McBead Drilling Co. v. Kremco, Ltd.

• Decision Date: 30 June 1987
• Docket Number: No. 86-C-1420,86-C-1420
• Citation: 509 So.2d 429
• Parties: Prod.Liab.Rep. (CCH) P 11,468 McBEAD DRILLING COMPANY, et al. v. KREMCO, LTD., et al.
• Court: Louisiana Supreme Court

Page 429

509 So.2d 429

Prod.Liab.Rep. (CCH) P 11,468

McBEAD DRILLING COMPANY, et al. v. KREMCO, LTD., et al.

No. 86-C-1420.

Supreme Court of Louisiana.

June 30, 1987.

Rehearing Denied Sept. 3, 1987.

A. Kennon Goff, III, Goff & Goff, Ruston, for plaintiff-applicant.

Charles G. Tutt, Cook, Yancey, King & Galloway, Shreveport, for defendant-respondent.

LEMMON, Justice.

The issues presented in this case are whether the Louisiana court may exercise personal jurisdiction over defendant Dickirson Corporation pursuant to La. R.S. 13:3201 et seq, Louisiana's Long-Arm Statute, and whether such an exercise of jurisdiction violates constitutional due process.

Plaintiff, an Arkansas corporation, contracted with Dickirson, a West Virginia corporation, to purchase a drilling rig. In accordance with its customary business practice in the sale of drilling rigs, Dickirson purchased the basic rig from Kremco, a Canadian company, and added its manufactured substructure and other modifications to the basic rig to meet plaintiff's specifications. ¹ In October 1981, Dickirson completed the sale of the modified rig to plaintiff for $658,680 and delivered the rig to plaintiff's yard in southern Arkansas. Shortly thereafter, plaintiff moved the rig across the state line to Caddo Parish, Louisiana for use in its drilling operations. On December 3, 1981, the rig collapsed while in use by plaintiff in Caddo Parish.

Alleging that design and structural defects caused the rig's collapse, plaintiff filed this action for damages against Dickirson and several other defendants, seeking to recover the cost of repairs, the loss of revenues, and other expenses and damages. Plaintiff alleged that all defendants "played a part in the sale, distribution, design, construction, reconstruction, and modification" of the rig prior to sale. Asserting its nonresident status, Dickirson filed an exception of lack of personal jurisdiction.

The evidence at the hearing on the exception established that Dickirson was in the business of selling drilling rigs, oil field service trucks, and other similar equipment. The company had sold oil field equipment in approximately twelve states from New York to Arkansas and in several foreign countries. ² However, Dickirson had never made a sale to a Louisiana resident and did not solicit in Louisiana in its regular course of business or do any advertising which would be expected to reach Louisiana.

Dickirson's only direct contacts with Louisiana consisted of several calls by a salesman on Louisiana businesses prior to 1981 in unsuccessful attempts to sell oil field trucks, while the salesman was in the state on personal business. Additionally, Dickirson had sent a service representative, as required by the warranty in the contract of sale, to Caddo Parish about a week before the rig collasped to change the hydraulic pump on plaintiff's rig. Because he could not change the pump at the particular stage of the drilling operation, the employee was still in Louisiana when the collapse occurred. Thereafter, Dickirson sent another employee by company plane to investigate the incident.

In addition to its sales operations, Dickirson purchased basic trucks, drilling rigs and other oil field equipment and customized the basic structures or added its manufactured substructures in accordance with the specifications of the customer for a particular sale. Thus, Dickirson frequently was a manufacturer as well as a seller. The gross profit on the sale of the rig to plaintiff was about $100,000.

