711 F.2d 1260 (5th Cir. 1983), 82-4197, DeMelo v. Toche Marine, Inc.

Docket Nº:82-4197.
Citation:711 F.2d 1260
Party Name:Jose DeMELO and Marie DeMelo, Plaintiffs-Appellants, v. TOCHE MARINE, INC., et al., Defendants, Woolsey Marine Industries, Inc., Defendant-Appellee.
Case Date:August 15, 1983
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1260

711 F.2d 1260 (5th Cir. 1983)

Jose DeMELO and Marie DeMelo, Plaintiffs-Appellants,

v.

TOCHE MARINE, INC., et al., Defendants,

Woolsey Marine Industries, Inc., Defendant-Appellee.

No. 82-4197.

United States Court of Appeals, Fifth Circuit

August 15, 1983

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Norman Breland, Gulfport, Miss., Joshua M. Morse, III, Tallahassee, Fla., for plaintiffs-appellants.

George F. Bloss, III, Gulfport, Miss., for defendant-appellee.

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

Before GOLDBERG, GEE and RANDALL, Circuit Judges.

GEE, Circuit Judge:

On a day in April of 1979, Jose DeMelo was applying spray paint aboard a vessel being constructed for George Engine Company, Inc. ("George Engine") by his employer, Toche Marine, Inc. ("Toche Marine") at its shipyard in Biloxi, Mississippi. An explosion and flash fire suddenly occurred, allegedly due to the ignition of flammable paint vapors. DeMelo suffered severe burns. He and his wife brought this suit in federal court in Mississippi naming George Engine, Toche Marine, and Woolsey Marine Industries, Inc. ("Woolsey"), the manufacturer of the paint, as defendants. The claims against George Engine and Toche Marine were based upon general maritime law and the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. § 905 (1976) (the "LHWCA"). The DeMelos sought recovery from Woolsey based upon breach of implied warranty and strict liability.

Woolsey entered a special appearance and filed a motion to dismiss under Rule 12, Federal Rules of Civil Procedure, for lack of subject matter and personal jurisdiction. 1 The district court granted Woolsey's motion on the latter ground, finding that "Woolsey has never had that minimal contact with the State of Mississippi to accord this suit the benefit of due process." In this interlocutory appeal, 2 the

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DeMelos contend that for two reasons the district court erred in dismissing Woolsey. First, they argue that Woolsey has waived its personal jurisdiction defense; second, they urge that Woolsey's contacts with Mississippi render it amenable to the jurisdiction of a federal district court sitting there.

I.

Before the plaintiffs commenced the present lawsuit in Mississippi, Woolsey had filed a Chapter 11 bankruptcy petition in the Bankruptcy Court for the Eastern District of New York. That court entered an automatic stay under 11 U.S.C. § 362 (Supp. III 1979), which had the effect, among other things, of prohibiting litigation against Woolsey. Upon the filing of the present lawsuit, the plaintiffs were made aware of the automatic stay, and in January of 1981 they filed a complaint seeking relief from it. On April 20, 1981, the Bankruptcy Court approved a stipulation entered into by plaintiffs, Toche Marine and Woolsey, which provides in relevant part:

  1. Joseph De Melo, Marie De Melo, Lucy De Melo and Carlos De Melo, plaintiffs in this adversary proceeding ("plaintiffs"), and Toche Marine, Inc. ("Toche"), should be and hereby are relieved, on consent of Woolsey Marine Industries, Inc. ("Woolsey"), as Debtor and Defendant in this proceeding, from the provisions of Section 362 of the Bankruptcy Code to the extent that they may continue the aforesaid action brought in the United States District Court for the District of Mississippi referred to hereinabove; and

  2. Plaintiffs and Toche waive any and all rights they may have to claim against Woolsey or the estate of Woolsey Marine Industries, Inc., Debtor in these bankruptcy proceedings, for satisfaction of any judgment or any other right they may have or obtain in the aforementioned action now pending in the United States District Court for the District of Mississippi, or otherwise, they agreeing to proceed solely against Aetna Insurance Company and the proceeds of the above-mentioned insurance policy to the limits of Woolsey's coverage thereunder, for any and all relief they might otherwise be entitled to against Woolsey or the bankrupt estate herein; and

  3. The relief from the stay as provided for in this stipulation is contingent upon the consent of Aetna's counsel, Thomas L. Stennis, Esq., and also upon approval of the United States Bankruptcy Court of all of the provisions hereof and it is expressly reserved that the automatic stay provided for in Section 362 of the Bankruptcy Code as respects Woolsey is modified only to the extent that the plaintiffs herein and Toche are relieved from the terms and conditions thereof and no other party to the said action now pending in Mississippi, or otherwise, shall be deemed to have been in any way or to any extent, contingent, or otherwise, relieved from the said stay, said stay remaining in full force and effect against all such parties other than the plaintiffs herein and Toche now existing or hereinafter appearing.

