OMNI CAPITAL INT'L v. RUDOLF WOLFF & CO.
Legal provision: Federal Rules of Civil Procedure, including Appellate Procedure (or relevant rules of a circuit court)
ORAL ARGUMENT OF ELLIOT PASKOFF, ESQ. ON BEHALF OF THE RESPONDENT
Chief Justice William H. Rehnquist: We will hear argument now on No. 86-740, Omni Capital International v. Rudolf Wolff & Company.
Mr. Kutcher, you may proceed whenever you are ready.
Mr. Kutcher: Mr. Chief Justice, may it please the Court:
This case addresses squarely the question of whether in a purely Federal question case arising under the Commodities Act against foreign nationals a Federal Court is bound by the state long arm statute in which it sits in determining whether the foreign national is subject to personal jurisdiction.
Ancillary to that issue is the question of whether in a private commodities claim there exists the same nationwide service standard as that found in other provisions of the Commodities Act.
The facts of the case are set forth in our brief.
They do not need to be repeated.
I do want to point out, however, to the Court that this is one of the so-called "Silver Straddle" cases which was argued in front of the Tax Court.
The Silver Straddle cases involved over 1400 United States taxpayers who, through trading in silver straddles, were attempting to shelter over $100 million.
The petitioners in this case were among those investors, Rudolf Wolff & Company and James Gourlay were among the London brokers who effected some of the trades.
Accordingly, there was a substantial participation by not only among these petitioners but about 1400 United States taxpayers, all involved in the same transactions.
The facts of the case present the Court with clear alternatives.
Under the Louisiana long arm statute, we have conceded that there are insufficient contacts to maintain this commodities fraud suit against Rudolf Wolff & Company and James Gourlay, one of whom is a British corporation, the other is a national of the United Kingdom.
However, it has also been determined that if one aggregates their contacts not only with the State of Louisiana, but throughout the United States, then there are sufficient contacts to subject them to suit under the Commodities Act.
The question which is presented here is what standard should this Court apply.
In essence, Your Honors, this case comes down to the application of Federal Rule Civil Procedure 4(e) and whether that procedural rule imposes a substantive standard on personal jurisdiction.
We submit that it does not and, as Judge Wisdom pointed out in his dissent in the Fifth Circuit opinion, Rule 4 is nothing more than a procedural rule designed for efficient housekeeping of the Federal Courts.
It was never intended nor should it be construed to impose substantive standards of personal jurisdiction.
Unidentified Justice: Do you think Rule 4(e) ever applies to a purely Federal question case?
Mr. Kutcher: Justice White, Rule 4(e) applies--
Unidentified Justice: Or it just doesn't apply when there is a foreigner involved?
Mr. Kutcher: --Well, Rule 4(e) applies for the purpose of the physical means of effecting service of process, not the amenability of the individual to the court's law.
Unidentified Justice: So, in a purely Federal question case, Rule 4(e) wouldn't apply at all if the question is the amenability of the defendant to service?
Mr. Kutcher: Yes, sir.
And I think that has to be the logical conclusion of the argument and I think... and I think your opinion, Your Honor, in Insurance Corporation of Ireland properly points out that the source for personal jurisdiction comes from the Fifth Amendment, comes from the due process clause, and 4(e), we submit is nothing more than the procedural means, the second half of determining whether or not you have got personal jurisdiction, but it doesn't effect the amenability.
This case involves foreign nationals and I certainly make the argument--
Unidentified Justice: Well, what if the state didn't have a long arm statute at all and there is just a purely Federal question case pending in a Federal Court?
Mr. Kutcher: --Yes, sir.
Unidentified Justice: Can you serve at all?
Mr. Kutcher: I think that if the state does not have a long arm statute then what you are faced with is whether or not it comports with the due process clause.
And, as you pointed out, the Fifth Amendment due process clause is the basis for personal jurisdiction.
So, yes, sir, I think you can.
The question is whether or not you can... the manner in which you physically effect that service I think, as Judge Wisdom said in his dissent, is something that can be fashioned on an ad hoc basis.
You do not need to have a specific provision in 4(e) to determine all methods of service of process, because Rule 82 and 83 permit the courts to fashion rules which are not inconsistent with the Federal Rules.
Unidentified Justice: Well, Mr. Kutcher, I think most decisions in this area have taken the position that Federal courts have only as much subject matter and personal jurisdiction as Congress gives them by affirmative grant.
