Tenth Circuit Reverses DCT Dismissal for Lack of Personal Jurisdiction, Finding Minimum Contacts over Foreign Defendants

Per AST Sports Science, Inc. v. CLF Distribution Ltd., --- F.3d ----, 2008 WL 217722 (10th Cir. Jan. 28, 2008):

Plaintiff, AST Sports Science, Inc. (AST) sued defendants, CLF Distribution Limited (CLF) and Robin Holiday, claiming they failed to pay for products received from AST. AST alleged breach of contract, breach of implied contract, unjust enrichment, and fraud in the inducement. . . . AST and CLF are in the business of selling health, nutrition, and vitamin products. AST is a Colorado corporation with its principal place of business in Golden, Colorado. Paul Delia is its president. CLF is a corporation established under the laws of Great Britain, with its principal place of business in Wiltshire, Great Britain. Robin Holiday is the president of CLF.

AST and Mr. Delia claim that they entered into an Exclusive Right to Distribute Agreement (“Agreement”) with CLF in 1999, executed by Mr. Holiday. The Agreement gave CLF the exclusive right to distribute AST products in Europe. . . . The complaint alleges CLF is indebted to AST for the principal amount of $194,259.27 for nonpayment of orders placed in 2002, 2004, and 2005.

. . .

A contract alone does not subject a nonresident defendant to the jurisdiction of the subject forum, Benton, 375 F.3d at 1077 (citing Burger King, 471 U.S. at 473), but AST presents several additional facts in support of jurisdiction. Especially significant to our analysis is the fact that Mr. Holiday approached Mr. Delia about becoming AST's European distributor, and then formed an ongoing business relationship to facilitate the same. Phone calls, letters, facsimiles, and emails “provide additional evidence that [the foreign defendant] pursued a continuing business relationship with [the plaintiff].” Pro Axess v. Orlux Distrib., Inc., 428 F.3d 1270, 1278 (10th Cir.2005); see also Benton, 375 F.3d at 1077 (correspondence exchanged is evidence of pursuit of business relationship). These modern communications can eliminate the need for physical presence.

. . .

Here we have Mr. Holiday's physical presence in Colorado in at least 1999. After that, the evidence clearly demonstrates-even at the motion to dismiss stage-that he continued the business relationship he began when he solicited AST's European distributorship. As is required for a finding of minimum contacts, the record reveals that the parties pursued a continuous course of dealing involving CLF placing orders to AST from England by phone, facsimile, or email. From Colorado, AST would, in turn, fill the order and ship it to England. From England, CLF would compensate AST for the product shipped. Taken together, these circumstances constitute a business relationship, lasting over a period of seven years, that include “prior negotiations and contemplated future consequences, along with the ... parties' actual course of dealing.” Burger King, 471 U.S. at 479 (1985). Quite simply, defendants reached out to become AST's European distributor, the relationship was allegedly memorialized in a contract, and the relationship lasted for a over a period of seven years. It should not be a surprise to defendants that this continuing relationship and the resulting obligations to plaintiff subjects them to regulations and sanctions in Colorado for the consequences of their alleged activities. See id. at 473. “[T]he Due Process Clause may not readily be wielded as a territorial shield to avoid interstate obligations that have been assumed.” Id. at 474. We are persuaded that defendants' contacts with the state provided fair warning to them that they were receiving the benefits and protections of Colorado's laws and were therefore subject to be brought before its courts.

