Bamford v. Hobbs

• Decision Date: 18 February 1983
• Docket Number: Civ. A. No. H-82-1801.
• Citation: 569 F. Supp. 160
• Parties: Charles Edward BAMFORD and Clifford J. Ott v. Raymond L. HOBBS, Individually and d/b/a Hobbs-Bannerman Corporation, et al.
• Court: U.S. District Court — Southern District of Texas

569 F. Supp. 160

Charles Edward BAMFORD and Clifford J. Ott v. Raymond L. HOBBS, Individually and d/b/a Hobbs-Bannerman Corporation, et al.

Civ. A. No. H-82-1801.

United States District Court, S.D. Texas, Houston Division.

February 18, 1983.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John C. Allen, Houston, Tex., for plaintiffs.

Don A. Wetzel, Sullivan, Bailey, King & Sabom, Houston, Tex., for defendants.

MEMORANDUM AND ORDER

SINGLETON, Chief Judge.

I. BACKGROUND

Plaintiffs Charles Edward Bamford and Clifford J. Ott sue defendants Raymond L. Hobbs, Hobbs-Bannerman Corporation, and Hobbs-Hood, Joint Venture for breach of contract, antitrust violations, tortious interference with contract, and malicious damage to property. This action is filed under 28 U.S.C. § 1332; sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; and sections 2 and 4 of the Clayton Act, 15 U.S.C. §§ 13, 15. In their original complaint, plaintiffs sought injunctive relief as well as damages at law: an application for a temporary restraining order was denied by this court on June 30, 1982.

This dispute arises out of an agreement between Messrs. Ott and Bamford, who are Texas domiciliaries, and Hobbs-Bannerman Corporation, a California concern, which is in the business of furnishing engineering and design services to utility companies throughout these United States. The agreement provided that plaintiffs would open an office on behalf of Hobbs-Bannerman Corporation in Houston, in return for which, Ott and Bamford were to receive salaries of $50,000.00 and $40,000.00, respectively, plus options to purchase up to twenty-five percent (25%) of the common stock issued by Hobbs-Bannerman Corporation at a price of twenty-five percent (25%) of the amount of the initial capital investment supplied by the corporation to the Houston operation. The purposes for opening the office in Houston were to facilitate the handling of the engineering and design work on a project in Wichita, Kansas and to attract new clients. Plaintiffs duly opened the Houston office. Several months later, it was closed by Hobbs-Bannerman, and all business ceased.

Messrs. Ott and Bamford allege that, in connection with the closure of the Houston business, defendants have totally defaulted on their contractual responsibilities, have attempted to illegally monopolize the engineering and design business in the Houston market area, and have slandered plaintiffs' professional abilities. Defendants advance a different view of what transpired. In an affidavit, Mr. Raymond L. Hobbs, president of Hobbs-Bannerman Corporation, states that it was plaintiffs' own incompetency and inability to live up to the terms of the contract that forced the termination of the Houston office.

Presently before the court are defendants' alternative motions to dismiss, to quash return of service of process, or to change venue. Defendants offer several grounds for dismissal: (1) lack of in personam jurisdiction, (2) insufficiency of service of process, and (3) improper venue.

II. THE SERVICE OF PROCESS ISSUE

Defendants contend that process was improperly served in this action in that it was not served in accordance with the provisions of article 2031b of the Texas Revised Civil Statutes, the Texas long-arm statute; rule 10(B) of the Local Rules of the Southern Districts of Texas; nor rules 4(e) and 4(f) of the Federal Rules of Civil Procedure. Plaintiffs counter that service was properly effected, in compliance with rule 4(d) of the Federal Rules of Civil Procedure and local rule 10(B)(2)(b), when a copy of the complaint and a summons was sent via certified mail to each defendant.

In antitrust actions, a federal statute provides for nationwide service of process.¹ Section 12 of the Clayton Act, 15 U.S.C. § 22 authorizes service in any district of which the corporate defendant is an inhabitant, may be found, or transacts business. Black v. Acme Markets, Inc., 564 F.2d 681, 684 (5th Cir.1977). Although in this case there is both federal question and diversity jurisdiction, plaintiffs need observe federal not state requirements. See Terry v. Raymond International, Inc., 658 F.2d 398, 402 (5th Cir.1981).²

Rule 4(e) of the Federal Rules of Civil Procedure provides for service upon nonresidents. According to this rule, when there is a federal statute providing for service, but not supplying a method for it, "service may be made ... in a manner stated in this rule ...," i.e. rule 4. Therefore, plaintiffs' lack of compliance with the requirements of the Texas long-arm statute for service on corporate defendants is irrelevant: the pertinent inquiry is whether process was served on Hobbs-Bannerman Corporation and Hobbs-Hood, Joint Venture in accordance with rule 4. Rule 4(d)(3) details the manner in which service is to be effectuated upon foreign corporations. Personal delivery of a copy of the summons and complaint by a United States marshall or by registered or certified mail will suffice. Fed.R.Civ.P. 4(c), 4(d)(3), 4(f); Black v. Acme Markets, Inc., 564 F.2d 681, 684 (5th Cir.1977).

