Sayers Construction, L.L.C. v. Timberline Construc ( 2020 )

Case: 19-51099 Document: 00515587316 Page: 1 Date Filed: 10/02/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
October 2, 2020
No. 19-51099
Lyle W. Cayce
Clerk
Sayers Construction, L.L.C.,
Plaintiff—Appellant,
versus
Timberline Construction, Incorporated; High Voltage,
Incorporated,
Defendants—Appellees.
Appeals from the United States District Court
for the Western District of Texas
USDC No. 6:19-CV-325
USDC No. 6:19-CV-487
Before Smith, Clement, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge:
The question presented is whether a federal district court in Texas
had jurisdiction to vacate an arbitration award in Florida. The district court
said no. We agree and affirm.
I.
In 2015, Florida Power & Light Company hired Sayers Construction,
L.L.C. to work on electrical utility lines in the State. Sayers then hired
Timberline Construction, Inc., a South Dakota corporation, and High
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Voltage, Inc., a Utah corporation, as subcontractors on the project. The
parties formalized their relationship in a Master Services Agreement.
Although High Voltage did not execute the Agreement, no one disputes that
High Voltage is equally bound by its terms.
Pursuant to the Agreement, Timberline and High Voltage picked up
work orders from Sayers at its Florida offices and then performed fieldwork
in Florida. After completing work, Timberline and High Voltage sent
invoices to Sayers in Texas. Sayers then paid the subcontractors within 45
days of receiving an invoice.
Sayers eventually stopped paying its invoices, so Timberline and High
Voltage stopped performing work. The subcontractors then filed an
arbitration demand with the American Arbitration Association (“AAA”).
An arbitrator in Florida eventually found in favor of Timberline and High
Voltage, awarding them damages and fees.
Sayers filed suit in the Western District of Texas seeking to vacate the
arbitration award under state law.1 Timberline and High Voltage filed a
motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), (b)(3), and
(b)(5), as well as under the Colorado River abstention doctrine. The court
dismissed the suit for lack of personal jurisdiction over the subcontractors.
1
In its pleadings, Sayers invoked the Western District’s diversity jurisdiction
under 28 U.S.C. § 1332. As an LLC invoking federal diversity jurisdiction, Sayers bore
responsibility for alleging the citizenship of each of its members to establish complete
diversity. See MidCap Media Fin., L.L.C. v. Pathway Data, Inc., 929 F.3d 310 (5th Cir.
2019). Our review of the record indicates that Sayers failed to meet that obligation.
Ordinarily that would require us to dismiss the action. See id. at 314. Because we resolve
this case on other jurisdictional grounds, however, we need not reach the adequacy of
Sayers’s pleadings on this point. Cf. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 578
(1999) (“[T]here is no unyielding jurisdictional hierarchy. . . . [T]here are circumstances
in which a district court appropriately accords priority to a personal jurisdiction inquiry.”).
2
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Sayers timely appealed. Our review is de novo. Halliburton Energy Servs., Inc.
v. Ironshore Specialty Ins. Co., 921 F.3d 522, 539 (5th Cir. 2019).
II.
Jurisdiction is power. And the Due Process Clause limits the
jurisdiction of state courts to exercise power over out-of-State defendants.
See Pennoyer v. Neff, 95 U.S. 714, 733 (1877).
Of course, this case turns on whether a federal (not state) court in
Texas can exercise power over out-of-State defendants. But the distinction
does not matter because, in general, federal courts can exert power only over
out-of-State defendants that are “subject to the jurisdiction of a court of
general jurisdiction in the state where the district court is located.” Fed. R.
Civ. P. 4(k)(1)(A). Here, Texas gives its courts of general jurisdiction all of
the power allowed by the Due Process Clause. See Tex. Civ. Prac. &
Rem. Code § 17.042. “Thus, in order to determine whether the Federal
District Court in this case was authorized to exercise jurisdiction over [the
subcontractors], we ask whether the exercise of jurisdiction comports with
the limits imposed by federal due process on the State of” Texas. Walden v.
Fiore, 571 U.S. 277, 283 (2014) (quotation omitted).
The Due Process Clause imposes several limitations that are relevant
to personal jurisdiction. But only one is relevant here—namely, whether the
subcontractors had “minimum contacts” in Texas such that a Texas court
could exercise specific personal jurisdiction over them. Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945). To determine whether the
subcontractors had such “minimum contacts,” we ask whether they
“purposefully avail[ed] [themselves] of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its
laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958); accord World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297–98 (1980).
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The “purposeful availment” requirement protects defendants from
being summoned to a forum where they have only “random, fortuitous, or
attenuated contacts.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475
(1985). To that end, our inquiry focuses on “actions by the defendant . . . that
create a substantial connection with the forum State.” Ibid. (quotation
omitted). In breach-of-contract disputes, the analysis turns on a “highly
realistic” assessment of the parties’ “prior negotiations and contemplated
future consequences, along with the terms of the contract and the parties’
actual course of dealing.” Id. at 479. A touchstone of this analysis is the
“place of contractual performance.” Jones v. Petty-Ray Geophysical
Geosource, Inc., 954 F.2d 1061, 1068 (5th Cir. 1992); see also Holt Oil & Gas
Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986) (finding no “minimum
contacts” with Texas in part because performance of the contract was
centered in Oklahoma).
