Moncrief Oil International Inc. v. OAO Gazprom

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
March 12, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk

No. 06-10552

MONCRIEF OIL INTERNATIONAL INC.,

Plaintiff-Appellant,

v.

OAO GAZPROM; OAO ZAPSIBGAZPROM; OAO SEVERNEFTEGAZPROM,

Defendants-Appellees.

Appeal from the United States District Court for the
Northern District of Texas, Fort Worth

Before REAVLEY, JOLLY, and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

This is an appeal from the district court’s dismissal of

Plaintiff’s claims against foreign defendants. Because we agree

that personal jurisdiction is lacking as to each defendant, we

affirm.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case arises from a business dispute between a Texas

plaintiff, Moncrief Oil International Inc. (“Moncrief”), and

Russian defendants OAO Gazprom (“Gazprom”), OAO Zapsibgazprom

(“Zapsib”), and OAO Severneftegazprom (“Severn”) (collectively “the
Gazprom defendants”) . The district court dismissed Moncrief’s

complaint for lack of personal jurisdiction, and Moncrief appeals.

Moncrief is a Texas corporation that identifies investments in

unexplored and/or underdeveloped foreign oil and gas projects

around the world. The Gazprom defendants are organized under the

laws of the Russian federation and their principal place of

business is in Moscow, Russia. Gazprom is the majority shareholder

of Zapsib, and wholly owns Severn as a subsidiary.

Zapsib obtained a license from Russian authorities to produce

natural gas from the Yuzhno-Russkoye gas field (the “Y-R Field”) in

1993, and commenced negotiations with Moncrief to work together to

develop the field. Zapsib and Moncrief subsequently entered into

three agreements: the Investment Agreement (1997), Framework

Agreement (1998), and Cooperation Agreement (1998). As part of the

Cooperation Agreement, Zapsib transferred the Y-R license to

Severn, and agreed to provide Moncrief a 20% interest in that

enterprise in exchange for securing financing, providing technical

expertise, and investing $120 million. Additionally, the

Cooperation Agreement provided that all disputes arising out of the

agreement would be subject to mandatory arbitration in Russia

before the International Arbitration Court, and that Russian law

would apply to any disputes.

Shortly after the Cooperation Agreement, Gazprom temporarily

lost control of Zapsib and Severn because of internal fraud. After

Gazprom regained control, Moncrief worked directly with the parent

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company regarding performance of the various agreements in 2000.

Gazprom allegedly assured Moncrief that it would continue working

with them and honor those prior agreements. In 2004, however,

Gazprom announced that it had partnered with German entities to

develop the Y-R field.

Moncrief filed suit in federal court for declaratory relief,

breach of contract, promissory estoppel, and negligent

misrepresentation, with estimated damages of several billion

dollars. The court dismissed the case for lack of personal

jurisdiction. Moncrief appeals. The Gazprom defendants argue that

the district court correctly dismissed the case. In the

alternative, they assert that Moncrief’s claims are subject to a

binding arbitration clause and that the case should be dismissed

under the doctrine of forum non conveniens.

II. STANDARD OF REVIEW

We review a district court’s dismissal for lack of personal

jurisdiction de novo. Central Freight Lines Inc. v. APA Transport

Corp., 322 F.3d 376, 380 (5th Cir. 2003). The district court

denied the Gazprom defendants’ motion to dismiss for mandatory

arbitration and forum non conveniens as moot given its finding as

to the lack of personal jurisdiction, and thus never reached those

issues. This Court may affirm on any ground supported by the

record, however, even if it was not reached by the district court.

See, e.g., United States v. Dow Chem. Co., 343 F.3d 325, 330 (5th

3
Cir. 2003); Pub. Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th

Cir. 2001).

III. DISCUSSION

In order for personal jurisdiction to satisfy Due Process

requirements, a plaintiff must show that (1) the defendant

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 personal jurisdiction over that

defendant does not offend traditional notions of fair play and

substantial justice.” Int’l Shoe Co. v. Wash., 326 U.S. 310, 316

(1945); Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999).1

We find that the Gazprom defendants did not establish minimum

contacts.

A. Minimum Contacts

A plaintiff’s or third party’s unilateral activities cannot

establish minimum contacts between the defendant and forum state.

Hydrokinetics, Inc. v. Alaska Mech., Inc., 700 F.2d 1026, 1028 (5th

Cir. 1983). A single act directed at the forum state can confer

personal jurisdiction so long as that act gives rise to the claim

asserted, but merely contracting with a resident of the forum state

1
The Texas long-arm statute extends personal jurisdiction to
the permissible limits of the Due Process Clause, and so we only
need to determine whether the exercise of personal jurisdiction in
this case would comport with those federal guarantees. Latshaw,
167 F.3d at 211; Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir.
1990).

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does not establish minimum contacts. Latshaw, 167 F.3d at 211;

Hydrokinetics, 700 F.2d at 1028.

