Petition — Fortuna Corp. v. Wilkerson

Supreme

ass

SEP 13 1977

CHREL RODAK, JR, CLERK

IN THE

7 Supreme Court of the United States

OCTOBER TERM, 1977

No. 77 239 8

FORTUNA CORPORATION,

Petitioner,

versus

EDDIE WILKERSON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

JAMES F. HULSE

Attorney for Petitioners

OF COUNSEL:

SCOTT, HULSE, MARSHALL

& FEUILLE

1ith Floor EI Paso National

Bank Building

El Paso, Texas 79901

SCOFIELDS’ QUALITY PRINTERS, P. o. BOX 563096, N. O. LA. 70163 - 504/822-1611

TABLE OF CONTENTS -

; Page

JJ hE tin GAS Bid ii TAD coe de ehisev cds 1

QUESTIONS PRESENTED ....................005- 2

THE LAW INVOLVED ......... 0. cece cece ce eeeeees 3

THE REQUIREMENT OF DUE PROCESS ...... 3

THE REQUIREMENTS OF THE TEXAS

“LIONG-ARM” STATUTE (20. o ccc cc cece ce eeeee 6

/ b.0is on0 bs tad dbs 6 6c dthe Sem omey cme o> oe 9

RESPONDENT’S PLEADINGS ALLEGE A

CAUSE OF ACTION ARISING IN NEW

h;; 2 . 9

THE RECORD SHOWS RESPONDENT'S

CAUSE OF ACTION AROSE IN NEW

„„ . 11

THE COURT OF APPEALS OPINION

BASICALLY HOLDS THE LOCATION OF

PETITIONER’S SUNLAND PARK

RACETRACK IS NEW MEXICO, BUT

NEAR EL PASO, TEXAS AND ITS

ADVERTISING IN EL PASO, TEXAS

CONFERS JURISDICTION ON COURTS

/ ĩ ² AA . . . ve 12

REASONS WHY THE WRIT SHOULD BE

r o benen. 16

s „6 21

CERTIFICATE OF SERVICE ..................-. 21

APPENDIX A — Opinion of U. S. Court of

Appeals, 5th Cir., dated June 24,1977 .......... la

* r Be ee * 8 3 r — e A e Nn * 22 ee ee . N N 8

ii .

TABLE OF CONTENTS (Continued)

Page

APPENDIX B — Order Denying Petition for

Rehearing, U. S. Court of Appeals. 5th. Cir...

r ˙e '. | cbkinadene lia

APPENDIX C — Article 2031(b) Tex. Rev. Civ.

— · m ˙ ˙ l... ô½ ese Erte 12a

APPENDIX D — U- Anchor Advertising, Inc.

v. N. H. Burt, S. W. 2d . 20 Tex. Sup.

Dee h ͤ .. 16a

TABLE OF AUTHORITIES

Cases:

Green v. Chicago, Burlington & Quincy Ry.,

205 U.S. 530, 533-534, 51 L. Ed. 910. 6

Hanson v. Denckla, 357 U.S. 235, 2 L.Ed.

123ꝶ 440 3,5. 17.19

International Shoe Co. v. Washington, 326

U.S. 310, COTM, GB A AS. a A edie. 3,4,5

MeInnes v. Fountainbleau Hotel Corp., 257

F. ad 832, 834, (2nd Cir. 19580)))/. 6

McGee v. International Life Ins. Co., *

72227 3.4.5

National Geographic Society v. California

Board of Equalization, ___ U.S., 97

S.Ct. 1386, 50 L.Ed.2d 631 (1977) .............. 6,19

O’Brien v. Lanpar Co., (Tex. Sup.) 399 S. W. ad

neee 8.9. 14. 15.20

Pennoyer v. Neff, 95 U.S. 715, 24 L.Ed. 565 ....... 3,4

Sun-X International Co. v. Witt, 413 S.W.2d

/ ̃ ᷣ ˙W1mitii.it 17

3

TABLE OF AUTHORITIES (Continued) -

Turner v. Jack Tar Grand Bahama, Ltd., 353

,, ͥ ; steeds er 6

Tyee Construction Co. v. Dulien Steel

Products, Inc., 62 Wash.2d 106, 381 P.2d 245,

EE ˙˙⁰AAAA ˙ 'ʃ¹n. ͤ«“ũ 8

U- Anchor Advertising, Inc. v. N. H. Burt.

S. W. ad , 20 Tex. Sup. Ct. J. 435 (7-13-

FJ ᷣ ⁵V ĩ 0—mß—— . 8.15.20

Other Authorities:

Art. 2031b, Tex. Rev. Civ. Stat 4,6,8,9,12,14,20

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

No.

FORTUNA CORPORATION,

Petitioner,

versus

EDDIE WILKERSON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

!

Petitioner-Defendant prays that a Writ of Certiorari

issue to review judgments of the United States Court

of Appeals for the Fifth Circuit, said Court's opinions

and judgments being dated June 24, 1977, the Petition

for Rehearing filed by Petitioner on July 8, 1977, hav-

ing been denied by the Court of Appeals on July 26,

1977.

JURISDICTION

The judgment of the Court of Appeals for the Fifth

Circuit was made final by the decision rendered on

June 24, 1977, and Petitioner's Petition for Rehearing

was denied by the Court on July 26, 1977. The Order

denying said Petition for Rehearing is appended to

this Petition in Appendix B infra p. 11a. The jurisdic-

tion of this Court is invoked under 28 U.S.C. § 1254(1),

and Rule 19.1(b), Revised Rules of the Supreme Court

of the United States.

QUESTIONS PRESENTED

(1) Whether the judgment of the Court of Appeals

decided an important question of federal law in a way

that is in conflict with applicable decisions of this

Court, to-wit, whether Petitioner's right to due process

of law under the Constitution of the United States is

violated by holding a United States District Court in

Texas had jurisdiction over a nonresident foreign cor-

poration in a diversity casein connection with a cause

of action in personam, which arose in New Mexico?

(2) Whether the judgment of the Court of Appeals

decided an important state question, in a diversity

case, in a way that conflicts with applicable state law,

to-wit, whether the holding of the Court of Appeals

with respect to jurisdiction of a United States District

Court in Texas, service of process having been made

under the Texas “Long-Arm” Statute, conflicts with

applicable state law?

(3) Whether the judgment of the Court of Appeals

has so far departed from the accepted and usual course

of judicial proceedings as to call for the exercise of

this Court's power of supervision, to-wit, whether

Petitioner's (a New Mexico corporation) advertising

in El Paso. Texas, coupled with the location of a place

of business of Petitioner in New Mexico, but near El

OO SSE Pa R

* 9 5 :

;

Paso, Texas, is sufficient to sustain jurisdiction in a

Court in El Paso, Texas over a cause of action in per-

sonam arising in New Mexico, and not arising out of

any action by Petitioner in Texas.

THE LAW INVOLV£D

The reason urged by Petitioner for reversing the

Court below is (1) that its holding decides a federal

question in a way that conflicts with applicable

decisions of this Court, namely, that a nonresident

foreign corporation is subject to being sued in Texas,

in personam, on substituted service, on a cause of ac-

tion arising in New Mexico, and basing such holding,

in substantial part, on the fact that Petitioner has a

place of business in New Mexico adjacent to Texas,

advertises in Texas and draws some business from

Texas customers, and (2) it decides the applicability of

the Texas “Long-Arm” Statute in a way that conflicts

with applicable state law.

The Requirement Of Due Process

The law basically is the due process clause of the

Fourteenth Amendment to the Constitution of the

United States, and the decisions of the Court in Pen-

noyer v. Neff, 95 U.S. 715, 24 L.Ed. 565; International

Shoe Co. v. Washington, 326 U.S. 310, 90 L.Ed. 95;

McGee v. International Life Ins. Co., 355 U.S. 220, 2

L.Ed.2d 223; and Hanson v. Denckla, 357 U.S. 235, 2

L.Ed. 1283.

This is a diversity case, and the United States Dis-

trict Court at El Paso, Texas, would have jurisdiction

over Petitioner, in personam, under the Texas “Long-

4

Arm” Statute, Art. 2031b, Tex. Rev. Civ. Stat., only if a

state court in Texas would have had jurisdiction.

