Southwire Co. v. Trans-World Metals & Co. Ltd.

• Decision Date: 29 June 1984
• Docket Number: 83-8546,Nos. 83-8391,TRANS-WORLD,s. 83-8391
• Citation: 735 F.2d 440
• Parties: SOUTHWIRE COMPANY, Plaintiff-Appellant, v.METALS & COMPANY, LTD., and Trans-World Metals, Inc., Defendants- Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 440

735 F.2d 440

SOUTHWIRE COMPANY, Plaintiff-Appellant, v. TRANS-WORLD METALS & COMPANY, LTD., and Trans-World Metals Inc., Defendants- Appellees.

Nos. 83-8391, 83-8546.

United States Court of Appeals Eleventh Circuit.

June 29, 1984.

James A. Bratton, Jr., John G. Despriet, Jane Childs Carr, Atlanta, Ga., for plaintiff-appellant.

Howard A. Rosenstein, New York City, for defendants-appellees.

Appeals from the United States District Court for the Northern District of Georgia.

Before GODBOLD, Chief Judge, HILL and THORNBERRY ^*, Circuit Judges.

GODBOLD, Chief Judge:

In this appeal we decide whether the Georgia long arm statute subjects the nonresident defendants to the jurisdiction of a Georgia court. Defendants came to Georgia to solicit sales of scrap aluminum to plaintiff. They returned to New York, and later, without coming back to Georgia, they entered by phone the contract here in dispute for sale to plaintiff of primary aluminum. Some months later defendants returned to Georgia to discuss the contract that had been made. We do not decide whether the pre-contract activity alone or the post-contract activity alone established jurisdiction. We hold that both activities in Georgia, when considered together and viewed in the context of defendants' prior extensive metal sales to plaintiff, confer jurisdiction under Georgia's long arm statute for suit on the contract. We reverse the district court's dismissal for lack of jurisdiction over the person.

I. Background

Southwire is a Georgia corporation that manufactures aluminum products. Trans-World Metals & Co., Ltd. (Metals & Co., Ltd.) is a British company that trades in metals. Trans-World Metals, Inc. (Metals, Inc.), a New York corporation, acted as agent for Metals & Co., Ltd. in the United States.

Allen Snyder is president and a director of Metals, Inc. Both James Huff and Fred Morosco are vice-presidents and directors of the company. Snyder and Huff are aluminum traders for the company.

Southwire and defendants have an extensive prior course of dealing. Since 1977 Southwire has contracted on numerous occasions with Metals & Co., Ltd. through Metals, Inc. for the purchase of copper and aluminum. Against this backdrop, in February 1981 (two months before the April 7 contract at issue) Huff visited Southwire in Carrollton, Georgia, to solicit aluminum sales. The district court found that during that trip Huff and Campbell, the manager of Southwire's primary metals division, discussed only the sale of scrap aluminum. Southwire contended that primary aluminum, the subject of the April 7 contract at issue, was also discussed, but the district court resolved this credibility choice in favor of defendants.

Two months later, on April 3, 1981, Huff, of Metals, Inc., and Campbell, of Southwire, negotiated over the phone for the sale of 12,000 tons of primary aluminum to Southwire in 1982. The parties dispute, and the district court did not decide, who solicited whose business in this telephone exchange. Negotiations continued by phone until April 7, when the parties reached an oral agreement for the sale of primary aluminum from Metals & Co., Ltd. to Southwire. Southwire sent a confirmation contract to Metals & Co., Ltd. that contained a Georgia choice of law clause but that was never signed. Metals & Co., Ltd. later sent its own confirmation, which contained no choice of law clause.

Before delivery of the aluminum began, questions arose over the parties' responsibilities in performing the contract. Southwire alleged that defendants failed to provide a sufficient amount of aluminum in the January 1982 shipment and sought to cancel the contract. On February 16, 1982, at Southwire's invitation, Snyder and Morosco met with Southwire's employees at Southwire's facility in Carrollton, Georgia. At that meeting, the district court found, Southwire attempted "to dissuade the defendants from enforcing the contract." District court op. at 5.

Three weeks later Southwire filed this declaratory judgment action, alleging that defendants had failed to perform and seeking cancellation of the agreement. Defendants moved to dismiss for lack of personal jurisdiction. The district court concluded that Georgia's long arm statute as construed did not confer jurisdiction over Metals & Co., Ltd. and Metals, Inc. and dismissed the action. Southwire appeals.

