D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc.

• Decision Date: 31 January 1985
• Docket Number: No. 84-1648,84-1648
• Citation: 754 F.2d 542
• Parties: D.J. INVESTMENTS, INC. d/b/a Race Ready, Plaintiff-Appellant, v. METZELER MOTORCYCLE TIRE AGENT GREGG, INC., etc., et al., Defendants-Appellees. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 542

754 F.2d 542

D.J. INVESTMENTS, INC. d/b/a Race Ready, Plaintiff-Appellant, v. METZELER MOTORCYCLE TIRE AGENT GREGG, INC., etc., et al.,

Defendants-Appellees.

No. 84-1648

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Jan. 31, 1985.

Irwin Lightstone, David Bell, Dallas, Tex., for plaintiff-appellant.

James Baker, Dallas, Tex., for defendants-appellees.

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

Before CLARK, Chief Judge, POLITZ and GARWOOD, Circuit Judges.

GARWOOD, Circuit Judge:

D.J. Investments, Inc., a Texas corporation doing business as Race Ready, brought this diversity action in the United States District Court for the Northern District of Texas against Metzeler Motorcycle Tire Agent Gregg, Inc., a Washington corporation, and Metzeler president Robert Gregg, a resident of Washington, alleging breach of contract and common law fraud. Defendants were served with process in Washington. Race Ready requested an injunction restraining defendants from cashing, transferring, or drawing against a letter of credit that Race Ready had delivered to defendants as a consequence of the alleged fraud, an order for the return of the letter of credit to Race Ready, and an award of actual and punitive damages against defendants. In response, defendants submitted a Motion to Dismiss under Fed.R.Civ.P. 12(b), arguing that the district court lacked personal jurisdiction over them. The district court, prior to discovery or proceedings on the merits, granted defendants' motion and issued a Memorandum Opinion and Order dismissing the case without prejudice on June 21, 1984. We conclude that under the prima facie showing made by appellant Race Ready, the district court had personal jurisdiction over the defendants. Accordingly, we reverse.

FACTS

Appellee Metzeler is a wholesale supplier of Metzeler Tires, a specialty line of tires used to equip motorcycles for off-road travel. According to the complaint, Metzeler is the alter ego of its president and principal shareholder, appellee Gregg. Neither has Appellant's verified complaint alleged that during a telephone conversation held on November 10, 1983, Gregg agreed that Metzeler would transfer the sole Texas tire distributorship rights upon the conditions that Race Ready post an irrevocable letter of credit in the amount of $30,600.28 to secure Van Sickler's previous Metzeler Tire purchases, and that it purchase the assets of Van Sickler's. Appellant also alleged that during the November 10 discussion, Gregg assured Hovers that no Texas distributorship deal had been arranged with Ed Tucker Distr. or any other group, and represented that Race Ready would become the sole Texas distributor of Metzeler Tires upon Metzeler's receipt of the irrevocable letter of credit.

                any place of business or employees in Texas, and neither has any Texas agent for service of process or permit to do business in Texas.  In September 1983, appellant Race Ready's representative and secretary, James Hovers, contacted Robert Gregg by telephone to discuss the possibility that Race Ready might acquire the assets and distributorship rights of "Van Sickler's Race Ready," which held exclusive Metzeler distributorship rights in Texas.  According to Race Ready's complaint, Hovers informed Gregg that Race Ready was unwilling to purchase the assets of Van Sickler's Race Ready unless defendants agreed to transfer the Metzeler distributorship to Race Ready.  The parties discussed the proposal over the telephone a number of times prior to November 10, 1983.  An affidavit by Gregg filed in support of the motion to dismiss states that these conversations "were by telephone from the State of Washington or the State of California."    Gregg was apparently not in Texas at the time of these conversations.  In addition, Gregg is alleged to have traveled to the Dallas-Fort Worth Airport on September 25, 1983, at which time Gregg allegedly carried on extensive discussions with Hovers concerning the proposed transfer of the distributorship rights and delivered information concerning Metzeler prices and programs to appellant
                

Race Ready subsequently purchased the assets of Van Sickler's Race Ready for approximately $400,000, and transmitted the letter of credit, which was on a Texas bank, by express mail on November 15. Hovers telephoned Gregg to inform him that the purchase had been completed and that the letter had been transmitted. Appellant alleged that during this conversation, Gregg again assured Hovers that the distributorship packet would be mailed to Race Ready once Metzeler received the letter of credit. In a letter dated November 21, however, Metzeler informed appellant that Metzeler did not plan to send the distributorship packet to Race Ready. Appellant demanded that defendants return the letter of credit, but they did not honor the demand. Appellant alleged that Metzeler's refusal to transfer the distributorship, as the parties had arranged, constituted a breach of their oral contract. Appellant also alleged that defendants committed fraud because at the time Gregg promised to transfer the sole distributorship rights to Race Ready, defendants already had designated Ed Tucker Distr. as the sole Texas distributor of Metzeler Tires. Therefore, at the time Gregg was supposed to have made his representations, he had no intention of carrying out his promises to transfer the distributorship.

