Soma Med. Int'l v. Standard Chartered Bank

• Decision Date: 01 December 1999
• Docket Number: No. 98-4138,98-4138
• Citation: 196 F.3d 1292
• Parties: (10th Cir. 1999) SOMA MEDICAL INTERNATIONAL, a Delaware corporation, Plaintiff - Appellant, v. STANDARD CHARTERED BANK, an international banking corporation; LEONARD D. FONG, an individual, Defendants - Appellees
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1292

196 F.3d 1292 (10th Cir. 1999)

SOMA MEDICAL INTERNATIONAL, a Delaware corporation, Plaintiff - Appellant, v. STANDARD CHARTERED BANK, an international banking corporation; LEONARD D. FONG, an individual, Defendants - Appellees.

No. 98-4138

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

December 1, 1999

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH. D.C. NO. 96-CV-85-B

[Copyrighted Material Omitted] Jason G. Landess, Las Vegas, Nevada (Peter W. Guyon, Salt Lake City, Utah, on the briefs), for Appellant.

Scott D. Larmore (Leo R. Beus and Michael R. Devitt with him on the brief), Beus, Gilbert & Devitt, P.L.L.C., for Appellee Standard Chartered Bank.

Before ANDERSON, McKAY, and HENRY, Circuit Judges.

ANDERSON, Circuit Judge.

Plaintiff Soma Medical International, Inc., appeals from the dismissal of this diversity action against Standard Chartered Bank ("SCB") for lack of personal jurisdiction. Soma also appeals the denial of an interlocutory discovery order. We affirm the dismissal of this case for lack of personal jurisdiction over SCB, and we affirm the denial of the discovery order.

BACKGROUND

Soma is a Delaware corporation primarily engaged in the business of researching, developing, and manufacturing medical monitoring devices. Its principal place of business is in Bountiful, Utah. SCB is an international banking institution incorporated under the laws of Great Britain, with branches in many cities throughout the world, including Hong Kong.

In August 1993, Soma opened a bank account with SCB's Hong Kong branch office. Soma intended to engage in a joint venture with the Chinese government to manufacture medical monitoring devices in China, and the Chinese government agreed to fund the venture provided Soma had certain funds on deposit in Hong Kong. Soma alleges that SCB was aware of the arrangement between Soma and the Chinese government and that SCB agreed to allow funds to be withdrawn from Soma's account upon presentation of an instrument bearing the signatures of both Mark Leishman and Robert Walker.

By mid-October 1993, Soma had approximately $250,000 in its account with SCB. As the district court found:

At some point during the next eight months, Defendant Leonard D. Fong created a fraudulent signature card for the account, and submitted the card to [SCB]. The fraudulent signature added Fong as a signatory, and authorized Fong to withdraw funds from the account without the signatures of either Leishman or Walker.

On May 13, 1994, Fong sent a letter to [SCB], demanding that Standard close Soma's account and transfer all funds to Fong's account in Las Vegas, Nevada. On November 14, 1994, Soma contacted [SCB] to inquire concerning the status of the account. Much to Soma's surprise, [SCB] informed Soma that approximately $250,000 had been transferred to the Las Vegas, Nevada account of Leonard D. Fongsupposedly at Soma's request.

Op. & Order at 2-3, Appellant's App. Vol. I at 83-84.

Soma filed this diversity action against SCB in federal district court in Utah, alleging breach of contract, negligence, breach of implied covenant, and civil conspiracy, all arising out of SCB's wrongful disbursement of funds to Fong upon Fong's unauthorized signature. Soma alleges consequential damages of $11,000,000.

SCB filed a motion to dismiss, asserting that the district court lacked personal jurisdiction over SCB. The court granted Soma leave to engage in limited jurisdictional discovery, including permitting Soma to propound a set of interrogatories and request the production of documents. The court denied Soma's motion to compel.

With discovery completed, the district court ruled on SCB's motion to dismiss for lack of personal jurisdiction. The court held that, under Utah law, it had neither general nor specific jurisdiction over SCB. We agree.

DISCUSSION

"To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show that jurisdiction is legitimate under the laws of the forum state and that the exercise of jurisdiction does not offend the due process clause of the Fourteenth Amendment." Far West Capital, Inc. v. Towne, 46 F.3d 1071, 1074 (10th Cir. 1995). Thus, Utah law governs the exercise of personal jurisdiction over SCB. Soma, as the plaintiff, "'bears the burden of establishing personal jurisdiction over the defendant.'" OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Rambo v. American Southern Ins. Co., 839 F.2d 1415, 1417 (10th Cir. 1988)). When, as in this case, a district court grants a motion to dismiss for lack of personal jurisdiction without conducting an evidentiary hearing, "the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion." Id. We review de novo the district court's dismissal for lack of personal jurisdiction. Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1533 (10th Cir. 1996).

