Stroman Realty, Inc. v. Antt

• Decision Date: 14 May 2008
• Docket Number: No. 05-20803.,05-20803.
• Citation: 528 F.3d 382
• Parties: STROMAN REALTY, INC., Plaintiff-Appellee, v. Jim ANTT, Jr., et al., Defendants, Simone Marstiller, Secretary of the Department of Business and Professional Regulations for the State of Florida; Jeff Davi, Commissioner of Department of Real Estate for the State of California, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

528 F.3d 382

STROMAN REALTY, INC., Plaintiff-Appellee, v. Jim ANTT, Jr., et al., Defendants Simone Marstiller, Secretary of the Department of Business and Professional Regulations for the State of Florida; Jeff Davi, Commissioner of Department of Real Estate for the State of California, Defendants-Appellants.

No. 05-20803.

United States Court of Appeals, Fifth Circuit.

May 14, 2008.

As Amended June 18, 2008.

Leslie Allison Powell (argued), Diana Magazine Schobel, Law Offices of Leslie A. Powell, Ralph Gordon, Gordon & Simmons, Frederick MD, Gerald M. Birnberg, Williams, Birnberg & Andersen, Houston, TX, for Plaintiff-Appellee.

Joel R. White (argued), Austin, TX, Linda C. Broocks, Ogden, Gibson, Broocks & Longoria, Houston, TX, for Simone Marstiller.

Mary Ellen Margaret Welsh (argued), Dept. of Revenue for State of Illinois, Chicago, IL, for State of Illinois, State of Alaska, State of Arizona, State of Iowa, State of Kansas, State of Kentucky, State of Massachusetts, State of Nevada, State of Oklahoma, Corporation Com'n, State of South Carolina, State of Utah, State of Vermont, State of Virginia, State of Wisconsin and Commonwealth of Puerto Rico, Amici Curiae.

Jeffery Taylor Nobles (argued), John Koetting Broussard, Beirne, Maynard & Parsons, Houston, TX, Clint Alexander Corrie, Beirne, Maynard & Parsons, Dallas, TX, for Jeff Davi.

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

Before GARWOOD, SMITH and DeMOSS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Stroman Realty, Inc. ("Stroman"), a Texas-based real-estate broker engaged in the resale of timeshares, filed a declaratory judgment action in Texas to enjoin California and Florida officials from imposing their states' respective licensing and regulatory requirements on real estate transactions in their states or involving their citizens, alleging that application of these requirements violates the dormant Commerce Clause. The district court enjoined Florida and California from enforcing their requirements on Stroman. Because the district court lacked personal jurisdiction over the defendants, we reverse and render a judgment of dismissal.

I.

Although Stroman's only office is in Conroe, Texas, it has sold properties in 47 states and 29 countries and has served purchasers in every state and in 87 countries. It establishes a large database of available timeshares; it does not use cold calls or pressure sales but focuses instead on advertising to customers through direct mail, the Internet, and newspapers. Its website displays its available properties, and its computer system matches potential sellers with buyers. All of its agents and brokers are licensed in Texas.

Stroman generates revenue through advance listing fees and commissions. It charges sellers a one-time $500 non-refundable advance fee to be listed on its website, as well as a commission of 10% or $750, whichever is greater, upon sale. In 1997, the year during which most discovery in this case occurred, Stroman made the vast majority of its revenue through advance fees, and most homes it listed were never sold. The parties argue strenuously about the prevalence of advance fees in the resale industry and about the policy arguments for and against advance fees.

A.

Florida requires all real-estate brokers to be licensed and declares that all contracts with its residents procured by agents who are unlicensed in Florida are void. Although Florida originally claimed that a real-estate agent would need to be licensed to sell a Florida timeshare regardless of where the owner or seller resides, it now claims that brokers only need to be licensed when they interact with Florida citizens. Florida licenses are available to out-of-state residents, although the residents must complete educational requirements and pay license fees. Renewal of a Florida license requires continuing education and additional fees.

Florida prohibits brokers from collecting advance listing fees for Florida timeshares (although they may collect such fees for traditional real estate). That ban explicitly applies to advance fees charged to non-resident owners of Florida timeshares. Out-of-state brokers must be approved by the Secretary of State and must consent to service of process in Florida.

B.

California also requires that all brokers who serve its residents have California licenses, participate in continuing education, and pay licensing fees. Though California allows advance fees, it requires brokers to keep such fees in a trust account in an in-state bank until they are spent for the customer's benefit. Brokers must account for those funds, and advertising materials soliciting fees must be approved by the state.

California also has a unique regulation: Licensed brokers must maintain an office in California that "shall serve as [their] office for the transaction of business." CAL. BUS. & PROF.CODE § 10162 (2007). The parties dispute whether all work must be done from that office, as the district court found. California claims that licenses are still available to non-residents, who need not maintain an in-state office until after they have acquired a license. California also urges that although the in-state office must be the broker's principal place of business, it need not be the exclusive place of business.

II.

In 1990, California, by mail, ordered Stroman to cease advertising and brokerage activities in California. In 1997, the Commissioner of the California Real Estate Department signed an order citing Stroman for violating California statutes and regulations in 1997. The order was mailed to the Texas Real Estate Commission, which investigated and determined that Stroman had complied with California's orders.

Invoking 42 U.S.C. § 1983, Stroman sued Florida's Secretary of the Department of Business and Professional Regulation, seeking an injunction to prevent Florida officials from enforcing their brokerage laws, after the Secretary had commenced enforcement proceedings in 1998. The California Commissioner was later joined as a defendant.

The defendants unsuccessfully moved to dismiss for want of personal jurisdiction. On cross-motions for summary judgment, the district court granted Stroman an injunction, finding that the real-estate licensing requirements of Florida and California violate the Dormant Commerce Clause when applied to Stroman's timeshare resale business in Texas.

III.

We adopt Texas's jurisdictional statutes to reach out-of-state defendants, because § 1983 lacks a provision for services of process. See FED.R.CIV.P. 4(e), (k). The Texas long-arm statute extends to the limits of the Constitution; our inquiry is therefore limited to the reach of the Fourteenth Amendment's Due Process Clause. See Religious Tech. Ctr. v. Liebreich, 339 F.3d 369, 373 (5th Cir.2003).

The Fourteenth Amendment allows a court to assert personal jurisdiction over defendants who have meaningful "contacts, ties, or relations" with the forum state. Int'l Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Such contacts can give rise to general or specific jurisdiction. Courts exercise "general jurisdiction" over any action where the defendant has "continuous and systematic general business contacts" with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 n. 9, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). If the contacts are less pervasive, courts may exercise "specific jurisdiction" in "a suit arising out of or related to the defendant's contact with the forum." Id. at 414 n. 8, 104 S.Ct. 1868.

The district court found general and specific jurisdiction. We review those findings de novo. Freudensprung v. Offshore Tech. Servs., 379 F.3d 327, 342 (5th Cir.2004).¹

A.

The district court held that it had general jurisdiction because the State of California Franchise Tax Board and the Florida Department of Revenue had offices in Houston, Texas, according to the phone directory. See SOUTHWESTERN BELL, GREATER HOUSTON BUSINESS WHITE PAGES 129, 265 (1998). Neither of the two departments that were sued had an office in Texas, however, nor did the district court make findings regarding the officers' particular contacts that could give rise to general jurisdiction.

Instead, the court reasoned that because the officers are parts of larger administrative apparatuses, segments of which had a permanent presence in Texas, this could give rise to general jurisdiction. The court went further by asserting that because "[the court] is part of a government that is...