International Trans. v. Embotelladora Agral Reg.
| Decision Date | 13 March 2002 |
| Docket Number | No. Civ.A. 3:01CV1140G.,Civ.A. 3:01CV1140G. |
| Citation | 277 F.Supp.2d 654 |
| Parties | INTERNATIONAL TRANSACTIONS, LTD., Plaintiff, v. EMBOTELLADORA AGRAL REGIONMONTANA SA DE CV, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Ernest W. Leonard, Friedman & Feiger, Dallas, TX, Gerald Thomas Drought, Martin & Drought, Inc., San Antonio, TX, for Plaintiff.
Molly Steele, Thompson & Knight, Dallas, TX, George R. Diax-Arrastia, Schirrmeister Ajamie, Houston, TX, Patrick J. Neligan, Jr., Neligan Tarpley Andrews & Foley, Dallas, TX, Andrew C. Schirrmeister, III, Schirrmeister Ajamie, Houston, TX, George H. Tarpley, Neligan Tarpley Andrews & Foley, Dallas, TX, for Defendants.
Before the court are the motions of the defendants Agral Arrendadora, S.A. de C.V., Agral Inmobiliaria, S.A. de C.V., Embotelladora Agral Regiomontana, S.A. de C.V., Embotelladora Agral de la Laguna, S.A. de C.V., and Agral Comisionista y Distribuidora, S.A. de C.V. (collectively, "Agral") to dismiss this case for lack of personal jurisdiction and insufficient service of process.1 Also before the court is Agral's motion to strike certain evidence submitted in support of the response of the plaintiff International Transactions, Ltd. ("ITL") to Agral's motion to dismiss and the motion of ITL to strike certain evidence in support of Agral's motion to dismiss. See Motion to Strike Certain Evidence Submitted in Support of Plaintiff's Response to the Motions to Dismiss of All Five Defendants and Brief in Support ("Agral's Motion to Strike"); Plaintiff's Opposed Motion to Strike Certain Evidence Submitted in Support of Motions to Dismiss of All Five Defendants and Brief in Support Thereof ("ITL's Motion to Strike"). For the reasons discussed below, Agral's motion to dismiss is denied and Agral's and ITL's motions to strike are denied as moot.
This case involves a debt collection dispute between ITL and Agral. ITL is a Cayman Islands corporation. See Original Petition to Confirm Arbitration Award and for Entry of Judgment on Award ("Complaint") ¶ 2, located at Exhibit A in Notice of Removal Pursuant to 9 U.S.C. §§ 205 & 302 and 28 U.S.C. § 1446 ("Notice of Removal"). The Agral defendants are Mexican corporations with their principal place of business in Mexico. Notice of Removal ¶¶ 8, 14; Complaint ¶¶ 3-7. Agral bottles and distributes Pepsi-Cola products in northeastern Mexico. Complaint ¶ 9. ITL originally brought this suit against the Agral defendants in the 68th Judicial District Court of Dallas County, Texas seeking an order confirming an arbitration award under Texas law. Complaint. On June 14, 2001, two of the defendants, Agral Arrendadora, S.A. de C.V., and Agral Inmobiliaria, S.A. de C.V., removed the case to this court pursuant to 9 U.S.C. §§ 205 & 302 and 28 U.S.C. § 1446. See Docket Sheet; Notice of Removal at 1.
According to the Complaint, ITL entrusted funds to Sharp Capital, Inc. ("Sharp")2 to invest in the purchase of a promissory note originally issued by Agral to NationsBank.3 Complaint ¶ 9. The loan proceeds were to be used by Agral for the construction of a Pepsi-Cola bottling plant in Monterrey, Mexico. Id. The loan was for approximately $10 million. Plaintiff's Response to Defendants' Motions to Dismiss and Brief ("Response to Dismiss") at 2. The promissory note contained an arbitration clause requiring that any disputes between Sharp, the holder of the note, and the Agral defendants be resolved through arbitration. Complaint ¶ 10; see also Promissory Note ¶ 17, attached to Complaint.
In 1996, Agral defaulted on the promissory note. Complaint ¶ 10. Shortly thereafter, Sharp—acting pursuant to the arbitration clause in the note—initiated arbitration proceedings against Agral with Judicial Arbitration and Mediation Services ("JAMS") in Dallas, Texas.4 Id. In response, Agral brought two different suits against Sharp in this district. In the first case, Agral Regiomontana, one of the defendants in this action, filed suit against Sharp seeking to stay arbitration proceedings before JAMS and to compel arbitration before the American Arbitration Association ("AAA"). Response to Dismiss at 4; see also Embotelladora Agral, et al. v. Sharp Capital Inc., et al., 952 F.Supp. 415 (N.D.Tex.1997) (Fitzwater, J.) ("Agral Suit 1"). Magistrate Judge Jane Boyle later denied Agral's request for relief and dismissed the case on August 26, 1996. Response to Dismiss at 4; see also Docket Sheet for No. 96-CV-01600-D. In the second suit, filed on October 16, 1996, four of the five current Agral defendants sought to compel the joinder of additional parties to the arbitration proceedings, as well as to assert an affirmative claim for relief against Sharp on the basis of usury. Response to Dismiss at 4; see also Embotelladora Agral, et al. v. Sharp Capital Inc., et al., No. 96-CV-02862-P (N.D.Tex.) (Solis, J.) ("Agral Suit 2"). Judge Solis closed that case in 1999 on the ground that the dispute between the parties had been settled. See Docket Sheet for No. 96-CV-02862-P (entry of February 22, 1999).
