This article analyzes that statutory framework regarding long-arm statutes, while next month’s article will examine the minimum contacts test that courts employ in determining whether or nor long-arm jurisdiction is available.
As fireworks retailers expand their business activities outside their state of incorporation a host of related issues pertaining to the exercise of personal jurisdiction over that company is introduced. Since each state has a long-arm statute that may provide a basis to exercise personal jurisdiction as against an out-of-state business (a non-resident), it is important for a business owner to determine whether its out-of-state activities may subject itself to the jurisdiction of another state.
Before a court can exercise personal jurisdiction over a nonresident defendant, the court must determine, first, whether that State’s long-arm statute is satisfied and, if the long-arm statute is satisfied, second, whether minimum contacts exist between the nonresident defendant and the forum state such that the exercise of personal jurisdiction over the nonresident defendant will not offend due process. The Due Process Clause of the U.S. Constitution protects a nonresident’s liberty interest in not being subject to the binding judgments of a foreign state with which the nonresident has established no meaningful contacts, ties or relations.
It is important for any fireworks business to familiarize itself with the long-arm statute for each state (other than the state of incorporation) in which it may transact business. While some states may have a long-arm statute that is limited in scope, the majority of states have enacted broad long-arm statutes that extend jurisdiction over nonresidents having any contact with or maintaining any relation to the forum state as far as the U.S. Constitution permits. Indeed, a typical long-arm statute (such as Nebraska’s long-arm statute) provides that a court may exercise personal jurisdiction over a person:
(1) Who acts directly or by an agent, at to a cause of action arising from the person:
(a) Transacting any business in this state;
(b) Contracting to supply services or things in
this state;
(2) Who has any other contact with or maintains any other relation to this state to afford a basis for the exercise of personal jurisdiction consistent with the Constitution of the United States.
The test for determining if the exercise of personal jurisdiction satisfies due process is whether the nonresident defendant’s minimum contacts with the forum state are such that the nonresident defendant should reasonably anticipate being hauled into court there. Two types of personal jurisdiction may be exercised depending upon the facts and circumstances of the case: general personal jurisdiction or specific personal jurisdiction. In the exercise of general personal jurisdiction, the plaintiff’s claim does not have to arise directly out of defendant’s contacts with the forum state if it is determined that the defendant had engaged in continuous and systematic general business contacts with the forum state. Where a nonresident defendant’s contacts are neither substantial nor continuous and systematic, but the cause of action arises out of or is related to the nonresident defendant’s contact with the forum, a court may assert specific jurisdiction over the nonresident defendant depending upon the quality and nature of such contact.
The existence of general jurisdiction is relatively straightforward and usually not an issue where one’s business has continuous and systematic general business contacts with out-of-state residents. For example, it is not uncommon for a business to advertise its products and services to, and transact business with, residents of neighboring states. The greater the amount of products delivered or services performed within the neighboring state, the greater the likelihood that general jurisdiction will be found. Interestingly, by having an out-of-state customer come into the your business’ home state to purchase products, as many fireworks retailers now do, the business may avoid the exercise of general long-arm jurisdiction over it since, under the personal jurisdiction analysis, the unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum state. Therefore, the customer cannot create the contact, only the nonresident business can create the contact by its own actions. The fact that the out-of-state customer went to your business as a result of advertising in the customer’s own home state may be considered as one source of contact; however, advertising alone may not be enough to invoke the out-of-state long-arm statute.
The standard of review for a motion to dismiss for lack of personal jurisdiction requires the party seeking to establish personal jurisdiction to carry the burden of proof, and the burden does not shift to the party challenging jurisdiction. However, while plaintiff bears the burden of proof, unless and until the court holds an evidentiary hearing, personal jurisdiction need not be proved by a preponderance of the evidence; rather the nonmoving party need only make a prima facie showing of jurisdiction.
In conclusion, the analysis succeeds and fails upon a determination that the nonresident defendant acted in such a manner that the substantial contacts with the forum state result in the nonresident defendant’s purposeful availment of the benefits and protections of the law of the forum state.
