You represent an international client supplying manufactured goods to a third-party (also a foreign entity) under a supply agreement with a U.S.-based entity. The supply agreement was negotiated at arms-length and signed abroad. Your client has no other contact with the domestic entity. After a time, the contractual relationship sours and your client begins to directly supply the third-party (effectively cutting out the U.S. entity). The U.S. entity learns of this and brings suit in federal court alleging breach of contract and intentional interference with a business expectancy. Your client has no assets or presence in the United States and is certainly not prepared for drawn out and expensive federal litigation. What do you do?
May 06, 2019 Practice Points
Lack of Personal Jurisdiction: The Underutilized Defense Tactic
Your client has no assets or presence in the United States and is certainly not prepared for drawn out and expensive federal litigation. What do you do?
By Andrew Bossory
Under these (admittedly narrow) set of circumstances, one of the first question to ask is, “Does this court have personal jurisdiction over my client?” If they do not, an immediate motion to dismiss under Rule 12(b)(6) should be filed.
In 1984, the U.S. Supreme Court established a three-part “effects” test to determine personal jurisdiction where a suit alleges the commission of an intentional tort. See Calder v. Jones, 104 S.Ct. 1482 (1984). However, relatively recently, the Supreme Court has sharpened the scope of Calder. In Walden v. Fiore, 134 S.Ct. 1115, 1122-1123 (2014) the Court held that a plaintiff cannot establish personal jurisdiction by claiming an intentional tort within a forum state without more; it is the conduct and contact of a defendant the courts must look at:
“First, the relationship must arise out of contacts that the ‘defendant himself’ creates with the forum State. Due process limits on the State’s adjudicative authority principally protect the liberty of the nonresident defendant—not the convenience of plaintiffs or third parties . . . Second, our ‘minimum contacts’ analysis looks to the defendant’s contacts with the forum State itself, not the defendant’s contacts with persons who reside there . . . [T]he plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant’s conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him . . . These same principles apply when intentional torts are involved . . . A forum State’s exercise of jurisdiction over an out-of-state intentional tortfeasor must be based on intentional conduct by the defendant that creates the necessary contacts with the forum.” Walden v. Fiore, 134 S.Ct. at 1122-1123. (Emphasis added.)
Although some federal courts had previously taken a narrow view of Calder (see, e.g. Johnson v. Arden, 614 F.3d 785, 796-97 (8th Cir. 2010), where the Eight Circuit stated “We therefore construe the Calder effects test narrowly, and hold that, absent additional contacts, mere effects in the forum state are insufficient to confer personal jurisdiction.”), the holding in Walden provided solid footing for other federal courts to adopt similar views. For instance, the Seventh Circuit has fully embraced the rationale behind Walden. In Advanced Tactical Ordnance Systems, LLC v. Real Action Paintball, Inc., 751 F.3d 796, 802 (7th Cir. 2014), the Court held:
“The question whether harming a plaintiff in the forum state creates sufficient minimum contacts is more complex. Compare Wallace v. Herron, (“We do not believe that the Supreme Court, in Calder, was saying that any plaintiff may hale any defendant into court in the plaintiff's home state, where the defendant has no contacts, merely by asserting that the defendant has committed an intentional tort against the plaintiff.”) with Janmark, Inc. v. Reidy (finding that “there can be no serious doubt after Calder [ ] that the state in which the victim of a tort suffers the injury may entertain a suit against the accused tortfeasor”). Although those two cases may be in some tension with one another, after Walden there can be no doubt that ‘the plaintiff cannot be the only link between the defendant and the forum.’ Any decision that implies otherwise can no longer be considered authoritative.” (Emphasis added.) (Internal citations omitted.)
It thus becomes apparent that when presented with a claim stemming from an intentional tort in federal court, particularly where there is no readily apparent nexus between a defendant and the forum state, it is imperative to parse through the facts of the case to assess whether personal jurisdiction exists. If not, the grounds are fertile for an immediate Rule 12(b)(2) motion to dismiss. Remember, such a motion must be filed prior to any other responsive pleads else the defense is waived.
Andrew Bossory is with Joshi P.C. in Ann Arbor, Michigan.
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