Source: https://supreme.justia.com/cases/federal/us/484/97/
Timestamp: 2019-04-25 04:25:10+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 484 › Omni Capital v. Rudolf Wolff & Co.
A federal court does not have personal jurisdiction over a foreign national who is being sued for violating Section 22 of the Commodity Exchange Act.
Rudolf Wolff & Co. served as a broker for Omni Capital, which was promoting an investment program in London that was based on commodity futures trading. Wolff was a British company run by British citizens. When investors sued after the IRS prevented them from receiving deductions based on the program, Omni tried to bring Wolff into the case through impleader. Wolff argued that there was no personal jurisdiction, and the federal district court in Louisiana dismissed it from the action.
There must be specific authorization to support jurisdiction by federal courts, since they have no such inherent right, and Section 22 of the CEA does not provide this authorization. The long-arm statute in Louisiana, which is the critical test under Federal Rule of Civil Procedure 4(e), does not authorize service in this situation. Congress long has held the power of determining rules of service, rather than the courts, so it would be improper to create a common law rule in the area without a change from Congress.
There are specific rules in the Federal Rules of Civil Procedure that govern service of process on non-citizen defendants, whether or not they are in the U.S. at the time that they are served.
Omni Capital International, Ltd. v. Rudolf Wolff & Co., Ltd.
Omni Capital International, Ltd., and Omni Capital Corporation (hereafter petitioners), New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Certain investors filed suits (later consolidated) against petitioners in the Federal District Court for the Eastern District of Louisiana, charging that petitioners fraudulently induced them to participate in petitioners' program, in violation of various federal securities laws. Petitioners impleaded respondent Rudolf Wolff & Co., a British corporation with offices in London that was employed by petitioners to handle trades on the London Exchange, and respondent Gourlay (hereafter respondents), a United Kingdom citizen and resident who was Wolff's representative in soliciting petitioners' business. Petitioners contended that their liability, if any, was caused by respondents' improper trading activities. While the action was pending, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U. S. 353, was decided, recognizing an implied private cause of action under the Commodity Exchange Act (CEA), and the plaintiffs in this litigation amended their complaints to allege violations of that Act. The District Court dismissed the other securities law claims as preempted by the CEA, and held that it lacked personal jurisdiction over respondents because (1) the CEA was silent about service of process for private causes of action, (2) thus, application of Louisiana's long-arm statute was required, and (3) that statute's requirements were not met. The Court of Appeals affirmed.
Held: The District Court lacked personal jurisdiction over respondents in this federal question litigation under the CEA. Pp. 484 U. S. 102-111.
(a) The requirement that a federal court have personal jurisdiction flows from the Due Process Clause of the Fifth Amendment. However, before a federal court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, there must be authorization for service of summons on the defendant. Pp. 484 U. S. 103-104.
(b) Under Federal Rule of Civil Procedure 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits to determine whether an out-of-state defendant is amenable to service. After the Curran decision, and while the present litigation was still pending in the District Court, Congress added § 22 to the CEA, explicitly authorizing a private cause of action for CEA violations but not referring to service of process, in contrast to Congress' explicit authorization of nationwide service of process in other CEA provisions for other civil actions under the Act. This contrast, as well as the legislative history, supports the conclusion that Congress did not intend to provide nationwide service of process for private actions under the CEA. Nor was nationwide service implicitly authorized for any implied private cause of action under the CEA, such as petitioners', that accrued prior to § 22's effective date. Moreover, the District Court held, and petitioners concede, that the requirements of Louisiana's long-arm statute were not met here. Pp. 484 U. S. 104-108.
(c) Even were it within this Court's power, judicial creation of a common law rule authorizing service of process in this litigation would be unwise. The strength of the longstanding assumption that federal courts cannot add to the scope of service of summons Congress has authorized, and the network of statutory enactments and judicial decisions tied to that assumption, argue strongly against devising common law service of process provisions. The responsibility for creating service of process provisions rests with those who propose the Federal Rules of Civil Procedure, and with Congress. Pp. 484 U. S. 108-111.
