Opinion ID: 1404850
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Heading: specific personal jurisdiction under the utah long-arm statute and fourteenth amendment due process

Text: The legislature has expressly stated an intent to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution. Utah Code Ann. § 78-27-22. This court has explicitly upheld that policy. See Synergetics v. Marathon Ranching Co., 701 P.2d 1106, 1110 (Utah 1985) (citing Brown v. Carnes Corp., 611 P.2d 378, 380 (Utah 1980)). Therefore, we frequently make a due process analysis first because any set of circumstances that satisfies due process will also satisfy the long-arm statute. See Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992); Parry v. Ernst Home Ctr. Corp., 779 P.2d 659, 661 (Utah 1989); Bradford v. Nagle, 763 P.2d 791, 793 (Utah 1988). In this case, however, we are asked to determine whether business conducted exclusively through remote means can qualify as transaction of any business within this state. Recent developments in technology and in Utah law make this a vital question. [3] Consequently, we will first examine jurisdiction under section 78-27-24(1).
ASC denies that it has transacted any business within Utah. However, in Synergetics, we noted that section 78-27-23(2) defines `transaction of business within the state' as `[t]he activities of a nonresident person, his agents, or representatives in this state which affect persons or businesses within the State of Utah.' 701 P.2d at 1110. The parties in that case contracted to exchange an ocean-going sailboat for a parcel of real property in Canada. Although the property was not within the state, we held that the negotiation, drafting, and signing of a single modified contract in Utah constituted the transaction of business sufficient to support jurisdiction. In the instant case, the parties did not formally execute a written contract while physically within the state. However, the Supreme Court held in Burger King that jurisdiction may not be avoided merely because the defendant did not physically enter the forum State if other contacts are sufficient. 471 U.S. at 476, 105 S.Ct. 2174 (emphasis in original). Although the distribution agreement was not a contract per se, since neither party was bound to perform, each order that ASC sent and SII received in Utah was an offer to form a contract. The offer of a promise for an act takes place ... in the sending of an order for goods to a merchant or manufacturer. 17 C.J.S. Contracts § 36(1) (1963). SII's shipment of goods in response to an order constituted acceptance of ASC's offer. Under the Uniform Commercial Code an order or offer to buy goods for prompt or current shipment may be accepted either by shipping the goods or promptly promising to do so.... 67 Am.Jur.2d Sales § 145 (1985) (footnotes omitted); see also 17 C.J.S. Contracts § 41(d) (1963) (An acceptance of an offer may be by act.... In such a case, performance is the only thing needful to complete the agreement and to create a binding promise....). In cases involving a contract which possesses possible elements in two or more jurisdictions ... the place where the last act is done which is necessary to complete the contract and give it validity is generally regarded as the place in which the contract is made. 16 Am.Jur.2d Conflict of Laws § 97 (1998) (footnotes omitted). Therefore, [a]n informal contract consisting of an offer in one state and an acceptance in another is usually regarded as having been made in the latter state. Id. § 98 (footnote omitted). Here, both the receipt of the offer and the last act needed to form the contract occurred in Utah. Furthermore, payment to SII constituted ASC's performance of its contractual promise, and default constituted breach of the contract. Consequently, the orders and shipments constituted hundreds of individual contracts, all formed and performed, or with performance due, in Utah, and all bound together into a course of business by the distribution agreement. As we held in Synergetics, the formation of a contract within a state involving a state resident qualifies as transaction of business for purposes of the long-arm statute. Additionally, other connections are stronger in the instant case than in Synergetics. SII is located in Provo, Utah. The parties signed a three-year distribution agreement that ASC considered significant enough to set out on its letterhead. ASC subsequently produced a sales forecast of $2.6 million for 1995 alone and represented that it would hire a full-time marketer to promote the SII products. Thereafter, almost weekly orders and shipments followed. These transactions pertained to the distribution agreement and therefore constituted part of a course of business, not isolated events. In short, pursuant to a three-year commercial agreement involving a Utah-based corporation, ASC submitted continuous orders for a product manufactured in Utah. The orders were received in Utah, filled in Utah, and invoiced in Utah, and the products were shipped from Utah. ASC mailed its payments to Utah, and its default on the payments injured a corporation. All of these activities affect[ed] persons or businesses within the State of Utah. Synergetics, 701 P.2d at 1110. Nonetheless, ASC relies on CPC-Rexcell, Inc. v. La Corona Foods, Inc., 912 F.2d 241, 242 (8th Cir.1990), to argue that fax and telephone orders cannot establish minimum contacts. In that case, the court found that the plaintiff could not establish jurisdiction over the defendant in the Missouri courts when the orders were sent to Missouri, paperwork was processed there, and payments were mailed to a Missouri post office box. However, the orders were actually shipped from North Carolina to warehouses in Arizona and California. CPC-Rexcell personnel located in Arizona and California managed any problems in the shipment or manufacture of the goods, and the company was incorporated in Delaware. Thus it was unlikely that the mail and fax transactions affected people or businesses within Missouri. The Supreme Court clarified the role of mail and wire transactions in Burger King, stating: [I]t is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. 471 U.S. at 476, 105 S.Ct. 2174 (citations omitted). This is more true today than it was in 1985 when Burger King was decided. Expanding business opportunities unfortunately give rise to expanding opportunities for breach of contract, injury, and fraud. More than ever, the public interest demands [that] the state provide its citizens with an effective means of redress against nonresident persons, who, through certain significant minimal contacts with this state, incur obligations to citizens entitled to the state's protection. Utah Code Ann. § 78-27-22. ASC purposefully directed its efforts toward residents of Utah as discussed above. We therefore find that ASC transacted business within this state.
