Product Promotions, Inc. v. Cousteau

• Decision Date: 05 June 1974
• Docket Number: No. 73-2088.,73-2088.
• Parties: PRODUCT PROMOTIONS, INC., Plaintiff-Appellant, v. Jacques Y. COUSTEAU et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

495 F.2d 483 (1974)

PRODUCT PROMOTIONS, INC., Plaintiff-Appellant, v. Jacques Y. COUSTEAU et al., Defendants-Appellees.

No. 73-2088.

United States Court of Appeals, Fifth Circuit.

June 5, 1974.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Harold B. Berman, Jay S. Fichtner, Douglas E. Yeager, Dallas, Tex., for plaintiff-appellant.

Hubert D. Johnson, Dallas, Tex., for defendants-appellees.

Before THORNBERRY, GOLDBERG and INGRAHAM, Circuit Judges.

GOLDBERG, Circuit Judge:

In this diversity case we are asked to gauge the reach of the Texas "long-arm" statute¹ as limited by federal constitutional requirements of due process in order to determine whether the district court properly granted nonresident defendants-appellees' motion to dismiss for lack of jurisdiction over the person. According to our calculations the district court's jurisdictional measurements were accurate as to some of the defendants but inaccurate as to another. We therefore affirm in part and reverse and remand in part.

I.

Although important details remain both hazy and in dispute, the pleadings and the testimony taken during a hearing on the motion to dismiss yield a reasonably clear picture of the key operative facts in this controversy.

Plaintiff-appellant Product Promotions, Inc., incorporated under the laws of Texas and located in Dallas, engages, as its name implies, in the business of product sales and television promotion. The individual defendant, Jacques Y. Cousteau, is a citizen of France, a resident of Monaco, and a world famous marine explorer and scientist. Also named as defendants are the "COUSTEAU GROUP COMPANIES, consisting of Centre d'Etude Marines Advancees (CEMA), Les Campagnes Oceanographiques Francaises (COF), Living Sea Corporation (LSC), Les Requins Associes (LRA) and Thalassa Corporation (THA)."² Apparently business spin-offs from Cousteau's oceanic exploits, these are identified as foreign corporations and residents of various jurisdictions other than the State of Texas, including the country of France and the States of California and New York. Neither Cousteau individually nor any of the corporate defendants maintains a regular place of business or designated agent for service of process in the State of Texas.

In 1971 appellant began to market the "TR-VII Fish Call," a device designed to attract fish through sonic emissions, light, and pellets. Hoping to have Jacques Cousteau test the device and then to use the test results and the Cousteau name in advertising, appellant's president, Elwood Ross, telephoned from Texas to a Mr. Thomas Horton in California. According to Mr. Ross, Horton represented himself as Jacques Cousteau's business manager and vice-president of Thalassa Corporation, one of the Cousteau Group Companies. Horton put Mr. Ross in contact with representatives of CEMA, another of the Cousteau Group, which would be able to make the tests and studies Ross desired.

In January 1972 Ross traveled to Marseilles, France, to meet with Claude Caillart, captain of Cousteau's ship the Calypso and an employee of CEMA. Ross advised Captain Caillart of his company's interest in having studies made of the fish call and receiving a report as well as photographs and film for television and other advertising promotions. On January 27, 1972, after he had returned to Dallas, Ross received a letter and attachments from Captain Caillart offering to conduct the tests, detailing the studies to be made, and outlining certain conditions and limitations on use of the results. By letter dated February 7, 1972, Ross accepted the terms contained in Caillart's letter subject to a $700.00 correction to make the price consistent with the terms discussed orally in France, and enclosed a check for $5,000.00 as the first payment on the total price of $21,500.00. In a subsequent letter Captain Caillart through his wife acknowledged both the correction and the first payment.

Pursuant to the terms of the contract, CEMA conducted the test studies off the coast of France and Monaco and mailed to Dallas a series of reports and film. When the film proved to be unsatisfactory, CEMA shot additional footage and mailed it to Dallas. Pleased with the results, appellant began a nationwide distribution of the TR-VII Fish Call through Sears, Roebuck and Company.³ Under its agreement with Sears, appellant used portions of the CEMA reports and the film in advertising the TR-VII, principally in the form of information on the packaging, a pamphlet enclosed with the fish call entitled "Secrets for Successful Fishing," and television spots.

