Court Opinion

ID: 17674
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:06:42+00
Date Added: 2024-06-11T08:02:30.737807
License: Public Domain

Revised June 9, 1999

                 UNITED STATES COURT OF APPEALS
                      for the Fifth Circuit

                               97-50709

ELECTROSOURCE, INC.,
                                                Plaintiff-Appellant,

versus

HORIZON BATTERY TECHNOLOGIES, Limited,
                                                Defendant-Appellee.

          Appeal from the United States District Court
                for the Western District of Texas

                             May 24, 1999

Before WIENER and DENNIS, Circuit Judges.*

DENNIS, Circuit Judge:

     Electrosource, Inc. (“Electrosource”) appeals the district

court’s dismissal of its suit against Horizon Battery Technologies

Limited (“HBTL”) for lack of personal jurisdiction.      Concluding

that Electrosource has established a prima facie case that HBTL is

subject to in personam jurisdiction in Texas, we reverse and

     *
      Judge John Minor Wisdom was a member of the original oral
argument panel that heard this case, but he died on May 15, 1999.
This matter is being handled by a quorum. 28 U.S.C. § 46(d).

                                  1
remand.

                        FACTS AND PROCEDURAL HISTORY

     Electrosource Inc., a Delaware corporation with its principal

place of business in Texas, is the owner and licensor of an

electrical    storage     battery     known   as   the    “Horizon      Battery.”

Electrosource developed its patented battery technology in Texas.

     In   1993,   Electrosource       participated       in   discussions    with

Metropolitan Industries, Inc. (“Metropolitan”), an Indian company,

concerning the purchase of a license permitting the manufacture and

distribution of the Horizon Battery in India and Asia.                      These

discussions led to the parties signing a preliminary Memorandum of

Understanding.     The Memorandum of Understanding provided that

Electrosource and Metropolitan had agreed to create a joint venture

agreement in the future.       Ultimately, however, the parties did not

fulfill the agreement and a joint venture was not created at that

time.

     Thereafter,         licensing      discussions           resumed     between

Electrosource     and     HBTL,     another   Indian      company       apparently

affiliated with Metropolitan. HBTL was not licensed to do business

in Texas and had no offices, agents, or employees in Texas.                During

this round of negotiations, six different HBTL representatives made

a series of six trips from India to Texas.          Furthermore, during the

negotiations, correspondence was sent from India to Electrosource

in Texas.    As before, these negotiations centered around licensing

the Horizon Battery technology that was developed in Texas.

                                        2
       The fruit of these extensive negotiations was a “Know-How

License      Agreement”    (“Agreement”)        that        was     signed       by   both

Electrosource      and    HBTL    in    Texas       in    1994.          The    Agreement

specifically provided that confidential know-how would be provided

to HBTL at the offices of Electrosource in Texas and HBTL employees

and consultants would be trained in Texas in matters associated

with the Horizon Battery. Although the choice-of-law clause called

for Indian law to govern the agreement, the parties agreed that the

laws of Texas governed the arbitration clause of the Agreement.

Additionally, the Agreement included a provision that allowed

Electrosource to inspect HBTL’s manufacturing facilities in order

to maintain uniformity and quality control for the duration of the

license.

       The   Agreement    directed      that    a    number        of    implementation

agreements had to be negotiated and executed before licensing would

take place.     The Agreement also required HBTL to pay a licensing

fee and obtain a Letter of Credit to secure the fee.                           The parties

also   expressly    provided      in    the    Agreement          that    unless      these

conditions precedent were fulfilled within one year after its

signing, the Agreement was to have no force and effect.

       Soon after the Agreement was executed, Electrosource began

preparation of the preliminary design review (“PDR”) in Texas. The

items to be presented in the PDR were preliminary versions of

controlling     documents,       such   as     the       Quality    Assurance         Plan,

Equipment     Design     and   Procurement       Plan,       Construction          Project

                                         3
Management Plan and a Cost Pricing Analysis.                     The PDR was a

necessary predicate to the implementation agreements.                      In the

meantime, HBTL made several payments for various equipment and

testing devices to Electrosource at its bank in Texas.                       HBTL,

however, only made partial payments for the work completed in

Texas.    Because HBTL did not make full payment, Electrosource did

not complete the PDR.         After a year passed, Electrosource decided

that the    Agreement     had    been   terminated     because    HBTL    had   not

complied with any of the condition precedents.