Mr. Kutcher: Yes, ma'am.
Unidentified Justice: And under your theory, there would not be an affirmative grant of jurisdiction then.
Mr. Kutcher: Justice O'Connor, a personal jurisdiction.
Unidentified Justice: Yes.
Mr. Kutcher: You are correct.
And that is the conclusion of our theory that the courts... the Federal courts, the courts of limited jurisdiction, that is that Congress will only create those statutes and you do not have the authority to hear that case.
But with respect to personal jurisdiction, with whether or not you can bring somebody in to hear a case, that comes either from the Fifth Amendment insofar as Federal question cases--
Unidentified Justice: Well, I suppose the weight of authority might be against you on this point; wouldn't it?
Mr. Kutcher: --Yes, ma'am.
I can't do anything about that.
Unidentified Justice: Well, it is very difficult to say that the Fifth Amendment is a source of authority to serve process.
The Fifth Amendment is a restriction on the authority of government.
Mr. Kutcher: Yes, sir.
Unidentified Justice: So, why do you say the Fifth Amendment is a source of authority?
Mr. Kutcher: Our argument is that the Fifth Amendment requires that there be due process in bringing someone into a court.
That is whether--
Unidentified Justice: But it's not.
The Fifth Amendment, you agree, is not an affirmative grant of authority to anyone.
Mr. Kutcher: --Yes, sir.
I do, Chief Justice Rehnquist.
And I can't argue that point with you, either.
Our position is that the due process clause of the Fifth... if there were no, as Justice White asked me: If there were no state long arm statute, I think that a state under the Fourteenth Amendment, not under the Fifth Amendment, can bring someone in, determine personal jurisdiction based on the limits of the Fourteenth Amendment.
In fact, as the Court knows there are some state statutes which simply say if it is okay under the Fourteenth Amendment, you can do it.
Unidentified Justice: If a state doesn't have a long arm statute it means that its courts... you may never bring in a non-resident into its courts.
Why shouldn't Rule 4(e) then govern that?
You can't bring him in in a Federal court, either.
Mr. Kutcher: Well, that relates to the question of whether or not... the distinction that I'm making, Justice White, is the distinction between the amenability to jurisdiction and the physical means of service of process.
And I think you can't bring them in based on--
Unidentified Justice: I know, but the state says that... the state law is that you just may not serve this person at all.
You just may not even try to bring him in.
He is just not amenable to the service of process for the purposes of a state court suit.
Now, why shouldn't the Federal court follow that under 4(e)?
Mr. Kutcher: --Because this is a Federal question case and the authorities and the authority under which a Federal court is acting in a Federal question case stems from the Commodities Exchange Act and not from state action.
And that is precisely the argument that we are making: that in this particular instance the authority under which the court is acting has no relationship to what jurisdiction or what state the District Court is sitting in.
To do otherwise would permit a disparity in treatment, depending on a state's long arm statute.
To do otherwise would permit a foreign national who, as in this case, has been found to have adequate contacts throughout the United States, but insufficient contacts in any one state to avoid ever having to answer on the merits of whether or not any commodities fraud was committed or not committed.
Unidentified Justice: Mr. Kutcher, there are some Federal statutes in which Congress has expressly adopted a provision such as you would have us apply here without an express provision.
Mr. Kutcher: Yes, ma'am.
Unidentified Justice: So, I guess, under your view, all those affirmative grants of jurisdiction on a national basis by Congress are superfluous.
They are not necessary.
Mr. Kutcher: Well, I think that--
Unidentified Justice: Isn't that right?
Mr. Kutcher: --Insofar as a claim against foreign nationals is concerned, I think that the standard is--
Unidentified Justice: Well, you think that that action by Congress is just not necessary.
Mr. Kutcher: --Insofar as claims against foreign nationals are concerned because the source of the authority comes from the due process clause of the Fifth Amendment.
Unidentified Justice: There you go again and say the source of the authority comes.
Mr. Kutcher: Yes, sir.
Unidentified Justice: The source of the authority has to come from somewhere else.
Where does it come from?
Mr. Kutcher: Well, I think it comes from whether or not it meets the traditional notions of fair play and justice that this Court has adopted over the past 50 years.
Unidentified Justice: Are you saying then that we can presume that Congress wished to reach out in every Federal question cause of action to the limits of the due process clause?
