# Petition — Fortuna Corp. v. Wilkerson

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2528%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1977
- **Citation:** 434 U.S. 939

## Text

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

18a

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

23a

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2528%3A1. Public record. Not legal advice.