Gundle Lining Construction Corp. v. Adams County Asphalt, Inc.

United States Court of Appeals,
Fifth Circuit.
No. 95-20155.
GUNDLE LINING CONSTRUCTION CORPORATION, Plaintiff,
and
United States Fidelity & Guaranty Company, Defendant/Third-party
Plaintiff/Appellee,
v.
ADAMS COUNTY ASPHALT, INC., Kimbob, Inc., and Robert M. Mumma,
II, Third-party Defendants/Appellants.
June 13, 1996.
Appeal from the United States District Court for the Southern
District of Texas.
Before BARKSDALE, DeMOSS and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
This diversity case was filed in the Southern District of
Texas by a Texas corporation seeking to recover on a bond issued by
the defendant. The defendant, a resident of Maryland, filed a
third-party complaint seeking indemnification from the third-party
defendants, who were the principals on the bond. The third-party
defendants, all residents of Pennsylvania, filed motions to dismiss
wherein they challenged the district court's in personam
jurisdiction. The district court denied their motions. The
plaintiff and defendant ultimately settled the underlying claim.
The district court then granted summary judgment to the third-party
plaintiff on its indemnity claim. The third-party defendants
appealed, challenging the district court's decisions as to personal
jurisdiction, venue, and the grant of summary judgment to the
1
third-party plaintiff. Finding that personal jurisdiction was
proper as to only one of the third-party defendants, we affirm in
part and reverse in part.
FACTS AND PROCEDURAL HISTORY
Adams County Asphalt, Inc. ("Adams Inc.") contracted with the
City of Harrisburg, Pennsylvania to perform a large project
("Harrisburg project") involving the city's waste disposal system.
Adams Inc. is owned by Robert Mumma II ("Mumma"), who also owns
Kimbob, Inc ("Kimbob Inc."). Adams Inc. obtained a payment bond
for the benefit of all persons furnishing labor, material, or both
on the Harrisburg project from United States Fidelity & Guaranty
Company ("USF & G"). USF & G entered into a Master Security
Agreement ("MSA") with Adams Inc., Kimbob Inc., and Mumma as
indemnitors to secure reimbursement to USF & G of any payments it
made in good faith on claims against the bond.
Adams Inc., as general contractor, entered into a subcontract
with Gundle Lining Construction Corporation ("Gundle") of Houston,
Texas to supply and install certain materials for the Harrisburg
project. The project owner had specified that Adams Inc.
subcontract with Gundle because Gundle had designed the portion of
the project that was to employ Gundle's materials.
During the course of construction, a dispute arose between
Adams Inc. and Gundle regarding the quantity of the material Gundle
had agreed to supply for the project and the quality of its
installation. Adams Inc. paid Gundle the amount for which it had
contracted but refused to pay Gundle for amounts in excess of the
2
original contract.
Rather than pursue Adams Inc. on its claim, Gundle elected to
make a claim for payment against the payment bond. After USF & G
refused to pay the claim, Gundle filed suit against USF & G in
Texas state court to recover on the bond. The suit was then
removed to federal district court based upon diversity
jurisdiction. Seeking indemnification, USF & G filed third-party
complaints against Adams Inc., Kimbob Inc., and Mumma ("third-party
defendants"), claiming that it was entitled to recover all amounts
paid to Gundle from its indemnitors. Shortly thereafter, Gundle
and USF & G settled their action for $121,000 (the amount of
Gundle's claim against the bond), and Gundle agreed to dismiss its
claim against USF & G.
The third-party defendants, all non-residents of Texas, filed,
inter alia, motions to dismiss for lack of personal jurisdiction.
USF & G countered with a motion for summary judgment. In October
1993, the district court denied the third-party defendants' motions
for dismissal. Then, nearly a year and a half later, the district
court granted USF & G's motion for summary judgment. The
third-party defendants then timely perfected this appeal.
ANALYSIS
I. Personal Jurisdiction
It is undisputed that none of the parties to this appeal are
residents of Texas. When the jurisdictional facts are not in
dispute this court conducts a de novo review of the district
court's determination that its exercise of personal jurisdiction
3
over a nonresident defendant is proper. Bullion v. Gillespie, 895
F.2d 213, 216 (5th Cir.1990). In analyzing the district court's
decision to exercise personal jurisdiction over a nonresident
defendant, it is important to bear in mind that the plaintiff bears
the burden of establishing the district court's jurisdiction over
the nonresident. Stuart v. Spademan, 772 F.2d 1185, 1192 (5th
Cir.1985).
