Oriental Trading Co.v. Firetti

Decision Date19 October 2000
Docket NumberDEFENDANTS-APPELLANTS,No. 99-3593,PLAINTIFF-APPELLEE,99-3593
Parties(8th Cir. 2001) ORIENTAL TRADING CO., INC., A NEBRASKA CORPORATION,, v. SAM G. FIRETTI; BING RAN, Submitted:
CourtU.S. Court of Appeals — Eighth Circuit

Appeal from the United States District Court for the District of Nebraska. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Wollman, Chief Judge, and Murphy and Bye, Circuit Judges.

Murphy, Circuit Judge.

This tort action was brought by Oriental Trading Co., Inc. (OTC) against Sam Firetti and Bing Ran for fraud, negligent misrepresentation, and conversion. After judgment was entered on a jury verdict in favor of OTC, Firetti and Ran each filed a motion for judgment as a matter of law or for a new trial. The district court 1 denied the motions, and Firetti and Ran appeal. We affirm.

I.

Sam Firetti and Bing Ran are residents of Virginia who were directors, officers, and shareholders of Global Marketing Group, Inc. (Global), a Virginia corporation that sold pencils and crayons. In September 1993, Firetti approached OTC at a trade show to develop a business relationship for Global. OTC is a Nebraska corporation that sells goods made in Asia through its catalogs. After the show, Firetti sent a letter to OTC listing prices for pencils and crayons. Chris Weber, a buyer for OTC, contacted Firetti in response and received a price quote. On January 31, 1994 and March 31, 1994, OTC and Global entered into two written form contracts in which OTC agreed to buy from Global a specific number of pencils and crayons at an established price. The goods were to be made in China and delivered to OTC in Nebraska. The contracts had identical terms except for the type and quantity of pencils and crayons to be shipped; they provided that Global would sell the goods "F.O.B. Hong Kong" and OTC could provide a letter of credit. United States Customs Service (Customs) duties were not mentioned in the contracts. Firetti and Ran negotiated the contracts by phone and fax; Firetti signed for Global in Virginia and Weber signed for OTC in Nebraska. After the contracts were signed, Firetti, Ran, and Alece Tanner, the import coordinator for OTC, maintained constant communication by phone and faxes regarding the location of the goods and their date of arrival.

In May 1994 Firetti made a new proposal to Weber. He informed her that Customs was contemplating imposition of anti-dumping duties on pencils made in certain Chinese factories. An anti-dumping duty is a special duty placed on goods to prevent importation of large quantities of the item into the United States. OTC had been the importer of record for the pencils and crayons up to this time and thus paid duties directly to Customs. There was evidence at trial from which the jury could find that Firetti suggested that Global now become the importer of record because it could switch factories and lower the cost of anti-dumping duties to OTC and that he represented that Global would deal directly with Customs, pay all duties, and bill OTC as anti-dumping duties were assessed. Based on Firetti's representations, OTC agreed on June 24, 1994 that Global would become the importer of record, deal directly with Customs, pay all duties, and bill OTC for the anti-dumping duties as they were paid. There is no indication in the record that Firetti and OTC ever discussed a new contract or changing terms in the written contracts. After Global became the importer of record, Ran arranged for Phil Patterson, Inc. (Patterson) to broker the pencils and crayons through Customs, but neither Firetti nor Ran told Patterson anything about anti-dumping duties. Two confidential forms filed with Customs by Patterson did not refer to any anti-dumping duties, and the estimates provided by Patterson to Global on the cost of clearing the goods through Customs did not include such duties.

Throughout July and August of 1994, Firetti and Ran submitted invoices to OTC which billed it for $360,886.32 in anti-dumping duties. This is the amount of damages OTC sought on its tort claims in this case and of the award by the jury. Both Firetti and Ran told OTC that the invoices for anti-dumping duties reflected the amount of money that was being deposited with Customs and that they must be paid by OTC so the goods could be released. Tanner, OTC's import coordinator, used automated broker software to estimate the amount of anti-dumping duties on the goods, and noticed that the software indicated such duties were not final. Tanner testified that she relied on representations by Firetti and Ran in deciding to pay the invoices since Global had exclusive control over the information concerning the amount actually being deposited with Customs. OTC paid by transferring funds from its bank in Nebraska to Global's bank in Virginia. After Firetti and Ran deposited the funds in Global's account, they used them for normal operating expenses of their business. At the end of August, OTC and Global agreed that OTC would again become the importer of record because shipments from China were frequently delayed and the new arrangement had not saved OTC money.

