Republic Intern. Corp. v. Amco Engineers, Inc., 73-2459

• Decision Date: 25 April 1975
• Docket Number: No. 73-2459,73-2459
• Citation: 516 F.2d 161
• Parties: REPUBLIC INTERNATIONAL CORPORATION (formerly Republic International Engineers Corporation), a Delaware Corporation, Appellee, v. AMCO ENGINEERS, INC., a California Corporation, et al., Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 161

516 F.2d 161

REPUBLIC INTERNATIONAL CORPORATION (formerly Republic

International Engineers Corporation), a Delaware

Corporation, Appellee, v. AMCO ENGINEERS, INC., a California Corporation, et al., Appellants.

No. 73-2459.

United States Court of Appeals, Ninth Circuit.

April 25, 1975.

William McD. Miller, Los Angeles, Cal. (argued), for appellants.

Richard B. Cutler, Los Angeles, Cal. (argued), for appellee.

OPINION

Before CHAMBERS and SNEED, Circuit Judges, and THOMPSON, ^* District Judge.

SNEED, Circuit Judge:

This is an appeal by defendant Ministry of Public Works, Republic of Uruguay ("Ministry"), from a default judgment in the sum of $428,904.86 entered in favor of appellee Republic International Corporation ("Republic"), a Delaware corporation, for damages for breach of contract. Appellee filed its complaint against appellant and other defendants on June 1, 1972, alleging federal jurisdiction on the ground of diversity of citizenship, 28 U.S.C. § 1332(a) (2). The trial court denied Ministry's motions to dismiss and to quash service of summons pursuant to F.R.Civ.P. 12(b)(1), 12(b)(2), 12(b)(5), and 12(b)(6) and further denied its motion to certify an interlocutory appeal from the order of denial. Thereafter, the Ministry filed a document of withdrawal from the suit. Entry of the default judgment followed, and Ministry filed this appeal.

Appellant Ministry raises several specifications of error. Our disposition of this appeal requires that we reach only the following contentions: First, appellant argues that the court below erred in refusing to grant its motion to quash service of process on the ground that it was never properly served. Appellant further claims that the court erred in refusing to grant its motion to dismiss the action on the ground that the court lacked personal jurisdiction over appellant. Finally, appellant argues that even if the court had personal jurisdiction, it should have dismissed the action since each contract contained a choice-of-forum clause which provided that suit must be brought in a Uruguayan court. For the reasons which follow, we reverse and remand.

I. Facts

Republic's complaint seeks damages for the alleged breach of two contracts for the widening and improvement of two highways in Uruguay, known, respectively, as Route 5 and Route 26. The two contracts along with a third, not involved here, for maintenance of the highways were awarded by the Ministry in 1963, after bidding, to Amco Engineers, Inc., a California corporation ("Amco"). The contracts, the material terms of which were substantially alike, ran originally for a term of thirty-six months from October 4, 1963, but were extended until March 4, 1970.

After the completion of some drafting and design work in Amco's Los Angeles office to which Ministry engineers had been sent for five or six months during this period ¹ the construction work was undertaken in Uruguay. Pursuant to Uruguayan law, Amco had formed a Uruguayan corporation, Amco Engineers, Inc., S.A. ("Amco, S.A.") in order to perform work in the country on a continuing basis.

On June 30, 1966, in Los Angeles, Amco assigned its rights, duties and obligations under both contracts to appellee. Shortly afterward, the corporate charter of Amco was suspended. The facts as recounted by the two sides in their respective briefs differ as to what transpired following the assignment. The parties agree that Ministry was notified of the assignment. At this time Ministry informed Republic of certain preconditions it was required to satisfy in order that it could obtain the requisite written consent of Ministry to the assignment. According to Ministry, satisfactory compliance on the part of Republic was not forthcoming, so that no approval, written or otherwise, was given to the assignment. According to Republic, it adequately fulfilled the conditions posited by Ministry and the latter at no time raised objections to the assignment of the contracts or the performance of the work by Republic.

In any event, the construction work on the highways continued through 1969 and appellant made monthly payments to Amco, S.A. ² In 1969 two private citizens of Uruguay filed an action against Amco, S.A. in an Uruguayan court, and petitioned the court for an "embargo," an order directing a debtor of a defendant to deposit with the court all monies due and owing that defendant, similar to a writ of garnishment under California law. The embargo was issued to appellant on December 31, 1969 and appellant states that in February, 1970, it deposited with the court its payment for work performed in December. After the issuance of the embargo appellee petitioned the Uruguayan court to dissolve the embargo on the ground that it was a bona fide assignee of Amco's contracts with appellant, and that the latter had impliedly consented to the assignment. The court ruled against appellee, however, and that ruling was confirmed on appeal.

