Wilkerson v. Fortuna Corp.

Decision Date24 June 1977
Docket NumberNo. 75-3306,75-3306
Citation554 F.2d 745
PartiesEddie WILKERSON, Plaintiff-Appellant, v. FORTUNA CORPORATION, Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Victor K. Sizemore, Ralph E. Harris, El Paso, Tex., for plaintiff-appellant.

James F. Hulse, El Paso, Tex., for defendant-appellee.

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

Before WISDOM, CLARK and RONEY, Circuit Judges.

CLARK, Circuit Judge:

Just because the eyes of Texas can see it, doesn't mean that the State's "long arm" process statute can reach it. However, location plays an important part in supporting personal jurisdiction in this tort action by an El Paso, Texas horse trainer against the operator of the adjacent Sunland Park race track in New Mexico. The district court erred in dismissing the action for lack of jurisdiction. We reverse and remand.

Eddie Wilkerson had been training horses in Texas for nine years when he filed the present action. Prior to 1972 he had applied for and received stalls at the Sunland Park race track for horses he trained. Sunland Park is operated by the defendant, Fortuna Corporation. Wilkerson alleged that in 1972 he applied for 33 stalls at Sunland Park but was granted only ten stalls. In 1973 he avers he applied for 32 stalls and was given none. Wilkerson pled that Fortuna Corporation's refusal to deal was an arbitrary, capricious breach of its duty to him in violation of a rule of the New Mexico Racing Commission. Wilkerson further asserted that as a result of Fortuna's actions, he lost his training business.

Fortuna moved to dismiss on the ground that it was not amenable to substituted service of process under the Texas long arm statute. To support its motion it recited the usual defendant's litany for actions of this type. It has no offices, no business facilities, no bank account, and no agent in Texas and is neither licensed nor qualified to do business there. It is incorporated under the laws of New Mexico. Its sole business is the operation of Sunland Park race track, which is located in New Mexico and regulated by the New Mexico Racing Commission.

Fed.R.Civ.P. 4(e), which governs service of summons in this federal forum, provides:

. . . Whenever a statute or rule of court of the state in which the district court is held provides for service of a summons . . . upon a party not an inhabitant of or found within the state, . . . service may . . . be made under the circumstances and in the manner prescribed in the statute or rule.

The pertinent Texas long arm statute 1 deems any non-resident corporation which engages in business in the state to have appointed its Secretary of State as agent for process. It specially defines doing business in this language:

For the purpose of this Act, and without including other acts that may constitute doing business, any foreign corporation, joint stock company, association, partnership, or non-resident natural person shall be deemed doing business in this State by entering into contract by mail or otherwise with a resident of Texas to be performed in whole or in part by either party in this State, or the committing of any tort in whole or in part in this State.

Tex.Rev.Civ.Stat. art. 2031b, § 4 (1964).

The district court's opinion stated:

None of these activities (which were shown by the proof), in the court's view, rise to the level of an 'act' or 'transaction' by the foreign corporation, Fortuna Corporation, that gives rise to a cause of action for damages and none of these activities are sufficient to fulfill the requirement of 'minimum contact' with the State of Texas to warrant jurisdiction under the Texas long arm statute.

Its reasoning was based on a line of Texas cases interpreting its long arm statute. 2 This three-part analysis was used: (1) The non-resident corporation must purposefully do some act or consummate some transaction in the forum state; (2) The cause of action must arise from or be connected with such act or transaction; and (3) the assumption of jurisdiction must not offend traditional notions of fair play and substantial justice considering activity in the state, relative convenience of the parties, benefits and protection of state law afforded the respective parties and basic equities.

Although Fortuna acknowledges that it engaged in much purposeful Texas activity, it asserts it was not doing business in Texas and that the district court correctly dismissed Wilkerson's asserted cause of action because it did not arise from any of those activities as required by Texas decisional law interpreting its long arm statute. This assertion is correct in its premise that the district court was controlled by forum state law as to the meaning and requirements of its statute. Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1232 (5th Cir. 1973). Fortuna's alternative position is that even if it were amenable to process in this action under Texas standards, the federal due process concept of minimum contacts has not been met because (1) its activities did not meet the standard of "minimum contacts," and (2) the asserted cause of action did not arise from those contacts.

I. Jurisdiction Under Texas Law

Our initial inquiry is as to whether Fortuna's activities constituted the doing of business in Texas within the meaning of its process statute. We find that the substantiality and continuity of its activities in Texas are of such nature and extent as would clearly meet the general Texas concepts of doing business.

It cannot be attributed to accident that Sunland Park race track is nearer to El Paso, Texas than to any urban center in New Mexico. It is so close, in fact, that in the course of the hearing the district judge stated, "I can see Sunland race track from the apartment where I live (in El Paso)." Obviously, it was placed conveniently by this metropolitan center so to draw as its sustaining life blood citizens who are nurtured and protected by Texas. Its telephone number has a regular listing in the white pages of the El Paso telephone book and no toll charge is made for calls between these locations. Sunland Park purchases a listing in the yellow pages of the El Paso telephone directory. In the course of its operation of Sunland Park, Fortuna regularly solicits customers from El Paso to attend and gamble on its races. It performs this solicitation by advertising in two El Paso newspapers, on El Paso billboards, on El Paso radio and television stations, by distributing place mats to El Paso restaurants and bars, and by distributing discount admission cards to El Paso hotels, motels and other public gathering places. The expenditures made for such promotional solicitations were classified as substantial by Fortuna's president, who maintains a place to live in El Paso. The track's racing secretary, who also maintains his abode in El Paso, regularly mailed stall applications to Texas residents and mailed such an application to Wilkerson for the years involved. By mail, telephone, or personal contact, the racing secretary solicited entries for races to be held at Sunland Park from Texas residents and mailed futurity and derby nominations for Sunland Park special races to Texas residents. On almost any racing day, more horses entered in races at Sunland Park are bred or foaled in Texas than any other state, including New Mexico.

The ultimate business of a race track is to exhibit races to patrons who will pay to attend and gamble on their outcome. Texas does not allow parimutuel horseracing, so Sunland Park race track was set up as close to its Texas patrons as the racing and gambling laws of New Mexico would allow just across the state line. It saturated El Paso with its substantial advertising activity to attract Texans a short step across that line. It also drew a large share of its racing horses from Texas. In summary, Sunland was designed and operated as a two-state venture. New Mexico gave the location and concomitant authorization of gambling and horse racing, an imprimatur unavailable in Texas. Texas and its citizens provided the necessary patronage and revenues and many of...

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    ...involving acts affecting commerce may, if necessary, be obtained through the long arm statute of the forum state. Wilkerson v. Fortuna Corp., 5 Cir. 1977, 554 F.2d 745, 747; 4 C. Wright & A. Miller, Federal Practice & Procedure §§ 1112, 1114 (1969). The Texas long arm statute, Tex.Rev.Civ.S......
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    ...Hanson v. Denckla, 357 U.S. 235, 251-52, 253-54, 78 S.Ct. 1228, 1238-39, 1240, 2 L.Ed.2d 1283 (1958). See also Wilkerson v. Fortuna Corp., 554 F.2d 745, 749-50 (5th Cir.), cert. denied, 434 U.S. 939, 98 S.Ct. 430, 54 L.Ed.2d 299 (1977) (due process requires only minimum connection between s......
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