Bearry v. Beech Aircraft Corp.

• Decision Date: 03 June 1987
• Docket Number: No. 86-2527,86-2527
• Citation: 818 F.2d 370
• Parties: Dorothy BEARRY, et al., Plaintiffs-Appellees, v. BEECH AIRCRAFT CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 370

818 F.2d 370

Dorothy BEARRY, et al., Plaintiffs-Appellees, v. BEECH AIRCRAFT CORPORATION, Defendant-Appellant.

No. 86-2527.

United States Court of Appeals Fifth Circuit.

June 3, 1987.

Thomas M. Farrell, Gerald L. Bracht, Mayor, Day & Caldwell, Houston, Tex., for defendant-appellant.

Joseph L. Lemoine, Jr., Lafayette, La., Larry P. Boyd, Wayne Fisher, Houston, Tex., for Helen N. Mills, et al.

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

Before POLITZ, JOLLY, and HIGGINBOTHAM, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This case presents the question whether the Constitution prohibits the exercise of jurisdiction by a Texas court over a nonresident defendant for claims having no relation to Texas, solely because a large quantity of products manufactured by the defendant, Beech Aircraft Corporation, has flowed into Texas during the past five years. We granted leave to appeal the district court's denial of Beech's motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer venue to Mississippi, a motion resting on the assertion that the district court erroneously employed the concept of "stream of commerce" to find that Texas had general jurisdiction over Beech--that Texas can exercise personal jurisdiction over Beech for any claims asserted against it. We reverse.

I

Lonnie H. Bearry and Alva R. Mills, both Louisiana residents, bought a Beech aircraft in Louisiana. On July 9, 1983, both were killed when the plane crashed outside of McComb, Mississippi, in a flight from McComb to Baton Rouge, Louisiana.

Mills' survivors first sued Beech in Louisiana, but that suit was dismissed for lack of personal jurisdiction under the Louisiana long-arm statute. The survivors of both decedents filed separate suits against Beech in Texas state court, ¹ claiming that the plane crash was caused by the defective design of the plane's throw-over yoke and Beech's failure to adequately warn or instruct regarding this danger.

After the suits were removed to federal court and consolidated, Beech moved to dismiss for lack of personal jurisdiction or venue, or in the alternative, to transfer venue to Mississippi. Beech is neither registered in nor a citizen of Texas. The only statutory peg for jurisdiction, then, is the Texas long-arm statute, Tex.Civ.Prac. & Rems.Code Ann. Secs. 17.041-.043 (Vernon 1986). As many, Texas courts have read the Texas long-arm statute as reaching to the limits of due process. 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).

According to the evidence before the district court, Beech is a Delaware corporation with its principal place of business in Kansas, designing, manufacturing and selling airplanes and related products. Its design, testing, manufacturing, sales and warehouse facilities are located in Kansas, Colorado, and Alabama. Beech has never qualified to do business nor maintained an agent for service of process in Texas. Beech has no telephone listing in Texas; it has no warehouse or manufacturing facilities and has never had a bank account in Texas, nor has it insured any person in Texas; it owns no real estate in Texas; it has not paid taxes to the State of Texas; it has no employees or directors who are permanently assigned to work in Texas.

There was also evidence that from 1980 to 1985, Beech engaged in a nation-wide marketing campaign, employing over 300 marketing employees at its Kansas office. During this five year period, nearly $250 million of Beech manufactured products flowed to seventeen independent Texas dealers from sales carefully negotiated and completed in Kansas. One of the dealers, Hedrick Beechcraft--Houston, Inc., is a wholly owned subsidiary of Beech Holdings, Inc., a Beech subsidiary. However, because Hedrick Beechcraft is operated as a distinct corporation, the district court properly held that its contacts with Texas could not be imputed to Beech. Beech also manufactured airframe assemblies for Bell Helicopters in Fort Worth, Texas, under contracts exceeding $72 million with all products delivered to Bell "F.O.B. Wichita." Furthermore, Beech representatives visited the Texas dealers on occasion to assist them with maintenance problems, to demonstrate new aircraft, and to offer sales incentives to the Texas dealers, but only at a dealer's request.

