I. Territorial Jurisdiction (in personam and in rem and quasi in rem)
A. Historical formulae – focus on physical presence and POWER!!
1. Pennoyer v. Neff
F: M sues N, who owns property in OR, for money for legal services. M publishes notice for 6 weeks in local paper, but N doesn’t show, loses by default; N’s property attached and issued to M, who sells it to P. N sues P 8 years later, Circuit Ct. holds for N.
H: (Field) The property was only reached by the Court in enforcement of a personal judgment, having “no relation to the property.” N argues that property could only be paid in an in rem proceeding. Without personal service, judgments obtained against absent defendants upon only publication, would be “instruments of fraud and oppression.” Publication is only effectual for in rem purposes, not for in personam. P argues that it doesn’t matter how property was reached by the Court… but Court holds that if it there was no jurisdiction, the judgment was void, relying on the 14th A due process clause.
Notes: Court subsumed state law rules of self-restraint into binding federal Due Process clause.
Types of territorial jurisdiction:
1) In personam J, binding a defendant personally. Torts, breach of contract.
2) In rem J, adjudicate rights of all persons with an interest in the property. Quiet title action, probate proceedings, etc.
3) Quasi in rem: settles property rights only of specific persons. Two types:
a) Dispute about the property itself.
b) Dispute unrelated to the property, but establishes right to prop. Prop. is brought under court’s J by attachment. This is what Pennoyer is.
There would have been valid J had the OR court attached the property at the outset! Would have alerted N to the attachment.
2. Harris v. Balk (1905, p. 194)
F: B sues H in NC for $180 he owed; H, sued by E while travelling in Baltimore, had consented to judgment in Maryland for the $180 because B owed E $344. NC courts say Maryland judgment is void.
H: (Peckham) Was Maryland judgment entitled to full faith and credit? J is a local law issue, and Maryland’s service of process was valid. H would lose his right to claim Maryland’s judgment as a defense if he didn’t properly notify his creditor B (so that B has an opportunity to defend himself in Maryland) But here, B obviously had notice of the Maryland judgment because he sued H immediately.
Notes: Also a quasi in rem case, type 2, as Pennoyer.
- limited v. general appearance: most states allowed a limited appearance, meaning defendant is only subjecting himself to liability up to the value of the property that serves as basis for jurisdiction.
3. Hess v. Pawloski (1927, 198)
F: D injured in Mass. when P drove negligently. P files suit to contest J, as violation of DP, under Mass. statute which appoints “the registrar” of the commonwealth as the representative of anyone who drives a car in Mass.
H: (Butler) Vehicles are dangerous; the state may require the fictitious appointment of one of its officials to be the representative of a suit against an out-of-state driver… ACTUAL notice of the suit had to be sent to the out-of-state party.
Notes: “special appearance”: one where the D appears without subjecting himself to the J of the Court, for the purposes of contesting J.
B. 20th Century – from POWER to FAIRNESS
1. Minimum contacts
a. International Shoe (1945, 202)
F: Washington wants to subject company to its jurisdiction to recover unpaid contributions to state unemployment fund; wants also to actually get the money. D made special appearance to claim that service upon one of its salesmen in the state wasn’t proper service; that it wasn’t a Wash. corporation and subject to the fund. Lower courts find for Wash. D has no office in WA; conducts business from St. Louis, MO. About 13 salesmen did live in WA.
H: (Stone) Before, J was based on state’s power over D’s “presence.” Now, due process only requires that D have “minimum contacts” such that suit doesn’t offend “traditional notions of fair play and substantive justice,” depending on the “quality and nature of the activity.” D’s activities in WA were systematic and continuous; it enjoyed WA’s privileges; thus it has the requisite contacts, AND WA can recover its money.
Black: thinks it’s within any state’s right to subject someone who does ANY business to taxation and jurisdiction. Doesn’t want the Court to review the state’s authority for “fair play.”
Notes: General J: number and quality of D’s contacts with the forum state are enough to litigate ANY dispute in the forum court, whether or not it arises out of those contacts. Ex: Ford can be sued in Michigan for anything. Corps can be sued in their place of incorporation, as well as their principal place of business. (and probably anywhere they do substantial business!)
Specific J: contacts with the forum are related to the litigation.