In a diversity suit a federal court has jurisdiction over a
nonresident defendant to the same extent that a state court in that
forum has such jurisdiction. Wilson v. Belin, 20 F.3d 644, 646
(5th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 322, 130 L.Ed.2d
282 (1994). The reach of a state court's jurisdiction is delimited
by: (1) the state's long-arm statute; and (2) the Due Process
Clause of the Fourteenth Amendment to the federal Constitution.
Bullion, 895 F.2d at 215. The Texas long-arm statute authorizes
the exercise of jurisdiction over nonresidents "doing business" in
Texas. Tex.Civ.Prac. & Rem.Code § 17.042. The Texas Supreme Court
has interpreted the "doing business" requirement broadly, allowing
the long-arm statute to reach as far as the federal Constitution
permits. Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990).
Consequently, we will analyze the exercise of personal jurisdiction
over nonresidents with reference to federal constitutional limits.
See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 702 n. 10, 102 S.Ct. 2099, 2104 n. 10, 72
L.Ed.2d 492 (1982) (the restriction on state power to subject a
nonresident to suit is "ultimately a function of the individual
4
liberty interest preserved by the Due Process Clause").
The exercise of personal jurisdiction over a nonresident will
not violate due process principles if two requirements are met.
First, the nonresident defendant must have purposefully availed
himself of the benefits and protections of the forum state by
establishing "minimum contacts" with that forum state.
International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct.
154, 158, 90 L.Ed. 95 (1945). The defendant's conduct and
connection with the forum state must be such that he should
reasonably anticipate being haled into court in the forum state.
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 296, 100
S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).
Second, the exercise of jurisdiction over the nonresident
defendant must not offend "traditional notions of fair play and
substantial justice." Asahi Metal Indus. Co. v. Superior Court,
480 U.S. 102, 113, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987)
(quoting International Shoe, 326 U.S. at 316, 66 S.Ct. at 158).
The "minimum contacts" prong of the inquiry may be further
subdivided into contacts that give rise to "specific" personal
jurisdiction and those that give rise to "general" personal
jurisdiction. It is indisputable that if there is personal
jurisdiction over the defendants in the instant case it exists by
virtue of "specific" personal jurisdiction. Consequently, our
review is limited to this subdivision of the minimum contacts
analysis.
The district court's exercise of specific jurisdiction is
5
appropriate only when the nonresident defendant's contacts with the
forum state arise from, or are directly related to, the cause of
action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466
U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404(1984). To exercise specific jurisdiction, the court must examine
the relationship among the defendant, the forum, and the litigation
to determine whether maintaining the suit offends traditional
notions of fair play and substantial justice. Shaffer v. Heitner,
433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977).
A. Jurisdiction as to Adams, Inc.
1. "Minimum contacts"
Adams Inc.'s contacts with Texas can be summarized as
follows: (1) Adams Inc. entered into a contract with Gundle, a
Texas entity, pertaining to the construction project in
Pennsylvania, (2) it mailed payments to Gundle at Gundle's Texas
address, and (3) it, a nonresident, engaged in communications with
a resident during the course of developing and carrying out the
contract. We have previously held that the combination of mailing
payments to the forum state, engaging in communications surrounding
the execution and performance of a contract, and the fact that a
nonresident enters into a contract with a resident are insufficient
to establish the requisite minimum contacts necessary to support
the exercise of personal jurisdiction over a nonresident defendant.
See Spademan, 772 F.2d at 1193.
However, the Spademan court was careful to recognize that one
factor that might affect the minimum contacts analysis is the
6
actual language present in the contract itself. Id. The court,
quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct.
2174, 85 L.Ed.2d 528 (1985), stated:
If the question is whether an individual's contract with an
out-of-state party alone can automatically establish
sufficient minimum contacts in the other party's home forum,
we believe the answer clearly is that it cannot.... Instead,
we have emphasized the need for a "highly realistic" approach
that recognizes that a "contract" is "ordinarily but an
intermediate step serving to tie up prior business
negotiations and contemplated future consequences which
themselves are the real object of the business transaction."
