Summary
Holding that the defendant's conduct of regularly entering into short-term contracts for the purchase of natural gas from Texas corporations was not sufficiently continuous and systematic to warrant jurisdiction over the corporation
Summary of this case from Extreme LLC v. Extreme Elecs. Corp.Opinion
Civil Action No. 3:02-CV-2400-BH
May 27, 2003
MEMORANDUM OPINION AND ORDER
Before the Court are Defendant Emanuel Medical Center, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer Venue ("M. to Dismiss") and Brief in Support ("Br."), filed November 8, 2002; Plaintiff's Response to Defendant's Motion to Dismiss and Motion to Transfer Venue ("Resp."), filed December 9, 2002; and Defendant's Reply Brief in Support of Emanuel Medical Center, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer Venue ("Reply"), filed December 23, 2002. An evidentiary hearing was held on the record on February 25, 2003. Having reviewed the evidence and the applicable authorities, the Court is of the opinion that Defendant Emanuel Medical Center, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer Venue should be GRANTED.
I. BACKGROUND
Plaintiff TXU Energy Retail Company, LP ("TXU") is a Texas limited partnership with its principal place of business in Dallas, Texas. (Resp. at 1.) TXU does business across the United States and maintains an office in Fremont, California. (Tr. at 19, 32-33, 39.) Defendant Emanuel Medical Center, Inc. ("Emanuel") is a California non-profit religious corporation with its principal place of business in Turlock, California. (Def. Exh. 3.) This dispute arises from TXU's sale of natural gas to Emanuel in 2001.
A. TXU Contracts
Emanuel entered into an agreement to purchase natural gas from TXU Energy Services from May 1, 2001, through May 31, 2001 in a document titled "Natural Gas Sales Agreement #18634." (Pl. Exh. 3.) Agreement #18634 showed TXU's address to be in Pittsburgh, Pennsylvania. Id. Emanuel's representative negotiated Agreement #18634 from California. (Def. Exh. 1.) TXU's marketer in California was responsible, in part, for customer maintenance, including ongoing pricing for Agreement #18634. (Tr. at 34.) Questions concerning the contract, pricing, quantities, or billing were to be directed to (1) the marketer in California, (2) the operations person in Dallas, Texas, or (3) the 800 number for billing and collections. Id. at 34-35. All invoices from TXU to Emanuel were sent from Texas, and payments were made to TXU's bank in Texas. (Tr. at 18.) Agreement #18634 contained a choice of law provision stating that Texas law was to apply to interpretation of the agreement, and that venue on any suit would be in Dallas, Texas. (Pl. Exh. 3.)
TXU succeeded to the contract at issue.
On June 7, 2001, TXU sent Emanuel an offer sheet locking in a price for natural gas from July 1, 2001, through June 30, 2003; Emanuel accepted the offer in writing on June 11, 2001. (Pl. Exh. 1.) The terms contained in the offer sheet were negotiated between a representative of Emanuel in California and a TXU marketer at its Fremont, California offices, and all negotiations took place at Emanuel's offices in California. (Tr. at 33; Def. Exh. 1.) The offer sheet listed TXU's address as being in Fremont, California. Id. It did not contain a venue or choice of law provision. An original contract was to be forwarded to Emanuel upon receipt of the offer sheet by TXU from its Texas office. (Pl. Exh. 1; Tr. at 39.) Apparently, the contract was never signed, although TXU did provide Emanuel with natural gas as agreed. TXU now sues Emanuel for breach of contract relating to the June 7, 2001 offer sheet.
B. Prior contracts with Texas companies
Prior to its dealings with TXU, Emanuel purchased natural gas from other Texas companies which TXU subsequently acquired. On September 1, 1995, Emanuel entered into a "Natural Gas Purchase Sale and Management Contract" with Enserch Gas Marketing, Inc. ("Enserch Gas") to purchase natural gas from September 1, 1995, through June 30, 1997. (Pl. Exh. 9.) Enserch Gas was a marketer and provider of gas sales and related services to natural gas consumers in California. Id. That contract included a choice of law provision which stated that the contract would be construed under the laws of California. Id. at 5.
