Gundle Lining Const. Corp. v. Adams County Asphalt, Inc.

• Decision Date: 13 June 1996
• Docket Number: No. 95-20155,95-20155
• Citation: 85 F.3d 201
• Parties: GUNDLE LINING CONSTRUCTION CORPORATION, Plaintiff, and United States Fidelity & Guaranty Company, Defendant/Third-party Plaintiff/Appellee, v. ADAMS COUNTY ASPHALT, INC., Kimbob, Inc., and Robert M. Mumma, II, Third-party Defendants/Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 201

85 F.3d 201

GUNDLE LINING CONSTRUCTION CORPORATION, Plaintiff and United States Fidelity & Guaranty Company Defendant/Third-party Plaintiff/Appellee, v. ADAMS COUNTY ASPHALT, INC., Kimbob, Inc., and Robert M Mumma, II, Third-party Defendants/Appellants.

No. 95-20155.

United States Court of Appeals Fifth Circuit.

June 13, 1996.

Ralph Alan Midkiff, Clements, O'Neill, Pierce & Nickens, Houston, TX, Warren Wayne Harris, Jill Marie Tillman, Porter & Hedges, Houston, TX, for Gundle Lining Construction Corporation, plaintiff.

J. Mark Brewer, Patrick E. Gaas, Brewer & Pritchard, Houston, TX, for United States Fidelity and Guaranty Company, defendant-third party plaintiff-appellee.

Carron Nicks Armstrong, Dallas, TX, for third party defendant appellants.

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

Before BARKSDALE, DeMOSS and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

This diversity case was filed in the Southern District of Texas by a Texas corporation seeking to recover on a bond issued by the defendant. The defendant, a resident of Maryland, filed a third-party complaint seeking indemnification from the third-party defendants, who were the principals on the bond. The third-party defendants, all residents of Pennsylvania, filed motions to dismiss wherein they challenged the district court's in personam jurisdiction. The district court denied their motions. The plaintiff and defendant ultimately settled the underlying claim. The district court then granted summary judgment to the third-party plaintiff on its indemnity claim. The third-party defendants appealed, challenging the district court's decisions as to personal jurisdiction, venue, and the grant of summary judgment to the third-party plaintiff. Finding that personal jurisdiction was proper as to only one of the third-party defendants, we affirm in part and reverse in part.

FACTS AND PROCEDURAL HISTORY

Adams County Asphalt, Inc. ("Adams Inc.") contracted with the City of Harrisburg, Pennsylvania to perform a large project ("Harrisburg project") involving the city's waste disposal system. Adams Inc. is owned by Robert Mumma II ("Mumma"), who also owns Kimbob, Inc ("Kimbob Inc."). Adams Inc. obtained a payment bond for the benefit of all persons furnishing labor, material, or both on the Harrisburg project from United States Fidelity & Guaranty Company ("USF & G"). USF & G entered into a Master Security Agreement ("MSA") with Adams Inc., Kimbob Inc., and Mumma as indemnitors to secure reimbursement to USF & G of any payments it made in good faith on claims against the bond.

Adams Inc., as general contractor, entered into a subcontract with Gundle Lining Construction Corporation ("Gundle") of Houston, Texas to supply and install certain materials for the Harrisburg project. The project owner had specified that Adams Inc. subcontract with Gundle because Gundle had designed the portion of the project that was to employ Gundle's materials.

During the course of construction, a dispute arose between Adams Inc. and Gundle regarding the quantity of the material Gundle had agreed to supply for the project and the quality of its installation. Adams Inc.

paid Gundle the amount for which it had contracted but refused to pay Gundle for amounts in excess of the original contract.

Rather than pursue Adams Inc. on its claim, Gundle elected to make a claim for payment against the payment bond. After USF & G refused to pay the claim, Gundle filed suit against USF & G in Texas state court to recover on the bond. The suit was then removed to federal district court based upon diversity jurisdiction. Seeking indemnification, USF & G filed third-party complaints against Adams Inc., Kimbob Inc., and Mumma ("third-party defendants"), claiming that it was entitled to recover all amounts paid to Gundle from its indemnitors. Shortly thereafter, Gundle and USF & G settled their action for $121,000 (the amount of Gundle's claim against the bond), and Gundle agreed to dismiss its claim against USF & G.

