Oswalt v. Scripto, Inc., TOKAI-SEIKI

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore GOLDBERG, FAY and ANDERSON; R. LANIER ANDERSON
Citation616 F.2d 191
PartiesGene M. OSWALT et vir, Plaintiffs-Appellants, v. SCRIPTO, INC., Defendant-Third Party Plaintiff, Appellant, v.KK, a Japanese corporation, Defendant-Third Party Defendant, Appellee.
Docket NumberTOKAI-SEIKI,No. 77-3296,77-3296
Decision Date01 May 1980

A. W. Salyars, Joyce Hill, Lubbock, Tex., Paul McCollum, Odessa, Tex., for plaintiffs-appellants.

Donald M. Hunt, Lubbock, Tex., for defendant-third party defendant, appellee.

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

Before GOLDBERG, FAY and ANDERSON, Circuit Judges.

R. LANIER ANDERSON, Circuit Judge:

The question before us in this diversity case is whether due process will permit the application of the Texas "Long-Arm" Statute to impose personal jurisdiction over Tokai-Seiki, a Japanese corporation. We find personal jurisdiction, and reverse. However, before addressing the merits, we must explain why this appeal is properly before us.

I. Appealability.

None of the parties to this appeal have raised the issue of appealability. Their failure to do so does not preclude this Court from addressing the question; it is well-established that a court may at any time, and sua sponte, determine whether it has jurisdiction. See Skidmore v. Syntex Laboratories, Inc., 529 F.2d 1244, 1248 n.3 (5th Cir. 1976); 5 Wright, Miller & Cooper, Federal Practice & Procedure, Civil, § 1350. Because the facts relevant to appealability in this case are somewhat convoluted, they require careful recounting.

On March 12, 1974, Mrs. Gene Oswalt was seriously burned when a "Catch 98" lighter, distributed by Scripto, allegedly malfunctioned, catching Mrs. Oswalt's pajamas on fire. Seeking to recover damages, Mrs. Oswalt and her husband sued Scripto and Tokai-Seiki, which the Oswalts alleged was the manufacturer of the lighter. Scripto subsequently filed a cross-claim against Tokai-Seiki and filed a third-party complaint for contribution and indemnity against Holland-Hessol Co., Inc., the manufacturer of the pajamas. Holland-Hessol in turn filed its own third-party complaint against Ameretex, the manufacturer of the fabric from which Mrs. Oswalt's pajamas were made.

On February 28, 1977, after a hearing on the issue of personal jurisdiction, the district court entered an order dismissing Tokai-Seiki. In response to this dismissal, the Oswalts and Scripto filed a Joint Motion for Permission to Appeal. One of the representations made to the district court in this Joint Motion was that the Oswalts had:

received $125,000 from Scripto, Inc. in exchange for (the Oswalts') agreement that they will not further prosecute their action against Scripto, Inc. and will allow Scripto, Inc. to receive the first $125,000 plus expenses and attorneys' fees up to $10,000, out of any recovery by (the Oswalts) against Tokai-Seiki KK. By such indemnity agreement, the only real defendant in (the Oswalts') cause of action is Tokai-Seiki KK.

The effect of the Court's order granting Tokai-Seiki KK's motion to dismiss (the Oswalts') suit against such corporation for lack of jurisdiction over the person is to dismiss (the Oswalts') entire law suit.

This Joint Motion was signed by both the Oswalts' and Scripto's attorneys. The district court granted the Oswalts' and Scripto's motion, and made the representations under 28 U.S.C.A. § 1292(b) 1 necessary to permit an appeal of an interlocutory order. On May 2, 1977, this court, exercising its discretion under 28 U.S.C.A. § 1292(b), denied the Oswalts and Scripto leave to appeal without giving reasons for the denial.

Undeterred by this court's refusal to hear their appeal, the Oswalts and Scripto then filed with the district court a Joint Motion to Sever the actions by Scripto against Holland-Hessol Company and the action by Holland-Hessol Company against Ameretex. In this Joint Motion, they repeated the representations concerning their settlement and the Oswalts' agreement not to prosecute their claim against Scripto. The district court granted this Joint Motion, and in addition entered a new Order, repeating in substance the order of February 25, 1977, as well as a Judgment, dismissing Tokai-Seiki for lack of personal jurisdiction. Because the Oswalts and Scripto this time did not request any 28 U.S.C.A. § 1292(b) representations, none were given. Nor did the district court give a Rule 54(b) certificate as is permitted by the Federal Rules of Civil Procedure. 2 The Oswalts and Scripto thereupon brought the appeal now before us.

