Court Opinion

ID: 33922
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:10:28+00
Date Added: 2024-06-11T12:18:24.942083
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT

                             No. 99-20295

MAXXIM MEDICAL, INC.,

                                                   Plaintiff-Appellee,

                                 versus

MARX MICHELSON,

                                                   Defendant-Appellant.

             Appeal from the United States District Court
                  for the Southern District of Texas
                              (H-99-0460)

                             June 4, 1999

Before WIENER, DeMOSS, and PARKER, Circuit Judges.

PER CURIAM:*

      Plaintiff-Appellee Maxxim Medical, Inc. (“Maxxim”) sued          its

former employee, Defendant-Appellant Mark Michelson, in federal

district court in California and in state court in Fort Bend

County, Texas, seeking an injunction to prohibit him from working

for   a   competitor.   Maxxim   grounded   its   complaint   in   a   non-

competition confidentiality agreement contained in a stock option

contract.    Michelson removed the Texas suit to the district court

for the Southern District of Texas which, after determining the

applicability of California law to the non-competition agreement,

      *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
found that it violated California law prohibiting such agreements.

Nevertheless, the court crafted an injunction prohibiting Michelson

“for one year from his resignation date from working for a direct

competitor of Maxxim in any of the product lines he was associated

with at Maxxim during the last two years” he worked there.                             The

district court based its decision on an Erie guess that, if faced

with the      question,      the   courts       of   California   would       adopt    the

“inevitable disclosure” theory of trade secrets law1 and that

Michelson’s employment by a competitor of Maxxim would inevitably

lead to disclosure of trade secrets. We granted Michelson’s motion

for an expedited appeal of the district court’s injunction.

I.    Appellate Jurisdiction

      As a general rule, we do not have jurisdiction to review

interlocutory orders.         Under 28 U.S.C. § 1292(a)(1), however, the

grant of a temporary injunction is an appealable interlocutory

order.        Moreover,      under    the       collateral     order   doctrine,       an

interlocutory        order    is     immediately        appealable       if    it     “(1)

conclusively determine[s] the disputed question, (2) resolve[s] an

important issue completely separate from the merits of the action,

and   (3)     [is]   effectively      unreviewable        on    appeal    from      final

judgment.”2

      The parties do not dispute our jurisdiction to review the

district court’s grant of the temporary injunction, but do dispute

      1
       See PepsiCo v. Redmond, 54 F.3d 1262 (7th Cir. 1995).
          2
          Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978).

                                            2
whether      we     have    pendent     jurisdiction           to    review      that   court’s

interlocutory orders regarding, inter alia, personal jurisdiction.

Michelson cites Magnolia Marine Transportation Company v. LaPlace

Coin Corporation3 for the proposition that we do have such pendent

jurisdiction because § 1292(i) grants subject matter jurisdiction

over       issues    that       “establish    the      basis”       for    the    grant    of    a

preliminary injunction. He also contends that we have jurisdiction

over these orders by virtue of the collateral order doctrine.

       Maxxim       argues       in   response      that      Michelson’s        reliance       on

Magnolia      Marine       is    misplaced,       as    the    jurisdictional           standard

articulated in that case has been replaced by the one set forth in

Swint v. Chambers County Commissioners.4                            Following the court’s

decision in Swint, we noted, in Thornton v. General Motors Corp.,5

that “pendent appellate jurisdiction is only proper in rare and

unique       circumstances            where   a        final        appealable      order       is

`inextricably intertwined’ with an unappealable order or where

review of the unappealable order is necessary to ensure meaningful

review of the appealable order.”6

       Maxxim        advances         that    the       district          court’s       personal

jurisdiction and other interlocutory rulings are not inextricably

intertwined —— as, for example, would be an injunction against

       3
        964 F.2d 1571, 1580 (5th Cir. 1992).
       4
        514 U.S. 35 (1995).
       5
        136 F.3d 450 (5th Cir. 1998).
       6
        Id. at 453-54.

                                               3
proceeding in a court under motion to transfer venue to that court7

—— and that review of those orders is not necessary to ensure

meaningful review of the injunction order.                       Maxxim also contends

that none of the other orders satisfies the requisites of the

collateral order doctrine.8

       Although we recognize that, as a general rule, jurisdictional

determinations by the district court are not immediately appealable

as collateral orders or otherwise, there are exceptions.                        As noted

above, we recognized that proposition recently in Thornton.                            We

conclude that the instant case —— linking a clearly appealable

interlocutory order granting a preliminary injunction with the

question of the court’s ruling that it had jurisdiction in personam

over           the   person   sought   to   be       enjoined   ——   presents   such   an

exception.            As issued, the injunction in this case has the very

real effect of prohibiting Michelson from pursuing his livelihood.

Even if the compensation that he does not receive during the

efficacy of the injunction (plus interest and damages as well)

could be reimbursed by Maxxim and thus not be deemed irreparable

injury, the same cannot be said of other effects of the injunction:

           7
Md. v. Atlantic Aviation Corp., 361 F.2d 873 (3rd Cir.
1966).
       8
     See Van Cauwenberghe v. Bierd, 486 U.S. 517, 527 (1988) (“the
denial of a claim of lack of jurisdiction is not an immediately
appealable collateral order”); Rein v. Socialist Peoples’ Libyan
Arab Jamahariya, 162 F.3d 748, 756 (2d Cir. 1998) (“denials of
motions to dismiss for jurisdictional reasons cannot ordinarily be
the subject of interlocutory appeals”); Louisiana Ice Cream
Distribs. v. Carvel Corp., 821 F.2d 1031, 1033 (5th Cir. 1987)
(holding orders regarding venue and transfer are not immediately
appealable).