Under Pennoyer v. Neff, supra, a state court's

jurisdiction is restricted by the territorial limits of the

state, and it cannot exercise jurisdiction over persons

without its territory; and this Court has never held

that a state sourt can exercise jurisdiction over a

foreign corporation, wholly or partly on the ground

that it owns and operates a business adjacent to the

state of the forum. International Shoe Co. v.

Washington, supra, held that the shoe company, which

had a force of salesmen in the forum state who

solicited and obtained orders, using a line of samples

supplied by the company, and displayed in rooms paid

for by the company, and which shipped merchandise

into the state, could be sued in the state courts for con-

tributions payable to the state unemployment com-

pensation fund. The holding was that defendant must

have certain minimum contacts with the state that the

maintenance of the suit does not offend traditional

notions of fair play and substantial justice, coupled

with the statement to the effect that its activities in the

state “may give rise to obligations, and so far as those

obligations arise out of or are connected within the

state,” it was not undue to require defendant to re-

spond to a suit based on those obligations. The holding

is thus limited to causes of action arising out of defen-

dant's activities in the state.

McGee v. International Life Ins. Co., 355 U.S. 220, 2

L.Ed.2d 223 held plaintiff could sue a nonresident

foreign corporation on a cause of action arising out of

nonpayment of a life insurance policy which was

delivered in the forum state, premiums paid by mail

from the forum state, and insured lived and died there.

The holding was that the suit was based on a contract

which had substantial connection with the state of the

forum.

Hanson v. Denckla, 357 U.S. 235, 2 L.Ed.2d 223 was

decided a few months after the McGee decision, and

after referring to McGee having noted a trend of

expanding personal jurisdiction over a nonresident

defendant, this Court stated it is a mistake to assume

this trend heralds the eventual demise of all restric-

tions on personal jurisdiction of state courts, and held

the Florida courts had no jurisdiction of a resident's

trust situated in Delaware.

In both the International Shoe Company and the

International Life Insurance Company cases the

cause of action arose out of acts by defendant (or in the

latter case by its predecessor in interest) in the forum

state. Hanson v. Denckla indicates this Court's

decisions do not go further than the actual holdings in

the Shoe Company and the Insurance Company cases.

And that, undoubtedly, is why the Texas “Long-Arm”’

statute requires and the Texas courts hold the cause of

action must arise out of acts purposefully done in Tex-

as by the defendant. This requirement is not met in this

case, as the cause of action here arises wholly out of

acts in New Mexico. The Court of Appeals, in effect,

by-passed this requirement by saying, Fortuna's

broad-based doing of its racetrack business in Texas

through location [which is in New Mexico], solicita-

tion of customers [advertising], and dealing with

Texas-raised and -trained horses anc trainers [all

done in New Mexico] gave rise to the cause of action

asserted here.” The important questions of law in this

case are, can the Court of Appeals override the Texas

statute and Texas court decisions by thus holding the

cause of action arises out of the totality of everything

done by Petitioner, where, of the things referred to in

the above quotation, only the advertising was done

in Texas? The holding in this case conflicts with the

Fifth Circuit’s previous holding in Turner v. Jack Tar

Grand Bahama, Ltd., 353 F.2d 954 (1965), where it was

held that the residence of officers and directors in Tex-

as, together with the holding of conferences in the

state regarding Appellee’s business operation, and

selecting and taking reservations for the Grand

Bahama Hotel, do not constitute a sufficient “plus” to

prevent application of the “rule” that solicitation

alone is an insufficient basis for in personam jurisdic-

tion, citing Green v. Chicago, Burlington & Quincy

Ry., 205 U.S. 530, 533-534, 51 L.Ed. 916; McInnes v.

Fountainbleau Hotel Corp., 257 F. ad 832, 834 (2nd Cir.

1958).

National Geographic Society v. California Board of

Equalization, __ U.S. 97 S.Ct. 1386, 50 L.Ed.2d

631 (1977) indicates the difference between the

decisions of this Honorable Court, and the instant

case, for in the National Geographic Society, case it

was held, and stated, that the “nexus” between the

Society and the State of California was its main-

taining of two offices in California and the activities at

such offices, whereas in the instant case Petitioner has

no office in Texas.

The Requirements Of The

Texas “Long-Arm” Statute

Art. 2031b, Tex. Rev. Civ. Stat. is the “Long-Arm”

Statute. See Appendix C. infra p. 12a. Service of

7

process in this case, if sustainable at all, has to be

sustained under Secs. 3 and 4 of said Statute. Sec. 3

provides that any foreign corporation that engages in

business in this state and does not maintain a place of

regular business in this state or a designated agent

upon whom service may be made upon causes of ac-

tion arising out of such business done in this state, the

act or acts of engaging in such business within this

state shall be deemed equivalent to the appointment of

such foreign corporation of the Secretary of State of

Texas as agent upon whom service of process may be

made in any action, suit or proceedings arising out of

such business done in this state.

It will be noted that Sec. 3 is limited to making sub-

stituted service on a foreign corporation only where.it

engages in business in this state, and the action, suit

or proceedings arise out of such business done in this

state.

Sec. 4 of said Statute defines doing business in this

state, referring first to entering into contracts, which

we do not have in this case, and states it may also exist

by the committing of any tort in whole or in part in this

state.

Your Petitioner is alleged to have received at its of-

fice in New Mexico, Respondent’s application for

stalls, which application Petitioner, at its office in

New Mexico did not grant. Respondent appealed from

such action by Petitioner to the New Mexico Racing

Commission, and which Commission declined to rule

in favor of Respondent. Petitioner is therefore alleged

to have committed a tort, and under said facts, the

alleged tort, if any, was done by acts of Petitioner

wholly in New Mexico, and not in Texas.

The requirements of a long- arm“ statute are dis-

cussed in the leading case of O’Brien v. Lanpar Co.,

(Tex. Sup.) 399 S.W.2d 340 (1966) involving the validi-

ty of the judgment of a Federal District Court in II-

linois against a Texas corporation growing out of a

contract made and performed in Illinois. Service in the

Illinois case was made under the Illinois “Long-Arm”

Statute, which is similar to Art. 2031b, Tex. Rev. Civ.

Stat., and the Supreme Court of Texas quoted with ap-

proval from Tyee Construction Co. v. Dulien Steel

Products, Inc., 62 Wash.2d 106, 381 P.2d 245, 251 (1963)

that there are three basic factors which should coin-

cide if jurisdiction over a nonresident corporation is

entertained, namely, (1) the nonresident corporation

must purposefully do some act or consummate some

business in the forum state; (2) the cause of action

must arise from, or be connected with, such act or

transaction (emphasis added); and (3) the assumption

of jurisdiction must not offend traditional notions of

fair play and substantial justice, consideration being

given to the quality, nature, and extent of the activity

in the forum state, the relative convenience of the par-

ties, the benefits and protection of the laws of the

forum state afforded the respective parties, and the

basic equities of the situation.

Jurisdiction of Texas Courts under the Texas “Long-

Arm” Statute was the issue in the recent case of U-

Anchor Advertising, Inc. v. N. H. Burt. S. W. 2d

decided by the Supreme Court of Texas on July

13, 1977. (Copy attached, App. D). This case involved a

contract made in Oklahoma concerning signs to be

erected in Oklahoma, defendant agreeing to make

payments therefor to plaintiff in Texas, and made

periodic payments of the consideration by mail from

Oklahoma to defendant in Texas. The opinion quotes

part of Art. 2031b, Tex. Rev. Civ. Stat., including Sec. 3,

which we have substantially set out above, and which

is Appendix C to this Petition. The Court, citing

O’Brien v. Lanpar Co., supra, repeated the three basic

elements that must exist to sustain jurisdiction over a

nonresident defendant, being the identical statement

set out in the O’Brien case, and which we have set out

above under our citation of that case. We repeat, in

order to emphasize, the first two of said elements,

namely, (1) the ... foreign corporation must pur-

posefully do some act or consummate some trans-

action in the forum state, and (2) the cause of action

must arise from, or be connected with, such act or

transaction.

STATEMENT

This action involves the question of jurisdiction of

the United States District Court, Western District of

Texas, El Paso Division, over Petitioner, a New Mex-

ico corporation which operates a racetrack at Sunland

Park, New Mexico. The action arises out of

Petitioner's rejection, at Sunland Park, New Mexico,

of Respondent’s application, as a horse trainer, for

stall space at the Sunland Park racetrack for the rac-

ing season of 1973-1974.

