Court Opinion

ID: 6988030
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:19:49.697751+00
Date Added: 2024-06-11T16:09:31.358989
License: Public Domain

LUTTIG, Circuit Judge,
dissenting:
I believe that the Supreme Court’s decision in Burger King v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), is both legally and factually indistinguishable in any material respect from the instant case and dictates a finding that jurisdiction over this dispute between HMH Partners and Diamond Healthcare unmistakably lies in the federal courts of Virginia, even if jurisdiction would also lie in the federal courts of Ohio.
Not only does the majority’s holding directly conflict with the Supreme Court’s decision in Burger King, it also directly conflicts with our own precedent in English & Smith v. Metzger, 901 F.2d 36 (4th Cir.1990). There, in a case involving contacts no more significant than those present in the instant case, we flatly rejected on the authority of Burger King the defendant’s claim, which mirrored the claim made by HMH Partners here, that Virginia lacked jurisdiction because “he conducted his business [with plaintiff] solely by phone and through the mails, and because he had no expectation that [plaintiff] would do the work in Virginia.” 901 F.2d at 39. Our holding, of course, was wholly unsurprising. For, as has always been the case, the “relevant question is not where the contacts predominate, but only whether enough minimum contacts exist that the district court’s assumption of specific jurisdiction satisfie[s] due process.” Id. (emphasis added).
Here, HMH Partners, an Ohio corporation, purposely availed itself of the privilege of doing business in the forum state of Virginia by virtue of its deliberate, reciprocal, continuing contract obligations to Diamond Healthcare, a Virginia corporation, and the connections between that contract and Virginia. Under Burger King and English & Smith, such a relationship between the parties and the forum easily constitutes sufficient minimum contact to make it “presumptively not unreasonable to require [the out-of-state corporation] to submit to the burdens of litigation” in the forum state. Burger King, 471 U.S. at 476, 105 S.Ct. 2174. As the Court explained in Burger King, where a defendant purposely avails itself “by some act ... of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws,” it should “reasonably anticipate out-of-state litigation.” Id. at 475, 105 S.Ct. 2174 (citing Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). Due process requires no more.
Although the majority perfunctorily acknowledges that the controlling question is whether sufficient minimum contacts with Virginia exist to satisfy due process, see ante at 450-51,1 believe that it is ultimately the majority’s failure first, to appreciate, and then, for purposes of its analysis, actually to draw, the distinction between “minimum” and “predominant” contacts, that leads it to conclude in error that jurisdiction over this dispute can lie only in Ohio. An understanding of this distinction is critical if one is not to confuse the due process inquiry of specific jurisdiction with a conflict of laws inquiry of the kind that the majority essentially undertakes. As if “predominance” of contacts were the relevant inquiry, throughout its opinion the majority repeatedly emphasizes, for example, that the parties performed “mainly” in Ohio, ante at 451-52; that the contract was “predominantly” performed there, id. at 449-50; and that it was contemplated that the “bulk of the contract’s performance” would occur in that state, id. at *454451-52. And, tellingly, without so much as a suggestion of any difference between its holding and that of the district court, the majority summarizes the judgment that it affirms as follows: “Even though Diamond Healthcare was a Virginia corporation located in Richmond and would perform its contract under the general supervision of its corporate leadership in Richmond, the [district] court concluded that the contract called for Diamond Healthcare to perform ‘predominantly in Ohio.’ ” Ante at 449; see also id. at 450 (quoting district court opinion that “the defendant did not anticipate that the forum corporation would provide its services predominantly from the forum”). The only other possible source of the majority’s error that I can conceive is a belief that jurisdiction can lie in but one jurisdiction. This belief, however, is no less foreclosed by Supreme Court caselaw than that on which I suspect the majority has in error ultimately proceeded.
Accordingly, on the strength of the Supreme Court’s decision in Burger King alone — an authority barely even cited by the majority, see ante at 452, and never discussed at all — but certainly on the combined strength of that decision and our own Circuit’s decision in English & Smith, I would hold that a federal court may exercise jurisdiction in Virginia over HMH Partners with respect to an action arising from its contract with Diamond Healthcare.
Turning to Burger King, at issue in that case was whether there were sufficient minimum contacts with the state of Florida to support jurisdiction over a contract dispute between Burger King, a Florida corporation, as franchisor, and Rudzewicz, a Michigan resident with no physical ties to Florida, as franchisee. Rudzewicz’s franchise operated solely in Michigan and sold food products only to Michigan residents, and the franchise agreement contemplated the bulk of performance -in Michigan. Notwithstanding, the Court held that, based on the contract and the parties’ contract performance, Rudzewicz had both “established a substantial and continuing relationship with Burger King’s Miami headquarters” and “received fair notice from the contract documents and the course of dealing that he might be subject to suit in Florida.” Burger King, 471 U.S. at 487, 105 S.Ct. 2174.