Here, the place of contractual performance was Florida—not Texas.
But Sayers says four other facts are nonetheless sufficient to establish a prima
facie case of specific personal jurisdiction over the subcontractors in Texas:
(1) Timberline solicited a business relationship with Sayers in Texas;
(2) Timberline and High Voltage contracted with Sayers, which has an office
in Texas; (3) Timberline and High Voltage mailed invoices to Sayers’s office
in Texas; and (4) the parties’ contract has a Texas choice-of-law clause.
Fact (1) does not constitute purposeful availment. Sayers’s
solicitation allegations are unclear. But the gist appears to be that two
individuals—Dan Reid and Tom Duffy—solicited Sayers for employment in
Texas. Sayers said no. Then Reid and Duffy went to work for Timberline.
And when Timberline solicited Sayers for the Florida project, Sayers said
yes. Reid and Duffy are irrelevant because the “unilateral activity of a third
party” cannot establish minimum contacts on behalf of a corporate
defendant. See Walden, 571 U.S. at 291 (quotation omitted). And any
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solicitation by Timberline is equally irrelevant because it establishes, at most,
a relationship between Timberline and Sayers—not Timberline and Texas.
See id. at 285–86; Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 823 (8th
Cir. 2014).
Facts (2) and (3) also do nothing to establish purposeful availment.
We have held: “[M]ailing payments to the forum state, engaging in
communications related to the execution and performance of the contract,
and the existence of a contract between the nonresident defendant and a
resident of the forum are insufficient to establish . . . minimum contacts . . . .”
Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 344 (5th Cir. 2004);
see also Halliburton, 921 F.3d at 544. These sorts of contacts are particularly
insufficient to satisfy the Due Process Clause when all of the work is
performed outside the forum State. See Patterson v. Dietze, Inc., 764 F.2d
1145, 1147 (5th Cir. 1985).
That leaves Sayers with fact (4): the parties’ agreement contains a
Texas choice-of-law clause. While such clauses can be probative of
purposeful availment, they’re never dispositive. See Hanson, 357 U.S. at 254
(“The issue is personal jurisdiction, not choice of law.”); see also Burger King,
471 U.S. at 481–82; Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688
F.3d 214, 223 (5th Cir. 2012).
But the choice-of-law clause in the Master Services Agreement does
not suggest the parties expected to resolve their disputes in Texas. That’s
because the same Agreement also required that arbitration take place in
accordance with the AAA’s venue-selection rules—i.e., as close as possible
to the project in Florida. So to the extent the Agreement is probative of the
parties’ expectations regarding venue, it cuts against finding personal
jurisdiction in Texas.
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The parties’ course of dealing cuts the same way. See Burger King, 471
U.S. at 479 (noting relevance of “the parties’ actual course of dealing”).
Timberline, High Voltage and Sayers contracted for work on a project in
Florida. After Sayers allegedly failed to pay its subcontractors’ invoices, the
parties met in Florida to discuss the dispute. Then they arbitrated the dispute
in Florida. And Florida’s courts have determined that Florida is a proper
venue for Timberline and High Voltage to seek enforcement of the
arbitration awards. See Sayers Constr., L.L.C. v. Timberline Constr., Inc., No.
3D19-2373, 2020 WL 3443268 (Fla. Dist. Ct. App. June 24, 2020).
In short, this is Florida’s problem. Not Texas’s.
AFFIRMED.2
2
Our disposition obviates the need to consider other arguments raised by the
parties. Because we conclude that Sayers has failed to establish a prima facie case of personal
jurisdiction, we need not decide whether exercising personal jurisdiction over Timberline
and High Voltage would comport with “fair play and substantial justice.” Int’l Shoe, 326
U.S. at 316 (quotation omitted). Because we resolve this case on jurisdictional grounds, we
need not reach the subcontractors’ argument that we can affirm the judgment on the basis
of Colorado River abstention. Because the subcontractors did not cross-appeal the district
court’s without-prejudice dismissal, we cannot consider whether the case should be
dismissed with prejudice for Sayers’s violation of the FAA’s service-of-process rules. See 9
U.S.C. § 12; 15A Charles Alan Wright, Arthur R. Miller, Edward H.
Cooper, Federal Practice and Procedure § 3904, at 196–98 (2d ed.) (1991)
(“The rule that a cross-appeal must be filed to secure a favorable modification of the
judgment is stated and applied in many settings. As shown by common examples an
appellee cannot, without cross-appeal, seek . . . to convert a dismissal without prejudice
into a dismissal with prejudice.”). And because Sayers opposed transferring this action when
it was pending in the district court, we will not consider its new argument that we should
transfer it under 28 U.S.C. § 1406. Cf. State Indus. Prods. Corp. v. Beta Tech., Inc., 575 F.3d
450, 456 (5th Cir. 2009) (generally refusing to review arguments raised for the first time on
appeal).
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