Latshaw v. Johnston

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

______________________________________

No. 97-21019
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TRENT B. LATSHAW; LATSHAW
DRILLING AND EXPLORATION CO.,

Plaintiffs-Appellants,

versus

H.E. “SONNY” JOHNSTON; FELICIANA SAND
AND GRAVEL COMPANY INC.,
Defendants-Appellees.
_____________________________________________

Appeal from the United States District Court
for the Southern District of Texas
_____________________________________________
February 5, 1999

Before DAVIS, SMITH, and WIENER, Circuit Judges.

WIENER, Circuit Judge.

Plaintiffs-Appellants Trent B. Latshaw and Latshaw Drilling

and Exploration Company (“Latshaw Drilling”) appeal the district

court’s dismissal of their breach of oral partnership/breach of

oral joint venture agreement claim against Defendants-Appellees

Henry E. Johnston and Feliciana Sand and Gravel Company, Inc.

(“Feliciana”) for lack of personal jurisdiction. Concluding that

the plaintiffs have established a prima facie showing of personal

jurisdiction sufficient to avoid dismissal without a hearing, we

reverse and remand.
2
 I.

FACTS AND PROCEEDINGS

This case involves claims by Latshaw and Latshaw Drilling that

Johnston and Feliciana breached an alleged oral partnership/joint

venture agreement for the joint purchase and sale of oil drilling

equipment. Latshaw is a Texas resident and the president and owner

of Latshaw Drilling, a Texas corporation. Johnston is a Louisiana

resident and the president and principal stockholder of Feliciana,

a Louisiana corporation.

Latshaw alleges that he first met Johnston in 1986 at an

auction in Beaumont, Texas. After this first encounter, Latshaw

sent a letter to Johnston outlining his (Latshaw’s) background in

the oil and gas industry and setting forth his view that it was a

propitious time to purchase drilling rigs and equipment at

depressed prices, which could later be resold at a significant

profit. It was from this letter, claims Latshaw, that an ongoing,

nearly decade-long business relationship arose between the two men.

Under this alleged arrangement, Latshaw searched for drilling

rigs to buy. Latshaw assumed responsibility for all costs incurred

in doing so, and Johnston financed the purchases. When they resold

the rigs, Johnston was reimbursed for the cost of purchase plus

interest before any profits were distributed to Latshaw. Latshaw

and Johnston then split any remaining profit, 60% to Johnston and

40% to Latshaw. Although Latshaw wrote to Johnston in June 1993

proposing that they sign a written contract memorializing this

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60%/40% arrangement (the “June 1993 Partnership Proposal”), they

never did so. Nevertheless, according to Latshaw, the two men

jointly purchased in the names of Latshaw (or Latshaw’s company) or

Johnston (or Johnston’s company) six complete drilling rigs for a

total price of $2.26 million. They additionally purchased other

types of petroleum-related equipment valued at $500,000.

The break in the relationship, asserts Latshaw, stemmed from

a deal involving two drilling rigs that were eventually sold to a

purchaser from China (the “China Rigs”). In 1993, Latshaw began

negotiations to sell to the Chinese purchaser two rigs that he and

Johnston had previously purchased. Johnston became uncomfortable

with the terms and conditions of the sale and the complexity of an

international transaction. As a result, Latshaw was forced to

carry on the negotiations and to bear the financial responsibility

of re-rigging and refurbishing the rigs without Johnston’s

financial support. In February 1994, after the “arrangements

became more solid,” Latshaw and Johnston entered into a written

agreement (the “February Agreement”) that provided for Johnston to

receive $2,550,000 for the sale of the China Rigs. Although the

February Agreement stated that Johnston (the “Seller”) was the

“sole owner” of the China Rigs, Latshaw alleges that the break in

the relationship began when Johnston refused to pay Latshaw the 40%

of the profit to which he was entitled from the sale of the rigs.

Latshaw further alleges that Johnston refused to pay him his 40% of

the profit generated by the sale of other rigs and equipment.

