## F I L E D United States Court of Appeals Tenth Circuit 

### MAR 6 2000 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

ROBERT PEAY, as guardian of minor child Jennifer McCluskey; TEEN HELP, doing business as Brightway Adolescent Hospital; DELBERT E. GOATES, M.D.,

Plaintiffs - Appellants,

v. BELLSOUTH MEDICAL ASSISTANCE PLAN; BLUE CROSS BLUE SHIELD OF ALABAMA,Defendants - Appellees.

-------------------------------- UNITED STATES DEPARTMENT OF LABOR, Amicus Curiae. No. 98-4180

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH (D. Ct. No. 97-CV-916-K)
Brian S. King and Marcie E. Schaap, King & Isaacson , P.C., Salt Lake City, Utah, appearing for Plaintiffs-Appellants. Keith W. Kochler, BellSouth Telecommunications, Inc ., Atlanta, Georgia (Gary L. Johnson, Richards, Brandt, Miller & Nelson, SaltLake City, Utah, with him on the brief), appearing for Defendants-Appellees.-2-

Henry L. Solano, Solicitor of Labor, Allen H. Feldm an, Associate Solicitor for Special Appellate and Supreme Court Litigation, and Edward D. Sieger, Senior Appellate Attorney, United States Department of Lab or, filed an amicus curiae brief in support of Appellants.

Before TACHA , BRORBY , and EBEL , Circuit Judges.

TACHA , Circuit Judge.

Plaintiffs appeal the district court’s order granti ng defendants’ motion to dismiss for lack of personal jurisdiction or, in th e alternative, to transfer for improper venue. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and

reverse. I. At the time of the events in this case, plaintiff J ennifer McCluskey lived in Tennessee with her guardian, plaintiff Robert Peay. Peay’s employer, BellSouth Telecommunications, Inc. (BST), provided both Peay and McCluskey with insurance through defendant BellSouth Medical Assis tance Plan (“Plan”). BST is headquartered in Atlanta, Georgia, and operates in nine southeastern states. Defendant Blue Cross & Blue Shield of Alabama (BCBS ), located in Birmingham, Alabama, provided third-party administration servic es to the Plan. In 1993, McCluskey received in-patient psychiatric care at plaintiff Brightway Adolescent Hospital (“Brightway”), a Utahfacility. Plaintiff Delbert-3-

Goates, a Utah resident, was McCluskey’s treating p hysician. The Plan’s utilization review agent precertified McCluskey’s t reatment, and the Plan and BCBS paid Goates for a portion of McCluskey’s care. However, the Plan refused to pay 100% of the covered charges because McCluske y did not use a preferred provider’s services. McCluskey and Peay executed an assignment of benefits in favor of Brightway and Goates. McCluskey, Peay, Brightway, and Goates then sued th e Plan and BCBS in Utah federal district court for a determination of medical benefits due under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). Plaintiffs served a summons and the complaint on BCBS in Birmingham, and the Plan waived service of process. Pursuant to Federal Rules of Civil Procedure 12(b)( 2) and 12(b)(3), defendants moved to dismiss for lack of jurisdictio n or, in the alternative, to transfer for improper venue. The district court gr anted defendants’ motion to dismiss, and plaintiffs appealed.
II.
A. We review de novo the district court’s legal determ ination that it lacks personal jurisdiction over defendants. Application to Enforce Admin. Subpoenas Duces Tecem of the SEC v. Knowles , 87 F.3d 413, 415 (10th Cir. 1996). The1 Plaintiffs also argue that venue is proper in Utah. Because the district

