at 415 & n. 7. 7 International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). 8 See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984); Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir.1987). 9 Ham v. La Cienega Music Co., 4 F.3d 413, 415-16 (5th Cir.1993); Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1361 (5th Cir.1990). 10 Ham, 4 F.3d at 416 n. 10 (citing Helicopteros, 466 U.S. at 414 & n. 9, 104 S.Ct. at 1872 & n. 9).). contacts with Texas, so we will perform a specific jurisdiction analysis. We do not decide today

whether Corchran's contacts with Texas are sufficiently "continuous and systematic" to support an

exercise of general jurisdiction.

The "minimum contacts" prong, for specific jurisdiction purposes, is satisfied by actions, or

even just a single act, by which the non-resident defendant "purposefully avails itself of the privilege

of conducting activities within the forum state, thus invoking the benefits and protections of its

laws."11 The non-resident's "purposeful availment" must be such that the defendant "should

reasonably anticipate being haled into court" in the forum state.12

The Supreme Court has stated that a defendant's placing of its product into the stream of

commerce with the knowledge that the product will be used in the forum state is enough to constitute

minimum contacts. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 100 S.Ct. 559,

567, 62 L.Ed.2d 490 (1980). The Fifth Circuit is among the circuits that have interpreted World-

Wide Volkswagen to hold that "mere foreseeability or awareness [is] a constitutionally sufficient basis

for personal jurisdiction if the defendant's product made its way into the forum state while still in the

stream of commerce." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 111, 107 S.Ct.

1026, 1031, 94 L.Ed.2d 92 (1987) (citing Bean Dredging Corp. v. Dredge Technology Corp., 744

F.2d 1081 (5th Cir.1984).).

In Asahi, the Supreme Court's most recent statement on personal jurisdiction, four justices

favored a narrower interpretation of the stream of commerce doctrine.13 The plurality opinion by

Justice O'Connor advocated a requirement of "additional conduct" by the defendant to support

11 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985); see also Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958); Ham, 4 F.3d at 415-16; Irving, 864 F.2d at 385. 12 World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980); Irving, 864 F.2d at 385. 13 Asahi, 480 U.S. at 110, 107 S.Ct. at 1031; see also Irving, 864 F.2d at 385. While four justices in Asahi supported the "stream-of-commerce-plus" theory and would decide the case on the "minimum contacts" prong, the remaining four justices focused on an alternate rationale, stating that the exercise of personal jurisdiction over the defendant did not meet the second, "fair play" prong of the due process test. Asahi, 480 U.S. at 115-16, 107 S.Ct. at 1033-34. personal jurisdiction under the stream of commerce theory:14

"The "substantial connection' between the defendant and the forum state necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum state. The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum state.... [A] defendant's awareness that the stream of commerce may or will sweep the product into the forum state does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum state."

Asahi, 480 U.S. at 112, 107 S.Ct. at 1032 (citations omitted).

The pluralit y opinion gave examples of "additional conduct" that would satisfy the

"stream-of-commerce-plus" test: (1) showing an intent or purpose to serve the market in the forum

state; (2) designing the product for that state's market; (3) advertising in the forum state; (4)

establishing channels to provide regular advice to customers in the forum state; or (5) marketing the

product through a distributor-agent in the forum state. Id.

In the years after Asahi, the Fifth Circuit has continued to follow the original

"stream-of-commerce" theory established in the majority opinion of World-Wide Volkswagen, and

has rejected the "stream-of-commerce-plus" theory advocated by the Asahi plurality. Irving v.

Owens-Corning Fiberglas Corp., 864 F.2d 383, 386 (5th Cir.), cert. denied sub nom. Jugometal

Enters. for Import and Export of Ores and Metals v. Irving, 493 U.S. 823, 110 S.Ct. 83, 107

L.Ed.2d 49 (1989); Bearry v. Beech Aircraft Co., 818 F.2d 370, 375 (5th Cir.1987) (noting that

"[t]he dimension of the "stream of commerce' doctrine now divides the Supreme Court" and referring

to the "uncertainty" evident in Asahi ). In Irving, 864 F.2d at 386, this circuit stated:

"Because the [Supreme] Court's splintered view of minimum contacts in Asahi provides no clear guidance on this issue, we continue to gauge [the nonresident defendant]'s contacts with Texas by the stream of commerce standard as described in World-Wide Volkswagen and embraced in this circuit."

Our most recent post-Irving personal jurisdiction case reaffirms the Irving rationale. Ham v. La

Cienega Music Co., 4 F.3d 413 (5th Cir.1993). In Ham, we noted the disagreement of the Supreme

Court justices in Asahi regarding the stream of commerce theory and concluded: "Absent rejection

by a majority on the Supreme Court, we have continued to apply the stream of commerce analysis

14 Asahi, 480 U.S. at 110, 107 S.Ct. at 1031; see also Irving, 864 F.2d at 385. found in our pre-Asahi cases."15

In its order finding a lack of personal jurisdiction over Corchran in this case, the district court

relied explicitly on the "stream-of-commerce-plus" theory advocated in the Asahi plurality opinion.

