Diamond Crystal Brands v. Food Movers Intern.

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Citation593 F.3d 1249
Docket NumberNo. 08-14782.,08-14782.
PartiesDIAMOND CRYSTAL BRANDS, INC., Diamond Crystal Sales, LLC., Plaintiffs-Counter-Defendants-Appellees, v. FOOD MOVERS INTERNATIONAL, INC., Defendant-Counter-Claimant-Appellant, Hormel Foods Corporation, Counter-Defendant.
Decision Date13 January 2010

Heather Smith Michael, Roger A. Chalmers, Debra G. Buster, Arnall, Golden & Gregory, LLP, Atlanta, GA, for Food Movers Intern., Inc.

Thomas W. Rhodes and Mark A. Rogers, Smith, Gambrell & Russell, LLP, Atlanta, GA, for Diamond Crystal Brands, Inc. and Diamond Crystal Sales, LLC.

Appeal from the United States District Court for the Southern District of Georgia.

Before TJOFLAT, ANDERSON and STAPLETON,* Circuit Judges.

TJOFLAT, Circuit Judge:

This challenge to the district court's exercise of personal jurisdiction over a nonresident defendant gives us occasion to revisit our jurisprudence regarding the Georgia Long-Arm Statute, O.C.G.A. § 9-10-91 (the "long-arm statute"), in light of recent pronouncements by the Georgia Supreme Court. Whereas we have previously understood the Georgia long-arm jurisdictional analysis to merge into a single, coextensive procedural due process analysis, the Georgia Supreme Court has since made clear the independent importance of the statute. In Innovative Clinical & Consulting Servs., LLC v. First Nat'l Bank of Ames, Iowa, 279 Ga. 672, 620 S.E.2d 352, 355-56 (2005), the Georgia Supreme Court held that a trial court must engage in a separate, literal application of the Georgia long-arm statute in addition to a due process inquiry in deciding whether personal jurisdiction exists over a nonresident defendant. We now conform the rule in this circuit to the state law as announced by the Georgia Supreme Court. Additionally, we conclude that although the district court may have erred in its analysis under this newly clarified standard, jurisdiction is proper under both the long-arm statute and the Due Process Clause of the Fourteenth Amendment. We affirm.

I.

This action was brought by Diamond Crystal Brands, Inc. and Diamond Crystal Sales, LLC (collectively "Diamond Crystal") against Food Movers International, Inc. ("Food Movers") alleging nonpayment for two shipments of Splenda Brand sweetener ("Splenda"). Diamond Crystal Brands, Inc., an international seller of sugar and other sweetening products, is a Delaware corporation that maintains a facility in Savannah, Georgia. Diamond Crystal Sales, LLC is a Delaware limited liability sales company qualified to do business in Georgia and is under common ownership with Diamond Crystal Brands. Food Movers is a food distribution company that purchases bulk food products from manufacturers for immediate resale to retail and other distributor customers. It is a California corporation with its sole place of business in Benicia, California. Food Movers has no offices, distribution centers, or personnel outside the state of California, and its employees do not travel outside of California to conduct business.1

Food Movers's business model is to purchase products from manufacturers, with the purchases sometimes being facilitated by outside food brokers, and then to quickly resell the products, usually before even taking delivery from the manufacturer, to its customers. Its customers then arrange for and accept delivery from the manufacturer and resell the products to their own customers or to the public.

In this case, Diamond Crystal's sales to Food Movers were facilitated by Nasser Company, Inc. ("Nasser"), a California-based food broker that markets Diamond Crystal's products. Nasser first solicited the sales to Food Movers, and Nasser and Diamond Crystal Brands's California-based region sales manager, Scott Seibel, traveled to Food Movers's office in California to negotiate the terms of the sales. All of the negotiations took place either in person at Food Movers's office in California or through telephone conversations between Food Movers and Nasser or Seibel, all of whom were in California.

As a result of these discussions, Food Movers submitted purchase orders to Nasser in California for the purchase of Diamond Crystal products. In all, from August 2005 to January 2006, Food Movers ordered bulk Splenda from Diamond Crystal, through Nasser, in fourteen transactions totaling more than $1.9 million. Diamond Crystal alleges that Food Movers failed to pay for two of these shipments, relating to purchases made on January 13 and 18, 2006, and therefore owes Diamond Crystal $288,111.60 plus prejudgment interest.

