Leonard v. USA Petroleum Corp.

• Decision Date: 17 August 1993
• Docket Number: Civ. A. No. H-92-2476.
• Parties: Robert LEONARD, Plaintiff, v. USA PETROLEUM CORPORATION, et al.
• Court: U.S. District Court — Southern District of Texas

829 F. Supp. 882

Robert LEONARD, Plaintiff, v. USA PETROLEUM CORPORATION, et al.

Civ. A. No. H-92-2476.

United States District Court, S.D. Texas.

August 17, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

J. Todd Shields, Houston, TX, for plaintiff.

Gregg C. Laswell, Houston, TX, James H. Berry, Jr., W. Paul Baskett, Los Angeles, CA, for defendant.

OPINION ON DISMISSAL

HUGHES, District Judge.

1. Introduction.

Robert Leonard, a petroleum trader, sued USA Petroleum Corporation and its sole shareholder, John J. Moller, for breach of contract. Because USA Petroleum and Moller did not consent to jurisdiction in Texas and do not do business in Texas, this case will be dismissed for lack of personal jurisdiction.

2. Background.

Leonard lives and works in Houston, Texas. USA Petroleum, a California corporation, owns and operates retail gas stations in several states and Puerto Rico. Leonard, a former employee and trader of petroleum products for USA Petroleum, knew that USA Petroleum had several Puerto Rican stations and that Idemitsu, a Japanese corporation, wanted to enter the American market. Through a friend, Leonard learned that Idemitsu's New York subsidiary was interested in purchasing the gas stations. Leonard contacted USA Petroleum to encourage it to sell its Puerto Rican stations to Idemitsu.

Leonard spoke several times with Moller about selling the Puerto Rican stations. Leonard contends that they orally agreed that Leonard would receive four percent of the gross sales price as a commission for arranging the sale. Moller claims that he agreed to pay a commission only if the sale price was above $45 million. After several months, USA Petroleum sold the Puerto Rican stations to Idemitsu for $40 million cash and assumption of an $8 million debt. Moller offered to pay Leonard a $500,000 finder's fee. Leonard rejected the offer, insisting that USA Petroleum owed him a four percent commission on the gross sale.

USA Petroleum filed a declaratory relief action in the United States District Court for the Central District of California, and the court dismissed it for lack of personal jurisdiction over Leonard. Two months after USA Petroleum filed its suit, Leonard sued USA Petroleum and Moller in Texas state court for breach of contract, quantum meruit, abuse of process, economic duress, and civil conspiracy; the defendants removed on diversity. USA Petroleum and Moller have moved to dismiss this case for lack of personal jurisdiction.

3. Personal Jurisdiction.

Leonard must show that this court has personal jurisdiction over USA Petroleum and Moller. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir.1985). He argues that jurisdiction is proper in Texas because (a) USA Petroleum consented to jurisdiction by registering to do business in Texas and appointing an agent for service of process and (b) USA Petroleum and Moller had sufficient contact with Texas to satisfy due process.

4. General Jurisdiction by Consent.

A party may expressly or impliedly consent to jurisdiction in a state. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703-05, 102 S.Ct. 2099, 2105-06, 72 L.Ed.2d 492 (1982). Leonard argues that, because USA Petroleum registered to do business in Texas and appointed an agent for service of process, it consented to jurisdiction in Texas, as a matter of law. Leonard argues further that USA Petroleum's consent obviates a due process inquiry.

Whether a foreign corporation's registration to do business in a state and appointment of an agent for service of process are acts that imply consent to personal jurisdiction in that state has been decided both ways. Some courts clearly have held that a corporation's registration to do business and appointment of an agent are factors having no significant weight in evaluating general personal jurisdiction. See Siemer v. Learjet Acquisition Corp., 966 F.2d 179 (5th Cir. 1992), cert. denied, ___ U.S. ___, 113 S.Ct. 1047, 122 L.Ed.2d 356 (1993); Ratliff v. Cooper Laboratories, Inc., 444 F.2d 745 (4th Cir.), cert. denied, 404 U.S. 948, 92 S.Ct. 271, 30 L.Ed.2d 265 (1971). To the contrary, at least one court held that a corporation does consent to jurisdiction by designating an agent for service of process in the state. See Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196 (8th Cir.1990).

