Gulf Consol. Services, Inc. v. Corinth Pipeworks, S.A.

• Citation: 898 F.2d 1071
• Decision Date: 26 April 1990
• Docket Number: No. 89-2451,89-2451
• Parties: 11 UCC Rep.Serv.2d 761, Prod.Liab.Rep.(CCH)P 12,589 GULF CONSOLIDATED SERVICES, INC., Plaintiff-Appellee, v. CORINTH PIPEWORKS, S.A., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1071

898 F.2d 1071

11 UCC Rep.Serv.2d 761, Prod.Liab.Rep.(CCH)P 12,589

GULF CONSOLIDATED SERVICES, INC., Plaintiff-Appellee, v. CORINTH PIPEWORKS, S.A., Defendant-Appellant.

No. 89-2451.

United States Court of Appeals, Fifth Circuit.

April 26, 1990.

Joseph Newton, Eastham, Watson, Dale & Forney, Houston, Tex., for defendant-appellant.

Howard King, Funderburk & Funderburk, Houston, Tex., for plaintiff-appellee.

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

Before GEE, REAVLEY, and GARWOOD, Circuit Judges.

GEE, Circuit Judge:

Today's case presents the question whether a Greek oil field casing manufacturer, licensed by a Texas-based organization which allows the manufacturer to warrant conformity with certain set standards, was properly haled into court in Texas to answer a claim that its products failed to conform to those standards. Because the manufacturer had an expectation that its products would be used in Texas, and having determined that its being required to defend suit in Texas was not unfair, we affirm the district court's exercise of personal jurisdiction.

I. Facts

The nominal plaintiff-appellee, Gulf Consolidated Services, Inc., ("Gulf") is a Texas corporation with its principal office in Houston, Texas. Its insurer, the real party in interest who prosecuted this action, is American Motorists Insurance Company ("AMI"), an Illinois corporation with its principal place of business in Illinois. The defendant-appellant, Corinth Pipeworks, S.A., is a Greek corporation with its principal office in Athens, Greece.

In 1980 Gulf, under the name of International Materials & Services Co. ("IMS"), was engaged in the business of importing and selling pipe. In October of that year, IMS purchased 1,260 joints of steel oil field casing from Corinth. Corinth warranted that the casings were manufactured in accordance with American Petroleum Institute ("API") standards.

After the casings arrived in Houston, Texas, they were sent to a pipe threading company. Following threading, 66 joints of the casings were then sold by IMS to United Pipe & Supply ("United") in Midland, Texas. United subsequently sold the casings to one Wayman Buchanan. The 66 joints were sent to Mr. Buchanan's oil well, Neely No. 1, in Wheeler County, Texas.

During drilling operations on the well, the casing failed in seven separate locations, increasing the cost of the well by $433,587.81. Two unused joints of the 66 sent to the site were taken to Failure Analysis Associates in Houston, where Metallurgical tests and examinations indicated that the two casings contained weld seam defects. These defects demonstrated that the casings inspected were not manufactured in accordance with API specifications. United reimbursed Mr. Buchanan for the additional drilling expenses incurred; and United was reimbursed, in turn, by AMI.

Following a bench trial, the district court found Corinth liable for breach of an express warranty that the casing would meet API specifications and for breach of the implied warranties of merchantability and fitness for a particular purpose. The court awarded actual damages of $433,587.88, prejudgment interest in the amount of $394,640.62, attorneys' fees in the amount of $55,050.18 and costs of $6,960.20.

II. Discussion

A. Jurisdiction

Corinth does not challenge its amenability to suit under the Texas Long-Arm Statute, but contends that it lacked sufficient contacts with Texas for it to be subject to the personal jurisdiction of the district court.

To satisfy the demands of due process, two requirements must be met before a non-resident defendant can be amenable to suit in a given forum. First, "(a) the nonresident must have some minimum contacts with the forum resulting from an affirmative act or acts on their part;" second, "(b) it must not be unfair or unreasonable to require the nonresidents to defend the suit in the forum state." Patterson v. Dietze, Inc., 764 F.2d 1145, 1148 (5th Cir.1985).