Pleadings refer to Enserch Gas Marketing, Inc. or Enserch Energy Services, Inc. as "predecessors" of TXU; TXU's representative clarified at the hearing that TXU later acquired these companies. See Tr. at 11.
Emanuel subsequently entered into a "Gas Sales Agreement" with Enserch Gas to purchase natural gas from December 1, 1995, through November 30, 1996. (Pl. Exh. 8.) The "Gas Sales Agreement" listed a payment address in Dallas, Texas, and a wire address to a Texas bank. Id.
Emanuel entered into a "Gas Purchase Sale and Management Contract" with Enserch Energy Services, Inc. ("Enserch Energy"), to purchase natural gas from March 1, 1998, through December 31, 2002. (Pl. Exh. 4.) The address listed in the contract for Enserch was in San Francisco, California. Id. Emanuel negotiated this agreement with Enserch Energy's California office; the California office sent the contract to Emanuel, and Emanuel returned it to the California office. (Def. Exh. 2.) That contract contained an arbitration clause, requiring the parties to arbitrate any disputes and stating that the rights and obligations of the parties were to be determined in accordance with the laws of Texas. (Pl. Exh. 4.)
Subsequently, Emanuel and Enserch Energy entered into "Natural Gas Sales Agreement #3297" for the purchase of non-core gas from July 1, 1998, through December 31, 1998. (Pl. Exh. 5). That agreement listed a Houston, Texas, address for Enserch and contained a choice of law provision wherein the parties agreed that Texas law was to apply to interpretation of the agreement. Id. Agreement #3297 further provided that venue on any suit brought on the agreement would be in Dallas, Texas. Id. The parties also entered into two written amendments to Agreement #3297 which, in part, extended the term of purchase through October 31, 1999. (Pl. Exhs. 6, 7.)
No evidence was presented regarding Emanuel's source of natural gas between October 31, 1999, and May 1, 2001, the date TXU initially began supplying gas to Emanuel per Natural Gas Sales Agreement #18634.
The "Gas Purchase Sale and Management Contract," dated January 20, 1998, purports to cover purchases by Emanuel from Enserch from March 1, 1998, through December 31, 2002. (Pl. Exh. 4.) However, it is unclear because of the intervening contracts whether the January 20, 1998 contract continued in effect for the stated term. The Court notes that the effective dates of other prior contracts were also changed by intervening contracts and/or addendums.
II. ANALYSIS
Emanuel moves to dismiss this action for lack of personal jurisdiction. (M. to Dismiss at 2.) TXU claims that specific and general jurisdiction exist in this Court based on Emanuel's continuing contracts with Texas companies. (Resp. at 2-3.) A federal district court sitting in a diversity action may exercise personal jurisdiction over a nonresident defendant if the long-arm statute of the forum state confers personal jurisdiction over that defendant and exercise of such jurisdiction by the forum state is not inconsistent with due process under the United States Constitution. Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999). Because the Texas long-arm statute has been determined to extend to the limits of due process, the Court's analysis is limited to determining whether subjecting Emanuel to suit in Texas is consistent with due process. Id."The Due Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed itself of the benefits and protections of the forum state by establishing `minimum contacts' with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend `traditional notions of fair play and substantial justice.'" Id. (citing International Shoe Co. v. State of Washington, 326 U.S. 310, 316 (1945)). "Minimum contacts" are those contacts sufficient to assert specific jurisdiction, or those sufficient to assert general jurisdiction. Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000). "To comport with due process, the defendant's conduct in connection with the forum state must be such that he `should reasonably anticipate being haled into court' in the forum state." Latshaw, 167 F.3d at 211 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). If the court determines that minimum contacts exist to support the exercise of personal jurisdiction, the court then determines whether it would be fair to require the nonresident defendant to defend the suit in the forum state. WNS, Inc. v. Farrow, 884 F.2d 200, 204 (5th Cir. 1989) (citing Bean Dredging Corp. v. Dredge Tech. Corp., 744 F.2d 1081, 1085 (5th Cir. 1984)). The court "must consider the burden on the defendant, the interest of the forum state, and the plaintiffs interest in obtaining relief." Id. Also to be considered are "the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies." Id.
