Green Country Crude, Inc. v. Avant Petroleum, Inc.

• Decision Date: 03 December 1986
• Docket Number: No. 86-1306-K.,86-1306-K.
• Parties: GREEN COUNTRY CRUDE, INC., a Kansas Corporation, Plaintiff, v. AVANT PETROLEUM, INC., Defendant.
• Court: U.S. District Court — District of Kansas

648 F. Supp. 1443

GREEN COUNTRY CRUDE, INC., a Kansas Corporation, Plaintiff, v. AVANT PETROLEUM, INC., Defendant.

No. 86-1306-K.

United States District Court, D. Kansas.

December 3, 1986.

Andrea Ramsay and Walter C. Williamson, Williamson, McGee, Griggs & DeMoss, Chartered, Wichita, Kan., for plaintiff.

William R. Sampson and Trisha A. Thelen, Foulston, Siefkin, Powers & Eberhardt, Wichita, Kan., Patterson, Belknap, Webb & Tyler, New York City, for defendant.

MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

In this diversity action plaintiff seeks to recover damages for defendant's alleged breach of a contract for the purchase of oil. Defendant has moved to dismiss contending, first, the court lacks in personam jurisdiction, and second, service of process was inadequate; alternatively, defendant seeks transfer of this case under 28 U.S.C. § 1404(a). Following review of the parties' briefs and oral argument, the court agrees it lacks personal jurisdiction over the defendant.

Questions of personal jurisdiction necessarily require a detailed examination of the facts of each case. Plaintiff Green Country Crude, Inc. ("Green Country") is a Kansas corporation, with its principal place of business in Coffeyville, Kansas. Defendant Avant Petroleum, Inc. ("Avant") is a New York corporation, qualified to do business in Texas with its principal place of business, in that state, in Houston. Avant is not qualified to do business in Kansas, and has no employees, facilities or bank accounts located in this state.

Representatives of these two companies first met during the fall of 1985 at a meeting in Dallas, Texas. Charles Hicks, president of Green Country, was invited to this meeting by a third party. There he met and spoke with Donald Wray, an Avant manager from that company's Houston office. In his affidavit to the court, Hicks states:

On or about October 20, 1985, during the first meeting which I had with Don Wray in Dallas, Texas, and prior to the execution of the contract, I informed Mr. Wray that in order for Green Country ... to provide oil and perform under a contract with Avant it would be necessary to purchase oil in Kansas. Mr. Wray stated that was okay, that he did not care where the barrels came from as long as it was marketable crude. He further encouraged me on behalf of Green Country ... to enter into such contracts in Kansas to supply oil to Avant.

(Rec. p. 10, ¶ 5.) No formal contract was entered at this meeting, but after Hicks returned to Kansas he telephoned Wray at his Houston office, and they continued their discussions. In Houston, Wray then drafted and signed, on Avant's behalf, a contract for the purchase of oil from Green Country. Wray mailed the contract to Green Country's offices in Coffeyville, Kansas, where Hicks signed the contract on November 22, 1985, and returned a duplicate original to Avant's offices in Houston. At no time did any Avant agent or representative physically enter the State of Kansas to negotiate or formalize this contract.

The contract designated Green Country as the seller, and Avant as the buyer, of approximately 240 barrels of "Domestic Sweet (West Texas Intermediate quality)" crude oil per day. Green Country was required to deliver the oil into the Arco pipeline facilities at Manuel, Oklahoma. The term of the contract began December 1, 1985, and continued on a monthly basis until and unless terminated upon 30 days' notice by either party. Price was to be calculated according to the daily average of light sweet crude oil prices on the New York Mercantile Exchange for each month in question, and Avant made weekly payments to the account designated by Green Country. The agreement incorporated by express reference the additional terms and conditions of Avant's standard provisions for domestic transactions, one of which stated that the laws of the State of Texas governed the agreement and any related disputes.

After the contract was signed by both parties, Dean Elliott, an Avant consultant, met with Hicks in Tulsa, Oklahoma to inspect Green Country's facilities there. Hicks later traveled to Houston and again met with Don Wray, but there were apparently no further personal contacts. During the performance of the contract Avant representatives communicated with Hicks in Coffeyville, Kansas, by telephone and mail. Plaintiff alleges Avant agents also contacted Arco at its offices in Independence, Kansas, with instructions and payments regarding the pipeline operation in Oklahoma, but it is clear that none of these contacts, nor any contacts with Green Country involved physical visits to Kansas by Avant personnel. Green Country's invoices were transmitted from its Coffeyville, Kansas office to Avant, and Avant made payments to plaintiff's account at the Fourth National Bank in Tulsa, Oklahoma.