... It is these factors—prior negotiations and contemplated
future consequences, along with the terms of the contract and
the parties' actual course of dealing—that must be evaluated
in determining whether the defendant purposefully established
minimum contacts within the forum.
Spademan, 772 F.2d at 1193 (citations omitted). Guided by the
direction of the Supreme Court and this court's well-reasoned
opinion in Spademan, we review the terms of the contracts at issue
in the instant case in order to determine if they, along with the
defendant's other contacts with Texas, were sufficient to confer
jurisdiction over Adams Inc.
In examining the terms of the contracts in the instant case,
Adams Inc. contends that we should look only to the Master Security
Agreement ("MSA") which was executed between USF & G and Adams Inc.
on April 10, 1990. In the MSA, Adams Inc. agreed to:
exonerate, indemnify, and keep indemnified SURETY [USF & G]
from and against any and all liabilities, losses and expenses
of whatsoever kind or nature ... incurred by SURETY by reason
of: (1) Surety having executed, provided or procured BOND(S)
in behalf of PRINCIPAL [Adams Inc.], or (2) UNDERSIGNED'S
failure to perform or comply with any provisions of this
AGREEMENT.
Examining this document alone, we would agree with Adams Inc. that
it is insufficient to confer jurisdiction over them. However, when
7
examining personal jurisdiction we do not subscribe to such a
myopic approach. Instead, our approach is "highly realistic",
cognizant of the commercial realities of the transactions that form
the basis of the nonresident defendant's contacts with the forum
state. Therefore, we look not only to the MSA but also to the bond
agreement between Adams Inc. and USF & G, which states:
[a]ll persons who have performed labor, rendered services or
furnished materials ... shall have a direct right of action
against the Principal [Adams Inc.] and Surety [USF & G] on
this bond, which right of action shall be asserted in
proceedings instituted in the State in which such labor was
performed, services rendered, or materials furnished.
In Spademan the plaintiffs argued that a choice-of-law
provision contained in the contract between the parties was
sufficient to establish the necessary contacts with the forum
state. The provision "specified that the agreement would be
construed and enforced in accordance with the law of the state in
which the "aggrieved party' is residing at the time of the breach
or grievance." Spademan, 772 F.2d at 1194. The court found that
the provision was insufficient, either standing alone or when
considered with the other contacts, so as to justify the exercise
of jurisdiction over the defendant. Spademan, 772 F.2d at 1196.
In its analysis of the choice-of-law provision the court stated:
At the outset, we note that the plaintiffs misapprehend the
very nature of this contractual provision. The provision
contemplates a choice of law not forum. Hence, despite
plaintiffs' protestations to the contrary, the provision of
itself does not evince [plaintiffs'] anticipation of being
haled into a Texas court.
Spademan, 772 F.2d at 1195 (emphasis added). Although the
contractual provision contained in the labor and materialman's bond
8
executed between USF & G and Adams Inc. is neither a choice-of-law
provision nor an express choice-of-forum provision, it resembles
the latter.
We recognize that under the labor and materialman's bond Adams
Inc. did not agree to have any disputes arising between itself and
USF & G settled in a specific forum. However, it agreed that any
cause of action brought to recover on the labor and materialman's
bond was subject to being tried in any "State in which such labor
was performed, services rendered, or materials furnished." This
acknowledgment by Adams Inc. weighs heavily against its contention
that the Texas court's decision to exercise jurisdiction over it
would somehow be unreasonable. See Kevlin Sevrs. Inc. v. Lexington
State Bank, 46 F.3d 13, 15 (5th Cir.1995) (district court erred in
refusing to enforce forum selection clause and subsequently
dismissing suit for lack of personal jurisdiction because a forum
selection clause in a written contract is prima facie valid and
enforceable unless the opposing party can show that the enforcement
of the provision would be unreasonable).
We are aware of the fact that, unlike the choice-of-law
provision at issue in Spademan involving an agreement between a
non-resident and a resident, the agreements between USF & G and
Adams Inc. involve only non-residents. While this fact, standing
alone, would appear to move the bond agreement outside of our
jurisdictional analysis, it is relevant to the analysis in that it
indicates what future consequences Adams Inc. should have
contemplated when it contracted with Gundle.
