Omni Capital v. Rudolf Wolff & Co.Annotate this Case
484 U.S. 97 (1987)
U.S. Supreme Court
Omni Capital v. Rudolf Wolff & Co., 484 U.S. 97 (1987)
Omni Capital International, Ltd. v. Rudolf Wolff & Co., Ltd.
Argued October 6, 1987
Decided December 8, 1987
484 U.S. 97
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FIFTH CIRCUIT
Omni Capital International, Ltd., and Omni Capital Corporation (hereafter petitioners), New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Certain investors filed suits (later consolidated) against petitioners in the Federal District Court for the Eastern District of Louisiana, charging that petitioners fraudulently induced them to participate in petitioners' program, in violation of various federal securities laws. Petitioners impleaded respondent Rudolf Wolff & Co., a British corporation with offices in London that was employed by petitioners to handle trades on the London Exchange, and respondent Gourlay (hereafter respondents), a United Kingdom citizen and resident who was Wolff's representative in soliciting petitioners' business. Petitioners contended that their liability, if any, was caused by respondents' improper trading activities. While the action was pending, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,456 U. S. 353, was decided, recognizing an implied private cause of action under the Commodity Exchange Act (CEA), and the plaintiffs in this litigation amended their complaints to allege violations of that Act. The District Court dismissed the other securities law claims as preempted by the CEA, and held that it lacked personal jurisdiction over respondents because (1) the CEA was silent about service of process for private causes of action, (2) thus, application of Louisiana's long-arm statute was required, and (3) that statute's requirements were not met. The Court of Appeals affirmed.
Held: The District Court lacked personal jurisdiction over respondents in this federal question litigation under the CEA. Pp. 484 U. S. 102-111.
(a) The requirement that a federal court have personal jurisdiction flows from the Due Process Clause of the Fifth Amendment. However, before a federal court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, there must be authorization for service of summons on the defendant. Pp. 484 U. S. 103-104.
(b) Under Federal Rule of Civil Procedure 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits to determine whether an out-of-state defendant is amenable to service. After the Curran decision, and while the present litigation was still pending in the District Court, Congress added § 22 to the CEA, explicitly authorizing a private cause of action for CEA violations but not referring to service of process, in contrast to Congress' explicit authorization of nationwide service of process in other CEA provisions for other civil actions under the Act. This contrast, as well as the legislative history, supports the conclusion that Congress did not intend to provide nationwide service of process for private actions under the CEA. Nor was nationwide service implicitly authorized for any implied private cause of action under the CEA, such as petitioners', that accrued prior to § 22's effective date. Moreover, the District Court held, and petitioners concede, that the requirements of Louisiana's long-arm statute were not met here. Pp. 484 U. S. 104-108.
(c) Even were it within this Court's power, judicial creation of a common law rule authorizing service of process in this litigation would be unwise. The strength of the longstanding assumption that federal courts cannot add to the scope of service of summons Congress has authorized, and the network of statutory enactments and judicial decisions tied to that assumption, argue strongly against devising common law service of process provisions. The responsibility for creating service of process provisions rests with those who propose the Federal Rules of Civil Procedure, and with Congress. Pp. 484 U. S. 108-111.
795 F.2d 415, affirmed.
BLACKMUN, J., delivered the opinion for a unanimous Court.
JUSTICE BLACKMUN delivered the opinion of the Court.
This case presents questions concerning the prerequisites to a federal court's exercise of in personam jurisdiction.
Petitioners Omni Capital International, Ltd., and Omni Capital Corporation (collectively Omni), [Footnote 1] New York corporations, marketed an investment program involving commodity futures trades on the London Metals Exchange. Omni employed respondent Rudolf Wolff & Co., Ltd., a British corporation with its offices in London, as a broker to handle trades on that Exchange. Respondent James Gourlay, a citizen and resident of the United Kingdom, served as Wolff's representative in soliciting this business from Omni.
The United States Internal Revenue Service disallowed income tax deductions, claimed by the participants in Omni's investment program, and did so on the ground that the program's commodities trades on the London Metals Exchange were not bona fide arm's-length transactions. A number of corporate and individual investors who participated in Omni's program then sued Omni in four separate actions in the United States District Court for the Eastern District of Louisiana. [Footnote 2] The plaintiffs in each action charged that, by misrepresenting its tax benefits and future profits, Omni fraudulently induced them to participate in the investment program. Omni, in turn, impleaded Wolff and Gourlay, [Footnote 3]
contending that its liability, if any, was caused by their improper trading activities.