Respondent’s Pleadings Allege A Cause Of

Action Arising In New Mexico

Respondent has alleged a cause of action arising in

and entirely connected with the State of New Mexico.

He alleged Petitioner is a New Mexico corporation,

and that it owns and operates the Sunland Park

10

Racetrack at Sunland Park, New Mexico, and that it is

a Licensee as that term is used in the New Mexico

Laws and Rules and Regulations governing horse rac-

ing. He alleged that he is licensed by the Racing Com-

mission of the State of New Mexico as a trainer

which license in effect granted him the right to lawful-

ly earn a living on Defendant's premises (the

racetrack at Sunland Park, New Mexico); and that

prior to 1972-1973 he had been granted a reasonable

number of stalls [at Sunland Park, New Mexico], ap-

parently in accordance with the Commission rules;

that he requested 35 stalls for the 1972-1973 season, but

was granted only 10, and alleged in that connection

that a number of Respondent’s horses were New Mex-

ico “bred or foal”; and that he requested stall space for

32 horses for the 1973-1974 season, but was given no

stalls, and in this connection alleged that a number of

Plaintiff's horses were New Mexico “bred or foal’; that

Defendant, as a “Licensee” is regulated by the rules of

the New Mexico State Racing Commission, and that it

has a duty not to be arbitrary or capricious in its ac-

tions toward Respondent. He alleged the New Mexico

Racing Commission has a rule requiring Petitioner to

give preference to a New Mexico “bred or foal” horse

when allocating stall space, and Respondent further

alleged that Petitioner violated said rule. He further

alleged that he appealed by protest to the New Mexico

State Racing Commission which held a hearing on it,

but denied him any relief. A reference to these

allegations of Plaintiff's First Amended Petition show

that all of the acts and actions of which he complains

on the part of Petitioner, and out of which

Respondent’s alleged cause of action arises, occurred

and took place in the State of New Mexico, at Sunland

Park Racetrack, and were in part alleged to be

11

violations by Petitioner of rules of the New Mexico

State Racing Commission, and as a part of his cause of

action further alleges an appeal by him to the New

Mexico State Racing Commission which denied him

any relief. The entire sequence of events occurred

within the State of New Mexico, and the cause of ac-

tion, if any there is, arose in that State. Respondent

does not allege, as part of his cause of action, any act

done by Petitioner in the State of Texas.

The Record Shows Respondent’s Cause Of Ac-

tion Arose In New Mexico

The record shows Petitioner is a New Mexico cor-

poration, operating a racetrack at Sunland Park, New

Mexico, near El Paso, Texas. As such it operated under

the laws of the State of New Mexico and under the

Rules and Regulations of the New Mexico Racing

Commission. Respondent, as a trainer, had a license

from the New Mexico Racing Commission, and after

being denied stall space, as above stated, he appealed

to the New Mexico Racing Commission, which denied

his appeal. It thus appears that the cause of action

which Respondent alleges to be a tort arose out of acts

of Petitioner in the State of New Mexico, and did not

arise, in whole or in part, out of any acts of Petitioner

in Texas.

Petitioner has no permit to do business in Texas, has

no office or place of business in Texas, no mail address

in Texas, no telephone in Texas, no bank account in

Texas, and has no agent for service in Texas.

Petitioner mails out applications for stall space to

persons it knows who may want them; after being

filled out they are delivered to Petitioner at Sunland

12

Park, New Mexico, either by hand or by mail, and

Petitioner accepts or rejects them at Sunland Park,

New Mexico. None of the matters referred to occurred

in Texas except the advertising.

Respondent relied mainly on the fact that among the

horses running at Sunland Park, New Mexico are

many “Texas” horses, and that he trained, in El Paso,

Texas, the horses he raced at Sunland Park, although

his pleadings refer only to his having New Mexico

“bred or foal” horses; and he also urged the fact that

Petitioner mails out stall applications and nomina-

tion applications for futurities and/orderbys to Texas

residents, and that it advertises in El Paso, Texas, has

a telephone listing in the El Paso Telephone Directory

(for an Anapra, New Mexico telephone number), and

that its President and its Racing Secretary maintain

residences in El Paso, Texas, as showing it was doing

business in Texas. Of these things, the only acts done

by Petitioner in Texas is the advertising.

The Court Of Appeals Opinion Basically

Holds The Location Of Petitioner’s Sunland

Park Racetrack Is New Mexico, But Near El

Paso, Texas And Its Advertising In EI Paso,

Texas Confers Jurisdiction On Courts In Tex-

as.

Service of process was made under the Texas “Long-

Arm” Statute, Art. 2031b, Tex. Rev. Civ. Stat., by ser-

ving the Secretary of State of the State of Texas. The

District Court held it did not have jurisdiction, and dis-

missed the action.

13

On appeal, the United States Court of Appeals, Fifth

Circuit, reversed, holding there was jurisdiction. It

emphasized the location of Petitioner's Sunland Park

Racetrack, that although located in New Mexico, it is

near EI Paso, Texas. For the first time in the juris-

prudence of this nation an Appellate Court has held, in

an action arising out of facts occurring in another

state, that a nonresident foreign corporation is subject

to the jurisdiction of courts of a state near which — but

not in which — its business is located, basing such

holding, in large part, on the proximity of the foreign

corporations’ place of business to a city in a nearby

state.

The opening sentences of the opinion read:

“Just because the eyes of Texas can see it,

doesn’t mean that the State’s Long-Arm'

process statute can reach it. However, loca-

tion plays an important part in supporting

personal jurisdiction in this tort action by an

El Paso, Texas horse trainer against the

operator of the adjacent Sunland Park race

track in New Mexico.”

Further on in the opinion it is said:

“It cannot be attributed to accident that

Sunland Park race track is nearer to El Paso,

Texas than to any urban center in New Mex-

100.“

And also,

“Sunland is like an attractive cluster of

mistletoe in a tree rooted in Texas soil.

14

Though not attached to Texas, the mistletoe

takes its nourishment from her earth, Without

resort to the tort-in-Texas definition of doing

business expressly provided for in Art. 2031b,

Sec. 4, the proof showed that Fortuna was do-

ing as much business in Texas as in New Mex-

ico.”

This last statement is not supported by the record,

and is in fact not correct. Indeed, Petitioner does

nothing in Texas except to advertise.

The Court of Appeals’ likening Sunland Park race-

track to mistletoe on a tree rooted in Texas soil points

up the error in its holding. Since Petitioner is a New

Mexico corporation, supervised by the New Mexico

Racing Commission, and with its racetrack and place

of business in New Mexico, with no acts by it in Texas

except its advertising here, it isobvious that factually

the tree is rooted in New Mexico, and the advertising

done in Texas is the mistletoe on the tree. The Court of

Appeals, accordingly, and, using tts own descriptive

words, has held the New Mexico tree is in the juris-

diction of Texas-located courts if the mistletoe on the

tree hangs over into Texas. This is an extension of the

law on the subject which was warned against in Han-

son v. Denckla, supra.

Nor is the Court of Appeals’ statement correct that,

“There is no precise Texas precedent, but we now

decide that if Texas has to decide this case, it would

hold it to be sufficient that the claim in the Complaint

arose from Fortuna’s general endeavors in Texas,” for

it is contrary.to the requirements of Art. 2031b, Sec. 3,

Tex. Rev. Civ. Stat., and to the law as stated in O’Brien

15

v. Lanpar Co., (Tex. Sup.) 399 S.W.2d 340 (1966) and in

U-Anchor Advertising, Inc. v. Burt, (Tex. Sup. 7-13-

1977), _— 8. W. 2d

This holding, if permitted to stand, will permit a

non-resident person or corporation doing business in

one state to be sued in another state if it is located near

the other state and advertises in it. This will be true,

although it does no act in the other state except to

advertise, such as by newspaper or television. Under

this decision a nonresident in Texarkana, Arkansas

may well be held to be within the jurisdiction of courts

in Texarkana, Texas, even though the nonresident

does nothing more than advertise in Texas. And the

same could be true of a person or corporation in the

District of Columbia advertising in Maryland or

Virginia, or vice versa, being held to be within the

jurisdiction of the courts in a state where it does

nothing but advertise, provided it has a place of busi-

ness in an adjacent state, located near the boundary

line between them. The opinion of the Court of Appeals

also refers, as a fact, to Petitioner's Sunland Park

Racetrack being placed near El Paso, Texas so as to

draw as its sustaining lifeblood citizens who are nur-

tured and protected by Texas; and also states the proof

showed Fortuna was as much doing business in Texas

as in New Mexico. The record does not support either

of these statements. The assumption that the race-

track draws its lifeblood from El Paso, Texas is

nowhere stated in the affidavits, deposition, or

testimony at the hearing in the District Court. This

racetrack, in fact, draws as well from Old Mexico, to

which it is also adjacent, and also from New Mexico

and other states. Sunland Park Racetrack is, in fact,

adjacent to the celebrated “Pass of the North”, through

16

which passed Spanish Conquistadores, Padres,

soldiers and settlers en route from Mexico City toSan-

ta Fe. After 1848 it also became an important point on

the east-west route between Texas and points east on

the one hand and California on the other hand. The net

result was and is that the area adjacent to the Pass of

the North has not only been affected and used by loca)

citizens in Old Mexico, New Mexico and Texas, but has

been affected and used by travelers and tourists from

many states and countries. It is the same with the race-

track, for those who use it and those who are its

patrons come from various states and countries.

