Civil Procedure Notes Page 10

LAW 5301 (4 credits)
Professor Pedro A. Malavet

Civil Procedure Page 10

VIII. Personal Jurisdiction

A. Minimum Contacts

By way of introduction to International Shoe, I discussed Pennoyer.

Jurisdiction over the Person or the "Thing"

(1) Personal Jurisdiction: acquiring jurisdiction over the individual, be it a real or legal person.

(2) In Rem: Jurisdiction over the "thing". The court has jurisdiction to determine matters related to title to that property.

(3) Quasi in rem: Also over the "thing", a hybrid, it is a claim against a person, but limited to the value of the property within the court's jurisdiction. E.g., trying to enforce a money judgment of $200K, by taking a $100K bank account belonging to a non-resident judgment debtor.

NOTE: Either In rem or quasi in rem can apply to either real or personal property. I did a poor job of explaining In Rem vs. Quasi In Rem today. We will discuss it in detail when we reach Shaffer v. Heitner in a few days.

Territoriality Principle: Traditionally, after Pennoyer v. Neff and prior to that under the territoriality principle, a court could acquire jurisdiction over a person only in two ways: (1) Personal service on the party within the state; (2) Voluntary appearance by the party.

INTERNATIONAL SHOE CO. v. WASHINGTON [686]

The questions for decision are (1) whether, within the limitations of the due process clause of the Fourteenth Amendment, appellant, a Delaware corporation, has by its activities in the State of Washington rendered itself amenable to proceedings in the courts of that state to recover unpaid contributions to the state unemployment compensation fund exacted by state statutes, *** and (2) whether the state can exact those contributions consistently with the due process clause of the Fourteenth Amendment.

[689] But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." Milliken v. Meyer

[The demands of Due Process] Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there. An "estimate of the inconveniences" which would result to the corporation from a trial away from its "home" or principal place of business is relevant in this connection.

[1] "Presence" in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept service of process has been given. [2] Conversely it has been generally recognized that the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation's behalf are not enough to subject it to suit on causes of action unconnected with the activities there. * * *

[3] While it has been held in cases on which appellant relies that continuous activity of some sort within a state is not enough to support the demand that the corporation be amenable to suits unrelated to that activity, Old Wayne Mut. Life Ass'n v. McDonough, [204 U.S. 8], there have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.

[690] [4] Finally, although the commission of some single or occasional acts of the corporate agent in a state sufficient to impose an obligation or liability on the corporation has not been thought to confer upon the state authority to enforce it, * * * other such acts, because of their nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit.

Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.

But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.

The obligation which is here sued upon arose out of those very activities.

Justice Black [Doing God Knows What (concurring in the result, but with contempt for the majority's rationale)]:

I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts", a power to tax and to open the doors of its courts for its citizens to sue corporations whose agents do business in those States.

Problems at pages 716-717 (Added March 22, 2009)

In this area, you want to start to get used to the categories of (1) No Personal Jurisdiction, (2) Specific Personal Jurisdiction and (3) General Personal Jurisdiction and what factors determine the case's positioning in any of these categories. After the graphics, you will find my discussion of the possible solutions of the problems.

(b) An Oregon resident visiting in Washington buys a pair of International Shoe shoes at a shoe store in Seattle, takes them home to Oregon, and is injured there due to an alleged defect in the shoes. Can he sue International Shoe in Oregon to recover for his injuries? Can she sue in Washington?
Unlikely in Oregon.
In Washington you have two factors that create problems: (1) The injury did not occur in Washington, and (2) Washington state has less of an interest in opening its courts to Oregon citizens, as compared to its own. But counterarguments may be made and Washington would be a better forum than Oregon.

(c) A Washington resident visiting in St. Louis buys a pair of International Shoe shoes there, takes them home to Washington and is injured there due to an alleged defect in the shoes. Can he sue International Shoe in Washington to recover for his injuries?
Specific Jurisdiction?
No link between claim and forum activities, therefore suit likely not appropriate.