     HBTL responded by demanding that Electrosource either perform

the contract or pay five million dollars in damages.                     HBTL also

threatened to invoke the arbitration clause in the Agreement and

implied    that   it   was      the   licensee    of   the   Horizon      Battery.

Electrosource     filed   a     petition     in   Texas   state   court     for   a

declaratory judgment that the Agreement had no force and effect.

After the case was removed by HBTL, the district court granted

HBTL’s motion to dismiss Electrosource’s action for want of in

personam jurisdiction over HBTL.             Electrosource appealed.

                              STANDARD OF REVIEW

     Absent any dispute as to the relevant facts, whether in

personam jurisdiction can be exercised over a defendant is a

question of law and subject to de novo review.                      Ruston Gas

Turbines, Inc. v. Dondaldson Co., Inc., 9 F.3d 415, 418 (5th Cir.

                                         4
1993).       When jurisdictional facts are disputed, all factual

conflicts are resolved in favor of the party seeking to invoke the

court’s jurisdiction.    Id.

                      IN PERSONAM JURISDICTION

     To    exercise   personal   jurisdiction        over   a   nonresident

defendant, two requirements must be met.           First, the nonresident

defendant must be amenable to service of process under a State’s

long-arm statute. Jones v. Petty-Ray Geophysical, Geosource, Inc.,

954 F.2d 1061, 1067 (5th Cir. 1992).           Second, the assertion of in

personam jurisdiction must be consistent with the 14th Amendment’s

due process clause.   Id.   Because Texas’ long-arm statute has been

interpreted to extend to the limits of due process, we need only

determine whether subjecting HBTL to suit in Texas would offend the

due process clause of the 14th Amendment.           Schlobohm v. Schapiro,

784 S.W.2d 355, 357 (Tex. 1990).

     Due    process   requirements       are    satisfied   when   personal

jurisdiction is asserted over a nonresident corporate defendant

that has “certain minimum contacts with [the forum] such that the

maintenance of the suit does not offend ‘traditional notions of

fair play and substantial justice.’” International Shoe Co. v.

Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945), quoting

Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343 (1940).

                                     5
                            MINIMUM CONTACTS

     The   Due   Process   Clause   protects   an   individual’s   liberty

interest in not being subject to the binding judgments of a forum

with which the individual has established no meaningful “contacts,

ties, or relations.”   Burger King Corp. v. Rudzewicz, 471 U.S. 462,

474, 105 S. Ct. 2174, 2183 (1985), citing International Shoe, 326
U.S. at 319, 66 S.Ct. at 159.       In requiring that individuals have

“fair warning that a particular activity may subject [them] to the

jurisdiction of a foreign sovereign,” Shaffer v. Heitner, 433 U.S.
186, 218, 97 S. Ct. 2569, 2587 (1977) (Stevens, J., concurring), the

Due Process Clause “gives a degree of predictability to the legal

system that allows potential defendants to structure their primary

conduct with some minimum assurance as to where that conduct will

and will not render them liable to suit.”       Burger King, 471 U.S. at

474, 105 S.Ct. at 2183, citing World-Wide Volkswagen Corp. v.

Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980).

     Where a forum seeks to assert specific jurisdiction over a

nonresident defendant who has not consented to suit there, this

“fair warning” requirement is satisfied if the defendant has

“purposefully directed” his activities at residents of the forum,

Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S. Ct.
1473, 1478 (1984), and the litigation results from alleged injuries

that “arise out of or relate to” those activities.          Burger King,
471 U.S. at 472, 105 S.Ct. at 2182.

