Opinion ID: 1404850
Heading Depth: 3
Heading Rank: 1

Heading: Jurisdiction Under the Long-Arm Statute

Text: 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.