court dismissed plaintiffs’ case on the ground thatit lacked jurisdiction over defendants, the lower court did not reach venue. T herefore, we do not decide whether Utah is an appropriate venue for this suit. -4- district court found that neither the Plan nor BCBS has an address, an office, a statutory agent, a telephone listing, employees, ac tive Plan participants, or other operations in Utah. McCluskey v. BellSouth Med. Assistance Plan , 23 F. Supp.2d 1312, 1315 (D. Utah 1998). Applying a “traditional personal jurisdiction test,” the lower court held that defendants lacked “suffic ient contacts” with Utah to support the exercise of personal jurisdiction and thus dismissed the suit. Id. On appeal, plaintiffs argue that ERISA, 29 U.S.C. § 1132(e)(2), authorizes nationwide service of process and consequently nati onwide personal jurisdiction. They assert that when a court’s jurisdiction is inv oked based on ERISA’s nationwide service of process provision, minimum co ntacts with the forum are unnecessary. Under these circumstances, plaintiffs insist, a federal district court can exercise jurisdiction over defendants as long a s defendants have minimum contacts with the United States. Plaintiffs claim that defendants have the requisite minimum contacts because defendants are large corporations carrying on day-to-day business throughout this country. 1 Defendants contend that even if § 1132(e)(2) author izes nationwide service of process, it does not authorize nationwide jurisd iction. They argue that under-5-

the plain language of § 1132(e)(2), personal jurisd iction in ERISA cases is coextensive with venue and plaintiffs cannot establis h either of these procedural requirements.
B. Before a federal court can assert personal jurisdic tion over a defendant in a federal question case, the court must determine (1) “whether the applicable statute potentially confers jurisdiction” by authorizing se rvice of process on the defendant and (2) “whether the exercise of jurisdic tion comports with due process.” Republic of Panama v. BCCI Holdings (Luxembourg) S.A. , 119 F.3d 935, 942 (11th Cir. 1997); see also Omni Capital Int’l v. Rudolf Wolff & Co. , 484 U.S. 97, 104 (1987) (finding, in a federal questioncase, that before a federal court may exercise personal jurisdiction over a def endant, there must be “a basis for the defendant’s amenability to service of summo ns”). While service of process and personal jurisdiction both must be satisfied before a suit can proceed, they are distinct concep ts that require separate inquiries. Willingway Hosp., Inc. v. Blue Cross & Blue Shield , 870 F. Supp. 1102, 1104 (S.D. Ga. 1994) (citing 4 Charles Alan Wright and Arthur R. Miller, Federal Practice & Procedure § 1063 (1987)). In th e federal system, service of process is governed by Rule 4 of the Federal Rules of Civil Procedure. By contrast, “‘[t]he requirement that a court have per sonal jurisdiction flows . . .2 “No person shall be . . . deprived of life, liberty , or property, without due

process of law . . . .” U.S. Const. amend. V. -6- from the Due Process Clause. . . . It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty.’” Omni Capital Int’l , 484 U.S. at 104 (quoting Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 702 (1982)). More specifically, in federal question cases, personal jurisdiction flows from th e Due Process Clause of the Fifth Amendment. 2 See id. at 103-04 (assuming, in a federal question case, t hat a court’s exercise of personal jurisdiction must comp ort with Fifth Amendment due process principles); Republic of Panama , 119 F.3d at 942 (“It is well established that when . . . a federal statute provides the basi s for jurisdiction, the constitutional limits of due process derive from th e Fifth, rather than the Fourteenth, Amendment.”).
C. To determine whether the applicable statute potenti ally confers jurisdiction over defendants by authorizing service of process, we begin with Fed. R. Civ. P. 4(h)(1). Rule 4(h)(1) governs service upon domesti c corporations. In pertinent part, Rule 4(h)(1) provides that, unless a defendant waives service, service must be made “in a judicial district of the United State s in the manner prescribed for individuals by” Rule 4(e)(1). Rule 4(e)(1) states, “Unless otherwise provided by3 Section 1132(e)(2) states that process may be serve d in the district where

the defendant resides. Because BCBS is a corporati on, we must determine where it resides. The statute does not define resides; h owever, the first part of § 1132(e)(2) which discusses venue also uses the wordresides. When Congress uses the same word twice in the same sentence, we p resume that it intended the word to carry the same definition. In determining the definition of resides in the -7- federal law, service upon an individual . . . may b e effected in any judicial district of the United States pursuant to the law of the state in which the district court is located . . . .” In ERISA cases, federal law provides: Where an action under this subchapter is brought ina district court of the United States, it may be brou ght in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found

