Opinion ID: 9457
Heading Depth: 3
Heading Rank: 1

Heading: Jurisdiction as to Adams, Inc.

Text: Adams Inc.'s contacts with Texas can be summarized as follows: (1) Adams Inc. entered into a contract with Gundle, a Texas entity, pertaining to the construction project in Pennsylvania, (2) it mailed payments to Gundle at Gundle's Texas address, and (3) it, a nonresident, engaged in communications with a resident during the course of developing and carrying out the contract. We have previously held that the combination of mailing payments to the forum state, engaging in communications surrounding the execution and performance of a contract, and the fact that a nonresident enters into a contract with a resident are insufficient to establish the requisite minimum contacts necessary to support the exercise of personal jurisdiction over a nonresident defendant. See Spademan, 772 F.2d at 1193. However, the Spademan court was careful to recognize that one factor that might affect the minimum contacts analysis is the 6 actual language present in the contract itself. Id. The court, quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), stated: If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.... Instead, we have emphasized the need for a highly realistic approach that recognizes that a contract is ordinarily but an intermediate step serving to tie up prior business negotiations and contemplated future consequences which themselves are the real object of the business transaction. ... It is these factors—prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing—that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum. Spademan, 772 F.2d at 1193 (citations omitted). Guided by the direction of the Supreme Court and this court's well-reasoned opinion in Spademan, we review the terms of the contracts at issue in the instant case in order to determine if they, along with the defendant's other contacts with Texas, were sufficient to confer jurisdiction over Adams Inc. In examining the terms of the contracts in the instant case, Adams Inc. contends that we should look only to the Master Security Agreement (MSA) which was executed between USF & G and Adams Inc. on April 10, 1990. In the MSA, Adams Inc. agreed to: exonerate, indemnify, and keep indemnified SURETY [USF & G] from and against any and all liabilities, losses and expenses of whatsoever kind or nature ... incurred by SURETY by reason of: (1) Surety having executed, provided or procured BOND(S) in behalf of PRINCIPAL [Adams Inc.], or (2) UNDERSIGNED'S failure to perform or comply with any provisions of this AGREEMENT. Examining this document alone, we would agree with Adams Inc. that it is insufficient to confer jurisdiction over them. However, when 7 examining personal jurisdiction we do not subscribe to such a myopic approach. Instead, our approach is highly realistic, cognizant of the commercial realities of the transactions that form the basis of the nonresident defendant's contacts with the forum state. Therefore, we look not only to the MSA but also to the bond agreement between Adams Inc. and USF & G, which states: [a]ll persons who have performed labor, rendered services or furnished materials ... shall have a direct right of action against the Principal [Adams Inc.] and Surety [USF & G] on this bond, which right of action shall be asserted in proceedings instituted in the State in which such labor was performed, services rendered, or materials furnished. In Spademan the plaintiffs argued that a choice-of-law provision contained in the contract between the parties was sufficient to establish the necessary contacts with the forum state. The provision specified that the agreement would be construed and enforced in accordance with the law of the state in which the aggrieved party' is residing at the time of the breach or grievance. Spademan, 772 F.2d at 1194. The court found that the provision was insufficient, either standing alone or when considered with the other contacts, so as to justify the exercise of jurisdiction over the defendant. Spademan, 772 F.2d at 1196. In its analysis of the choice-of-law provision the court stated: At the outset, we note that the plaintiffs misapprehend the very nature of this contractual provision. The provision contemplates a choice of law not forum. Hence, despite plaintiffs' protestations to the contrary, the provision of itself does not evince [plaintiffs'] anticipation of being haled into a Texas court. Spademan, 772 F.2d at 1195 (emphasis added). Although the contractual provision contained in the labor and materialman's bond 8 executed between USF & G and Adams Inc. is neither a choice-of-law provision nor an express choice-of-forum provision, it resembles the latter. We recognize that under the labor and materialman's bond Adams Inc. did not agree to have any disputes arising between itself and USF & G settled in a specific forum. However, it agreed that any cause of action brought to recover on the labor and materialman's bond was subject to being tried in any State in which such labor was performed, services rendered, or materials furnished. This acknowledgment by Adams Inc. weighs heavily against its contention that the Texas court's decision to exercise jurisdiction over it would somehow be unreasonable. See Kevlin Sevrs. Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir.1995) (district court erred in refusing to enforce forum selection clause and subsequently dismissing suit for lack of personal jurisdiction because a forum selection clause in a written contract is prima facie valid and enforceable unless the opposing party can show that the enforcement of the provision would be unreasonable). We are aware of the fact that, unlike the choice-of-law provision at issue in Spademan involving an agreement between a non-resident and a resident, the agreements between USF & G and Adams Inc. involve only non-residents. While this fact, standing alone, would appear to move the bond agreement outside of our jurisdictional analysis, it is relevant to the analysis in that it indicates what future consequences Adams Inc. should have contemplated when it contracted with Gundle. 9 But for USF & G's decision to act as surety for Adams Inc., USF & G never would have found itself being sued by a Texas corporation in a Texas court. Under the MSA, Adams Inc., prior to entering into the subcontract with Gundle, agreed to indemnify USF & G for any payments made under the bonds it issued. On April 23, 1990, Adams Inc. and USF & G executed the labor and materialman's bond in which Adams Inc. acknowledged that, as contractor, it could be subject to suit in any state in which labor was performed or materials were furnished. Then, on May 24, 1990, Adams Inc. entered into a subcontract with Gundle, a Texas corporation which Adams Inc. knew would be performing services and rendering labor in Texas. The sequence of contractual commitments made by Adams Inc., concluding with the subcontract with Gundle, should have made Adams Inc. aware that it was subject to being haled into a Texas court. See World-Wide Volkswagon Corp., 444 U.S. at 296, 100 S.Ct. at 567. Consequently, we find that Adams Inc.'s express acknowledgment that it was subject to suit in any state where labor was performed or materials furnished and its subsequent decision to contract with Gundle, along with the other aforementioned contacts, are sufficient to satisfy the minimum contacts prong of the personal jurisdiction analysis.
Once there has been a determination that the defendant purposefully directed its activities at the forum state, the defendant must present a compelling case that the presence of some 10 other considerations would render jurisdiction unreasonable. Burger King Corp., 471 U.S. at 477, 105 S.Ct. at 2185. When determining the fundamental fairness issue this court will normally examine (1) the defendant's burden; (2) the forum state's interests; (3) the plaintiff's interest in convenient and effective relief; (4) the judicial system's interest in efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental substantive social policies. Asahi, 480 U.S. at 113, 107 S.Ct. at 1033; World-Wide Volkswagon Corp., 444 U.S. at 292, 100 S.Ct. at 564. Adams Inc. again urges us to restrict our view when examining whether the exercise of personal jurisdiction over it comports with fair play and substantial justice, asserting that Texas has no interest in this litigation because the Texas company that filed this lawsuit, Gundle, is no longer a party to the action by virtue of its decision to settle with USF & G. If we were to adopt this argument then we would be discouraging parties, such as USF & G, from settling for fear that they might have to pursue third-party defendants in separate actions in order to obtain the indemnification that those third-party defendants had contractually bound themselves to provide.1 This approach is contrary to a convenient and effective resolution of the dispute for the plaintiff; it is contrary to the judicial systems' interest of 1 Of course, the nonresident third-party defendants to which we refer would still have to have minimum contacts with the forum state in order to justify the district court's exercise of jurisdiction. 11 efficiently resolving controversies; and it is contrary to the forum state's interest in providing for an effective means of redress for its citizens. We recognize that there is some burden placed on Adams Inc., a Pennsylvania corporation, as a result of the case being tried in Texas. However those burdens do not present the type of compelling reasons necessary to justify a finding that the exercise of jurisdiction over Adams Inc. is contrary to notions of fair play and substantial justice.