Mr. Kutcher: I don't think you have to make that presumption, Chief Justice Rehnquist.
I think that the due process clause on its own permits you to determine whether or not you meet the standards of traditional justice and fair play.
Unidentified Justice: Of course.
But there is always the question entirely apart from the constitutional limitation whether the person having the authority wishes to exercise it.
And that is the intimation I drew from Justice O'Connor's question is that Congress in several sections of the Securities Act has indicated: Yes, we do want to reach as far as we can.
But you say that you don't need any indication like that from Congress because in every case they have created a Federal question claim, they are going to be presumed to want to reach as far as they can.
Mr. Kutcher: I think that under, I think that under 4(e) as was argued by Judge Wisdom in the dissent in the Fifth Circuit that Congress in a case... in the case of this nature involving what has been in the legislative history deemed to be something of significant importance to the enforcement of commodities actions would permit the extension of a nationwide service of process.
Now, that I will address a little bit later if the Court doesn't mind regarding the application in Commodities Act, but it seems to me that if you take a look at the origin of the way the Commodities Act was originated and the history revolving around the Commodities Act that it is clear that a commodities action was designed to prohibit the very same abuses which the securities laws 50 years earlier were designed to prohibit.
And, under those circumstances, we submit that there should certainly with regard to commodities actions be a nationwide service standard for service of process.
Unidentified Justice: Rule 4(e) says that whenever a statute of the United States or an order of the Court provides for service of summons, then you will serve the summons that way.
What is the... what does the reference to an order of the Court mean?
Mr. Kutcher: I think it refers to local rules or to rules which the courts--
Unidentified Justice: You mean a Federal Court in a Federal question case could, where a statute does not provide for a service, just enter an order in that particular case providing for serving of process?
Mr. Kutcher: --To effect the physical means of notifying a defendant of the pendency of an action in a jurisdiction.
And that is exactly what happened in the Petro Shipping case.
Unidentified Justice: Well, what about amenability?
Mr. Kutcher: On amenability, it comes down to the standard of whether or not you meet the traditional notions of fair play and justice.
Unidentified Justice: Well, could an order, could just... I just don't know why the rule has a reference to an order of the Court.
Mr. Kutcher: Well, it seems... my interpretation of that, Your Honor, is that it authorizes and incorporates Rule 83 where the Court has the authority to enter rules as long as they are not inconsistent with the Federal Rules of Civil Procedure.
And that is how I interpret that particular provision.
Unidentified Justice: Well, it could be, too, couldn't it to authorize substitute service, substitute service of process where one method has been tried and the person can't be found at the address?
That was the practice in Arizona.
Mr. Kutcher: Yes, sir.
I think that is another alternative that could apply.
Unidentified Justice: Mr. Kutcher?
Mr. Kutcher: Yes.
Unidentified Justice: If the Congress is not using the manner of service as a shorthand for prescribing what the reach of personal jurisdiction is, then why is it that when the manner of service is improper, the suit is dismissed for want of jurisdiction?
Isn't that what happens?
Is it dismissed for procedural--
Mr. Kutcher: The suit is dismissed for insufficiency of service of process.
And the process is fair--
Unidentified Justice: --That is not a jurisdictional defect?
Mr. Kutcher: --It is not a personal jurisdictional defect, no, sir.
I think it is dismissed for insufficiency of service of process.
And I think if you can properly--
Unidentified Justice: Well, what other kinds of jurisdictions are there other than jurisdiction over the person and the subject matter?
Mr. Kutcher: --That's it.
But what I am suggesting--
Unidentified Justice: So, you are saying that all these dismissals because of improper service really are not jurisdictional--
Mr. Kutcher: --They are not necessarily.
I think that they are separately addressed under Rule 12(b).
You can bring a motion to dismiss for a lack of personal jurisdiction or you can bring a motion for insufficiency of service or insufficiency of process.
So, the Federal Rules contemplate a distinction between personal jurisdiction and service of process.
And I think what has happened... and I can't argue with Justice O'Connor that the courts have done this... is somehow they have adopted a substantive constitutional basis and incorporated that into the procedure of Rule 4 for obtaining service of process.
Unidentified Justice: --What if you have an improper service of process and the point is not noted by the defendant, the case goes on to judgment and that judgment is then sued on somewhere else.
Mr. Kutcher: That's waived.
As I appreciate 12(b) the only thing that you can't waive is subject matter jurisdiction.
