Stuart v. Spademan

• Decision Date: 07 October 1985
• Docket Number: No. 84-1634,84-1634
• Citation: 772 F.2d 1185
• Parties: David H. STUART and Richard A. Whitaker, Plaintiffs-Appellants, v. Richard G. SPADEMAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1185

772 F.2d 1185

David H. STUART and Richard A. Whitaker, Plaintiffs-Appellants, v. Richard G. SPADEMAN, Defendant-Appellee.

No. 84-1634.

United States Court of Appeals Fifth Circuit.

Oct. 7, 1985.

Wendell Coffee, Walker Metcalf, Lubbock, Tex., for plaintiffs-appellants.

Townsend & Townsend, J. George Seka, San Francisco, Cal., for defendant-appellee.

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

Before CLARK, Chief Judge, RANDALL and JOLLY, Circuit Judges.

RANDALL, Circuit Judge:

In this diversity case filed in a Texas district court, the plaintiffs, residents of Texas, seek to recover damages for breach of contract from a nonresident. The defendant filed a Rule 12(b)(2) motion to dismiss challenging the court's in personam jurisdiction. After a hearing on the motion, the district court dismissed the suit for want of personal jurisdiction over the defendant. The question presented is whether the defendant had sufficient contacts with Texas to support an exercise of personal jurisdiction over him. Because we agree with the district court's determination that such contacts were insufficient, the dismissal is affirmed.

I.

The defendant, Richard G. Spademan ("Spademan"), currently a Nevada resident, is the president of Spademan Release Systems, Inc. ("SRS"), a California corporation engaged in the design, manufacture, and distribution of ski bindings. In the fall of 1974, the plaintiffs, David H. Stuart and Richard A. Whitaker (the "plaintiffs"), residents of Texas, determined that the Spademan release binding, which was then being manufactured by SRS, could be modified to make it easier to fasten and release. ¹ Whitaker was a principal in the Chalet Ski Shop, Inc., a Texas corporation located in Amarillo, which stocked the Spademan bindings for sale. The plaintiffs tested the modified bindings in November 1974 while skiing in Colorado.

On January 28, 1975, Whitaker wrote to Spademan in care of SRS, enclosing a patent search report and a working model of the modified binding, to solicit interest in the modification. Spademan returned the model unopened, explaining that SRS would not examine any suggestion in the absence of an executed disclosure form. The plaintiffs completed the disclosure form that Spademan had enclosed with the unopened model and again mailed the model to Spademan.

In the summer of 1975, Spademan requested that the plaintiffs send him some modified bindings for testing. The plaintiffs offered a countersuggestion that Spademan mail some bindings to Stuart in Amarillo for modification. On November 14, 1975, Spademan shipped two bindings to Amarillo. The bindings were modified and returned to Spademan for testing in January 1976. The plaintiffs then filed an application for a United States patent on the invention, which was issued on December 20, 1977.

In April 1977, the plaintiffs met Spademan in Denver, Colorado, to explore the possibility of incorporating the modification into the bindings manufactured by SRS. In mid-1977, Spademan requested that a copy of the patent application be forwarded to him for evaluation. Later in 1977, a demonstration unit of the binding was sent to the plaintiffs in Amarillo.

After subsequent negotiations by letter and telephone, the plaintiffs assigned the patent on the invention to Spademan. The written agreement of assignment, which was executed by the plaintiffs in Texas and Spademan in California, specified that the effective date of assignment was December 1, 1977. In addition to the assignment, the agreement provided that the plaintiffs would assist in any further patent applications or for reissuance of the existing patent and that Spademan would make payments totalling $85,000 to the plaintiffs in Texas.

A problem with the payments precipitated the parties' execution of an amendment to the original agreement in February 1980. The amendment, executed by the plaintiffs in Texas and Spademan in Nevada where he had recently moved, required that Spademan make the payments called for in the original agreement directly to the plaintiffs' bank accounts in Texas. The amendment also substituted the following choice-of-law provision for that in the original agreement, which had provided that the agreement was subject to and would be construed and enforced in accordance with California law: "All of the terms of this agreement as amended shall be subject to and shall be construed and enforced according to the laws of the state in which the aggrieved party under the terms of the contract is residing at the time such breach of contract or grievance occurs." Spademan made eight annual payments to the plaintiffs' bank accounts in Amarillo, Texas, pursuant to the amended agreement.

