Opinion ID: 1400494
Heading Depth: 3
Heading Rank: 1

Heading: Purposeful Availment Through The Settlement Agreement

Text: The mere existence of a contract is insufficient to establish minimum contacts. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.). But a contract is typically an intermediate step between past negotiations and future transactions, and Burger King instructs that it is these factorsprior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealingthat must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum. Id. at 479, 105 S.Ct. 2174. BBI argues that several aspects of the Settlement Agreement's terms, as well as prior negotiations and contemplated future consequences, create minimum contacts. First, BBI points out that the Agreement contains a choice-of-law clause stating that it will be governed by and construed under the laws of the State of California. Br. of Appellant 39. As Burger King points out, a choice-of-law provision standing alone would be insufficient to confer jurisdiction, but combined with other factors, it may reinforce a party's deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there. 471 U.S. at 482, 105 S.Ct. 2174. We must therefore consider other factors before we can decide how much weight to afford to this provision. Second, BBI points out that the Defendants negotiated the Settlement Agreement by telephone and mail with California-based BBI and its attorneys. Br. of Appellant 40. Interpreting California law, the Ninth Circuit has said that, ordinarily, use of the mails and telephone simply do not qualify as purposeful activity invoking the benefits and protection of the [forum] state. Roth v. Garcia Marquez, 942 F.2d 617, 622 (9th Cir.1991) (quoting Thos. P. Gonzalez Corp. v. Consejo Nacional De Produccion De Costa Rica, 614 F.2d 1247, 1254 (9th Cir.1980)). Moreover, an important distinction between the negotiations in Burger King and those in the instant case is that the Burger King defendant actively sought contract negotiations with a company based in the forum state, whereas White did not reach out to anyone in California until BBI threatened litigation. See Burger King, 471 U.S. at 479, 105 S.Ct. 2174 (Eschewing the option of operating an independent local enterprise, Rudzewicz deliberately `[reached] out beyond' Michigan and negotiated with a Florida corporation for the purchase of a long-term franchise and the manifold benefits that would derive from affiliation with a nationwide organization.). Third, BBI asserts that the Defendants established minimum contacts by accepting BBI's settlement payment which was wired from a California bank to defendants. Br. of Appellant 41. To underscore the importance of this payment, BBI cites a case from the Southern District of Mississippi, Medical Assurance Co. of Mississippi v. Jackson, 864 F.Supp. 576 (S.D.Miss.1994). Jackson involved a suit brought by a Mississippi-based medical malpractice insurance company against two Alabama residents: Moore, the victim of a botched operation in Mississippi that created a need for additional surgery; and Jackson, Moore's attorney. Id. at 577. Jackson threatened to sue the insurance company on Moore's behalf and demanded a $1,100,000 settlement. Id. After a series of letters and telephone calls, Moore agreed to a settlement of $56,250 from the insurance company in exchange for an absolute release. Id. Jackson and Moore accepted and negotiated the $56,250 check that the insurance company tendered, but they refused to execute the absolute release that the company had also sent them. Id. They returned an altered version of the release form instead. Id. at 578. The insurance company sued Jackson and Moore in a Mississippi federal district court, alleging breach of the settlement agreement. Id. at 578. Jackson and Moore claimed that the court lacked personal jurisdiction over them because the insurance company had sent the payment and the release documents to Alabama. Id. The court rejected their claim, pointing out that the check was sent from Mississippi and was ultimately paid by a Mississippi bank, that the release, which is central to this action was sent from Mississippi and was to be returned to Mississippi, and that defendants did, in fact, return a [modified] release document to Mississippi. Id. Moreover, the court pointed out that Jackson initiated the transaction by threatening to sue the Mississippi-based insurance company. Id. at 579. Despite some superficial similarities, Jackson is distinguishable. Although White and her attorney, like Moore and Jackson, accepted payment from a bank located in the forum state in exchange for accepting a settlement agreement, they did not initiate the transaction by threatening to sue a California company. [20] Also, whereas Moore had traveled to Mississippi for surgery performed by a Mississippi doctor, 864 F.Supp. at 577, White had not directed any activities toward California before BBI contacted her. Thus, even if we regard Jackson as persuasive authority, it does not compel a finding of purposeful availment. Fourth, BBI argues that the parties contemplated future consequences. Among other things, the Agreement states that the Defendants hereby irrevocably appoint BBI as their respective lawful attorney-in-fact with authority to file any document in the name of and on behalf of [the Defendants] for the purpose of taking any of the actions required by [Section 4 of the Agreement] upon the event of a default. We agree that the attorney-in-fact provision suggests that the parties contemplated future consequences to some extent. Still, a large gulf exists between the future contacts contemplated by this provision and the extensive future contacts contemplated by the Burger King contract. Whereas the Burger King defendant entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida, id. at 480, 105 S.Ct. 2174, the Settlement Agreement merely describes what will happen in the event of default. In sum, we question whether any of the factors that BBI cites (the choice of law clause, the mail and telephone negotiations, the acceptance of the settlement check, and the attorney-in-fact provision) would individually support purposeful availment. The combined force of these factors, however, may be sufficient. On the other hand, White has asserted that the original agreement contained a clause consenting to personal jurisdiction in California that the parties removed at White's insistence. If true, this suggests that we should hesitate to read the terms of the contract, especially the choice-of-law clause, as indicative of the reasonable foreseeability of possible litigation in California court. [21] See 471 U.S. at 482, 105 S.Ct. 2174. BBI contests this fact, and we do not have evidence of it in the record other than White's affidavit and brief. Therefore, on remand the District Court may wish to investigate White's claim regarding the contract negotiations, since it could shed light on the extent to which the parties contemplated an ongoing relationship with California, including the possibility of litigation there. [22]