Opinion
Civ. No. 3:99-CV-2915-H.
April 13, 2000.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Dismiss Plaintiffs' Complaint, filed January 18, 2000; Plaintiff's Response, filed February 7, 2000; and Defendant's Reply, filed March 3, 2000.
After considering the pleadings, briefs and relevant authorities, the Court is of the opinion that the Motion to Dismiss should be, and hereby is, GRANTED.
I . Background
On December 8, 1997, Plaintiff Sealco International, Inc. ("Sealco") entered into a purchase agreement with Defendant Control de Deschechos Industriales Y Monitoreo Ambiental, S.A. ("CDIMA"), an entity organized under the laws of, and doing business solely in, Mexico. This agreement was for the purchase of a medical waste incinerator, manufactured by National Incinerator, Inc. ("National Incinerator"), which Sealco was to deliver to CDIMA at Eagle Pass, Texas, for installation at CDIMA's facility in Mexico. CDIMA was the party responsible for arranging for transborder shipment as well as site installation, while SEALCO was to send qualified technicians to oversee the installation process. The original contract specified certain guaranteed emission levels, but stated the incinerator did not incorporate a "scrubber," which would further reduce those levels. A scrubber could be added, but at additional cost.
Subsequent to the installation, CDIMA was informed by Mexican regulatory authorities that the emissions from the incinerator exceeded permitted levels. CDIMA complained to National Incinerator about the emissions problem, which sent additional parts in an attempt to rectify the situation, to no avail. National Incinerator alleges those parts, valued at $13,614.00, were not covered by the original warranty and CDIMA has failed to pay for them.
On October 16, 1999, Mr. Alfonzo Lopez, President of CDIMA, notified the Plaintiffs through his counsel that, pursuant to the Texas Deceptive Trade Practices Act ("DTPA"), TEX. Bus, COM. CODE ANN. 17.01 et seq., he intended to sue them for breach of contract, misrepresentation, and deceptive trade practices unless they addressed the problems with the incinerator. Plaintiffs, instead of responding to Mr. Lopez, filed this action just prior to the expiration of the 60 day notice period.
Section 17.505 of the DTPA says, in pertinent part, that prior to filing a suit for damages under the DTPA, "a consumer shall give written notice to the person at least 60 days before filing suit advising the person in reasonable detail of the consumer's specific complaint and the amount of economic damages, damages for mental anguish, and expenses, including attorney's fees, if any, reasonably incurred by the consumer in asserting the claim against the defendant." TEX. BUS. COM. CODE ANN.§ 17.505(a).
Plaintiffs seek a declaratory judgment: 1) that Plaintiffs Fred Seal and Otto Baker took no actions giving rise to any liability, and that all actions taken by them were in their official capacities as officers of their respective corporations; 2) that Plaintiff Sealco and National Incinerator performed all material obligations under their contract with Defendant, and neither corporation took any action giving rise to liability under that contract; and 3) that as a result of the services performed and the equipment delivered to CDIMA by National Incinerator, over and above the requirements of the original agreement, CDIMA is indebted to National Incinerator in the amount of $13,614.00.
In response to Plaintiffs' suit for declaratory judgment, CDIMA filed its Motion to Dismiss alleging that Plaintiffs fail to establish subject matter jurisdiction, pursuant to FED.R.CIV.P. 12(b)(1) ("Rule 12(b)(1)"); that CDIMA is not subject to personal jurisdiction in Texas, pursuant to Rule 12(b)(2); that venue in the Northern District of Texas in improper, pursuant to Rule 12(b)(3); that process and service of process were improper, pursuant to Rules 12(b)(4) and 12(b)(5); and that Plaintiffs have failed to state a claim, pursuant to Rule 12(b)(6). II . Analysis
In its Motion CDIMA also sought reasonable expenses and attorney fees, pursuant to Rule 11. That claim was withdrawn, however, in its Reply.
A. Subject Matter Jurisdiction
As a threshold matter, the Court must determine whether it has jurisdiction to entertain this case, since the federal declaratory judgment statute, 28 U.S.C. § 2201 ("Declaratory Judgment Act"), does not grant the Court an independent ground for subject matter jurisdiction. TTEA v. Ysleta del Sur Pueblo, 181 F.3d 676, 681 (5th Cir. 1999). Here, Plaintiffs assert diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(2), since Plaintiffs are citizens of Texas, Defendant is a corporation organized and located in Mexico, and the amount in controversy is allegedly in excess of $75,000.00. Defendant disputes the amount in controversy, asserting that Plaintiffs only claim damages of $13,614.00.
