Court Opinion

ID: 9493487
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:09:37.451958+00
Date Added: 2024-06-11T17:55:52.198786
License: Public Domain

HILLMAN, District Judge,
dissenting.
I respectfully dissent. The majority opinion has failed to demonstrate how the exercise of jurisdiction by the district court of Ohio would be fundamentally unfair or that the Due Process Clause is offended when defendants have meaningful “contacts, ties or relations” with the State of Ohio. See International Shoe Co. v. State of Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
In its opinion, the majority goes to great lengths to minimize the seventeen-year continuing business relationship between these parties and to broaden the notion of “fortuitous” contacts so as to expand the concept beyond all recognition. While citing the relevant controlling language from the cases, the majority distorts and distinguishes the facts of this case in ways that render those controlling decisions meaningless. In the end, the instant decision is almost unrecognizable under modern notions of personal jurisdiction, harking back to the days of Pennoyer v. Neff, 95 U.S. (5 *725Otto) 714, 24 L.Ed. 565 (1878) (requiring physical presence in a state at the time process is being served), overruled by International Shoe, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (establishing new test that “due process requires only that in order to subject a defendant to a judgment in personam, ... [the defendant] have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ”).
This case falls squarely within the holding of Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), and is indistinguishable in all relevant respects. In Burger King, the Supreme Court considered whether Florida had properly exercised jurisdiction over a Michigan resident in an action involving a dispute over a franchise agreement. Defendant John Rudzewicz and Brian MaeShara, both Michigan residents, entered into a 20-year franchise agreement with Burger King, Inc., a Florida corporation, to operate a Burger King franchise in Detroit, Michigan. Shortly thereafter, a dispute arose over defendant’s operation of the franchise under the franchise agreement, and Burger King brought an action in the United States District Court for the District of Florida. In analyzing the question of Florida’s jurisdiction over Rudzewicz, the Supreme Court recognized that an individual’s onetime contract with an out-of-state party “alone can[not] establish sufficient minimum contacts in the other party’s home forum....” Id. at 478, 105 S.Ct. 2174 (emphasis in original). The Court reiterated, however, that “where the defendant ‘deliberately’ has engaged in significant activities within a state ... or has created ‘continuing obligations’ between himself and residents of the forum ... he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by ‘the benefits and protections’ of the forum’s laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.” Id. at 475-76, 105 S.Ct. 2174 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984), and Travelers Health Ass’n v. Virginia, 339 U.S. 643, 648, 70 S.Ct. 927, 94 L.Ed. 1154 (1950)). See also LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1300 (6th Cir.1989) (“The Supreme Court has emphasized, with respect to interstate contractual obligations, that ‘parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other State for the consequences of their activities.’ ”) (quoting Burger King, 471 U.S. at 473, 105 S.Ct. 2174) (internal quotations omitted). Applying that reasoning, the Burger King Court held that Rudzewicz’s negotiation of a 20-year agreement with Burger King, which contemplated “continuing and wide-reaching contacts with Burger King in Florida ... can in no sense be viewed as ‘random,’ ‘fortuitous,’ or ‘attenuated.’ ” Id. at 480, 105 S.Ct. 2174 (citations omitted).
Despite citing language from Burger King, the majority appears to disregard its fundamental import. The majority arrives at its finding of no personal jurisdiction by breaking the argument and evidence into discrete and distorted portions and addressing them seriatim, rather than viewing the relationship in its entirety.
First, for example, although the majority recognizes that the parties in the instant case had a seventeen-year business relationship during which Rowlette served as the exclusive sales representative for Calphalon in a five-state area, the majority summarily concludes that such a relationship is not a “continuing business relationship” within the meaning of Burger King and that the contacts created by this series of agreements are merely “fortuitous.” The majority entirely dismisses the duration of the relationship, stating only that the “quality” of the relationship, not the “quantity” is controlling. The *726majority then declares that the “quality” of the relationship has only a fortuitous relationship with Ohio, citing the wholly inapposite and distinguishable cases of Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 151 (6th Cir.1997) (holding that a contract governing a one-time sale and purchase of a product negotiated by fax and phone is insufficient to establish minimum contacts where delivery actually occurred in another state), and International Technologies Consultants, Inc. v. Euroglas, 107 F.3d 386, 395 (6th Cir.1997) (holding that consulting contract that was initiated by plaintiff Michigan company in Europe, for development of a European facility and governed under European law was insufficient to establish jurisdiction over defendants, particularly in light of the special considerations involving international defendants). . In the instant case, in contrast, the “quality” of the continuing relationship that has actually occurred between Rowlette and Calphalon during the many years of their arrangement is precisely the kind of relationship deemed sufficient by the Supreme Court in Burger King. In fact, in Burger King, the Court held that such a continuing relationship was sufficient where it had been merely agreed to by the contracting parties. Here, the parties not only agreed to that kind of continuing relationship, they actively pursued it for seventeen years.
