Southern Investors II v. Commuter Aircraft Corp.

• Decision Date: 18 August 1981
• Docket Number: Civ.A.No. 81-364-B.
• Citation: 520 F. Supp. 212
• Parties: SOUTHERN INVESTORS II and Southern Investors Management Co., Inc. v. COMMUTER AIRCRAFT CORPORATION.
• Court: U.S. District Court — Middle District of Louisiana

520 F. Supp. 212

SOUTHERN INVESTORS II and Southern Investors Management Co., Inc. v. COMMUTER AIRCRAFT CORPORATION.

Civ.A.No. 81-364-B.

United States District Court, M. D. Louisiana.

August 18, 1981.

Phillip W. Preis, Baton Rouge, La., for plaintiffs.

H. Evans, Scobee, Durrett, Hardin, Hunter, Dameron & Fritchie, Baton Rouge, La., David A. Lee, Isicson, Steinmetz & Lee, Washington, D. C., for defendant.

POLOZOLA, District Judge.

Plaintiffs, Southern Investors II (Southern) and Southern Investors Management Company, Inc. (SIMCO), have filed this diversity action seeking damages for breach of contract by the defendant, Commuter Aircraft Corporation, (CAC). Southern is a Louisiana partnership while SIMCO is a Louisiana corporation. Defendant, CAC, is a Maryland corporation having its principal place of business in Ohio but also does business in California. Plaintiffs claim that CAC requested Paine, Webber, Jackson and Curtis, an investment banking group for CAC, to seek a lender for a working capital loan to assist CAC in the development, manufacture and marketing of a commuter aircraft. Initially, CAC had applied with the United States Department of Commerce, Economic Development Administration (EDA), for financial assistance in the form of a guarantee of the working capital loan. Southern and SIMCO, acting upon the request of the investment banking group as potential lenders for the working capital loan, then met several times with EDA and CAC representatives to negotiate the loan and guarantee agreement. The EDA thereafter agreed to provide a ninety percent (90%) guarantee of the working capital loan. On October 29, 1980, Southern made a commitment to purchase a thirty-eight million dollar ($38,000,000) loan to be made to CAC, with SIMCO as lead service lender. On November 3, 1980, CAC executed and returned the commitment agreement to the plaintiffs. One condition of the commitment agreement provided for the payment of one-half (½) of one percent (1%) of the principal loan amount commitment fee to SIMCO within ninety (90) days of the execution of the agreement. In this case plaintiffs contend the commitment fee of one hundred ninety thousand dollars ($190,000) was not paid within the ninety day period and has not been tendered as of the date of the institution of this suit.

This matter is now before the Court on the motion of the defendant, CAC, to dismiss the complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure for failure to establish personal jurisdiction. In the alternative the defendant seeks to transfer this action to the United States District Court for the District of Columbia or to the United States District Court for the District of Maryland. Plaintiffs have filed an opposition to this motion. Defendant contends that it has not had sufficient contacts with the state of Louisiana for the Court to constitutionally exercise personal jurisdiction over it under the facts of this case. Defendant further contends that the only possible contacts it had with the plaintiffs were telephone conversations with the plaintiffs, both within and outside the state of Louisiana, and personal negotiations with the plaintiffs outside the state.

Plaintiffs contend that this Court has personal jurisdiction over the defendant, CAC, because the defendant transacted business in the state of Louisiana within the intent and meaning of the Louisiana Long-Arm Statute, La.R.S. 13:3201. The plaintiffs assert four grounds in support of this contention:

1) CAC sought out the plaintiffs for a loan in connection with the manufacture of a commuter aircraft, thereby availing itself of the protection and benefits of Louisiana law.

2) The commitment agreement was prepared by Southern in Louisiana and it provided for numerous obligations to be undertaken by Southern in Louisiana.

3) The commitment agreement provides for a continuing relationship between the defendant and the plaintiffs as a result of the contractual agreement.

4) Substantial services would have been provided by the plaintiffs to the defendant had the contract not been breached.

In determining whether CAC is subject to the in personam jurisdiction of this Louisiana federal court, the Court must follow the two-step analysis set forth by the Fifth Circuit Court of Appeals in Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228 (5 Cir. 1973). See also Standard Fittings Co. v. Sapag, S.A., 625 F.2d 630 (5 Cir. 1980), rehearing en banc denied, 631 F.2d 732 (5 Cir. 1980), cert. denied, ___ U.S. ___, 101 S.Ct. 1981, 68 L.Ed.2d 299 (1981). Thus, the Court must first determine whether the defendant is amenable to service under the Louisiana Long-Arm Statute. Louisiana law controls this determination. Standard Fittings Co. v. Sapag S.A., supra; Jetco Electronic Industries, Inc. v. Gardiner, supra; Barrett v. Browning Arms Co., 433 F.2d 141 (5 Cir. 1970); Tetco Metal Products, Inc. v. Langham, 387 F.2d 721 (5 Cir. 1968). If the requirements of the Louisiana statute are satisfied, then federal law must be applied to determine whether assertion of jurisdiction over the defendant comports with due process. Standard Fittings Co. v. Sapag, S.A., supra; Jetco Electronic Industries, Inc. v. Gardiner, supra; Barrett v. Browning Arms Co., supra; Tetco Metal Products, Inc. v. Langham, supra; Arrowsmith v. United Press International, 320 F.2d 219 (2 Cir. 1963).

