484 U.S. 97 (1987), 86-740, Omni Capital International, Ltd. v. Rudolf Wolff & Co., Ltd.

Docket Nº:No. 86-740
Citation:484 U.S. 97, 108 S.Ct. 404, 98 L.Ed.2d 415, 56 U.S.L.W. 4031
Party Name:Omni Capital International, Ltd. v. Rudolf Wolff & Co., Ltd.
Case Date:December 08, 1987
Court:United States Supreme Court

Page 97

484 U.S. 97 (1987)

108 S.Ct. 404, 98 L.Ed.2d 415, 56 U.S.L.W. 4031

Omni Capital International, Ltd.

v.

Rudolf Wolff & Co., Ltd.

No. 86-740

United States Supreme Court

Dec. 8, 1987

Argued October 6, 1987

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

Syllabus

Omni Capital International, Ltd., and Omni Capital Corporation (hereafter petitioners), New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Certain investors filed suits (later consolidated) against petitioners in the Federal District Court for the Eastern District of Louisiana, charging that petitioners fraudulently induced them to participate in petitioners' program, in violation of various federal securities laws. Petitioners impleaded respondent Rudolf Wolff & Co., a British corporation with offices in London [108 S.Ct. 406] that was employed by petitioners to handle trades on the London Exchange, and respondent Gourlay (hereafter respondents), a United Kingdom citizen and resident who was Wolff's representative in soliciting petitioners' business. Petitioners contended that their liability, if any, was caused by respondents' improper trading activities. While the action was pending, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, was decided, recognizing an implied private cause of action under the Commodity Exchange Act (CEA), and the plaintiffs in this litigation amended their complaints to allege violations of that Act. The District Court dismissed the other securities law claims as preempted by the CEA, and held that it lacked personal jurisdiction over respondents because (1) the CEA was silent about service of process for private causes of action, (2) thus, application of Louisiana's long-arm statute was required, and (3) that statute's requirements were not met. The Court of Appeals affirmed.

Held: The District Court lacked personal jurisdiction over respondents in this federal question litigation under the CEA. Pp. 102-111.

(a) The requirement that a federal court have personal jurisdiction flows from the Due Process Clause of the Fifth Amendment. However, before a federal court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, there must be authorization for service of summons on the defendant. Pp. 103-104.

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(b) Under Federal Rule of Civil Procedure 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits to determine whether an out-of-state defendant is amenable to service. After the Curran decision, and while the present litigation was still pending in the District Court, Congress added § 22 to the CEA, explicitly authorizing a private cause of action for CEA violations but not referring to service of process, in contrast to Congress' explicit authorization of nationwide service of process in other CEA provisions for other civil actions under the Act. This contrast, as well as the legislative history, supports the conclusion that Congress did not intend to provide nationwide service of process for private actions under the CEA. Nor was nationwide service implicitly authorized for any implied private cause of action under the CEA, such as petitioners', that accrued prior to § 22's effective date. Moreover, the District Court held, and petitioners concede, that the requirements of Louisiana's long-arm statute were not met here. Pp. 104-108.

(c) Even were it within this Court's power, judicial creation of a common law rule authorizing service of process in this litigation would be unwise. The strength of the longstanding assumption that federal courts cannot add to the scope of service of summons Congress has authorized, and the network of statutory enactments and judicial decisions tied to that assumption, argue strongly against devising common law service of process provisions. The responsibility for creating service of process provisions rests with those who propose the Federal Rules of Civil Procedure, and with Congress. Pp. 108-111.

795 F.2d 415, affirmed.

BLACKMUN, J., delivered the opinion for a unanimous Court.

BLACKMUN, J., lead opinion

JUSTICE BLACKMUN delivered the opinion of the Court.

This case presents questions concerning the prerequisites to a federal court's exercise of in personam jurisdiction.

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I

Petitioners Omni Capital International, Ltd., and Omni Capital Corporation (collectively Omni),1 New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Omni employed respondent Rudolf Wolff & Co., Ltd., a British corporation with its offices in London, as a broker to handle trades on that Exchange. Respondent James Gourlay, a citizen and resident of the United Kingdom, served as Wolff's representative in soliciting this business from Omni.