After several exchanges between the parties, appellant notified Amco, S.A. by telegram on February 13, 1970, that it would continue to deposit with the court accrued fees for road construction until it received a judicial order releasing the embargo. On March 3, 1970, appellee informed appellant by telegram that it was rescinding the contracts. Appellee later filed this action for breach.

II. Service of Process

Two alternative procedures were employed to effect service of process upon appellant Ministry. The district court issued letters rogatory, which were delivered to the National Court of Financial and Administrative Matters of the Republic of Uruguay; the latter served the summons and complaint on appellant and, in accordance with its laws and procedure, made a return of summons to the district court. Also, by district court order, Moise Saporta was appointed to make service of process on appellant; he delivered the summons and complaint to the contractually-designated "special residence" of Ministry in Montevideo ³ and made a return of summons to the court.

We reject appellant's contention that service of process was invalid and hold that service here was reasonably calculated to give actual notice. We note at the outset that in making a general appearance, appellant did not, as claimed by appellee, waive its right to assert the alleged defects in service. Special appearances to challenge jurisdiction are no longer required in federal courts. Dragor Shipping Corp. v. Union Tank Car Co., 378 F.2d 241, 243 n.2 (9th Cir. 1967); 2A Moore, Federal Practice P 12.12.

While it may be argued that both methods of service utilized here were valid under Rule 4, F.R.C.P., ⁴ we have concluded that its provisions do not apply to service upon a foreign government. We uphold service upon appellant, however, under the rule-making authority of the district court pursuant to Rule 83, F.R.C.P. ⁵ In so doing we follow the reasoning of the Second Circuit opinion in Petrol Shipping Corp. v. Kingdom of Greece, Ministry of Commerce, 360 F.2d 103 (2d Cir.), cert. denied, 385 U.S. 931, 87 S.Ct. 291, 17 L.Ed.2d 213 (1966). In that case the court held that the terms of Rule 4(d)(3) in particular and Rule 4 in general did not extend to service upon the defendant foreign governmental agency. ⁶ It then turned to Rule 83 and explained:

(W)hen there is no Federal Rule, and no local rule, the court may fashion one not inconsistent with the Federal Rules. Rule 83, supra. . . .

. . . (I)f neither service under Rule 4, or under a local rule was available here, and, for some reason, that part of Rule 83 authorizing ad hoc rules could not be used, then the court may fashion a rule outside the Federal Rules altogether, although this really amounts to the same thing as the ad hoc provisions of Rule 83. Id. 360 F.2d at 108.

The court then upheld service upon the defendant by ordinary mail addressed to its office within the state.

Such service clearly was consistent with a local rule of the district court. ⁷ In the present case, however, we are faced with a local rule which, as we view it, is inapplicable. This follows from the fact that the relevant local rule, Rule 5(a)(2), set forth in the margin, ⁸ speaks of service in diversity cases in terms of F.R.C.P. 4(d)(1) rather than in terms of "parallels" and "analogies." Our holding that Rule 4 is inapplicable to foreign governmental agencies renders local Rule 5(a)(2) also inapplicable.

It follows that here the district court was confronted with a situation "not provided for by rule" in which Rule 83 permits a district judge to fashion a procedure consistent with the federal rules. The action of the court below, in authorizing both the issuance of the letters rogatory to the Uruguayan court and the service by Saporta at the special residence of appellant was a proper exercise of its power to regulate its practice under Rule 83. Service was, in both instances, reasonably calculated to give actual notice. Thus we hold that service of process was valid and that appellant's motion to quash was properly denied.

III. Personal Jurisdiction

In discussing the amenability of the Ministry to suit in a federal court based on diversity, we recognize that the unanimous view of the circuits is that such amenability is determined by reference to the law of the state in which the federal court sits. 4 Wright & Miller, Federal Practice and Procedures: Civil § 1075. This is not altered by our holding that Rule 4 is not applicable to the service of process on an agency of a foreign government. ⁹ Thus, we must examine California's long-arm statute, California Code of Civil Procedure § 410.10, which provides: A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.

This is indeed a long arm. We have described it in this fashion. "The jurisdiction of the California courts is therefore coextensive with the outer limits of due process under the state and...