686 F.2d 276 (5th Cir. 1982), 81-2246, Wyatt v. Kaplan

Docket Nº:81-2246.
Citation:686 F.2d 276
Party Name:Oscar WYATT, Jr., Plaintiff-Appellant, v. Jerome KAPLAN, et al., Defendants-Appellees.
Case Date:September 20, 1982
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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686 F.2d 276 (5th Cir. 1982)

Oscar WYATT, Jr., Plaintiff-Appellant,


Jerome KAPLAN, et al., Defendants-Appellees.

No. 81-2246.

United States Court of Appeals, Fifth Circuit

September 20, 1982

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Fulbright & Jaworski, Thomas R. McDade, Houston, Tex., for plaintiff-appellant.

Vinson & Elkins, Charles W. Schwartz, Houston, Tex., for defendants-appellees.

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

Before WISDOM, POLITZ and TATE, Circuit Judges.

WISDOM, Circuit Judge:

This action is one for conspiracy to commit libel and slander. 1 It concerns statements that one of the defendants, Jerome Kaplan, allegedly made to a reporter for The Wall Street Journal regarding a stockholder derivative suit he had filed against the plaintiff, Oscar S. Wyatt, Jr. The district court denied the plaintiff discovery and, in an unpublished memorandum and order, dismissed the action for lack of personal jurisdiction. We affirm.


Oscar Wyatt, a Texas resident, is the Chief Executive Officer of the Coastal Corporation (Coastal), which has its headquarters

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in Houston. Jerome Kaplan is a lawyer residing in Philadelphia and a Coastal stockholder. On November 5, 1980, Kaplan filed a stockholder derivative suit against Wyatt and Coastal in the United States District Court for the Southern District of New York. The complaint accused Wyatt of various misdeeds injurious to Coastal and included the allegation that Wyatt had "interpositioned himself in numerous ... transactions with the resultant skimming off of substantial amounts of profits which otherwise would have gone to Coastal". 2

On the same day, Steven Mufson, a reporter for The Wall Street Journal, telephoned Kaplan and interviewed him about the suit. On November 6, 1980, The Wall Street Journal published a report of the suit. The next day the Journal carried a similar report in its southwestern edition, which is distributed in Texas. To the extent relevant in this defamation action, the two reports were virtually identical, and they read as follows:

NEW YORK-A suit charging Oscar S. Wyatt, Jr., chairman of Coastal Corp. with "skimming off substantial amounts of profits" from the company was filed here yesterday in U.S. District Court....

Jerome Kaplan, a Philadelphia corporate, estate, and tax lawyer with the firm of Abrahams & Loenstein (sic), filed the suit because, he said, he "didn't like what was going on." ...

The suit alleges that Mr. Wyatt "interpositioned himself" in Coastal's exchanges of crude oil and petroleum products on the spot market, keeping a portion of would-be profits for himself.

In addition, the suit charges that Coastal paid $326,266 to Mr. Wyatt for the use of his personal airplane.

Finally, the suit alleges that Mr. Wyatt influenced an ill-advised tanker deal benefiting a company owned predominantly by his son. Mr. Wyatt allegedly helped arrange the sale for $1 million of a Coastal tanker to WJS Shipping Associates, a partnership owned 56% by Clark D. Wyatt. WJS, after repairing the ship, would lease it back to Coastal for $2 million a year.

Wall St.J., Nov. 6, 1980, at 21, col. 1.

On December 9, 1980, Wyatt brought this action in the United States District Court for the Southern District of Texas, naming as defendants Kaplan, his law firm, Abrahams & Loewenstein, the lawyers who represented him in the derivative suit, Richard M. Meyer and Melvyn I. Weiss, and their law firm, Milberg, Weiss, Bershad & Specthrie. Subject matter jurisdiction of the case was based on diversity of citizenship. 28 U.S.C. § 1332(a)(1). The complaint alleged that Kaplan had "maliciously published to the Wall Street Journal ... false and untrue accusations concerning Wyatt". Specifically, it accused Kaplan of telling Mufson that Wyatt was "skimming off substantial amounts of profits" from Coastal. The other defendants were alleged to have conspired with Kaplan in committing this libel and slander.

On February 9, 1981, the defendants moved to dismiss for lack of personal jurisdiction, under Fed.R.Civ.P. 12(b)(2). The next day, Wyatt noticed the depositions of the individual defendants and of three other lawyers, members of the defendant law firms. The defendants moved for a protective order, and the district court deferred the requested depositions pending its disposition of the motion to dismiss. On May 21, 1981, the district court granted the motion to dismiss, and the requested depositions never took place. Wyatt brought this appeal, in which he asserts two grounds for reversal. He argues that the district court committed reversible error both in denying him discovery to develop jurisdictional facts and in finding the evidence justified dismissal. Our resolution of the discovery question is best understood in the light of our analysis of the jurisdictional issue. We therefore consider first whether the evidence

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before the district court justified dismissal.