You can waive personal jurisdiction and you can waive the service of process, Your Honor.
And I think that, as in this case, if you don't file a motion to dismiss for--
Unidentified Justice: The individual never appears.
Mr. Kutcher: --And if you've got good service and the individual never appears and the default is taken, I don't think you can collaterally--
Unidentified Justice: Improper service.
Improper service and the individual never appears and judgment is entered nonetheless?
Mr. Kutcher: --As I appreciate it, you would have to come back and argue the same way you would in any other default.
The service... the question of the propriety of service is waived if it is not asserted under Rule 12(b).
Unidentified Justice: There is jurisdiction over the person, then, right?
Mr. Kutcher: I think so.
Unidentified Justice: How do you waive it by not appearing?
Mr. Kutcher: --Well, the same way that you would if you don't assert it, you waive it.
And if you appear, Judge.
It seems to me--
Unidentified Justice: Well, that is a rather extreme position.
Say the defendant never even heard of the lawsuit.
Mr. Kutcher: --Well, then he has got the same remedies available to him--
Unidentified Justice: Well, he has some remedy other than 12(b)?
Mr. Kutcher: --Yes, sir.
Unidentified Justice: Well, what is the difference if you have never heard of it and you are improperly served?
What is the distinction?
When is an improper service waived and when isn't it?
Mr. Kutcher: I think an improper service is waived if... I think an improper service such as would be dismissable under Rule 12(b) would be waived in any instance that any other 12(b) motion would be waived.
Unidentified Justice: Even if he never even heard of the fact that a lawsuit had been brought against him?
Mr. Kutcher: Well, if he never heard of it--
Unidentified Justice: How could he waive?
Mr. Kutcher: --then I assume, then I would assume that when they went to try to collect on the judgment he would have remedies available to him.
Unidentified Justice: Well, he hears about it when they collect on the judgment, but the time to file a 12(b) motion is long gone.
Mr. Kutcher: I think that is something that is addressed, frankly, to the discretion of the trial court as to whether or not there was... whether he should have known about it or not.
But that really--
Unidentified Justice: Do you have any cases for this rather novel approach?
Mr. Kutcher: --No, sir, because I didn't plan on getting on the question of whether or not a default was taken.
I think we are taking the position that under the... that Rule 4 simply prescribes the method by which you physically notify someone of a suit.
Rule 4, by its own language, says service may be made under the circumstances which we argue and which Judge Wisdom and five other Circuit Court judges in the Fifth Circuit, viewed to be discretionary, not the mandatory method of if you can't do it this way, you can't do it at all, but simply, you can another route.
And the whole basis should be whether or not the presence of the defendant in the Federal Court is such that it does not offend the traditional notions of fair play and justice.
Unidentified Justice: Well, you mentioned earlier, I think, that a source of authority to fashion the service of process rule is 83.
Mr. Kutcher: Yes, sir.
Unidentified Justice: Which deals with local rules; doesn't it?
Mr. Kutcher: As I understand it it deals with--
Unidentified Justice: Beyond that?
Mr. Kutcher: --Yes, sir.
As I appreciate it and again as the dissent pointed out and as was determined in the Petro Shipping case which is cited in Judge Wisdom's dissent that the Court has the... the Federal District Court has the authority to effect a method by which service is obtained.
And what we are submitting--
Unidentified Justice: But if it is on alien defendants lack minimum contacts with the states, it nevertheless has to be sufficient national contacts?
Mr. Kutcher: --Oh, absolutely.
Unidentified Justice: To be amenable jurisdiction under the Fifth Amendment.
Mr. Kutcher: Absolutely.
Unidentified Justice: So, to that extent, your submission is not as broad as I thought you were referring--
Mr. Kutcher: Oh, no.
I'm not suggesting that.
What I am suggesting is that in Federal question cases, which the Commodities Act certainly is, and certainly in cases involving foreign nationals.
And, if you look at the national contacts cases which have been decided, which are cited in our brief, they all talk about... one of the factors that we--
Unidentified Justice: --Let me ask you one question, Mr. Kutcher.
Mr. Kutcher: --Yes.
Unidentified Justice: To the extent that you rely on Rule 83, does that mean that the District Court in New Orleans can have a rule saying: We want to go to the full extent of the Fifth Amendment in these cases.
And Western District in Shreveport can say: Well, no, we don't think we will go that far.
I mean is it 93 different rules for 93 different districts?