9
But for USF & G's decision to act as surety for Adams Inc.,
USF & G never would have found itself being sued by a Texas
corporation in a Texas court. Under the MSA, Adams Inc., prior to
entering into the subcontract with Gundle, agreed to indemnify USF
& G for any payments made under the bonds it issued. On April 23,
1990, Adams Inc. and USF & G executed the labor and materialman's
bond in which Adams Inc. acknowledged that, as contractor, it could
be subject to suit in any state in which labor was performed or
materials were furnished. Then, on May 24, 1990, Adams Inc.
entered into a subcontract with Gundle, a Texas corporation which
Adams Inc. knew would be performing services and rendering labor in
Texas.
The sequence of contractual commitments made by Adams Inc.,
concluding with the subcontract with Gundle, should have made Adams
Inc. aware that it was subject to being haled into a Texas court.
See World-Wide Volkswagon Corp., 444 U.S. at 296, 100 S.Ct. at 567.
Consequently, we find that Adams Inc.'s express acknowledgment that
it was subject to suit in any state where labor was performed or
materials furnished and its subsequent decision to contract with
Gundle, along with the other aforementioned contacts, are
sufficient to satisfy the "minimum contacts" prong of the personal
jurisdiction analysis.
2. "Fair play and substantial justice"
Once there has been a determination that the defendant
purposefully directed its activities at the forum state, the
defendant "must present a compelling case that the presence of some
10
other considerations would render jurisdiction unreasonable."
Burger King Corp., 471 U.S. at 477, 105 S.Ct. at 2185. When
determining the fundamental fairness issue this court will normally
examine (1) the defendant's burden; (2) the forum state's
interests; (3) the plaintiff's interest in convenient and
effective relief; (4) the judicial system's interest in efficient
resolution of controversies; and (5) the shared interest of the
several states in furthering fundamental substantive social
policies. Asahi, 480 U.S. at 113, 107 S.Ct. at 1033; World-Wide
Volkswagon Corp., 444 U.S. at 292, 100 S.Ct. at 564.
Adams Inc. again urges us to restrict our view when examining
whether the exercise of personal jurisdiction over it comports with
fair play and substantial justice, asserting that Texas has no
interest in this litigation because the Texas company that filed
this lawsuit, Gundle, is no longer a party to the action by virtue
of its decision to settle with USF & G. If we were to adopt this
argument then we would be discouraging parties, such as USF & G,
from settling for fear that they might have to pursue third-party
defendants in separate actions in order to obtain the
indemnification that those third-party defendants had contractually
bound themselves to provide.1 This approach is contrary to a
convenient and effective resolution of the dispute for the
plaintiff; it is contrary to the judicial systems' interest of
1
Of course, the nonresident third-party defendants to which
we refer would still have to have "minimum contacts" with the
forum state in order to justify the district court's exercise of
jurisdiction.
11
efficiently resolving controversies; and it is contrary to the
forum state's interest in providing for an effective means of
redress for its citizens.
We recognize that there is some burden placed on Adams Inc.,
a Pennsylvania corporation, as a result of the case being tried in
Texas. However those burdens do not present the type of compelling
reasons necessary to justify a finding that the exercise of
jurisdiction over Adams Inc. is contrary to notions of fair play
and substantial justice.
B. Jurisdiction as to Mumma and Kimbob Inc.
It is undisputed that Mumma and Kimbob Inc. had no contacts
with Texas. However, USF & G offered three arguments as to why the
exercise of jurisdiction over them would be proper. First, USF &
G argues that by signing the MSA, Mumma and Kimbob Inc. somehow
entered into a contract that was performable in Texas. While
Mumma's and Kimbob Inc.'s signatures on the MSA might obligate them
to indemnify USF & G, the MSA, standing alone, is insufficient to
establish the requisite contacts with the forum state.
Second, USF & G contends that by signing the MSA, Mumma and
Kimbob Inc. put themselves at financial risk so that Adams Inc.
could procure the project contract and do business with Gundle in
Texas, and that this fact is somehow sufficient to support the
exercise of jurisdiction over these two defendants. In support of
this argument they cite this court to National Can Corp. v. K.