The procedural history is complex. The original complaints, filed in 1980 and 1981, charged violations of the Securities Exchange Act of 1934, ch. 404, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq. (1982 ed. and Supp. IV); SEC Rule 10b-5, 17 CFR § 240. 10b-5 (1987); and the Securities Act of 1933, 48 Stat. 74, as amended, 15 U.S.C. § 77a et seq. (1982 ed. and Supp. IV), and included pendent state law claims. The four cases were consolidated in the District Court. While they were pending, this Court decided Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,456 U. S. 353 (1982). In Curran, we recognized an implied private cause of action under the Commodity Exchange Act (CEA), 42 Stat. 998, as amended, 7 U.S.C. § 1 et seq. (1982 ed. and Supp. IV). The plaintiffs accordingly amended their complaints to allege violations of §§ 4b and 9(b) of the CEA, as amended, 7 U.S.C. §§ 6b and 13(b).
Wolff and Gourlay moved to dismiss the claims against them for lack of personal jurisdiction, and, as an additional ground, argued that the securities law claims failed to state causes of action. In its initial opinion dated May 13, 1983, the District Court dismissed the securities law claims as having been preempted by the CEA, but concluded that it could exercise personal jurisdiction over Wolff and Gourlay. App. 6. The court reasoned that, in actions under the CEA,
"Congress intended for U.S. courts to exercise personal jurisdiction over foreign defendants not present in the United States to the limits of the due process clause of the Fifth Amendment."
Id. at 9. Therefore, the court determined, if "the quality and nature of a foreign defendant's activities . . . in the United States" support a "finding of fair play and substantial justice," personal jurisdiction would be proper. Id. at 9-10. After examining the extent of Wolff's and Gourlay's contacts with the United States, the District Court concluded it had personal jurisdiction.
After this initial decision of the District Court, the Fifth Circuit decided DeMelo v. Toche Marine, Inc., 711 F.2d 1260 (1983). In DeMelo, the Court of Appeals concluded that,
"when a federal question case is based upon a federal statute that is silent as to service of process, and a state long-arm statute is therefore utilized to serve an out-of-state defendant, [Federal Rule of Civil Procedure] 4(e) requires that the state's standard of amenability to jurisdiction apply."
Id. at 1266. Following that decision by its controlling court, the District Court granted Wolff's and Gourlay's motions for reconsideration, noting that the CEA is silent about service of process for private causes of action. App.19. Upon its reconsideration, the District Court concluded that, in accord with DeMelo, "unless jurisdiction can be asserted under the Louisiana long-arm statute, there is no personal jurisdiction over Wolff or Gourlay." App. 22. Because, in its view, the requirements of the Louisiana long-arm statute [Footnote 4] were not met, the District Court concluded that it lacked personal jurisdiction over Wolff and Gourlay, and it directed the entry
of a final judgment dismissing all claims against them. Id. at 23.
The Fifth Circuit decided the ensuing appeals en banc in the first instance and, by a 9-to-6 vote, affirmed. Point Landing, Inc. v. Omni Capital Int'l, Ltd., 795 F.2d 415 (1986). The majority started from "the unmalleable principle of law . . . that federal courts . . . must ground their personal jurisdiction on a federal statute or rule." Id. at 423. In the majority's view, neither the CEA nor the Federal Rules of Civil Procedure authorized service of process upon Wolff or Gourlay, and therefore personal jurisdiction over them was lacking. The dissent conceded that neither the CEA nor Civil Rule 4 provided for service of process on Wolff and Gourlay, but would have remedied this "bizarre hiatus in the Rules," 795 F.2d at 428, with an ad hoc authorization of service of process on them based on their contacts with the United States as a whole.
Because of a possible conflict with views of the Sixth Circuit expressed in Handley v. Indiana & Michigan Electric Co., 732 F.2d 1265, 1272 (1984), we granted certiorari to decide whether, in this federal question litigation arising under the CEA, the District Court may exercise personal jurisdiction over Wolff and Gourlay.
Omni's primary and fundamental contention is that, in a suit under the CEA, the only limits on a district court's power to exercise personal jurisdiction derive from the Due Process Clause of the Fifth Amendment. The objection of the Court of Appeals, and of Wolff and Gourlay before this Court, is that, even if an exercise of personal jurisdiction would comport with that Due Process Clause, [Footnote 5] the District Court cannot
exercise personal jurisdiction over Wolff and Gourlay, because they are not amenable to service of summons in the absence of a statute or rule authorizing such service. [Footnote 6]
Omni attempts to meet this objection in a variety of ways. First, Omni argues that the District Court may exercise personal jurisdiction because Wolff and Gourlay have constitutionally sufficient contacts with the forum and, as well, have notice of the suits. Second, Omni contends that, even if a rule authorizing service is a prerequisite to effective service, and thus to the exercise of personal jurisdiction, Congress implicitly authorized nationwide service for private causes of action under the CEA. Third, Omni presses upon us the view of the Fifth Circuit dissenters that, even if authorization for service of process is required and cannot be found in a statute or rule, such authorization should be created by fashioning a remedy to fill a gap in the Federal Rules of Civil Procedure. We examine these contentions in turn.