"The amount in controversy, in an action for declaratory or injunctive relief, is the value of the right to be protected or the extent of the injury to be prevented." St. Paul Reinsurance Company, Ltd. v. Greenberg, 134 F.3d 1250, 1252-53 (5th Cir. 1998) (quoting Leininger v. Leininger, 705 F.2d 727, 729 (5th Cir. 1983)). Here, the injury to be prevented is not the amount of damages National Incinerator claims against CDIMA, but the amount of damages Plaintiffs are seeking to avoid, viz, the amount CDIMA stated in its letter it would seek from Plaintiffs in its anticipated suit. Since this total, $842,700.00, easily meets the requirements of § 1332, this Court has subject matter jurisdiction independently of the suit for declaratory judgment.
B. Personal Jurisdiction
Under the Texas long-arm statute, TEX. CIV. PRAC. REM. CODE ANN. § 17.041 et seq., a court has personal jurisdiction over a foreign defendant to the fullest extent allowed by the federal constitution. See Wilson v. Belin, 20 F.3d 644, 647 n. 1 (5th Cir. 1994).
Obtaining personal jurisdiction over a non-resident of a state is constitutionally permissible if the nonresident purposefully availed himself of the benefits and protections of Texas by establishing minimum contacts with Texas such that the defendant could reasonably anticipate being haled into court in the forum state and the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 211 (5th Cir. 1999) (quoting Holt Oil Gas Corporation v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986).
Exercising personal jurisdiction over a nonresident may be in the form of "specific" jurisdiction, i.e., jurisdiction over a defendant based on contacts with the forum related to the particular controversy, Holt Oil Gas Corp., 801 F.2d at 777, or "general" jurisdiction, i.e., jurisdiction over a defendant based on that defendant's continuous and systematic contacts with the forum, Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984).
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, plaintiff bears the burden of showing that the court can exercise personal jurisdiction over the nonresident. Wilson, 20 F.3d at 648 (quoting Stuart v. Spademan, 772 F.2d 1185 (5th Cir. 1985)). Absent an evidentiary hearing on the issue, plaintiff need only make out a prima facie case. Id. (citing Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985)). "Moreover, on 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." Id. (quoting Bullion v. Gillespie, 895 F.2d 213, 215 (5th Cir. 1990)).
Plaintiffs do not assert that CDIMA had any "continuous and systematic" dealings with Texas giving the Court general jurisdiction over the company, but they claim that specific personal jurisdiction over CDIMA is proper since: 1) Lopez, CDIMA's president, initially contacted Sealco in Texas; 2) Lopez and other CDIMA agents negotiated the purchase agreement through telephone calls and faxes between Mexico and Texas; 3) Lopez came to San Antonio to meet personally with Plaintiffs' agent Ruben Madrid to negotiate the contract; and 4) the incinerator was delivered to CDIMA at Eagle Pass, Texas. The agreement itself is silent on jurisdiction.
Lopez, in his affidavit, acknowledges his initial call to Sealco in Texas, but alleges that "the majority, if not all" of the additional contacts between the parties was by telephone calls initiated by Sealco. He states that no CDIMA employee or agent ever traveled to Dallas to conduct negotiations, but does not address Plaintiffs' assertion that he met with Madrid in San Antonio. He states that the contract was signed by him in Mexico after being mailed to Eagle Pass and carried across the border to him, and that payment for the incinerator was made "from Mexico," presumably to Sealco in Texas. For the most part, Lopez does not dispute Plaintiffs' facts, and where he does the Court must resolve the issue in Plaintiffs' favor. See Wilson, 20 F.3d at 648.
Merely contracting with a resident of the forum state is insufficient to subject the nonresident to the forum's jurisdiction. Holt Oil Gas Corp., 801 F.2d at 778. In Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026 (5th Cir. 1983), a nonresident contracted to purchase equipment in Texas for installation outside the forum, its agents traveled to Texas to close the contract, and payment was made in Texas, yet personal jurisdiction was found lacking. In Hydrokinetics, however, unlike the facts here, the nonresident was initially approached in its home state by the Texas seller, and the contract specifically called for the law of the nonresident's home state to control. Another case that more closely parallels the facts before the Court is Command-Aire v. Ontario Mechanical Sales Service, 963 F.2d 90 (5th Cir. 1992). In Command-Aire, minimum contacts were established to assert personal jurisdiction over the nonresident where the nonresident initiated contact with the forum, traveled to the forum to negotiate the contract, took possession of the subject of the contract in the forum state, and made payment to the forum state,. The Court is of the opinion that CDIMA's contacts with Texas, like those of the nonresident in Command-Aire, achieved the minimum necessary to be subject to personal jurisdiction here.