This case presents questions concerning the prerequisites to a federal court's exercise of in personam jurisdiction.
Petitioners Omni Capital International, Ltd., and Omni Capital Corporation (collectively Omni), [Footnote 1] New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Omni employed respondent Rudolf Wolff & Co., Ltd., a British corporation with its offices in London, as a broker to handle trades on that Exchange. Respondent James Gourlay, a citizen and resident of the United Kingdom, served as Wolff's representative in soliciting this business from Omni.
contending that its liability, if any, was caused by their improper trading activities.
The procedural history is complex. The original complaints, filed in 1980 and 1981, charged violations of the Securities Exchange Act of 1934, ch. 404, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq. (1982 ed. and Supp. IV); SEC Rule 10b-5, 17 CFR § 240. 10b-5 (1987); and the Securities Act of 1933, 48 Stat. 74, as amended, 15 U.S.C. § 77a et seq. (1982 ed. and Supp. IV), and included pendent state law claims. The four cases were consolidated in the District Court. While they were pending, this Court decided Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U. S. 353 (1982). In Curran, we recognized an implied private cause of action under the Commodity Exchange Act (CEA), 42 Stat. 998, as amended, 7 U.S.C. § 1 et seq. (1982 ed. and Supp. IV). The plaintiffs accordingly amended their complaints to allege violations of §§ 4b and 9(b) of the CEA, as amended, 7 U.S.C. §§ 6b and 13(b).
"Congress intended for U.S. courts to exercise personal jurisdiction over foreign defendants not present in the United States to the limits of the due process clause of the Fifth Amendment."
Id. at 9. Therefore, the court determined, if "the quality and nature of a foreign defendant's activities . . . in the United States" support a "finding of fair play and substantial justice," personal jurisdiction would be proper. Id. at 9-10. After examining the extent of Wolff's and Gourlay's contacts with the United States, the District Court concluded it had personal jurisdiction.
"when a federal question case is based upon a federal statute that is silent as to service of process, and a state long-arm statute is therefore utilized to serve an out-of-state defendant, [Federal Rule of Civil Procedure] 4(e) requires that the state's standard of amenability to jurisdiction apply."
of a final judgment dismissing all claims against them. Id. at 23.
The Fifth Circuit decided the ensuing appeals en banc in the first instance and, by a 9-to-6 vote, affirmed. Point Landing, Inc. v. Omni Capital Int'l, Ltd., 795 F.2d 415 (1986). The majority started from "the unmalleable principle of law . . . that federal courts . . . must ground their personal jurisdiction on a federal statute or rule." Id. at 423. In the majority's view, neither the CEA nor the Federal Rules of Civil Procedure authorized service of process upon Wolff or Gourlay, and therefore personal jurisdiction over them was lacking. The dissent conceded that neither the CEA nor Civil Rule 4 provided for service of process on Wolff and Gourlay, but would have remedied this "bizarre hiatus in the Rules," 795 F.2d at 428, with an ad hoc authorization of service of process on them based on their contacts with the United States as a whole.
Because of a possible conflict with views of the Sixth Circuit expressed in Handley v. Indiana & Michigan Electric Co., 732 F.2d 1265, 1272 (1984), we granted certiorari to decide whether, in this federal question litigation arising under the CEA, the District Court may exercise personal jurisdiction over Wolff and Gourlay.
Omni attempts to meet this objection in a variety of ways. First, Omni argues that the District Court may exercise personal jurisdiction because Wolff and Gourlay have constitutionally sufficient contacts with the forum and, as well, have notice of the suits. Second, Omni contends that, even if a rule authorizing service is a prerequisite to effective service, and thus to the exercise of personal jurisdiction, Congress implicitly authorized nationwide service for private causes of action under the CEA. Third, Omni presses upon us the view of the Fifth Circuit dissenters that, even if authorization for service of process is required and cannot be found in a statute or rule, such authorization should be created by fashioning a remedy to fill a gap in the Federal Rules of Civil Procedure. We examine these contentions in turn.
