Panda Brandywine Corp. v. Potomac Electric Power Co.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 00-11158
Summary Calendar

PANDA BRANDYWINE CORPORATION; and
PANDA GLOBAL HOLDINGS, INC.,

Plaintiffs-Appellants,

POTOMAC ELECTRIC POWER COMPANY,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Texas
Dallas Division

June 22, 2001
Before EMILIO M. GARZA, STEWART, and PARKER, Circuit Judges.
PER CURIAM:

Appellants Panda Brandywine Corporation (“PBC”) and Panda Global Holdings, Inc.

(“PGH”) appeal the judgment of the district court dismissing their action for lack of personal

jurisdiction over Appellee Potomac Electric Power Company. We AFFIRM.

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Appellants are Delaware corporations that maintain their principal places of business in Dallas,

Texas. Appellants are both affiliates of Panda-Brandywine, L.P. (“PBLP”), a Delaware limited

partnership of which Appellant PBC is general partner. Appellant PGH is the indirect owner of all

of the shares of PBC and is the guarantor of certain bonds issued by another of its subsidiaries and

guaranteed by PBC’s cash flow. PBLP oversees the operations of an electricity-generating power

plant in Brandywine, Maryland (“Brandywine facility”). Appellee is a utility incorporated in Virginia

and District of Columbia and maintains its principal place of business in Washington, D.C.

PBLP sells electricity generated by the Brandywine facility to Appellee under a long-term

power purchase agreement (“PPA”). To finance the facility’s operations, PBLP and Appellants

entered into certain financing agreements, including a participation agreement, a facility lease, and

a trust indenture, with various financial institutions. These financing agreements interrelate with the

PPA by encumbering the revenue paid by Appellee to PBLP pursuant to the PPA. Appellee is not

a party to any of these financing agreements.

When Appellee decided to divest certain electricity-generating assets and power-purchasing

contracts, including the PPA, PBLP objected, and Appellants ultimately sued Appellee in County

Court of Dallas County, Texas, alleging that Appellee tortiously interfered with Appellants’ financing

agreements. Appellants specifically alleged that Appellee’s actions caused the “potential” for

Appellants to be in default under the financing agreements. Appellee removed the action pursuant

to diversity jurisdiction under 28 U.S.C. §§ 1332 and 1441 to the district court, which then granted

Appellee’s motion to dismiss for lack of personal jurisdiction without holding a hearing. Appellants

timely appealed that decision to this court.

II.

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A.

We review the district court’s dismissal for lack of personal jurisdiction de novo. Alpine View

Co. v. Atlas Copco A.B., 205 F.3d 208, 214 (5th Cir. 2000). In a diversity action, a federal court may

exercise personal jurisdiction over a defendant to the extent permitted by the applicable state law.

See id.; FED. R. CIV. P. 4(e)(1). In this action, the Texas long-arm statute authorizes the exercise of

personal jurisdiction to the extent allowed by the Due Process Clause of the Fourteenth Amendment.

See 2 TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (West 1997); Schlobohm v. Schapiro, 784

S.W.2d 355, 357 (Tex. 1990). Therefore, we review whether the district court correctly held that

exercising personal jurisdiction over Appellee would be inconsistent with due process. See Alpine

View Co., 205 F.3d at 214.

Exercising personal jurisdiction over a nonresident defendant is consistent with due process

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.” Id. at 215

(citations and internal quotation marks omitted); Felch v. Transportes Lar-Mex, 92 F.3d 320, 323

(5th Cir. 1996); International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). “‘Minimum

contacts’ can be established either through contacts sufficient to assert specific jurisdiction, or

contacts sufficient to assert general jurisdiction.” Alpine View, 205 F.3d at 215. Because Appellants

did not argue the existence of general jurisdiction before the district court or this court, our analysis

is limited to whether Appellants’ allegations support specific jurisdiction, which exists when a

nonresident defendant has “purposefully directed its activities at the forum state and the litigation

results from alleged injuries that arise out of or relate to those activities.” Id. (quoting Burger King

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Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)) (internal quotation marks omitted). Where a district

court dismisses for lack of personal jurisdiction without a hearing, as in this action, we review the

dismissal to determine whether the plaintiff presented sufficient evidence to support a prima facie case

supporting jurisdiction. Id. We accept the plaintiff’s uncontroverted, nonconclusional factual

allegations as true and resolve all controverted allegations in the plaintiff’s favor. Id.; Felch, 92 F.3d

at 326 n.16.

