Civil procedure - in-forum injury may constitute forum contact for relatedness prong of specific jurisdiction inquiry.

Author:Fulford, Thomas R.
 
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Civil Procedure--In-Forum Injury May Constitute Forum Contact for Relatedness Prong of Specific Jurisdiction Inquiry--Astro-Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1 (1st Cir. 2009)

To properly exercise specific jurisdiction over a nonresident defendant, due process requires that the defendant have certain minimum contacts with the forum, such that it would be fair to hale him into court there to defend against a claim related to those contacts. (1) The First Circuit has refined its minimum contacts analysis by requiring that a plaintiff's claim relate to or arise out of the defendant's contacts, that the defendant have purposely availed himself of the forum, and that the exercise of jurisdiction be reasonable. (2) When a defendant, although not physically present in the relevant forum, intentionally engages in tortious conduct that injures a plaintiff located there, courts will evaluate the injuries or "effects" when analyzing whether a sufficient connection exists between the plaintiffs claim and the defendant's contacts. (3) Traditionally, courts only considered in-forum effects under the purposeful availment prong of minimum contacts analysis, but in Astro-Med, Inc. v. Nihon Kohden America, Inc., (4) the First Circuit strayed from its precedent by considering such effects under the relatedness prong and holding that specific jurisdiction over the defendant was proper. (5)

The plaintiff, Astro-Med, Inc. (Astro-Med), is a Rhode Island company in the life sciences equipment market. (6) Astro-Med sued one of its major competitors, California-based Nihon Kohden America, Inc. (Nihon Kohden), for hiring away an Astro-Med sales manager, Kevin Plant, which was in breach of an employee agreement (the Agreement) between Plant and Astro-Med. (7) Prior to hiring Plant, Nihon Kohden learned of the Agreement, but, despite warnings from its lawyer about potential legal risks, the company persisted in its pursuit of Plant and extended him a job offer, which he accepted. (8) Soon thereafter, an agent of Nihon Kohden emailed Plant asking if the two men could discuss various aspects of Astro-Med's product line; Plant agreed. (9)

In December 2006, Astro-Med filed suit against Plant alleging breach of contract, misappropriation of trade secrets, and unfair competition. (10) Astro-Med later added Nihon Kohden as a defendant and asserted claims of tortious interference and misappropriation of trade secrets. (11) Nihon Kohden moved to dismiss on the ground that the district court lacked personal jurisdiction over it, but the motion was denied and the district court subsequently entered judgment against the defendants at the close of the jury trial. (12)

The defendants appealed to the United States Court of Appeals for the First Circuit alleging nine separate claims of legal error, including that the district court erred in denying Nihon Kohden's motion to dismiss for lack of personal jurisdiction. (13) The First Circuit rejected Nihon Kohden's argument that because it is a California business that hired a Florida resident to work as a sales agent in Florida, compounded with the absence of any direct contact between the company and Rhode Island, it should not have been haled into court in the Rhode Island territorial forum. (14) After determining that Rhode Island's jurisdiction over Nihon Kohden was proper, the First Circuit affirmed the district court's judgment and maintained that venue was proper, that the Agreement was partially enforceable at all relevant times, and that the amount of damages was appropriate. (15) Specifically, as to jurisdiction, the court stated that a defendant does not have to be physically located in the forum to cause injury there, and held that Nihon Kohden intentionally engaged in conduct it knew would injure--and that ultimately did injure--a Rhode Island plaintiff, thereby subjecting itself to jurisdiction in Rhode Island. (16)

