Opinion ID: 664674
Heading Depth: 2
Heading Rank: 1

Heading: Wisconsin's Long-Arm Statute

Text: 6 Ordinarily, under Fed.R.Civ.P. 4(e), a federal court sitting in diversity begins its personal jurisdiction analysis by determining whether the forum state's long-arm statute confers personal jurisdiction over the defendant. Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 105, 108 S.Ct. 404, 410, 98 L.Ed.2d 415 (1987). The Wisconsin Supreme Court has determined that its long-arm statute is to be liberally construed in favor of the exercise of jurisdiction, Schroeder v. Raich, 89 Wis.2d 588, 593, 278 N.W.2d 871 (1979); International Placement & Recruiting v. Reagan Equip. Co., 592 F.Supp. 1252, 1254 (E.D.Wis.1984); see also Capitol Fixture v. Woodma Distrib., 147 Wis.2d 157, 432 N.W.2d 647, 649 (Ct.App.1988). In this case, Plaintiff argues that personal jurisdiction may be obtained over Defendant under either the (1) tort, or (2) contract provisions of the State's long-arm statute. See Wis.Stat. Sec. 801.05(3) & (5)(a) (1991).
7 In its argument before the district court the Plaintiff claimed personal jurisdiction existed under either Secs. 801.05(3) or 801.05(4) of Wisconsin's long-arm statute. 8 The tort provision of Wisconsin's long-arm statute grants jurisdiction [i]n any action claiming injury to person or property within or without this state arising out of an act or omission within this state by defendant. Wis.Stat. Sec. 801.05(3). Plaintiff contends that Defendant's failure to disclose to Plaintiff the substantial likelihood of litigation at the time Defendant purchased or increased its insurance coverage constitutes an act or omission in Wisconsin sufficient to assert jurisdiction under the statute. In response to Plaintiff's argument, Defendant asserts that any act or omission took place in the Pacific Northwest in face-to-face negotiations with Plaintiff's local agent. 9 Defendant relies heavily on Lincoln v. Seawright, 104 Wis.2d 4, 310 N.W.2d 596, 600 (1981). In Lincoln, a Wisconsin plaintiff purchased a dog from a New Mexico defendant. The defendant shipped the dog from New Mexico to Wisconsin and wired money to Wisconsin to pay air freight charges. The defendant neglected to warn the plaintiff that the dog was dangerous and had a history of biting children. When the dog arrived in Wisconsin, it bit the plaintiff who then sued the defendant in Wisconsin. The court dismissed the suit and held that neither the wiring of money nor the failure to warn occurred within this state for purposes of Sec. 801.05(3). Id., 310 N.W.2d at 601. Thus, in Lincoln, the Wisconsin Court held that acts or omissions occurring outside Wisconsin but having consequences that are felt within Wisconsin do not fit within the tort provisions of Sec. 801.05(3). Plaintiff attempts to distinguish Lincoln by contending that Lincoln merely involved a failure to warn of a physical risk within the forum, whereas the case here involves a defendant who allegedly misrepresented and breached his duty of good faith. 10 Despite Plaintiff's efforts, we share the district court's view that the differences Plaintiff attempts to draw between Lincoln and this case are illusory. The defendant in Lincoln had a continuing duty to provide the plaintiff with information concerning dangers and problems associated with the dog for the entire time the dog would be under the control of the plaintiff. Thus, we see no reason why the financial injury here, caused by an act or omission, should receive more protection than the physical injury experienced in Lincoln. Indeed, case law reveals the opposite to be true. See Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 597 F.2d 596, 602 n. 11 (7th Cir.1979), cert. denied, 445 U.S. 907, 100 S.Ct. 1087, 63 L.Ed.2d 325 (1980) (declining to exercise jurisdiction over the defendant and stating that Wisconsin courts have a lesser interest in protecting Wisconsin residents in disputes not involving dangers to persons or things within the state's borders). Therefore, we agree with the district court that the tort provision of Wisconsin's long-arm statute, Sec. 801.05(3), does not extend sufficiently far to reach Defendant's conduct. 11 Plaintiff also contends that Sec. 801.05(4) authorizes personal jurisdiction over Defendant in Wisconsin. Section 801.05(4) of Wisconsin's long arm statute provides that a State court has personal jurisdiction over a defendant if: 12 [i]n any action claiming injury to person or property within this state arising out of an act or omission outside this state by the defendant, provided in addition that at the time of the injury, either: 13 (a) Solicitation or service activities were carried on within this state or on behalf of the defendant; or 14 (b) Products, material or things processed, serviced or manufactured by the defendants were used or consumed within this state in the ordinary course of trade. 15 Plaintiff argues that because Defendant allegedly engaged in solicitation within the State, Sec. 801.05. (4)(a) provides jurisdiction over Defendant. This alleged solicitation occurred, according to Plaintiff, through Defendant's general manager, Mr. Slatt, who also concurrently served as the manager of Northwest Rural Electric Cooperatives (Northwest Rural), an informal trade group consisting of various rural electrical cooperatives located in Idaho, Oregon and Washington. Plaintiff argues that when Slatt asked Plaintiff's CEO to attend a meeting sponsored by Northwest Rural, 3 Slatt in effect solicited services on behalf of Defendant, and thus triggered Sec. 801.05(4)(a). 16 According to Wisconsin law, before a solicitation triggers Sec. 801.05(4)(a) it must be made by the defendant to the plaintiff, and the defendant must expect some financial benefit. Pavlic v. Woodrum, 169 Wis.2d 585, 486 N.W.2d 533, 535 (Wis.App.1992), Fields v. Peyer, 75 Wis.2d 644, 250 N.W.2d 311, 316 (Wis.1977). Thus the issue becomes whether the soliciting party that expected a financial benefit from Plaintiff was Defendant or Northwest Rural. The district court found that Plaintiff had failed to carry its burden of demonstrating that Mr. Slatt's encouragement was on Defendant's behalf, rather than on behalf of Northwest Rural. Federated v. Inland Power, No. 93-C-072-C, slip op. at 14, 1993 WL 603562 (W.D.Wis. Apr. 27, 1993) (hereinafter Federated I ). As the district court reasoned, it is more probable that Plaintiff, on its own initiative, sought to avail itself of the State's insurance market than the Defendant solicited Plaintiff into its service. Since we are in agreement with the district court's finding that Plaintiff has failed to establish a Sec. 801.05(4)(a) solicitation by Defendant, personal jurisdiction under the tort provision of Wisconsin's long-arm statute does not exist in this case.
