Entek Corp. v. Southwest Pipe & Supply Co.

• Decision Date: 11 April 1988
• Docket Number: No. CA-3-85-2505-T.,CA-3-85-2505-T.
• Citation: 683 F. Supp. 1092
• Parties: ENTEK CORPORATION and James E. Turner, Plaintiffs, v. SOUTHWEST PIPE & SUPPLY CO. d/b/a Arizona Pump, Inc.; National Pump Company; Powell Duffryn Public Limited Company; Powell Duffryn (USA) Limited, Inc.; James W. Mason; C. Lee Chipman; Aquapore Corp.; Dasurat Enterprises PTE Ltd.; Moisture Systems, Inc., and J.B. Keysor, Inc., Defendants.
• Court: U.S. District Court — Northern District of Texas

683 F. Supp. 1092

ENTEK CORPORATION and James E. Turner, Plaintiffs, v. SOUTHWEST PIPE & SUPPLY CO. d/b/a Arizona Pump, Inc.; National Pump Company; Powell Duffryn Public Limited Company; Powell Duffryn (USA) Limited, Inc.; James W. Mason; C. Lee Chipman; Aquapore Corp.; Dasurat Enterprises PTE Ltd.; Moisture Systems, Inc., and J.B. Keysor, Inc., Defendants.

No. CA-3-85-2505-T.

United States District Court, N.D. Texas, Dallas Division.

April 11, 1988.

COPYRIGHT MATERIAL OMITTED

William D. Sims, Jr., John C. Eichman, Jenkens & Gilchrist, Dallas, Tex., for Entek Corp. and James Turner.

Schuyler B. Marshall, Bruce S. Sodtek, Jonathan W. Richards, Thompson & Knight, Dallas, Tex., for Southwest Pipe and Supply Co., National Pump Co., Moisture Systems, Inc., and J.B. Keysor, Inc.

Lyle Jeanes, II, Vial, Hamilton, Koch & Knox, Dallas, Tex., for James Marson.

Gerard B. Rickey, Pace Chandler & Rickey, Dallas, Tex., and Donald A. Streck and Marvin E. Jacobs, Jacobs & Streak, Ventura, Cal., for James Mason, Lee Chipman, Aquapore Corp., and Dasurat Enterprises PTE Ltd.

ORDER

MALONEY, District Judge.

Before the Court are motions to dismiss for want of personal jurisdiction from all Defendants except Southwest Pipe & Supply Company ("Southwest") and National Pump Company ("National").¹

Two issues underlie the question of whether this Court may exercise personal jurisdiction over the defendants: first, are the defendants amenable to personal jurisdiction in federal court under constitutional standards; and second, was service of process correctly executed.

I.

Plaintiffs' Background Version.

The following background is taken from the allegations in Plaintiffs' complaint.

Plaintiff Turner invented "Leaky Pipe," a porous irrigation pipe and a process to manufacture that product. Turner is the sole owner and president of Plaintiff Entek Corporation ("Entek"). Entek owns and holds three patents covering Leaky Pipe and the manufacturing process.² The Leaky Pipe trademark is registered with the United States Patent and Trademark Office.

On September 1, 1982, Entek entered into a distributor agreement with Defendant Chipman which granted Chipman the right to distribute Leaky Pipe in Florida. Chipman and Defendant Mason visited Entek's plant in Southlake, Texas, with Plaintiffs' permission under the pretext that Chipman and Mason would suggest improvements in Leaky Pipe. There, Chipman and Mason signed confidentiality agreements, promising not to misappropriate the information they would receive. Chipman and Mason then obtained technical secrets on the manufacturing process for Leaky Pipe. Thereafter, Mason, with Chipman's support, used the secrets to apply for patents, without informing Plaintiffs that he would do so. Mason eventually received Patent No. 4,517,316 (the '316 patent).

Chipman formed Defendant Aquapore Corporation ("Aquapore"), and then with Mason received a loan from Dasurat Enterprises PTE LTD ("Dasurat"). Following the visit to the Entek plant, Chipman and Aquapore began to manufacture and market a porous pipe using Entek's patents and the trade secrets and inventions stolen from Plaintiffs. Chipman and Aquapore contracted with Defendant Powell Duffryn Public Limited Co. ("PDPLC"), National, and Southwest to market the pipe worldwide. Aquapore and Chipman also entered into an exclusive licensing agreement with National and Southwest. Representatives of National met in Dallas with representatives of Defendant Moisture Systems Inc. ("Moisture Systems"), at that time a distributor for Plaintiffs, to discuss whether Moisture Systems would become the marketing arm in the United States for National, Southwest, and Powell Duffryn (USA) Limited, Inc. ("PDUSA"). Aquapore and Moisture Systems now operate as the marketing arm for PDPLC, PDUSA, National, and Southwest for porous irrigation pipe. Defendant Keysor manufactures the pipe.