Mr. Kutcher: I think the authority is such that--
Unidentified Justice: Well, what authority?
Mr. Kutcher: --I think that the argument that we are asserting, Chief Justice, is that under the... that the Federal Rules should not substantively effect the rights of a plaintiff to maintain an action against a foreign national.
Judge Wisdom analogized the state long arm statute to the national contacts theory in cases involving foreign nationals.
And I think that is a pretty fair analogy.
Unidentified Justice: Well, now, are you going to get back to my question about Rule 83?
Mr. Kutcher: Well, I think that 83 just permits you to fashion... no, I don't think that you can have 93 different rules.
Unidentified Justice: So, how do you determine which rule is right in the various districts?
Mr. Kutcher: I think as long as the rule is in compliance--
Unidentified Justice: In compliance with what?
Mr. Kutcher: --With the limits of what is permitted under the Fifth Amendment.
Unidentified Justice: Well, then you say that every district has to promulgate a rule that goes as far as the Fifth Amendment permitted.
Mr. Kutcher: Well, every district has, I think... I think the Federal Courts have that authority.
Unidentified Justice: What if one particularly, the Chief Judge up in Shreveport says: I may have that authority, but I just don't choose to exercise it.
That is not the way I read this statute.
Mr. Kutcher: Chief Justice, I think that under those circumstances that there would be some sort of appellate review.
I can't answer your question specifically because it seems to me that the likelihood, frankly, of 93 different opinions as to what they can do or what a District Court judge can do--
Unidentified Justice: It is not what they can do, it is what they choose to do.
The Chief Justice's question focuses on the fact that Rule 83 is not mandatory.
It says that in cases not provided for by rule, they may regulate their practice in any manner not inconsistent with these rules.
Now, it wouldn't be inconsistent to assert the full scope of jurisdiction that you assert exists, but it also would not be inconsistent to assert something less than that.
So, how would you be reversed if you chose to exercise less than that?
Mr. Kutcher: --In thinking about it, I think, as Mr. Lee did this morning, I think that I have got to change my response and say that as long as it is constitutional a District Court judge can do anything which is permitted under the Fifth Amendment--
Unidentified Justice: So, you can have 93 different rules.
Mr. Kutcher: --Theoretically, you can have 93 different rules.
I think... but the venue provisions which are going to limit where you can maintain an action regardless of personal jurisdiction are going to have an effect here as well.
And that is something that I think needs to be addressed.
As the Fifth Circuit has held in several cases, the Federal Courts have never had to fashion a personal jurisdiction basis because your strict venue requirements dictate that you can either bring your action where the plaintiffs reside or the cause of action arose where the defendants reside, depending on whether or not you have got diversity of Federal question jurisdiction.
And under those circumstances, I think the limitation, if you will, on the power of a Federal District Court stems from the venue provisions and not from the personal jurisdiction basis.
And that is the argument which we are asserting: that venue is what is going to limit the hailing of a foreign national, such as Rudolf Wolff & Company, into a court where there wouldn't... where the court may have the personal jurisdiction and it may be constitutional and it may meet traditional notions of fair play, but it simply is not the proper venue.
And you have got to shop elsewhere.
Unidentified Justice: You say that 4(e) just deals with the manner of service of process and never in any action doesn't go to amenability of service outside the state.
Mr. Kutcher: I think that, yes, sir.
That's my argument and 1 think that in Federal--
Unidentified Justice: And so, I suppose you would say Federal District Court could by rule say that when the suits are against non-residents service of process may be had on those people to the extent the Fifth Amendment will allow.
Mr. Kutcher: --And I think... yes, sir.
Unidentified Justice: And provide the method.
Mr. Kutcher: And provide the method.
And I think that is accurate.
Unidentified Justice: And without having to worry about Rule 4(e).
Mr. Kutcher: That's exactly right.
And that's the national contacts theory.
You look to the basis of the foreign nationals contacts with the entire United States.
And this Court has held in at least one case that in terms of foreign relations that this is one country.
It is not 50 separate states.
It is not 50 separate autonomous units.
It is one country with regard to foreign nationals.
I think that standard applies.
And I think it particularly applies in a case of this nature in an action which is a commodities fraud case which was initially filed as a securities fraud claim.
The irony is that this lawsuit when it was initially filed, was filed as a securities fraud claim.
No dispute that Section 27 permits nationwide service of process.
