Command-Aire Corp. v. Ontario Mechanical Sales and Service Inc.

• Decision Date: 18 June 1992
• Docket Number: COMMAND-AIRE,No. 91-8509,91-8509
• Citation: 963 F.2d 90
• Parties: CORP., Plaintiff-Appellee, v. ONTARIO MECHANICAL SALES AND SERVICE INCORPORATED, Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 90

963 F.2d 90

23 Fed.R.Serv.3d 379

COMMAND-AIRE CORP., Plaintiff-Appellee, v. ONTARIO MECHANICAL SALES AND SERVICE INCORPORATED Defendant-Appellant.

No. 91-8509

Summary Calendar.

United States Court of Appeals Fifth Circuit.

June 18, 1992.

David G. Tekell, Beverly Willis Bracken, Naman, Howell, Smith & Lee, Waco, Tex., for defendant-appellant.

David N. Deaconson, Michael G. Cosby, Pakis, Cherry, Beard & Giotes, Waco, Tex., for plaintiff-appellee.

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

Before POLITZ, Chief Judge, HIGGINBOTHAM and BARKSDALE, Circuit Judges.

POLITZ, Chief Judge:

Ontario Mechanical Sales and Service Incorporated (OMS) appeals a bench trial judgment for $60,400 which approximates a default judgment. For the reasons assigned, we affirm.

Background

OMS is a Canadian corporation with its principal place of business in Canada. Command-Aire Corp. is incorporated in Texas and has its principal place of business there. In 1986, OMS entered into a sale representative agreement with Command-Aire under which OMS made numerous bookings for Command-Aire products for which it received commissions. In January of 1989 the OMS president and principal owner, Lou Barbesin, met representatives of Command-Aire at a convention in Chicago and discussed the possible purchase of heat pump equipment manufactured by Command-Aire. During the period of negotiation preceding the actual sale, Barbesin traveled to Texas to deliver and discuss engineering and design specifications. Contract negotiations were conducted and the contract was finally consummated by use of telephonic and mail services. A choice of law clause provided that Texas law controlled the sale and that any dispute thereunder would be resolved in Texas court. Although the initial sales agreement contemplated that Command-Aire would deliver the equipment, the parties ultimately agreed that OMS would take possession in Texas. OMS installed the pumps in Canadian condominiums. Contending that the pumps were defective, OMS refused to make payment as agreed.

Command-Aire filed suit for the purchase price in Texas state court. OMS removed to federal court and moved to dismiss for lack of personal jurisdiction or, in the alternative, on grounds of forum non conveniens. OMS argued that it is not registered to do business in Texas, does not have a regular place of business or own property there, and would suffer hardship defending the suit in a Texas forum. After considering the pleadings and affidavits the district court denied both motions.

The case was originally set for trial on October 29, 1990 but because of psychiatric difficulties experienced by the president of OMS, including hospitalization, three continuances were granted and the trial was finally set for July 15, 1991. On that date, a fourth continuance was sought by OMS. In support of its motion OMS offered a handwritten note ostensibly written by a physician which stated: "Mr. Lou Barbesin is a patient under my care. I have advised Mr. Barbesin that he should not leave the immediate vicinity of his home in Toronto until further notice." The court denied the fourth continuance. Because of the failure by OMS to answer interrogatories served in September of 1990 and its failure to comply with the October 1990 pretrial order, the court granted Command-Aire's motion for sanctions and struck all of the OMS pleadings except those relating to personal jurisdiction and forum non conveniens. The court then entered judgment for Command-Aire for $60,400, plus interest and fees. OMS timely appealed.

Analysis

1. Personal Jurisdiction

A district court's finding that personal jurisdiction may be exercised over a nonresident defendant is a question of law reviewable de novo. ¹ A nonresident defendant is subject to personal jurisdiction in a federal diversity suit to the extent permitted by the laws of the forum state and considerations of constitutional due process. Bullion v. Gillespie, 895 F.2d 213 (5th Cir.1990). Inasmuch as the Texas Long Arm statute reaches as far as is constitutionally allowed, the personal jurisdiction question is actually a constitutional due process inquiry. Id.; Bearry v. Beech Aircraft Corp., 818 F.2d 370 (5th Cir.1987); see also Tex.Civ.Prac. & Rem.Code Ann. §§ 17.041-17.045. That inquiry has two components: (1) the defendant purposefully must have established minimum contacts with the forum state, invoking the benefits and protections of that state's laws and, therefore, reasonably could anticipate being haled into court there; and (2) the exercise of personal jurisdiction, under the circumstances, must not offend traditional notions of fair play and substantial justice. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Asarco, Inc. v. Glenara, Ltd., 912 F.2d 784 (5th Cir.1990).