. 29 U.S.C. § 1132(e)(2) (emphasis added). There is no question that the last clause of § 1132(e)(2) authorizes nationwide servic e of process. “When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction.” Republic of Panama , 119 F.3d at 942; see also Fed. R. Civ. P. 4(k)(1)(D) (“Service of a summons or filing a waiver of service is effective to establish jurisdiction over the personof a defendant when authorized by a statute of the United States.”). Thus, provid ed that due process is satisfied, § 1132(e)(2) confers jurisdiction over defendants b y authorizing service of process on them. 3venue context, we supplement the specific venue statute in § 1132(e)(2) with the

more general venue provision applicable in all civi l cases found in 28 U.S.C. § 1391(c). See Monument Builders, Inc. v. American Cemetery Ass’n , 891 F.2d 1473, 1477 (10th Cir. 1989). The general provisionstates that “[f]or purposes of venue . . . a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to persona l jurisdiction at the time the action is commenced.” 28 U.S.C. § 1391(c). Thus, under § 1132(e)(2), a corporation resides wherever personal jurisdiction is proper. Although this reading seems to negate the rest of the venue provisions for corporations, it still has meaning when a plaintiff sues an individual or a partnership. Thus, in this case, because plaintiffs served a sum mons and complaint on BCBS in Birmingham, where it has its offices, and t he Plan waived service of process, service was proper.

4 On two occasions, the Supreme Court has declined to decide whether the national contacts approach is constitutional under the Fifth Amendment. Omni Capital Int’l , 484 U.S. at 103 n.5; Asahi Metal Indus. Co. v. Superior Court of Cal. , 480 U.S. 102, 113 n.* (1987). Some jurisdictions have adopted the national contacts test. Federal Fountain, Inc. v. KR Entertainment, Inc. ( In re Federal Fountain, Inc.) , 165 F.3d 600, 601-02 (8th Cir. 1999) (en banc) (b ankruptcy); -8- D. Next, we must determine whether the Utah district c ourt’s exercise of jurisdiction over defendants comports with due proc ess. Plaintiffs argue that because ERISA authorizes nationwide service of proc ess, the district court can constitutionally exercise jurisdiction over defendants as long as they have minimum contacts with the United States as a whole. Under this approach, the so-called “national contacts” test, a plaintiff cou ld sue a defendant in any federal court in the United States, regardless of the defen dant’s contacts with the forum or the burden on the defendant of litigating in that forum. We are convinced that due process requires something more. 4Bellaire Gen. Hosp. v. Blue Cross Blue Shield , 97 F.3d 822, 825-26 (5th Cir.

1996) (following precedent “dutifully” and applying the national contacts test in an ERISA case, but criticizing this approach becaus e it separates personal jurisdiction from due process); see also Robert C. Casad, Personal Jurisdiction in Federal Question Cases , 70 Tex. L. Rev. 1589, 1606 (1992) (advocating the national contacts approach). Plaintiffs contend that we adopted the national contacts test in Application to Enforce Admin. Subpoenas Duces Tecem of the SEC v. Knowles , 87 F.3d 413 (10th Cir. 1996). In Knowles , the SEC filed an application for an order to show cause and for an order compelling the defendant to comply with administrative subpoenas duces tecum. Id. at 415. The district court issued an order to sho w cause, and the SEC served the defendant with the order in Nassau, Bahamas. Id. The defendant filed a motion to dismiss, arguing th at the district court did not have jurisdiction over him. Id. We recognized that 15 U.S.C. § 77v(a) provides for “worldwide service of process in cases of the e nforcement of subpoenas issued by the SEC” and upheld the district court’s order to the defendant to comply with the subpoenas. Id. at 417, 419. In so doing, we limited our decision “to the question of the jurisdiction of the distric t court, based upon the extraterritorial service of the Order to Show Cause , to enforce the SEC’s subpoenas duces tecum against [the defendant].” Id. at 416. Thus, Knowles merely stands for the narrow proposition that underthe facts and circumstances presented in that case, § 77v(a) authorized the dis trict court to exercise and enforce its subpoena power worldwide. -9- As we noted above, the personal jurisdiction requir ement flows from the Due Process Clause of the Fifth Amendment and restr icts judicial power in order to protect the individual’s liberty interest. Bauxites , 456 U.S. at 702. Thus, the “proper focus for a personal jurisdiction test shou ld be on protecting an individual’s liberty interest in avoiding the burde ns of litigating” in an unfair or unreasonable forum. Busch v. Buchman, Buchman & O’Brien , 11 F.3d 1255, 1259 (5th Cir. 1994) (Garza, J., dissenting). “Req uiring that the individual defendant in a national service of process case onl y reside somewhere in the-10-

