Quasha v. Shale Development Corp.

• Decision Date: 12 February 1982
• Docket Number: No. 81-3099,81-3099
• Citation: 667 F.2d 483
• Parties: Wayne G. QUASHA, et al., Plaintiffs-Appellants, v. SHALE DEVELOPMENT CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 483

667 F.2d 483

Wayne G. QUASHA, et al., Plaintiffs-Appellants, v. SHALE DEVELOPMENT CORPORATION, et al., Defendants-Appellees.

No. 81-3099.

United States Court of Appeals Fifth Circuit.

Feb. 12, 1982.

Blanchard, Walker, O'Quin & Roberts, Wm. Paul Lawrence, II, Clyde W. Thurmon, J. Jay Caraway, Shreveport, La., for plaintiffs-appellants.

John M. Madison, Jr., Shreveport, La., for defendants-appellees.

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

Before THORNBERRY, TATE and WILLIAMS, Circuit Judges.

TATE, Circuit Judge:

The Quashas appeal from the dismissal of their Louisiana diversity suit for lack of personal jurisdiction. The plaintiffs filed suit for breach of an alleged contract to purchase certain Louisiana mineral interests. On the defendants' motion, the district court dismissed for lack of personal jurisdiction. Finding that the plaintiffs showed sufficient minimum contacts with Louisiana to justify the exercise of in personam jurisdiction and that maintenance of this suit in Louisiana does not offend traditional notions of fair play and substantial justice, we reverse the district court's decision.

Facts

In December 1978, the plaintiffs, citizens of New York, advertised the sale of certain oil and gas properties located in Texas and Louisiana. The defendant, Shale Development Corporation (a Nevada corporation), through its president, Delbert Thomas (a California resident), responding to the Quashas' ad wrote to Louisiana to request a bid package from their agent. In response, they were mailed a brochure from Louisiana describing each property; the package also included an invitation to submit bids and a bid reply sheet to be submitted to Wayne G. Quasha, in care of accountant William Burroughs in Shreveport, Louisiana.

On January 23, 1979, Thomas completed and mailed to Burroughs in Louisiana a bid on certain mineral properties in Louisiana. ¹ On February 2, 1979, Wayne Quasha sent Thomas a telegram from Shreveport stating that

Your bid of $405,000.00 ... and your bid of $245,000.00 ... are acceptable subject to deposit in escrow of ten (10%) per cent as earnest money on or before 12:00 noon, Monday, February 5, 1979, said earnest money to be forfeited upon failure to consummate the transaction ....

Please accept the above by return telegram ....

Thomas replied, by telegram to Quasha's attorney in Shreveport, on February 2, 1979 stating: "We acknowledge receipt of your acceptance wire of our bid ... and concur with conditions." No money was ever placed in escrow, as required by the plaintiff's telegram, or paid toward the purchase price. Both properties were ultimately sold to a third party for $200,000.00 each.

In July, 1979, the plaintiffs Quasha then brought suit against the defendants for the breach of their alleged agreement to purchase, claiming damages of $250,000.00 (the difference between the price bid by the defendants for the two parcels and the sales price actually received by the plaintiffs when they subsequently sold the properties to third persons.) Jurisdiction was grounded on diversity and service was made on both defendants pursuant to the Louisiana Long-Arm Statute, Louisiana Revised Statutes 13:3201, et seq. ² Following oral argument on the defendants' motion to dismiss for lack of personal jurisdiction, the district court granted the motion and denied the plaintiffs' motion for rehearing.

In granting the defendants' motion, the trial court stated that the "sole question before this court is whether the above dealings constitute sufficient contact with the State of Louisiana to justify this court's exercise of in personam jurisdiction over the defendants." After discussing the two-prong test ("minimum contacts" and "fair play") for determining whether due process permits the assertion of Louisiana in personam jurisdiction, the district court concluded that neither test was met in this case. The district court ruled that there were insufficient minimum contacts with the State of Louisiana because the plaintiffs had failed to make a prima facie showing of the existence of a contract with the defendants and, furthermore, while further proceedings might give the plaintiffs an opportunity to develop a prima facie showing of a contract, the exercise of in personam jurisdiction in this case would violate traditional notions of fair play and substantial justice.

Jurisdiction Under the Louisiana Long-Arm Statute

The Quasha plaintiffs assert jurisdiction over the defendants under the Louisiana Long-Arm Statute, La.R.S. 13:3201(a) and (e), which provide that

A court may exercise personal jurisdiction over a nonresident, who acts directly or by an agent, as to a cause of action arising from the nonresident's

(a) transacting any business in this state;

(e) having an interest in, using or possessing a real right or immovable property in this state.