The third-party defendants, all non-residents of Texas, filed, inter alia, motions to dismiss for lack of personal jurisdiction. USF & G countered with a motion for summary judgment. In October 1993, the district court denied the third-party defendants' motions for dismissal. Then, nearly a year and a half later, the district court granted USF & G's motion for summary judgment. The third-party defendants then timely perfected this appeal.

ANALYSIS

I. Personal Jurisdiction

It is undisputed that none of the parties to this appeal are residents of Texas. When the jurisdictional facts are not in dispute this court conducts a de novo review of the district court's determination that its exercise of personal jurisdiction over a nonresident defendant is proper. Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir.1990). In analyzing the district court's decision to exercise personal jurisdiction over a nonresident defendant, it is important to bear in mind that the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir.1985).

In a diversity suit a federal court has jurisdiction over a nonresident defendant to the same extent that a state court in that forum has such jurisdiction. Wilson v. Belin, 20 F.3d 644, 646 (5th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 322, 130 L.Ed.2d 282 (1994). The reach of a state court's jurisdiction is delimited by: (1) the state's long-arm statute; and (2) the Due Process Clause of the Fourteenth Amendment to the federal Constitution. Bullion, 895 F.2d at 215. The Texas long-arm statute authorizes the exercise of jurisdiction over nonresidents "doing business" in Texas. Tex.Civ.Prac. & Rem.Code § 17.042. The Texas Supreme Court has interpreted the "doing business" requirement broadly, allowing the long-arm statute to reach as far as the federal Constitution permits. Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990). Consequently, we will analyze the exercise of personal jurisdiction over nonresidents with reference to federal constitutional limits. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 n. 10, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982) (the restriction on state power to subject a nonresident to suit is "ultimately a function of the individual liberty interest preserved by the Due Process Clause").

The exercise of personal jurisdiction over a nonresident will not violate due process principles if two requirements are met. First, the nonresident defendant must have purposefully availed himself of the benefits and protections of the forum state by establishing "minimum contacts" with that forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). The defendant's conduct and connection with the forum state must be such that he should reasonably anticipate being haled into court in the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 296, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Second, the exercise of jurisdiction over the nonresident defendant must not offend "traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987) (quoting The "minimum contacts" prong of the inquiry may be further subdivided into contacts that give rise to "specific" personal jurisdiction and those that give rise to "general" personal jurisdiction. It is indisputable that if there is personal jurisdiction over the defendants in the instant case it exists by virtue of "specific" personal jurisdiction. Consequently, our review is limited to this subdivision of the minimum contacts analysis.

International Shoe, 326 U.S. at 316, 66 S.Ct. at 158).

The district court's exercise of specific jurisdiction is appropriate only when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404 (1984). To exercise specific jurisdiction, the court must examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice. Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977).

A. Jurisdiction as to Adams, Inc.

1. "Minimum contacts"

Adams Inc.'s contacts with Texas can be summarized as follows: (1) Adams Inc. entered into a contract with Gundle, a Texas entity, pertaining to the construction project in Pennsylvania, (2) it mailed payments to Gundle at Gundle's Texas address, and (3) it, a nonresident, engaged in communications with a resident during the course of developing and carrying out the contract. We have previously held that the combination of mailing payments to the forum state, engaging in communications surrounding the execution and performance of a contract, and the fact that a nonresident enters into a contract with a resident are insufficient to establish the requisite minimum contacts necessary to support the exercise of personal jurisdiction over a nonresident defendant. See Spademan, 772 F.2d at 1193.

However, the Spademan court was careful to recognize that one factor that might affect the minimum contacts analysis is the actual language present in the contract itself. Id. The court, quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), stated:

If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.... Instead, we have emphasized the need for a "highly realistic" approach...