On February 26, 1986, the parties amended the contract to provide for Avant's purchase of up to 500 barrels of oil per day; on March 3, 1986, the contract was further amended, providing for the purchase of up to 700 barrels per day. Three days later, on March 6, a final amendment required 45, rather than 30, days' written notice by either party to effect cancellation of the contract. Each of these amendments originated in Avant's Houston office and was sent to Green Country in Coffeyville, Kansas.

Less than one week later, on March 12, 1986, defendant Avant allegedly refused to accept any further deliveries of oil, without giving Green Country the 45 days' written notice of cancellation required by the amended contract. Plaintiff filed this suit, seeking recovery for defendant's breach, on April 9, 1986.

In a diversity action such as this, the court must look to the law of the forum state for the basis of in personam jurisdiction over the nonresident defendant. Doyn Aircraft, Inc. v. Wylie, 443 F.2d 579 (10th Cir.1971); NL Industries, Inc. v. Gulf & Western Industries, Inc., No. 85-6039 (D.Kan., unpub. Aug. 7, 1986). Plaintiff bears the burden of establishing personal jurisdiction over the nonresident defendant and must make a prima facie showing jurisdiction exists to avoid dismissal. Behagen v. Amateur Basketball Assoc. of U.S.A., 744 F.2d 731 (10th Cir.1984). Factual doubts are to be resolved in plaintiff's favor. Ammon v. Kaplow, 468 F.Supp. 1304 (D.Kan.1979).

In addressing the question of jurisdiction we must first determine whether defendant's conduct falls within the scope of any of the enumerated provisions of the Kansas long arm statute, K.S.A. 60-308(b), authorizing service of process on nonresident defendants. We must then analyze whether this conduct satisfies the "minimum contacts" requirements of constitutional due process. Federal Deposit Ins. Corp. v. Culver, 640 F.Supp. 725, 727 (D.Kan.1986); Thermal Insulation Systems, Inc. v. Ark-Seal Corp., 508 F.Supp. 434, 436 (D.Kan. 1980); and J.E.M. Corp. v. McClellan, 462 F.Supp. 1246, 1247 (D.Kan.1978). Both the statutory and constitutional requirements must be satisfied before this court can properly exercise jurisdiction over a nonresident defendant. A motion to dismiss may be granted for lack of personal jurisdiction on either basis alone. Cases must be carefully distinguished on the basis of statutory holdings that find a defendant not within the literal terms of the statute or rule that authorizes service, and constitutional holdings that find the exercise of jurisdiction, once properly invoked by statute or rule, inconsistent with due process standards. J.E.M. Corp. v. McClellan, 462 F.Supp. at 1247.

Plaintiff argues defendant Avant's conduct falls within either, or both, the "transacting business" or "express or implied contract" provisions of the Kansas long arm statute, K.S.A. 60-308(b), which thus provides:

Any person, whether or not a citizen or resident of this state, who in person or through an agent or instrumentality does any of the acts hereinafter enumerated, thereby submits the person and, if an individual, the individual's personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of these acts:

(1) Transaction of any business within this state;

* * * * * *

(5) entering into an express or implied contract, by mail or otherwise, with a resident of this state to be performed in whole or in part by either party in this state; ....

This statute reflects the Kansas public policy of asserting personal jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment. Misco-United Supply, Inc. v. Richards of Rockford, Inc., 215 Kan. 849, 528 P.2d 1248 (1974); Woodring v. Hall, 200 Kan. 597, 606, 438 P.2d 135 (1968). Where a statute extends state court jurisdiction to the constitutionally permissible limits, the "only" concern of a court addressing a jurisdictional challenge is whether minimum contacts exist so that maintenance of the suit does not offend due process. Shanks v. Westland Equipment and Parts Co., 668 F.2d 1165 (10th Cir.1982). Thus, consistent with the Kansas Supreme Court's interpretation of K.S.A. 60-308(b), the primary restraint on the exercise of jurisdiction is the limits found in the due process clause of the Fourteenth Amendment as interpreted in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), and their progeny. Intern. Pizza Hut, etc. v. Supreme Pizza, Inc., 464 F.Supp. 65, 67 (D.Kan.1978).

While courts must be careful to avoid burdening the Kansas Legislature with narrowing constructions of the long arm statute which may in turn require curative enactments, the axiom of liberal construction does not mean we may ignore the enumerated acts. Only under the circumstances embraced by the provisions of K.S.A. 60-308(b) may service issue and the constitutionality of jurisdiction under any set of facts be tested. J.E.M. Corp. v....