REASONS WHY THE WRIT

SHOULD BE GRANTED

In this diversity case the Court of Appeals not only

has refused to follow the Texas law, but has also, in

effect, extended the law as announced in the decisions

of the Supreme Court of the United States so as to

cover not only acts in the forum state, but also acts in

an adjacent state as a basis for in personam juris-

diction. It has by its opinion in this case extended the

rules, as stated in the decisions of this Court, to in-

clude as minimum contacts” the fact that Petitioner's

place of business in New Mexico is adjacent to EI Paso,

Texas, and it gave great weight to this fact. In the sec-

ond sentence in the Court of Appeals’ opinion it is said,

. . . location plays an important part in supporting

personal jurisdiction in this tort action by an El Paso,

Texas horse trainer against the operator of the adja-

cent Sunland Park racetrack in New Mexico.” In Par.3

of the opinion it said, “Fortuna’s broad-based doing of

its racetrack business in Texas through location,

solicitation of customers, and dealing with Texas-

17

raised and -trained horses and trainers gave rise to the

cause of action asserted here. Because it projected

itself into Texas daily and because its very reason for

being was to deal constantly and mostly with cus-

tomers from the forum state, it is not appropriate to re-

quire that Wilkerson demonstrate some specific local

act which created the cause of action.” But of the

things referred to, two of them, i.e., location and deal-

ing with Texas-raised and -trained horses and trainers

are all locations in or acts done by Petitioner in New

Mexico. Only the solicitation of customers occurred in

Texas. This is a tort case, and the cause of action arose

in New Mexico. It is based upon Petitioner's failure to

give Respondent stall space at its racetrack at

Sunland Park, New Mexico. This is Petitioner’s place

of business, and it operated under a license from the

New Mexico Racing Commission, and pursuant to the

Commission’s rules and regulations. Respondent, as a

trainer, likewise held a license from the New Mexico

Racing Commission, and was subject to its rules and

regulations. His training horses in Texas, which he

hoped to race in New Mexico (and on which the Court

of Appeals partly based its holding) was not an act of

Petitioner in Texas, but was unilateral activity on the

part of Respondent, which does not satisfy the require-

ment of contact with the forum state. Hanson v.

Denckla, 357 U.S. 235 at 253, 2 L. Ed.2d 1283 at 1297;

Sun-X International Co. v. Witt, 413 S.W.2d 761 at 765.

The decision of the Court of Appeals runs counter to

Hanson v. Denckla, supra, and the statement in the

opinion in that case, where, after referring to Pen-

noyer v. Neff, and International Shoe Co. v.

Washington, it is said at p. 251 (p. 1296 in L.Ed.2d):

“But it is a mistake to assume that this trend

heralds the eventual demise of all restric-

18

tions on the personal jurisdiction of state

courts. See Vanderbilt v. Vanderbilt, 354 U.S.

416, 418, 1 L.Ed.2d 1456, 1459, 77 S. Ct. 1360.

Those restrictions are more than a guarantee

of immunity from inconvenient or distant

litigation. They are a consequence of terri-

torial limitations on the power of the respec-

tive states. However minimal the burden of

defending in a foreign tribunal, a defendant

may not be called upon to do so unless he has

had the ‘minimal contacts’ with that state that

are a prerequisite to its exercise of power over

him.”

No more graphic description of what the Court of

Appeals had can be found than in its own analogy as

set out in its opinion, where it is said:

“Sunland is like an attractive cluster of

mistletoe in a tree rooted in Texas soil, though

not attached to Texas, the mistletoe takes its

nourishment from her earth. . . Sunland sim-

ply could not exist without an ordered society

in El Paso.”

The facts show however that the Court of Appeals

has reversed the situation as to the soil in which the

tree is rooted. Petitioner is a New Mexico corporation.

its racetrack is situated in New Mexico, it is licensed

by its office in New Mexico, the stalls for horses, out of

which this controversy arose, are a part of the race-

track facility in New Mexico, and subject to the rules

and regulations and regulations of the New Mexico

Racing Commission, its acceptance or rejection of

application for stall space was done at its office in

19

New Mexico. The Court of appeals in referring to For-

tuna’s broad-based doing of its racetrack business in

Texas” referred specifically and only to “location,

solicitation of customers and dealing with Texas-

raised and -trained horses and trainers.” Of these, only

the solicitation of customers occurred in Texas. It is

apparent that this is a New Mexico tree rooted in the

soil of New Mexico and that the mistletoe, if such it be,

is the solicitation of customers, among other places, in

Texas. It therefore seems clear that the Court of

Appeals has held that a New Mexico tree on which the

mistletoe (solicitation of customers) hangs over in

Texas, is thereby subject to the jurisdiction of courts

in the latter state. It has given great weight to the race-

track’s location, which is in New Mexico, albeit near

El Paso, Texas. This is an extension of the law on the

subject which was warned against in Hanson v..

Denckla, supra. By way of comparison, it will be noted

that in National Geographic Society v. California

Board of Equalization, ___ U. S., 97 S.Ct. 1386, 50

L.Ed.2d 631 (1977) held that the Society's maintenance

of two offices in California and activities there ade-

quately established a relationship, or “nexus”

between the Society and the state that renders con-

stitutional the obligations imposed upon it pursuant

to the California use tax. No office is maintained by

Petitioner in Texas and accordingly there are no ac-

tivities out of such office.

It therefore clearly appears that the Court of

Appeals has gone far beyond the holdings of this

Court, andcontrary to the warning set out in Hanson v.

Denckla, supra.

This is a diversity case, and the decision of the Court

of Appeals is contrary to the requirements of the Tex-

as “Long-Arm” Statute, and the decisions of the Texas

Appellate Courts. Art. 2031b, Tex. Rev. Civ. Stat.

makes the statute applicable to “any action, suit or

proceedings arising out of such business done in this

state.“ O’Brien v. Lanpar Co., (Tex. Sup.) 399 S.W.2d

340 (1966) and U-Anchor Advertising, Inc. v. Burt,

(Tex. Sup.) S. W. 2d . 20 Tex. Sup. Ct. J. 435 (7-13-

1977) state three basic elements must exist to sustain

jurisdiction over a nonresident: (1) defendant must

purposefully do some act or consummate some

transaction in the forum state; (2) the cause of action

must arise from, or be connected with, such act or

transaction; and (3) meet the due process re-

quirements. The Court in the instant case held con-

trary to these requirements, stating that Petitioner's

“broad-based” business in Texas through location

[which is in New Mexico, not Texas], solicitation of

customers, and dealing with Texas-raised and

trained horses [which dealings were 1 New Mexico,

not Texas] gave rise to this cause of action. The deci-

sion patently is based upon actions by Petitioner in

New Mexico, and not in Texas, contrary to the Texas

statutes and decisions. In this diversity case this is an

error on the important question of jurisdiction over a

foreign corporation that should be corrected by this

Honorable Court.

This Petition for a Writ of Certiorari therefore

should be granted so that this Honorable Court can

correct these errors on the part of the Court below.

21

CONCLUSION

For the reasons set forth above, it is respectfully

submitted that this Petition for a Writ of Certiorari

should be granted.

