Holt Oil & Gas Corp. v. Harvey

• Decision Date: 08 October 1986
• Docket Number: No. 85-1491,85-1491
• Citation: 801 F.2d 773
• Parties: HOLT OIL & GAS CORPORATION and Faywin Investments, Pty. Ltd., Plaintiffs-Counter Defendants-Appellees, v. Ralph L. HARVEY, Defendant-Counter Plaintiff-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 773

801 F.2d 773

HOLT OIL & GAS CORPORATION and Faywin Investments, Pty Ltd., Plaintiffs-Counter Defendants-Appellees, v. Ralph L. HARVEY, Defendant-Counter Plaintiff-Appellant.

No. 85-1491.

United States Court of Appeals Fifth Circuit.

Oct. 8, 1986.

Roger E. Beecham, Stigall & Maxfield, Benjamin Raye Collier, Mark D. Foster, Dallas, Tex., Fellers, Snider, Blankenship, Bailey & Tippens, Harry H. Selph, II, Oklahoma City, Okl., for defendant-counter plaintiff-appellant.

C. Steven Matlock, Jr., Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., for plaintiffs-counter defendants-appellees.

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

Before WISDOM, JOHNSON, and HIGGINBOTHAM, Circuit Judges.

JOHNSON, Circuit Judge:

Ralph Harvey appeals from the district court's judgment in favor of Holt Oil & Gas Company ("Holt") in this diversity action. Finding Harvey's contentions unpersuasive, we affirm the judgment of the district court.

I.

This lawsuit arises out of an ill-fated oil and gas drilling venture in northwestern Oklahoma. The plaintiff, Holt Oil & Gas Company, ¹ is a Texas corporation with its principal place of business in Dallas. The defendant, Ralph Harvey, is an Oklahoma resident who is in the business of investing in oil and gas drilling ventures.

In 1981, Holt filed with the Oklahoma Corporation Commission notice of its intent to drill on certain acreage in Beaver County, Oklahoma. After filing notice, Holt discovered that Harvey owned a one-eighth leasehold interest in the proposed drill site. Holt offered Harvey an opportunity to participate in drilling the well which Harvey accepted thereby acquiring a working interest in the well. After some negotiation, Holt and Harvey executed a Joint Operating Agreement (JOA), the terms of which were to govern the drilling project.

Under the terms of the JOA, Harvey agreed to pay a pro rata share of the costs incurred in drilling an initial well in the Marmaton geological formation. The JOA provided that this well would be drilled "to a true vertical depth of 6,900 feet; or to a depth sufficient to test the Marmaton Lime, ..." This initial well was designated the "Campbell 1" well. The JOA further provided that if any party sought to drill a subsequent well, or to

rework, deepen or plug back a dry hole drilled at the joint expense of all parties or a well jointly owned by all the parties and not then producing in paying quantities, the party desiring to drill, rework, deepen or plug back such a well shall give the other parties written notice of the proposed operation, specifying the work to be performed, the location, proposed depth, objective formation and the estimated cost of the operation. The parties receiving such a notice shall have fifteen (15) days after receipt of the notice within which to notify the parties wishing to do the work whether they elect to participate in the cost of the proposed operation.

The Campbell 1 drilling effort encountered numerous difficulties and was ultimately unsuccessful. In December of 1981, after drilling to a depth of approximately 6,700 feet, Holt sent a new drilling prognosis to Harvey which called for sidetracking the Campbell 1 well. Under this prognosis, Holt would use the first 1640 feet of the Campbell 1 well and then directionally drill from that depth to a depth sufficient to evaluate the Marmaton formation. The sidetracking operation was designated "Campbell 1-A."

Harvey, upset by the problem plagued Campbell 1 drilling effort, advised Holt on December 21, 1981, that he would not pay any expenses incurred due to Holt's imprudence and negligence. Harvey also refused to pay any expenses associated with the Campbell 1-A sidetrack operation. The sidetrack operation nevertheless continued until March of 1982 when Holt determined that the Campbell 1-A well was a dry hole. Holt then decided to recomplete the Campbell 1-A well in the Cleveland geological formation. Harvey participated in the recompletion operation which was also eventually unsuccessful. After the recompletion effort failed, Holt plugged the well.