(d) An Oregon shoe retailer meets with International Shoe salesmen in Seattle and places an order for 100 pairs of International Shoe shoes. International Shoe accepts the order and ships the shoes to Oregon. The retailer sells some, and customers who discover defects in the shoes return them. Can the Oregon retailer sue International Shoe in Oregon to get back the money she paid for the shoes and to recover damages for injury to his business reputation?
Maybe, Specific Jurisdiction.
CON: No showing of continues and systematic if a single sale, and single sale seems small.
PRO: voluntary reaching out to Oregon and stronger interest by the state to regulate such activities and open courts to its home businesses and citizens.

(e) Assume the Oregon retailer in the previous example had not paid for the shoes when she received the complaints and that she then refused to pay. Can International Shoe sue her in St. Louis for payment? In Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 43 S.Ct. 170, 67 L.Ed. 372 (1923), cited in International Shoe, an Oklahoma retailer of clothing which regularly purchased a large part of its merchandise from New York, was sued in New York when it failed to pay for some of the merchandise. The Court held that New York could not exercise jurisdiction. It reasoned that “[t]he only business alleged to have been transacted by the company in New York, either then or theretofore, related to such purchases of goods by officers of a foreign corporation. Visits on such business, even if occurring at regular intervals, would not warrant the inference that the corporation was present within the jurisdiction of the State.”
Sales v. Purchases. Sellers are treated more harshly than purchasers.

[CB-717]
(f) If one of the customers of the Oregon retailer in (d) above was injured in Oregon due to the alleged defects in the shoes, could he sue in Oregon to recover for his injuries? If so, would that affect the right of the Oregon resident in (b) above, who bought her shoes in Seattle, to sue in Oregon for injuries received there due to alleged defects in International Shoe shoes?
3-B, but with different emphasis. Retailer is less likely to be subjected to suit than the manufacturer. Why would that be?

[Note the repeated language that the obligations arise out of or are connected with the activities within the state.]

[Thus, as is indicated in the handout on In Personam Jurisdiction, there are three areas in the In Personam Jurisdiction argument:

(1) No jurisdiction, i.e., when there are no contacts or when contacts are so Casual or Isolated that the exercise of jurisdiction over the person would violate the Due Process clause;

(2) Specific Jurisdiction, when (a) a single act (e.g., an Auto accident, Hess v. Powloski, p. 682; Insurance Contract, McGee, p. 693), or, more commonly, Continuous and Systematic contacts with the forum, i.e., minimum contacts, (b) allow the courts of the forum state to exercise jurisdiction over claims that "arise out of or are connected with the activities within the state", International Shoe, p. 690. Please keep in mind that this is a two part test!

(3) General Jurisdiction. When contacts with the forum state are so Substantial or Pervasive to expose defendant to any type of suit, regardless of the relationship between the cause of action and the facts establishing presence.]

[GO TO GRAPHIC]

[COMPARE: McGEE and Hanson v. Denckla

[McGee: Lulu was allowed to enforce a California Judgment issued by a court that obtained personal jurisdiction over a non-resident defendant based on the sale of a single insurance contract in California.

[Note how the nature of cars in Hess, and the nature of business by mail in McGee seem crucially important. ]

[694-695] It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State. The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. When claims were small or moderate individual claimants frequently could not afford the cost of bringing an action in a foreign forum--thus in effect making the company judgment proof. Often the crucial witnesses--as here on the company's defense of suicide--will be found in the insured's locality. Of course there may be inconvenience to the insurer if it is held amenable to suit in California where it had this contract but certainly nothing which amounts to a denial of due process. There is no contention that respondent did not have adequate notice of the suit or sufficient time to prepare its defenses and appear.

[Note the interesting laundry-list of factors included above.]

Hanson: [696, The] Court found minimum contacts absent: "The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."

[Just as with Summary Judgment, and Judgment as a Matter of Law, the legal alternatives are clear, the question is, deciding in which pigeon-hole your case belongs.]

Long Arm Statutes

FACTORS:

• Volume of Contacts
• Systematic and continuos nature of contacts
• Balance of conveniences
• State interest in regulating defendant's conduct
• State interest in opening its courts to its residents
• Location of witnesses or evidence
• Foreseeability of suit in that forum

GRAY v. AMERICAN RADIATOR & STANDARD SANITARY CORP. [697].

