U. S. Supreme Court Addresses Minimum Contacts to Create Specific Jurisdiction

The United States Supreme Court in an unanimous decision addressed the minimum contacts necessary to create specific (or case-linked) jurisdiction over a non-resident defendant by the state. Walden v. Fiore, 571 U.S. ____(February 25, 2014). Specific jurisdiction depends on an “affiliation between the forum and the underlying controversy” (i.e. an “activity or occurrence that takes place in the forum state and is therefore subject to the State’s regulation”). Walden v. Fiore, 571 U.S. ___, citing, Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___, ___ (2011) (slip op., at 2). While the facts of Walden are unusual, the Supreme Court provides a detailed analysis of the what should be considered for a state to exercise specific jurisdiction consistent with due process.

Now a thumbnail of the facts. Walden, a police officer working as a DEA agent, searched Gina Fiore and her friend at the San Juan airport and found $97,000 allegedly won at a San Juan Casino. Fiore claimed she was a professional gambler and had residences in Nevada and California.  Walden called ahead to the Atlanta airport and when Fiore and her friend landed they were again questioned and the money seized.  After the fact, Walden helped draft a probable cause affidavit to justify the forfeiture of the money and forwarded the affidavit to the United States Attorney’s office. Fiore and her friend alleged that the affidavit was false and omitted a number of facts. Ultimately, no forfeiture action was filed and the funds were eventually returned to Fiore and her friend. Fiore then filed suit seeking monetary damages in the U.S. District Court in Nevada for the tortious actions of Walden and the other agents.  The basis for jurisdiction was that Walden caused harm to Fiore in Nevada knowing that Fiore lived in Nevada.

The District Court dismissed the lawsuit for lack of jurisdiction based on the U.S. Supreme Court’s decision in Calder v. Jones, 465 U.S. 783 (1984). On appeal, the United States Court of Appeals for the Ninth Circuit reversed and held that while the seizure portion of the facts did not confer jurisdiction, the District Court could exercise jurisdiction based on the filing of the false probable cause affidavit aspect of the case.  The Ninth Circuit reasoned that Walden expressly aimed his submission of the false affidavit with knowledge that it would affect persons with a “significant connection” to Nevada. Further, the delay in returning the funds caused foreseeable harm and the exercise of personal jurisdiction was otherwise reasonable. Walden v. Fiore, 571 U.S. ___(2014), citing, Fiore v. Walden, 688 F.3d 558, 577, 582, 585 (9th Cir. 2011). From these facts, and the apparent expansion of personal jurisdiction by the Ninth Circuit, the U.S. Supreme Court granted certiorari.

In reversing the Ninth Circuit, the U.S. Supreme Court (opinion by Justice Thomas) held that a defendant’s suit-related conduct must create a substantial connection with the forum state. First, the relationship must arise out of contacts that the defendant himself created within the forum state. Walden v. Fiore, 571 U.S. ___(2014), citing, Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Justice Thomas further opined that “Due process limits on state adjudicative authority principally protect the liberty of the nonresident defendant-not the convenience of the plaintiffs or third parties.” The opinion also reiterated the Supreme Court’s repeated rejection of attempts to satisfy defendant’s “minimum contacts” inquiry by demonstrating contacts between the plaintiff (or third parties) and the forum state. Reciting a litany of prior U.S. Supreme Court decisions dealing with specific jurisdiction, Justice Thomas bluntly stated that “Put simply, however significant the plaintiff’s contacts with the forum may be, these contacts cannot be decisive in determining whether the defendant’s due process rights are violated. Walden v. Fiore, 571 U.S. ___(2014).

Justice Thomas also set out a second consideration. The minimum contacts analysis must look to defendant’s contacts with the forum state itself, not the defendant’s contacts with persons who reside there. While acknowledging that physical entry into the state is a relevant contact, it is not a prerequisite to jurisdiction. However, the plaintiff cannot be the only link between the defendant and the forum. It is the defendant’s conduct that must form the necessary connection with the forum state that is the basis for jurisdiction over the defendant. Citing to International Shoe, Justice Thomas held that the requirement must be met for each defendant over whom a state exercises jurisdiction. Due process requires that a defendant be haled into court based on his own affiliation with the state and not “random, fortuitous or attenuated contacts” he makes by interacting with others affiliated with the state. Moreover, these same principles apply when intentional torts are involved. A forum state’s exercise over an intentional tortfeasor must be based on intentional conduct by the defendant that creates the necessary contacts with the forum. The minimum contacts inquiry in intentional tort cases is the “relationship among the defendant, the forum and the litigation.”  It is the defendant and not the plaintiff or third parties who must create contacts with the forum state.  The fact that Walden’s conduct in Georgia affected Fiore with connections to the forum state was not sufficient to confer jurisdiction. Walden v. Fiore, 571 U.S. ___(2014).