Under the Federal Rules of Civil Procedure, a federal district court in a diversity case may exercise personal jurisdiction over a defendant residing outside the state in which it sits only to the extent permitted by state law. Fed.R.Civ.P. 4(d)(7), (e); Gold Kist, Inc. v. Baskin-Robbins Ice Cream Co., 5 Cir. 1980, 623 F.2d 375, 377; Arrowsmith v. United Press International, 2 Cir. 1963, 320 F.2d 219, 222-26 (en banc) (Friendly, J.); 4 C. Wright & A. Miller, Federal Practice and Procedure § 1075 at 131 (1981 Supp.). Compliance with state law, however, is not enough to establish the valid exercise of personal jurisdiction; the federal Constitution must also be considered. Specifically, due process requires the dismissal of a suit against a nonresident defendant unless he has "certain minimum contacts with (the forum) such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice' ". International Shoe Co. v. Washington, 1945, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (quoting Milliken v. Meyer, 1940, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278, 283); Hanson v. Denckla, 1958, 357 U.S. 235, 251-54, 78 S.Ct. 1228, 1238-40, 2 L.Ed.2d 1283, 1296-98; Walker v. Newgent, 5 Cir. 1978, 583 F.2d 163, cert. denied, 1979, 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374. Accordingly, questions of personal jurisdiction generally entail inquiries under both applicable state law and the federal constitution. Product Promotions, Inc. v. Cousteau, 5 Cir. 1974, 495 F.2d 483, 489.

Wyatt seeks to premise personal jurisdiction on the Texas long-arm statute, which authorizes service of process on nonresidents who "engage in business" in Texas, "in any action ... arising out of such business". Tex.Rev.Civ.Stat.Ann. art. 2031b § 2 (Vernon 1964). 3 Specifically, he relies on a provision that defines "doing business" to include "the committing of any tort in whole or in part in this State". Tex.Rev.Civ.Stat.Ann. art. 2031b, § 4 (Vernon Supp.1982). 4 The district court found that Wyatt had not adequately demonstrated the commission of a tort in Texas and concluded that article 2031b was inapplicable. Dismissing the action on this ground, the court did not consider the constitutional question. Although our reasoning differs slightly from that of the district court, we agree

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with its conclusion and also find it unnecessary to reach the constitutional question.

On a motion to dismiss for lack of personal jurisdiction, the plaintiff rather than the movant has the burden of proof. Southwest Offset, Inc. v. Hudco Publishing Co., 5 Cir. 1980, 622 F.2d 149, 152 (per curiam). He need not, however, establish personal jurisdiction by a preponderance of the evidence; prima facie evidence of personal jurisdiction is sufficient. See Product Promotions, 495 F.2d at 491; Walker v. Newgent, 583 F.2d at 166. Conflicts between the affidavits submitted on the question of personal jurisdiction are thus resolved in favor of the plaintiff. See O'Hare International Bank v. Hampton, 7 Cir. 1971, 437 F.2d 1173, 1176. When, as in this case, personal jurisdiction is predicated on the commission of a tort within the state, of course the jurisdictional question involves some of the same issues as the merits of the case, and the plaintiff must make a prima facie case on the merits to withstand a motion to dismiss under rule 12(b)(2). Jetco Electronic Industries, Inc. v. Gardiner, 5 Cir. 1973, 473 F.2d 1228, 1232. In such a case, of course, it is not enough to establish prima facie that a tort has occurred. Because the plaintiff bears the burden of establishing jurisdiction, see Product Promotions, 495 F.2d at 91, he must also make a prima facie showing that the tort occurred within the state.

Wyatt alleges that when Kaplan spoke to Mufson in the telephone interview, he committed a tort by uttering defamatory statements, specifically the statement about "skimming off substantial amounts of profits". The other defendants purportedly committed torts by conspiring with Kaplan. Wyatt further alleges that the torts occurred "in part" in Texas, where his reputation was damaged when the southwestern edition of The Wall Street Journal republished that language. 5 The defendants argue that Kaplan made no defamatory statement to Mufson and that the newspaper article quoted the language in question from the complaint filed in the New York derivative action. Allegations in a complaint filed in a judicial proceeding are privileged, see W. Prosser, Handbook of the Law of Torts § 114, at 778 (4th ed. 1971), and Wyatt does not allege that he was injured in Texas by publication of statements in the complaint. 6 His case thus stands or falls with the assertion that the language quoted in the newspaper article originated in Kaplan's...

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