The trial court held that there was no personal jurisdiction over Dickirson and dismissed that defendant from the action. Noting that only Subsection (d) of La.R.S. 13:3201 could possibly serve as a basis for providing jurisdiction, the court found that Dickirson did not regularly do or solicit business in Louisiana, did not engage in a persistent course of conduct in Louisiana, and did not derive substantial revenue from goods used or consumed or service rendered in Louisiana. ³

Plaintiff applied for a new trial on the ground that the trial court had failed to consider the 1984 amendment which added Subparagraph (8) to the Long Arm-Statute. ⁴ The trial court denied the application noting that the amendment was not in effect at the time of the alleged loss or at the time suit was filed.

On appeal, the intermediate court concluded that the 1984 amendment should be applied retroactively, but nevertheless affirmed Dickirson's dismissal, concluding that the exercise of jurisdiction over Dickirson would violate constitutional due process. 490 So.2d 674. The court characterized Dickirson's contacts with Louisiana as insubstantial. We granted certiorari. 494 So.2d 1164.

A dual analysis is required to determine whether Louisiana has personal jurisdiction over a nonresident defendant under La.R.S. 13:3201. First, the facts of the case must fit within one of the provisions of the Long-Arm Statute. Second, the assertion of jurisdiction must comport with constitutional due process standards.

The facts of this case fit squarely under Subsection (8) of the Long-Arm Statute. Dickirson manufactured a component of a product which allegedly caused damages in Louisiana and could have reasonably foreseen at the time the product was placed into the stream of commerce that the product may eventually be found in the state by reason of the product's nature and the manufacturer's marketing practices. ⁵ Moreover, Subsection (8), which pertains to jurisdiction and procedure, is entitled to retroactive application. Laws which determine jurisdiction and procedure are applicable, from the date of their promulgation, to all law suits, even to those which bear upon facts and acts of a prior date and to pending law suits. 1 M. Planiol, Traite Elementaire de Droit Civil § 258 (Louisiana State Law Institute Trans. 1959); Covington v. Southern Specialty Sales Co., 158 So.2d 79 (La.App. 3rd Cir.1963); Coreil v. Pearson, 242 F.Supp. 802 (W.D.La.1965); see also R. Casad, Jurisdiction in Civil Actions § 4.01 (1983). We conclude, as did the court of appeal, that the Louisiana court's exercise of jurisdiction is authorized by La.R.S. 13:3201(8).

The remaining issue is whether the exercise of jurisdiction over Dickirson under La.R.S. 13:3201(8) violates constitutional due process standards.

In International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), the Court held that for the exercise of personal jurisdiction to comport with constitutional due process, there must be sufficient minimum contacts between the defendant and the forum to satisfy traditional notions of fair play and substantial justice. The International Shoe decision formed the basis of most of the long-arm statutes adopted by state legislatures to confer personal jurisdiction over nonresidents, primarily in contracts, torts, property and domestic relations cases. In Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), a quasi-in-rem jurisdiction case, the Court expanded its prior holdings and held that the standards of fairness and substantial justice set forth in International Shoe govern actions in rem as well as in personam. The Court reiterated that the central concern of any inquiry into personal jurisdiction is "the relationship among the defendant, the forum, and the litigation". 433 U.S. at 205, 97 S.Ct. at 2580.

In the present case, the lower courts relied primarily on the decision in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). World-Wide Volkswagen was a product liability case which arose out of an automobile accident in Oklahoma. Plaintiffs had purchased their car in New York while domiciled there and were driving to their new home in Arizona when the collision occurred, causing their car to catch fire. Claiming design defects, plaintiff filed suit in Oklahoma, naming the manufacturer, the importer, the regional distributor and the retail dealer as defendants under the long-arm statute which contained a provision similar to the former La.R.S. 13:3201(d). Only the distributor and dealer challenged the exercise of jurisdiction. The Court concluded that the affiliating circumstances necessary for the exercise of personal jurisdiction had not been established, observing that the sole "fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma" was insufficient to establish jurisdiction. Id. at 295, 100 S.Ct. at 566. In response to the argument that it was foreseeable from an automobile's design and purpose that it might cause injury in Oklahoma, the...