JAMES F. HULSE

Attorney for Petitioners

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the above and

foregoing Petition has this date been served upon op-

posing counsel of record by placing same in the Unit-

ed States Mail, postage prepaid and properly ad-

dressed.

August — 1977.

JAMES F. HULSE

la

APPENDIX A .

Eddie WILKERSON,

Plaintiff-Appellant.

V.

FORTUNA CORPORATION,

Defendant- Appellee.

No. 75-3306.

United States Court of Appeals, Fifth Circuit.

June 24, 1977.

Appeal from the United States District Court for the

Western District of Texas.

Before WISDOM, CLARK and RONEY, Circuit

Judges.

CLARK, Circuit Judge:

Just because the eyes of Texas can see it, doesn't

mean that the State’s long arm“ process statute can

reach it. However, location plays an important part in

supporting personal jurisdiction in this tort action by

an El Paso, Texas horse trainer against the operator of

the adjacent Sunland Park race track in New Mexico.

The district court erred in dismissing the action for

lack of jurisdiction. We reverse and remand.

Eddie Wilkerson had been training horses in Texas

for nine years when he filed the present action. Prior to

1972 he had applied for and received stalls at the

Sunland Park race track for horses he trained.

2a

Sunland Park is operated by the defendant, Fortuna

Corporation. Wilkerson alleged that in 1972 he applied

for 33 stalls at Sunland Park but was granted only ten

stalls. In 1973 he avers he applied for 32 stalls and was

given none. Wilkerson pled that Fortuna Cor-

poration’s refusal to deal was an arbitrary, capriciouc

breach of its duty to him in violation of a rule of the

New Mexico Racing Commission. Wilkerson further

asserted that as a result of Fortuna’s actions, he lost

his training business.

Fortuna moved to dismiss on the ground that it was

not amenable to substituted service of process under

the Texas long arm statute. To support its motion it

recited the usual defendant’s litany for actions of this

type. It has no offices, no business facilities, no bank

account, and no agent in Texas and is neither licensed

nor qualified to do business there. It is incorporated

under the laws of New Mexico. Its sole business is the

operation of Sunland Park race track, which is located

in New Mexico and regulated by the New Mexico Rac-

ing Commission.

Fed.R.Civ.P. 4(e), which governs service of sum-

mons in this federal forum, provides:

... Whenever a statute or rule of court of the

state in which the district court is held

provides for service of asummons...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.

The pertinent Texas long arm statute! deems any non-

resident corporation which engages in business in the

state to have appointed its Secretary of State as agent

for process. It specially defines doing business in this

language:

For the purpose of this Act, and without in-

cluding other acts that may constitute doing

business, any foreign corporation, joint stock

company. association, partnership, or non-

resident natural person shall be deemed doing

business in this State by entering into contract

by mail or otherwise with a resident of Texas

to be performed in whole or in part by either

party in this State, or the committing of any

tort in whole or in part in this State.

Tex.Rev.Civ.Stat. art. 2031b, § 4 (1964).

The district court’s opinion stated:

None of these activities [which were shown

by the proof], in the court’s view, rise to the

level of an ‘act’ or ‘transaction’ by the foreign

corporation, Fortuna Corporation, that gives

rise to a cause of action for damages and none

of these activities are sufficient to fulfill the

requirement of ‘minimum contact’ with the

State of Texas to warrant jurisdiction under

the Texas long arm statute.

1 Tex.Rev.Civ.Stat. art. 2031b (1964).

4a

Its reasoning was based on a line of Texas cases inter-

preting its long arm statute. This three-part analysis

was used: (1) The non-resident corporation must pur-

posefully do some act or consummate some trans-

action in the forum state; (2) The cause of action must

arise from or be connected with such act or trans-

action; and (3) the assumption of jurisdiction must not

offend traditional notions of fair play and substantial

justice considering activity in the state, relative con-

venience of the parties, benefits and protection of state

law afforded the respective parties and basic equities.

Although Fortuna acknowledges that it engaged in

much purposeful Texas activity, it asserts it was not

doing business in Texas and that tife district court cor-

rectly dismissed Wilkerson’s asserted cause of action

because it did not arise from any of those activities as

required by Texas decisional law interpreting its long

arm statute. This assertion is correct in its premise

that the district court was controlled by forum state

law as to the meaning and requirements of its statute.

Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d

1228, 1232 (5th Cir. 1973). Fortuna’s alternative posi-

tion is that even if it were amenable to process in this

action under Texas standards, the federal due process

concept of minimum contacts has not been met

because (1) its activities did not meet the standard of

“minimum contacts,” and (2) the asserted cause of ac-

tion did not arise from those contacts.

2 O’Brien v. Lanpar Co., 309 S. W. ad 340 (Tex. Sup. Ct. 1966);

Hoppenfeld v. Crook. 498 S. W. 2d 52 (Tex. Civ. — Austin 1973,

writ ref'd n. r. e.): Sun-X Int I Co., Inc. v. Witt, 413 S. W. ad 761 (Tex.

Civ. App. — Texarkana 1967, writ ref d n. r. e.). See also, Pizza Inn,

Inc. v. Lumar, 513 S.W.2d 251 (Tex.Civ.App. — Eastland 1974, writ

ref d n. r. e.)

—

5a

I. Jurisdiction Under Texas Law

Our initi:] inquiry is as to whether Fortuna’s ac-

tivities constituted the doing of business in Texas

within the meaning of its process statute. We find that

the substantiality and continuity of its activities in

Texas are of such nature and extent as would clearly

meet the general Texas concepts of doing business.

It cannot be attributed to accident that Sunland Park

race track is nearer to El Paso, Texas than to any ur-

ban center in New Mexico. It is so close, in fact, that in

the course of the hearing the district judge stated. I

can see Sunland race track from the apartment where I

live {in El Paso].” Obviously, it was placed con-

veniently by this metropolitan center so to draw as its

sustaining life blood citizens who are nurture and

protected by Texas. Its telephone number has a

regular listing in the white pages of the El Paso

telephone book and no toll charge is made for calls

between these locations. Sunland Park purchases a

listing in the yellow pages of the El Paso telephone

directory. In the course of its operation of Sunland

Park, Fortuna regularly solicits customers from El

Paso to attend and gamble on its races. It performs this

solicitation by advertising in two El Paso news-

papers, on El Paso billboards, on El Paso radio and

television stations, by distributing place mats to El

Paso restaurants and bars, and by distributing dis-

count admission cards to El Paso hotels, motels and

other public gathering places. The expenditures made

for such promotional solicitations were classified as

substantial by Fortuna’s president, who maintains a

place to live in El Paso. The track's racing secretary,

who also maintains his abode in El Paso, regularly

6a

mailed stall applications to Texas residents and

mailed such an application to Wilkerson for the years

involved. By mail, telephone, or personal contact, the

racing secretary solicited entries for races to be held

at Sunland Park from Texas residents and mailed

futurity and derby nominations for Sunland Park

special races to Texas residents. On almost any racing

day, more horses entered in races at Sunland Park are

bred or foaled in Texas than any other state, including

New Mexico.

The ultimate business of a race track is to exhibit

races to patrons who will pay to attend and gamble on

their outcome. Texas does not allow parimutuel horse-

racing, so Sunland Park race track was set up as close

to its Texas patrons as the racing and gambling laws

of New Mexico would allow — just across the state

line. It saturated El Paso with its substantial adver-

tising activity to attract Texans a short step across

that line. It also drew a large share of its racing horses

from Texas. In summary, Sunland was designed and

operated as a two-state venture. New Mexico gave the

location and concomitant authorization of gambling

and horse racing, an imprimatur unavailable in Tex-

as. Texas and its citizens provided the necessary

patronage and revenues and many of Sunland's race

horses. Sunland is like an attractive cluster of mis-

tletoe in a tree rooted in Texas soil. Though not at-

tached to Texas, the mistletoe takes its nourishment

from her earth. Without resort to the tort-in-Texas

definition of doing business expressly provided in Ar-

ticle 2031b, § 4, the proof showed that Fortuna was as

much doing business in Texas as it was in New Mex-

ico. Product Promotions, Inc. v. Cousteau, 495 F.2d 483

(5th Cir. 1974); Hull v. Gamblin, 241 A.2d 739

7a

(D.C.App.1968) (applying Texas long arm statute); 4C.

Wright & A. Miller, Federal Practice & Procedure,

§ 1069 at 253-55.