The flow of goods also ran to Beech who purchased over $195 million of goods and services from over 500 Texas vendors under sales agreements with Texas dealers carefully negotiated in Kansas, with delivery of all goods accepted in Kansas.

Finally, the evidence established that plaintiffs' plane was not designed or manufactured in Texas, had never been owned by a Texas resident, and had never been repaired in or serviced in Texas. None of the plaintiffs or their decedents was domiciled in Texas. In short, no one argues that this lawsuit relates in any way to Beech's contacts with Texas.

Nonetheless, the district court denied Beech's motion to dismiss for lack of personal jurisdiction because, as it explained:

Beech has created a stream of commerce with Texas that is so continuous and systematic and of such enormous volume that Beech has established a general presence within the State for purposes of in personam jurisdiction.

The district court then denied the alternative motion to transfer. Recognizing the novelty and importance of its decision, the district court certified the jurisdiction issue for interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b), and we granted the requested leave to appeal.

II

We first ask whether Texas law authorizes process on these facts and, if so, whether its effort reaches beyond constitutional limits. These two inquiries collapse into one, however, given Texas' effort to reach as far as constitutionally allowed.

Because the interests of Texas and the plaintiffs in trying this lawsuit in Texas are so slight, we are persuaded that maintenance of this suit in Texas would be unfair and unreasonable. In this approach we indicate two interests that, while often overlapping, are nonetheless distinct. First, there are the federalism concerns of state sovereignty--in which we inquire about the power of one state to subject to its process the citizen of another state. The restriction on state sovereign power limits the power of a state to compel a citizen of a sister state to submit to its process. This restriction does not affect the subject-matter jurisdiction of the state's courts--the power to adjudicate the matter once consent is given. Accordingly, nonresidents may consent to litigation in a foreign state without raising federalism concerns. While the Supreme Court suggested otherwise in Ins. Corp. of Ireland v. Compagnie des Bauxites, 456 U.S. 694, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982), it retreated from this position in Asahi Metal Ind. v. Superior Court, --- U.S. ----, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), requiring consideration of "the shared interest of the several states in furthering fundamental substantive social policies." Id. 107 S.Ct. at 1034 (quoting World-wide Volkswagen v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980)). To hold otherwise either confuses the distinction between the power to compel and the power to adjudicate or disregards our federalist structure. Second, there is the personal right to due process secured by the fourteenth amendment.

Both are limits upon state power--limits that are defined by similar inquiries into fairness to the nonresident defendant. Nonetheless, it bears mention that the origin of the limits are different and their occasional coincidence of inquiry can diverge, particularly as both the interests of the forum state and the relative inconvenience of the defendant to proceed in the forum become slight. One is a limit upon states implicit in their very membership in the federation enforceable by residents. The other is the positive right running to persons from the due process clause itself.

A. Minimum Contacts.

(1)

The due process clause limits the power of a state to assert personal jurisdiction over a nonresident defendant. Its requirements are satisfied when the nonresident defendant has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (citation omitted). In evaluating these 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 protections of its laws. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).

When the cause of action relates to the defendant's contact with the forum, the "minimum contacts" requirement is satisfied, and "specific" jurisdiction is proper, so long as that contact resulted from the defendant's purposeful conduct and not the unilateral activity of the plaintiff. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S.Ct. 559, 567-68, 62 L.Ed.2d 490 (1980). If the contact resulted from the defendant's conduct and created a substantial connection with the forum state, even a single act can support jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 2184 n. 18, 85 L.Ed.2d 528 (1985); McGee v. International Life Insurance Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957). When the contact stems from a product, sold or manufactured by the foreign defendant, which has caused harm in the forum state, the court has jurisdiction if it finds that the defendant delivered the product into the stream of commerce with the expectation that it would be purchased by or...