Expanding interstate business and the increasing necessity to protect state residents also gives rise to a converse consideration of due process protection for defendants. ASC expresses a legitimate concern with protecting parties from unforeseeably being haled into court in a foreign jurisdiction regarding a transitory or ephemeral transaction. Therefore, we turn to the analysis of jurisdiction under the due process requirements of the Fourteenth Amendment. It is well established that jurisdiction must result from `minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.' Synergetics, 701 P.2d at 1110 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940))). Consequently, defendant must have `purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' Mallory Eng'g, Inc. v. Ted R. Brown & Assocs., 618 P.2d 1004, 1008 (Utah 1980) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). Specific personal jurisdiction may be asserted... `only on claims arising out of defendant's forum-state activity,' Neways, Inc. v. McCausland, 950 P.2d 420, 423 (Utah 1997) (quoting Abbott G.M. Diesel, Inc. v. Piper Aircraft Corp., 578 P.2d 850, 853 n. 6 (Utah 1978)), and the connection between the defendant and the forum state must be such that the defendant `should reasonably anticipate being haled into court there.' Synergetics, 701 P.2d at 1110 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). Finally, the determination of whether Utah can justify asserting jurisdiction over defendants hinges on the balancing of the fairness to the parties and the interests of the State in assuming jurisdiction. Synergetics, 701 P.2d at 1110-11 (footnote omitted); see also Burger King, 471 U.S. at 478, 105 S.Ct. 2174 (jurisdiction must not put party at severe comparative disadvantage). ASC's transaction of business in Utah, as discussed above, fulfills the requirement of minimum contacts. Additionally, [b]y transacting business in this state, [defendant] satisfied the purposeful activity requirement of Hanson and Mallory.  Synergetics, 701 P.2d at 1110. ASC purposefully availed itself of the benefits and protections of Utah law when it signed the distribution agreement and commenced a regular course of ordering products from SII. We found in Synergetics that [t]he same conduct establishes the requisite connection between the activity and the cause of action. Id. This is also true in the instant case with regard to ASC II. As SII aptly noted in its memorandum in opposition to the motion to dismiss: [a]ny nonresident business that confirms that it intends to act as a national and international distributor for a Utah business and then places hundreds of purchase orders for goods that are to be shipped and invoiced from Utah, with full knowledge that it must perform its part of the bargain by paying for the goods in Utah[,] should not be surprised when it gets haled into court after it fails to pay no fewer than 170 invoices. ASC relies on Conn v. Whitmore, 9 Utah 2d 250, 255, 342 P.2d 871, 874-75 (1959), to support its argument that acquiring jurisdiction from a mail order purchase would jeopardize interstate business by subjecting every such purchaser to jurisdiction in a distant and inconvenient forum. We emphasize that ASC's connection with Utah is not based on isolated or occasional transactions, nor is it a traditional mail order purchase. Rather, ASC engaged as a wholesale purchaser in a regular and continuing course of business with SII pursuant to a three-year distribution agreement. Therefore, the transactions at issue here constitute much more than standard retail mail order purchasers. Turning to the question of fairness to the parties and the interest of the state, we note that where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Burger King, 471 U.S. at 477, 105 S.Ct. 2174. ASC II has presented no such evidence. Furthermore, `[i]n undertaking interstate business [a defendant] must recognize and accommodate... the probability and necessity of litigating in foreign forums.' Synergetics, 701 P.2d at 1111 (quoting Mallory, 618 P.2d at 1009 n. 8). The distribution agreement between SII and ASC covered the United States and six foreign countries. Clearly, ASC was conducting an interstate business. Additionally, the amount in controversy, $118,000, is large enough that ASC II is unlikely to default on its defense due to the burden of defending in a foreign forum. See id. Where the amount in controversy ... is substantive compared to the costs of litigating the action, there is only minimal possibility of defendants defaulting on the basis that they cannot afford to litigate in the forum. Id. Balanced against the inconvenience to the defendants is the express interest the state has in ensuring protection to its residents from the acts of nonresidents. Id. The legislature has clearly mandated, as discussed above, that the rules of jurisdiction be applied so as to give Utah residents the broadest protection permitted by the federal constitution. Therefore, to borrow the language from Burger King, [w]e cannot conclude that [Utah] had no `legitimate interest in holding [ASC II] answerable on a claim related to' contacts [it] had established in that State. 471 U.S. at 482-83, 105 S.Ct. 2174 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 776, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984)). Accordingly, we hold that Utah's jurisdiction over ASC II accords with Fourteenth Amendment due process of law.