The terms and mechanics of the purchases included the following. Food Movers submitted its purchase orders to Nasser in California. Immediately thereafter, Food Movers resold the product to its own third-party customers. Diamond Crystal and Food Movers agreed that Diamond Crystal would tender the product F.O.B. Savannah,2 at its plant.3 Diamond Crystal also invoiced Food Movers from its Savannah facility. Although the purchase orders specified "[c]ustomer pickup" and the bills of lading recorded delivery as having been taken "buy buyers [sic] truck," Food Movers offered affidavit evidence that its personnel did not actually take delivery of the product from Diamond Crystal.4 Instead, as the product had been resold to third-party customers of Food Movers by the time of tender by Diamond Crystal, those third-party customers took delivery of the product directly from Diamond Crystal. Accordingly, Food Movers never picked up the Splenda in Georgia. It did, however, send payments (for the shipments for which it paid), drawn on its California bank, by mail or wire transfer to Diamond Crystal in Georgia.

On February 28, 2007, Diamond Crystal filed this lawsuit, seeking the $288,111.60 Food Movers failed to pay, in the Superior Court of Chatham County, Georgia. Food Movers removed the action, on the basis of diversity jurisdiction, to the United States District Court for the Southern District of Georgia on March 22, 2007. On April 6, 2007, Food Movers moved to dismiss Diamond Crystal's complaint pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and submitted affidavit evidence in support of its challenge to the court's jurisdiction. After full briefing, including the submission of counter-affidavits by Diamond Crystal, the district court denied the motion on August 3, 2007.

Food Movers subsequently answered the complaint, preserving its objection to personal jurisdiction and asserting counterclaims against Diamond Crystal for breach of contract, tortious and bad faith breach of contract, unfair trade practices, and deceptive trade practices in connection with Diamond Crystal and related companies' decisions to stop selling Splenda and other products to Food Movers.5 Food Movers later filed an amended answer and counterclaims asserting claims against Diamond Crystal for breach of contract and against Diamond Crystal and its corporate parent for "Unfair, Unlawful, Discriminatory, and Anti-Competitive Business Practices" in violation of California unfair competition and antitrust law and federal antitrust law. Food Movers admitted that it withheld payment on two of the Splenda purchase orders but denied that it owed Diamond Crystal any money due to Diamond Crystal's alleged conduct implicated in the counterclaims.

On June 20, 2008, the district court granted Diamond Crystal judgment on the pleadings for its complaint and entered judgment on that order the same day. It stayed enforcement of its judgment, however, pursuant to Federal Rule of Civil Procedure 62(h), pending the resolution of Food Movers's counterclaims. On July 21, 2008, the district court granted Diamond Crystal's motion for summary judgment on Food Movers's counterclaims and lifted the stay of its June 20, 2008, judgment. The court entered final judgment pursuant to its July 21 summary judgment order on September 10, 2008. Food Movers now appeals the district court's denial of its motion to dismiss for lack of personal jurisdiction.6

II.

"We have consistently held that the issue of whether personal jurisdiction is present is a question of law and subject to de novo review." Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1217 (11th Cir.2009).

"A plaintiff seeking the exercise of personal jurisdiction over a nonresident defendant bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction." United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir.2009). "Where, as here, the defendant challenges jurisdiction by submitting affidavit evidence in support of its position, `the burden traditionally shifts back to the plaintiff to produce evidence supporting jurisdiction.'" Id. (quoting Meier ex rel. Meier v. Sun Int'l Hotels, Ltd., 288 F.3d 1264, 1269 (11th Cir.2002)); see also Polskie Linie Oceaniczne v. Seasafe Transport A/S, 795 F.2d 968, 972 (11th Cir.1986) (noting that, if the defendant makes a showing of the inapplicability of the long-arm statute, "the plaintiff is required to substantiate the jurisdictional allegations in the complaint by affidavits or other competent proof, and not merely reiterate the factual allegations in the complaint"). "Where the plaintiff's complaint and supporting evidence conflict with the defendant's affidavits, the court must construe all reasonable inferences in favor of the plaintiff." Meier, 288 F.3d at 1269.

III.
A.

"A federal court sitting in diversity undertakes a two-step inquiry in determining whether personal jurisdiction exists: the exercise of jurisdiction must (1) be appropriate under the state long-arm statute and (2) not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution." United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir.2009). "When a federal court uses a state long-arm statute, because the extent of the statute is governed by state law, the federal court is...

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