Stripling v. Jordan Production Co., No. 99-60875

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: KING
• Citation: 234 F.3d 863
• Parties: (5th Cir. 2000) J R STRIPLING; ROSSON EXPLORATION COMPANY; WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY COMPANY, Plaintiffs - Appellants, v. JORDAN PRODUCTION COMPANY, LLC, Defendant - Appellee, J R STRIPLING; ROSSON EXPLORATION COMPANY; WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY COMPANY, Plaintiffs - Appellants, v. GUARDIAN ENERGY EXPLORATION CORPORATION; JORDAN PRODUCTION COMPANY, LLC, Defendants - Appellees
• Docket Number: No. 99-60875
• Decision Date: 29 November 2000

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234 F.3d 863 (5th Cir. 2000) J R STRIPLING; ROSSON EXPLORATION COMPANY; WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY COMPANY, Plaintiffs - Appellants,
v.
JORDAN PRODUCTION COMPANY, LLC, Defendant - Appellee, J R STRIPLING; ROSSON EXPLORATION COMPANY; WILLIAM G BOWEN; BROOKHAVEN PUMP & SUPPLY COMPANY, Plaintiffs - Appellants,
v.
GUARDIAN ENERGY EXPLORATION CORPORATION; JORDAN PRODUCTION COMPANY, LLC, Defendants - Appellees. No. 99-60875 IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT November 29, 2000

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Appeal from the United States District Court for the Southern District of Mississippi

Before KING, Chief Judge, PARKER, Circuit Judge, and FURGESON, District Judge.^*

KING, Chief Judge:

Plaintiffs-Appellants J.R. Stripling, Rosson Exploration Company, William G. Bowen, and Brookhaven Pump & Supply Company (collectively "Stripling") appeal from a Rule 54(b) judgment entered in favor of Defendant-Appellant Guardian Energy Exploration Corporation ("Guardian"). For the following reasons, we REVERSE and REMAND for further proceedings.

I. FACTUAL AND PROCEDURAL HISTORY

On November 2, 1996, Stripling and Jordan Production Company ("Jordan") executed a Letter of Intent by which Stripling proposed to sell Jordan eighty percent of Stripling's oil and gas working interest in the Flora Field Unit.¹ On January 1, 1997, the parties entered into a Purchase and Sale Agreement (the "Agreement"), which memorialized the sale of the working interest. Under the Agreement, Jordan agreed to make payments to Stripling and to undertake a four-phase "Drilling Program" with certain drilling requirements.² The parties closed on the Agreement in Mississippi on January 27, 1997. At the closing, Jordan tendered its first required payment of $1,650,000. The drilling for the first phase of the four-phase Drilling Program then commenced.

On November 12, 1997, Stripling brought its first action against Jordan ("Jordan I"), claiming that Jordan began the second phase of the Drilling Program without paying the additional $1,600,000 payment contemplated by the Agreement. In Jordan I, Stripling sought a declaratory judgment that the work for the second phase had begun and that Jordan owed Stripling $1,600,000. Stripling also sought damages for breach of contract.

During the period of discovery for Jordan I, Stripling learned that Jordan, prior to executing its Agreement with Stripling, had entered into an agreement with Guardian Energy Management Corporation

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("GEMC"), the parent of Guardian. Under the agreement between GEMC and Jordan, GEMC agreed to purchase seventy-five percent of the eighty-percent working interest through Guardian, GEMC's wholly owned subsidiary. Moreover, Stripling discovered that Jordan purchased the working interest with Guardian's funds.

In response to this new information, Stripling filed "Plaintiffs' Motion for Leave to File an Amended Complaint and Join a Party-Defendant" (the "Motion to Amend"). The Motion to Amend came a month and a half after the deadline to file motions for joinder of parties as set out in the Case Management Plan Order.³ On September 29, 1998, despite recognizing that "Rule 15 requires that leave to amend be freely given," the magistrate judge determined that the proposed amendment would be futile because Stripling "failed to point to any facts indicating that in entering the agreement with [Stripling], Jordan was acting on behalf of Guardian," and thus, "there [was] no basis for [Stripling] to recover from Guardian under the contract with Jordan." Accordingly, the magistrate judge denied Stripling's Motion to Amend.

As a result of the magistrate judge's order disallowing joinder of Guardian, on October 6, 1998, Stripling filed a second suit against Jordan ("Jordan II"), which named both Jordan and Guardian as a party defendants. In addition, on October 14, 1998, Stripling filed objections to the magistrate judge's order and asked the district court to set it aside. The district court consolidated Jordan I and Jordan II. On November 23, 1998, Guardian filed a Rule 12 motion to dismiss on the ground that the magistrate judge's ruling in Jordan I--that Guardian could not be liable to Stripling--collaterally estopped Stripling from raising the issues against Guardian in Jordan II.