PERSONAL JURISDICTION

The district court determined that it lacked personal jurisdiction over defendants because Metzeler and Gregg's contacts with the forum state--Texas--were insufficient to satisfy the due process clause of the Constitution. In determining whether " 'a foreign corporation should be required to defend itself in a suit in Texas arising out of a contract between it and a Texas corporation, each case must be decided on its own facts.' " Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 2180, 80 L.Ed.2d 561 (1984) (quoting Southwest Offset, Inc. v. Hudco Publishing Co., Inc., 622 F.2d 149, 151 (5th Cir.1980)). In a diversity suit, two preconditions must generally be satisfied to allow personal jurisdiction over nonresident defendants served out of state: (1) the nonresidents must be amenable to service of process under the forum state's long-arm statute (an issue which is governed by the law of the forum state); (2) if the state jurisdictional statute has been complied with, the assertion of jurisdiction over the nonresidents must be consistent with the due process clause of the Fourteenth Amendment (an issue which is governed by federal law). DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1265 (5th Cir.1983); Hydrokinetics, 700 F.2d at 1028 & n. 4; Brown v. Flowers Indus., Inc., 688 F.2d 328, 332 (5th Cir.1982), cert. denied, 460 U.S. 1023, 103 S.Ct. 1275, 75 L.Ed.2d 496 (1983); Walker v. Newgent, 583 F.2d 163, 166 (5th Cir.1978), cert. denied, 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979). To satisfy the latter condition that the exercise of jurisdiction must be consistent with the due process clause, this Court has outlined two requirements: (a) the nonresidents must have some minimum contacts with the forum resulting from an affirmative act or acts on their part ¹; (b) it must not be unfair or unreasonable to require the nonresidents to defend the suit in the forum state. ² Growden v. Ed Bowlin and Associates, Inc., 733 F.2d 1149, 1150 (5th Cir.1984); Hydrokinetics, 700 F.2d at 1028; Southwest Offset, 622 F.2d at 152; C & H Transp. Co., Inc. v. Jensen & Reynolds Constr., 719 F.2d 1267, 1269 (5th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1930, 80 L.Ed.2d 475 (1984).

When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, the party who seeks to invoke the jurisdiction of the federal court bears the burden of establishing the district court's jurisdiction over the nonresident. Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir.1982); Southwest Offset, 622 F.2d at 152; Brown, 688 F.2d at 332. If the question whether jurisdiction lies in federal court is to be decided on the basis of facts contained in the parties' affidavits, however, the party who bears the burden need only present a prima facie case for personal jurisdiction; proof by a preponderance of the evidence is not required. Wyatt, 686 F.2d at 280; Union Carbide Corp. v. UGI Corp., 731 F.2d 1186, 1189 (5th Cir.1984); Walker, 583 F.2d at 166; Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 491 (5th Cir.1974); Brown, 688 F.2d at 332; Jetco Elec. Indus., Inc. v. Gardiner, 473 F.2d 1228, 1232 (5th Cir.1973). Moreover, on a motion to dismiss for lack of jurisdiction, uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purposes of determining whether a prima facie case for personal jurisdiction exists. Brown, 688 F.2d at 332; Wyatt, 686 F.2d at 280.

The district court appears to have assumed that appellant satisfied the initial test, which concerns the amenability of defendants to service of process. Appellant seeks to establish the existence of personal jurisdiction under Tex.Rev.Civ.Stat.Ann. art. 2031b (Vernon 1964). ³ This long-arm statute permits service of process on nonresidents who have engaged in business in Texas, so long as the cause of action arises out of such business. ⁴ The statute defines "doing business" in Texas to include the commission "of any tort in whole or in part" within the state by a nonresident natural person or foreign corporation. Resolving conflicts in favor of appellant and taking allegations in its complaint as true, we hold that the nonresident defendants are amenable to service of process under Article 2031b. In a May 31, 1984 affidavit filed below in opposition to the motion to dismiss,...