Soma alleges it has made a prima facie showing of general and specific personal jurisdiction.

I. General Jurisdiction

As the Utah Supreme Court has stated, "[g]eneral personal jurisdiction permits a court to exercise power over a defendant without regard to the subject of the claim asserted. For such jurisdiction to exist, the defendant must be conducting substantial and continuous local activity in the forum state." Arguello v. Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992); see also Harnischfeger Eng'rs, Inc. v. Uniflo Conveyor, Inc., 883 F. Supp. 608, 611-12 (D. Utah 1995); Buddensick v. Stateline Hotel, Inc., 972 P.2d 928, 930-31 (Ut. Ct. App. 1998), cert. denied, 982 P.2d 88 (Utah 1999), cert. denied, ___ U.S. ___, 120 S.Ct. 324, ___ L.Ed.2d ___ (1999).

The Utah Court of Appeals recently observed that the following factors are relevant to the issue of whether general personal jurisdiction exists:

Whether the corporate defendant is

1. engaged in business in this state;

2. licensed to do business in this state;

3. owning, leasing, or controlling property (real or personal) or assets in this state 4. maintaining employees, offices, agents, or bank accounts in this state;

5. present in that shareholders reside in this state;

6. maintaining phone or fax listings within this state;

7. advertising or soliciting business in this state;

8. traveling to this state by way of salespersons, etc.;

9. paying taxes in this state;

10. visiting potential customers in this state;

11. recruiting employees in the state;

12. generating a substantial percentage of its national sales through revenue generated from in-state customers.

Buddensick, 972 P.2d at 930-31. It is undisputed that SCB does none of those things. Soma argues that, because SCB filed a small number of UCC financing statements and recorded several instruments in Utah, all evidencing various SCB security interests, and because it filed five civil cases in Utah prior to 1992 to recover monies and/or foreclose on trust deeds, SCB is subject to general jurisdiction. We disagree. Those are not the kinds of activities which Utah courts, and federal courts applying Utah law, have held constitute the kind of "substantial and continuous local activity" necessary to subject SCB to general jurisdiction. See, e.g., Beck v. D'Amour S.A., 923 F. Supp. 196, 199-200 (D. Utah 1996); Harnischfeger Eng'rs, Inc., 883 F. Supp. at 612; Frontier Fed. Savings & Loan Ass'n v. National Hotel Corp., 675 F. Supp. 1293, 1296 (D. Utah 1987); Buddensick, 972 P.2d at 931.

Soma further argues SCB's maintenance of a website, accessible from Utah, also constitutes "substantial and continuous local activity" for general jurisdiction purposes. While neither our court nor the Utah Supreme Court has specifically addressed this issue yet, a federal district court judge in Utah has addressed the circumstances in which a website will subject an entity to personal jurisdiction in Utah. See Patriot Systems, Inc. v. C-Cubed Corp., 21 F. Supp. 2d 1318, 1323-24 (D. Utah 1998). The court in Patriot Systems adopted the analysis of several other courts, which "reveals three general categories along a 'sliding scale' for evaluating jurisdiction." Id. at 1324. The categories are as follows:

First, personal jurisdiction is established when "a defendant clearly does business over the Internet," such as entering into contracts which require the "knowing and repeated transmission of computer files over the Internet." Second, exercising personal jurisdiction is not appropriate when the Internet use involves "[a] passive Web site that does little more than make information available to those who are interested in it." Under these circumstances, "a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions." Third, a middle category encompasses "interactive Web sites where a user can exchange information with the host computer." Whether the exercise of jurisdiction is appropriate depends upon "the level of interactivity and commercial nature of the exchange of information that occurs on the Web site."

Id. (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1123-24 (W.D. Pa. 1997)) (other quotations omitted); see also Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir., 1999) (adopting Zippo court analysis); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 419 (9th Cir. 1997) (noting that "the common thread [in cases involving jurisdiction via an Internet website], well stated by the district court in Zippo, is that 'the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.'") (quoting Zippo, 952 F. Supp. at 1124); SF Hotel Co. v. Energy Invs., Inc., 985 F. Supp. 1032, 1034 (D. Kan. 1997).

In its response to SCB's motion to dismiss for lack of personal jurisdiction, Soma alleged that "Standard...