17 The contract provision of Wisconsin's long-arm statute states that jurisdiction is proper in any action which [a]rises out of a promise, made anywhere to the Plaintiff ..., by the defendant to perform services within this state or to pay for services to be performed in this state by the plaintiff. Wis.Stat. Sec. 801.05(5)(a). In Wisconsin the following minimum contacts must exist before a defendant is subject to jurisdiction under the contract provision: 18 (i) a claim arising out of a bargaining arrangement made with the defendant by or on behalf of the plaintiff; (ii) a promise or other act of the defendant, made or performed anywhere, which evidences the bargaining arrangement sued upon; and (iii) a showing that the arrangement itself involves or contemplates some substantial connection with the state. 19 Capitol Fixture, 432 N.W.2d at 650; see also Foster, Revision Notes to Wis.Stat. Sec. 801.05(5) (1959). Here, the parties have agreed that the first two of these elements--that the insurance policies existed, and that the claims being asserted here relate to the policies--have been satisfied. However, to meet the third element, the substantial connection requirement, Defendant must contemplate that at least some services will occur in Wisconsin. See Daniel J. Hartwig Assoc., Inc. v. Kanner, 913 F.2d 1213, 1217 (7th Cir.1990). 20 In Hartwig, we found a sufficient connection with Wisconsin to assert jurisdiction under the contract provision when a defendant had met the plaintiff in Wisconsin, had solicited the plaintiff's services in Wisconsin, and had entered into an agreement with the plaintiff that required the plaintiff to perform significant research in Wisconsin and to travel from Wisconsin on behalf of the defendant. 913 F.2d at 1216. Conversely, in Management Science, Inc. v. Wilson Mfg. Co., 451 F.Supp. 963, 964-65 (E.D.Wis.1978), the Eastern District of Wisconsin declined to assert personal jurisdiction over a defendant who executed a contract in Texas with the Wisconsin plaintiff for computers to be manufactured in Wisconsin and sent to Texas, even though defendant mailed payments for the computers to Wisconsin and sent two employees to Wisconsin to receive computer training by defendant. 21 In deciding this matter, we agree with the district court in its finding that, under the facts of this case, the contract provision of the long-arm statute, Sec. 801.05(5), does not subject Defendant to personal jurisdiction in Wisconsin. As an initial matter it is uncertain what services were performed by Plaintiff in Wisconsin. It is also unclear whether Plaintiff's acts of processing Defendant's policies and claims under the policies in its Wisconsin offices constitute services at all as contemplated by the insurance contracts. Ultimately, the service provided by insurers such as Plaintiff is liability and defense coverage. Because Defendant engaged in business in the Pacific Northwest only, Plaintiff performed all of these services in the Pacific Northwest rather than in its home office of Wisconsin. 22 Furthermore, even if Plaintiff did perform services for Defendant in Wisconsin, it is too great a stretch to say that the insurance contracts between Plaintiff and Defendant contemplated substantial connection with Wisconsin. See Capitol Indemnity Corp. v. Certain Lloyds Underwriters, 487 F.Supp. 1115, 1120 (W.D.Wis.1980) (one who merely purchases insurance from an insurer residing in the forum state does not subject himself to jurisdiction of the state). Defendant conducted the bulk of its negotiations with Plaintiff through Plaintiff's agent in the Pacific Northwest. Plaintiff's agent visited Defendant's offices approximately every six months to discuss Defendant's policies. Occasionally, Defendant directed its questions to Plaintiff's office in Wisconsin through the mails or by telephone. Except for Defendant's general manager, Vincent Slatt, none of Defendant's officers, directors or employees ever set foot in Wisconsin in connection with the insurance policies with Plaintiff. There is only the most tenuous of links between Defendant and Wisconsin through Defendant's purchase of Plaintiff's stock and Defendant's backing of WPPSS bonds, some of which were purchased by Wisconsin residents. Neither of these activities led to services in Wisconsin or were substantial. Therefore, as the district court found, the facts in this case do not satisfy the contract provision of Wisconsin's long-arm statute, Sec. 801.05(5), and thus Plaintiff cannot obtain personal jurisdiction over Defendant under this section.