Titan Valve Manufacturing Company The complaint charges, inter alia, that the Titan company, a foreign corporation, had negligently constructed the safety valve; and that the injuries were suffered as a proximate result thereof. Summons issued and was duly served on Titan's registered agent in Cleveland, Ohio. The corporation appeared specially, filing a motion to quash on the ground that it had not committed a tortious act in Illinois. Its affidavit stated that it does no business here; that it has no agent physically present in Illinois; and that it sells the completed valves to defendant, American Radiator & Standard Sanitary Corporation, outside Illinois. [698].

Section 16 of the Civil Practice Act provides that summons may be personally served upon any party outside the State; and that as to nonresidents who have submitted to the jurisdiction of our courts, such service has the force and effect of personal service within Illinois. (Ill.Rev.Stat.1959, chap. 110, par. 16.) Under section 17(1)(b) a nonresident who, either in person or through an agent, commits a tortious act within this State submits to jurisdiction. [698].

[What this means is that the Illinois Long-arm statute allows "substitute service" to be accomplished. Substitute service is any service other than personal service within the state. Therefore, service by mail, or personal service OUTSIDE the state, are substitute forms of service.]

The questions in this case are (1) whether a tortious act was committed here, within the meaning of the statute, despite the fact that the Titan corporation had no agent in Illinois; and (2) whether the statute, if so construed, violates due process of law. [698].

Only the consequences occurred in Illinois. It is well established, however, that in law the place of a wrong is where the last event takes place which is necessary to render the actor liable. Restatement, Conflict of Laws, sec. 377. A second indication that the place of injury is the determining factor is found in rules governing the time within which an action must be brought. In applying statutes of limitation our court has computed the period from the time when the injury is done. We think it is clear that the alleged negligence in manufacturing the valve cannot be separated from the resulting injury; and that for present purposes, like those of liability and limitations, the tort was committed in Illinois. [698-99].

In the case at bar the defendant's only contact with this State is found in the fact that a product manufactured in Ohio was incorporated, in Pennsylvania, into a hot water heater which in the course of commerce was sold to an Illinois consumer. [699].

Since the International Shoe case was decided the requirements for jurisdiction have been further relaxed, soo that at the present time it is sufficient if the act or transaction itself has a substantial connection with the State of the forum. [699].

* * * With the increasing specialization of commercial activity and the growing interdependence of business enterprises it is seldom that a manufacturer deals directly with consumers in other States. The fact that the benefit he derives from its laws is an indirect one, however, does not make it any the less essential to the conduct of his business; and it is not unreasonable, where a cause of action arises from alleged defects in his product, to say that the use of such products in the ordinary course of commerce is sufficient contact with this State to justify a requirement that he defend here. [700]

NOTES:

Please pay particular attention to note 2 at pages 701-701. In New York, the court initially interprets their analogous long-arm statute not to cover a case similar to Gray. But the Legislature immediately overruled this decision by enacting a statute dealing with effects within the state.

Evidently the New York Legislature found the general outcome in Gray more palatable, and soon after Feathers v. McLucas was decided it added a provision to its long-arm statute to cover tortious acts outside New York causing injury within, as long as defendant "expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." [701]. [Not how this language is, however, narrower than the holding in Gray].

PERSONAL JURISDICTION IN FEDERAL COURT [705]

[The question is: Should a person be subject to Personal Jurisdiction anywhere in the territory of the United States, when the forum is the Federal Court System?]

[705] Certainly one could reasonably surmise that these federal courts would not be subject to the same personal jurisdiction limitations as the courts of the states in which they sit, particularly since the 14th Amendment, with its due process clause, applies only to the states and not to the federal government (although the 5th Amendment due process clause does apply to the federal government).

[THE BASIC RULE:, 705] But the reality is different, and raises some extremely slippery issues. Rule 4(k)(1)(A) authorizes exercise of personal jurisdiction by a federal court only to the extent a state court of the state in which it sits, under the state's long-arm statute, could exercise jurisdiction.

[706] One important exception is that Congress has, in some instances, authorized nationwide service of process in specific statutes. See Rule 4(k)(1)(D). Many of these provisions are designed to facilitate the assertion of the claims created by the statutory scheme.

[706] Are there no constitutional protections against unfair inconvenience where nationwide service is permitted? Some have argued that the due process clause of the 5th Amendment, which does bind the United States, should be read to impose similar limitations on nationwide service.

[Other exceptions are covered by Rule 4(k)(1)(B) and 4(k)(2).]