- Note that foreseeability is probably not the deciding factor in minimum contacts, i.e. just because someone thinks they could be sued somewhere. (see McGee, 212, life insurance case)
Hanson v. Denckla (1958, 213) distinguishes McGee. X has trust in DE; on deathbed appoints some cash to Daughter #1; other $ to D2 and D3. They sue in FL, claiming appointment to D1 was invalid, so that they’d get the $. Meanwhile D1 sues in DE to get declaratory judgment that appointment was valid. In the U.S. S.Ct., held that FL courts didn’t have J over DE trustee, an indispensable party… (was he?) so D1 wins. This seems to be indistinguishable from McGee, where there WERE minimum contacts w/ Int’l Life.
b. World-Wide Volkswagen (1980, 215)
F: P’s buy VW in NY, get into crash in OK. Sue Audi (mfr), VW of America (nationwide importer), World-Wide VW (regional distributor), and Seaway (NY retailer) in OK state court. Latter 2 object to J. P’s want to defeat diversity J. D.Ct. rejects D’s claim as to lack of minimum contacts.
H: Court doesn’t find minimum contacts, just b/c P’s drove their car through OK. “Foreseeability” alone isn’t the benchmark of J; it matters insofar as D’s “conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.” D didn’t here “purposefully avail itself” of the privilege of conducting activities in OK.
Blackmun and Marshall: dissent; think that auto business is global and that D’s should be aware that they can be sued elsewhere.
Notes: The main issue here from the parties’ standpoint isn’t OK vs. NY, but rather state vs. federal court – they were in a very P-friendly J.
- Contracts locking buyers into a particular state are now probably enforceable, says Fletch.
- What about cases where a parts-maker furnishes a component to a mfr. elsewhere? Should they be subject to J everywhere the mfr. sells? See notes, 1/26. Not readily answered from a fairness standpoint.
c. Kulko (1978, 225)
F: P and D are married in CA but NY residents; have 2 kids there. They separate; she gets kids for summers and $3000/year. She gets a Haitian divorce, and when the kids decide to live with her in CA, she sues in CA cts. to enforce the Haitian divorce, get more child support, and full custody of the kids. D files special appearance, arguing no J; CA sustains J, while pointing out that unilateral activity of some related person (i.e., the wife) can’t establish J.
H: (Marshall) CA justified J on the “purposeful act” of dad’s consenting to his daughter moving to CA. S.Ct. disagrees. Nor is the child support enough. Court discusses “effects test,” but says it’s not supported by the evidence here. D stayed in the “state of marital domicile” and couldn’t have anticipated being “haled into court” in CA. CA hasn’t purposefully asserted an interest in these kinds of cases by statute (but could it? Isn’t it’s J already extended as far as the Const. will allow?). Further, P could sue in NY from CA under special statutory provision.
Notes:
- why isn’t effects test satisfied here? Why are personal, domestic relations different than car parts or commercial activity? Don’t know, Court doesn’t say, but they are different!
- Minimum contacts aren’t required for a Plaintiff to file anywhere, see Keeton, p. 233.
- as to effects test, see Calder, p. 232, where an article written in FL but aimed at a Californian was sufficient to establish J over the FL dude.
- Note that S.Ct. can only review this case as to Due Process concerns!
- If D went to CA to visit his family, he could definitely be served there. Do we want a rule which seems to discourage parents from visiting their children?
- As to fairness, this case is brutal either way.
- As far as expecting to be brought to court, the Ct. may be right as to Kulko not expecting it, but wrong as to SeaWay from above, says Fletch.
- Supplement: in “status” cases where custody or divorce is at stake, no min. contacts analysis may need to occur. In “property” cases, where alimony/etc. is sought, this analysis applies.
d. Helicopteros Nacionales (1984, 234)
F: H is Columbian Co. whose helicopter crashed. X are 4 decedents working for Peruvian consortium headquartered in Houston. Contract provided for Peruvian courts. H’s contacts w/ TX include negotiating the K there, buying equip. there, training pilots there, bank accounts, etc. X filed wrongful death suit in TX state court, won; appeals court reversed for lack of J; S.Ct. aff’d then rev’d. TX long-arm statute reaches as far as DP allows.
H: (Blackmun) Reverses – no J. No minimum contacts with TX of a systematic and continuous nature.