S.D.N.Y. Discusses Split Re Meaning of “Arise out of or Relate to” in the Context of a Personal Jurisdiction Analysis

Per Del Ponte v. Universal City Development Partners, Ltd., Slip Copy, 2008 WL 169358 (S.D.N.Y. Jan. 16, 2008):

What does it mean for a cause of action to “arise out of or relate to” a given defendant's conduct in a forum? As the Second Circuit has observed, there is little consensus on this issue. See Chew v. Dietrich, 143 F.3d 24, 29 (2d Cir.1998) (“[T]here appears to be a split in the Circuits on the standard to be applied in determining if a tort claim ‘relates' to the defendant's activities within the state.”). The Supreme Court has resisted explicating the scope of the “arise out of or relate to” requirement. See Helicopteros, 466 U.S. at 415 n. 10 (“We do not address ... whether the terms ‘arising out of and ‘related to’ describe different connections .... Nor do we reach the question whether, if the two types of relationship differ, a forum's exercise of personal jurisdiction in a situation where the cause of action ‘relates to,’ but does not ‘arise out of,’ the defendant's contacts with the forum should be analyzed as an assertion of specific jurisdiction.”); Carnival Cruise Lines, Inc., v. Shute, 499 U.S. 585, 589 (1991) (holding that construction of a forum selection clause was dispositive of the case, thus permitting the Court to punt on the issue for which certiorari was granted: whether plaintiff's claim arose from or related to defendant's contacts with the forum); see also O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 318 (3d Cir.2007) (collecting Supreme Court cases commenting on the “arise from or relate to” language).

Without explicit guidance from the Supreme Court, the various Circuits have reached different conclusions on what standard should be applied in determining whether a claim “arises from or relates to” a defendant's contacts with a forum. Some circuits have held that jurisdiction over a defendant is proper only when the defendant's conduct within the forum is the “proximate cause” of the plaintiff's injury. See Chew, 143 F.3d at 29 (noting use of the “proximate cause” test by the First and Eighth Circuits). Other circuits have offered a more relaxed test, holding that minimum contacts exist when a defendant's conduct is a “but for” cause of the plaintiff's injury. See id. (noting use of the “but for” test in the Sixth, Seventh, and Ninth Circuits).

The Second Circuit, however, has eschewed commitment to either test. The court in Chew contrasted the “but for” and the “proximate cause” tests, but explicitly rejected the “dichotomy” of these two tests. Id. Instead, the Court proposed a more flexible application of minimum contacts, which would view “relatedness” as but one aspect of a “general inquiry ... designed to determine whether the exercise of personal jurisdiction in a particular case does or does not offend ‘traditional notions of fair play and substantial justice.’ “ See id. (quoting Int'l Shoe, 326 U.S. at 316). . . . Under [the Second Circuit] test, if a defendant has scant contacts with the forum, a court may demand a proximate relation between the defendant's contacts and the plaintiff's injury. If, on the other hand, the defendant has substantial contacts with the forum (even if not sufficient to establish general jurisdiction), the court may accept a more attenuated relation between the defendant's contacts with the forum and the plaintiff's cause of action.

Prof. Symeonides Posts Annual Choice of Law Survey on SSRN

Professor Symeon Symeonides Has posted an article entitled Choice of Law in the American Courts in 2007: Twenty-First Annual Survey on SSRN. Here is the Abstract:

This is the Twenty-First Annual Survey of American Choice-of-Law Cases. It covers cases decided by American state or federal courts from January 1 to December 31, 2007, and reported during the same period. Of the 3,676 conflicts cases meeting both of these parameters, the Survey focuses on the cases that deal with the choice-of-law part of conflicts law, and then discusses those cases that may add something new to the development or understanding of that part. The Survey is intended as a service to fellow teachers and students of conflicts law, both within and outside the United States. Its purpose is to inform rather than to advocate.