Subsequently, the case is amended to include a commodities fraud claim, then it is determined that the commodities remedy is the exclusive remedy.
And, now, all of a sudden, these Petitioners, who when the suit was filed had service of process against Rudolf Wolff & Company and against James Gourlay, all find themselves relegated to the state remedy, the Louisiana state long arm statute to determine whether or not they have got jurisdiction over the foreign nationals.
They went from no contest as to having it to being relegated to the state claim simply... and the facts, and the underlying facts of causes of action never changed.
And under those circumstances, we believe that insofar as this cause of action is concerned that a nationwide national contacts theory should apply and that Rudolf Wolff and James Gourlay have both been found to have national contacts with the United States, although not with the State of Louisiana.
And I will reserve the rest of my time for rebuttal.
Thank you, Your Honors.
Chief Justice William H. Rehnquist: Thank you, Mr. Kutcher.
We will hear now from you, Mr. Paskoff.
Mr. Paskoff: Mr. Chief Justice, and may it please the Court:
To address the limitations of personal jurisdiction in Federal Courts over non-residents, I think we should start in the beginning.
Pursuant to Article 3, Section 1 of the Constitution, it is Congress that is ordained... that may ordain and create the lower Federal Courts.
Our Federal Court system is a creature of Congressional grant as a limited... as a court of limited jurisdiction, our Federal District Courts may not create their own jurisdictional premise.
If we delve back into history, we find that the members of this nation's First Congress were concerned with pre-revolutionary oppressiveness of causing persons to travel long distances to settle their disputes.
Unidentified Justice: Mr. Paskoff, before you get into your legal argument, could you help me on one factual matter?
Mr. Paskoff: Yes, sir.
Unidentified Justice: Your opponent indicated at the end of his argument something I hadn't really quite understood.
That the London parties who deny personal... who claim there is no personal jurisdiction over them, were subjected to the personal jurisdiction of the court while it was a Securities Act claim and then they subsequently claim there was no jurisdiction.
I had thought they were brought in as Third Parties after the Securities Act--
Mr. Paskoff: Your Honor, what has happened is in the original Point Landing litigation, one of my clients, Rudolf Wolff & Co., Ltd.
, was named as a direct party.
That Defendant moved to dismiss for failure to assert impersonum jurisdiction under Section 27.
We never conceded that we were subject to the jurisdiction of the Federal District Court in Louisiana pursuant to Section 27.
The reason why we never conceded that, Justice Stevens, is that the assertion of personal jurisdiction over a non-resident is a dual-pronged requirement.
And these are not parallel prongs.
The initial prong is you require a statutory grant from Congress--
Unidentified Justice: --You had it in Section 27.
Mr. Paskoff: --Yes, but then you had the next step.
The next step was whether or not that statutory grant as applied comports with traditional notions of fair play and substantial justice.
Unidentified Justice: Whether your contacts with the whole country were adequate.
Mr. Paskoff: Exactly.
Now, understanding the--
Unidentified Justice: And that motion was never decided.
Is that right?
Mr. Paskoff: --Your Honor, that motion... that motion was decided... the motion was decided and that was Point Landing 1.
In Point Landing 1, the Federal District Court held that there was impersonum jurisdiction.
Unidentified Justice: So, then your client was before the court.
Mr. Paskoff: Yes.
But we also argued at that time, Your Honor, that the Commodities Act as amended in 1974 granted exclusive jurisdiction... I know this is not part of this petition, but we did argue that it granted exclusive jurisdiction through the Commodity Futures Trading Commission and to the Federal District Courts.
Unidentified Justice: But if you had lost on that argument, your client would have been before the court?
Mr. Paskoff: If I had lost under that argument, we would have been before the court.
Unidentified Justice: And, of course, if the District Court was right on the contacts rule.
Mr. Paskoff: That is correct.
Under Section 27 of the Federal Securities--
Unidentified Justice: What if the District judge had deferred ruling on your pre-emption argument or the, you know, that there's no Securities Act claim here, until the end of the Plaintiffs' case, something like that.
And then they had said,
"Well, I was wrong. "
"I never should have gone to trial on the Securities Act because there is just no... it has been preempted by the Commodities Exchange Act. "
Would you still be able to get out on your present jurisdictional theory, do you think?
Mr. Paskoff: --I believe so, Your Honor.
Unidentified Justice: After the case is half tried?