The Supreme Court’s opinion provides good guidance on what to look at when challenging specific jurisdiction and should be reviewed, if for nothing else, the detailed listing of cases cited to support the opinion and its holding. The opinions in this blog are solely the author’s and any comments, suggestions and replies can be sent to john@jrjoneslaw.com.

Update on Dodd-Frank Arbitration Ban in Residential Loans

Two recent cases addressed an issue of first impression of whether the Dodd-Frank ban on the use of arbitration in residential loan disputes should be given retroactive effect. Weller v. HSBC Mortgage Services, 2013 WL 4882758 (D. Colo. Sept. 11, 2013) and State v. Webster, 752 S.E.2d 372 (W.Va. 2013). The Dodd-Frank Act, which became effective on July 22, 2010, bars the use of arbitration in residential mortgage loan disputes.

Relying on the United States Supreme Court decision in Landgraf v. USI Film Prods., 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), both the Colorado and West Virginia courts held that statutory retroactivity is disfavored unless the express language of the statute says otherwise.  In both cases, the mortgages were entered into prior to the effective date of Dodd-Frank. Both borrowers challenged the enforcement of the arbitration clauses on the grounds that Dodd-Frank banned arbitration in residential loan disputes and that the loan documents’ arbitration clauses were unconscionable.  Rejecting these arguments, both courts held that the clauses were not unconscionable and Dodd-Frank did not apply retroactively.

The opinions in this blog are solely the author’s and any comments, suggestions or replies can be forwarded to me at john@jrjoneslaw.com.

Motions for New Trial in Texas-An Ongoing Evolution

Texas Rule of Civil Procedure 320 states that new trials may be granted and a judgment set aside for good cause and new trials may be granted when the damages are manifestly too large or too small. Tex. R. Civ. P. 320. Unfortunately “good cause” has not been defined and the ability of trial courts to set aside judgments has been allowed under an interest of justice and fairness standard.

The Supreme Court of Texas first held that trial courts could grant a new trial in “the interest of justice” in 1985.  See In re Columbia Med. Ctr. of Las Colinas, 290 S.W.3d 204 (Tex. 2009). In In re Columbia Med. Ctr. of Las Colinas, the Supreme Court reaffirmed a trial court’s significant discretion to grant a new trial in the “interest of justice and fairness” adding the requirement that in doing so the trial court should identify and be reasonably specific as to the reasons why the motion for new trial was granted.  In the Columbia Med. Ctr case, the trial court granted a motion for new trial disregarding the jury’s verdict and stated that it was done in the “interests of justice and fairness” without specifying the reason. The Supreme Court did not have an issue with the trial court’s discretion to grant the new trial despite the jury’s verdict, but in the interests of transparency and respect for the courts, remanded the case back for the trial court to simply specify why the new trial was granted. See In re Columbia Med. Ctr of Las Colinas, 290 S.W.3d 204, 213. The Supreme Court  of Texas in In re Columbia Med. Ctr. of Las Colinas also refused to define the term “good cause” in Rule 320. 

Since In re Columbia Med. Ctr., the Supreme Court of Texas has issued In re Toyota Motor, U.S.A, Inc., 407 S.W.3d 756 (Tex. 2013) and In re United Scaffolding, Inc., 377 S.W.3d 685 (Tex. 2012).  In the United Scaffolding case, The Supreme Court was asked to decide whether a trial court that gave four reasons for granting a new trial, including “in the interest of justice and fairness,” and linked them by “and/or” satisfied Columbia. In concluding that it did not, the Supreme Court noted that Columbia’s purpose “w[ould] be satisfied so long as the order provides a cogent and reasonably specific explanation of the reasoning that led the court to conclude that a new trial was warranted.” Id. at 688.  The Supreme Court held that the trial court’s “use of ‘and/or’ le[ft] open the possibility that ‘in the interest of justice and fairness’ [could be] the sole rationale.” Id. at 689. That possibility, if true, would have violated the Columbia standard. In the Toyota Motor case, the Supreme Court held that appellate courts can conduct a merits review of the bases for a new trial order after a trial court has set aside a jury verdict. If the record does not support the trial court’s rationale for ordering a new trial, the appellate court may grant mandamus relief.

When faced with the necessity to file a motion for new trial, the Supreme Court of Texas’ decisions of Columbia, United Scaffolding and Toyota Motor U.S.A. should be reviewed. When read collectively the United Scaffolding and Toyota Motor U.S.A. opinions appear to place an unnecessary burden on trial courts and ignore the realities of a trial court’s work load and the fact that it is the trial court, not the appellate courts, who actually see the witnesses, hear the testimony and can judge the credibility of the witnesses.

The opinions in this blog are solely the author’s and any comments, replies and suggestions can be sent to john@jrjoneslaw.com. Happy President’s Day!