The district court concluded that specific jurisdiction did not exist because Appellee did not

have the requisite minimum contacts with Texas. The district court found Appellants’ jurisdictional

allegations to be conclusory, and determined that Appellee’s contacts with Texas were

constitutionally insufficient because Appellants’ tortious interference claims involved financing

agreements not governed by Texas law, not to be performed in Texas, and unrelated to Texas other

than the fortuity that Appellants reside in Texas.

Appellants contend that the district court erred in two principal ways. First, Appellants argue

that the district court erred by not accepting their jurisdictional allegations as true and by rejecting

them as conclusory. Second, Appellants contend that had the district court accepted their

jurisdictional allegations as true, they presented a prima facie case for exercising specific jurisdiction

over Appellee because Appellee knew the existence and terms of the financing agreements with which

it allegedly interfered, knew its actions in divesting its interest in the PPA would cause harm in Texas,

and intended to cause such harm. Appellants assert that the district court erred by examining choice-

of-law pro visions and forum-selection clauses of the financing agreements in conducting the

jurisdictional analysis. Appellants finally add that exercising specific jurisdiction under these facts

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comports with fair play and substantial justice.

We disagree. Although jurisdictional allegations must be accepted as true, such acceptance

does not automatically mean that a prima facie case for specific jurisdiction has been presented.

Establishing a prima facie case still requires the plaintiff to show the nonresident defendant’s

purposeful availment of the benefits and protections of and minimum contacts with the forum state.

See Burger King, 471 U.S. at 474 (“[T]he constitutional touchstone remains whether the defendant

purposefully established ‘minimum contacts’ in the forum State.”); Far West Captial, Inc. v. Towne,

46 F.3d 1071, 1079 (10th Cir. 1995) (“[T]he mere allegation that an out-of-state defendant has

tortiously interfered with contractual rights or has committed other business torts that have allegedly

injured a forum resident does not necessarily establish that the defendant possesses the

constitutionally required minimum contacts.”); IMO Indus., Inc. v. Kiekert, A.G., 155 F.3d 254, 263

(3d Cir. 1997); ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 625-26 (4th Cir.1997), cert.

denied, 523 U.S. 1048 (1998). The district court’s examination of Appellee’s contacts beyond those

alleged in Appellants’ petition is therefore not a rejection of Appellants’ allegations as false, but a

straightforward application of the due-process-minimum-contacts analysis. Moreover, the district

court correctly held that the prima-facie-case requi rement does not require the court to credit

conclusory allegations, even if uncontroverted. See Felch, 92 F.3d at 326 n.16 (crediting

nonconclusional factual allegations of the complaint to the extent those are not controverted by any

of the evidence); Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass’n, 142 F.3d 26, 34 (1st Cir.

1998) (“[T]he law does not require us to struthiously to credit conclusory [jurisdictional] allegations

or draw farfetched inferences.”) (citation and internal quotation marks omitted). Appellants’ sole

evidence is their state court petition, which alleges “on information and belief” that Appellee knew

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Appellants are Texas residents and knew its actions would intentionally cause harm to Appellants in

Texas. Appellants present no other evidence of Appellee’s contacts with Texas relating to

Appellant s’ claims, and thus the district court properly concluded that the allegations are merely

conclusory.