Mr. Paskoff: Because if the Commodities Exchange Act has preempted the regulation of commodities futures trading, then Section 27 does not apply because the commodity... because the Securities Exchange Act is not applicable to determining the duties and liabilities involved with trading of commodity futures.
Unidentified Justice: What if instead of the preempt, the argument that the Commodities Act superceded the other, you had simply persuaded the District judge that it didn't state a cause of action under the Securities Act and, yet, you were properly before... if you were before the court on the Securities Act, I presume they also could have tried the commodities exchange claim at the same time.
You can't have a pending jurisdiction motion.
Mr. Paskoff: Well, I understand what you are saying, Your Honor, except Congressional history has clearly indicated that the Commodity Exchange Act preempts--
Unidentified Justice: Well, I understand that.
But at least that he had the right to bring you before the court and require you to make that argument to the court and demonstrate that there really is no valid claim under the Securities Act.
Mr. Paskoff: --That is correct.
Unidentified Justice: So, you were, for a brief period of time at least, subject to the jurisdiction of the Louisiana court.
It's a kind of a puzzle.
I don't know what... they haven't really argued this, but I have to confess I don't quite understand it.
You don't really want to give that pendant jurisdiction necessarily applies to jurisdiction over the person as well as it applies to jurisdiction over subject matter?
Mr. Paskoff: That's correct.
Part of the second prong of the Petitioners' request to this Court is to ask for an implication of nationwide service of process under the Commodity Exchange Act.
Congress has had three separate opportunities within the last 12 years to speak on the subject of nationwide service of process.
In 1974, the Commodity Futures Trading Commission Act was enacted and it specifically conferred nationwide service of process under Section 13(a)(1) on the Commodity Futures Trading Commission.
It similarly conferred nationwide service of process on the sister states' attorney generals under Section 13(a)(2).
Nowhere was there a mention that there was a nationwide service of process for private litigants.
This Court decided Merrill Lynch v. Curran in 1982, holding that a private right of action exists under the Commodity Exchange Act.
In 1982, the Futures Trading Act amending the Commodity Exchange Act expressly provided for a private right of action by a private litigant aggrieved under the Commodity Exchange Act.
That was the perfect place if Congress had so intended to assert a nationwide service of process clause for private litigants.
That Act is silent.
That provision does not provide for nationwide service of process in enforcing private claims.
Congressional history with respect to the enactment of Section 25 in 1982 indicates that Congress recognized... the Agricultural Committee of the House stated that Congress does not intend to rely upon private litigants as the policemen of the Commodity Exchange Act.
More recently, Congress enacted the Futures Trading Act of 1986 which among other provisions granted to the Commodity Futures Trading Commission the power to serve extra-territorial subpoenas beyond the United States' territories.
In the conference committee report relating to that provision, the conference committee has instructed the Commissioners that prior to the issuance of a pre-complaint investigatory subpoena they must confer with the Department of State in order to meet with representatives of the receiving nation so as not to cause a perception of intrusion on the sovereignty of the receiving nation.
It is not surprising in light of the caution and sensitivity expressed by Congress in dealing with aliens under the Commodity Exchange Act that a restrictive scope of personal jurisdiction has been defined because Congress simply cannot restrain private litigants in their dealing with aliens.
So, we are left with the statutes, the Commodity Exchange Act.
It has in some sections grants of nationwide service of process with respect to the Commodity Futures Trading Commission and in other sections relating to private action, there is no such language.
This Court has observed in Russello v. United States as a matter of constitutional construction that where Congress includes particular language in one part of the statute but omits that language in another section of the statute, it will be presumed that that omission was intentional and deliberate.
The basic assumption is that Congress knows how to write its statutes.
I think the likely inference that I draw is that Congress did not intend to grant extra-territorial jurisdiction as a weapon to private litigants.
For that reason, I would urge this Court to reject the request by the Petitioners to imply a nationwide service of process clause under the Commodity Exchange Act.
Unidentified Justice: It seems to me that argument would also demonstrate that Congress didn't intend any cause of action to be implied.
Mr. Paskoff: Your Honor, not necessarily.
And the reason... I am quite familiar with your decision in Merrill Lynch v. Curran.
The Congressional intent relied upon by the majority seemed to want to preserve a private right of action which existed by case law prior to the enactment of the Commodity Futures Trading Commission Act of 1974.
There was a private right of action by case law.
So all that decision does is preserve.