Personal Jurisdiction: World Wide VW

World Wide Volkswagen v. Woodson [707].

[The plaintiffs are the Robinsons, but since this action seeks an order directed to a judge, the judge's name, Woodson, is in the title.]

The facts presented to the District Court showed that World-Wide is incorporated and has its business office in New York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. [708]

[Note the careful wording of the Oklahoma Long-arm statute at footnote 7, at page 708].

The relationship between the defendant and the forum must be such that it is "reasonable ... to require the corporation to defend the particular suit which is brought there." 326 U.S., at 317, 66 S.Ct., at 158. Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State's interest in adjudicating the dispute, see McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957); the plaintiff's interest in obtaining convenient and effective relief, see Kulko v. California Superior Court, 436 U.S., at 92, 98 S.Ct., at 1697, at least when that interest is not adequately protected by the plaintiff's power to choose the forum, cf. Shaffer v. Heitner, 433 U.S. 186, 211, n. 37, 97 S.Ct. 2569, 2583, n. 37, 53 L.Ed.2d 683 (1977); the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies, see Kulko v. California Superior Court, supra, 436 U.S., at 93, 98, 98 S.Ct., at 1697, 1700. [710].

Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment. Hanson v. Denckla, 357 U.S., at 251, 254, 78 S.Ct., at 1238, 1240. [711].

[711-712].They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma.

[712].This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. The Due Process Clause, by ensuring the "orderly administration [712-13] of the laws," International Shoe Co.* * * gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit. When a corporation "purposefully avails itself of the privilege of conducting activities within the forum State," Hanson v. Denckla, * * *, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. Cf. Gray * * *

[Note the discussion of Hess in footnote 11].

[713] It is foreseeable that the purchasers of automobiles sold by World-Wide and Seaway may take them to Oklahoma. But the mere "unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State." Hanson v. Denckla, [We really meant it in Hanson!]

[713-714] Respondents observe that the very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen service centers throughout the country, including some in Oklahoma. However, financial benefits accruing to the defendant from a collateral relation to the forum State will not support jurisdiction if they do not stem from a constitutionally cognizable contact with that State.

Calder v. Jones

The plaintiff's lack of "contacts" will not defeat otherwise proper jurisdiction, see Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779-81, 104 S.Ct. 1473, 1480-1482, 79 L.Ed.2d 790 (1984), but they may be so manifold as to permit jurisdiction when it would not exist in their absence. [723].

Keeton v. Hustler Magazine [724, n. 1]

[725] The Court reasoned that New Hampshire had a sufficient interest in redressing injuries that occurred within the state because its residents were allegedly misled about plaintiff, and that her reputation was harmed by these misrepresentations even though she was otherwise unknown in New Hampshire. Plaintiff's lack of contacts, although not irrelevant to the issue of state interest, did not foreclose jurisdiction.

Personal Jurisdiction: Burger King

BURGER KING CORP. v. RUDZEWICZ, 728

The State of Florida's long-arm statute extends jurisdiction to "[a]ny person, whether or not a citizen or resident of this state," who, inter alia, "[b]reach[es] a contract in this state by failing to perform acts required by the contract to be performed in this state," so long as the cause of action arises from the alleged contractual breach. [728].

Burger King alleged that Rudzewicz and MacShara had breached their franchise obligations "within [the jurisdiction of] this district court" by failing to make the required payments "at plaintiff's place of business in Miami, Dade County, Florida," and also charged that they were tortiously infringing its trademarks and service marks through their continued, unauthorized operation as a Burger King restaurant. [730].

The District Court denied their motions after a hearing, holding that, pursuant to Florida's long-arm statute, "a non-resident Burger King franchisee is subject to the personal jurisdiction of this Court in actions arising out of its franchise agreements." [731].

BURGER KING [This is my guide to the text that follows]

• 1. Due Process Clause (Protects)
• 2. Warning/Predictability/ Purposeful Availment (Substitute Physical Presence)
  • a. Fair Warning of
  • b. Predictability which allows defendant to taylor primary conduct accordingly
  • c. Purposefully directed activity to the forum
• 3. Specific Jurisdiction
  • a. Injuries arise out of or relate to activities
  • b. Out of state activities which injure forum consumers [in the forum?]