An exchange of communications in the course of developing and

carrying out a contract also does not, by itself, constitute the

required purposeful availment of the benefits and protections of

Texas law. Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th

Cir. 1986). Otherwise, jurisdiction could be exercised based only

on the fortuity that one of the parties happens to reside in the

forum state. Id. To avoid that, we evaluate multiple factors in

determining whether a defendant purposefully established minimum

contacts within the forum. Burger King Corp. v. Rudzewicz, 471

U.S. 462, 479 (1985). Random, fortuitous, or attenuated contacts

are not sufficient to establish jurisdiction. Id. at 476. We

consider each of the Gazprom defendants in turn.2

i. Zapsib

Moncrief argues that Zapsib established minimum contacts by

(1) entering into contracts with Moncrief, (2) knowing from the

outset that Moncrief is a Texas resident, (3) acknowledging and

approving of Moncrief’s substantial performance in Texas, and (4)

2
Personal jurisdiction can be of either the general or
specific variety, Mink v. AAAA Develop., LLC, 190 F.3d 333, 336
(5th Cir. 1999), but Moncrief only alleges specific jurisdiction,
meaning that the defendants must have purposefully directed their
activities at residents of the forum, and the litigation results
from alleged injuries arising out of or related to those
activities. See Burger King, 471 U.S. at 472; Bullion, 895 F.2d at
216.

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sending an executive to visit Texas—at Moncrief’s expense—in

furtherance of that performance. The plaintiffs do not dispute

that all the agreements were executed in Russia, with a Russian

corporation, concerning a Russian joint venture, to develop a

Russian gas field. Further, the Cooperation Agreement provided for

arbitration in Russia, under Russian law.

As stated above, merely contracting with a resident of Texas

is not enough to establish minimum contacts. Latshaw, 167 F.3d at

211. Moreover, a plaintiff’s unilateral activities in Texas do not

constitute minimum contacts where the defendant did not perform any

of its obligations in Texas, the contract did not require

performance in Texas, and the contract is centered outside of

Texas. Hydrokinetics, 700 F.2d at 1029. Nevertheless, Moncrief

cites Central Freight Lines, Inc. v. APA Transp. Corp., 322 F.3d

376 (5th Cir. 2003), and Mississippi Interstate Express, Inc. v.

Transpo Inc., 681 F.2d 1003 (5th Cir. 1982), to argue that minimum

contacts exist in a breach of contract case where a nonresident

enters into a contract with a known resident of the forum state, if

it is reasonably foreseeable that the resident will perform a

material part of its obligations in the forum state and thereby

cause business activity in the forum state. See Central Freight,

322 F.3d at 382 (“a nonresident can establish contact with the

forum by taking purposeful and affirmative action, the effect of

which is to cause business activity (foreseeable by the defendant)

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in the forum state”).

Reading that language broadly, Zapsib surely could have

foreseen that Moncrief might perform many of its duties in Texas.

Nevertheless, this argument ultimately fails. As we noted in

Patterson v. Dietze, 764 F.2d 1145, 1147 (5th Cir. 1985), our

finding of jurisdiction in Transpo was supported not only by

foreseeability, but also by the fact that the forum state was

“clearly the hub of the parties’ activities.” 681 F.2d at 1008–09.

That was not true in Patterson, nor in this case, where the parties

negotiated and prepared key elements abroad (Mexico and Russia,

respectively).

Mere foreseeability, standing alone, does not create

jurisdiction. In addition to the hubs of activity lying within the

forum states, Transpo and Central Freight differ from the present

case in other ways, including a plaintiff that only existed within

the forum state, and a defendant actively engaged in the various

activities taking place therein. Transpo, 681 F.2d at 1005, 1009,

1011. In Central Freight, the contract contemplated that the

plaintiff would make shipments from Texas on behalf of third-party

Texas customers. The plaintiff’s Texas location was strategically

advantageous to the defendant and was the basis for the agreement,

see Cent. Freight, 322 F.3d at 382, suggesting that the defendant

had purposefully availed itself of doing business in Texas. In

contrast, Moncrief agreed to perform analysis, without any

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discussion of where it would be done. The contract was silent as

to location. Given the nature of the work, there’s no indication

that the location of the performance mattered, and it is not clear

how performance of that work would “cause business activity.”

Moncrief, though based in Texas, is an international company

engaged in various projects around the world. Moncrief even

established an office in Russia specifically for this relationship.

Perhaps most significantly, the Cooperation Agreement—which

cemented the earlier agreements between the parties—included

clauses calling for mandatory arbitration in Russia, under Russian

law. In Central Freight, this Court gave weight to the absence of

a choice of law provision that might have given the defendant

reason to believe it could not be haled into court in the forum

state. 322 F.3d at 383 (“Although the . . . Agreement apparently

does not contain a forum selection clause, a choice of law clause,

or some other provision that could have put [the defendant] on

specific notice that it might be amenable to suit in Texas, neither

does the Agreement contain any provision that would give [the

defendant] reason to think that it could not be haled into court in

Texas . . . .”).