Congress did not intend, Congress did not specifically intend to eliminate that private right of action.
When a Federal statute is silent as to a provision for nationwide service of process, Rule 4(e) instructs us how to obtain impersonum jurisdiction over a non-resident.
1963, we had 4(e) amended to the Federal Rules of Civil Procedure.
It used the language,
"Service of process may be made under the circumstances and in the manner prescribed by the statute or rule of the state where the District Court is sitting. "
The commentators including the reporter to the Advisory Committee in 1963 have indicated that it was the intent to incorporate by reference the state's standard of amenability to personal jurisdiction.
There is no other reason to include the language under the circumstances but for to include the state standard of personal jurisdiction.
Thus, if Respondents Wolff and Gourlay were amenable to the impersonum jurisdiction of the Louisiana long arm statute, then they would be amenable to the impersonum jurisdiction of the Federal District Court under 4(e).
Petitioners concede and this can be found at page 50 of the joint appendix.
Petitioners concede and Plaintiffs concede that there is no personal jurisdiction under the Louisiana long arm statute.
What concerns me is an implication of nationwide service of process under the Commodity Exchange Act.
If that were to be granted today would, by analogy, be applicable to every single Federal question statute which is silent as to service of process.
I do not believe that that is what Congress intended.
Mr. Chief Justice, if any Member of the Court has a question for me, I would respond.
Otherwise, I will sit.
Chief Justice William H. Rehnquist: Thank you, Mr. Paskoff.
Mr. Kutcher, you have four minutes remaining.
ORAL ARGUMENT OF ROBERT A. KUTCHER, ESQ. ON BEHALF OF PETITIONERS -- REBUTTAL
Mr. Kutcher: First, I will respond to Justice Stevens' inquiry regarding what happened in the District Court below.
The District Court judge did find that there existed adequate national contacts based on... for Mr. Rudolf Wolff and Mr. James Gourlay, and held that he had personal jurisdiction.
Subsequently, the Fifth Circuit in DeMelo came out and said: You have to look to the state statute under 4(e).
And that was when they came back for motion for reconsideration.
And the District Court judge reversed himself based on the DeMelo decision, but there was no question that the judicial determination after discovery as to the contacts found that there weren't adequate national contacts.
The national contacts theory in Federal question cases I think has application here and, as Judge Wisdom indicated in dissent, in the appellate court opinion, is something which the court should consider in Federal question cases.
Mr. Paskoff's argument that what is going to result are rampant lawsuits everywhere in all Federal question cases ignores what I alluded to in my argument in chief and that is the venue provisions of the United States Code which will limit where litigation can take place.
Before 1963, this Court in International Shoe and its successors determined that all that is required is traditional notions of fair play and justice.
The argument that a rule of procedure which has been described as a housekeeping rule should somehow control the rights of a Federal litigant in a Federal cause of action in a Federal court is something which places procedure over substance.
This is a commodities fraud claim.
The exclusive place to bring it is in the United States District Courts.
And the effect of the Fifth Circuit decision is to insulate the foreign aliens from any action in any District Court because they don't have adequate contacts with that particular district, although there is no question that they have contacts with the entire country.
I thank Your Honors for your time.
If you have got any questions, I will be happy to answer them.
Chief Justice William H. Rehnquist: Thank you, Mr. Kutcher.
The case is submitted.
Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 86-740, Omni Capital Investment versus Rudolf Wolff & Company will be announced by Justice Blackmun.
Argument of Justice Blackmun
Mr. Blackmun: This case comes to us by way of certiorari to the United States Court of Appeals for the Fifth Circuit.
It does not lend itself well to announcement from the Bench and I think it will be suffice to say that the primary issue is whether a Federal Court in Louisiana had personal jurisdiction over a British Corporation and the person who is a citizen of the United Kingdom.
The District Court and the Court of Appeals ruled that personal jurisdiction was lacking and that the requirements of the Louisiana long-arm statute were not met.
We affirm that judgment.
The requirement of personal jurisdiction here flows from the Due Process Clause of the Fifth Amendment and noticed to the defendant and the constitutionally sufficient relationship between the defendant and the four or more not in themselves enough.
The defendant also must be amenable to service of summons, and we refrained from treating judicially a common law rule that authorizes service in this litigation, and that responsibility we feel rest with those who proposed the Federal Rules of Civil Procedure and with Congress.
The opinion is unanimous.