Southeast Wireless v. U.S. Telemetry

• Court: Louisiana Supreme Court
• Writing for the Court: Johnson
• Citation: Southeast Wireless v. U.S. Telemetry, 954 So.2d 120 (La. 2007)
• Decision Date: 11 April 2007
• Docket Number: No. 2006-C-1736.,2006-C-1736.
• Parties: SOUTHEAST WIRELESS NETWORK, INC., Slaydon Investment, Inc., and Celia Katz, Individually and in her Capacity as Independent Executrix for the Succession of Samuel B. Katz v. U.S. TELEMETRY CORPORATION, U.S. Telemetry Network, Inc., K. Steven Roberts, Thomas L. Siebert, Donald M. Clarke, S. Andrew Banks, Charles M. Bruce And James K. Gable.

954 So.2d 120

SOUTHEAST WIRELESS NETWORK, INC., Slaydon Investment, Inc., and Celia Katz, Individually and in her Capacity as Independent Executrix for the Succession of Samuel B. Katz v. U.S. TELEMETRY CORPORATION, U.S. Telemetry Network, Inc., K. Steven Roberts, Thomas L. Siebert, Donald M. Clarke, S. Andrew Banks, Charles M. Bruce And James K. Gable.

No. 2006-C-1736.

Supreme Court of Louisiana.

April 11, 2007.

Phelps Dunbar, Harry Alston Johnson, III, Michael Dale Hunt, Jane Ann Robert, Baton Rouge, Bruce A. Ericson, John M. Grenfell, for Applicant.

Moore, Walters, Thompson, Thomas Papillion & Cullens, Patrick Nelson Broyles, Joseph Elton Cullens, Jr., Stephen Layne Lee, Charles Roger Moore, Baton Rouge, Chehardy, Sherman, Ellis Breslin, Murray, Recile, Stephen D. Marx, Metairie, Kantrow, Spaht, Weaver & Blitzer, Paul Holden Spaht, Baton Rouge, Frank D. Blackburn & Associates, Allison Uhrich Rovira, Donald L. Beckner, Baton Rouge, for Respondent.

JOHNSON, Justice.

We granted this writ application to address whether Louisiana courts can properly exercise personal jurisdiction over a non-resident director of a corporation which has its principal place of business in Louisiana. For the following reasons, we affirm the decision of the court of appeal, finding that the trial court may properly exercise jurisdiction over defendant James K. Gable.

FACTUAL AND PROCEDURAL HISTORY

Defendant, U.S. Telemetry Corporation ("USTC") had a plan whereby it would develop equipment to transfer data using low-frequency radio waves (218 and 219 MHz bandwidth) that were auctioned off by the Federal Communications Commission in 1994. USTC was incorporated in Delaware, but at all relevant times, had its principal place of business in Baton Rouge, Louisiana. Plaintiffs, all Louisiana residents and companies, owned the licenses for the radio bands. This suit arises out of a series of contractual and securities transactions between the Plaintiffs and USTC, in which Plaintiffs either invested cash in USTC or transferred these licenses to USTC in exchange for company stock.

Plaintiffs allege that they suffered financial losses as a result of numerous misrepresentations and omissions of material facts made by USTC through members of its board of directors, including defendant, James K. Gable ("Gable"). Generally, these misrepresentations and omissions of material fact related to the state of USTC's financial condition and the state of its technology. Plaintiffs allege that because of such misrepresentations and material omissions, they paid cash and transferred FCC radio spectrum licences in exchange for securities in USTC, which resulted in financial losses.

The series of investments and contracts at issue took place from 1999 through September, 2001. Gable began his tenure as a director of USTC in June, 2001, after his employer, Texaco,¹ made a substantial investment in USTC, entitling it to appoint a director to the board. Gable, a Texaco employee, and a California resident, voluntarily accepted a position on the board. Gable continued to serve on the board until he resigned in December, 2001.

Plaintiffs sued Gable and other directors for violations of Louisiana's Blue Sky Law, La. R.S. 51:701 et seq., negligent or intentional misrepresentations, general tort liability, and breach of fiduciary duty in connection with various sales of USTC securities to the plaintiffs. Gable filed an Exception of Lack of Personal Jurisdiction which was sustained by the trial court. The trial court reasoned that Plaintiffs had not shown that Gable had sufficient contacts with Louisiana to subject him to the personal jurisdiction of the court. The court of appeal reversed, holding that a Louisiana court could assert personal jurisdiction over Gable, as a director of a foreign corporation with its principal place of business in Louisiana, without offending the due process clause of the U.S. Constitution.² The court of appeal reasoned that "[a]ccepting such a corporate position is deemed to constitute a manifest decision to avail oneself of the protection of the laws of the forum, and therefore it is not unreasonable to subject such directors to personal jurisdiction in the forum notwithstanding that their actions may have been only in their official capacity."³

For the following reasons, we agree with the conclusion of the court of appeal.

