Can Email Create Personal Jurisdiction over a Foreign Defendant?

A recent Fourth Circuit Court of Appeals decision, finding that email and telephone communications are insufficient to establish personal jurisdiction over a foreign defendant in a lawsuit asserting tort and contract claims, is causing litigators to once again consider the importance of forum selection clauses. Consulting Engineers Corp. v. Geometric, Ltd. [PDF].

Citizenship, Contacts, and Contracts
The Consulting Engineers dispute arose from a series of transactions among three companies—a Virginia corporation, a Colorado corporation, and an Indian corporation—regarding a software project to be completed in India.

The parties signed two contracts. Both contracts contained a choice-of-law provision, but only one contained a choice-of-venue clause (specifying a forum other than Virginia). The parties’ communications involved several emails and phone calls and one meeting in India.

Following an alleged breach of contract, the Virginia company sued the others in Virginia, alleging tort and contractual claims. After removal to the Eastern District of Virginia, the defendants moved to dismiss the complaint for lack of personal jurisdiction. The district court agreed and dismissed the suit.

The Fourth Circuit Affirmed
According to the Fourth Circuit, personal jurisdiction over a foreign defendant is appropriate when authorized by the forum state’s long arm statute (permitting jurisdiction when the defendant, directly or through an agent, transacts any business within the state) as long as the statute satisfies constitutional due process concerns (i.e., the defendant must have sufficient “minimum contacts” with the forum state so that “the maintenance of the suit does not offend traditional notions of fair play and substantial justice”).

Because the transactions, the only face-to-face meeting, the potential performance of the contract, and any alleged tortuous activity all took place in India, the foreign companies’ contacts with Virginia were “simply too attenuated to justify the exercise of personal jurisdiction,” the opinion explains. Emails and telephone calls to and from the forum state could not establish minimum contacts.

Even though one of the contracts included a choice-of-law provision, such a provision, standing alone, will likely not support personal jurisdiction over a foreign defendant. This is so because “[t]he jurisdictional inquiry remains centered on the extent, nature, and quality” of the foreign defendant’s contacts with the forum state.

Other Jurisdictions
Is Consulting Engineers consistent with other jurisdictions’ consideration of email communications as the basis for personal jurisdiction?

In general, courts throughout the country analyzing whether email, telephone, and fax communications are sufficient to create personal jurisdiction have considered the purpose and nature of the communications, and not simply the frequency of the communications. For example, in the Tenth Circuit, the District of Kansas Court in Schlumberger Technology Corp. v. Greenwich Metals Inc. ruled that “[p]hone calls and letters are not necessarily sufficient to establish minimum contacts” reasoning that the “exercise of personal jurisdiction depends on the nature of those communications,” citing the 2005 Tenth Circuit opinion, Olsen v. Mapes.

Similarly, in the Ninth Circuit, the Northern District of California Court reasoned in S.H. Silver Co. Inc. v. David Morris International that “[b]usiness communications from foreign locations, such as telephone calls and wire transfers, can support personal jurisdiction where the defendant’s contact is continuous or the volume of communications suggests purposefulness.”

In the Third Circuit, in American Estates Wines, Inc. v. Kreglinger Wine Estates Pty, Ltd., the District Court for New Jersey would not impose personal jurisdiction over one of the foreign defendants simply because of the defendant’s frequent communication through telephone calls, facsimile transmissions, and email, considering that “informational communications in furtherance of [a] contract do not establish the purposeful activity necessary for a valid assertion of personal jurisdiction.”

Practitioners should be aware of a different result in a cases involving intentional torts. In the Eleventh Circuit, in a 2009 opinion, the Southern District of Florida Court in Exhibit Icons, LLC v. XP Companies, LLC, found that numerous calls and emails from defendant to the resident plaintiff may be sufficient to establish personal jurisdiction. This case follows the 2001 Sixth Circuit decision, Neal v. Janssen, and the 2001 Eighth Circuit decision Oriental Trading Co., Inc. v. Firetti.

Tips for Practitioners
Litigators have noted this most recent Fourth Circuit decision highlights the importance of forum-selection clauses in agreements between the parties.

Negotiating choice-of-law and choice-of-forum clauses is something worth fighting for, according to Kent A. Lambert, New Orleans, cochair of the ABA Section of Litigation Pretrial Practice and Discovery Committee. Lambert says that because courts will enforce forum-selection clauses, attorneys should advise their clients to consider “where [they] want to end up if there’s a dispute. Do [they] want to litigate in [their] backyard or thousands of miles away in another forum?”

In drafting a forum-selection clause, an attorney should consider not only the state in which to litigate, but also the court in which to determine disputes, suggests Lambert. Agreeing to litigate in state court or federal court can save the client time and expense in addressing removal or remand concerns.

“Think through what court you want to be in, whether you would be content with either state or federal court in the forum, and whether you will be able to get into that court on subject matter jurisdiction grounds,” advises Erica L. Calderas, Cleveland, cochair of the Section’s Pretrial Practice and Discovery Committee.

“Be clear about whether you are picking one court to the exclusion of others or whether you would be satisfied with any state or federal court within a geographic area,” she says.

Significantly, a party’s agreement to a forum selection clause will effectively waive that party’s right to contest personal jurisdiction, notes Lambert.

While Lambert has encountered arguments that a forum selection clause resulting in a jurisdictional waiver may be “adhesionary,” his experience teaches that courts will likely enforce a forum selection clause, particularly among sophisticated commercial parties.

“Forum selection clauses may also be used in settlement agreements,” says Calderas. “That way, if you find yourself having problems with enforcement of the settlement, you have a quicker route back to the forum of your choice, with a court that is educated as to your case,” she suggests.

The purpose of the personal jurisdiction inquiry is to protect a defendant from having to defend himself or herself in a forum where he or she should not have anticipated being sued. Planning ahead and adding a forum-selection clause may minimize legal expense, delays, and ensure that you litigate in your preferred court with familiar law and known judges.

Keywords: Jurisdiction, forum selection

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