United States does not protect this interest.” Id. (Garza, J., dissenting); see also Willingway Hosp., Inc. , 870 F. Supp. at 1106 (“To allow Congress to dictate personal jurisdiction through the enactment of nati onwide service of process provisions, unquestioned by the judiciary[,] is non sensical.”). The Supreme Court has not yet defined Fifth Amendme nt due process limits on personal jurisdiction. However, the Court has h eld that due process under the Fourteenth Amendment requires that “maintenance of [a] suit . . . not offend traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington , 326 U.S. 310, 316 (1945) (internal quotation mark s and citation omitted). Due process limits on a court’s ability to exerc ise jurisdiction “are designed to protect [defendants] by providing them with fair notice that their activities will render them liable to suit in a particular forum.” Republic of
Panama , 119 F.3d at 945 (citing Burger King Corp. v. Rudzewicz , 471 U.S. 462, 470-77 (1985)). A defendant is deemed to have “fair warning” if i t has “purposefully directed [its] activities at residents of the forum.” Burger King Corp. , 471 U.S. at 472 (internal quotation marks and cit ation omitted). However, even if a defendant has “minimum contacts” with the forum, due process is not satisfied unless “the assertion of personal jurisdi ction would comport with fair play and substantial justice.” Id. at 476 (internal quotation marks and citation omitted).5 Compare U.S. Const. amend. XIV, § 1 (“No State shall . . . deprive any

person of life, liberty, or property, without due process of law . . . .”), with U.S. Const. amend. V (“No person shall be . . . deprive d of life, liberty, or property, without due process of law . . . .”). -11- Like the Eleventh Circuit, we discern no reason whythe Fourteenth Amendment’s fairness and reasonableness requirement s “should be discarded completely when jurisdiction is asserted under a federal statute.” Republic of
Panama , 119 F.3d at 945. The Due Process Clauses of the Fourteenth and Fifth Amendments are virtually identical, 5 and both “were designed to protect individual liberties from the same types of government infringement.” Id. (citing Mathews v. Eldridge , 424 U.S. 319, 331-32 (1976)). Accordingly, we ho ld that in a federal question case where jurisdiction is invok ed based on nationwide service of process, the Fifth Amendment requires the plaint iff’s choice of forum to be fair and reasonable to the defendant. In other words, t he Fifth Amendment “protects individual litigants against the burdens of litigat ion in an unduly inconvenient forum.” Id. To establish that jurisdiction does not comport wi th Fifth Amendment due process principles, a defendant must first demonstr ate “that his liberty interests actually have been infringed.” Id. at 946. The burden is on the defendant to show that the exercise of jurisdiction in the chose n forum will “make litigation so gravely difficult and inconvenient that [he] unfair ly is at a severe disadvantage in-12-

comparison to his opponent.” Burger King Corp. , 471 U.S. at 478 (internal quotation marks and citations omitted); accord Republic of Panama , 119 F.3d at 948 (following Burger King Corp. ). However, as Judge Becker has pointed out, given the “practical considerations emanating from the realities of cont emporary litigation, . . . any constitutional due process limitations upon a feder al extraterritorial (nationwide) service of process statute must be broadly defined.” Oxford First Corp. v. PNC Liquidating Corp. , 372 F. Supp. 191, 201 (E.D. Pa. 1974). Thus, in evaluating whether the defendant has met his burden “of establ ishing constitutionally significant inconvenience,” Republic of Panama , 119 F.3d at 946, courts should consider the following factors: (1) the extent of t he defendant’s contacts with the place where the action was filed; (2) the inconveni ence to the defendant of having to defend in a jurisdiction other than that of his residence or place of business, including (a) the nature and extent and interstate character of the defendant’s business, (b) the defendant’s access to counsel, an d (c) the distance from the defendant to the place where the action was brought ; (3) judicial economy; (4) the probable situs of the discovery proceedings and the extent to which the discovery proceedings will take place outside the state of th e defendant’s residence or place of business; and (5) the nature of the regulated ac tivity in question and the extent of impact that the defendant’s activities have beyo nd the borders of his state of6 “We note that inconvenience ‘most frequently can be accommodated

