Telephone Negotiations Not Enough to Obtain Personal Jurisdiction

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In a decision that came out just after Christmas, Dairy Farmers of America, Inc. v. Bassett & Walker International, Inc., Case No. 12-1723 (8th Cir., Dec. 26, 2012), the Eighth Circuit appears to have narrowed the grounds on which personal jurisdiction may be established based on business dealings between parties who were never in the same place at the same time. Dairy Farmers of America (DFA) sued Bassett & Walker for breach of contract in the Western District of Missouri. Bassett moved to dismiss for lack of jurisdiction, and the district court granted the motion. DFA appealed.

The Eighth Circuit affirmed the trial court, finding the following facts material to the analysis: DFA’s principal place of business is in Kansas City, Missouri. Bassett, by contrast, is an international commodities broker and a Canadian corporation, with its principal place of business located in Toronto, Ontario. In fact, as the 8th Circuit noted, “Bassett is not qualified to do business in Missouri; has no agent for service of process, offices, property, bank accounts, telephone listings, or employees here; and does not advertise or promote its business here. According to the record, no Bassett employee has ever entered Missouri.” Slip op. p. 2. The product Bassett contracted to purchase was manufactured in Colorado and payment went to Illinois, with product to be delivered in Mexico. Slip op. p. 10. This “random, fortuitous, or attenuated” contact was insufficient to support jurisdiction. Slip op. p. 10, citing Burger King Corp.v. Rudzewicz, 471 U.S. 462, 486 (1985).

The Eighth Circuit dismissed the course of dealings between the parties as insufficient to establish personal jurisdiction because the transactions occurred entirely remotely. Bassett purchased $5 million in dairy products from DFA, but each transaction occurred by phone. Basset’s representative was in Toronto, while DFA’s either was in Michigan or on the road, although approval was received from DFA’s Missouri headquarters for each transaction. Delivery and billing also were discussed between a Basset representative in Toronto and someone at DFA’s headquarters. The court of appeals found that, although Missouri courts broadly construe transaction of business, “the use of mail or telephone communications to Missouri is not by itself the transaction of business.” Slip op. p. 6. Nor did the fact that Bassett used credit-support jurisdiction in Missouri such that it should anticipate being hailed into court there. Consequently, the court held that Bassett did not transact business in Missouri and, consequently, it was not within reach of Missouri’s long-arm statute.

The court found that jurisdiction did not exist because Bassett did not conduct business in Missouri, and Bassett lacked sufficient minimum contacts with Missouri. This opinion from the 8th Circuit should be contrasted with recent decisions in which courts have found that offering goods for sale on the Internet is sufficient to support jurisdiction over a party in a foreign state. It may be that the court was particularly troubled by the fact that Bassett is a Canadian company. Nonetheless, there were many different contacts with Missouri advanced by DFA, but none was sufficient. This opinion, therefore, is noteworthy in the way in which it seemingly contracts or limits jurisdiction.

Topics:  Breach of Contract, Minimum Contacts, Personal Jurisdiction, Telephone Sales

Published In: Civil Procedure Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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