1. Minimum Contacts

"[T]he concept of minimum contacts permits a non-resident to 'structure his primary conduct as to avoid being haled into court in a particular state.' " Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1169 (5th Cir.1985). Corinth alleges that it had purposefully structured its conduct so as to avoid being haled into Texas. Corinth maintains that the following facts demonstrate its successful avoidance of minimum contacts with Texas in the present transaction: Corinth, a Greek corporation with its offices and factory in Greece, is not registered to do business in Texas or any other location in the United States; it maintains no agent, office, or assets in the United States; IMS and Corinth negotiated the transaction by telegram; the actual sale took place in Greece; IMS opened its letter of credit at a Greek bank in Athens; under the terms of the sale, performance was complete when it delivered the casings to the ocean carrier in Greece, the risk of loss transferring to the plaintiff at that time. Corinth also notes that all of its sales of pipe to United States customers had been on similar terms.

Although a party can, through its actions, avoid being haled into a foreign jurisdiction, the simple fact that a sales transaction is consummated outside that jurisdiction does not prevent the sale from forming the basis of jurisdiction. Oswalt v. Scripto, Inc., 616 F.2d 191, 197 n. 8 (1980) ("jurisdiction does not depend on the technicalities of when title passes"). Nor is jurisdiction always successfully evaded merely because the defendant has avoided physical contact with the forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). The "minimum contacts" requirement is satisfied, and "specific" jurisdiction proper, ¹ where the contact with the forum arises from the sale or manufacture of a product by a foreign defendant, which has caused harm in the forum state, so long as the defendant delivered the product into the "stream of commerce" with the expectation that it should be purchased by or used by consumers in the forum state. Bearry v. Beech Aircraft Corp., 818 F.2d 370 (5th Cir.1987) (citing World-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)).

Here, Corinth's expectation that the casings would be used in Texas is indisputable. Corinth had a license agreement with API, an organization in Dallas, Texas, which allowed Corinth to sell API specification pipe. IMS purchased the casing in question in reliance upon Corinth's warranty that the casing was manufactured in accordance with API specifications. Corinth's sole market for API oilfield casing was Houston, Texas, and Corinth representatives frequently called on customers there. Corinth was the charterer of the vessels which carried the casing shipments from Greece to Houston.

Corinth contends that the "stream of commerce doctrine" is inapplicable in this case as the nominal plaintiff in the suit did not encounter the product in the stream of commerce. This contention is meritless. The question to be answered in determining whether "minimum contacts" has been satisfied is whether "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen, 444 U.S. at 295, 100 S.Ct. at 566. A defendant's expectation that it may be held into a foreign court does not lessen simply because the ultimate consumer's claim of damages is subrogated to an insurer.

2. Fair and Reasonable

The second part of due process analysis asks the question whether it is fair and reasonable to request the non-resident defendant to defend suit in the forum. The determination of the reasonableness of the exercise of jurisdiction in each case will depend on an evaluation of several factors, including the burden on the defendant, the interests of the forum state, and the plaintiff's interest in obtaining relief. Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 U.S. 102, 113, 107 S.Ct. 1026, 1033-34, 94 L.Ed.2d 92 (1987).

In Asahi, the Court was faced with a situation in which a Taiwanese motorcycle inner tube manufacturer sought indemnity in a California court from its Japanese supplier of valve stems for its settlement of a personal injury claim. In analyzing the burden on the defendant in defending the suit in California, the court stated:

Certainly the burden on the defendant in this case is severe. Asahi has been commanded by the Supreme Court of California not only to traverse the distance between Asahi's headquarters in Japan and the Superior Court of California in and for the County of Solano, but also to submit its dispute with Cheng Shin to a foreign nation's judicial system. The unique burdens placed upon one who must defend oneself in a foreign legal system should have significant weight in assessing the reasonableness of stretching the long arm of personal jurisdiction over national borders.

Id. at 114, 107 S.Ct. at 1034. Likewise, the burden on Corinth, in having to defend suit in a legal system greatly different from that of Greece, should be given significant weight in our assessment of the reasonableness of Texas's assertion of personal jurisdiction in the present case.

The burden on a defendant to have to defend suit in a foreign country may nonetheless be justified if the interests of the plaintiff and the forum are of sufficient importance. Id. In Asahi, the interests of the plaintiff and the forum were held to be slight for several reasons: the transaction took place in Taiwan; Asahi's valve stems were shipped from Japan to Taiwan; the Taiwanese company had not demonstrated that it was more convenient for it to litigate its indemnification claim in California, rather than in Taiwan or Japan. Moreover, because the plaintiff was not a California resident, California's legitimate interests in the dispute were found to have been...