Brennan dissents, thinks contacts are enough, fears precedent and general/specific J distinction – here court said we’re in the realm of gen J, thus limiting specific J to controversies that “arise out of” rather than just “relate to” contacts.
Notes:
- Why does the Court refuse to see this as a Specific J case? They claim that X conceded this, but they didn’t really… could this be a policy issue, b/c U.S. doesn’t want to discourage foreign commerce? See p. 241.
- Why not consider all U.S. contacts, cumulatively? If it’s not currently allowed, could this be changed by statute?
- Note that the K for Peruvian courts probably doesn’t bind the families.
2. Reformulation of minimum contacts
a. Burger King (1985, 242)
F: FL’s long-arm statute allows J for someone who breaches K in state. D franchisee allegedly breached franchise agreement with FL corp. Federal D.Ct. relied on statute to assert J over MI franchisee.
H: (Brennan) There are minimum contacts in this case. Doctrinal background: with a goal of predictability, in personam J gives states J when D has “purposefully directed” activities at forum state or “purposefully derived a benefit” from that state. Minimum contacts is the touchstone; foreseeability is important only as to “purposeful availment” that makes it not unreasonable to take him to court there. Once minimum contacts are established, other factors:
1) burden on D
2) Forum state’s interest in adjudicating the dispute
3) P’s interest in obtaining convenient relief
4) Interest of interstate judicial system in efficient conflict resolution
5) Shared interests of states in furthering substantive social policies.
These factors may lessen the amount of contact required. Here, the contract alone was not necessarily a minimum contact, but it was representative of a substantial connection to FL. Even though D thought he may have been dealing with MI field office, there’s lots of evidence that he knew FL was really the place. The FL choice-of-law provision in the K is valuable as evidence. Ct. doesn’t find big discrepancy in bargaining power. Explicitly holds that smaller K’s might not be sufficient as minimum contacts; each case must be decided separately.
Stevens’ dissent: D had no business contacts with FL, and didn’t have the cash to litigate there.
Notes:
- MI statute in 257 probably wouldn’t help much; see notes 2/2.
- Court says that b/c of the choice of FL law provision in the K, D purposefully availed himself of FL’s protection… Fletcher says this is bogus, that D was probably unhappy with the clause even though not disputing its enforceability.
- So, now we’re no longer limited to minimum contacts… we can look to other factors.
- Brennan’s mention of “change-of-venue” option (28 USC §1404(a)) implies that there might be a different DP analysis in state court, where there’s no recourse to that option!
b. Asahi Metal (1987, 257)
F: Z gets in motorcycle accident in CA; complaint names Taiwanese tube mfr as D (Cheng Shin). D files cross-complaint against Asahi, maker of valve assembly. All claims are settled except this indemnity cross-claim; so 2 foreign corps. litigating in CA state courts. CA S.Ct. concluded that by placing parts into the stream of commerce Asahi should be subject to CA J.
H: (O’Connor) Reverses; no J. In PLURALITY opinion, says that just placing a product into the stream of commerce isn’t enough to satisfy min. contacts… requires more action purposefully directed at state. In MAJORITY opinion, says that “other factors” reveal the unreasonableness of asserting J over Asahi: burden on them is severe, Cheng Shin hasn’t shown that CA is more convenient for it than Taiwan or Japan, CA’s interests are diminished b/c neither P isn’t CA resident.
Brennan writes for 4 to say that though he agrees that the “other factors” necessitate a finding of no J here, insertion into the stream of commerce is enough… he says O’Connor deviates from WorldWideVW because there the Court specifically distinguished between “a case involving goods which reach a distant state through a chain of distribution and a case involving goods which reach the same State because a consumer took them there.” (WW VW involving the latter; this case the former)
Stevens says that min. contacts analysis isn’t even necessary to say that this would be unfair and unreasonable assertion of J.
Notes:
- Court expressly withholds from answering the big Q about aggregate national contacts.
- Something else is going on here – don’t believe that this is just about inconvenience for the D, because that’s always the case, right? Here, it might be that Taiwanese or Japanese law will apply, or that the U.S. doesn’t think it should resolve disputes between foreign corps.
- How can the S.Ct. say that the CA S.Ct. overstated CA’s interest in keeping the suit?? Don’t they state the law??