In December 1972, shortly after the television spots began to run nationally, attorneys acting on behalf of Jacques Cousteau and Cousteau Group, Inc., approached station WOR-TV in New York City, challenging appellant's use of the Cousteau name and threatening to file suit if the station televised the commercials. Acceding to the challenge, WOR-TV refused to present the commercials for which appellant had already paid and which had already been scheduled. The Cousteau attorneys also approached Sears with a similar challenge and threat. Sears then refused further distribution of the TR-VII until changes in the advertising were made. In order to save a business relationship that predated the TR-VII contract, appellant agreed to repurchase several thousand fish calls and prepare new packaging and advertising materials deleting any reference to the Cousteau name.

In late December 1972 appellant filed this suit in the United States District Court for the Northern District of Texas. In the amended complaint appellant sought $340,000 actual damages for breach of the contract between itself and the defendants. In the alternative, appellant also pleaded several tort counts of misrepresentation, conspiracy to commit fraud, and interference with contractual relationships. Appellant also asked for $750,000 in exemplary damages. Substituted service of process was made on all defendants under the terms of Vernon's Tex.Rev.Civ.Stat.Ann. art. 2031b(3).⁴ by serving the Secretary of State of Texas. Thereafter the district court held a hearing on and granted defendants-appellees' motion to dismiss for want of jurisdiction over the person.⁵

II.

The power of a federal court entertaining a suit based on diversity of citizenship to exercise jurisdiction over the persons of non-resident defendants turns on two independent considerations. The law of the state in which the federal court sits must confer jurisdiction over the persons of the defendants, and if it does, the exercise of jurisdiction under state law must comport with basic due process requirements of the United States Constitution. Jetco Electronic Industries, Inc. v. Gardiner, 5 Cir. 1973, 473 F.2d 1228, 1232; Atwood Hatcheries v. Heisdorf & Nelson Farms, 5 Cir. 1966, 357 F.2d 847, 852. See 2 Moore's Federal Practice ¶ 4.41-1 3 (2d ed. 1974).

At the threshold of this two-step analysis in the case at bar, however, we confront a mechanical question over which the parties strongly disagree. Plaintiff-appellant contends that defendants-appellees bore the burden of producing evidence and persuading the district court on their motion to dismiss for want of personal jurisdiction. Citing Texas court decisions that place the burden of proof on the defendant who attacks the personal jurisdiction of the court, appellant reasons that a federal diversity court in Texas must do likewise under the decisions following Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), that characterized placement of the burden of proof as a substantive rule governed by state law rather than a procedural rule.

We are unpersuaded by appellant's Erie logic. The Texas cases cited by appellant concern the operation of Rule 120a, Texas Rules of Civil Procedure, under which a nonresident defendant may make a special appearance in state court to challenge the court's jurisdiction over his person on the grounds that he is not amenable to process in Texas.⁶ As appellant correctly notes, the burden of proof in a Rule 120a special appearance proceeding rests on the movant, the defendant. Taylor v. American Emery Wheel Works, 480 S.W.2d 26, 31 (Tex.Civ.App. — Corpus Christi 1972, no writ); Roquemore v. Roquemore, 431 S.W.2d 595, 600 (Tex.Civ.App. — Corpus Christi 1968, no writ); Thode, supra note 6, at 319. Appellant also correctly notes that in diversity cases questions concerning the burden of proof are ordinarily controlled by state law. E. g., Jones & Laughlin Steel Corp. v. Matherne, 5 Cir. 1965, 348 F.2d 394. The flaw in appellant's argument is that Rule 120a, promulgated in 1962 by the Texas Supreme Court to create an exception to the infamous Texas rule that an appearance by a nonresident defendant to challenge the jurisdiction of the court over his person itself confers jurisdiction, is exactly the sort of state procedural accessory that federal courts are not bound to don whenever they enter the diversity courtroom.

Speaking for the Supreme Court in Hanna v. Plumer, 1965, 380 U.S. 460, 472-473, 85 S.Ct. 1136, 1144-1145, 14 L. Ed.2d 8, 17-18, Chief Justice Warren wrote:

The constitutional provision for a federal court system . . . carries with it congressional power to make rules governing the practice and pleading in those courts . . . .

"One of the shaping purposes of the Federal Rules is to bring about uniformity in the federal courts by getting away from local rules. This is especially true of matters which relate to the administration of legal proceedings, an area in which federal courts have traditionally exerted strong inherent power, completely aside from the powers Congress expressly conferred in the Rules. . . ." citation omitted

Erie and its offspring cast no doubt on the long-recognized power of Congress to prescribe housekeeping rules for federal courts even though some of those rules will inevitably differ from comparable

...