through a change of venue.’ Alternative methods of addressing inconvenience do not, however, do away with the need for a constitut ional floor to protect litigants against truly undue burdens. ‘[I]nconvenience may at some point become so substantial as to achieve constitutional magnitude.’” Republic of Panama , 119 F.3d at 947 n.25 (quoting Burger King Corp. , 471 U.S. at 484). -13- residence or business. Oxford First Corp. , 372 F. Supp. at 203. “We emphasize that it is only in highly unusual cas es that inconvenience will rise to a level of constitutional concern.” Republic of Panama , 119 F.3d at 947. Certainly, “[i]n this age of instant communication,” Oxford First Corp. , 372 F. Supp. at 201, and modern transportation, the bur dens of litigating in a distant forum have lessened, Republic of Panama , 119 F.3d at 947-48. 6 If a defendant successfully demonstrates that litig ation in the plaintiff’s chosen forum is unduly inconvenient, then “jurisdic tion will comport with due process only if the federal interest in litigating the dispute in the chosen forum outweighs the burden imposed on the defendant.” Republic of Panama , 119 F.3d at 948. To determine whether infringement on the d efendant’s liberty is justified sufficiently by government interests,

courts should examine the federal policies advanced by the statute, the relationship between nationwide se rvice of process and the advancement of these policies, t he connection between the exercise of jurisdiction in the chosen forum and the plaintiff’s vindication of his federal right, and concerns of judicial efficiency and econ omy. Where . . . Congress has provided for nationwide se rvice of process, courts should presume that nationwide p ersonal-14- jurisdiction is necessary to further congressional objectives. Id.
III. We conclude that under the broad standard set forth above, defendants cannot show that their liberty interests actually h ave been infringed. First, defendants have sufficient contacts with Utah: theyprecertified plaintiff McCluskey’s treatment at a Utah hospital and paid p laintiff Goates, a Utah resident, for a portion of McCluskey’s care. Becau se defendants rendered benefits in Utah, they knew or should have known th at a dispute over benefits could arise in Utah. Second, even though defendants may be inconvenience d by defending this action in Utah, they cannot show that this burden r ises to the level of constitutional concern. Defendants are large corpo rations operating throughout the southeastern United States. They surely have t he resources to access counsel in Utah. And, while Utah may be some distance from the southeast, modern methods of communication and transportation greatlyreduce the significance of this physical burden. Third, nothing in the record indicates that conside rations of judicial economy or the probable location of discovery in th is case make Utah an unfair forum. Finally, because defendants operate and adm inister a multi-state insurance-15-

plan regulated by federal law, their activities unq uestionably have a significant impact beyond the borders of Alabama and Georgia. Indeed, as this case demonstrates, defendants’ activities reach far beyo nd the southeastern United
States. Thus, defendants have not met their burden of demon strating that the district court’s assertion of jurisdiction will mak e litigation so difficult and inconvenient that they unfairly will be at a severe disadvantage compared to plaintiffs. See ESAB Group, Inc. v. Centricut, Inc. , 126 F.3d 617, 627 (11th Cir. 1997) (finding, in a RICO case, that jurisdiction was co nsistent with the Fifth Amendment because there was no evidence in the reco rd of “extreme inconvenience or unfairness” to the defendants), cert. denied , 523 U.S. 1048 (1998); Republic of Panama , 119 F.3d at 948 (same); Oxford First Corp. , 372 F. Supp. at 203-05 (applying the “fairness test” set f orth above in a securities case and finding that it was not unfair to subject defen dants to the court’s jurisdiction). Because defendants have not shown that the districtcourt’s assertion of jurisdiction will infringe upon their liberty inter ests, we need not balance the federal interests at stake in this suit. We hold t hat the district court erred in granting defendants’ motion to dismiss for lack of personal jurisdiction.
REVERSED AND REMANDED.