Defendants have used the Leaky Pipe trademark, logo, and have attempted to associate themselves with Plaintiffs' product. Defendants make pipe of inconsistent quality, but the public confuses Defendants' pipe with that of Plaintiffs' because of Defendants' misuse of Plaintiffs' trademark.

Allegedly, this Court has personal jurisdiction over Defendants pursuant to the Texas Long-Arm Statute, Tex.Civ.Prac. & Rem.Code Ann. §§ 17.041-17.093 (Vernon 1986) and the principles of due process, because Defendants have done business and committed torts in Texas and this suit arises out of this business and these torts. Plaintiffs served Defendants, except PDPLC and Dasurat, pursuant to the Texas Long-Arm Statute.³ PDPLC and Dasurat were personally served under Fed.R. Civ.P. 4(i).

II.

Personal Jurisdiction Over Individual Defendants.

A. Standard for Personal Jurisdiction.

When a federal question case is based upon a federal statute which is silent as to service of process,⁴ and a state long-arm statute is therefore utilized to serve an out-of-state defendant, Fed.R.Civ.P. 4(e) requires that the state's standard of amenability to jurisdiction apply. See Point Landing, Inc. v. Omni Capital Int'l, LTD., 795 F.2d 415, 427 (5th Cir.1986) (per curiam) (en banc) aff'd sub nom. Omni Capital Int'l, LTD. v. Rudolf Wolff & Co., LTD., 484 U.S. ___, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987); DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1266 (5th Cir. 1983). In such a case, personal jurisdiction may be exercised over a nonresident defendant if: (1) the nonresident defendant is amenable to service of process under the law of the forum state; and (2) the exercise of jurisdiction under state law comports with the due process clause of the fifth amendment.⁵ Id.; See D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir. 1985).

The first step of this inquiry is to determine the reach of the forum state's long-arm statute. The second step — the due process inquiry — is governed by federal law and requires the satisfaction of two elements: (a) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; and (b) it must be fair and reasonable to require the nonresident to defend the suit in the forum state. D.J. Investments, Inc., 754 F.2d at 545. Because the Texas long-arm statute has been construed to reach to the limits of due process, see Hall v. Helicopteros Nacionales de Colombia, 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), this Court need only determine whether it may constitutionally assert jurisdiction over the defendants.

Due process requirements for exercising personal jurisdiction over a nonresident have been delineated in a familiar body of Supreme Court case law. Burger King v. Rudzewicz, 471 U.S. 462, 471-478, 105 S.Ct. 2174, 2181-85, 85 L.Ed.2d 528 (1985); Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir.1985). A court must determine whether the nonresident defendant has, through his actions, purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its law. The defendant's conduct and connection with the forum state must be such that the defendant should reasonably anticipate being haled into court in the forum state. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283 (1958). The minimum contacts analysis requires more than counting the nonresident's contacts with the forum. Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir.1983) cert. denied, 466 U.S. 962, 104 S.Ct. 2180, 80 L.Ed.2d 561 (1984).

The Supreme Court observed:

The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful "contacts, ties, or relations." ... By requiring that individuals have "fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign," ... the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." ... Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum ... and the litigation results from alleged injuries that "arise out of or relate to" those activities.

Burger King, 471 U.S. at 471-472, 105 S.Ct. at 2181-82 (citations and footnotes omitted).

The "purposeful availment" requirement delineates reasonable anticipation of out-of-state litigation. Hanson v. Denckla, 357 U.S. at 253, 78 S.Ct. at 1239-40. This requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts or of the unilateral activity of another party or a third person. Burger King, 471 U.S. at 475, 105 S.Ct. at 2183. Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State. Id.

With respect to interstate contractual obligations, parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other state for the consequences of their activities. Burger King, 471 U.S. at 473, 105 S.Ct. at 2182-83.

After deciding that a defendant purposefully established minimum contacts with the forum state, the Court must determine whether maintenance of the suit comports with "traditional notions of fair play and substantial justice." Burger King, 471 U.S. 476, 105 S.Ct. at 2184 (citing International Shoe Co., 326 U.S. at 320, 66 S.Ct. at 160); Asahi Metal Industry...