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 In May 1997, Latshaw brought the present suit against Johnston

in federal district court in Texas, asserting claims for breach of

contract and breach of fiduciary duty as partner or joint venturer

or both. Johnston filed a motion to dismiss for lack of personal

jurisdiction. In support of his motion, Johnston submitted an

affidavit averring that (1) he and Feliciana do not transact

business or advertise in Texas; (2) Feliciana is not licensed to do

business in Texas; (3) although he, individually, was in the

business of buying and selling oil field equipment and he paid

Latshaw and Latshaw Drilling a commission ($88,600) for Latshaw’s

services in facilitating a sale of a single oil drilling rig, he

never entered into a partnership or joint venture with Latshaw; and

(4) he had only minimal contacts with Texas after his chance

encounter with Latshaw at the 1986 auction in Texas. More

specifically, Johnston asserted in the affidavit that he or

Feliciana alone (and not Latshaw or Latshaw Drilling) bought all

six rigs and that they did not buy any of the rigs from Texas. He

further averred that, although he did deliver the two China Rigs to

Texas “in accordance with Latshaw’s instructions” in the February

Agreement, he made only two other trips to Texas after the 1986

auction, both of which were to attend equipment auctions.

In response, Latshaw submitted a counter-affidavit based on

his business diary, stating that Johnston had made 26 trips to

Texas related to their alleged business arrangement, including

trips to attend oil field equipment auctions, to inspect equipment

5
for potential purchase, and to purchase equipment. Latshaw further

asserted in the affidavit that Johnston had made at least 37 calls

to Latshaw in Texas related to their alleged business arrangement.

Although the district court did not hold an evidentiary

hearing under Federal Rule of Civil Procedure 12, it granted

Johnston’s motion to dismiss. Latshaw timely filed this appeal.

II.

ANALYSIS

A. Standard of Review

We review de novo a district court’s grant of a motion to

dismiss for lack of personal jurisdiction.1

B. Applicable Law

When a court rules on a motion to dismiss for lack of personal

jurisdiction without holding an evidentiary hearing, it must accept

as true the uncontroverted allegations in the complaint and resolve

in favor of the plaintiff any factual conflicts posed by the

affidavits.2 Therefore, in a no-hearing situation, a plaintiff

1
Jobe v. ATR Mktg., Inc., 87 F.3d 751, 753 (5th Cir. 1996).
2
See Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir.
1993); Command-Aire v. Ontario Mechanical Sales & Service, 963 F.2d
90, 93 (5th Cir. 1992); Bullion v. Gillespie, 895 F.2d 213, 217
(5th Cir. 1990) ("[O]n a motion to dismiss for lack of
jurisdiction, uncontroverted allegations in the plaintiff's
complaint must be taken as true, and conflicts between the facts
contained in the parties' affidavits must be resolved in the
plaintiff's favor for purposes of determining whether a prima facie
case for personal jurisdiction exists.") (quoting D.J. Investments,
Inc. v. Metzler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542,
546 (5th Cir. 1985)).

6
satisfies his burden by presenting a prima facie case for personal

jurisdiction.3

A federal district court sitting in diversity may exercise

personal jurisdiction over a nonresident defendant if (1) the

long-arm statute of the forum state confers personal jurisdiction

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

forum state is consistent with due process under the United States

Constitution.4 As the Texas long-arm statute5 extends to the limits

of federal due process, these two steps conflate.6

The Due Process Clause of the Fourteenth Amendment permits the

exercise of personal jurisdiction over a nonresident defendant when

(1) that defendant has purposefully availed himself of the benefits

and protections of the forum state by establishing "minimum

contacts" with the forum state; and (2) the exercise of

jurisdiction over that defendant does not offend “traditional

notions of fair play and substantial justice.”7 To comport with

due process, the defendant’s conduct in connection with the forum

state must be such that he “should reasonably anticipate being

3
Bullion, 895 F.2d at 217.
4
See, e.g., Ham, 4 F.3d at 415; Irving v. Owens-Corning
Fiberglas Corp., 864 F.2d 383, 385 (5th Cir. 1989).
5
Tex. Civ. Prac. & Rem. Code §§ 17.041-045 (Vernon 1986).
6
Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990); Ham,
4 F.3d at 415 & n.7.
7
International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945).