For the purpose of personal jurisdiction analysis, a federal court sitting in diversity is the functional equivalent of a state court located in that forum state. (17) When the forum state's long-arm statute reaches as far as the United States Constitution allows, jurisdiction is assessed under the Due Process Clause. (18) In International Shoe Co. v. Washington, (19) the United States Supreme Court held that to properly exercise specific jurisdiction over a nonresident defendant, due process requires only that the defendant have certain minimum contacts with the forum state of such quality and nature that haling him into court there would be fair and just. (20) Thus, jurisdictional analysis is closely connected to the specific claims asserted and courts pay particular attention to how the underlying elements of the claim are tied to jurisdictional questions. (21) For example, in tort cases--when the element of causation is central to the resolution of the entire dispute--courts probe the nexus between the defendant's contacts and the plaintiff's cause of action by looking specifically for a causal relationship. (22)

The First Circuit uses a tripartite inquiry for specific jurisdiction, separately assessing relatedness, purposeful availment, and reasonableness. (23) The relatedness prong, often regarded as a flexible standard, looks to whether the plaintiff's claim arises out of or relates to the defendant's contacts or activity in the forum. (24) Focusing on intent and foreseeability, the purposeful availment prong requires that the defendant have voluntarily directed conduct or activity at the forum, such that he could reasonably anticipate the possibility of having to defend against a related claim in the forum's courts. (25) Finally, the reasonableness prong weighs the various interests of the parties, the forum, and the several states in light of efficiency and fairness factors of litigating a case in a given forum. (26)

Where a defendant lacks forum contacts in the traditional sense, but where he nevertheless engaged in tortious conduct intending to injure a plaintiff in the forum, courts commonly look to the in-forum effects of that conduct as part of their jurisdictional inquiry. (27) The United States Supreme Court first approved of the effects test in Calder v. Jones, (28) holding that jurisdiction is proper over a defendant who intentionally aims his tortious conduct at the forum and the conduct's effects cause injury to a plaintiff there. (29) Courts across the United States have struggled with the import of Calder by failing to define a consistent limit for the application of the effects test, although the First Circuit has expressly rejected the use of an effects analysis under the relatedness prong. (30) Nevertheless, recent First Circuit opinions, particularly in cases involving business torts, have left open the possibility of drawing a distinction between the in-forum effects felt after a completed tort and the in-forum injuries that constitute an element in the legal definition of the tort. (31) In such a case, the plaintiff's injury may be considered an in-forum "activity" for purposes of the relatedness inquiry when the tort is presumed by law not to be complete until the plaintiff is injured. (32) Because of these varying standards and exceptions, effects-based jurisdictional analysis in the First Circuit remains a fact-sensitive endeavor that turns more on the nature of the underlying claim than on the mechanical application of a rigid test. (33)

In Astro-Med, Inc. v. Nihon Kohden America, Inc., the First Circuit considered whether specific jurisdiction over a defendant was proper when based solely on the plaintiff's in-forum injuries, which were caused by the defendant's tortious conduct outside of the forum. (34) The court emphasized that prior to employing Plant, Nihon Kohden was fully aware of the Agreement's legal ramifications and knowingly ran the risk of being sued by Astro-Med for tortiously interfering with the Agreement by hiring Plant. (35) The court explained that, consistent with Supreme Court precedent, a defendant's tortious conduct need not take place in the forum to cause injury there, and when that conduct is expressly aimed at the forum and causes the plaintiff's in-forum injuries, those injuries may be considered "activity" for jurisdictional purposes. (36) The court held that the breach of contract was not just causally related to Nihon Kohden's intentional conduct, but that it also established the elemental basis for Astro-Med's tortious interference claim, thus satisfying the relatedness prong of minimum contacts analysis. (37)

The First Circuit correctly concluded that the district court's exercise of personal jurisdiction over Nihon Kohden was proper, marking an appropriate departure from more formalistic applications of the relatedness standard in past First Circuit cases. (38) Nevertheless, the lack of consistent reasoning among the three appeals court judges in deciding the case represents a missed opportunity to add clarity to this otherwise murky area of civil procedure. (39) The majority opinion relies on a blanket application of Northern Laminate Sales, Inc. v. Davis, (40) a case that, while lacking a detailed...

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