The United States Internal Revenue Service disallowed income tax deductions, claimed by the participants in Omni's investment program, and did so on the ground that the program's commodities trades on the London Metals Exchange were not bona fide arm's-length transactions. A number of corporate and individual investors who participated in Omni's program then sued Omni in four separate actions in the United States District Court for the Eastern District of Louisiana.2 The plaintiffs in each action charged that, by misrepresenting its tax benefits and future profits, Omni fraudulently induced them to participate in the investment program. Omni, in turn, impleaded Wolff and Gourlay,3

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contending that its liability, if any, was caused by their improper trading activities.

The procedural history is complex. The original complaints, filed in 1980 and 1981, charged violations of the Securities Exchange Act of 1934, ch. 404, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq. (1982 ed. and Supp. IV); SEC Rule 10b-5, 17 CFR § 240. 10b-5 (1987); and the Securities Act of 1933, 48 Stat. 74, as amended, 15 U.S.C. § 77a et seq. (1982 ed. and Supp. IV), and included pendent state law claims. The four cases were consolidated in the District Court. While they were pending, this Court decided Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353 (1982). In Curran, we recognized an implied private cause of action under the Commodity Exchange Act (CEA), 42 Stat. 998, as amended, 7 U.S.C. § 1 et seq. (1982 ed. and Supp. IV). The plaintiffs accordingly amended their complaints to allege violations of §§ 4b and 9(b) of the CEA, as amended, 7 U.S.C. §§ 6b and 13(b).

Wolff and Gourlay moved to dismiss the claims against them for lack of personal jurisdiction, and, as an additional ground, argued that the securities law claims failed to state causes of action. In its initial opinion dated May 13, 1983, the District Court dismissed the securities law claims as having been preempted by the CEA, but concluded that it could exercise personal jurisdiction over Wolff and Gourlay. App. 6. The court reasoned that, in actions under the CEA,

Congress intended for U.S. courts to exercise personal jurisdiction over foreign defendants not present in the United States to the limits of the due process clause of the Fifth Amendment.

Id. at 9. Therefore, the court determined, if "the quality and nature of a foreign defendant's activities . . . in the United States" support a "finding of fair play and substantial justice," [108 S.Ct. 408] personal jurisdiction would be proper. Id. at 9-10. After examining the extent of Wolff's and Gourlay's contacts with the United States, the District Court concluded it had personal jurisdiction.

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After this initial decision of the District Court, the Fifth Circuit decided DeMelo v. Toche Marine, Inc., 711 F.2d 1260 (1983). In DeMelo, the Court of Appeals concluded that,

when a federal question case is based upon a federal statute that is silent as to service of process, and a state long-arm statute is therefore utilized to serve an out-of-state defendant, [Federal Rule of Civil Procedure] 4(e) requires that the state's standard of amenability to jurisdiction apply.

Id. at 1266. Following that decision by its controlling court, the District Court granted Wolff's and Gourlay's motions for reconsideration, noting that the CEA is silent about service of process for private causes of action. App.19. Upon its reconsideration, the District Court concluded that, in accord with DeMelo, "unless jurisdiction can be asserted under the Louisiana long-arm statute, there is no personal jurisdiction over Wolff or Gourlay." App. 22. Because, in its view, the requirements of the Louisiana long-arm statute4 were not met, the District Court concluded that it lacked personal jurisdiction over Wolff and Gourlay, and it directed the entry

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of a final judgment dismissing all claims against them. Id. at 23.

The Fifth Circuit decided the ensuing appeals en banc in the first instance and, by a 9-to-6 vote, affirmed. Point Landing, Inc. v. Omni Capital Int'l, Ltd., 795 F.2d 415 (1986). The majority started from "the unmalleable principle of law . . . that federal courts . . . must ground their personal jurisdiction on a federal statute or rule." Id. at 423. In the majority's view, neither the CEA nor the Federal Rules of Civil Procedure authorized service of process upon Wolff or Gourlay, and therefore personal jurisdiction over them was lacking. The dissent conceded that neither the CEA nor Civil Rule 4 provided for service of process on Wolff and Gourlay, but would have remedied this "bizarre hiatus in the Rules," 795 F.2d at 428, with an ad hoc authorization of service of process on them based on their contacts with...

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