Holt initiated the instant diversity action in the United States District Court for the Northern District of Texas seeking to recover Harvey's unpaid share of the operating expenses. According to Holt, Harvey had breached the JOA by refusing to pay any costs associated with the Campbell 1-A sidetrack operation. Holt also alleged that Harvey had refused to pay some of the costs associated with either the Campbell 1 operation or the Cleveland recompletion operation.

Harvey moved to dismiss the action pursuant to Fed.R.Civ.P. 12(b)(2) asserting that the court lacked personal jurisdiction. In a written order issued on July 29, 1983, the district court denied Harvey's motion to dismiss. Harvey then filed an answer and counter-claim asserting, inter alia, (1) that the Campbell 1-A sidetrack operation was a "subsequent or other operation" under the terms of the JOA for which Harvey was not liable absent prior approval, and (2) that Holt had breached the JOA by failing to perform drilling operations in a reasonable and prudent manner. Following trial, the jury, in response to a number of special interrogatories, returned a verdict in favor of Holt. The district court denied Harvey's motion for a j.n.o.v. and Harvey filed timely notice of appeal. On appeal, Harvey raises a variety of challenges to the judgment of the district court.

II.

As an initial matter, Harvey contends that the district court erred in failing to dismiss the case for want of personal jurisdiction. The district court properly exercised personal jurisdiction only if Harvey (1) was amenable to service of process under the Texas long-arm statute; and (2) the exercise of jurisdiction under Texas law was consistent with due process. See Colwell Realty Investments v. Triple T Inns, 785 F.2d 1330, 1333 (5th Cir.1986); Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir.1985). Because the Texas long-arm statute has been interpreted to extend to the limits of due process, see Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex.1982), rev'd on other grounds, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); Colwell Realty, 785 F.2d at 1333; Stuart, 772 F.2d at 1189, our inquiry in the instant case focuses solely on whether the district court's exercise of jurisdiction over Harvey comports with the constitutional requirement of due process.

In order for an exercise of personal jurisdiction to be consistent with due process, the nonresident defendant must have some minimum contact with the forum which results from an affirmative act on the part of the nonresident. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). In evaluating a nonresident's contacts with the forum, we must determine whether the nonresident has purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws. The defendant's conduct and connection with the forum state must be such that he should reasonably anticipate being haled into court in the forum state. See Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958)).

When a court exercises personal jurisdiction over a defendant based on contacts with the forum related to the particular controversy, the court is exercising "specific jurisdiction." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984) (citing von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1138, 1144-64 (1966)). To exercise specific jurisdiction, the court must examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice. Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977). Even where specific jurisdiction is lacking, however, a court may nevertheless exercise "general jurisdiction" based on a defendant's contacts with the forum unrelated to the controversy. Helicopteros Nacionales, 104 S.Ct. at 1872. To exercise general jurisdiction, the court must determine whether "the contacts are sufficiently systematic and continuous to support a reasonable exercise of jurisdiction." Stuart, 772 F.2d at 1191 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 1480-81, 79 L.Ed.2d 790 (1984); Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952)).

Holt relies on both specific and general jurisdiction to support the district court's exercise of personal jurisdiction over Harvey. We proceed to first examine whether an exercise of specific jurisdiction was permissible. Harvey's only contacts with Texas relating to the instant controversy were as follows: (1) Harvey entered into a contract with Holt, a Texas corporation; (2) Harvey sent a final revised joint operating agreement from Oklahoma to Texas; (3) Harvey sent three checks from Oklahoma to Texas in partial performance of its contractual obligations; and (4) Harvey engaged in extensive telephonic and written communication with Holt.

We conclude that these limited contacts were insufficient to support an exercise of specific jurisdiction. On several occasions this Court has observed that merely contracting with a resident of the forum state is insufficient to subject the nonresident to the forum's jurisdiction. See, e.g., Colwell Realty, 785 F.2d at 1334; Stuart, 772 F.2d at 1192-93; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Although the contractual relationship between Holt and Harvey may have been cemented in Texas, the significance of this fact is diminished by the contract provision specifying that Oklahoma law would govern the...