Burger King Corp. v. Rudzewicz
In Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), Burger King Corporation filed suit in federal district court in Florida against individuals who operated a Burger King franchise in Michigan. (471 U.S. at pp. 468-469.) Burger King claimed the defendants had breached their franchise obligations and were infringing upon Burger King's trademarks through their continued, unauthorized operation of a Burger King restaurant. (Ibid.) The Michigan defendants claimed the court lacked personal jurisdiction over them because they were Michigan residents and because Burger King's claim did not arise within Florida. (Id. at p. 469.)
The United States Supreme Court concluded there was a sufficient basis for the court to exercise jurisdiction over the Michigan defendants. (Id. at p. 478.) Among other things, the franchise dispute grew directly out of a contract that had a substantial connection with the state of Florida, where Burger King was headquartered. (Id. at pp. 479-480.)
The Michigan franchisee deliberately reached out to a Florida corporation for the purchase of a long-term franchise agreement with the anticipation that it would involve continuing and far-reaching contacts with Burger King in Florida. The franchisee voluntary accepted the long-term and exacting regulation of the business from Burger King's Miami headquarters. (Ibid.)
Further, the franchise documents specifically provided that all disputes would be governed by Florida law. (Id. at p. 481.) When the choice-of-law provision was combined with "the 20-year interdependent relationship" between the Michigan franchisee and Burger King's Miami headquarters, "it reinforced the franchisee's deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there." (Id. at p. 482.)
The Supreme Court concluded Florida had jurisdiction over a nonresident franchisee in a suit brought by the Florida franchisor for breach of the franchise agreement. The evidence showed the franchise agreement was entered into in Florida and was governed by Florida law and the franchisor maintained regular control over the operations of the franchisee. (Id. at pp. 464-468.)
According to the high court: "Jurisdiction ... may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are 'purposefully directed' toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there." (Id. at p. 476 85 L.Ed.2d at p. 543.)
In discussing the application of the purposeful availment prong to specific jurisdiction in breach of contract actions, the United States Supreme Court stated that it had long ago rejected the notion that "an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum."
Burger King involved a plaintiff incorporated in Florida and with its principal place of business in Florida suing a Michigan resident in Florida. (Burger King, supra, 471 U.S. at p. 464.)
Rather than focus on "theories of the place of contracting or of performance," the Burger King court emphasized the need for a "'highly realistic' approach that recognizes that a 'contract' is 'ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.'" (Id. at pp. 478-479)
Thus, in considering whether a contract can constitute a sufficient minimum contact for purposes of personal jurisdiction, the Burger King court instructed courts to consider factors such as "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing . . . ." (Burger King, supra, 471 U.S. at p. 479.)
The Supreme Court devised a two-prong test for analyzing the validity of Florida's jurisdiction over the defendant.
First, the plaintiff must establish the requisite minimum contacts.
Next, the court must determine whether sustaining jurisdiction would offend traditional notions of fair play and substantial justice. Id., 476-477.
The latter test involves consideration of four factors:
(1) the state's interest in providing its citizens with a forum for redress;
(2) the plaintiff's interest in a convenient forum;
(3) the state's interest in enforcing substantive law and policy;
(4) inconvenience to the defendant. Id., 477-478.