II. Defendants' activities and the reach of the Georgia long

arm statute

In a diversity action a federal court can assert jurisdiction over a nonresident defendant only to the extent permitted by the long arm statute of the forum. See Burger King Corp. v. Macshara, 724 F.2d 1505, 1508 (11th Cir.1984); Gold Kist Inc. v. Baskin-Robbins Ice Cream Co., 623 F.2d 375, 377 (5th Cir.1980). Georgia's statute provides:

A court of this state may exercise personal jurisdiction over any nonresident ... as to a cause of action arising from any of the acts, omissions, ownership, use, or possession enumerated in this Code section, in the same manner as if he were a resident of the state, if in person or through an agent, he:

(1) Transacts any business within this state....

Ga.Code Ann. 9-10-91 (Supp.1983).

The Georgia Supreme Court summarized the reach of the statute as follows:

Under our Long Arm Statute jurisdiction over a nonresident exists on the basis of transacting business in this state if the nonresident has purposefully done some act or consummated some transaction in this state, if the cause of action arises from or is connected with such act or transaction, and if the exercise of jurisdiction by the courts of this state does not offend traditional fairness and substantial justice.

Davis Metals, Inc. v. Allen, 230 Ga. 623, 198 S.E.2d 285, 287 (1973). The Davis Metals court recognized the trend to construe "transacting business" liberally and "to uphold the jurisdiction of the court of the plaintiff's residence in actions, arising either directly or indirectly, out of such transactions." 198 S.E.2d at 287-88; see also Warren v. Warren, 249 Ga. 130, 287 S.E.2d 524, 525 (1982) ("this court has 'interpreted the long-arm statute liberally' ...--within a long-arm category, such as 'transacts any business,' jurisdiction will be exercised to the extent permitted by procedural due process.").

A. Defendants' visit to Georgia after execution of the contract to discuss enforcement of the contract

Snyder's and Morosco's visit to Carrollton, Georgia to discuss the April 7 contract in February 1982 is jurisdictionally significant. The district court discounted this meeting because it occurred, the court found, after the contract was entered into and at the behest of Southwire to persuade Metals & Co., Ltd. not to enforce the contract.

The negotiations over enforcement of the contract satisfy the first two prongs of the Davis Metals test. The negotiations constitute an act within the forum, and the cause of action arises from or is connected with that act. ¹ Although the cause of action does not arise out of the post-contract negotiations, the cause is connected with those negotiations, which is all Davis Metals requires. Defendants solicited an aluminum sale from Southwire and later consummated an aluminum sale by phone. Differences arose over performance of that contract. Southwire contended that defendants had failed to provide the requisite amount of aluminum and sought to cancel the contract. Southwire's right to cancel was the subject of the visit, for, as the district court found, Southwire attempted "to dissuade the defendants from enforcing the contract." Southwire has now sued defendants seeking cancellation and relief from the contract, the subject matter of the visit and discussion in Georgia. The suit is sufficiently connected to defendants' activities within the forum to justify the exercise of jurisdiction. This analysis is consistent with Porter v. Mid-State Homes, Inc., 133 Ga.App. 706, 213 S.E.2d 10 (1975), where the court held that the purchase of advertising space in a newspaper, though not directly related to a suit arising out of foreclosure of land, was sufficiently "connected with" the plaintiff's claim to furnish transaction of business to support jurisdiction.

In O.N. Jonas Co. v. B & P Sales Corp., 232 Ga. 256, 206 S.E.2d 437, 438 (1974), a Georgia manufacturer fabricated goods and sold them to a nonresident. The nonresident's agents visited the plant in Georgia, but no negotiations took place. The goods were ordered later by mail and telephone and shipped F.O.B. shipping point. No contracts were executed in Georgia. The Georgia resident argued that the nonresident's mere visit to Georgia was sufficient to create transaction of business. The supreme court held this visit insufficient but emphasized that "there were no negotiations or contracts entered into in Georgia with respect to the goods that are the subject matter of these actions." 206 S.E.2d at 439 (emphasis added).

Later cases in the Georgia Court of Appeals show that both pre-contract and post-contract negotiations constitute the transaction of business and allow suit on the contract. In Delta Equities, Inc. v. Larwin Mortgage Investors, 133 Ga.App. 382, 211 S.E.2d 9 (1974), agents of the defendant came to Georgia to negotiate a contract. The court found transaction of business sufficient to invoke long arm jurisdiction:

Appellee's agents made two visits to Georgia to negotiate a contract. We harbor no question but that such negotiations constitute a significant contact in Georgia and are significant factors to be considered in determining whether appellee is subject to this state's jurisdiction. Accordingly, we hold that the negotiations within the confines of this state constituted the required "minimum contacts" necessary to hold that appellee was "transacting business" within the intent of Georgia's Long Arm Statute ....

211 S.E.2d at 11.

Finally, in Shea/Rustin, Inc. v. Home Fashion Guild Ltd., 135 Ga.App. 88, 217 S.E.2d 405,...