7
haled into court” in the forum state.8

As Latshaw alleges that his suit arises from or relates to the

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

“specific jurisdiction.”9 Although a single act by the defendant

directed at the forum state can be enough to confer personal

jurisdiction if that act gives rise to the claim being asserted,10

entering into a contract with an out-of-state party, without more,

is not sufficient to establish minimum contacts.11 Rather, in a

breach of contract case, to determine whether a party purposefully

availed itself of a forum, a court must evaluate "prior

negotiations and contemplated future consequences, along with the

terms of the contract and the parties’ actual course of

dealing....”12

C. Merits

Latshaw argues that the district court incorrectly accepted

Johnston’s averments as true for the purposes of determining

whether personal jurisdiction could be exercised over Johnston; and

that he (Latshaw) has presented more than sufficient evidence to

8
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
(1980).
9
See Burger King, 471 U.S. at 486; Bearry v. Beech Aircraft
Corp., 818 F.2d 370, 374 (5th Cir. 1987).
10
Ham, 4 F.3d at 415-16; Dalton v. R & W Marine, Inc., 897 F.2d
1359, 1361 (5th Cir. 1990).
11
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478-79 (1985).
12
Id. at 479.

8
establish a prima facie case for jurisdiction. Specifically,

Latshaw points to (1) his diary entries indicating that Johnston

made 26 trips to Texas between 1986 and 1993, including trips to

inspect, bid on at auction or purchase oil field equipment, to sign

the sales agreement on the China Rig deal, and to deliver the China

Rigs to Latshaw in Houston; (2) evidence that on “more than 24

occasions” Latshaw and Johnston bought and sold equipment located

in Texas; and (3) his diary entries that Johnston made at least 37

phone calls to Latshaw regarding their business together.

Latshaw additionally adverts to an incident in connection with

the sale of the China Rigs to demonstrate Johnston’s ready

willingness to resort to the court system in the very state that he

now claims has no jurisdiction over him. The February Agreement

provided that the China Rigs were to be held and refurbished at the

Roberds Johnson Industries yard in Houston and that they would not

be moved from the yard onto the ship chartered by the Chinese party

until Johnston had received the amount he was owed from the deal.

Latshaw states that when he was forced to move the rigs prematurely

because the city no longer permitted sandblasting and painting to

take place within the city limits, and Johnston learned the rigs

had been moved, Johnston hired a Houston law firm, which threatened

Latshaw that it was going to file an injunction in Houston to

prevent the loading of the rigs onto the ship chartered by the

Chinese party. Latshaw asserts that, even though no such

injunction was ever filed, the incident and the above-listed

9
contacts clearly demonstrate that Johnston purposefully availed

himself of the benefits and protections of Texas law and could

reasonably anticipate being haled into Texas court as a result of

these contacts.

Johnston’s response is two-fold. First, he asserts that the

vast majority of the contacts on which Latshaw relies are not

relevant to the personal jurisdiction inquiry because, as Latshaw’s

offer, and Johnston’s rejection of, the June 1993 Partnership

Proposal establish, there was no partnership or joint venture

agreement between the two businessmen prior to June 1993. Second,

Johnston asserts that the only contacts that Latshaw alleges to

have occurred after Johnston rejected the June 1993 Partnership

Proposal —— (1) a February 1994 trip to Texas to sign the China

Rigs sales agreement; (2) a separate February 1994 trip to deliver

a mud pump also connected to the China Rigs; and (3) a March 1994

trip to “look over” the China Rigs13 —— were initiated by Latshaw

and thus cannot serve as the basis for subjecting Johnston to the

jurisdiction of courts located in Texas.14

Johnston cites Hydrokinetics, Inc. v. Alaska Mechanical,

13
As we reject Johnston’s proposed dissection of the relevant
contacts, we need not and therefore do not address whether these
three contacts alone are sufficient to constitute a prima facie
case of personal jurisdiction.
14
Hanson v. Denkla, 357 U.S. 235, 253 (1958) (“The unilateral
activity of those who claim some relationship with a nonresident
defendant cannot satisfy the requirement of contact with the forum
state.”).

10
Inc.,15 in support of his argument that Latshaw’s allegations, when

so parsed (i.e., assuming no joint venture agreement prior to June

1993), are insufficient to establish jurisdiction over Johnston.