Omni argues that the jurisdictional limits that Art. III of the Constitution places on the federal courts relate to subject matter jurisdiction only. In this view, although Art. III, § 1, leaves it to Congress to "ordain and establish" inferior federal courts, the only limits on those courts, once established, in their exercise of personal jurisdiction, relate to due process. Thus, Omni contends, the District Court may exercise personal jurisdiction over Wolff and Gourlay if the Due Process Clause of the Fifth Amendment does not forbid it.
Omni's argument that Art. III does not itself limit a court's personal jurisdiction is correct.
"The requirement that a court have personal jurisdiction flows not from Art. III, but from the Due Process Clause. . . . It represents a restriction on judicial power, not as a matter of sovereignty, but as a matter of individual liberty."
Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee,456 U. S. 694, 456 U. S. 702 (1982). Omni's argument fails, however, because there are other prerequisites to a federal court's exercise of personal jurisdiction.
Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied.
"[S]ervice of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served."
Mississippi Publishing Corp. v. Murphree,326 U. S. 438, 326 U. S. 444-445 (1946). Thus, before a court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, this means there must be authorization for service of summons on the defendant.
The next question, then, is whether there is authorization to serve summons in this litigation. Today, service of process in a federal action is covered generally by Rule 4 of the Federal Rules of Civil Procedure. Rule 4(f) describes where process "may be served." [Footnote 7] It authorizes service in the State
in which the action is brought, or anywhere else authorized by a federal statute or by the Rules.
The "most obvious reference" of this last provision is to Rule 4(e). [Footnote 8] See D. Currie, Federal Courts 373 (3d ed.1982). The first sentence of the Rule speaks to the ability to serve summons on an out-of-state defendant when a federal statute authorizes such service. The second sentence, as an additional method, authorizes service of summons "under the circumstances" prescribed in a state statute or rule. Thus, under Rule 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits to determine whether a defendant is amenable to service, a prerequisite to its exercise of personal jurisdiction. [Footnote 9]
Omni argues that Wolff and Gourlay are amenable to service under Rule 4(e) because the CEA implicitly "provides for service . . . upon a party not an inhabitant of or found within the state." Omni points out that, prior to this Court's recognition in Curran of an implied private cause of action, all other civil actions under the CEA explicitly authorized nationwide service of process. See § 6c (in a Commodity Futures Trading Commission (CFTC) action, service authorized "wherever the defendant may be found"), § 6d(4) (in an action
by a state attorney general, service authorized "wherever the defendant may be found"), and § 14(d) (in enforcement action by a beneficiary of a CFTC order, service authorized "anywhere in the United States") of the CEA, as amended, 7 U.S.C. §§ 13a-1, 13a-2(4), and 18(d). Omni contends that this broad avenue for service is mandated by the importance of futures trading to the Nation as a whole. Since this Court concluded that a private right of action was intended as a "tool for enforcement," Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. at 456 U. S. 393, it must be given the same "dignity" as other enforcement provisions. Accordingly, Omni contends, nationwide service of process is also authorized for the implied private cause of action under the CEA.
Neither the majority nor the dissent in the Court of Appeals found that the CEA contained an implied provision for nationwide service of process in a private cause of action. We, too, decline to draw that inference. After the Curran decision, while the present litigation was still pending in the District Court, Congress enacted the Futures Trading Act of 1982, 96 Stat. 2294. That Act amended the CEA by adding § 22, 96 Stat. 2322, 7 U.S.C. § 25, which authorizes explicitly a private right of action for a violation of the CEA. Section 22, however, is silent as to service of process. This contrasts sharply with the other enforcement provisions of the CEA, on which Omni asks us to rely. We find it significant that Congress expressly provided for nationwide service of process in those sections, but did not do so in the new § 22. See Russello v. United States,464 U. S. 16, 464 U. S. 23 (1983). It would appear that Congress knows how to authorize nationwide service of process when it wants to provide for it. That Congress failed to do so here argues forcefully that such authorization was not its intention. Cf. INS v. Hector,479 U. S. 85, 479 U. S. 88-91 (1986).
The legislative history also supports the conclusion that Congress did not intend to provide nationwide service of process for private actions under the CEA. The House Report
on the Futures Trading Act of 1982 noted:
"The availability of -- . . . private rights of action -- supplements, but does not substitute, for the regulatory and enforcement program of the CFTC. . . . The Committee fully expects [it will] not become necessary to rely on private litigants as a policeman of the Commodity Exchange Act."
H.R.Rep. No. 97-565, pt. 1, p. 57 (1982). Thus, it is unremarkable that Congress enacted broader service provisions for CFTC actions than for private actions.
That the new § 22 of the CEA does not provide nationwide service of process does not end our inquiry, however, because Omni's cause of action accrued prior to the effective date of that section. See § 22(d), 7 U.S.C. § 25(d). Strictly speaking, Omni's argument may be that nationwide service is authorized under the implied cause of action recognized in Curran. This argument, however, is equally without force. See Gravois v. Fairchild, [1977-1980 Transfer Binder] CCH Comm. Fut.L.Rep.
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