- S.Ct. might be hostile because int’l trade is the domain of the fed. gov’t, not the states. But at the same time, there are no statutes barring CA’s assertion of J here.
- is this really a FNC case? after the settlement, at least, it is… perhaps that’s why S.Ct. has to decide this on minimum contacts, and b/c it doesn’t want to give anyone the idea that there was J in the first place. Also, S.Ct. doesn’t want to make common law of FNC, even though it can.
- So Fletcher thinks if the other place in this case and Helicopteros was Alaska, we’d get a different outcome… here the Court might just want to let a foreign court handle it.
- Gray v. American Radiator (IL, 1961) Water heater/valve case… IL court says valve maker can be haled, even though it only sold to heater maker who assembled heaters in PN. This wouldn’t be good law anymore if O’Connor’s opinion was the law…. she might even protect the heater maker! But see the case in the Supp., p. 22 #7. Comes out the other way in the 4th Cir, 1994.
- Important question: is the S.Ct. saying all this stuff because we’re dealing with foreign parties, or will this same analysis apply to state cases?
- Supp. #8: Asahi and Burger King are specific J cases; Met Life case in the 2nd Cir in 1996 used these factors in a general J case to find it unreasonable to assert J in spite of minimum contacts.
- Supp. #9: internet cases; decided generally on “purposeful availment” vs. passivity…
3. Notice
a. Mullane v. Central Hanover Bank & Trust (1950, 269)
F: Individual trustees pool their funds together, and beneficiaries are unable to sue them for breach of fiduciary duty after that. There’s an accounting procedure going on here. How much notice is required?
H: (Jackson) This cases implicates DP b/c it affects property rights. Notice must be reasonably calculated to appraise the parties. Publication in a newspaper is enough for people who couldn’t be located or whose interests are remote and not readily known. But for everyone else, mail it!
Notes:
- Disassociates the service of process with the type of underlying action.
- Eisen, re/ class action strike suit in odd-block trading scandal, is not compelled by Mullane…. see notes, 2/16.
- Is the outcome of this case the same after Shaffer v. Heitner? Yes, but Fletch isn’t sure why… implied consent? Mailing of the checks?? Jurisdiction by necessity – no other place would work better?
4. Long-arm statutes
a. State
i. American Eutectic (2nd Cir., 1971, 288)
F: P trained individual D’s for 3 months in NY; in their 5 and 13 years of employment they had lots of NY contact. P sues individual D’s and corporate D for trade secret stuff in NY federal court; D.Ct. dismisses; this Ct. has to guess at what NY courts would do in applying its long-arm statute.
H: No J over Dytron (corporate D) but J over individuals.
- As to the individual Ds: The NY statute asserts J over any non-domiciliary who “transacts any business within the state.” Ct. says that requirement is easily met; they did far more in NY than just sign a K.
- As to Dytron: statute says J over non-res D who “commits a tortious act… causing injury to” someone in the state, if he “expects or should reasonably expect to have consequences in the state and derives substantial revenue from interstate or int’l commerce.” Court says there’s no J because the injury occurred outside of NY – the business was lost in MI, and not NY.
Notes:
- this is a statutory, not constitutional, case… but is DP analysis filtering in here? Fletch thinks so, at least as to the corporate D. Under the stream of commerce idea, any company could be haled here…
- Supp.: IL case said mere cancellation of an order was enough injury to a P to satisfy DP.
- Supp. #9: Hong Kong Hotel successfully brought into MA federal court.
DES cases: (Supp):
- These cases are good examples of how far Burger King and Asahi might go! Even bit players in the DES market can be brought into court because it’s not very inconvenient for them because it’s a mass tort case.
- Why use a national market share, rather than a state market share?? Esp. if a company never sold in NY…
b. Federal
i. Omni Capital (1987, 296)
F: Investors sue Omni, an investment corp., who impleads Wolff, an English Co., after IRS disallows tax deductions because of improper trades. W seeks dismissal for lack of personal J.
H: (Blackmun) Omni argues that DP is the only limit on personal J. W says with no statutory authority for service, no personal J. Omni’s arguments:
1) DP clause is only bar
2) Cong. implicitly authorized service under CEA
3) If they didn’t, Ct. should make common law.