In this case, a copy of the complaint and summons was sent via certified mail to each corporate defendant, addressed to Raymond L. Hobbs, who was authorized to receive process on their behalf. This satisfies the requirements of rule 4. Therefore, Hobbs-Bannerman Corporation and Hobbs-Hood, Joint Venture were properly served.

Because the Clayton Act does not provide for service of process on individuals, the propriety of service of process on Mr. Hobbs must be gauged by the requirements of the applicable Texas long-arm statute or rule; not by rule 4. See Fed.R.Civ.P. 4(e).³ Rule 108 of the Texas Rules of Civil Procedure authorizes personal delivery on a nonresident defendant or delivery by registered or certified mail restricted to addressee only. The record shows that defendant Raymond L. Hobbs was served in accordance with rule 108, and this court concludes that service of process was properly perfected not only on Mr. Hobbs, but on all three defendants.

III. THE PERSONAL JURISDICTION ISSUE

A. The Corporate Defendants

Alluding to the doctrine of International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), the parties disagree as to whether defendants had the requisite contacts with the State of Texas to satisfy due process. Their simple disagreement is complicated by the fact that in an antitrust action, Congress permits nationwide service of process on corporate defendants. A recent fifth circuit opinion has held that when nationwide service is authorized, the district court's jurisdiction is not circumscribed by the perimeters of the state in which it sits, and that the only "minimum contacts" required by due process are contacts with the United States, not the forum state. Federal Trade Commission v. Jim Walter Corp., 651 F.2d 251, 255-57 (5th Cir.1981).

In Jim Walter Corp. the court viewed due process limitations on personal jurisdiction as part of the concept of sovereignty and reasoned that the International Shoe doctrine defines the "limits on the exercise of the sovereign function...." Id. at 256. Consequently, the court decided, since the federal court exercises the "Judicial Power of the United States, ... due process requires only that a defendant in a federal suit have minimum contacts with the United States, `the sovereign that created the court.'" Id. at 256 (citations omitted).

A recent Supreme Court case appears to seriously undermine the rationale of Jim Walter Corp. In Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982), the Court, in no uncertain terms, rejected sovereignty as the basis for fourteenth amendment limitations on personal jurisdiction. It stated: "The personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty." Id. at 702, 102 S.Ct. at 2104 (citations omitted). Although Jim Walter Corp. implicated the fifth amendment, while the fourteenth amendment was at issue in Insurance Corp. of Ireland, this difference will not allow a clash between the two holdings to be averted. In Jim Walter Corp., there was no distinction made between the conceptual underpinnings of the two amendments; the court simply and logically borrowed the method of analysis used in a state law case and applied it to the federal question case before it.⁴ The message to be gleaned from this is that the same concept of limitation on sovereignty underlies restrictions on in personam jurisdiction under both the fifth and fourteenth amendments; only the sovereign entities differ. See Burstein v. State Bar of California, 693 F.2d 511, 515-16 n. 8. (5th Cir. 1982).

In view of the irreconcilability of the two opinions, the precedential value of Jim Walter Corp. has been eroded. This leaves the vexing issue of personal jurisdiction and nationwide service of process still open in this circuit. Consequently, this court must determine on its own whether the result, if not the rationale, of Jim Walter Corp. can be saved.

The validity of the national contacts approach is contingent on both statutory and constitutional authority. See Black v. Acme Markets, Inc., 564 F.2d 681, 684 (5th Cir.1977). In this case, Section 12 of the Clayton Act provides the necessary statutory underpinning. See id; Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); cf. DeJames v. Magnificence Carriers, Inc., 491 F.Supp. 1276, 1282-83 (D.N.J.1980), affd. 654 F.2d 280 (3d Cir.1981) (accepting the national contacts test on principle, but holding it inapplicable in an admiralty action in which there is no federal statute permitting nationwide service of process.) Constitutional authority, however, is more problematic. Most courts have decided that fifth amendment due process requires...