In Hydrokinetics, a Texas resident brought a breach of contract

suit against an Alaskan defendant.16 We held that, although the

defendant negotiated a contract by phone and telefax with a Texas

company, traveled to Texas to “close” the deal, and agreed to

purchase goods manufactured in Texas, there was no personal

jurisdiction over the Alaskan defendant because (1) the defendant’s

only contacts with the state were related to a single transaction;

(2) the plaintiff had initiated this single transaction contacting

the defendant in Alaska; (3) the agreement’s choice-of-law

provision specified Alaskan law; and (4) the plaintiff delivered

the goods it produced under the contract to the defendant in

Seattle, Washington.17 Johnston asserts that, as in Hydrokinetics,

Latshaw initiated the alleged agreement by sending a letter to

Johnston in Louisiana; the February 1994 Agreement was governed by

Louisiana law; and Johnston never purchased any rigs in Texas.

Johnston’s reliance Hydrokinetics is misplaced. His argument

founders on the simple fact that, at the this stage of a no-

evidentiary-hearing situation, we are constrained to accept

15
700 F.2d 1026 (5th Cir. 1983).
16
Id. at 1028.
17
Id. at 1028-29.

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Latshaw’s allegation that the two men had entered into an oral

partnership/joint venture agreement prior to June 1993 and that all

of the alleged trips, phone calls, sales, and purchases in

furtherance of that agreement took place.18 With this assumption,

it is clear that Latshaw’s allegations are both distinguishable

from those in Hydrokinetics and sufficient to establish a prima

facie case of specific personal jurisdiction over Johnston.

In Hydrokinetics, the defendant had no more than a fortuitous

connection to Texas related to a single transaction, initiated by

the Texas plaintiff, and carried out in large part outside the

Texas state boundaries. Johnston, by contrast, was much more than

a one-shot purchaser of Texas goods whose only connection with the

state grew out of a Texas manufacturer’s marketing efforts.

Rather, according to Latshaw’s complaint and affidavit, Johnston

entered into an ongoing business relationship with a Texas resident

(and his company) and made multiple trips and phone calls to Texas

18
Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415,
418 (5th Cir. 1993) (“When alleged jurisdictional facts are
disputed, we must resolve all conflicts in favor of the party
seeking to invoke the court’s jurisdiction.”); Bullion, 895 F.2d
at 217 (“While deposition testimony or evidence adduced at a
hearing or at trial might mandate a different conclusion, for
purposes of this appeal we must accept as true [plaintiff’s factual
assertions supporting jurisdiction].”); Associated Bus. Tele. Sys.
Corp. v. Danihels, 829 F. Supp. 707, 711 n.1 (D.N.J. 1993)
(“Although the existence of this contract is disputed, where a
jurisdictional issue cannot be decided without ruling on the
merits, the case must proceed to trial.”) (citing Wade v. Rogala,
270 F.2d 280, 285 (3d Cir. 1959)).

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in furtherance of that relationship.19 When, as we must at this

point, we accept Latshaw’s allegations as true, we find that

Johnston has purposefully availed himself of the benefits and

protections of doing business in Texas and could reasonably

anticipate being haled into court there. As such, Latshaw has

stated a prima facie case for personal jurisdiction.20

III.

CONCLUSION

For the foregoing reasons, we REVERSE and REMAND for

proceedings consistent with this opinion.

19
See Polythane Sys., Inc. v. Marina Ventures Int’l, Ltd., 993
F.2d 1201, 1206 (5th Cir. 1993) (“The parties had an ongoing
business relationship, and the [nonresident defendant’s] contacts
with the forum state were not fortuitous.”); cf. Trinity Indus.,
Inc. v. Myers & Assocs., Ltd., 41 F.3d 229, 231 (5th Cir. 1995)
(holding attorneys subject to personal jurisdiction when they had
“deliberately availed themselves of benefits of ongoing
relationship” with Texas client); Bullion, 895 F.2d at 217
(specific jurisdiction over nonresident doctor when forum state
patient had ongoing relationship with doctor and treatment occurred
partly in forum state).
20
Such a determination does not, of course, preclude the
district court from conducting hearing on remand regarding the
jurisdictional issue. Bullion, 895 F.2d at 217.

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