Plaintiffs argue that the provision in paragraph 1 of the stipulation lifting the automatic stay so that the parties "may continue" the litigation in Mississippi constitutes a waiver by Woolsey of its personal jurisdiction defense. This argument is frivolous. Though perhaps inartfully drawn, the stipulation as a whole clearly indicates that its only purpose was to remove the barrier to the present litigation erected by the Chapter 11 petition, not to affect substantive rights in this case. Nothing in it says that the present litigation must "continue" past a valid motion to dismiss. The right to be tried only by a court of competent jurisdiction is a liberty interest protected by the Constitution. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701-02, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492, 501 (1982). It is a commonplace that waiver of constitutional

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rights in any context must "at the very least, be clear" to be effective. Fuentes v. Shevin, 407 U.S. 67, 95, 92 S.Ct. 1983, 2001, 32 L.Ed.2d 556 (1972) (emphasis original); cf. Petrowski v. Hawkeye-Security Insurance Co., 350 U.S. 495, 76 S.Ct. 490, 100 L.Ed. 639 (1956) (example of a stipulation clearly waiving personal jurisdiction defense). Paragraph 2 of the stipulation shows that the parties knew how to provide clearly for waiver when one was intended. Woolsey's personal jurisdiction defense has not been waived. 3

II.

The plaintiffs' second contention is that the district court erroneously determined that Woolsey was not amenable to personal jurisdiction in federal court in Mississippi. The concept of personal jurisdiction comprises two distinct components: amenability to jurisdiction and service of process. Terry v. Raymond Int'l, Inc., 658 F.2d 398, 401 (5th Cir.1981), cert. denied, 456 U.S. 928, 102 S.Ct. 1975, 72 L.Ed.2d 443 (1982). Amenability to jurisdiction means that a defendant is within the substantive reach of a forum's jurisdiction under applicable law. Id. Service of process is simply the physical means by which that jurisdiction is asserted. Id. Plaintiffs effected service of process on Woolsey pursuant to the Mississippi long-arm statute, 4 by serving the Mississippi Secretary of State. Woolsey has not challenged the technical effectiveness of the physical service; it attacks only its amenability to the jurisdiction of the district court under applicable law.

A.

A threshold question, not originally addressed by the parties or the district court, is whether Woolsey's amenability to personal jurisdiction in this case is governed by a federal or state standard. Unfortunately we are faced with an embarrassment of riches on this subject--our decisions are in conflict. Although both parties accepted our invitation to brief this issue supplementally, neither has come to grips with it. Even so, the point is important to our law and we must address it, assisted or no.

A little background is necessary to understand this issue fully. It is well-settled that a defendant is amenable to the personal jurisdiction of a federal court in a diversity case to the extent permitted a state court in the state where the federal court sits. Brown v. Flowers Industries, Inc., 688 F.2d 328, 331 (5th Cir.1982); Terry, 658 F.2d at 401; Gold-Kist, Inc. v. Baskin-Robbins Ice Cream Co., 623 F.2d 375 (5th Cir.1980) (collecting cases). In other words, a state standard applies in diversity cases: the federal court may assert personal jurisdiction only if the cognate state court could have done so. There are two components of

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the state standard. First, the state's long-arm statute, as interpreted by the state courts, must apply. Second, its application in the particular case must comport with the due process requirements of the fourteenth amendment. Brown, 688 F.2d at 331-32; Terry, 658 F.2d at 401. Thus, the state standard, in referring to the power of state courts, incorporates elements of both state and federal law.

The question in the present case is what standard of amenability should apply when the plaintiff's claims are founded in part upon federal question jurisdiction, but service of process is effected under a state long-arm statute. The two most recent Fifth Circuit cases on this point, decided only three days apart, give different answers. The second of these, issued on December 17 of last year, held that a federal standard applies:

[T]he otherwise-threshold inquiry of whether the state long-arm statute asserts jurisdiction over the defendant sought to be joined in suit, is irrelevant "where the power of the federal court ... can be independently sustained ... on the ground that the matter in controversy arises under the Constitution, laws or treaties of the United States." Lone Star Package Car Co. v. Baltimore & O.R. Co., 212 F.2d 147, 153-54 (5th Cir.1954).

Lapeyrouse v. Texaco, Inc., 693 F.2d 581, 585 (5th Cir.1982). Although the physical means of...

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