The plaintiffs seek to invoke the provisions of La.R.S. 13:3201 et seq. to obtain jurisdiction over the "person" of the defendant. The statute provides in part:

"A court may exercise personal jurisdiction over a nonresident, who acts directly or by an agent, as to a cause of action arising from the nonresident's

(a) transacting any business in this state; ..." R.S. 13:3201(a).

The comments of the Louisiana State Law Institute immediately following the text of the statute indicate that the term "transacting business" "is intended to mean a single transaction of either interstate or intrastate business, and to be as broad as the phrase `engaged in business activity' of R.S. 13:3471(1)." Adcock v. Surety Research and Investment Corp., 344 So.2d 969, 971 (La.1977); Thompson v. Great Midwest Fur Co., 395 So.2d 840, 843 (La.App. 1 Cir. 1981).

It is now clear that the intent of the Louisiana Long-Arm Statute is to permit the exercise of in personam jurisdiction to the full limits of due process in contract cases as well as tort cases. In other words, the statutory inquiry is synonymous with the due process inquiry. Standard Fittings Co. v. Sapag, S.A., supra at 638; Adcock v. Surety Research and Investment Corp., supra at 971; Drilling Engineering, Inc. v. Independent Indonesian American Pet. Co., 283 So.2d 687 (La.1973); Thompson v. Great Midwest Fur Co., supra at 843; Soileau v. Evangeline Farmers Co-op, 386 So.2d 179 (La.App. 3 Cir. 1980); Latham v. Ryan, 373 So.2d 242 (La.App. 3 Cir. 1979); Ingram Contractors, Inc. v. Rowley, 360 So.2d 593 (La.App. 4 Cir. 1978); Mayeux v. Hughes, 333 So.2d 273 (La.App. 1 Cir. 1976); Aucoin v. Hanson, 207 So.2d 834 (La.App. 3 Cir. 1968). Therefore, it is settled that if a business activity satisfies the requirements of due process, it ipso facto satisfies the "transacting business" requirements of the Louisiana Long-Arm Statute.

The Due Process Clause of the Fourteenth Amendment of the United States Constitution limits the power of this Court in exercising jurisdiction over the person of a nonresident defendant. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Kulko v. Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978).

The Fifth Circuit Court of Appeals has recently referred to a two-prong test in determining whether a nonresident defendant is subject to suit consistent with due process. Thus, in Standard Fittings Co. v. Sapag, S.A., supra:

"In Product Promotions, Inc. v. Cousteau, 495 F.2d 483 (5th Cir. 1974)24, footnote omitted this court described a two-part test for determining whether the exercise of in personam jurisdiction would deprive a defendant of due process: `First, "there must be some minimum contact with the state which results from an affirmative act of the defendant," i. e., purposeful activity. Secondly, "it must be fair and reasonable to require the defendant to come into the state and defend the action."' 495 F.2d at 494. In a footnote to this two-part test, the court identified several factors which various courts have used in determining whether the exercise of personal jurisdiction over a nonresident corporation comports with due process: the quantity of contacts, the nature and quality of the contacts, the connection of the cause of action to the contacts, the interest of the forum state in providing a forum for its residents, the convenience to the parties, and the nature and character of the business. 495 F.2d at 494 n. 17.

Further explaining the first part of the two-prong test, the court in Product Promotions stated that purposeful activity of a defendant within the forum state implies that there must be some activity by the defendant and that it must `support an inference that the nonresident defendant purposefully availed himself of the benefits of conducting business in the forum.' 495 F.2d at 495. The court went on to say that `even if the defendant performs no physical act within the State, activities outside the State can provide adequate contacts if they have reasonably foreseeable consequences within the State.' 495 F.2d at 496. And finally, with respect to the purposeful activity prong of the test, the court said, `the operative consideration is that the defendant's contacts with the forum were deliberate, rather than fortuitous, so that the possible need to invoke the benefits and protections of the forum's laws was reasonably foreseeable, if not foreseen, rather than a surprise.' 495 F.2d at 496.

Product Promotions refined the second prong of the test which...