Omni argues that the jurisdictional limits that Art. III of the Constitution places on the federal courts relate to subject matter jurisdiction only. In this view, although Art. III, § 1, leaves it to Congress to "ordain and establish" inferior federal courts, the only limits on those courts, once established, in their exercise of personal jurisdiction, relate to due process. Thus, Omni contends, the District Court may exercise personal jurisdiction over Wolff and Gourlay if the Due Process Clause of the Fifth Amendment does not forbid it.
Omni's argument that Art. III does not itself limit a court's personal jurisdiction is correct.
"The requirement that a court have personal jurisdiction flows not from Art. III, but from the Due Process Clause. . . . It represents a restriction on judicial power, not as a matter of sovereignty, but as a matter of individual liberty."
Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U. S. 694, 456 U. S. 702 (1982). Omni's argument fails, however, because there are other prerequisites to a federal court's exercise of personal jurisdiction.
Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied.
"[S]ervice of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served."
Mississippi Publishing Corp. v. Murphree, 326 U. S. 438, 326 U. S. 444-445 (1946). Thus, before a court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, this means there must be authorization for service of summons on the defendant.
in which the action is brought, or anywhere else authorized by a federal statute or by the Rules.
by a state attorney general, service authorized "wherever the defendant may be found"), and § 14(d) (in enforcement action by a beneficiary of a CFTC order, service authorized "anywhere in the United States") of the CEA, as amended, 7 U.S.C. §§ 13a-1, 13a-2(4), and 18(d). Omni contends that this broad avenue for service is mandated by the importance of futures trading to the Nation as a whole. Since this Court concluded that a private right of action was intended as a "tool for enforcement," Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. at 456 U. S. 393, it must be given the same "dignity" as other enforcement provisions. Accordingly, Omni contends, nationwide service of process is also authorized for the implied private cause of action under the CEA.
Neither the majority nor the dissent in the Court of Appeals found that the CEA contained an implied provision for nationwide service of process in a private cause of action. We, too, decline to draw that inference. After the Curran decision, while the present litigation was still pending in the District Court, Congress enacted the Futures Trading Act of 1982, 96 Stat. 2294. That Act amended the CEA by adding § 22, 96 Stat. 2322, 7 U.S.C. § 25, which authorizes explicitly a private right of action for a violation of the CEA. Section 22, however, is silent as to service of process. This contrasts sharply with the other enforcement provisions of the CEA, on which Omni asks us to rely. We find it significant that Congress expressly provided for nationwide service of process in those sections, but did not do so in the new § 22. See Russello v. United States, 464 U. S. 16, 464 U. S. 23 (1983). It would appear that Congress knows how to authorize nationwide service of process when it wants to provide for it. That Congress failed to do so here argues forcefully that such authorization was not its intention. Cf. INS v. Hector, 479 U. S. 85, 479 U. S. 88-91 (1986).
"The availability of -- . . . private rights of action -- supplements, but does not substitute, for the regulatory and enforcement program of the CFTC. . . . The Committee fully expects [it will] not become necessary to rely on private litigants as a policeman of the Commodity Exchange Act."
H.R.Rep. No. 97-565, pt. 1, p. 57 (1982). Thus, it is unremarkable that Congress enacted broader service provisions for CFTC actions than for private actions.
we conclude that a nationwide service provision for a private action was not implicit in the CEA.
"applies only to a defendant who 'regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this state.'"
App. 22-23 (quoting La.Rev.Stat.Ann. § 13:3201(d) (West 1968)). Because the terms of the Louisiana statute were not met, the District Court considered a due process analysis unnecessary. Before us, Omni has not contended that Wolff and Gourlay may be reached under the Louisiana long-arm statute. Indeed, Omni has conceded that they may not. See Tr. of Oral Arg. 4. Thus, neither part of Rule 4(e) authorizes the service of summons on Wolff and Gourlay.