The arbitration and choice of law clauses found in the

Cooperation Agreement suggest that Gazprom meant for the

undertaking to remain wholly Russian in nature. See Jones v.

Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1069 (5th

8
Cir. 1992) (stating that forum-selection and choice-of-law clauses

“indicate rather forcefully” that defendant “did not purposefully

direct its activities towards Texas”). Moncrief’s Texas location

was irrelevant, and this case thus falls into the category of cases

discussed in Holt Oil, where mere fortuity that one company happens

to be a Texas resident, coupled with that company’s unilateral

performance, is not enough to confer jurisdiction. See Holt Oil,

801 F.2d at 778.

The only remaining alleged contact for Zapsib is the 1997

visit of its executive, Mr. Nikiforov, to Texas. The visit, at the

invitation of Moncrief, helped to further planning and

negotiations, but no agreement was established during the trip. In

Hydrokinetics, we found that the defendant’s two physical visits to

Texas did not create jurisdiction, in part because the defendant

did not regularly do business in Texas, and because most of the

negotiations appeared elsewhere. 700 F.2d at 1028–29. The same is

true here, and Mr. Nikiforov’s visit did not create jurisdiction.

ii. Gazprom

Moncrief’s argument for jurisdiction over Gazprom stems from

its vice chairman, Mr. Yurlov’s visit to Texas in 2002 to speak at

a U.S./Russia Energy Summit. During that visit, Yurlov met with

Moncrief and allegedly misrepresented that, despite internal

changes within the company, Gazprom would continue to honor and

work in furtherance of the already existing agreements.

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 Moncrief’s initial complaint stated only a breach-of-contract

claim against Gazprom, which would require a showing of minimum

contacts in order to find that there is personal jurisdiction. The

district court, however, accurately described Yurlov’s visit to

Houston as “fortuitous,” and the visit and meeting were certainly

not sufficient to establish personal jurisdiction: Yurlov was

visiting for purposes of the summit, and his meeting with Moncrief

was purely incidental to that. Perhaps realizing that personal

jurisdiction might not otherwise exist for Gazprom, Moncrief later

amended the complaint to add a claim for negligent

misrepresentation, a tort, thus giving rise to the argument that

personal jurisdiction exists because Gazprom committed a tort in

Texas.

“When a nonresident defendant commits a tort within the state

. . . that tortious conduct amounts to sufficient minimum contacts

with the state by the defendant to constitutionally permit courts

within that state . . . to exercise personal adjudicative

jurisdiction . . .” Guidry v. United States Tobacco Co., Inc., 188

F.3d 619, 628 (5th Cir. 1999). Therefore, even without other

contacts, jurisdiction would exist if Gazprom committed a tort

while in the state. Moncrief, however, failed to state a claim of

negligent representation.

The elements of negligent misrepresentation include providing

false information upon which a plaintiff relies. Federal Land Bank

Ass’n v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991). We have further

10
clarified that a negligent misrepresentation claim must allege

misstatement of an “existing fact.” Accord Clardy Mfg. Co. v.

Marine Midland Bus. Loans Inc., 88 F.3d 347, 357 (5th Cir. 1996).

The misrepresentation alleged by Moncrief concerned the future

behavior of Gazprom—that Gazprom would continue to honor the

agreements—rather than an existing fact.

Moncrief also argues that there is “effects jurisdiction”

based on the representation made in Texas, as well as a subsequent

promise made in Russia. “Effects” jurisdiction is premised on the

idea that an act done outside the state that has consequences or

effects within the state can suffice as a basis for personal

jurisdiction if the effects are seriously harmful and were intended

or highly likely to follow from the nonresident defendant’s

conduct. See Guidry, 188 F.3d at 628. Such jurisdiction is rare.

We have expressly declined to allow jurisdiction for even an

intentional tort where the only jurisdictional basis is the alleged

harm to a Texas resident. See Panda Brandywine Corp. v. Potomac

Elec. Power Co., 253 F.3d at 870 (5th Cir. 2001). Moreover, the

alleged promise made in Russia succumbs to the same problem as the

one made in Texas: the complaint alleged a misstatement of a future

event, rather than misstatement of an already existing fact. It

therefore fails as a negligent misrepresentation claim, and cannot

give rise to jurisdiction as a tort.

iii. Severn

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 Moncrief argues that the jurisdictional contacts of the parent

company, Gazprom, are attributable to Severn given that Severn is

wholly owned and controlled by Gazprom. Because we find that no

minimum contacts exist for Gazprom, and because Moncrief does not

allege any contacts for Severn independent of Gazprom, we need not

consider whether Gazprom’s contacts, if existent, would be

attributable to Severn.

B. Traditional Notions of Fair Play and Substantial Justice

Given our finding that no minimum contacts exist to exercise

jurisdiction over the Gazprom defendants, we do not need to

consider whether such jurisdiction would violate traditional

notions of fair play and substantial justice. We also do not need

to reach the Gazprom defendants’ arguments concerning binding

arbitration and forum non conveniens.

IV. CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s

dismissal.

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