In the meantime, Spademan, through his attorneys, sought reissuance of the U.S. patent and began gathering information for obtaining patents in several other nations. Toward this end and pursuant to the agreement, Spademan's California attorneys contacted the plaintiffs in Texas, seeking information surrounding the invention and original patent application. A significant amount of correspondence and numerous telephone calls regarding these matters were exchanged between Spademan's attorneys in California and the plaintiffs in Texas.

On August 31, 1982, the United States Patent and Trademark Office declined to reissue the patent--a decision that Spademan has apparently appealed. Spademan's attorney wrote the plaintiffs on November 5, 1982, indicating that Spademan intended to discontinue payments under the agreement due to the failure of consideration. Spademan did not make the December 1, 1982 payment or any subsequent payment.

Electing to declare the entire indebtedness mature, as permitted under the agreement the plaintiffs filed this breach-of-contract action in the United States District Court for the Northern District of Texas. The plaintiffs effected service of process on Spademan in Nevada under Federal Rule of Civil Procedure 4(c)(2)(B). Spademan moved to dismiss the complaint for lack of personal jurisdiction and filed two affidavits and documentary evidence in support of this motion. The plaintiffs opposed the motion with affidavits, documentary evidence, and the plaintiffs' oral testimony adduced at a June 19, 1984 hearing on the motion before the district court. Based on this record evidence, the court granted Spademan's motion to dismiss for lack of personal jurisdiction, and it filed findings of fact and conclusions of law supporting the decision. The plaintiffs appeal.

On appeal, the plaintiffs allege three grounds of error: (1) the district court erred by not considering the choice-of-law provision set out in the amended agreement in determining whether personal jurisdiction could be exercised over Spademan; (2) the court erred by holding that SRS's contacts with Texas were not attributable to Spademan; (3) the court erred in its minimum-contacts analysis by assigning little or no weight to certain alleged contacts between Spademan and Texas, including the delivery of payments under the agreement, the shipment of two bindings to Texas for modification, and communications between Spademan or his attorneys and the plaintiffs concerning the patent. We address each of these contentions against the well-established framework for assessing whether an exercise of long-arm jurisdiction would offend traditional notions of fair play and substantial justice embodied in the due process clause of the fourteenth amendment.

II.

A. Principles of Personal Jurisdiction

In a diversity action, personal jurisdiction may be exercised over a nonresident defendant if: (1) the nonresident defendant is amenable to service of process under the law of the forum state; and (2) the exercise of jurisdiction under state law comports with the due process clause of the fourteenth amendment. See Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1166 (5th Cir.1985); D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir.1985); Smith v. DeWalt Products Corp., 743 F.2d 277, 278 (5th Cir.1984). The first step of the dual inquiry is solely a matter of determining the reach of the forum state's long-arm statute. The second step--the due process inquiry--is governed by federal law and requires the satisfaction of two elements: (a) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; (b) it must be fair and reasonable to require the nonresident to defend the suit in the forum state. See D.J. Investments, 754 F.2d at 545; Pedelahore v. Astropark, Inc., 745 F.2d 346, 348 (5th Cir.1984); Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 494 (5th Cir.1974). Because the Texas long-arm statute, Tex.Rev.Civ.Stat.Ann. art. 2031b (Vernon 1964 & Supp.1985), has been interpreted to extend to the limits of due process, see Hall v. Helicopteros Nacionales de Colombia, 638 S.W.2d 870, 872 (Tex.1982), rev'd on other grounds, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); D.J. Investments, 754 F.2d at 546; Jim Fox Enterprises Inc. v. Air France, 705 F.2d 738, 740 (5th Cir.1983), we need only inquire whether the assertion of jurisdiction over Spademan by a district court sitting in Texas would be constitutionally permissible.

Due process requirements for exercising personal jurisdiction over a nonresident have been delineated in a familiar body of United States Supreme Court case law. ² A minimum-contacts analysis involves more than counting the nonresident's contacts with the forum. See Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 2180, 80 L.Ed.2d 561 (1984); Brilmayer, How Contacts Count: Due Process Limitations on State Court Jurisdiction, 1980 Sup.Ct.Rev. 77. We must look to see whether there has been some act by which the nonresident " 'purposefully avails itself of the privilege...