Polythane Systems, Inc. v. Marina Ventures Intern., Ltd.

Decision Date28 June 1993
Docket NumberNos. 92-7058,92-7310,s. 92-7058
Parties39 Fed. R. Evid. Serv. 104 POLYTHANE SYSTEMS, INC., Plaintiff-Counter Defendant-Appellee, v. MARINA VENTURES INTERNATIONAL, LTD., and Marina Ventures, Ltd., Defendants-Counter Plaintiffs-Appellants, and Constellation Place Corporation, and LF Marina Corporation, Counter Plaintiffs-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

Louis R. Koerner, Jr., New Orleans, LA, for defendants-counter plaintiffs-appellants.

Lansford Orville Ireson, Jr., Ireson & Weizel, Houston, TX, for plaintiff-counter defendant-appellee.

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

Before POLITZ, Chief Judge, DUHE, Circuit Judge, and MAHON 1, District Judge.

DUHE, Circuit Judge:

Two marina floating dock systems began to lose buoyancy. The manufacturer of the polyurethane flotation foam used in the docks' construction was notified that its product may be defective. In a preemptive move, the foam manufacturer sued for declaratory judgment, requesting that the court determine what liability, if any, it may have for the docks' problems. The designer, builder, and owners of the docks filed counter-claims. A jury found that the flotation foam was not defective, and that the manufacturer was not liable. Finding no reversible error, we affirm.

Background and Procedural History

Two marinas in Baltimore, Maryland, the Anchorage Marina and the Licorice Factory Marina (the "Baltimore Marinas"), 2 were developed by Marina Ventures International, Ltd. ("MVI"). Marina Ventures, Ltd. ("MV") 3 built these facilities using a floating dock system comprised of laminated wood decking attached to pontoons filled with polyurethane flotation foam. The docks are anchored to a series of pilings driven into the seabed. This construction allows the docks to rise and fall with the tide.

Polythane Systems, Inc. ("PSI") manufactured some of the flotation foam used in the Baltimore Marinas. PSI shipped the foam as two liquids which were later blended together at the jobsites to produce solid foam material.

The marinas began to experience a loss of "freeboard," the distance between the docks and the water. Marina Ventures requested that PSI send a representative to inspect this problem. PSI declined to do so, stating that there was no indication that the loss of freeboard was attributable to their foam; moreover, there was a question as to whether PSI foam was used in the problem areas.

In reaction to Marina Ventures' allegations that it had sold defective flotation foam, PSI filed a declaratory judgment action in district court in Texas. Marina Ventures responded with motions to dismiss for lack of personal jurisdiction, and to transfer the action to the District of Maryland, where they were involved in litigation against another flotation foam manufacturer. A magistrate judge recommended against transfer, and that personal jurisdiction over the Appellants was properly exercised. The district court adopted these conclusions. Trial proceeded, and the jury returned a verdict against the Appellants. The court then assessed costs against Marina Ventures. We are urged to find error in a host of actions taken by the district court, including its assessment of costs against Appellants.

Discussion
1. Personal Jurisdiction

Appellants first contend that the district court improperly exercised personal jurisdiction over them. Marina Ventures International, Ltd. ("MVI"), and Marina Ventures, Ltd. ("MV"), are both organized under the laws of Maryland; neither maintains an office or an agent for service of process in Texas. The owners of the respective marinas have no contacts with Texas. PSI is a Texas corporation, whose principal place of business is Spring, Texas. Diversity of the parties provided jurisdiction for PSI's declaratory judgment petition. 28 U.S.C. § 1332(a).

MVI was responsible for paying suppliers, including PSI, and for providing financing for these projects. See R. vol. III, at 440 (Deposition of Gary Sheide); Id. at 427 (Deposition of Gale J. Brimhall). Floatec International Corp., a Texas corporation, was engaged by MVI to apply the polyurethane foam supplied by PSI.

MV actually built the marinas. The orders for PSI flotation foam were placed on MV purchase-order forms, and were often signed by Gary Sheide, MV's president. PSI would mix the components for the foam at their Texas facility, and ship the drums "F.O.B. Plant." Payments were made via mail to PSI in Texas.