Second, in the course of its discussion, the majority repeatedly observes that Rowlette did not sell products in Ohio to Ohio citizens, suggesting that to establish jurisdiction, the defendant must exploit the end market in the forum state. Such a suggestion makes no sense at all and, with all due respect, is patently absurd. In Burger King, the franchisee sold no hamburgers in Florida. The Supreme Court did not consider the identity of Rudzew-icz’s ultimate customers; it considered the identity and relationship with the relevant Florida resident — Burger King, Inc.
In the instant case, Rowlette had extensive contacts and an ongoing relationship with the only Ohio citizen of relevance for purposes of the Burger King analysis-— Calphalon. Rowlette intentionally sought to enter into and maintain a relationship with an Ohio corporation over an extended period of time, which in turn led to numerous commercial transactions between them. See Southern Machine Co. v. Mohasco Ind., Inc., 401 F.2d 374, 382 (6th Cir.1968) (recognizing that although defendant had not solicited the original agreement, it unquestionably had purposefully availed itself of the license agreement at issue in the case). The relationship to Ohio is not rendered fortuitous simply because Calphalon originally chose where to establish its business.
Third, the majority casually dismisses as unimportant the fact that the parties agreed that the manufacturer’s representative contract would be governed by Ohio law. The majority, of course, recognizes that multiple decisions have held that such choice-of-law provisions are relevant to a finding of personal jurisdiction. See Burger King, 471 U.S. at 482, 105 S.Ct. 2174 (choice-of-law provision, while not sufficient standing alone to confer'jurisdiction, is relevant factor in determining whether party purposefully availed itself of the forum); Euroglas, 107 F.3d at 393 (emphasizing choice-of-law. provision as significant factor) (citing Burger King, 471 U.S. at 482, 105 S.Ct. 2174, and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)); CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1264 (6th Cir.1996) (finding purposeful availment in part because of choice-of-law provision in contract). Yet the majority simply declares in conclusory terms that while Rowlette was on notice that the contract would be governed by Ohio law, “it did not make a deliberate affiliation with th[e] state and could not reasonably foresee possible litigation there.” Majority opinion, at 723.
Fourth, the majority ignores years of telephone, fax and mail contacts, focusing instead on a single letter from Rowlette to *727Calphalon threatening litigation. The majority concludes that such a letter is insufficient to create personal jurisdiction. But as the Burger King Court recognized, much modern commercial activity is conducted by mail and wire communications, obviating need for physical presence, and as long as a “commercial actor’s efforts are ‘purposefully directed’ towards residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.” Id. at 476, 105 S.Ct. 2174. All of Rowlette’s telephone and mail communication, not just a single letter, should have been considered.
The majority suggests, however, that other communications were irrelevant and that the nature of Rowlette’s relationship with Ohio was “fortuitous” because Row-lette did not care where Calphalon was located and “[ajrguably ... would have served as Calphalon’s representative in the designated states, regardless of Calphal-on’s base of operations.” The majority’s reasoning conflicts with the Supreme Court’s decision in Burger King. The Burger King Court did not conclude that Rudzewicz’s “phone, mail and fax contact ... and physical visits” were “fortuitous” on the basis that they “occurred solely because [Burger King] chose to be headquartered in [Florida].” Majority opinion, at 722-23. If the majority’s reasoning is credited, the rationale will undermine a finding of personal jurisdiction in virtually all commercial relationships because “arguably” no distributor or buyer reasonably is concerned with where a product is made.
Finally, the majority dismisses without discussion Rowlette’s periodic physical presence in Ohio as fortuitous. The Supreme Court squarely has recognized that physical presence within the state, while not mandatory, will bolster the reasonable foreseeability of being sued in a state. See id. at 476, 105 S.Ct. 2174 (“[territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there_”). In the instant case, Rowlette was physically present in Ohio on a periodic basis — at Calphalon’s insistence and as required by Rowlette’s relationship with Calphalon. Rowlette clearly contemplated being periodically haled into Ohio by Calphalon for business purposes. It therefore was entirely reasonable for Row-lette to contemplate being haled into Ohio court by Calphalon.
Rather than applying the atomistic analysis used by the majority, Burger King and other Supreme Court cases admonish us to apply
a “highly realistic” approach that recognizes that a “contract” is “ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.” 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 within the forum.
