ITL Int'l, Inc. v. Constenla, S.A.

• Decision Date: 31 January 2012
• Docket Number: No. 10–60892.,10–60892.
• Citation: 669 F.3d 493
• Parties: ITL INTERNATIONAL, INCORPORATED, doing business as Mars Caribbean and Central America, doing business as Master Foods Interamerica; Mars Incorporated, Plaintiffs–Appellants, v. CONSTENLA, S.A.; Grupo Constenla, S.A., Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

669 F.3d 493

ITL INTERNATIONAL, INCORPORATED, doing business as Mars Caribbean and Central America, doing business as Master Foods Interamerica; Mars Incorporated, Plaintiffs–Appellants,

v.CONSTENLA, S.A.; Grupo Constenla, S.A., Defendants–Appellees.

No. 10–60892.

United States Court of Appeals, Fifth Circuit.

Jan. 31, 2012.

Michael Peter Socarras (argued), Chadbourne & Parke, L.L.P., Washington, DC, Michael Edward Whitehead, Page, Mannino, Peresich & McDermott, P.L.L.C., Biloxi, MS, for Plaintiffs–Appellants.

Jeremy Daniel Kernodle (argued), Michael Lester Hood, Litig. Counsel, Haynes & Boone, L.L.P., Dallas, TX, Hugh Dennis Keating, I, Dukes, Dukes, Keating & Faneca, P.A., Gulfport, MS, for Defendants–Appellees.

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

Before HIGGINBOTHAM, OWEN and HAYNES, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

ITL International, formerly known as Master Foods Interamerica (“MFI”), and its parent company Mars, Inc. filed this declaratory judgment action in federal district court in Mississippi, seeking relief against their longtime Costa Rican distributor. The district court dismissed the complaint for lack of personal jurisdiction over the defendants. Failing to find specific jurisdiction under the Due Process Clause, we affirm.

I.

This appeal arises from a declaratory judgment action filed by Mars, Inc.—the manufacturer of M&M's and other candy—and its subsidiary ITL International, formerly known as Master Foods Interamerica (“MFI”), against their Costa Rican distributor and its parent company.

In May 1992, MFI entered into an exclusive distribution agreement with a Costa Rican company known as Ciamesa, which was later acquired by defendant Constenla, a subsidiary of defendant Grupo Constenla. The agreement provided that Ciamesa would develop the Costa Rican market and promote the sales of Mars products in Costa Rica. The agreement further provided that “[t]his Agreement is personal to CIAMESA and it may not be assigned or transferred, either apart from or as a part of CIAMESA's business, to any other party without [MFI's] prior written approval.” The agreement did not include a choice-of-law provision, but the parties agree that the agreement was made in Costa Rica and is governed by Costa Rican law.

Plaintiffs contend that the agreement terminated when Ciamesa was acquired by defendants in 1996; defendants maintain that they acquired the distribution rights as part of the merger. Regardless, the parties continued to abide by the distribution agreement for many years afterward, until Mars recently decided to sell some of its products directly to Costa Rican retailers. The record reflects that since January 2009, plaintiffs have delivered 91 shipments of goods to defendants for distribution in Costa Rica. On 55 of these occasions, plaintiffs shipped the goods to defendants “FOB/Gulfport, Mississippi.” The defendants requested to take possession and title to the goods in Gulfport,¹ although they insist that their decision was effectively dictated by Mars's quality control policies.

When plaintiffs notified defendants that they wished to revise or terminate the exclusive distribution agreement, defendants claimed that Costa Rica Law 6209 requires a termination penalty of more than $7 million.² Defendants argue that the termination penalty applies regardless of their actual damages from breach and despite the contract's express provision that either party may terminate the agreement by giving three-months' written notice.

Plaintiffs subsequently filed this declaratory judgment action in federal district court in Mississippi, seeking declarations (1) that the distribution agreement does not restrict Mars from making other distribution arrangements in Costa Rica, either because the agreement terminated when Constenla acquired Ciamesa or because the plaintiffs validly terminated it; (2) that, if the agreement applies to Constenla, then defendants breached the agreement by demanding a severance payment under Law 6209, entitling plaintiffs to damages and a permanent injunction preventing defendants from claiming that they are the plaintiffs' exclusive Costa Rican distributor; (3) that plaintiffs are not liable to defendants for any reason and that defendants must pay any unpaid amounts; (4) that defendants no longer have license to use Mars's trademarks; and (5) that any interference with plaintiffs' contracts with other trademark licensees and Costa Rican importers or distributors constitutes tortious interference. Plaintiffs further allege that any termination penalty unrelated to actual damages violates the fundamental public policy of Mississippi and cannot be enforced. They have requested an international anti-suit injunction to prevent defendants from seeking a judgment against them in the Costa Rican courts.