Consent requires a voluntary, reasoned act. A person consents to jurisdiction in a state if he is physically present in that state. See generally Burnham v. Superior Court of California, 495 U.S. 604, 110 S.Ct. 2105, 109 L.Ed.2d 631 (1990). Many states have statutes that forbid service of process on a person who is in the state involuntarily, as by subpoena or fraud. See Burnham, 495 U.S. at 613, 110 S.Ct. at 2112. Texas itself also rejects personal jurisdiction procured by fraud. 3 Roy W. McDonald, Texas Civil Practice § 11.24 (1992); see Brown v. Brown, 520 S.W.2d 571, 574-75 (Tex.Civ.App.— Houston 14th Dist. 1975, writ dism'd), disapproved on other grounds, 561 S.W.2d 172 (Tex.1978); Cornell v. Cornell, 402 S.W.2d 571 (Tex.Civ.App.—El Paso 1966), rev'd on other grounds, 413 S.W.2d 385 (Tex.1967); but cf., Oates v. Blackburn, 430 S.W.2d 400, 402-03 (Tex.Civ.App. — Houston 14th Dist. 1968, writ ref'd n.r.e.). Due process demands that presence imply consent only if it is voluntary.

In 1985, USA Petroleum applied for a certificate of authority to do business in Texas and appointed an agent for service of process, as required by state law. From 1982 to 1988, USA Petroleum maintained an office in Houston. Since 1988, USA Petroleum has not maintained an office, employed people, or conducted business in Texas. It does, however, have the authority to conduct intrastate business in Texas because it keeps its registration current. Leonard does not argue that this court has general jurisdiction over the defendants because of USA Petroleum's contacts with Texas; rather, he asserts that general jurisdiction is proper through USA Petroleum's registration. The issue, then, is whether USA Petroleum voluntarily consented to jurisdiction in Texas courts after 1988 because it had registered to do business in Texas and appointed an agent for service of process in 1985.

In Texas, foreign corporations must receive a certificate of authority to do business from the secretary of state to act properly as a corporation in intrastate business. Tex.Bus.Corp.Act Ann. art. 8.01(A) (1980 & Supp.1993). A foreign corporation does not, however, need a certificate of authority to conduct business in interstate commerce. U.S. Const. art. I, § 8; Tex.Bus.Corp.Act Ann. art. 8.01(B)(9); see also Continental Supply Co. v. Hoffman, 135 Tex. 552, 144 S.W.2d 253 (1940); Killian v. Trans Union Leasing Corp., 657 S.W.2d 189, 192 (Tex. App. — San Antonio 1983, writ ref'd n.r.e.). A foreign corporation has the same rights and privileges as a Texas corporation. Tex.Bus. Corp.Act Ann. art 8.02 (1980 & Supp.1993). Once a foreign corporation is registered, it must appoint a registered agent who can be served with process. Tex.Bus.Corp.Act Ann. arts 8.08, 8.10(A) (1980).

Under Texas law, a foreign corporation runs a risk if it accidentally should engage in local commerce because a foreign corporation must get a certificate of authority to do business and must appoint an agent for service; it has no choice. If it does not, it cannot sue in Texas courts, and the state may fine it. Id. at 8.18. If a foreign corporation fails to register and to appoint an agent, the secretary of state becomes automatically the agent for service of process. Id. at 8.10(B). Under Texas law, foreign corporations will always have an agent for service of process. The state gives a foreign corporation merely the option of appointing its own agent for its convenience.

Leonard argues that because USA Petroleum appointed an agent for service of process, it consented to jurisdiction in Texas as a matter of law. Each case he relies on deals with a foreign corporation that had registered to do business in the particular state and had appointed an agent for service. See Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610 (1917); Knowlton, 900 F.2d 1196; Prejean v. Sonatrach, Inc., 652 F.2d 1260 (5th Cir.1981); Acacia Pipeline Corp. v. Champlin Exploration, Inc., 769 S.W.2d 719 (Tex.App. — Houston 1st Dist. 1989, no writ); Goldman v. Pre-Fab Transit Co., 520 S.W.2d 597 (Tex.Civ.App. — Houston 14th Dist. 1975, no writ). A careful reading of these cases, however, shows that either the facts do not support Leonard's case or the cases are completely devoid of jurisprudential force. The courts have long held that a corporation's consent to jurisdiction by registering and appointing an agent is no more than "mere fiction." Pennsylvania Fire, 243 U.S. at 96, 37 S.Ct. at 345; Smolik v. Philadelphia & Reading Coal & Iron Co., 222 F. 148, 151 (S.D.N.Y.1915). While using fiction shows that the law is malleable and imaginative, it does still have to have a foundation in reality and the facts.

A. Pennsylvania Fire v. Gold Issue Mining

In the late 1800s, the Missouri legislature tightened its grip on insurance companies. Since 1845, Missouri has required foreign insurance companies to register with the state to do business and appoint an agent for service of process; service of process was limited to suits brought on policies contracted for and issued in Missouri. In 1879, the legislature limited the amount of time an insurance company could be exposed to service of process to "so long as it shall have any policies or liabilities outstanding in this state." In 1885, the legislature further amended the statute so that residents and nonresidents could sue a foreign insurance company that did business in Missouri on any policy, whether or not that policy was issued in Missouri. The

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