The minimum contacts may result in either specific or general jurisdiction:

When a cause of action arises out of a defendant's purposeful contacts with the forum, minimum contacts are found to exist and the court may exercise its "specific" jurisdiction. Even a single, substantial act directed toward the forum can support specific jurisdiction. Where a cause of action does not arise out of a foreign defendant's purposeful contacts with the forum, however, due process requires that the defendant have engaged in "continuous and systematic contacts" in the forum to support the exercise of "general" jurisdiction over that defendant.... [C]ontacts of a more extensive quality and nature are required.

Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1361-62 (5th Cir.1990) (citation omitted); see also Burger King. The district court found both general and specific jurisdiction. We agree that specific jurisdiction is extant and thus look no further.

At the threshold we seek the place where the contract is to be performed. That is a weighty consideration. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061 (5th Cir.1992). If, however, the forum plaintiff's decision to perform its contractual obligation within its own forum state is totally unilateral, it cannot be viewed as purposeful on the part of the nonresident and the weight necessarily is diminished. Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003 (5th Cir.1982). It is clear that the OMS president traveled to Texas for the purpose of tailoring the pump manufacture to the needs of OMS and that it took possession of the goods in Texas. The selection of the Texas situs was not entirely a unilateral decision by Command-Aire. OMS, which had dealt with Command-Aire for several years, purposefully engaged the Texas manufacturing facility and dealt with its personnel there. We also deem relevant the place of contracting, the law governing the contract, and the place at which title to the goods passed. Jones (discussing place of contract and governing law); Bearry (technicality of when title passes to goods is relevant in analyzing general personal jurisdiction questions). An agreement to mail payment checks into the forum state also may be given some consideration. See Stuart v. Spademan, 772 F.2d 1185 (5th Cir.1985) (noting that this factor does not weigh heavily). The final sales agreement provided that OMS would take possession of the goods in Texas; therefore, title passed in that state. Tex.Bus. & Com.Code § 2.401 (Title passes at "the time and place at which the seller completes performance with reference to the physical delivery of the goods[.]"). Texas was also the place of payment. See Tex.Bus. & Com.Code § 2.310 (place of payment where buyer receives goods).

OMS urges as "factually indistinguishable," our decision in Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026 (5th Cir.1983), cert. denied, 466 U.S. 962, 104 S.Ct. 2180, 80 L.Ed.2d 561 (1984). We do not perceive that decision as controlling the instant dispute. In Hydrokinetics a nonresident buyer contracted to purchase equipment made in Texas for installation in the buyer's state. Notwithstanding that the goods were manufactured in Texas, payment was to be made in Texas, and the buyer's representatives traveled to Texas to close the contract, we found personal jurisdiction lacking. Of import in the Hydrokinetics analysis, however, was the fact that the nonresident buyer, who did not regularly engage in business in any state but its own, was approached in its home state by the seller's representatives. The initial negotiations were exclusively in the buyer's state; it was not until later that any part of the contracting process migrated to Texas. The fact that the transaction was concluded in Texas was not considered dispositive because the agreement the parties reached provided that the law of the buyer's state was controlling. By contrast, OMS had an ongoing relationship with Command-Aire and initiated discussion, negotiations, and the ultimate contract respecting the sale. All in-person negotiations for the contract occurred outside of Canada and the parties agreed that Texas law would control the sales contract. In this setting we cannot discount, as we did in Hydrokinetics, the travel to Texas by the OMS president to deal with a critical part of the contract.

Even if minimum contacts exist, the exercise of personal jurisdiction over a nonresident defendant will fail to satisfy due process requirements if the assertion of jurisdiction offends traditional notions of fair play and substantial justice. Asahi Metal Industry Co. v. Superior Court of California. This assessment requires examination of the burden on the defendant, the interest of the forum state, the plaintiff's interest in obtaining relief, and the shared interest of the several states in furthering fundamental social policies. Although the Texas forum may be less convenient for OMS than a Canadian...