Sunland simply could not exist without an ordered

society in El Paso. Even Fortuna's advertising efforts

would be ineffectual without the regular function of

municipal government there. These substantial Texas

activities suffice to form a solid basis of purposeful

action and thereby satisfy the first of the Texas law

three-part analysis. The second is met as well. It re-

quires that the cause of action arise from, or be con-

nected with, the defendant’s Texas activities. In For-

tuna’s instance, Texas courts would not have to utilize

the long arm statute’s thin fiction of a single tort or

single contract as the basis of appointment of the

Secretary of State for substituted service of process.

Fortuna’s broad-based doing of its race track business

in Texas through location, solicitation of customers,

and dealing with Texas-raised and -trained horses and

trainers gave rise to the cause of action asserted here.

Because it projected itself into Texas daily and

because its very reason for being was to deal constant-

ly and mostly with customers from the forum state, it

is not appropriate to require that Wilkerson

demonstrate some specific local act which created the

cause of action. There is no precise Texas precedent,

but we now decide that if Texas has to decide this case,

it would hold it to be sufficient that the claim in the

complaint arose from Fortuna’s general endeavors in

Texas.

An additional state law point remains to be con-

sidered. Texas requires that the assumption of

jurisdiction must not offend traditional notions of fair

F

play. This analysis considers activity in the state.

relative convenience of the parties, benefits and

protection of state law extended to the non-resident,

and basic equities. These factors have been discussed

in some detail above, and that discussion is apropos

here. Fortuna placed its facing enterprise as close to

El Paso as it conveniently could so it could earn

money from patrons who lived, worked, and visited

there. It availed itself of Texas businesses, news-

papers, radio and television stations, and other media

to attract Texans to its race track. As we have also

observed, the tort allegedly committed caused damage

in Texas to one of her residents. El Paso is the site of

the United States District Court closest to Fortuna’s

place of business. Her president and the official who

allegedly committed the tort both live in El Paso. No

traditional notion of fair play is offended by requiring

Fortuna to defend this suit in Texas. Because Fortuna

has availed itself of the benefits and protection of Tex-

as law extended to itself, its patrons and performers,

the basic equities favor the maintenance of jurisdic-

tion in the El Paso District Court.

II. Federal Due Process

Finally, we must give attention to Fortuna’s secon-

dary position that the maintenance of jurisdiction

here will offend federal due process. Fortuna’s conten-

tion has two parts. The first is that the contacts were

insufficient to meet minimum standards. This has

been completely discussed above as to a general doing

of business. Our court has also approved the special

statutory definition covering a single tort. Jetco Elec-

tronic Industries, Inc. v. Gardiner, supra; see also

Product Promotions, Inc. v. Cousteau, supra. The sec-

9a

ond is whether the cause of action asserted must arise

from Fortufia’s contacts with Texas. The factual

answer to this second point has also been set out above

in the course of discussing both the broad and the

narrow state law standards for doing business. The

Supreme Court has recently supplied a legal answer

as well. In National Geographic Society v. California

Board of Equalization, ___ U.S., 97 S.Ct. 1386, 51

L.Ed.2d 631 (1977), the Court held a District of Colum-

bia non-profit corporation liable for collection of

California use tax on mail-order sales made from the

District of Columbia. The ruling was bottomed on the

concept of doing business in California. The business

done by the Society consisted of the maintenance of

two offices which did nothing but solicit advertising

for the Society’s magazine. They played no part what-

soever in mail-order sales. The Court expressly re-

jected the claim that federal constitutional due

process required a connection between the California

activity and the matter regulatable by California

statute. The Court stated:

[T]he relevant constitutional test to establish

the requisite nexus for requiring an out-of-

state seller to collect and pay the use tax is not

whether the duty to collect the use tax relates

to the seller’s activities carried on within the

State, but simply whether the facts

demonstrate “some definite link, some

minimum connection, between [the State and]

the person .. it seeks to tax.” Miller Bros. v.

Maryland, supra, 347 U.S. 340, at 344-345, 74

S.Ct. 535, at 539, 98 L.Ed. 744. (Emphasis add-

ed.) Here the Society’s wo offices, without

regard to the nature of their activities, had the

r ee ee ee SESE ee Oe ae

10a

advantage of the same municipal services —

fire and police protection, and the like — as

they would have had if their activities. . in-

cluded assistance to the mail order operations

that generated the use taxes.

Id. at, 97 S.Ct. at 1393. The National Geographic

holding that federal due process is not offended when a

state imposes a use tax that is unrelated to the ac-

tivities of the non-resident within the state is

applicable here. If a “minimum connection” is all that

need be shown to exert the state’s power to tax, a for-

tiori, a non-resident may be required to defend an ac-

tion in state court even though the suit bears no rela-

tion to the activities deemed necessary and sufficient

to constitute minimum contacts. It is more than

enough to satisfy federal constitutional due process,

in the case at bar, to establish that Fortuna’s fortunes

were continuously and intimately linked with El Paso.

National Geographic confirms the conclusions

reached by this circuit in Jetco Electronic Industries,

Inc. v. Gardiner, supra. The Texas long arm statute

was held properly to embrace a defendant who com-

mitted a tort in the state, since the defendant's other

activities within the forum, even though wholly un-

related to the suit, satisfy the minimum contacts re-

quirement.” Id.. 473 F. ad at 1234. See also 4 C. Wright &

A. Miller. supra. § 1069 at 261.

The judgment dismissing the action for lack of per-

sonal jurisdiction is reversed and the cause is remand-

ed for further proceedings not inconsistent with this

opinion.

REVERSED AND REMANDED.

11

APPENDIX B

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 75-3306

EDDIE WILKERSON,

Plaintiff-Appellant, *

versus

FORTUNA CORPORATION;

Defendant-Appellee.

Appeal from the United States District Court for the

Western District of Texas

ON PETITION FOR REHEARING

(July 26, 1977)

Before WISDOM, CLARK and RONEY, Circuit

Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing filed

in the above entitled and numbered cause be and the

same is hereby DENIED.

> r — —

— ae — — — ———

12a

ENTERED FOR THE COURT:

/s/ CHARLES CLARK

United States Circuit Judge

(Filed: Jul. 26, 1977]

APPENDIX C

Art. 2031b. Service of process upon foreign cor-

porations and nonresidents

Failure to appoint agent; designation of Secretary of

State as lawful attorney

Section 1. When any foreign corporation, associa-

tion, joint stock company, partnership, or non-

resident natural person required by any Statute of this

State to designate or maintain a resident agent, or any

such corporation, association, joint stock company,

partnership, or non-resident natural person subject to

Section 3 of this Act, has not appointed or maintained

a designated agent, upon whom service of processcan

be made, or has one or more resident agents and two (2)

unsuccessful attempts have been made on different

business days to serve process upon each of its

designated agents, such corporation, association,

joint stock company, partnership, or non-resident

natural person shall be conclusively presumed to

have designated the Secretary of State of Texas as

their true and lawful attorney upon whom service of

process or complaint may be made.

13a

Engaging in business in state; service upon

person in charge of business

Sec. 2. When any foreign corporation, association,

joint stock company, partnership, or non-resident

natural person, though not required by any Statute of

this State to designate or maintain an agent, shall

engage in business in this State, in any action in which

such corporation, joint stock company, association,

partnership, or non-resident natural person is a party

or is to be made a party arising out of such business,

service may be made by serving a copy of the process

with the person who, at the time of the servite, is in

charge of any business in which the defendant or

defendants are engaged in this State, provided a copy

of such process, together with notice of such service

upon such person in charge of such business shall

forthwith be sent to the defendant or to the defendants

principal place of business by registered mail, return

receipt requested.

Act of engaging in business in state as

equivalent to appointment of Secretary of

State as agent

Sec. 3. Any foreign corporation, association, joint

stock company, partnership, or non-resident natural

person that engages in business in this State.

irrespective of any Statute or law respecting designa-

tion or maintenance of resident agents, and does not

maintain a place of regular business in this State or a

designated agent upon whom service may be made

upon causes of action arising out of such business

done in this State, the act or acts of engaging in such

business within this State shall be deemed equivalent

14a

to an appointment by such foreign corporation, joint

stock company. association, partnership, or non-

resident natural person of the Secretary of State of

- Texas as agent upon whom service of process may be

made in any action, suit or proceedings arising out of

such business done in this State, wherein such cor-

poration, joint stock company, association, partner-

ship, or non-resident natural person is a party or is to

be made a party.