After these procedural maneuvers by the Oswalts and Scripto, the current status of the case is as follows: (1) the Oswalts, Scripto and Tokai-Seiki are the only parties to the suit, as the actions against Holland-Hessol and Ameretex have been severed; (2) the judgment dismissing Tokai-Seiki does not have a Rule 54(b) certificate nor are there current § 1292(b) representations by the district court; and (3) while the Oswalts and Scripto have made representations in their Joint Motion for Permission to Appeal and in their Joint Motion to Sever that they have settled the claim by the Oswalts against Scripto, there remains no final order or judgment by the district court dismissing the claim by the Oswalts against Scripto.

It is the fact that there is no final order or judgment dismissing the claim by the Oswalts against Scripto which raises the question of whether the judgment below is final. See 28 U.S.C.A. § 1291. 3 Normally, in a multi-party law suit such as this one, an order is final under § 1291 only if it meets one or the other of two conditions: (1) it must adjudicate the claims or the rights and liabilities of all the parties, or (2) it must contain the certificate required by Rule 54(b), Fed.R.Civ.P. Huckeby v. Frozen Food Express, 555 F.2d 542, 545 (5th Cir. 1977); Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1231 (5th Cir. 1973). But there is some flexibility in this rule in order that justice, and the economic termination of litigation may not suffer from an overly strict adherence to formalism. It must be remembered that practical, not technical, considerations are to govern the application of principles of finality. Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964); Jetco, supra.

We begin our analysis by noting that the representation to the district court of a settlement between the Oswalts and Scripto, and their agreement that the Oswalts would not further prosecute their claim against Scripto, is tantamount to a stipulation of dismissal under Fed.R.Civ.P. 41(a)(1)(ii). 4 The representation concerning the settlement was signed by the attorneys for both the Oswalts and Scripto. It sets forth the basic terms of the agreement between the Oswalts and Scripto. It states unequivocally that in exchange for $125,000, the Oswalts have agreed that they would not further prosecute their action against Scripto. The representation further states unequivocally that as a result of this settlement the only real defendant in the Oswalts' cause of action is Tokai-Seiki and that the effect of the order dismissing Tokai-Seiki is to dismiss the Oswalts' entire law suit. The clear import of these statements was to indicate to the district court that the claim of the Oswalts against Scripto was no longer before it.

We are not deterred in reaching this decision by the fact that Rule 41(a)(1) refers to dismissals of an "action" by notice or stipulation. While the Second Circuit in Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105 (2nd Cir. 1953), cert. denied 345 U.S. 964, 73 S.Ct. 949, 97 L.Ed. 1383 (1953), has held that "action" in Rule 41 means the entire controversy, that view was rejected by this Court in Plains Growers, Inc., Fl. M. I. Co. v. Ickes-Braun Glass Inc., 474 F.2d 250 (5th Cir. 1973). 5 Several courts have not objected to stipulations dismissing individual parties or claims to a law suit without dismissing the entire controversy. See Pipeliners Local Union No. 798, Tulsa, Oklahoma v. Ellerd, 503 F.2d 1193 (10th Cir. 1974); Rudloff v. Johnson, 267 F.2d 708 (8th Cir. 1959); Battle v. Municipal Housing Authority for City of Yonkers, 53 F.R.D. 423 (S.D.N.Y.1971).

Nor are we deterred from finding a stipulated dismissal by the fact that there is no formal stipulation of dismissal entered in the record by the Oswalts or Scripto. This court approved a district court's finding that an oral dismissal of claims against defendants in the course of a trial was sufficient to constitute a dismissal under Rule 41(a)(1) even though there was no formal dismissal or stipulation filed with the clerk. Harkless v. Sweeny Independent School District of Sweeny, Texas, 554 F.2d 1353, 1360 (5th Cir. 1977), aff'g. in part, 388 F.Supp. 738, 749 (S.D.Tex.1975). The Tenth Circuit in Pipeliners Local has found that a verbal stipulation of dismissal in open court sufficed for the purposes of Rule 41(a)(1)(ii). Compare, Municipal Housing Authority for the City of Yonkers, supra. To require the filing of a formal document would be to countenance a mechanistic view of the Federal Rules of Civil Procedure and exalt form over substance.

Having found that the Oswalts' claim against Scripto was dismissed by stipulation, we conclude the dismissal of Tokai-Seiki results in the termination of the litigation in the district court. Compare Jetco, supra. Accordingly, the order dismissing Tokai-Seiki is appealable. We now turn to the merits of this appeal.

II. Personal jurisdiction over Tokai-Seiki.

Personal jurisdiction over Tokai-Seiki is urged pursuant to Texas' "Long-Arm" Statute, Article 2031b, Vernon's Tex.Rev.Civ.Stat.Ann. 6 Normally, there is a two-step procedure in determining whether a state jurisdictional statute confers jurisdiction over a non-resident defendant in a federal diversity suit. First, it must be determined that the defendant is in fact amenable to service under the state statute; state law of...

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