[CB-731-732] [1] The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful "contacts, ties, or relations." International Shoe Co. v. Washington, * * * [2-a] By requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," Shaffer v. Heitner, * * *, the Due Process Clause [2-b] "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit," World-Wide Volkswagen Corp. v. Woodson, * * *.

Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, this [2c] "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., * * *

[SPECIFIC JURISDICTION]

[CB-732] [3-a] * * * and the litigation results from alleged injuries that "arise out of or relate to" those activities, Helicopteros Nacionales de Colombia, * * * [3-b] Thus "[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in [of from] the forum State" and those products subsequently injure forum consumers. World-Wide Volkswagen Corp. v. Woodson

[Note how all the cases cited following this statement talk about "impact" or "effect" being felt within the forum state.]

[Be careful in evaluating the "reasonableness language in that follows, remeber that minimum contacts is a threshold question. See also footnote 25]

Nevertheless, minimum requirements inherent in the concept of "fair play and substantial justice" may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities. World-Wide Volkswagen Corp. v. Woodson, [734]

[The approach in contract cases is]

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 with 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. [735].

[In spite of a total lack of physical presence in, and direct communication with the state of Florida, the court finds minimum contacts, because]

Eschewing the option of operating an independent local enterprise, Rudzewicz deliberately "reach[ed] out beyond" Michigan and negotiated with a Florida corporation for the purchase of a long-term franchise and the manifold benefits that would derive from affiliation with a nationwide organization. Travelers Health Assn. v. Virginia, 339 U.S., at 647, 70 S.Ct., at 929. Upon approval, he entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida. In light of Rudzewicz's voluntary acceptance of the long-term and exacting regulation of his business from Burger King's Miami headquarters, the "quality and nature" of his relationship to the company in Florida can in no sense be viewed as "random," "fortuitous," or "attenuated."

The Court of Appeals concluded, however, that in light of the supervision emanating from Burger King's district office in Birmingham, Rudzewicz reasonably believed that "the Michigan office was for all intents and purposes the embodiment of Burger King" and that he therefore had no "reason to anticipate a Burger King suit outside of Michigan." * * * When problems arose over building design, site-development fees, rent computation, and the defaulted payments, Rudzewicz and MacShara learned that the Michigan office was powerless to resolve their disputes and could only channel their communications to Miami. Throughout these disputes, the Miami headquarters and the Michigan franchisees carried on a continuous course of direct communications by mail and by telephone, and it was the Miami headquarters that made the key negotiating decisions out of which the instant litigation arose.

"This Agreement shall become valid when executed and accepted by BKC at Miami, Florida; it shall be deemed made and entered into in the State of Florida and shall be governed and construed under and in accordance with the laws of the State of Florida. The choice of law designation does not require that all suits concerning this Agreement be filed in Florida."

[736].

[COMPARE THE Dissent, quoting the Circuit court]

"Nothing in the course of negotiations gave Rudzewicz reason to anticipate a Burger King suit outside of Michigan. The only face-to-face or even oral contact Rudzewicz had with Burger King throughout months of protracted negotiations was with representatives of the Michigan office. Burger King had the Michigan office interview Rudzewicz and MacShara, appraise their application, discuss price terms, recommend the site which the defendants finally agreed to, and attend the final closing ceremony. There is no evidence that Rudzewicz ever negotiated with anyone in Miami or even sent mail there during negotiations. He maintained no staff in the state of Florida, and as far as the record reveals, he has never even visited the state. [740].

The "quality and nature" of an interstate transaction may sometimes be so "random," "fortuitous," or "attenuated" that it cannot fairly be said that the potential defendant "should reasonably anticipate being haled into court" in another jurisdiction. [739]

[In other words, Bell South, a Georgia Corporation, cannot sue you, citizen of Florida, in Georgia, for failing to pay your telephone bill, simply on the basis of your contractual relationship].

NOTES AND QUESTIONS:

[Note 1 really makes the discussion we had regarding McGee. Are we viewing a single contract as substantial contacts? Well, perhaps really we are seeing substantial contacts resulting from a complex contractual relationship. I do think that this is a way to make sense of Burger King. Yes I know, hard to see how that is present in McGee, but do remember that McGee represents a highly permissive approach from which the court, arguably, has moved away. Certainly, it is reasonable to argue the factors more similar to Travelers Health are required.]