The following are among the cases reviewed in the Survey: A California Supreme Court decision involving recordings of cross border communications and another California case raising issues of cross-border discrimination in managing a web site; a product-liability decision of the New Jersey Supreme Court backtracking from its earlier pro-plaintiff decisions, and several other cases continuing to apply the pro-defendant law of the victim's home state and place of injury; several cases arising out of the events of September 11, 2001, and a few cases involving claims of torture (by them and us); the first guest statute conflict in years, as well as a case eerily similar to Schultz v. Boy Scouts of America, Inc.; two cases in which foreign plaintiffs succeeded, and many more cases in which US plaintiffs failed, to obtain certification of a nationwide class action; a case involving alienation of affections and one involving palimony between non-cohabitants; several cases involving deadly combinations of choice-of-law, choice-of-forum, and arbitration clauses; three cases involving the paternity or maternity of children born after artificial insemination, in three different combinations (known sperm donor, unknown sperm donor, and unknown egg donor); a case involving the child of a Vermont civil union and holding that DOMA does not trump the Parental Kidnapping Prevention Act; a case involving the constitutionality of a Missouri statute affecting out-of-state abortions of Missouri minors; and one US Supreme Court decision allowing federal courts to dismiss on forum non conveniens grounds without first affirming their jurisdiction, and another decision exonerating Microsoft from patent infringement charges arising from partly foreign conduct.

SCOTUS Issues Opinion in Federal Tort Claims Act Case

Today the Supreme Court issued its decision in Ali v. Federal Bureau of Prisons, No. 06-9130. Here is BNA's summary of the case holding: "A prisoner's claims against Federal Bureau of Prisons employees for allegedly losing the prisoner's personal property are barred by sovereign immunity, because an exclusion from the Federal Tort Claims Act's waiver of sovereign immunity for certain torts that protects detention of property by a 'law enforcement officer' applies to all law enforcement officers, not just those enforcing customs or excise laws." More on this case can be read by BNA subscribers at http://pubs.bna.com/ip/bna/lwt.nsf/SupCtOpDateDecided.

Prof. Bone Posts Article on Rule 68 and FRCP

Prof. Robert Bone has posted an article entitled "To Encourage Settlement: Rule 68, Offers of Judgment, and the History of the Federal Rules of Civil Procedure" on SSRN. Here is the abstract:

Rule 68, the offer of judgment rule, has been described as among the most enigmatic of the Federal Rules of Civil Procedure. This Rule allows a defendant to serve an offer of judgment on the plaintiff and makes the plaintiff who rejects the offer liable for post-offer costs if she fails to improve on the offer at trial. It is universally accepted today that Rule 68 was adopted to encourage settlements, but the Rule's text makes it an extremely poor settlement device. The Rule operates only one-way (in favor of defendants); the penalty is too small to be meaningful; the requirement of a judgment (rather than just a settlement) discourages its use, and the Rule's timing requirements are puzzling. The mystery is why intelligent lawyers and judges in 1938 would have drafted such a poor settlement promotion tool. This Article solves that mystery. Contrary to the conventional view, the 1938 drafters did not intend Rule 68 to encourage settlement in the way we understand that today. They adopted the offer of judgment rule that existed in state practice, the primary purpose of which was litigation fairness not settlement promotion. The state rules aimed to prevent plaintiffs from imposing costs unfairly when the defendant offered everything the plaintiff was entitled to receive from trial. The text of Rule 68 makes much more sense when it is viewed in fairness terms. The prevailing settlement promotion view became entrenched in the 1970s and 1980s, when concerns about litigation cost, case backlog, and litigation delay grew acute and interest in settling cases intensified. Because the settlement promotion view has caused problems for interpretation of the Rule and for efforts to revise it, clarifying the history of Rule 68 is important. Moreover, empirical work on Rule 68 is nearing completion and the Advisory Committee is considering another look at the Rule, so the time is ripe for a clearer understanding. With the FRCP about to celebrate their seventieth anniversary, the history of Rule 68 also sheds light on two of the most important changes in federal civil procedure over the past seventy years: the rise of settlement and the politicization of the rulemaking process.

The full text of the article may be downloaded by visiting http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1081423.