More importantly, even if Appellants’ allegations are not conclusory, they are nonetheless

insufficient to establish a prima facie case for jurisdiction over Appellee. Appellants rely on Calder

v. Jones, 465 U.S. 783, 789 (1984), which upheld specific jurisdiction in a California court over

Florida defendants based on the allegedly libelous “effects” of their Florida conduct in California, in

arguing that Appellee’s act ions allegedly caused tortious “effects” in Texas sufficient to support

jurisdiction. However, Calder’s “effects” test “is not a substitute for a nonresident ’s minimum

contacts that demonstrate purposeful availment of the benefits of the forum state.” Allred v. Moore

& Peterson, 117 F.3d 278, 286 (5th Cir. 1997), cert. denied, 522 U.S. 1048 (1998). “‘[T]he key to

Calder is that the effects of an alleged intentional tort are to be assessed as part of the analysis of the

defendant's relevant contacts with the forum.’” Id. (quoting Wallace, 778 F.2d at 395). Appellants’

allegations, even if true, only relate to the foreseeability of causing injury in Texas, which is not a

“sufficient benchmark” for specific jurisdiction. Burger King, 471 U.S. at 474; Wien Air Alaska, Inc.

v. Brandt, 195 F.3d 208, 212 (5th Cir. 1999) (“Foreseeable injury alone is not sufficient to confer

specific jurisdiction, absent the direction of specific acts toward the forum.”). The “foreseeability that

is critical to due process analysis . . . is that the defendant’s conduct and connection with the forum

State are such that he should reasonably anticipate being haled into court there.” Burger King, 471

U.S. at 474 (emphasis added). To conclude that a defendant should “reasonably anticipate” being

haled into the forum State requires “some act by which the defendant purposefully avails itself of the

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privilege of conducting activities within the forum State, thus invoking the benefits and protections

of its laws,” or “purposefully directs” its efforts toward the forum State residents. Id. at 475, 476.

Under this standard, Appellants’ allegations are simply insufficient. There are no facts

suggesting that Appellee purposefully availed itself of the privilege of conducting activities in Texas

and invoked the benefits and protections of Texas’s laws when it acted to divest its interests in the

PPA. While Appellants’ allegations seem to suggest that Appellee purposefully directed its actions

toward them, the district court correctly held that such allegations were insufficient because the

financing agreements are not governed by Texas law, are not to be performed in Texas, and have no

relation to Texas other than the fortuity that Appellants reside there. See Southmark Corp. v. Life

Investors, Inc., 851 F.2d 763, 772-73 (5th Cir. 1988). Appellants’ contention that the district court

erred by considering such terms lacks merit because such consideration is not only proper, but

required under the due-process-minimum-contacts analysis. Burger King, 471 U.S. at 479;

Southmark, 851 F.2d at 772-73. If we were to accept Appellants’ arguments, a nonresident

defendant would be subject to jurisdiction in Texas for an intentional tort simply because the

plaintiff’s complaint alleged injury in Texas to Texas residents regardless of the defendant’s contacts,

and would have to appear in Texas to defend the suit “no matter how groundless or frivolous the suit

may be.” Wallace, 778 F.2d at 395. Such result would completely vitiate the constitutional

requirement of minimum contacts and purposeful availment. We refuse to ignore the limits of specific

jurisdiction to allow Appellants to sue Appellee in the district court based on Appellants’ self-serving

allegations when the “potential” injury claimed by Appellants resulted from interference with financing

agreements that have nothing to do with Texas except for the mere fortuity that Appellants reside

there.

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Because of our conclusion, we need not examine whether exercising specific jurisdiction over

Appellee comports with “fair play and substantial justice.” We also need not determine Appellee’s

motion to dismiss appeal, and that motion is denied as moot. See Ruhrgas A.G. v. Marathon Oil Co.,

526 U.S. 574 (1999) (noting that personal-jurisdiction issues could be decided before subject-matter

jurisdiction issues).

III.

For the foregoing reasons, the order and judgment of the district court dismissing Appellants’

action without prejudice for lack of personal jurisdiction is AFFIRMED. Costs are taxed against

Appellants.

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