473 F.2d 1228 (5th Cir. 1973), 72-2061, Jetco Electronic Industries, Inc. v. Gardiner

Docket Nº:72-2061.
Citation:473 F.2d 1228
Party Name:JETCO ELECTRONIC INDUSTRIES, INC., and Thomas H. Doss, Plaintiffs-Appellants, v. Robert F. GARDINER, Individually and d/b/a Gardiner Electronics Company and Engineers Testing Laboratories, Inc., Defendants-Appellees.
Case Date:February 08, 1973
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1228

473 F.2d 1228 (5th Cir. 1973)

JETCO ELECTRONIC INDUSTRIES, INC., and Thomas H. Doss, Plaintiffs-Appellants,

v.

Robert F. GARDINER, Individually and d/b/a Gardiner Electronics Company and Engineers Testing Laboratories, Inc., Defendants-Appellees.

No. 72-2061.

United States Court of Appeals, Fifth Circuit.

February 8, 1973

Page 1229

W. R. Malone, Huntsville, Tex., C. Donald Gunn, Houston, Tex., for plaintiffs-appellants.

Louis T. Pirkey, Karl C. Hoppess, Houston, Tex., Riney B. Salmon, II, Phoenix, Ariz., for Gardiner.

James Greenwood, III, Houston, Tex., for Engineers Testing.

Before JOHN R. BROWN, Chief Judge, and THORNBERRY and MORGAN, Circuit Judges.

THORNBERRY, Circuit Judge:

This appeal from the district court's order dismissing appellants' cause of action

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against one of several defendants, 1 presents, inter alia, an interesting question concerning the limits imposed by due process upon the exercise of personal jurisdiction by a federal court sitting in a diversity case. After a careful review of the policies and controlling precedents in this area of law, we reverse the judgment below.

Appellee Engineers Testing Laboratories, Inc. (ETL) is an Arizona corporation, with its principal place of business in Arizona. It has no office in Texas nor does it have any employees, agents or servants in Texas on a regular basis. It is not qualified to do business in Texas nor has it sought to so qualify. It has had only two jobs in Texas within the past five years. Both jobs involved soil investigation for building foundations in El Paso during the summer of 1970. Neither job was connected with this suit. The fees for these two jobs totalled about $2,500, less than two-tenths of one percent of ETL's 1970 gross receipts. Appellants Jetco Electronic Industries, Inc. and Thomas H. Doss are Texas residents engaged in the business of manufacturing and selling treasure hunting devices under the trade names "Jetco" and "Relco." Robert F. Gardiner, a defendant below but not a party to this appeal, is an Arizona resident doing business as Gardiner Electronics Company, which manufactures and sells a competitive treasure hunting device. In December 1969 or January 1970, Gardiner purchased treasure hunting devices from a number of his competitors, including Jetco and Doss, and conducted a test to compare the performance of his device with that of his competitors'. The test consisted of burying an object some measured distance under the ground and operating each device over the object to see whether it would detect the object. He then paid ETL $85.00 to duplicate this test and "authenticate" the results already obtained. An ETL employee conducted the test in March 1970, employing the same techniques Gardiner used in his test. ETL prepared a report of the test procedures and results and sent it to Gardiner. The report stated that a Gardiner device would detect a penny buried as deep as five and one-half inches, but that a Jetco device with a six-inch search coil would detect a penny to a depth of only two inches and that a Jetco with a twelve-inch search coil showed no response to a penny buried deeper than one-half inch. The report claimed that the Relco devices were likewise inferior to Gardiner's devices.

Gardiner advertised his treasure hunting devices in several magazines of widespread circulation. Some of these advertisements invited the reader to send for a free catalog containing "comparison tests of different makes." Some twenty thousand persons are said to have responded to these advertisements, and Gardiner sent each of them a catalog which incorporated ETL's report of the test procedures and results-complete with brand names of the devices tested-and which contained a conclusion extracted from an earlier ETL report to Gardiner. 2 ETL had nothing to do with the preparation or dissemination of this catalog.

Jetco and Doss sued ETL, Gardiner and Gardiner Electronics in the Southern District of Texas, alleging that publication of the catalog containing ETL's test results caused appellants to lose sales. Appellants' cause of action against ETL was based on three theories: first, that ETL negligently tested the devices and proximately caused appellants' loss of sales; second, that ETL and Gardiner jointly libeled appellants; third, that ETL and Gardiner jointly committed the common law tort of disparagement of property by preparing

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and circulating the test results. Because the trial court's subject matter jurisdiction rested on the diverse citizenship of the parties, obtaining in personam jurisdiction over the Arizona defendants required compliance with the Texas "long arm" jurisdiction statute, Article 2031b, Vernon's Tex.Rev.Civ.Stat.Ann. 3 On March 10, 1972, the trial court granted ETL's motion to dismiss appellants' cause of action against it for failure to state a cause of action and for failure to comply with the Texas long arm statute. The instant appeal was taken from that order. Several months later, the trial court entered an agreed judgment disposing of appellants' claims against the other two defendants, Gardiner and Gardiner Electronics. On this appeal ETL argues that the dismissal was proper, because appellants did not prove facts sufficient to invoke the Texas long arm statute and because the exercise of long arm jurisdiction over ETL would offend due process.

I

Before reaching the merits of this controversy, we must decide whether the district court's March 10, 1972, order dismissing appellants' suit against ETL is appealable. With several exceptions not relevant here, this Court's appellate jurisdiction extends only to final orders. 28 U.S.C. § 1291. In a multiparty lawsuit such as this...

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