July 2023

If you not a professor or attorney that LOVES civil procedure (and specifically personal jurisdiction), I highly recommend moving on to a different article! But if you fall into either of the above categories, you are in luck!

In the latest appellate decision (Davis v. Cranfield Aerospace Solutions – June 23, 2023) from the Ninth Circuit Court of Appeals on personal jurisdiction, the court delivers a gift to civil procedure law professors everywhere by walking through and reiterating the law on personal jurisdiction — i.e., whether a particular court has the power to exercise its authority over a particular person or business entity. In this case, the issue was whether a federal district court in Idaho could exercise jurisdiction over an English corporation. The link to the full case can be found here.

First, the court looks at how far applicable state law extends the boundaries of its courts’ jurisdiction (i.e., the long-arm statute). While some states are more restrictive statute, many states (including Idaho, California, Arizona, etc.) authorizes the exercise of “all the jurisdiction available to the State…under the due process clause of the United States Constitution.” As such, jurisdiction under state law and due process are coextensive. 

Second, the court notes that whether the exercise of jurisdiction satisfies due process turns on “the nature and extent of the defendant’s relationship to the forum State…” meaning that “a state court can exercise personal jurisdiction over a defendant if the defendant has ‘minimum contacts’ with the forum—which means that the contacts must be ‘such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” Given this focus on forum state contacts, the court highlights that jurisdiction comes in two forms: (1) general jurisdiction and (2) specific jurisdiction.

General jurisdiction—or “all-purpose” jurisdiction— comes into play when a defendant is “essentially at home” in the forum state. In 99% of cases, litigants need look no further than general jurisdiction to determine whether the exercise of jurisdiction over a defendant is appropriate.

• Although the court does not address this for individuals (natural persons), this typically means: (i) Presence (aka “gotcha jurisdiction” which is accomplished by simply serving the litigant with the summons and complaint within that state’s borders); (ii) Domicile (i.e., where the defendant lives); or (iii) Consent (e.g., forum selection clause in a contract).
• For corporations, this type of extensive contact generally means either: (i) the company’s state of incorporation; or (ii) the location of its principal place of business (aka its “nerve center”). Such jurisdiction extends over “any and all claims” against the defendant concerning “events and conduct anywhere in the world.”

If the defendant is not subject to the general jurisdiction of the court, then specific jurisdiction, on the other hand, permits jurisdiction over a defendant “less intimately connected” with a forum state. To assert specific jurisdiction, the defendant must have “take[n] some act by which it purposefully avails itself of the privilege of conducting activities within the forum State.” And given the more limited contacts with the forum state, this type of jurisdiction is specifically “case-linked,” only covering a particular class of claims. To comply with due process, the plaintiff’s claims must also “arise out of or relate to the defendant’s contacts with the forum.”

The court reiterates its three-part test to determine whether specific jurisdiction exists:

1. the non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws (i.e., “purposeful availment”);
2. the claim must be one which arises out of or relates to the defendant’s forum-related activities (i.e., “relatedness”); and
3. the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable (i.e., “reasonableness”).

The plaintiff bears the burden of meeting the first two prongs, while the defendant shoulders the burden on the final prong. All three prongs must be met (at least in some degree) to exercise personal jurisdiction over the defendant.

Purposeful Availment v. Purposeful DIrection

The Ninth Circuit’s decision in Davis gets interesting with its discussion of the first prong of the specific jurisdiction test — the “purposeful availment” prong. (In fact, since the court held that the personal availment prong was not satisfied, the court did not discuss the second and third prongs).

In the past, the court suggested that it evaluates this prong somewhat differently depending on whether the case involves tort or contract claims. The “purposeful direction” test (aka the Calder Effects test) typically applies to tort claims while the “purposeful availment” test typically applies to contract cases. The court has never held that this line is a hard-and-fast rule. Indeed, the first prong may be satisfied by purposeful availment, by purposeful direction, or by some combination thereof since a rigid dividing line doesn’t serve the purposes of due process.

Both purposeful availment and purposeful direction ask whether defendants have voluntarily derived some benefit from their interstate activities such that they will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts. “So there’s no need to adhere to an iron-clad doctrinal dichotomy to analyze specific jurisdiction. Rather, when considering specific jurisdiction, courts should comprehensively evaluate the extent of the defendant’s contacts with the forum state and those contacts’ relationship to the plaintiffs’ claims—which may mean looking at both purposeful availment and purposeful direction.”

The court then goes on to describe each of these two tests (citations omitted below):

“Start with the purposeful direction test. We evaluate purposeful direction under the three-part ‘effects’ test from Calder v. Jones, 465 U.S. 783, 789–90 (1984): the defendant must have allegedly ‘(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state. ‘ An action may be directed at a forum state even if it occurred elsewhere. This analysis is driven by the defendant’s contacts with the forum state—not the plaintiff’s or other parties’ forum connections…. Harm suffered in the forum state is a necessary element in establishing purposeful direction.”

(In applying this test to the Davis case, the court declared this test to be inapplicable because the harms occurred in Indiana, where the plane crash killed their loved ones, or in Indiana and Louisiana, where they resided when the crash occurred — thus, under the purposeful direction test, haling defendant into court in Idaho for a harm that was suffered elsewhere does not satisfy due process).

On the other hand, “to establish purposeful availment, we look at a defendant’s ‘entire course of dealing’ with the forum state— ‘not solely the particular contract or tortious conduct giving rise to [a plaintiff’s] claim.’ It exists when a defendant’s dealings with a state establishes a ‘quid pro quo’—where the defendant ‘purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,’ and in return ‘submit[s] to the burdens of litigation’ in the State. In other words, we examine whether the defendant ‘deliberately reached out beyond [its] home—by, for example, exploiting a market in the forum State or entering a contractual relationship centered there.’ The ‘unilateral activity’ of another party does not meet this standard. Purposeful availment can be established by a contract’s negotiations, its terms, its contemplated future consequences, and the parties’ actual course of dealing.”

(Again, in applying this test to the Davis case, the court also held there was no purposeful availment because while plaintiff was an Idaho resident, there’s no evidence that defendant sought out plaintiff in Idaho or benefitted from plaintiff’s residence in Idaho. Neither the contract’s negotiations, terms, nor contemplated consequences establish that defendant formed a substantial connection with Idaho. And while the course of dealings show that defendants’ employees entered Idaho several times, those transitory trips into the forum state do not sufficiently reflect purposeful availment).

After looking at the contract negotiations, contract terms, the contemplated consequences of the contract, and the parties’ actual course of dealing, the court determined that plaintiff failed to establish that the defendant had sufficient minimum contacts with Idaho. And in doing so, the court also gave law professors everywhere additional confidence in the proper instruction on personal jurisdiction issues!

For more information contact:

Chris Ng

Cng@gibbsgiden.com

310-734-3367

Christopher Ng is an equity partner, executive committee member, and the managing partner of Gibbs Giden. Chris primarily represents companies in a wide range of business, commercial and construction negotiations and disputes. Chris is a member of the State Bar of California and District of Columbia and licensed to practice in all California state and federal courts.  Chris is also an educator, active speaker, published author and frequent contributor to local, regional and national legal publications. For his achievements, Chris has been named to the “Rising Star” and “Super Lawyers” lists by Los Angeles Magazine and Super Lawyers® (Thomson/Reuters) regularly since 2009 (including again in 2020), a distinction conferred upon less than 5% of all California attorneys. Chris was also named the 2015-2016 “Educator of the Year” by Credit Management Association (CMA).

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