The party seeking to invoke the court's jurisdiction has the burden of establishing sufficient contacts by the nonresident defendant. WNS, Inc., 884 F.2d at 203. When the court conducts a pre-trial evidentiary hearing, the plaintiff must prove jurisdiction by a preponderance of the evidence. Travelers Indem. Co. v. Calvert Fire Ins. Co., 798 F.2d 826, 831 (5th Cir. 1986). Because a pre-trial evidentiary hearing was conducted, the Court must therefore determine whether TXU met its burden to establish by a preponderance of the evidence that Emanuel engaged in "minimum contacts" to support the exercise of personal jurisdiction.
A. Specific jurisdiction
TXU argues that specific personal jurisdiction is proper in Texas, alleging that Emanuel "purposefully availed itself of the benefits and protections of Texas laws because it intended to contract with a Texas resident for natural gas" and because the subsequent failure of Emanuel to pay for the natural gas delivered pursuant to the parties' agreement gave rise to this lawsuit. (Resp. at 3-4.) Emanuel alleges that the facts do not demonstrate that it was forseeable that Emanuel's conduct would cause it to be haled into court in Texas. (Br. at 8.)
A court has specific jurisdiction over an out-of-state defendant if the defendant has `purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that `arise out of or relate to' those activities. Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985) (citations omitted). "The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State." Id. at 474-75 (noting that there must "be some act 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."). A non-resident defendant must have fair warning that a particular activity may subject him to the jurisdiction of another state. Electrosource, Inc. v. Horizon Battery Technologies, Ltd., 176 F.3d 867, 871 (5th Cir. 1999). The unilateral activity of entering into a contract with an out-of-state party, without more, is not sufficient to establish minimum contacts. Burger King, 471 U.S. at 478-79. Rather, in a breach of contract case, to determine whether a party purposefully availed itself of a forum, a court must evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing. . . ." Id. at 479.
In this case, TXU argues that Emanuel knew that TXU was a Texas company and that Emanuel would be subject to suit in Texas for breach of its agreement to purchase natural gas. (Resp. at 4.) After reviewing the past agreements, it is clear, as TXU argues, that Emanuel knew that it was dealing with a Texas company. However, Emanuel was a buyer of TXU's products, rather than a seller. It is difficult to find that a nonresident defendant has "reached out" to a resident plaintiff where the nonresident defendant is a buyer, rather than a seller of the resident plaintiffs products. See Bell Paper Box, Inc. v. Trans Western Polymers, Inc., 53 F.3d 920, 922 (8th Cir. 1995); Vetrotex Certainteed Corp. v. Consolidated Fiber Glass Prods. Co., 75 F.3d 147 (3rd Cir. 1995). Moreover, it is not clear that Emanuel's prior purchases from a different company, albeit one now part of TXU, are relevant to the evaluation of the prior negotiations of the parties to this lawsuit. Even considering all contracts or agreements entered into by Emanuel for the purchase of natural gas in evidence, however, the Court is not convinced that these contacts are sufficient to establish that Emanuel purposefully availed itself of a Texas forum. Emanuel entered into several agreements to buy natural gas, which was marketed to California buyers, for specific periods of time. The evidence did not establish that Emanuel continuously purchased gas from TXU or Enserch between 1995 and the contract at issue; notably, there was no evidence regarding Emanuel's source of gas between October 1999, when it ceased contracting for gas from Enserch, and May 2001, when it began contracting with TXU. Emanuel negotiated all of the agreements in California, and its primary contacts with TXU and Enserch were with employees in the California office. (Def.'s Exhs. 1, 2.) Further, not every past agreement contained a Texas choice-of-law provision nor listed Texas as the proper venue for resolving disputes; one agreement provided that California law would govern. Although a choice of law provision alone does not confer jurisdiction, such a provision is a factor in considering minimum contacts. See Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1069 (5th Cir. 1992).