DISCUSSION

Personal Jurisdiction

The Louisiana long-arm statute, La. R.S. 13:3201, provides for the exercise of personal jurisdiction over a nonresident defendant:

A. A court may exercise personal jurisdiction over a nonresident, who acts directly or by an agent, as to a cause of action arising from any one of the following activities performed by the nonresident:

(1) Transacting any business in this state.

(2) Contracting to supply services or things in this state.

(3) Causing injury or damage by an offense or quasi offense committed through an act or omission in this state.

(4) Causing injury or damage in this state by an offense or quasi offense committed through an act or omission outside of this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives revenue from goods used or consumed or services rendered in this state.

B. In addition to the provisions of Subsection A, a court of this state may exercise personal jurisdiction over a nonresident on any basis consistent with the constitution of this state and of the Constitution of the United States.

Subsection B was added in 1987 to ensure that jurisdiction under the long-arm statute extended to the limits allowed by due process. Official Comments, Acts 1987, No. 418. In Fox v. Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, 576 So.2d 978 (La.1991), this Court stated that "[s]ince the 1987 amendment to LSA-R.S. 13:3201, the sole inquiry in Louisiana into jurisdiction over a nonresident is whether the assertion of jurisdiction complies with constitutional due process. (citation omitted) The limits of the Louisiana long arm statute and the limits of constitutional due process are coextensive and therefore, if the assertion of jurisdiction meets the constitutional requirements of due process the assertion of jurisdiction is authorized under the long arm statute." Fox, 576 So.2d at 983.

This due process requirement has evolved into a two-part test. In order to subject a nonresident defendant to personal jurisdiction, the defendant must have certain minimum contacts with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); de Reyes v. Marine Mgt. and Consulting, 586 So.2d 103 (La.1991).

The "minimum contacts" prong is satisfied by a single act or actions by which the defendant "purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985). This "purposeful availment" must be such that the defendant "should reasonably anticipate being haled into court" in the forum state. Ruckstuhl v. Owens Corning Fiberglas Corporation, 1998-1126 (La.4/13/99), 731 So.2d 881, cert. denied, 528 U.S. 1019, 120 S.Ct. 526, 145 L.Ed.2d 407 (1999). This part of the test ensures that the defendant will not be haled into a jurisdiction solely as a result of a random, fortuitous or attenuated contact, or by the unilateral activity of another party or a third person. de Reyes, 586 So.2d at 106; Alonso v. Line, 2002-2644 (La.5/20/03), 846 So.2d 745, cert. denied, 540 U.S. 967, 124 S.Ct. 434, 157 L.Ed.2d 311 (2003). If the defendant deliberately engages in significant activities within a state, or creates continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there. Because his activities are shielded by the benefits and protections of the forum's laws, it is presumptively not unreasonable to require the defendant to submit to the burdens of litigation in that forum. de Reyes, 586 So.2d at 106.

The second part of the due process test centers around the fairness of the assertion of jurisdiction. Once minimum contacts are established, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with "fair play and substantial justice." Burger King Corp., 471 U.S. at 476, 105 S.Ct. at 2184. Thus, once the plaintiff meets his burden of proving minimum contacts, "a presumption of reasonableness of jurisdiction arises" and "the burden then shifts to the opposing party to prove the assertion of jurisdiction would be so unreasonable in light of traditional notions of fair play and substantial justice as to overcome the presumption of reasonableness created by the defendant's minimum contacts with the forum." de Reyes, 586 So.2d at 107. In determining this fundamental fairness issue, the relevant considerations are: (1) the defendant's burden; (2) the forum state's interest; (3) the plaintiff's interest in convenient and effective relief; (4) the judicial system's interest in efficient resolution of controversies; and (5) the state's shared interest in furthering fundamental social policies. Ruckstuhl, 731 So.2d at 890.

Gable's Minimum Contacts

In reviewing a judgment on an exception of lack of personal jurisdiction, we are mindful that the factual findings underlying the judgment are reviewed for manifest error. Groth v. International Dispensing Systems, Inc., 361 So.2d 1312, 1313 (La.App. 1st Cir.1978). However, the application of the facts to established rules of law is a legal question, and thus, the legal issue of personal jurisdiction over a non-resident by a Louisiana court is...