The district court dismissed the complaint for lack of personal jurisdiction over the defendants.³ The court first found that the defendants were amenable to suit under the contract prong of the Mississippi long-arm statute⁴ and that they had minimum contacts with Mississippi. ⁵ Nevertheless, the district court concluded that “this case is one of the rare instances when exercising jurisdiction would be unreasonable despite the presence of minimum contacts.”⁶ The court noted that the underlying claims are governed by Costa Rican law and that most of the witnesses and evidence are located in Costa Rica.⁷ Plaintiffs are both Delaware corporations with principal places of business in Virginia; neither has offices in Mississippi, and MFI was not registered to do business in Mississippi until after it filed suit. In the district court's view, the plaintiffs “appear to have chosen Mississippi because it is the state in which the Defendants have the greatest contacts.”⁸ The court also explained that Costa Rica would be a preferable forum based in part on expert testimony that Costa Rican courts would not enforce a U.S. court judgment applying Costa Rican law against a Costa Rican defendant, “rais[ing] the possibility that this Court's orders would be for nothing”⁹ and that allowing suit to proceed in the United States would interfere with Costa Rica's sovereignty and social policy.¹⁰

Plaintiffs now appeal, arguing that the defendants' purposeful contacts with Mississippi render jurisdiction there fair and reasonable. Defendants argue that allowing suit in Mississippi would violate traditional notions of fair play and substantial justice; they also argue, as alternative grounds for affirmance, that there was no basis for personal jurisdiction under the Mississippi long-arm statute and that they had insufficient contacts with the state for personal jurisdiction there to be consistent with constitutional due process.

II.

This Court reviews a district court's dismissal for lack of personal jurisdiction de novo.¹¹ At this preliminary stage, the plaintiff need only make a prima facie showing of jurisdiction.¹² When the district court rules on the motion to dismiss before holding an evidentiary hearing, the court must accept as true all uncontroverted allegations in the complaint and must resolve any factual disputes in favor of the plaintiff.¹³

III.

Our analysis proceeds in two parts.¹⁴ We first examine whether the defendants are amenable to suit under the Mississippi long-arm statute. We hold that they are amenable under the statute's “doing business” prong. Next we examine whether personal jurisdiction over this dispute comports with the Due Process Clause of the Fourteenth Amendment. We hold that it does not, for we find the nexus between the defendants' contacts in Mississippi and the nature of the dispute inadequate to support specific jurisdiction.

A. The Mississippi Long–Arm Statute

Federal Rule of Civil Procedure 4(k)(1)(A) provides personal jurisdiction over any defendant who would be subject to personal jurisdiction under the long-arm statute of the state in which the district court sits. The Mississippi long-arm statute authorizes jurisdiction over

[a]ny nonresident ... who shall [1] make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall [2] commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall [3] do any business or perform any character of work or service in this state.¹⁵

The three prongs of the long-arm statute are commonly referred to as the contract prong, the tort prong, and the doing-business prong. Plaintiffs argue that jurisdiction exists under both the contract prong and the doing-business prong. The district court found jurisdiction under the contract prong without ruling on the doing-business prong. We likewise find jurisdiction under the long-arm statute, but our conclusion rests on the doing-business prong rather than the contract prong. We affirm the district court's conclusion on this alternative ground.¹⁶

As a preliminary matter, we must address the defendants' argument that plaintiffs may not avail themselves of the long-arm statute because, when MFI first filed suit, it was not registered to do business in Mississippi and thus not a Mississippi resident. The argument fails for two reasons. First, the first amended complaint added Mars, Inc. as a plaintiff, and Mars has been registered to do business in Mississippi since 2003. Second, Mississippi's door-closing statute contemplates that a plaintiff corporation that is not a resident upon commencing suit may cure that defect by subsequently obtaining a certificate of authority to do business in the state, making it a state resident.¹⁷ The statute clarifies that MFI's nonresident status when it commenced suit is a curable defect, and because MFI has now cured it by registering as a Mississippi resident, there is no bar to the plaintiffs' use of the Mississippi long-arm statute to assert personal jurisdiction over the...