Id. at 479, 105 S.Ct. 2174 (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316-17, 63 S.Ct. 602, 87 L.Ed. 777 (1943)). As a result, the real question before the court in evaluating personal jurisdiction is the nature and extent of Rowlette’s relationship with Calphalon, who is and always has been located in Ohio. Rowlette engaged in an intentional relationship with Calphalon to sell its products for seventeen years. Under its contract with Calphalon, Rowlette promoted Calphalon products, transmitted orders to Calphalon, extended Calphalon’s business, and reported to Cal-phalon on the activities of competitors in the region. Calphalon supplied samples to Rowlette, paid commissions to Rowlette, and refrained from appointing any other representative in Rowlette’s region. Row-lette agreed that Ohio law would govern the contract. Further, Rowlette attended mandatory meetings in Ohio as dictated by *728Calphalon. Such substantial contacts, which occurred in fulfilling a continuing contractual relationship, may not be considered fortuitous' — they are intimately connected with the relationship itself and with the dispute in question. “[T]he ‘quality and nature’ of [Rowlette’s] relationship to the company in [Ohio] can in no sense be viewed as ‘random,’ ‘fortuitous,’ or ‘attenuated.’ ” Burger King, 471 U.S. at 480, 105 S.Ct. 2174.
Under the jurisdictional analysis set forth by the Supreme Court, the facts of this case unquestionably support a conclusion that Rowlette purposefully availed itself of the privilege of conducting activities in Ohio. See Burger King, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).
The majority also concludes that the second prong of Southern Machine is not met because the dispute did not arise from Rowlette’s contacts with the state. This secondary conclusion, however, is dependent on the majority’s primary conclusion that no purposeful availment occurred, and the majority applies a gloss to the second requirement not contemplated by precedent.
As the majority notes, the “arising from” requirement is satisfied when the operative facts of the controversy arise from the defendant’s contacts with the state. See Southern Machine, 401 F.2d at 384 n. 29 (“Only when the operative facts of the controversy are not related to the defendant’s contact with the state can it be said that the cause of action does not arise from the contract.”). A suit over the termination of a seventeen-year business relationship unquestionably arises from the minimum contacts established during that seventeen-year relationship.
The majority, however, distorts this straightforward requirement by demanding that the specific conduct leading to the action must have taken place in the state seeking to assert personal jurisdiction. The majority reasons that the action is one for breach of contract and that any breach by Rowlette could not have occurred in Ohio since Rowlette’s actions were taken in Minnesota. The majority therefore concludes that the action does not “arise from” Rowlette’s contacts with Ohio.
The reasoning is fallacious for twin reasons. First, no case law suggests that in a contract action, personal jurisdiction may be established only when the defendant has breached that contract in the forum state. Indeed, since defendant Rudzewicz never entered Florida in relation to his agreement with Burger King, any breach necessarily occurred outside the forum state. The Supreme Court imposed no artificial requirement that personal jurisdiction depend upon the place of the defendant’s allegedly wrongful conduct. See Burger King, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528.
Second, the action at issue is not for breach of contract. Instead, it is an action for declaratory judgment on Calphalon’s obligations under the manufacturer’s representative agreement. No breach is asserted by Calphalon. Calphalon seeks only to adjudicate the parties’ obligations under the very contractual arrangement that has established Rowlette’s minimum contacts with Ohio.
Indeed, this court in Southern Machine expressly recognized that a declaratory judgment action unquestionably arises out of a business agreement. The court rejected both the notion that a defendant’s breach of contract is required and the notion that the location of such breach is relevant to the jurisdictional analysis:
[M]any of the operative facts of this controversy arose from obligations created by the license agreement and from acts performed under that agreement. Mohasco’s participation in establishing those obligations and in setting in motion that performance is clear. To suggest that Mohasco should not be joined in this action because it has been guilty of no breach of contract or bad faith conduct places emphasis on the wrong consideration. In personam jurisdiction *729is not assumed as punishment for the commission of a tort or the breach of a contract. Its assumption is not based on the fault of the defendant but on the interest of the state. A state has as much interest in resolving business differences before they cause damage as it has in providing a remedy once the damage has occurred.
401 F.2d at 384. Where, as here, the action seeks to adjudicate the rights of parties who have engaged in a seventeen year business relationship and to determine their respective obligations under the final contract between them, the action arises from the contacts established during that seventeen year relationship.
There can be little doubt both that Row-lette purposefully availed itself of the privilege of doing business with and causing consequences in Ohio and that the present action arises out of Rowlette’s contacts with Ohio. Exercise of jurisdiction by Ohio in no way offends due process. Any other conclusion is inconsistent with controlling Supreme Court and Sixth Circuit precedent. Accordingly, I respectfully dissent.