Burger King Corp. v. Rudzewicz

471 U.S. 462, 105 S. Ct. 2174 (1985)

 

RULE:

Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice.

FACTS:

Appellant is a Florida corporation whose principal offices are in Miami. It conducts most of its restaurant business through a franchise operation, under which franchisees are licensed to use appellant's trademarks and service marks in leased standardized restaurant facilities for a period of 20 years. The governing contracts provide that the franchise relationship is established in Miami and governed by Florida law, and call for payment of all required monthly fees and forwarding of all relevant notices to the Miami headquarters. Appellee is a Michigan resident who, along with another Michigan resident, entered into a 20-year franchise contract with appellant to operate a restaurant in Michigan. Subsequently, when the restaurant's patronage declined, the franchisees fell behind in their monthly payments. After extended negotiations among the franchisees, the Michigan district office, and the Miami headquarters proved unsuccessful in solving the problem, headquarters terminated the franchise and ordered the franchisees to vacate the premises. They refused and continued to operate the restaurant. Appellant then brought a diversity action in Federal District Court in Florida, alleging that the franchisees had breached their franchise obligations and requesting damages and injunctive relief. The franchisees claimed that, because they were Michigan residents and because appellant's claim did not "arise" within Florida, the District Court lacked personal jurisdiction over them. But the court held that the franchisees were subject to personal jurisdiction pursuant to Florida's long-arm statute, which extends jurisdiction to any person, whether or not a citizen or resident of the State, who breaches a contract in the State by failing to perform acts that the contract requires to be performed there. The Court of Appeals reversed.

ISSUE:

Was out-of-state franchisee subject to jurisdiction in franchisor's home state where franchise agreement established franchisor's home state as the forum for breach of contract actions?

ANSWER:

Yes.

CONCLUSION:

An individual's contract with an out-of-state party cannot alone automatically establish sufficient minimum contacts in the other party's home forum. Instead, the prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing, must be evaluated to determine whether a defendant purposefully established minimum contacts within the forum. 

The Court held that the exercise of in personam jurisdiction over the franchisee pursuant to the state's long-arm statute did not violate the due process clause of the Fourteenth Amendment. because the franchisee established a substantial and continuing relationship with the plaintiff's headquarters in the forum state, received fair notice from the contract documents and the course of dealing that he might be subject to suit in the forum state, and failed to demonstrate how jurisdiction in that forum would otherwise be fundamentally unfair.

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