Last month’s article analyzed the statutory framework regarding long-arm statutes, while this month’s article examines the minimum contacts test that court’s employ in determining whether or not long-arm jurisdiction is available over a non-resident defendant.
As a general rule, there are two species of jurisdiction: (a) general and (b) specific, and the court will analyze a non-resident’s contacts to determine whether they satisfy one or the other.
In evaluating minimum contacts, the proper focus is on the relationship among the non-resident defendant, the forum and the litigation. As stated in my prior article (Long-Arm Jurisdiction-Part I, June 2005 edition), before long-arm personal jurisdiction can be exerted it is essential that there be some act by which the non-resident defendant purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.
Generally, the court measures the contacts between a non-resident defendant and the forum state, except when the claim is one based upon federal law and service is made pursuant to federal statute, in which case the court measures the contacts between the non-resident defendant and the United States.
General jurisdiction may be satisfied when a non-resident defendant has purposefully established continuous and systematic contact with the forum state. Here, the court may exercise personal jurisdiction over a non-resident defendant for a suit unrelated to or not arising from non-resident defendant’s contact with the forum state. In determining the existence (or absence) of general jurisdiction, the non-resident defendant’s contacts are commonly evaluated over a period of several years prior to plaintiff’s filing to the complaint.
An example where general jurisdiction principles apply occurs when a business has a subsidiary or affiliate in a state located outside the state of incorporation; for example, a Texas fireworks retailer that also has a place of business in Nebraska, where it regularly conducts activities on behalf of the parent corporation, employs residents of Nebraska, maintain files and prepares correspondence relating to the business. Under this scenario, the non-resident defendant’s contacts with Nebraska are continuous and, therefore, long-arm jurisdiction is likely to be exerted by the Nebraska courts. As an aside, it is also likely that the Texas business has obtained a license to conduct business in Nebraska, and this fact also leads to the conclusion that the business has agreed to the jurisdiction of the Nebraska courts. Other indicia of a non-resident defendant’s contacts with a forum jurisdiction are (1) the maintenance of a bank account in the forum state, and (2) the maintenance of a telephone listing in the forum state (although mere telephone contact with resident of another state is not enough).
Specific jurisdiction exists when the plaintiff’s claims arise out of or are related to non-resident defendant’s contacts with the forum state. Here, the question is whether plaintiff’s claim is related to the non-resident’s actions. Some circuits apply a ‘but-for’ test; meaning, that but for the non-resident defendant’s actions plaintiff would not have suffered injury. Other circuits apply a ‘proximate cause’ test; meaning, the actions of the non-resident defendant were the proximate cause of plaintiff’s injury.
Even after it is determined that a non-resident defendant has purposefully established minimum contacts with the forum state, the contacts may be considered together with other factors to determine whether the exercise of personal jurisdiction over the non-resident would be fair and reasonable. At this juncture, the court may evaluate the burden on the defendant for appearing in the forum state (the inconvenience factor), the plaintiff’s interest in resolving the claims in the home state (the convenience factor), the forum state’s interest in deciding the dispute, and any other factor that may promote fair and effective resolution of controversies.
In conclusion, the exercise of jurisdiction over a non-resident defendant, oftentimes, involves a complex analysis of the business activities of the non-resident defendant in the forum jurisdiction. There is no precise formula. While the principle of Due Process does not require a defendant’s physical presence in the forum before personal jurisdiction is exercised, it is essential in each case that there be some act by which the non-resident defendant purposely avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.