"A nonresident defendant is amenable to personal jurisdiction in a federal diversity suit to the extent permitted by a state court in the state in which the federal court resides." Bullion v. Gillespie, 895 F.2d 213, 215 (5th Cir.1990) (citing Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d 612, 616 (5th Cir.1989); DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1264 (5th Cir.1983)). Our inquiry thus starts with a review of the Texas Long-Arm Statute. 4 Next, we address whether the statutory exercise of jurisdiction comports with the due process concerns of the fourteenth amendment. See Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 193, 121 L.Ed.2d 136 (1992).

The Texas Long-Arm Statute reaches as far as constitutionally permitted, and the personal jurisdiction inquiry collapses into one of due process only. Bullion, 895 F.2d at 216; Bearry v. Beech Aircraft Corp., 818 F.2d 370, 372-73 (5th Cir.1987). This results in the familiar two-pronged analysis: (1) minimum contacts with the forum state; and (2) the exercise of personal jurisdiction, under the circumstances, must not offend "traditional notions of fair play and substantial justice." Command-Aire Corp. v. Ontario Mechanical Sales & Service, Inc., 963 F.2d 90, 94 (5th Cir.1992) (internal citations omitted).

Personal jurisdiction over a nonresident defendant can be general or specific. Bullion, 895 F.2d at 216. General jurisdiction arises when the nonresident defendant maintains systematic and continuous contacts with the forum state. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 415-16, 104 S.Ct. 1868, 1872-73, 80 L.Ed.2d 404 (1984).

In the instant dispute, the Appellants' contacts with Texas cannot support general jurisdiction. Therefore, we review whether the court properly exercised specific jurisdiction. Physical presence in the forum state is not determinative; rather "[t]he appropriate inquiry is whether the defendant purposefully availed [itself] of the privilege of conducting activities in-state, thereby invoking the benefits and protections of the forum state's laws.... Jurisdiction is improper if grounded in the unilateral activity of the plaintiff." Bullion, 895 F.2d at 216 (internal citations omitted). 5

Appellants MV and MVI purposefully availed themselves of the privilege of conducting business in Texas. At the outset, we note that the contract, as evinced by the purchase orders and corresponding invoices, shows that the mixing and packaging of the flotation foam was performed in Texas. The place where the contract is performed is a "weighty consideration" in ascertaining whether or not specific jurisdiction is properly exercised. Command-Aire Corp., 963 F.2d at 94. Once mixed, the foam was delivered to a common carrier in Texas, where title passed to PSI. 6 See Bearry v. Beech Aircraft Corp., 818 F.2d 370, 372-73 (5th Cir.1987) (location where title passes is factor in analyzing jurisdictional question). Payments were made to PSI, by mail, at its Texas offices. This buyer-seller relationship continued for over three years. MVI also engaged Floatec, another Texas corporation, to apply the flotation foam supplied by PSI. Furthermore, both the Appellee's declaratory judgment action and the Appellants' counter-claims stem from the sales of flotation foam.

Aggregating the Appellants' contacts with Texas, it is clear that their connections " 'were deliberate, rather than fortuitous, so that the possible need to invoke the benefits and protections of the forum's laws was reasonably foreseeable....' " Standard Fittings Co. v. Sapag, S.A., 625 F.2d 630, 643 (5th Cir.1980) (quoting Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 496 (5th Cir.1974)), cert. denied, 451 U.S. 910, 101 S.Ct. 1981, 68 L.Ed.2d 299 (1981).

Turning to the second prong of the due process inquiry, we evaluate whether the exercise of jurisdiction over the Appellants offends "traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 105, 107 S.Ct. 1026, 1028, 94 L.Ed.2d 92 (1987); see Command-Aire Corp., 963 F.2d at 94; Bullion, 895 F.2d at 216. The Command-Aire Corp. court noted that "[t]his 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." Command-Aire Corp., 963 F.2d at 95.

Although Texas may be less convenient for Appellants than a Maryland forum, we cannot say that prosecution of the action in Texas was unreasonable or unfair. Marina Ventures was able to lodge its counter-claims in responding to PSI's petition for declaratory judgment. No witnesses or documents were shown to be unavailable to Appellants in Texas, despite the distance from Marina Ventures' offices in Maryland. The forum state's interest stems from the involvement of two of its corporate citizens in this action--PSI and Floatec. PSI, as the declaratory judgment plaintiff, assuredly had an interest in ascertaining what liability it may have for the marinas' problems. PSI likewise would have a legitimate interest in defending its product's reputation against Appellants' claims that the flotation foam was defective.

Determinations regarding the exercise of personal jurisdiction over non-resident defendants must be made on a case-by-case...

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