Beverage Co., 674 F.2d 1134 (6th Cir.1982), a case that is readily
distinguishable.
12
In National Can the court examined the contacts of nonresident
individual guarantors in order to determine if those contacts
supported the forum state's exercise of jurisdiction over the
nonresidents. At issue, inter alia, were the contacts of two
individual guarantors who had never set foot in the forum state.
The court ultimately found that the defendants had sufficient
contacts to support the exercise of jurisdiction and cited three
factors in support of its decision.
First, the court found that the defendants knew that the
business they were guaranteeing was to be located in Kentucky, the
forum state, which made it reasonable for the defendants to
anticipate being haled into court in Kentucky. Id. at 1138.
Second, the guaranty agreements formed the basis of the action.
Id. Third, the court found that the dispute had a substantial
enough connection with Kentucky to compel the defendants to defend
the suit there. Id.
The first two criteria that supported the exercise of
jurisdiction over the nonresident defendants in National Can weigh
against exercising jurisdiction over Mumma and Kimbob Inc. First,
the guarantee agreement in the instant case, the MSA, contained no
statement concerning where the obligations that the defendants were
guaranteeing were to be performed. In fact, the bonds that Mumma
and Kimbob Inc. were purporting to guarantee had not yet been
issued. Second, the guarantee agreement was not the basis of the
initial lawsuit initiated by Gundle. While the dispute may have a
connection with Texas, that fact alone is insufficient to justify
13
the exercise of jurisdiction over Mumma and Kimbob Inc.
USF & G's final argument in support of the exercise of
jurisdiction over Mumma and Kimbob Inc. is that we should regard
them as alter egos of Adams Inc. They contend that, as alter egos,
the contacts of Adams Inc. are attributable to both Mumma and
Kimbob Inc., thereby justifying the exercise of jurisdiction.
Although USF & G cites no binding authority for this argument, we
agree that under Texas law, a finding by the district court that
Mumma and Kimbob Inc. were alter egos of Adams Inc. would have
permitted the lower court to disregard the corporate fiction and
pierce the corporate veil, thereby attributing Adams Inc.'s
contacts to its codefendants. See S. Villar, Etc., et al. v.
Crowley Maritime Corp., 990 F.2d 1489, 1496 (5th Cir.1993). The
only evidence offered to the trial court by USF & G in support of
its alter ego theory was to provide financial evidence relating to
Kimbob Inc. and Adams Inc. Consequently, our review is limited to
examining this evidence in order to determine if it is sufficient
to support a finding of alter ego status.2
This circuit has developed the following laundry list of
factors to be used when determining whether a subsidiary is the
alter ego of the parent:3
2
The district court made no findings and issued no opinion
on the issue of personal jurisdiction. The trial court's
disposition of this issue is limited to a one sentence denial of
the defendants' motions to dismiss for lack of personal
jurisdiction.
3
We are mindful that we are not dealing with a
parent-subsidiary relationship in the instant case. However, the
factors used for determining whether a subsidiary is an alter ego
14
(1) the parent and the subsidiary have common stock
ownership;
(2) the parent and the subsidiary have common directors or
officers;
(3) the parent and the subsidiary have common business
departments;
(4) the parent and the subsidiary file consolidated financial
statements and tax returns;
(5) the parent finances the subsidiary;
(6) the parent caused the incorporation of the subsidiary;
(7) the subsidiary operates with grossly inadequate capital;
(8) the parent pays the salaries and other expenses of the
subsidiary;
(9) the subsidiary receives no business except that given to
it by the parent;
(10) the parent uses the subsidiaries property as its own;
(11) the daily operations of the two corporations are not kept
separate; and
(12) the subsidiary does not observe the basic corporate
formalities, such as keeping separate books and records
and holding shareholder and board meetings.4
United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691-92 (5th
of its parent provide guidance in determining whether Kimbob is
an alter ego of Adams Inc. This court has also approved of the
application of the Jon-T factors to situations where it is
asserted that an individual is an alter ego of a corporation.
See Century Hotels v. United States, 952 F.2d 107, 110 (5th
Cir.1992).