In December 1994, Customs announced that no anti-dumping duties would be assessed. Tanner contacted Ran to inquire about a refund of the payments OTC had made for the duties. Ran promised to get back to OTC about its deposits, but he did not and none of the money was ever returned. OTC tried numerous times to obtain the refund, but Firetti took the position that Global had a right to retain the money even if none of it had been used for duties.

In December 1996, OTC sued Global in Nebraska state court for breach of contract and misrepresentation. The action was stayed pursuant to a clause in the contract requiring that any disputes be arbitrated in Washington, D.C. Global was subsequently dissolved, and OTC brought this action in state court against Firetti, alleging fraud, negligent misrepresentation, and conversion.

Firetti removed the case to federal court and filed a motion to dismiss for lack of personal jurisdiction. OTC then amended its complaint to add Ran as a defendant. The district court found that OTC had established a prima facie case of personal jurisdiction, and the matter went to trial. The jury found appellants liable for fraud, negligent misrepresentation, and conversion and returned a general verdict awarding OTC $360,886.52, the exact amount that OTC had paid Global for anti-dumping duties that were never assessed by Customs. Appellants each filed a motion for judgment as a matter of law or a new trial. The district court ruled that it had personal jurisdiction over Firetti and Ran because they had intentionally directed their tortious conduct at residents of Nebraska and the brunt of the harm was felt there. The district court then denied both motions.

On appeal, Firetti and Ran argue that the district court lacked personal jurisdiction over them; that because OTC had contracts with Global it could not recover from Firetti and Ran in tort; that there was insufficient evidence of fraud, negligent misrepresentation, or conversion; and that the jury was not adequately instructed on their theory of the case. OTC responds that the appellants had sufficient contacts and effects in the state of Nebraska for the assertion of personal jurisdiction over them; that Nebraska law controls the issues of substantive law and does not bar OTC's claims; that there was sufficient evidence to support the verdict; and that the jury was instructed on their theory of the case.

II.
A.

Firetti and Ran argue that there was no personal jurisdiction over them in Nebraska. The district court's finding of personal jurisdiction is reviewed de novo. See Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996). "A federal court in a diversity action may assume jurisdiction over nonresident defendants only to the extent permitted by the long-arm statute of the forum state and by the Due Process Clause." Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991). Nebraska allows a court to exercise jurisdiction over a person "(a) [t]ransacting any business in th[e] state; (b) [c]ontracting to supply services or things in th[e] state; [or] (c) [c]ausing tortious injury by an act or omission in th[e] state. . . ." Neb.Rev.Stat. 25-536 (1983). When a state construes its long arm statute to grant jurisdiction to the fullest extent permitted by the Constitution as Nebraska has, the key question becomes whether the exercise of personal jurisdiction would comport with the due process clause. See Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610, 612 (8th Cir. 1994) (citing Stucky v. Stucky, 185 N.W.2d 656 (Neb. 1971)).

In order for there to be jurisdiction consistent with due process, OTC must establish that Firetti and Ran had sufficient minimum contacts with Nebraska so that "traditional notions of fair play and substantial justice" are not offended. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The appellants must have conducted themselves in such a way that they could "reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). This "'fair warning' requirement is satisfied if the defendant[s] ha[ve] 'purposefully directed' [their] activities at residents of the forum. . . , and the litigation results from alleged injuries that 'arise out of or relate to' those activities. . . ." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal citations omitted).

Firetti and Ran argue that they did not have sufficient minimum contacts with Nebraska since they never entered the state and only made phone calls and faxes into Nebraska. The lack of physical presence in a state cannot alone defeat jurisdiction. See id. at 476...

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