In a diversity action, federal court jurisdiction over a nonresident defendant extends only to the limits permitted by the long-arm statute of the forum state. Moore v. Lindsey, 662 F.2d 354, 357-58 (5th Cir. 1981); Gold Kist Inc. v. Baskin-Robbins Ice Cream, 623 F.2d 375, 377 (5th Cir. 1980); Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 489 (5th Cir. 1974).

The Louisiana Long-Arm Statute is to be interpreted liberally in favor of finding jurisdiction, Thompson v. Great Midwest Fur. Co., 395 So.2d 840, 843 (La.App. 1st Cir. 1981); Latham v. Ryan, 373 So.2d 242, 244 (La.App. 3rd Cir. 1979), and is to extend to the full limits of due process under the fourteenth amendment. Austin v. North American Forest Products, 656 F.2d 1076, 1089 (5th Cir. 1981); Standard Fittings Co. v. Sapag, S.A., 625 F.2d 630, 639-41 (5th Cir. 1980), cert. denied, --- U.S. ----, 101 S.Ct. 1981, 68 L.Ed.2d 299 (1981); Adcock v. Surety Research and Investment Corp., 344 So.2d 969, 971 (La.1977); Thompson v. Great Midwest Fur. Co., supra, 395 So.2d at 843; Latham v. Ryan, supra, 373 So.2d at 244.

Due Process Requirements

To comport with due process requirements in asserting in personam jurisdiction, a nonresident defendant must have certain "minimum contacts" with the forum state "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). In making the determination, this court considers first, whether the defendant purposefully availed itself of the benefits and protection of the forum state's laws, and second, whether the state has any special interest in providing a forum for the suit and whether the relative conveniences and inconveniences of the parties favor litigating in another forum. Austin v. North American Forest Products, supra, 656 F.2d at 1089; Standard Fittings Co. v. Sapag, S.A., supra, 625 F.2d at 641-43; Product Promotions v. Cousteau, supra, 495 F.2d at 494-98.

In deciding that the exercise of jurisdiction in this case would violate due process, the district court first determined that the plaintiffs failed to establish a prima facie showing of the existence of a contract with the defendants, and, thereby, failed to establish certain "minimum contacts" between the defendant and the forum state of Louisiana. Second, the court ruled that, even if such a prima facie showing could be made, it would not be "fair" to require Shale to defend this suit in Louisiana.

A. "Fairness" of Louisiana Forum

As the district court seemed to find this second (or "fairness") ruling dispositive, we will turn our attention to this point. The district court found particularly important the fact that the main issue in the present suit involved contract damages, not the title to the property in Louisiana ³ (since the Quashas had previously sold the mineral properties to a third party purchaser); that the plaintiffs were not Louisiana residents that the state would be seeking to protect; and that, as both parties were nonresidents, if the plaintiffs must suffer some inconvenience in litigating in a foreign forum, the defendants should not be required to suffer that same inconvenience. Upon review of the factors involved in this case, we find that it is not unfair nor unreasonable under the circumstances to require Shale to defend this suit in Louisiana.

Louisiana has a legitimate and reasonable interest in providing a forum for this lawsuit. Louisiana has a special interest in negotiations regarding the sale of mineral property located within the state, characterized by Louisiana law as "immovable" property (i.e., in common law terms, as "realty").

Initially, we note that, whether the suit is brought in Louisiana or in California, nevertheless under accepted conflict principles the law of Louisiana, the situs of the mineral property, will govern the validity of the contract to sell the immovable property and the rights created thereby. Restatement, Conflict of Laws 2d, §§ 189, 223 (1971). ⁴ Further, with regard to the alleged confection of the contract, the bids were received in Louisiana, the offer and counter-offer were made from Louisiana, and the acceptance of the counter-offer was sent to and received in Louisiana-Louisiana factual indicia, governed by the applicable Louisiana law.

Additionally important, if the defendants had in fact deposited the funds in escrow and sought to enforce the contract, then-not only would Louisiana law govern the validity of the contract-the defendants would also ultimately have been required to resort to Louisiana courts to enforce a decree rendered in another jurisdiction relating to the contract. As the Supreme Court noted, the "(c)ourts of one State are completely without jurisdiction directly to affect title to land in other States," Durfee v. Duke, 375 U.S. 106, 115, 84 S.Ct. 242, 247, 11 L.Ed.2d 186 (1963), citing earlier decisions, such as Fall v. Eastin, 215 U.S. 1, 30 S.Ct. 3, 54 L.Ed. 65 (1909) (which held...