On January 31, 1997, an arbitration award of more than $11 million was entered in favor of Sharp. Complaint ¶ 11; see also Notice of Removal at 2. Approximately one month later, four of the Agral defendants filed for bankruptcy protection in Mexico. Response to Dismiss at 5.5 On February 4, 1999, ITL brought suit in this district against Sharp and Mauricio Gutierrez, Sharp's President, seeking to regain custody of the arbitration award. Id. at 8; see also International Transactions Limited v. Gutierrez, et al., No. 99-CV-00241-M (N.D.Tex.) (Lynn, J.). Nearly two years later, Judge Lynn ordered the Special Master for the Sharp Estate to convey the arbitration award to ITL.6 Complaint ¶ 12; see also Response to Dismiss at 9. Thereafter, ITL brought the present action in Texas state court to enforce payment of the arbitration award. Complaint ¶ 14; Response to Dismiss at 9.
On July 5, 2001, after removing the case to this court, the Agral defendants filed motions to dismiss this case for insufficient service of process, defective process, lack of personal jurisdiction, and international comity. Motion to Dismiss at 2. Agral later filed a motion to strike certain materials, including exhibits and portions of exhibits, attached to ITL's response to Agral's motion to dismiss. Agral's Motion to Strike. ITL responded in kind by seeking to strike certain materials submitted in support of Agral's motion to dismiss. ITL's Motion to Strike.7
On February 7, 2002, ITL filed a supplemental brief in which it informed the court that the bankruptcy proceedings in which four of the five Agral defendants were parties had been terminated by the bankruptcy court in Monterrey, Mexico on or about December 19, 2001. Supplemental Brief ("Supplemental Brief") at 1-2 and attached Exhibit A. In light of this development, ITL asked the court to reject Agral's attempt to dismiss this case on the basis of international comity. Id. at 1-2. Agral responded to ITL's supplemental brief on March 1, 2002 and sought to modify its motion to dismiss with respect to dismissal on comity grounds. Agral Companies' Response to Plaintiff's Supplemental Brief at 2 ("Response to Supplemental").
Agral argues that ITL's service of the complaint was deficient for two reasons. First, Agral contends that service of process on all five Agral defendants via the Texas Secretary of State was defective because (1) the Secretary of State is not in the position to properly serve a foreign party pursuant to Rules 1068 and 108a9 of the Texas Rules of Civil Procedure; and (2) international service of process via the Secretary of State does not conform to due process and is, therefore, unconstitutional. Motion to Dismiss at 13-16. Second, three of the Agral defendants, Agral Regiomontana, Agral de Laguna, and Agral Comisionista, argue that even if service of process was proper, process was defective because it was served on them at the wrong address. Id. at 17-18. The court will consider the merits of each of these arguments in turn.
Because ITL originally instituted this action in Texas state court, ITL bears the burden of demonstrating on the face of the record that service was properly performed.10 See McKanna v. Edgar, 388 S.W.2d 927, 929-30 (Tex.1965). Unless service of process was made in strict compliance with Texas state law, the court acquires no personal jurisdiction over Agral. See Whitney v. L & L Realty Corporation, 500 S.W.2d 94, 96 (Tex.1973).
ITL points to two cases in support of its claim that service of process on Agral, a foreign defendant, was proper via the Texas Secretary of State. Response to Dismiss at 13-16 ().
Based on the court's reading of Rules 103, 106 and 108a and the decisions in Petroleum Workers Union and Paradigm Entertainment, the court finds that service of process on Agral is permissible under the Texas Rules of Civil Procedure, that such service comports with the Hague Convention, and that such service—under the circumstances of this case—does not violate the due process clause.
Under Agral's reading of the Texas Rules of Civil Procedure, ITL's service of process was ineffective. Motion to Dismiss at 13-14; Reply in Support of the Motions to Dismiss of All Five Defendants ("Reply to Dismiss") at 6-9. In support of this claim, Agral relies on World Distributors, Inc. v. Knox, 968 S.W.2d 474, 478-80 (Tex.App.—El Paso 1998,...
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