In a lengthy, but detailed, opinion, The Tennessee Business Court, now in Phase II of the Pilot Project, has provided substantial guidance to practitioners concerning objections to the subject matter jurisdiction of the Court and its personal jurisdiction over corporate and individual defendants. Nissan North America, Inc. v. West Covina Nissan, LLC, et al, No. 16-0883-BC(decided December 16, 2016). Previous rulings by the Business Court in this case were discussed in this blog.
In short, the plaintiff alleged that the corporate and individual defendants, who conducted their businesses and/or resided outside the State of Tennessee, had engaged in a massive scheme to deprive it of millions of dollars by submission of fraudulent warranty and repair claims. The plaintiff is based in Tennessee.
One of the corporate defendants, a California new motor vehicle distributor for the plaintiff, argued that the Business Court lacked subject matter jurisdiction because the plaintiff failed to exhaust its remedies under California law, which provided a procedure for “charging back” unauthorized or invalid warranty claims. Citing California decisions, the Business Court found that the California Board of Motor Vehicles was “not the exclusive forum for disputes between dealers and manufacturers”; it denied application of the “doctrine of primary jurisdiction” which allows deferral of litigation and ceding jurisdiction to an administrative agency where 1) uniformity of the law would be advanced and/or 2) the agency’s expertise appears to be valuable. The Business Court found neither of these to be present in this case.
To resolve the in personam jurisdictional challenges, the Business Court discussed applicable decisions by the U.S. and Tennessee Supreme Courts, as well as the Sixth Circuit Court of Appeals. The Business Court did not rely on “general” personal jurisdiction, but found “specific personal jurisdiction” over certain corporate defendants by applying the Calder “Effects” Test – based on evidence that the alleged tortious activity was aimed at Tennessee, the forum state was Tennessee, and the brunt of the harm was in Tennessee such that the focal point of the harm was in the forum state. The Business Court found that the corporate defendant failed to carry its burden of showing unfairness or unreasonableness in litigating in Tennessee.
With respect to certain of the individual defendants, the Business Court held that the plaintiff had made a “colorable” case of specific personal jurisdiction such that discovery on the jurisdictional issues would be allowed. The defendants’ “kitchen sink” argument of “forum non conveniens” was deferred until completion of the limited discovery on jurisdictional issues.