                                     6
     In determining when a potential defendant should “reasonably

anticipate” out-of-state litigation, the court frequently has drawn

from the reasoning of Hanson v. Denckla, 357 U.S. 235, 253, 78
S. Ct. 1228, 1239-40 (1958):

     The    unilateral      activity         of   those     who        claim    some

     relationship with a nonresident defendant cannot satisfy

     the requirement of contact with the forum State.                            The

     application of that rule will vary with the quality and

     nature of the defendant’s activity, but it is essential

     in    each   case    that       there   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.

Id., citing International Shoe, 325 U.S. at 319, 66 S. Ct. at 159.

(Emphasis added).

     The    Supreme      Court    stated     that    this    purposeful         availment

element    “ensures      that    a    defendant     will    not    be    haled    into   a

jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or

‘attenuated’ contacts, or of the ‘unilateral activity of another

party or a third person.’” Burger King, 471 U.S. at 475, 105 S.Ct.

at 2183.   The contacts with the forum State must be such that it is

foreseeable that the defendant “should reasonably anticipate being

haled into court there.”             World-Wide Volkswagen, 444 U.S. at 297,

100 S.Ct. at 567.

                                             7
      A   contract    with    an    out-of-state           party     alone,      although

relevant,   does     not   automatically           establish     sufficient       minimum

contacts.      Burger King, 471 U.S. at 478, 105 S.Ct. at 2185.                           A

“highly realistic” approach is called for, recognizing that a

contract is ordinarily but an intermediate step serving to tie up

prior negotiations and future consequences which themselves are the

real object of the business transaction.                 Id.     The factors of prior

negotiations and contemplated future consequences, along with the

terms of the contract and the parties’ actual course of dealing

must be evaluated in determining whether the defendant purposefully

established minimum contacts within the forum.                      Id.

      As in the franchise transaction in Burger King, the actual

course of dealing between Electrosource and HBTL involved wide

reaching contacts and contemplated future consequences within the

forum state.       HBTL was attempting to acquire technology from

Electrosource in Texas for the establishment of manufacturing

centers   in    India.       As    an    essential        part     of     the   Agreement

Electrosource contracted to train HBTL employees, aid in designing

HBTL’s manufacturing facilities, provide technical support and

regulate quality control of HBTL’s products.                       Electrosource and

HBTL planned to participate in each of these functions either

wholly or in substantial part in Texas.

      HBTL sent several employees and documentation to Texas during

the   extensive    negotiations         of       the   Agreement.         At    least   six

different representatives of HBTL made a series of six trips to

                                             8
Texas from India for negotiations and planning.           HBTL employees

came to Texas and joined Electrosource in the laborious process of

creating   and   compiling   the   PDR.      Furthermore,   the   parties

contemplated that the PDR would be fully completed in Texas, and

HBTL took significant action toward this end in Texas before the

Agreement was terminated.     Therefore, we conclude that through the

negotiations,    consummation,     and    partial   performance   of     the

Agreement with Electrosource, HBTL purposefully availed itself of

the privilege of conducting activities within Texas invoking the

benefits and protections of its laws.       Hanson, 357 U.S. at 253, 78

S.Ct. at 1239-40 (1958).     As a result of its actions related to the

Agreement, HBTL engaged in such “continuing and wide-reaching

contacts” with Electrosource in Texas, and committed itself to such

future contacts in the forum, that it should reasonably have

anticipated being haled into court there.       Burger King, 471 U.S. at

480, 105 S.Ct. at 2186.

      In dismissing the claim against HBTL for lack of personal

jurisdiction, the district court relied heavily upon this Court’s

decisions in Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700
F.2d 1026 (5th Cir. 1983) and Jones v. Petty-Ray Geophysical,

Geosource, Inc., 954 F.2d 1061 (5th Cir. 1992).          In citing these

cases, the district court emphasized two factors in finding a lack

of personal jurisdiction: (1) the choice-of-law clause provided

that Indian law governed the Agreement and (2) the expected place

of manufacture of the batteries by HBTL was in India.                  These

                                    9
decisions rested on facts dissimilar to those of the present case,

however, and do not govern our conclusions here.