[FACTORS DISCUSSED IN NOTE 5]

Note 5: p. 742

(1) the extent of the purposeful interjection into the forum state, (2) the burden on the defendant of defending in the forum, (3) the extent of conflict with the sovereignty of defendant's state, (4) the forum state's interest in adjudicating the dispute, (5) the most efficient judicial resolution of the controversy, (6) the importance of the forum to plaintiff's interest in convenient and effective relief, and (7) the existence of an alternative forum. Are these the same factors that International Shoe looked to?

[CONCLUSION AT NOTE 8, page 743, by Professor Louis:]

He found that tort and contract cases are actually not approached differently; "jurisdiction over the person in both tort and contract cases is readily established when the claim arises out of the personal activities of the defendant within the forum state or out of the regular shipment of defendant's goods into, or the plaintiff's goods out of, the forum state. Jurisdiction is much more difficult to establish if the defendant has not personally entered the state, the defendant's contacts with the state are few or irregular, and the defendant is a purchaser, particularly a consumer-purchaser."

[DO YOU AGREE?]

Contract Choice of Forum vs. Choice of Law Clauses
(updated April 23, 2009).

The distinction is very critical. Choice of Forum determines the forum slection, on the othe hand, a choice of law clause simply becomes an element in the Due Process Minimum Contacts and Reasonableness analysis.

Forum selection clauses need to be read like a long arm statute. They may be general or very specific, and just like a long arm statute, you have to establish what the cover before you can apply properly. The one in Carnival Cruise lines is very broad. It read: "8. It is agreed by and between the passenger and the Carrier that all disputes and matters whatsover arising under in connection with or incident to this contract shall be litigated, if at all, in a court located in the state of Florida U.S.A. to the exclusion of the courts of any other states or country."

This is discussed in your casebook at pages 834-835 (Forum Selection Clauses) and in the notes after Burger King at page 765.

[CB-764-765] 5. In Burger King, the Court finds that the choice-of-Iaw provision in the franchise agreement constituted some purposeful availment by defendants of Florida law. How realistic is that analysis? The franchise agreement could have provided for the appointment of a Florida agent for service of process, National Equipment Rental, Inc. v. Szukhent, infra p. 833, and might validly have required that disputes be adjudicated in a certain jurisdiction to the exclusion of all others. See Carnival Cruise Lines, Inc. v. Shute, infra p. 835. Since the agreement in this case did not include any such provisions, does the provision regarding choice of law really notify defendant that he may be sued in Florida?

The casebook explains this way at pages 834-835:

[CB-834] FORUM SELECTION CLAUSES

Another aspect of consent involves the advance choice of the forum for any possible disputes, commonly called a forum selection clause. In The MIS Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), an American company had entered into such a contract with a German company in a contract to tow an oil drilling rig from Louisiana to Italy, designating London as the chosen forum. Notwithstanding, the American company filed an action in a U.S. District Court. Recognizing "present-day commercial realities and expanding international trade," the Supreme Court held that the clause should be enforced and the American suit should be dismissed. So a forum a forum selection clause can trump otherwise valid jurisdiction.

[835] In Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991), the Court applied the same reasoning to a forum selection clause that was on the back of a cruise line passenger ticket. Although the passengers came from the state of Washington and the cruise in question originated in Los Angeles, the clause said that any suit had to be filed in Florida. The Court found the clause reasonable because Carnival Cruise Lines had its headquarters in Florida and many of its cruises originated there, and because a cruise line would have a "special interest in limiting the fora in which it could potentially be liable to suit." It also observed that "it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys." Because the clause was not fundamentally unfair, the Court held that the plaintiffs' suit in Washington had to be dismissed. For an example outside the admiralty area, see Caspi v. The Microsoft Network, 732 A.2d 528 (N.J. Super. Ct.1999) (holding that a forum selection clause in the on-line subscription contract for the Microsoft Network is binding).

Is use of forum selection clauses in consumer contracts fair? For criticism, see Purcell, Geography as a Litigation Weapon: Consumers, Forum-Selection Clauses, and the Rehnquist Court, 40 U.C.L.A.L. Rev. 423 (1992).

[For next time, please consider if the ASAHI case might have been decided differently if the victims of the alleged tort had remained in the case.]