Prof. Weiss Posts Article about PSLRA Lead Plaintiff Provisions

Elliot J. Weiss of the University of Arizona College of Law recently posted an Article entitled The Lead Plaintiff Provisions of the PSLRA after a Decade, or 'Look What's Happened to My Baby'. Here is the Abstract:

In 1995, my colleague John Beckerman and I had an experience shared by very few legal academics. We wrote an article recommending dramatic changes in the manner securities class actions are organized and saw Congress enact into law a bill that included essentially all the recommendations we had made. The article was Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L.J. 2053 (1995); the law was the Private Securities Litigation Reform Act of 1995 (PSLRA); the relevant provisions, now generally known as the lead plaintiff provisions, prescribe procedures for the selection of lead plaintiffs and lead counsel in securities class actions. In this Essay, I recount some aspects of the unique history of the lead plaintiff provisions and reflect on what has happened in the decade or so that they have been in effect. The Essay has six parts. Part I describes the questions that led Professor Beckerman and me to undertake research concerning the dynamics of securities class actions and summarizes our findings and recommendations. Part II sets forth our perspective on how our recommendations came to be enacted into law. Part III describes post-enactment developments that have been consistent with our expectations - most notably, the emergence of institutional investors as major players in securities class action litigation and the related increase in investors' recoveries. Part IV describes postenactment developments that we did not anticipate, including one precipitated by the emergence of the Internet and another that involves the difficulty, which we should have anticipated, that courts have had in deciding which class member has the largest loss and therefore is the presumptive lead plaintiff. In Part V, we conclude that even had Congress followed a more deliberative process before enacting our recommendations into law, it is unlikely that it would have come up with a substantially better approach for organizing the process by which lead plaintiffs and lead counsel are appointed in securities class actions. Part VI sets forth our recommendation that Congress clarify the language of the statute in one minor respect and two other recommendations for changes in how courts deal with administrative issues that arise in securities class action litigation.

S.D. Ill. Uses Twombly Standard to Dismiss Civil Rights Claim as Speculative

Per Neuman v. U.S., Slip Copy, 2008 WL 78785 (S.D. Ill. Jan. 07, 2008):

McNaught argues that Neuman's complaint contains only conclusory allegations that she conspired with others to violate his civil rights. Citing Bell Atlantic, McNaught argues that Rule 8 requires a plaintiff's complaint to include “enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement,” and that failure to do so may result in dismissal. 127 S.Ct. at 1969.

. . .

Here, Neuman's complaint stems from allegations that he was denied entrance into the Peoria County Courthouse and allegations of wrongdoing by federal judicial employees. However, the complaint fails to allege any facts specific to McNaught, other than that she is and was an Assistant Attorney General. Neuman sets forth no fact that would permit this Court to infer that there is a plausible claim for relief against McNaught. She is not said to have been involved in any of the incidents discussed in Neuman's complaint. Neuman merely speculates that McNaught was involved in a conspiracy with other government officials to violate his civil rights.

In his response to this motion to dismiss, Neuman repeatedly states that he “truly believes” that McNaught “may have known” about the alleged conspiracy. He further states, “I don't know but Karen McNaught may have been a moving force behind the deprivation of my Civil Rights....” Other formulations of these allegations include: “I truly believe that Karen McNaught knew the plaintiff's picture was being circulated by the defendants to identify him immediately so he could be retaliated against,” “I believe that it is possible that she know (sic) about the plaintiff's picture being circulated at the Peoria County Courthouse,” and “I believe she may know about everything that was happening within the Illinois states attorneys' office and the Sheriffs department within the courthouse at the time of the incident.”

The only factual information that Neuman provides is that McNaught was the attorney representing the Defendants at the time of the incident. As such, the allegations against McNaught are entirely speculative, conclusory, and without support. Such broad assertions are not sufficient under Rule 8. Because the complaint fails to set forth enough facts to state a claim to relief that is plausible on its face, all claims against McNaught must be dismissed.

SCOTUS Decides Court of Federal Claims Statute of Limitations Case

Yesterday the Supreme Court decided John R. Sand & Gravel Co. v. United States, No. 06-1164, in which it held that the special statute of limitations governing the Court of Federal Claims requires that court to consider on its own initiative the timeliness of a suit filed in the claims court, even where the federal government has waived the issue.

You can read the Syllabus and Opinions in this case by visiting http://www.law.cornell.edu/supct/html/06-1164.ZS.html.