A comparison of Rudzewicz’s contacts with Florida, which the Supreme Court held in Burger King were more than sufficient to support federal jurisdiction in that state, and HMH Partners’ contacts with Virginia, confirms beyond any question that jurisdiction in this case lies in the federal courts of the Commonwealth.
First, in Burger King, Rudzewicz “[e]s-chew[ed] the option of operating an independent local enterprise, [and] deliberately ‘[reached] out beyond’ Michigan and negotiated with a Florida corporation.” 471 U.S. at 480, 105 S.Ct. 2174. As the Court observed, focusing on the fact of purposeful affiliation rather than on which party initiated the contract, “Rudzewicz most certainly knew that he was affiliating himself with an enterprise based primarily in Florida.” Id. at 481, 105 S.Ct. 2174.
As, in Burger King, Rudzewicz deliberately affiliated with a foreign corporation in the forum state (Florida), so also in this case did HMH Partners deliberately affiliate with a foreign corporation in the forum state (Virginia). Regardless of who initiated the contact between the two parties, it is undisputed that HMH Partners was well aware that Diamond Healthcare was a Virginia corporation. HMH Partners requested an acquisition proposal from Diamond Healthcare’s Virginia Headquarters, conducted extensive negotiations between Ohio and Virginia over an eleven-month period, and mailed the contract at issue into Virginia for Diamond Healthcare’s signature. J.A. 54, 88, 94.
Second, in Burger King, Rudzewicz not only chose to do business with a corporation located outside of Michigan, but he also negotiated with the Florida corpora*455tion for “a long-term franchise and the manifold benefits that would derive from affiliation with a nationwide organization,” 471 U.S. at 480-81, 105 S.Ct. 2174, evidencing the antithesis of random, fortuitous, or attenuated contacts that have historically given rise to due process concerns. Id. at 475, 105 S.Ct. 2174.
As, in Burger King, Rudzewicz reached out for a franchise agreement -with a national franchisor located outside his home state, so also here did HMH Partners reach out for a four-year contract with an out-of-state corporation, Diamond Healthcare, “one of the larger behavioral health management companies in the country.” J.A. 87.
This conduct by HMH Partners in not only reaching out to a foreign corporation, but reaching out for the express purpose of entering into and 'engaging in a long-term business relationship, is anything but “unilateral activity” of another party or a third person, ante at 452 — at least as that phrase has heretofore been understood by either the Supreme Court or our court. And it is far removed from the.“unilateral activity of those who claim some relationship with a nonresident defendant,” which the Court in Burger King described as insufficient to establish the minimum contact necessary to support specific jurisdiction against constitutional attack. See Burger King, 471 U.S. at 476 n. 17, 105 S.Ct. 2174.
Third, in Burger King, Rudzewicz contractually bound his franchise to “exacting regulation of virtually every conceivable aspect of [his] operations” by Burger King’s Miami, Florida, headquarters. 471 U.S. at 465 & n. 4, 105 S.Ct. 2174.
As, in Burger King, Rudzewicz contracted for exacting regulation by personnel in Florida, so also here, HMH Partners consented to extensive regulation of its business by Diamond Healthcare’s personnel in Virginia. The contract between HMH Partners and Diamond Healthcare provided that Diamond Healthcare was to develop, implement, and maintain policies and procedures to govern virtually every conceivable aspect of HMH Partners’ NuStart Program. J.A. 58-60. It specifically provided that Diamond Healthcare would “provide consultation ... as reasonably necessary in the areas of finance, program development and operations, personnel and labor relations, professional staff relations, recruiting, licensure, and survey compliance.” J.A. 61. And it required HMH Partners to provide Diamond Healthcare with monthly financial information, and to notify Diamond Healthcare “... of [any and all] legal or governmental action.” J.A. 62-63, 67, 69.
Fourth, in Burger King, although, under Burger King’s two-tiered administrative structure, day-to-day monitoring of Rud-zewicz’s Michigan franchise took place from Burger King’s Michigan district office, policy was set in Miami, district offices reported to Miami, and “the parties’ course of dealing repeatedly confirmed that decision-making authority was vested in the Miami headquarters.” 471 U.S. at 481, 105 S.Ct. 2174.
As, in Burger King, issues raised at the district office in Michigan were forwarded to, and resolved in Florida, so also here were issues raised in Diamond Healthcare’s Ohio offices forwarded to, and resolved in, Virginia. Under Diamond Healthcare’s like two-tier administrative structure, although day-to-day monitoring and operation of the partial hospitalization program was undertaken by the local program staff in Ohio, “it was a key term of the contract that local program staff [in Ohio] be managed by Diamond Healthcare’s senior managers in Virginia.” J.A. 55 (testimony of HMH Partners’ Chief Operating Officer). Indeed, by contract, Diamond Healthcare actually “was to provide management consultation to the[NuStart] partial hospitalization program from its [Richmond] corporate office.” J.A. 54, 61; see also id. at 61 (providing, by contract, that Diamond Healthcare would “provide consultation from its corporate offices [in *456Richmond] as reasonably necessary in the areas of finance, program development and operations, personnel and labor relations, professional staff relations, recruiting, li-censure, and survey compliance”).