Also, the agreement at issue in this case did not "call for an acquisition of knowledge, skill and technology that envision[ed] `continuing and wide-reaching contacts'" by Emanuel with TXU in Texas. Electrosource, Inc., 176 F.3d at 871 (5th Cir. 1999) (finding specific jurisdiction when the contract required the plaintiff to train the nonresident defendant's employees in Texas and to provide technical support in Texas, the defendant's representatives traveled to Texas for negotiations and planning, and the parties contemplated that the preliminary work would be fully completed in Texas). Emanuel's employees did not visit Texas to receive any training. (Def.'s Exhs. 1, 2.) Emanuel's only contact with TXU's Texas offices was with respect to billing and collections. (Def. Exh. 1, 2; Tr. at 35.) Those contacts were made by phoning TXU's 800 number. Id. The fact that Emanuel sent payments to TXU in Texas is not dispositive. See Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026 (5th Cir. 1983) (finding the nonresident defendant's contact with Texas to be insufficient to establish personal jurisdiction even though it purchased goods it knew were to be manufactured in Texas, mailed payment checks to Texas, sent its officers to Texas to close the deal, and accepted the plaintiffs offer in Texas). The offer sheet itself contains no reference to TXU's Texas offices, but lists TXU's address as being in California. (Pl. Exh. I.)
The mere purchase of natural gas from a Texas company for a limited term, after dealing almost exclusively with that company's California office, is not the type of activity having the clearly foreseeable effect of causing business activity in Texas. Compare Burger King, 471 U.S. at 478-79 (finding personal jurisdiction over a nonresident defendant who had never even visited the forum state, when the contract at issue had a substantial connection with the forum state in that it created a long-term relationship between the defendant and the plaintiff and the defendant's breach caused foreseeable injuries to the plaintiff in the forum state); Central Freight Lines, Inc., 322 F.3d at 382 (finding specific jurisdiction over a nonresident defendant when the defendant negotiated the terms of the contract with the plaintiff at its Texas headquarters, the contract envisioned a long-term relationship with the foreseeable and intended result of causing business activity within Texas, and the defendant agreed to accept shipments from Texas for Texas customers). Here, the agreement between TXU and Emanuel did not create a long-term relationship or cause business activity, other than that associated with payment, within Texas.
In conclusion, TXU did not meet its burden to establish by a preponderance of the evidence that Emanuel purposefully invoked the benefits of Texas' laws such that this Court may find that it had minimum contacts with the state and exert specific jurisdiction.
B. General jurisdiction
TXU further argues that Texas has general personal jurisdiction over Emanuel because Emanuel has "purchased natural gas from Texas corporations for more than five years prior to the contract . . . at issue in this lawsuit." (Resp. at 4.) A court may assert general jurisdiction over a nonresident defendant when the defendant's "contacts with the forum state are substantial and `continuous and systematic' but unrelated to the instant cause of action." Central Freight Lines, Inc. v. APA Transport Corp., 322 F.3d 376, 381 (5th Cir. 2003) (citations omitted). However, "mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 418 (1984) (finding that a trip to Texas to negotiate the contract, accepting checks drawn on a Texas bank, purchasing equipment, and sending personnel to Texas for training were not contacts of a continuous and systematic nature).
Emanuel is not registered to do business in Texas and does not conduct any business in Texas. (M. to Dismiss, App. at 1.) Emanuel's representative never traveled to Texas to negotiate its contracts with TXU. (Def. Exh. 1.) Emanuel did enter into a series of short-term contracts for the purchase of natural gas from Texas corporations, but it is not clear from the record that the contracts created a continuous relationship with this state. Emanuel made payments on those contracts to TXU's bank in Texas. (Tr. at 18.) The Court finds that Emanuel's conduct, in regularly entering into short-term contracts for the purchase of natural gas from Texas corporations is not the sort of "continuous and systematic contacts" sufficient to create general personal jurisdiction. See Central Freight Lines, Inc., 322 F.3d at 381 (concluding that there was no general jurisdiction over a shipping company that never operated in Texas, even though it arranged and received shipments to and from Texas and regularly sent sales people to Texas to develop business because those activities were not substantial enough).
The Court finds that TXU did not establish by a preponderance of the evidence that Emanuel had sufficient contacts with the state of Texas such that this Court may exercise personal jurisdiction over it. Because the Court lacks both specific and general personal jurisdiction over Emanuel, it is therefore ORDERED that Defendant Emanuel Medical Center, Inc.'s Motion to Dismiss for lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer Venue is GRANTED, and this case be DISMISSED for lack of personal jurisdiction.
Because the Court finds it lacks personal jurisdiction over Emanuel, it does not address the factors applicable to Emanuel's improper venue argument.