Doing business in state; definition

Sec. 4. For the purpose of this Act, and without

including other acts that may constitute doing busi-

ness, any foreign corporation, joint stock company,

association, partnership, or non-resident natural per-

son shall be deemed doing business in this State by

entering into contract by mail or otherwise with a resi-

dent of Texas to be performed in whole or in part by

either party in this State, orthe committing of any tort

in whole or in part in this State.

Delivery of process to Secretary of State;

forwarding copy

Sec. 5. Whenever process against a foreign cor-

poration, joint stock company, association, partner-

ship, or non-resident natural person is made by

delivering to the Secretary of State duplicate copies of

such process, the Secretary of State shall require a

statement of the name and address of the home or

home office of the non-resident. Upon receipt of such

process, the Secretary of State shall forthwith forward

to the defendant a copy of the process by registered

mail, return receipt requested.

15a

Non-residency after accrual of cause of action;

service upon Secretary of State

Sec. 6. When any corporation, association, joint

stock company, partnership or natural person

becomes a non-resident of Texas, as that term is com-

monly used, after a cause of action shall arise in this

State, but prior to the time the cause of action is

matured by suit in a court of competent jurisdiction in

this State, when such corporation, association, joint

stock company, partnership or natural person is not

required to appoint a service agent in this State, such

corporation, association, joint stock company,

partnership or natural person may be served with

citation by serving a copy of the process upon the

Secretary of State of Texas, who shall be conclusively

presumed to be the true and lawful attorney to receive

service of process; provided that the Secretary of State

shall forward a copy of such service to the person in

charge of such business or an officer of such company,

or to such natural person by certified or registered

mail, return receipt requested.

Cumulative effect of act

Sec. 7. Nothing herein contained shall be con-

strued as repealing any statute in force in this State in

reference to service of process, but this Act shall be

cumulative of all existing statutes. Acts 1959, 56th

Leg., p. 85, ch. 43.

16a

APPENDIX D

U-ANCHOR ADVERTISING, INC.

V.

N. H. BURT, d/b/a Granot Lodge

No. B-6516

From Potter County, Seventh District.

Writ of error granted April 20, 1977. (20 Tex. Sup. Ct.

Jour. 277) (Opinion of CCA, 544 S. W. 2d 500).

Judgments of the courts below are affirmed. (Opin-

ion by Justice Steakley.)

For Petitioner: Hal Miner, Amarillo, Texas.

For Respondent: Kennetl . Back, Aniarillo, Tex-

as.

This is a suit for breach of contract. It was instituted

in the 47th District Court of Potter County, Texas by U-

Anchor Advertising, Inc., Petitioner, against N. H.

Burt, doing business as Granot Lodge, Respondent. U-

Anchor is a Texas corporation domiciled in Amarillo,

Potter County, Texas. Burt is a resident of Clinton,

Custer County, Oklahoma. Citation was served upon

the Secretary of State of Texas as the presumed agent

of Burt for service of process pursuant to Article

2031b, TEX. REV. CIV. STAT. ANN., the Texas long-

arm” statute. Burt entered a special appearance to

contest the jurisdiction of the Texas court pursuant to

Rule 120a of the Texas Rules of Civil Procedure. The

trial court sustained Burt’s Motion to the Juris-

17a

diction, and this was affirmed by the Court of Civil

Appeals. It was the view of the court that while Burt

was unquestionably doing business in Texas within

the terms of Article 2031b, his contacts with Texas fell

short of the requirements of due process. 544 S. W. 2d

500. We affirm the judgment of the Court of Civil

Appeals.

Certain additional facts bearing upon the question

of jurisdiction appear undisputed. The written con-

tract upon which suit was brought was executed by the

parties in Clinton, Oklahoma. It resulted from

solicitation by a salesman for U-Anchor who signed

the contract for U-Anchor. The contract called for U-

Anchor to place five advertising displays for Burt at

various Oklahoma highway locations for a period of

36 months. Burt agreed to pay U-Anchor $80 monthly

at its office in Amarillo, Potter County, Texas. U-

Anchor constructed the signs in Amarillo and erected

them at the Oklahoma locations. Burt mailed six and

perhaps seven monthly payment checks to U-Anchor

at its office in Amarillo, but he had no other contacts

with Texas.

The controlling provisions of Sections 3 and 4 of Ar-

ticle 2031b are as follows:

Sec. 3. Any ... non-resident natural person that

engages in business in this State, irrespective of any

Statute or law respecting designation or mainte-

nance of resident agents, and does not maintain a

place of regular business in this State or a designated

agent upon whom service may be made upon causes of

action arising out of such business done in this State,

the act or acts of engaging in such business within this

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State shall be deemed equivalent to an appointment by

such... non-resident natural person of the Secretary

of State of Texas as agent upon whom service of

process may be made in any action, suit or pro-

ceedings arising out of such business done in this

State, wherein such. . . non-resident natural person is

a party or is to be made a party.

Sec. 4. For the purpose of this Act, and without

including other acts that may constitute doing busi-

ness, any ... non-resident natural person shall be

deemed doing business in this State by entering into

contracts by mail or otherwise with a resident of Tex-

as to be performed in whole or in part by either party in

this State. . (Italics are added for emphasis).

Article 2031b provides that a non-resident entering

into a contract with a Texas resident performable in

part by either party in Texas shall be deemed to be do-

ing business in Texas. The contract in question

obligated Burt to perform his payment obligations at

the office of U-Anchor in Amarillo, Texas, and thus he

was “doing business” in Texas within the meaning of

the statute. We agree that in this respect, as well as

with respect to “other acts that may constitute doing

business,” Article 2031b reaches as far as the federal

constitutional requirements of due process will per-

mit. We let stand the statement in Hoppenfeld v. Crook,

498 S. W. 2d 52 (Tex. Civ. App. — Austin 1973, writ ref d

n.r.e.) “that the reach of Art. 2031b is limited only by

the United States Constitution.” See also National

Truckers Service, Inc. v. Aero Systems, Inc., 480

S. W. 2d 455 (Tex. Civ. App. — Fort Worth 1972, writ

19a

ref d n.r.e.).1 The federal courts have similarly con-

strued Article 2031b. See Product Promotions, Inc. v.

Cousteau, 495 F. 2d 483 (5th Cir. 1974), and the cases

there cited. Furthermore, such a construction is

desirable in that it allows the courts to focus on the

constitutional limitations of due process rather than

to engage in technical and abstruse attempts to con-

sistently define doing business. See Thode, In Per-

sonam Jurisdiction; Article 2031b, the Texas Long

Arm” Jurisdiction Statute; and the Appearance to

Challenge Jurisdiction in Texas and Elsewhere, 42

TEX. L. REV. 279, 307 (1964).

The question, then, becomes one of due process. In

Cousteau, supra, the Fifth Circuit concluded that the

relevant federal decisions established a dual test for

determining whether a court may exercise its juris-

diction without depriving a non-resident defendant of

due process of law: “First, ‘there must be some

minimum contact with the state which results from an

affirmative act of the defendant.’ Secondly, ‘it must be

fair and reasonable to require the defendant to come

into the state and defend the action.’ Cousteau, supra,

at 494. See also Jetco Electronic Industries, Inc. v. Gar-

diner, 473 F.2d 1228 (5th Cir. 1973); 2 J. MOORE,

MOORE’S FEDERAL PRACTICE 14.25 [5] (1975). In

O’Brien v. Lanpar Company, 399 S. W. 2d 340 (Tex.

1 It may be noted that in 1975 Rule 108 of the Texas Rules of Civil

Procedure was amended to add the words shown in italics:

A defendant served with such notice shall be required to

appear and answer in the same manner and time and under

the same penalty as if he had been personally served with

citation within the State to the full extent that he may be ro-

quired to appear and answer under the Constitution of the

United States in an action either in rem or in personam.

We stated that the purpose of the amendment is to permit acquisi-

tion of in personam jurisdiction to the constitutional limits.

1966), this Court recognized the following statement of

the three basic elements that must exist to sustain

jurisdiction over a non-resident:

(1) The nonresident defendant or foreign cor-

poration must purposefully do some act or

consummate some transaction in the forum

state; (2) the cause of action must arise from,

or be connected with, such act or transaction;

and (3) the assumption of jurisdiction by the

forum state must not offend traditional

notions of fair play and substantial justice,

consideration being given to the quality,

nature, and extent of the activity in the forum

state, the relative convenience of the parties,

the benefits and protection of the laws of the

forum state afforded the respective parties,

and the basic equities of the situation.