And, from negotiation through performance, HMH Partners acted in conformance with this understanding that decisions would be made in, and management would emanate from, the Commonwealth. In the course of contract negotiations, HMH Partners communicated by mail and telephone with Diamond Healthcare’s Virginia headquarters. J.A. 54-55, 88, 92. These communications continued over the course of contract performance. HMH Partners even terminated the Management Agreement with Diamond Healthcare by letter sent to Virginia, and the parties’ negotiations relating to this dispute took place via telephone and correspondence between Ohio and Virginia. J.A. 92.
Fifth, in Burger King, the franchise contract between Rudzewiez and Burger King called for “payment of all required fees and forwarding of all relevant notices to the Miami headquarters.” 471 U.S. at 466, 480, 105 S.Ct. 2174.
As, in Burger King, all payments were to be forwarded to the forum state of Florida, so also here, during the term of contract performance, HMH Partners was required to, and did, mail all management fees to Diamond Healthcare in Virginia. J.A. 91.
Sixth, in Burger King, “Rudzewicz’s refusal to make contractually required payments in Miami ... caused foreseeable injuries to the corporation in Florida.” 471 U.S. at 480, 105 S.Ct. 2174.
As, in Burger King, foreseeable injuries occurred in the forum state of Florida, so also here did HMH Partners’ alleged failure to make contractually required payments in Virginia, and termination of its contract with Diamond without proper notice, cause foreseeable injury to Diamond Healthcare in Virginia.
Finally, in Burger King, although there was a choice-of-law provision in the contract between the franchisor and the franchisee, there was an absence of a contractually-designated dispute resolution forum, which, as the Court noted, by negative implication places the parties on notice that suit could be filed in the jurisdiction of either party to the contract. 471 U.S. at 482 n. 24, 105 S.Ct. 2174.
And as, in Burger King, there was no forum selection provision in the parties’ contract, so also here, although HMH Partners and Diamond Healthcare contracted for a choice of law, there was no forum selection provision included in their contract. Significantly, in fact, HMH Partners’ own Chief Operating Officer even recognized the significance of such an intentional omission:
It was my understanding that termination of the Management Agreement might lead to litigation with Diamond Healthcare that Diamond Healthcare might bring in Virginia because, while we had negotiated a choice of law clause under the Management Agreement, we had not negotiated a choice of forum clause limiting litigation to courts in Ohio.
J.A. 56 (affidavit of Norman F. Gruber).
Given the almost uncanny parallels between the contacts between Rudzewiez and the forum state of Florida, which the Supreme Court held in Burger King gave rise to jurisdiction in Florida, and the contacts between HMH Partners and the forum state of Virginia in this case, I have no question at all that a federal court sitting in Virginia may, consistent with the minimum requirements of due process, exercise jurisdiction over HMH Partners in this dispute related to its long-term contract with Diamond Healthcare. If Burger King instructs us as to anything, it is that a defendant who seeks and enters into an interstate contract with a national corporation that is to be performed by the plaintiff in substantial part from out of state; who, *457by contract, is regulated and directed by the plaintiff from out of state; and, who, pursuant to contract, directs communications, payments, and other information to the plaintiffs headquarters out of state, cannot then contest an assertion of jurisdiction by the out-of-state forum on the ground that that forum lacks, as a matter of constitutional due process, the very minimum of contacts necessary to support personal jurisdiction.
If I had any doubt as to this conclusion — and, frankly, I have none — I would think this conclusion inescapable upon consideration of the further factors of Virginia’s manifest interest “in providing its residents with a convenient forum for redressing injuries inflicted by out-of-town actors”; the interest in keeping due process from transforming itself into “a territorial shield to avoid interstate obligations that have been voluntarily assumed”; and, the lesser burdens imposed by out-of-state suits, given the realities of modern transportation and communications. Burger King, 471 U.S. at 473-74, 105 S.Ct. 2174 (citations omitted).
As the Supreme Court observed in Burger King with respect to an interstate contract, a party that creates “ ‘continuing relationships and obligations with citizens of another state’ ” is conducting activities within the forum state; as a consequence, the party is “subject to regulation and sanctions in the other State for the consequences of [its] activities.” Burger King, 471 U.S. at 473, 105 S.Ct. 2174 (citing Travelers Health Assn. v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154 (1950)). See also McGee v. International Insurance Co., 355 U.S. 220, 222-23, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). Under such circumstances a defendant “manifestly has availed [itself] of the privilege of conducting business [in the forum state], and because [its] activities are shielded by the ‘benefits and protections’ of the forum’s laws,” it is not unreasonable, let alone unconstitutional, to subject it to suit there as well. Burger King, 471 U.S. at 476, 105 S.Ct. 2174.
Because I believe that the district court erred in dismissing Diamond Healthcare’s suit against HMH Partners for lack of minimum contacts with the forum state of Virginia, I respectfully dissent from this court’s affirmance of the district court’s judgment.