     In Hydrokinetics, an Alaskan corporation, Alaska Mechanical,

purchased equipment from a Texas corporation.            In negotiations for

the purchase, some of the employees of Alaska Mechanical came to

Texas    and   visited    the   plant   to   inspect   the   equipment.      The

contract, which was a purchase order, stated that Alaskan law would

apply.    Upon attempted delivery of the equipment in Alaska, Alaska

Mechanical rejected it as unsuitable.           The Texas corporation sued

Alaska Mechanical in Texas for breach of the purchase agreement.

This court stated that it was “significant that only a single

transaction is involved in this case, governed by Alaska law, which

is [Alaska Mechanical’s] sole contact with the state.”                    Id. at

1029.     Furthermore, we stated that “no performance by Alaska

Mechanical was to take place in Texas, other than perhaps the

payment for the goods.”         Id.

     The district court in the present case cited Hydrokinetics in

placing decisive weight on the requirement of the choice-of-law

clause that Indian law would govern.            But, the Supreme Court has

indicated that a choice-of-law provision should neither be ignored

nor considered sufficient alone to confer jurisdiction.                   Burger

King, 471 U.S. at 482, 105 S.Ct. at 2187.           Thus, the choice-of-law

clause is one factor among others that may determine whether the

forum    State   has     jurisdiction    over   a   nonresident    defendant.

Accordingly, in Hydrokinetics, this Court took into consideration

                                        10
not only the choice-of-law clause, but also the fact that the

contract at issue was simply a sale of a product, and that all

foreseeable contacts were to cease after delivery, in finding that

Alaskan Mechanical did not have minimum contacts with Texas.

      In the present case, although the Agreement contained a

choice-of-Indian-law clause, the multitude of contacts between HBTL

and Texas substantially outweighs the law choice factor.                  The

Agreement     calls   for   an   acquisition    of   knowledge,   skill   and

technology that envisions “continuing and wide-reaching contacts”

by HBTL with Electrosource in Texas.         Burger King, 471 U.S. at 480,

105 S.Ct. at 2186.          The parties contemplated Electrosource’s

training of HBTL personnel in Texas, Electrosource’s providing

assistance and advice in design of manufacturing facilities to HBTL

in   Texas,    and    Electrosource’s      monitoring   of   HBTL’s   product

uniformity and quality control through activities in both Texas and

India. Furthermore, even though the Agreement provided that Indian

law would govern generally, the parties stipulated that Texas law

was to apply to disputes settled by arbitration.                  Thus, HBTL

purposefully invoked the benefits of Texas’ laws in many respects.

Burger King, 471 U.S. at 482, 105 S.Ct. at 2187.

      In Petty-Ray Geophysical, the plaintiff brought a wrongful

death action in Texas against Petty-Ray Geophysical, Geosource,

Inc. (“Geosource”), an international corporation with an office in

Texas.   The plaintiff alleged that her husband had been killed

while he was employed by Geosource in the Democratic Republic of

                                      11
Sudan.    Geosource attempted to implead a French corporation, Total

Exploration, as a third-party defendant.            The district court held

that it did not have personal jurisdiction over Total Exploration

and dismissed the third-party claim.               We affirmed.      Petty-Ray

Geophysical, 954 F.2d at 1070.

     The present case is distinguishable from Petty-Ray Geophysical

because in that case Total Exploration, the French third-party

defendant, had only attenuated contacts with Texas.             In Petty-Ray

Geophysical we stated that:

     With regard to performance under the contract between

     Total Exploration and Geosource, the only Texas activity

     that   Plaintiff     has    shown    is   unilateral   activity    by

     Geosource.     ...     Total    Exploration      negotiated     with

     Geosource’s United Kingdom office for exploration work in

     the Sudan, and the fact that Geosource has a Houston

     office is nothing more than a mere fortuity.

Id., 954 F.2d at 1068-69.