Even with minimum contacts established, the Court must still determine whether subjecting CDIMA to suit here would "offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). This consideration is a bit easier, in essence because this is an action for declaratory judgment filed by Plaintiffs after receiving Defendant's notice of intent to sue. CDIMA gave notice to Plaintiffs that it intended to sue them, pursuant to a Texas state statute, if they did not address alleged problems with the incinerator. Just prior to the expiration of the mandatory notice period Plaintiffs brought this action over the same issues. Clearly, if Defendant stated it intended to bring a suit against Plaintiffs in Texas, it cannot now complain that it would be unjust to be haled by Plaintiffs into a Texas court. CDIMA may not like being in federal court, and it may not like being in Dallas, but it cannot say that it is unfair to be in Texas.
On April 6, 2000, counsel for CDIMA advised the Court that it had, in fact, filed suit against Plaintiffs in Texas state court. See Control de Desechos Y Monitoreo Ambiental, S.A. Alfred Lopez v. Sealco International, Inc., Fred E. Seal, National incinerator, Inc., and Otto Baker, Cause No. 00-04-16528-CV (293rd Judicial District).
C. Abstention
Where, as here, a party seeks a declaratory judgment on matters that are the subject of pending or anticipated state court litigation, the Court must determine whether the principles of federalism and comity call for abstention from exercising its jurisdiction. See, e.g., Travelers Insurance Company v. Louisiana Farm Bureau Federation, 996 F.2d 774, 776 (5th Cir. 1993). Generally, federal district courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800, 817 (1976). The Supreme Court stated in Colorado River that ordinarily only "exceptional circumstances" warrant abstention from exercising jurisdiction. Id. at 818-20. See also Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) (finding that the exceptional circumstances test applies to claims under the Arbitration Act).
In a subsequent case, however, the Supreme Court stated "distinct features of the Declaratory Judgment Act, we believe, justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the "exceptional circumstances" test of Colorado River and Moses H. Cone. See Wilton v. Seven Falls Company, et al., 515 U.S. 277, 286 (1995). For the following reasons the Court decides that abstention in this declaratory judgment action is appropriate.
In deciding whether to abstain in a declaratory judgment action the Court must consider: 1) whether there is a pending state action in which all of the matters in controversy may be filly litigated; 2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; 3) whether the plaintiff engaged in forum shopping in bringing the suit; 4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change the forum exist; 5) whether the federal court is a convenient forum for the parties and witnesses; and 6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy. Travelers Insurance, 996 F.2d at 778.
Here, Defendant has notified the Court that a state action has been filed which will fully litigate the exact issues before the Court. See note 3, supra. There is no dispute that Plaintiffs filed this action in anticipation of such a suit, and only after CDIMA provided the required 60 day notice. While CDIMA, in its DTPA Notice letter, did not state where it would file its suit, it appears likely to the Court that Plaintiffs filed this action both in Dallas and in federal court not only to preempt Defendants' DTPA suit, but to pick the forum and venue they preferred. This assumption is borne out by the Parties' contentiousness over appropriate forum and venue selection in their pleadings.
There does not appear to be any particular inequity to the Parties or potential witnesses by trying this matter in federal court, although CDIMA clearly prefers to be in state court and this is a diversity action requiring interpretation of a contract under Texas law, with no federal question present. Clearly, judicial economy would be better served if the entire matter was heard and disposed of in one proceeding, and comity favors the state court hearing a case solely pertaining to state law.
It is the fourth factor that the Court finds most salient, i.e., the inequitable result from letting Plaintiffs circumvent the requirements of the DTPA notice requirement to gain precedence in time and forum selection. As previously noted, the state law requires that a consumer give 60 days notice to any entity from whom it seeks redress. The purpose of that notice requirement is to discourage litigation and to encourage settlement. See, e.g., Foster v. Daon Corp., 713 F.2d 148, 151 (5th Cir. 1983), and Angelo Broadcasting, Inc. v. Satellite Music Network, Inc., 836 S.W.2d 726 (Tex.App. — 5th Dist. 1992, writ denied). Were this Court to allow Plaintiffs' declaratory judgment action to stand, it would serve to circumvent the purpose of the notice requirement. Instead of seeking settlement, any prospective defendant receiving a notice under the DTPA might be encouraged to use the 60 day waiting period to preemptively file an action, thereby choosing their own forum, venue and parties for the lawsuit. Clearly, that is not a result the Texas legislature intended in promulgating § 17.505.
III . Conclusion
For the foregoing reasons the Court chooses to exercise the discretion afforded it under the Declaratory Judgment Act, and declines to retain Plaintiffs' declaratory judgment suit. Defendant's Motion to Dismiss is GRANTED, based upon the principle of abstention, and Plaintiffs' declaratory judgment action is DISMISSED at Plaintiffs' cost.
SO ORDERED.