                                                 4
The company for whom Michelson went to work following resignation

from Maxxim will not necessarily hold open that or any position for

Michelson; and the injurious effects to Michelson and his family

from the abrupt interruption of his stream of earned income are

such that virtually no amount of money could repair them.      We are

satisfied that, under the particular facts of this case, the issue

of personal jurisdiction is so “inextricably intertwined” with the

granting of the injunction, and that ordinary channels of appellate

review would be so ineffectual, that even under Swint and Thornton,

we have —— and must exercise —— appellate    jurisdiction to review

the   district   court’s   determination   that   it   had   personal

jurisdiction over Michelson.9

II.   Personal Jurisdiction

      A federal district court sitting in diversity may exercise

personal jurisdiction over a nonresident defendant if (1) the

long-arm statute of the forum state confers personal jurisdiction

over that defendant;   and (2) exercise of such jurisdiction by the

forum state is consistent with due process under the United States

      9
      See Burlington Indus. v. Maples Indus., 97 F.3d 1100, 1101
(8th Cir. 1996) (holding in trade secret misappropriation case that
court had appellate pendent jurisdiction to review personal
jurisdiction determination underlying appealable preliminary
injunction order); see also NationsBank Corp. v. Herman, No. 98-
1127, 1999 WL 187239, at * 2-3 (4th Cir. Apr. 6, 1999) (holding
court had appellate pendent jurisdiction over denial of motion for
summary judgment based on plaintiff’s alleged failure to exhaust
administrative remedies because “if [plaintiff] must exhaust . . .,
the preliminary injunction was improper.”); Thornton, 136 F.3d at
453-454 (holding court had appellate pendent jurisdiction to review
attorney’s fees sanction because it was “inextricably intertwined”
with immediately appealable suspension sanction).

                                 5
Constitution.10            In    the   present     case,    because   Texas    long-arm

statute10 extends to the limits of federal due process, these two

steps collapse into one.11

      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 himself 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.”12                         The defendant,

through his conduct and connection with the forum state, should

reasonably anticipate being haled into court in the forum state.13

      As Maxxim alleges its suit arises from or relates to the

defendant’s contact with the forum state, we are concerned with

“specific jurisdiction.”14              Although a single act by the defendant

directed at the forum state can be enough to confer personal

           10
       See, e.g., Ham, 4 F.3d at 415;     Irving v. Owens-Corning
Fiberglas Corp., 864 F.2d 383, 385 (5th Cir. 1989).
      10
Tex. Civ. Prac. & Rem. Code §§ 17.041-045 (Vernon 1986).
      11
      Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990); Ham,
4 F.3d at 415 & n.7.
            12
                 International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945).
             13
         World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
297(1980).
       14
      See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466
U.S. 408, 414 n.8 (1984); Bearry v. Beech Aircraft Corp., 818 F.2d
370, 374 (5th Cir. 1987).

                                               6
jurisdiction if that act gives rise to the claim being asserted,15

entering into a contract with an out-of-state party, standing

alone, is not sufficient to establish minimum contacts.16                 Rather,

in   a        breach   of   contract   case,   to   determine   whether   a   party

purposefully availed himself 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....”17

         In holding that it had personal jurisdiction over Michelson,

the district court relied on the facts that: Michelson (1) entered

into an employment agreement with a Texas-based company while

living in California, (2) signed stock option agreements with a

Texas employer while he was living in California, which agreement

specified application of Texas substantive law but not jurisdiction

or venue, (3) made sales trips to Texas at the behest of employer,

(4) supervised personnel whose territory included but a sliver of

far west Texas —— namely, El Paso, Texas, (5) annually attended

Maxxim’s mandatory national sales training meeting in Texas, (6)

made mandatory visits to Maxxim’s assembly plants in Texas, and (7)

made telephone calls to and from Maxxim’s Texas headquarters.

         The district court correctly held that these contacts were not

sufficiently “continuous and systematic” to justify the exercise of

     15
      Ham, 4 F.3d at 415-16; Dalton v. R & W Marine, Inc., 897 F.2d
1359, 1361 (5th Cir. 1990).
     16
          Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478-79 (1985).
         17
              Id. at 479.

                                           7
general jurisdiction over Michelson,18 yet concluded —— curiously

—— that they were sufficient to confer specific jurisdiction over

him.        As indicated above, to establish that the court has specific

jurisdiction       over   Michelson,      Maxxim     must     show    that    Michelson

undertook some activity in, or purposefully directed some act at,

Texas, and that its claims arise out of or relate to those acts.19

Maxxim, however, has failed to demonstrate that any of Michelson’s

alleged        contacts   has     even     the    slightest      nexus        with     its

unenforceable non-competition claim or its misappropriation of

trade secrets claim.           Accordingly, those contacts cannot serve as

the basis for an exercise of specific jurisdiction over Michelson.

As Maxxim can point to no other link between Michelson and Texas

that is related to its claims against him, jurisdiction is not

proper.

III. Conclusion

       We conclude that the district court reversibly erred as a

matter of law in deciding that it had personal jurisdiction over

Michelson. As such, the preliminary injunction issued by the court

is a nullity.       We therefore reverse the district court, vacate and

dissolve the preliminary injunction issued by that court, and

remand this        case   to   that   court      with   instructions         to    dismiss

Maxxim’s        action,   without        prejudice      for    lack     of        personal

jurisdiction.

       18
        See Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir. 1990).
       19
      Felch v. Transportes Lar-Mex SA de CV, 92 F.3d 320, 325 (5th
Cir. 1996).

                                           8
REVERSED; PRELIMINARY INJUNCTION VACATED and DISSOLVED; REMANDED

with instructions.

                               9