4
In 1989 the Texas legislature amended it Business
Corporation Act. The amendments removed "failure to observe
corporate formalities" from the list of factors used in proving
alter ego theories. See Tex.Bus.Corp. art. 2.21 A(3); see also
Western Horizontal Drilling, Inc. v. Jonnet Energy Corp., 11 F.3d
65, 67 (5th Cir.1994) (interpreting the effect of art. 2.21
A(3)). Consequently, we will not consider this factor in our
analysis.
15
Cir.1985) (internal citations omitted), cert. denied, 475 U.S.
1014, 106 S.Ct. 1194, 89 L.Ed.2d 309 (1986). Resolution of alter
ego issues must be based on a consideration of "the totality of the
circumstances." Id. at 694.
Concerning its argument that Kimbob Inc. is the alter ego of
Adams Inc., USF & G presented no evidence or argument on the
following factors listed above: (1) common stock ownership, (2)
common officers and directors (with the exception of Mumma), (3)
common business departments, (4) the filing of joint tax returns,
(5) who caused the incorporation of Kimbob Inc. or Adams Inc., (6)
how the corporations receive their business, (7) whether the
corporations share property, and (8) the daily operations of the
two corporations. In fact, the evidence that USF & G did submit on
this issue indicates that the corporations neither operate with
grossly inadequate capital nor do they pay one another's salaries
and expenses. In short, USF & G failed to present sufficient
evidence to demonstrates that Kimbob Inc. is an alter ego of Adams
Inc.
In addition to examining the Jon-T factors for purposes of
determining whether an individual is an alter ego of a corporation,
courts will examine the total dealings of the corporation and the
individual, the amount of financial interest the individual has in
the corporation, the ownership and the control that the individual
maintains over the corporation, and whether the corporation has
been used for personal purposes. Permian Petroleum Co. v.
Petroleos Mexicanos, a/k/a Pemex, 934 F.2d 635, 642 (5th Cir.1991)
16
(citing Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986)).
In support of its alter ego theory between Mumma and Adams
Inc., USF & G offered evidence of Mumma's signature on the MSA and
on checks from Adams Inc. to Gundle. USF & G also asserts that
Mumma's personal assets guarantee the bank debt of Adams Inc.
However, it offered no evidence to support this assertion.
Therefore, the only evidence to support its alter ego theory is
Mumma's signature on the MSA and on Adams Inc.'s checks to Gundle.
This evidence is wholly insufficient to support an alter ego
theory. USF & G had the burden of establishing that the court had
personal jurisdiction over Mumma and Kimbob. They failed to meet
that burden.
II. Venue
Adams Inc. argues that even if we find that it was subject to
the court's jurisdiction, then the district court abused its
discretion in denying its motion to transfer venue. Although we
would agree that a district court's decision denying a motion to
transfer venue is typically reviewed under the abuse of discretion
standard,5 we are not dealing with a typical motion to transfer
venue. The motion to transfer venue in the instant case is
atypical because it was filed by a third-party defendant.
"[S]tatutory venue limitations have no application to Rule 14
claims even if they would require the third-party action to be
5
"A motion to transfer venue is addressed to the discretion
of the trial court and will not be reversed on appeal absent an
abuse of discretion." Peteet v. Dow Chemical, 868 F.2d 1428,
1436 (5th Cir.1989).
17
heard in another district had it been brought as an independent
action." Charles Alan Wright, Arthur R. Miller and Mary Kay Kane,
6 Fed.Prac. & Proc.Civ.2d § 1445 (1990); see also Southern Milling
Co. v. U.S., 270 F.2d 80 (5th Cir.1959) (dictum) ("In the absence
of a showing of substantial inconvenience to a third-party
defendant, leave to file a third-party complaint should not be
denied on the ground of venue."). "[T]he third-party defendant is
protected against an inconvenient forum ... by the requirement that
the court have personal jurisdiction over him and the court's
ability to take account of venue considerations when exercising its
discretion to decide whether to disallow impleader or to sever the
third-party claim." Charles Alan Wright, Arthur R. Miller & Mary
Kay Kane, 6 Fed.Prac. & Proc.Civ.2d § 1445. Consequently, we find
that the district court did not err when it denied Adams Inc.'s
motion to transfer.