Citing Asahi, 480 U.S. at 112, 107 S.Ct. at 1032, the court concluded that because Donaldson did

not show that Corchran engaged in acts "purposefully directed toward the forum state," a federal

district court in Texas could not exercise personal jurisdiction over Corchran. This reasoning fails

to recognize the Fifth Circuit's interpretation of the stream of commerce test and is therefore

erroneous. In Irving, 864 F.2d at 386, and again in Ham, 4 F.3d at 416 n. 11, this circuit expressed

its position that Asahi does not provide clear guidance on the "minimum contacts" prong, and

therefore we will continue to follow the stream of commerce analysis in World-Wide Volkswagen,

444 U.S. at 298, 100 S.Ct. at 559. Under the World-Wide Volkswagen test, Corchran's contacts with

Texas are more than enough to justify an exercise of personal jurisdiction. See Irving, 864 F.2d at

386-87; Bean Dredging, 744 F.2d at 1085.16 Corchran intentionally placed its products into the

stream of commerce by delivering them to a shipper destined for delivery in Texas. At the time the

goods left Corchran's plant in Minnesota, Corchran not only could have foreseen that the products

might end up in Texas, it knew as a fact that the products were going to be delivered to a specific user

in Houston, Texas. Given Corchran's 211 contacts with Texas through its business relationship with

Donaldson over the years, as well as the visits of its own employees to Texas to serve Donaldson's

customers, Corchran reasonably should have anticipated that it could be haled into court in Texas.

C. Fair Play and Substantial Justice

15 Ham, 4 F.3d at 416 & n. 11; Gulf Consol. Services, Inc. v. Corinth Pipeworks, S.A., 898 F.2d 1071, 1073 (5th Cir.) (citing Bearry, 818 F.2d at 375) (follows the original World-Wide Volkswagen test without comment), cert. denied, 498 U.S. 900, 111 S.Ct. 256, 112 L.Ed.2d 214 (1990); See also Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534, 1548 & n. 17 (11th Cir.) (noting that the Fifth Circuit in Irving, as well as federal district courts in Utah, Guam, Indiana, Kansas and Virginia, have declined to follow the Asahi plurality), cert. denied sub nom. Regie Nationale Des Usines Renault S.A. v. Vermeulen, --- U.S. ----, 113 S.Ct. 2334, 124 L.Ed.2d 246 (1993). 16 All facts alleged by Donaldson regarding jurisdictional issues must be taken as true for purposes of determining whether Donaldson has met its burden of proving a prima facie case for the existence of personal jurisdiction. Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir.1990). Even if minimum contacts exist, the exercise of personal jurisdiction over a non-resident

defendant will fail to satisfy due process requirements if the assert ion of jurisdiction offends

"traditional notions of fair play and substantial justice."17 In determining this fundamental fairness

issue we must examine (1) the defendant's burden; (2) the forum state's interests; (3) the plaintiff's

interest in convenient and effective relief; (4) the judicial system's interest in efficient resolution of

controversies; and (5) the state's shared interest in furthering fundamental social policies.18

In this case, Donaldson has a strong interest in obtaining convenient and effective relief. The

claims Donaldson asserts against Corchran are third-party claims arising from Ruston's claims against

Donaldson in the same case. The Texas forum will bring all the parties into one courtroom for a

single resolution. Texas, as forum state, also has an interest in adjudicating a dispute that involves

a sale of goods to a Texas consumer, Ruston. Corchran participated in the transaction by delivering

component parts to Texas that were incorporated into a finished good in Texas. The burden on

Corchran to defend in Texas is not unreasonable, given that Corchran employees have traveled to

Texas in connection with its business relationship with Donaldson. It is not unfair or unjust to require

the manufacturer of a good that is knowingly delivered to a specific state to respond to a lawsuit

arising out of defects in the good in that state. Therefore, the second prong of the due process test

is satisfied; the exercise of personal jurisdiction over Corchran in Texas does not offend fair play and

substantial justice.

III. CONCLUSION

Our decision in this case is governed by our opinions in Bean Dredging, 744 F.2d at 1085,

and Irving, 864 F.2d at 386. Because we hold, under the original "stream-of-commerce" theory

established in World-Wide Volkswagen, 444 U.S. at 298, 100 S.Ct. at 567, that the federal district

court in Texas did have personal jurisdiction over Corchran, we REVERSE the trial court's dismissal

17 International Shoe, 326 U.S. at 316, 66 S.Ct. at 158; See also Asahi, 480 U.S. at 112, 107 S.Ct. at 1032; World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 559; Command-Aire v. Ontario Mechanical Sales & Service, 963 F.2d 90, 95 (5th Cir.1992); Irving, 864 F.2d at 387. 18 Asahi, 480 U.S. at 112, 107 S.Ct. at 1032; World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 559; Irving, 864 F.2d at 387. of Donaldson's third-party claims and REMAND the case for further proceedings in accordance with

this opinion.