See Tyee Construction Co. v. Dulien Steel Products,

Inc., 62 Wash. 2d 106, 381 P. 2d 245 (1963). It is evident

that U-Anchor’s cause of action against Burt is con-

nected with the contractual obligation assumed by

Burt and partially performable in Texas. However,

Burt must also have purposefully done some act or

consummated some transaction in Texas, and the

assumption of jurisdiction by the Texas courts must

be found not to offend traditional notions of fair play

and substantial justice.

In Hanson v. Denckla, 357 U.S. 235 (1958), the

Supreme Court admonished that it would be “a mis-

take” to assume that the liberal due process standard

enunciated in International Shoe Co. v. Washington,

326 U.S. 310 (1945), “heralds the eventual demise of all

2ia

restrictions on the personal jurisdiction of state

courts,” Hanson, supra, at 251. Explaining the re-

quirements of due process, the Court continued:

The unilateral activity of those who claim

some relationship with a non-resident defen-

dant 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 by 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. [Emphasis added].

Id. at 253. See Shaffer v. Heitner, 45 U.S. L. W. 4849, 4857

(U.S. June 24, 1977). In the instant case the contacts of

Burt with Texas are minimal and fortuitous, and he

cannot be said to have “purposefully” conducted ac-

tivities within the State. Burt’s contacts with Texas

were not grounded on any expectation or necessity of

invoking the benefits and protections of Texas law,

nor were they designed to result in profit from a busi-

ness transaction undertaken in Texas. The contract

was solicited, negotiated, and consummated in

Oklahoma, and Burt did nothing to indicate or to sup-

port an inference of any purpose to exercise the

privilege of doing business in Texas. Simply stated,

Burt was a passive customer of a Texas corporation

who neither sought, initiated, nor profited from his

single and fortuitous contact with Texas.

Furthermore, in the instant case the exercise of

jurisdiction by Texas courts would offend traditional

notions of fair play and substantial justice. As noted

above, the only contact of Burt with Texas consisted of

his execution of a contract stipulating that certain

payments were to be made in Amarillo and his remit-

tance of several payments to U-Anchor in Amarillo.

Thus the quality, nature, and extent of Burt’s activity

in Texas is minimal. Indeed, it can be said that Burt

has engaged in no “activity” in Texas, his only ac-

tivity” being the preparation and mailing of checks

from his place of business in Oklahoma. Resolution of

the question of the relative convenience of the parties

results in a stalemate since it is no doubt more con-

venient to each party to litigate in his home state.

However, since the contract was solicited, negotiated,

and consummated in Oklahoma, Burt might reason-

ably expect its enforcement to be governed by

Oklahoma law. Considering the basic equities and

circumstances of the case, we hold that Burt would not

be accorded due process of law if required to defend the

suit of U-Anchor in Texas. See Hoppenfeld v. Crook,

supra: Sun-X International Company v. Witt, 413

S. W. 2d 761 (Tex. Civ. App. — Texarkana 1967, writ

ref'd n. r. e.).

Numerous decisions of the Texas courts of civil

appeals hold that on the facts there presented the non-

resident defendant would not be denied due process by

being subjected to suit in Texas. With one exception.

those cases are distinguishable on their facts. For ex-

ample, in National Truckers Service, Ino. v. Aero Sys-

tems, Inc., 480 S. W. 2d 455 (Tex. Civ. App. — Fort

Worth 1972, writ ref'dn.r.e.), the defendant had been do-

ing business in Texas through its subsidiary, Tran-

systems, Inc. When the subsidiary became delinquent

on its accounts, Aero agreed to guarantee the debts of

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Transystems, executed a guaranty agreement, and

mailed it to National Truckers Service in Fort Worth.

In reliance on this guaranty agreement. National

Truckers continued to extend credit to Transystems.

The guaranty agreement provided that payment

would be made in Fort Worth and that the guaranty

itself was performable at Fort Worth. Subsequently

Transystems became delinquent on its accounts, and

National Truckers filed suit in Texas to enforce the

guaranty agreement. The Court of Civil Appeals held

the contacts of Aero with Texas were sufficient to

justify the assertion of in personam jurisdiction by the

Texas courts, and we found no reversible error in that

holding. Of significance in that case was the fact that

Aero voluntarily and purposefully agreed to

guarantee the Texas debts of its Texas subsidiary.

Aero should reasonably have expected to face suit in

the Texas courts in the event its subsidiary defaulted

on its obligations. .

In Uvalde Rock Asphalt Company v. Consolidated

Carpet Corporation, 457 S. W. 2d 649 (Tex. Civ. App. —

Beaumont 1970, writ ref'd n.r.e.), the contract forming

the basis of the business relationship was solicited in

Arizona by a Texas manufacturer. All debts were

payable in San Antonio, Texas. Pursuant to the con-

tract, the Arizona wholesaler placed several orders

with the Texas manufacturer. The goods were

delivered F. O. B. Houston, and on some orders the

Arizona wholesaler requested delivery to Texas

retailers. The Court of Civil Appeals concluded that

the activity of the Arizona wholesaler was calculated

to extract profits from markets in Texas. This factor,

coupled with the additional contacts enumerated

above, was sufficient to supply the “minimum con-

tacts” demanded by due process.

Estes Packing Company v. Kadish and Milman Beef

Co., 530 S. W. 2d 622 (Tex. Civ. App. — Fort Worth 1975,

no writ), did not reach this Court. In that case a

Chicago broker ordered beef from a Fort Worth pack-

ing company and resold it to a Massachusetts corpora-

tion. The broker sent both parties written confirma-

tions of sale giving shipping instructions stating the

beef was to be delivered by truck to the defendant's

plant in Boston. The shipper was an independent con-

tractor unrelated to either the Texas seller or the

Boston buyer. The shipment was accompanied by an

invoice stating the meat was offered for sale at the

prices quoted on the invoice. The invoice also provid-

ed “All Bills Payable in Fort Worth.” Kadish sent a

check to Estes covering a portion of the shipment and

noted on the back of the check that it was in full pay-

ment of all debts of Kadish to Estes. Estes refused to

accept the check with that notation and subsequently

filed suit. The Court of Civil Appeals concluded that

these facts established the existence of a contract

between Kadish and Estes. Further, the court held that

due process would not be violated by the exercise of

jurisdiction over Kadish even though Kadish’s only

contact with Texas was the remittance of one check to

the Texas seller. This holding conflicts with our/hold-

ing in the instant case and is disapproved.

The facts of this case bring it within the literal reach

of Art. 2031b, but, as detailed above, the due process

clause of the Fourteenth Amendment prohibits Texas

courts from exercising jurisdiction over Burt in asuit

arising out of his contract with U-Anchor. The nature

and extent of the contacts of a non-resident with the

forum state determine whether or not the forum may

exercise in personam jurisdiction over the non-

7

resident, but the infinite variety of such contacts and

the vagueness of the constitutional standard render a

more definitive articulation of due process re-

quirements impossible. As noted in Cousteau, supra,

no one formulation of the constitutional test could

possibly encompass all the potentially important fac-

tors, nor could a formula perform the crucial task of

weighing and balancing the relevant considerations.

Narrow factual distinctions will often suffice to swing

the due process pendulum. Here, as elsewhere, impor-

tant constitutional questions prove immune to solu-

tion by checklist. See Annot., 20 A.L.R. 3rd 1201 (1968);

Thode, supra; Kurland, The Supreme Court, the Due

Process Clause and the In Personam Jurisdiction of

State Courts — From Penoyer to Denckla: A Review,

25 U. CHI. L. REV. 569 (1958); Comment, The Texas

Long-Arm Statute, Article 2031b: A New Process Is

Due, 30 SW. L. J. 747 (1976); Comment, Long-Arm and

Quasi in Rem Jurisdiction and the Fundamenta! Test

of Fairness, 69 U. MICH. L. REV. 300 (1970); Note, 34 U.

LA. L. REV. 691 (1974).

The judgment of the Court of Civil Appeals is af-

firmed.

ZOLLIE STEAKLEY

Justice

Opinion delivered July 13, 1977.