American Steel, Inc. v. Cascade Steel Rolling Mills, Inc.

• Decision Date: 03 April 1975
• Docket Number: Civ. A. No. 74-C-67.
• Citation: 425 F. Supp. 301
• Parties: AMERICAN STEEL, INCORPORATED v. CASCADE STEEL ROLLING MILLS, INC.
• Court: U.S. District Court — Southern District of Texas

425 F. Supp. 301

AMERICAN STEEL, INCORPORATED v. CASCADE STEEL ROLLING MILLS, INC.

Civ. A. No. 74-C-67.

United States District Court, S. D. Texas, Corpus Christi Division.

April 3, 1975.

Gary Norton, Branscomb, Gary, Thomasson & Hall, Corpus Christi, Tex., for American Steel, Inc.

Leslie S. Lockett (now deceased), Kleberg, Mobley, Lockett & Weil, Corpus Christi, Tex., for Cascade Steel Rolling Mills, Inc.

ORDER

OWEN D. COX, District Judge.

In this breach of contract action brought by American Steel, Inc., a Texas corporation, against Cascade Steel Rolling Mills, Inc., an Oregon corporation, the Defendant has raised by its motion the defense, under Rule 12(b)(2), of lack of personal jurisdiction. Certain facts basic to this jurisdictional question are in dispute. In answering such question, it is proper for this Court to resolve such disputes in the Plaintiff's favor, and it will do so. Accordingly, the Court perceives, for the purpose of the Defendant's motion, the facts to be as follows:

In March, 1973, the Defendant (Oregon corporation) approached the Plaintiff (Texas corporation) with an offer to sell it steel products. After extended negotiations via telecommunications (which infers that during negotiations no representative of the Texas corporation went to Oregon), the agreement became binding with Plaintiff's acceptance by telephone and by telegram from its Texas offices, and by forwarding its purchase order. The Court concludes, for the purpose of this issue, that the contract was consummated in Texas. This contract had two provisions pertinent to this motion. First, delivery of the steel was to be made F.O.B. Oregon, and the ultimate destination of the steel was apparently Singapore, certainly not Texas. Secondly, the Plaintiff was required by the contract to obtain an irrevocable letter of credit from the Corpus Christi State National Bank in Corpus Christi, Texas, payable at the U. S. National Bank in McMinnville, Oregon. Subsequently, officials of the Plaintiff company did visit the Defendant's office and steel-making facilities in Oregon. The Defendant sent no representatives or agents into this state in connection with this transaction, and it has no representative or agent for service in this state. Other than this particular transaction, the Defendant has never solicited any business in this state and has never delivered any materials into this state.

When the Defendant allegedly failed to adequately perform under the contract, the Plaintiff filed its action in this United States District Court. The Plaintiff obtained service of process through the Texas Secretary of State, pursuant to Tex.Rev. Civ.Stat.Ann., Art. 2031b. The complaint asserts that service under this statute was proper because the Defendant was "doing business" within this state. The Plaintiff, who has the laboring oar, apparently bases this allegation on the fact that the Defendant entered into a contract which was consummated in Texas and which was partially performable in Texas due to the requirement that the Plaintiff procure an irrevocable letter of credit here. See Tex.Rev.Civ. Stat.Ann., Art. 2031b(4).

The first step in this inquiry is to determine whether the nonresident Defendant can be held within a reading of the Texas "long arm" statute.

If we take the Plaintiff's allegations to be true, the Court finds the Defendant to be within the statutory ambit of Art. 2031b. It was "doing business" within the meaning of 2031b because, as defined by the statute, there was a "contract . . . to be performed in whole or in part by either party in this State." Tex.Rev.Civ.Stat.Ann., § 2031b(4). See Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 492, n. 11 (5th Cir. 1974). A contractual obligation on the part of the Plaintiff to secure a letter of credit at the Corpus Christi State National Bank in Corpus Christi, Texas, would seem to satisfy a literal reading of the statutory performance requirement. The statutory requirements of said Art. 2031b have been met for our purposes here.

Again taking the alleged facts relied on by Plaintiff as being true, the Court must now decide whether assertion of jurisdiction in this case exceeds constitutional limits. The principles, while general, are clear. Article 2031b represents an effort by the state legislature to exploit to the fullest the expanding limits of in personam jurisdiction. Atwood Hatcheries v. Heisdorf & Nelson Farms, 357 F.2d 847 (5th Cir. 1966). However, due process does still impose some restraints on this expanding assertion of jurisdiction over nonresident defendants. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228 (5th Cir. 1973). The Fifth Circuit has recently distilled from the numerous decisions on the permissible grasp of "long arm" statutes a dual test for determining whether a court may take jurisdiction without depriving the defendant of due process. Product Promotions, Inc. v. Cousteau, supra, at 494. The quality of the Defendant's contacts with the forum state must be of such a purposeful nature that the Court can determine that such contacts were "deliberate, rather than fortuitous, so that the possible need to invoke the benefits and protections of the forum's laws was reasonably foreseeable, if not foreseen, rather...