The dissenters in the Court of Appeals argued that, even if authorization to serve process is necessary and cannot be found in Rule 4(e), the federal courts should act to fill the "interstices in the law inadvertently left by legislative enactment" by creating their own rule authorizing service of process in this litigation. See 795 F.2d at 431-432. We decline to embark on that adventure.
Board, 268 U. S. 619, 622-623 (1925). Thus, specific legislative authorization of extraterritorial service of summons was required for a court to exercise personal jurisdiction over a person outside the district. Even were we to conclude that the bases for the rule in Robertson are no longer valid, [Footnote 10] we would not necessarily have the power to create service-of-process rules. We would have to decide that the provisions of Rules 4(e) and 4(f), in authorizing service in certain circumstances, were not intended to prohibit service in all other circumstances. We would also have to find adequate authority for common law rulemaking. [Footnote 11] We need not decide these questions, however, since we would not fashion a rule for service in this litigation even if we had the power to do so.
authorization necessary to a federal court's service of summons. See, e.g., Max Daetwyler Corp. v. Meyer, 762 F.2d 290, 297 (CA3), cert. denied, 474 U.S. 980 (1985); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 414-416 (CA9 1977); 2 J. Moore, J. Lucas, H. Fink, & C. Thompson, Moore's Federal Practice ¦ 4.02, p. 4-67 (1987); 4 C. Wright & A. Miller, Federal Practice and Procedure § 1075, p. 302 (1969).
Nothing about this case impels us to a different conclusion. If we do not create a rule here, the only harm to federal interests is the inability of a private litigant to bring a CEA action in the United States against an alien defendant who is not within the reach of the state long-arm statute. Since the CEA authorizes broader service of process in other enforcement actions, aliens cannot consider themselves immune from the Act's provisions. Also, a British court may be willing to enforce the CEA itself, if Omni brings suit against Wolff and Gourlay there.
We are not blind to the consequences of the inability to serve process on Wolff and Gourlay. A narrowly tailored service of process provision, authorizing service on an alien in a federal question case when the alien is not amenable to service under the applicable state long-arm statute, might well serve the ends of the CEA and other federal statutes. It is not for the federal courts, however, to create such a rule as a matter of common law. That responsibility, in our view, better rests with those who propose the Federal Rules of Civil Procedure, and with Congress.
In summary, the District Court may not exercise jurisdiction over Wolff and Gourlay without authorization to serve process. That authorization is not found in either the CEA or the Louisiana long-arm statute, to which we look under Rule 4(e). We reject the suggestion that we should create a common law rule authorizing service of process, since we would consider that action unwise, even were it within our power.
The other petitioners are Richard Friedberg and Michael Stern, officers of Omni, and Northglen Capital Corporation which was named as a defendant with Omni in three of the four consolidated cases now before this Court. Petitioners have filed a single brief.
The plaintiffs were two Louisiana corporations, Point Landing, Inc., and Point Landing Fuel Corporation, and six individuals, William S. and Ruby M. Smith, Frank J. and Brenda A. George, and Dennis M. and Joan Rosenberg. Although all these plaintiffs technically are respondents here, see this Court's Rule 19.6, all of them except the Georges have filed a skeletal brief adopting Omni's brief "as if copied in extenso." Brief for Respondents in Support of Petitioners 1.
In the Point Landing suit, Wolff was named as a defendant. In that suit, Omni crossclaimed against Wolff and filed a third-party complaint against Gourlay. In the Smith and George suits, Omni filed a third-party complaint against both Wolff and Gourlay. In the Rosenberg suit, no move was made against either Wolff or Gourlay.
"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;"
"(b) contracting to supply services or things in this state;"
"(c) causing injury or damage by an offense or quasi offense committed through an act or omission in this state;"
"(d) causing injury or damage in this state by an offense or quasi offense committed through an act or omission outside of this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this state. . . ."