On September 30, 1999, the district court issued two orders. The first order denied Stripling's motion to set aside the magistrate judge's order, which found that joining Guardian would be futile. The second district court order dismissed Guardian from the consolidated suit on two grounds: (1) Stripling's claims were barred by the doctrine of collateral estoppel as a result of the magistrate judge's order; and (2) the court lacked personal jurisdiction over Guardian. On November 30, 1999, the district court entered its final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

Stripling timely appealed the district court's final judgment. On this appeal, we must address three issues. First, Stripling contends that the magistrate judge's order did not preclude the claims against Guardian. Second, Stripling argues that it presented a prima facie case of personal jurisdiction over Guardian based upon either the "contract prong" or the "doing-business prong" of the Mississippi long-arm statute. Finally, Stripling asserts that the district court abused its discretion in upholding the magistrate judge's finding of futility.

III. STRIPLING IS NOT COLLATERALLY ESTOPPED FROM RAISING THE ISSUES IN JORDAN II

In Jordan II, the district court dismissed Guardian, concluding that Stripling was collaterally estopped by the magistrate judge's order in Jordan I from raising its theories of recovery against Guardian. We conclude that the district court

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erred in finding that Stripling was collaterally estopped.

A. Standard of Review

This court reviews de novo a district court's dismissal under Rule 12(b)(6). See Shipp v. McMahon, 199 F.3d 256, 260 (5th Cir. 2000). In addition, "[t]he application of collateral estoppel is a question of law that we review de novo." United States v. Brackett, 113 F.3d 1396, 1398 (5th Cir. 1997).

B. Discussion

"'[W]hen an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.'" RecoverEdge L.P. v. Pentecost, 44 F.3d 1284, 1290 (5th Cir. 1995) (quoting Ashe v. Swenson, 397 U.S. 436, 443 (1970)). Under federal law, collateral estoppel encompasses three elements: "'(1) the issue at stake must be identical to the one involved in the prior action; (2) the issue must have been actually litigated in the prior action; and (3) the determination of the issue in the prior action must have been a necessary part of the judgment in that earlier action.'" Next Level Communications LP v. DSC Communications Corp., 179 F.3d 244, 250 (5th Cir. 1999) (quoting RecoverEdge L.P., 44 F.3d at 1290).

We find that the district court erred in concluding that Stripling was precluded by the magistrate judge's order in Jordan I from raising its claims against Guardian in Jordan II. The threshold inquiry, which is the dispositive inquiry in this analysis, is whether we are considering "an issue of ultimate fact [that has] been determined by a valid and final judgment."⁴ RecoverEdge L.P., 44 F.3d at 1290 (emphasis added). We conclude that the magistrate judge's order did not qualify as a final judgment, such that it would provide a preclusive collateral estoppel effect. See Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 219-20 (5th Cir. 2000) (finding that a magistrate judge's discovery orders "are not final orders under 28 U.S.C. § 1291"); Reynaga v. Cammisa, 971 F.2d 414, 416 (9th Cir. 1992) (finding that a magistrate judge's order under 28 U.S.C. § 636(b) is not final); Glover v. Ala. Bd. of Corrections, 660 F.2d 120, 122 (5th Cir. Unit B Oct. 1981) ("[28 U.S.C. § 636(b)] does not grant to a magistrate judge the authority to render a final judgment. Only a district court can make a magistrate's decision final, and therefore appealable." (footnote omitted)).⁵

A magistrate judge's order issued under 28 U.S.C. § 636(b)(1)(A) or § 636(b)(1)(B) only becomes final once the district court makes it final. See Alpine View Co., 205 F.3d at 220; Glover, 660 F.2d at 122. In the present case, it was not until after the district court ruled on the issues in Jordan II that it "direct[ed] the entry of a final judgment on . . . the Order Denying Plaintiffs' Motion To Set Aside Magistrate's Order dated September 30, 1999." From this set of circumstances, we conclude that the magistrate judge's order was not final at the time the district court rendered its Memorandum Opinion in Jordan II. Accordingly, the district court erred in finding that Stripling was collaterally estopped from raising the issues in Jordan II.

III. STRIPLING PRESENTED A PRIMA FACIE CASE OF PERSONAL JURISDICTION OVER GUARDIAN

Stripling asserts that the district court erred in holding that the court did not

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have personal jurisdiction over Guardian. Stripling contends that it set out a prima facie case for personal jurisdiction under both the "contract prong" and "doing-business prong" of Mississippi's long-arm statute. See Miss. Code Ann. § 13-3-57 (2000).⁶ We conclude that Stripling met the requirement of a prima facie showing, and therefore, the district court erred in dismissing Guardian for lack of personal jurisdiction at this stage in the proceedings.

A. Standard of Review

We review de novo a dismissal for lack of personal jurisdiction. See Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th Cir. 2000); Jobe v. ATR Mktg., Inc., 87 F.3d 751, 753 (5th Cir. 1996).

B. Discussion

Under the Federal Rules of Civil Procedure, a federal court sitting in diversity may exercise jurisdiction over a...