     On   the   other    hand,   HBTL     purposefully   initiated     multiple

continuing contacts with Electrosource in Texas for the purpose of

acquiring the know how and the franchise to make the Horizon

batteries in India.       The contacts that accompanied the Agreement

between HBTL and Texas cannot “be viewed as ‘random,’ ‘fortuitous,’

or ‘attenuated.’”       Burger King, 471 U.S. at 480, 105 S.Ct. at 2186.

HBTL sought out Electrosource for a particular technology that had

                                         12
been developed in Texas, negotiated for its acquisition in Texas,

entered into an agreement for the transfer of technology in Texas,

and began the process of training, designing, and preparation in

Texas necessary to the transfer of the technology.            These contacts

display that HBTL purposefully availed itself of the privilege of

conducting activities within Texas, thus invoking the benefits and

protections of its laws.         Burger King, 471 U.S. at 475, 105 S.Ct.

at 2183.   HBTL’s purposeful, multiple and continuing contacts with

Electrosource in Texas cannot be ignored simply because HBTL’s

unsuccessful plan was to use Electrosource’s Texas technology to

make Horizon batteries in India.

      Moreover, the district court’s reliance on language in Petty-

Ray   Geophysical   for    the    proposition    that   the   place   of   the

performance of a contract is automatically determinative of whether

or not a forum has jurisdiction over a non-resident defendant was

misguided.    The Supreme Court long ago rejected the notion that

personal jurisdiction might turn on “mechanical” tests or on

“conceptualistic ... theories of the place of contracting or of

performance.”    Burger King, 471 U.S. at 478, 105 S.Ct. at 2185,

citing Hoopeston Channing Co. v. Cullen, 318 U.S. 313, 316, 63
S. Ct. 602, 605 (1943).

                                   FAIRNESS

      After   concluding   that     HBTL   had   sufficient   contacts     with

                                      13
Electrosource in Texas to warrant in personam jurisdiction, we must

now decide if it is fair to force HBTL to litigate in Texas.                   The

imposition of jurisdiction cannot offend “traditional notions of

fair play and substantial justice.”          International Shoe, 326 U.S.

at 316, 66 S.Ct. at 158.

     The factors we consider in the fairness analysis are:

     [(1) t]he burden upon the nonresident defendant; (2) the

     interests    of     the   forum   state;    (3)     the   plaintiff’s

     interest in securing relief; (4) “the interstate judicial

     system’s     interest     in   obtaining     the     most    efficient

     resolution     of    controversies”;       and     (5)    “the   shared

     interest of the several States in furthering fundamental

     substantive social policies.”

Wilson v. Belin, 20 F.3d 644, 647, n.3 (5th Cir.), cert. denied,

513 U.S. 930, 115 S. Ct. 322 (1994).

     The burden on HBTL of litigating in Texas may be considerable.

However, HBTL voluntarily came to Texas, negotiated, entered the

Agreement and began to participate in the performance of the

contract in Texas.         Additionally, HBTL made payments to Texas

banks, and HBTL’s representatives also visited Texas and joined

Electrosource in performing work on the PDR.

     Undoubtedly, the most efficient forum for the resolution of

this conflict would be Texas.          Even though Indian law will be used

in interpreting the Agreement, the vast majority of the witnesses

                                       14
will be found in Texas, the partial preparation for and termination

of the PDR occurred in Texas, HBTL employees were trained in Texas,

partial payments to Electrosource were made through a Texas bank,

and other evidence concerning the alleged breach is located in

Texas.     Indeed, HBTL may suffer an inconvenience in defending a

suit in Texas, but not a burden that amounts to a denial of due

process.    See McGee v. International Life Insurance Co., 355 U.S.
220, 224, 78 S. Ct. 199, 201 (1957).

                              CONCLUSION

     For the reasons assigned, we conclude that Electrosource has

made a prima facie case that HBTL is subject to in personam

jurisdiction    in   Texas.   Therefore,   the   order   entered   by   the

district court granting HBTL’s motion to dismiss for lack of in

personam jurisdiction is reversed and the case is remanded for

proceedings consistent with this opinion.

REVERSED and REMANDED.

                                  15