La.Rev.Stat.Ann. § 13:3201 (West 968).
Louisiana has amended this statute, see 1980 La.Acts, No. 764, § 2, and 1984 La.Acts, No. 398, § 1, codified at La.Rev.Stat.Ann. § 13:3201 (West Supp.1987), but no party has argued that the amendments affect the outcome of this litigation. We therefore do not consider them.
Under Omni's theory, a federal court could exercise personal jurisdiction, consistent with the Fifth Amendment, based on an aggregation of the defendant's contacts with the Nation as a whole, rather than on its contacts with the State in which the federal court sits. As was the case in Asahi Metal Industry Co. v. Superior Court of Cal., 480 U. S. 102 (1987), "[w]e have no occasion" to consider the constitutional issues raised by this theory. Id. at 480 U. S. 113, n.
There is no objection to the method of service in this litigation, the objection is only to amenability to service. See Point Landing, Inc. v. Omni Capital Int'l, Ltd., 795 F.2d 415, 424 (CA5 1986).
"All process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held, and, when authorized by a statute of the United States or by these rules, beyond the territorial limits of that state."
"Whenever a statute of the United States or an order of court thereunder provides for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state in which the district court is held, service may be made under the circumstances and in the manner prescribed by the statute or order, or, if there is no provision therein prescribing the manner of service, in a manner stated in this rule. Whenever a statute or rule of court of the state in which the district court is held provides . . . for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state . . . service may . . . be made under the circumstances and in the manner prescribed in the statute or rule."
This assumes, of course, that the defendant is not "an inhabitant of or found within the state," Fed.Rule Civ.Proc. 4(e), and has not consented to service.
The successor to the provision of the first Judiciary Act relating to a district court's ability to serve process was revised in 1948, 62 Stat. 869, at which time the express territorial limitation on serving process was dropped. See 28 U.S.C. §§ 1391, 1401, 1693, 1695. See also note following 28 U.S.C. § 112 (1940 ed.) (tracing history of provision prior to 1948 revision). To the extent that the cases cited in Robertson rely on principles of territoriality, their force may have been undercut by the decision in International Shoe Co. v. Washington, 326 U. S. 310 (1945), where the Court held that "presence [of the defendant] within the territorial jurisdiction of a court" was no longer necessary "to subject a defendant to a judgment in personam." Id. at 316. We express no view as to continuing validity of Robertson's rationales.
See Petrol Shipping Corp. v. Kingdom of Greece Ministry of Commerce, Purchase Directorate, 360 F.2d 103, 107-109 (CA2) (discussing court's authority to fashion an ad hoc rule to govern method of service), cert. denied, 385 U.S. 931 (1966).
Presumably acting on this widespread understanding that federal courts may serve process nationwide only when a federal statute authorizes such service, Congress has carefully provided for that kind of service of process when it so desired. See 2 J. Moore, J. Lucas, H. Fink & C. Thompson, Moore's Federal Practice ¦ 4.42[2. - 1], pp. 4-386 to 4-391 (1987) (listing over 15 statutes).
The legislative history of the Futures Trading Act of 1986, 100 Stat. 3556, provides an example why courts should not construct service of process rules ad hoc, even if they have the power to do so. Section 103 of that Act, 100 Stat. 3557, 7 U.S.C. § 15 (1982 ed., Supp. IV), amended the CEA to allow the CFTC to serve subpoenas outside the United States in the manner prescribed by the Federal Rules of Civil Procedure. The Conference Committee, however, expressed concern about the possibility of disrupting the Nation's foreign policy objectives, and stated a preference that the new power be exercised with circumspection. See H. Conf. Rep. No. 99-995, pp. 21-22 (1986). We also note that, with this amendment of the CEA, Congress declined still another opportunity to authorize nationwide service of process for a private action under the CEA.

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