III. Summary Judgment
Having determined that the court properly exercised
jurisdiction over Adams Inc. and that venue was proper, we turn to
Adams Inc.'s challenge to the district court's decision to grant
summary judgment to USF & G on its third-party claim. We conduct
a de novo review of a district court's grant of summary judgment.
Fireman's Fund Ins. Co. v. Murchison, 937 F.2d 204, 207 (5th
Cir.1991). No deference is given to the district court and all
reasonable inferences from the evidence must be resolved in favor
of the nonmovant. United States v. Diebold, Inc., 369 U.S. 654,
665, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).
18
USF & G filed the third-party complaint against Adams Inc.
alleging that Adams Inc. was contractually obligated to indemnify
and exonerate USF & G for the losses it incurred as a result of USF
& G's decision to execute bonds on behalf of Adams Inc. Adams Inc.
claimed that it was not obligated to indemnify USF & G because USF
& G's decision to pay Gundle on the bond was not made in good
faith. In support of this defense, Adams Inc. relied on the
following provision of the MSA:
IV. (A) The liability of [Adams Inc.] shall extend to and
include all amounts paid by [USF & G] in good faith under
the belief that: (1) [USF & G] was or might be liable
therefor; (2) such payments were necessary or advisable
to protect any of [USF & G's] rights or avoid or lessen
[USF & G's] liability or alleged liability; ...
(C) the voucher(s) or other evidence of such payment(s)
or an itemized statement of payment(s) sworn to by an
officer of [USF & G] shall be prima facie evidence of the
fact and extent of the liability of the [Adams Inc.] to
[USF & G].
(emphasis added). Adams Inc. contends that because USF & G
originally disputed Gundle's claim for payment under the bond, it
cannot now claim that the payments it made to Gundle under that
bond were made in good faith. Therefore, Adams Inc. argues that a
genuine issue of material fact exists as to whether USF & G's
decision to pay the bond was made in good faith, thereby precluding
summary judgment.
In accordance with the requirements of the MSA, USF & G
presented payment vouchers to the district court evidencing the
fact and amount of the indemnitors' liability. Those vouchers were
sworn to as being valid by a surety claim representative of USF &
G. USF & G also presented evidence of the efforts it made to
19
contact Adams Inc. prior to settling with Gundle. This evidence
consisted of a letter written to "Robert Mumma, President, Adams
County Asphalt." In that letter USF & G stated:
Gundle has offered and demanded to settle this claim for
[$121,060.99] until Monday, March 15, 1993, which does not
include attorney's fees or interest. If you continue to fail
to cooperate immediately, USF & G will have no choice but to
settle this case on the best terms possible under the
circumstances, and then seek indemnity from you.
... We have attempted to contact you every day this week in an
effort to get your assistance in resolving this matter.
However, you have failed to return any of our phone calls. As
you must certainly realize, your cooperation is imperative;
the failure to communicate or even return our phone calls
leaves USF & G little choice but to settle on the best terms
it can, by paying up to the amount claimed by Gundle.
(emphasis in original). The statements contained in this letter
were uncontroverted by Adams Inc. and they belie Adams Inc.'s
contentions that USF & G failed to act in good faith.
The fact and extent of [a principal's] liability to [the
surety] may be prima facie established by vouchers or
affidavits. Bad faith on the part of [the surety] may be
urged by [the principal] as a defense, but where a genuine
issue of material fact in such respect is not raised by the
summary judgment evidence, [the principal's] reliance on such
defense would be ineffective.
Ford v. Aetna Ins. Co., 394 S.W.2d 693, 698 (Tex.Civ.App.—Corpus
Christi 1965, writ ref'd n.r.e.); accord Safeco Ins. Co. of
America v. Gaubert, 829 S.W.2d 274, 282 (Tex.App.—Dallas 1992, writ
denied). Because USF & G offered prima facie evidence of its
liability under the bond, and because Adams Inc. failed to present
a genuine issue of material fact that would controvert USF & G's
evidence of its good faith efforts to settle the dispute, we find
that the district court was correct in granting summary judgment to
USF & G.
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CONCLUSION
For the foregoing reasons, the district court's grant of
summary judgment against Mumma and Kimbob Inc. is VACATED, and, as
to them, the action is DISMISSED for lack of personal jurisdiction.
The judgment is AFFIRMED as to Adams Inc.
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