Brand v. Menlove Dodge

Citation796 F.2d 1070
Decision Date06 August 1986
Docket NumberNo. 84-6384,84-6384
PartiesMurray BRAND, Sydell Brand, Biarritz Motors, Inc., Plaintiffs-Appellees, v. MENLOVE DODGE, Los Angeles Dealer Auto Auction, Defendants. Menlove Dodge, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

James R. Goff, Orange, Cal., for plaintiffs-appellees.

George K. Fadel, Bountiful, Utah, for defendant-appellant.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN, TANG and FLETCHER, Circuit Judges.

FLETCHER, Circuit Judge:

Menlove Dodge appeals from a default judgment entered against it on fraud and negligence counts. Because the district court did not have personal jurisdiction over Menlove, we reverse.

BACKGROUND

Menlove is an auto dealership in Bountiful, Utah. In early 1980, Menlove purchased a used 1979 Toyota landcruiser from another dealer and promptly resold it. Four months later, the buyer returned the vehicle to Menlove upon discovering that the front-end assembly had been replaced with a front end from a 1972 model. Menlove then sold the vehicle to Wade Patterson, a Utah used car dealer. The parties dispute whether Kendall Cochrane of Menlove told Patterson about the rebuilt front end and whether Patterson told Cochrane he intended to take the Toyota to California for resale.

Patterson sold the vehicle at the Los Angeles Auto Auction in Rosemead, California, to Murray Brand, a Phoenix auto dealer. Brand sold it in Arizona. Brand's customer had problems with the front end. En route to a Toyota dealership, the front wheels of the landcruiser broke apart. Litigation between Brand and the customer resulted in a jury verdict against Brand.

Brand brought suit in federal district court in Los Angeles against Menlove, Patterson, and the Los Angeles Auto Auction. 1 Menlove moved to quash summons and process. When Menlove did not appear at the hearing on the motion, the motion was denied pursuant to Central District Local Rule 7.10 (requiring attendance of counsel at hearings unless excused). Menlove made no further appearances before the court, which entered a default judgment against it on the fraud and negligence counts and awarded compensatory and punitive damages. Menlove timely appeals. 2

DISCUSSION 3
I. Standard of Review

When a district judge has made no findings on disputed facts, we review the materials presented de novo to determine if the plaintiff has made out a prima facie case of personal jurisdiction over the defendant. See Pacific Atlantic Trading Co. v. M/V Main Express, 758 F.2d 1325, 1326-27 (9th Cir.1985). For the purposes of the appeal, we resolve all factual disputes in favor of Brand. See id. at 1327.

II. General Jurisdiction

"In a case based on diversity jurisdiction, a federal court applies the personal jurisdiction rules of the forum state provided the exercise of jurisdiction comports with There are two types of personal jurisdiction, specific and general. See Haisten, 784 F.2d at 1396. General personal jurisdiction, which enables a court to hear cases unrelated to the defendant's forum activities, exists if the defendant has "substantial" or "continuous and systematic" contacts with the forum state. Id.; Peterson v. Kennedy, 771 F.2d 1244, 1261 (9th Cir.1985), cert. denied, --- U.S. ---, 106 S.Ct. 1682, 90 L.Ed.2d 187 (1986); see Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984). Our cases demonstrate that "substantial" is intended to be a fairly high standard. See, e.g., Helicopteros, 466 U.S. at 416, 104 S.Ct. at 1873 (no jurisdiction over foreign corporation that sent officer to forum for one negotiating session, accepted checks drawn on a forum bank, purchased equipment from the forum, and sent personnel to the forum to be trained); Cubbage v. Merchent, 744 F.2d 665, 667-68 (9th Cir.1984), (no jurisdiction over doctors despite significant numbers of patients in forum, use of forum's state medical insurance system and telephone directory listing that reached forum), cert. denied, --- U.S. ---, 105 S.Ct. 1359, 84 L.Ed.2d 380 (1985); Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1330-31 (9th Cir.1984) (no jurisdiction over defendants despite several visits and purchases in forum, solicitation of contract in forum which included choice of law provision favoring forum, and extensive communication with forum), cert. denied, --- U.S. ---, 105 S.Ct. 2143, 85 L.Ed.2d 500 (1985); Congoleum Corp. v. DLW Aktiengesellschaft, 729 F.2d 1240, 1243 (9th Cir.1984) (developing sales force in forum state insufficient). See also Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779, 104 S.Ct. 1473, 1480, 79 L.Ed.2d 790 (1984) (circulation of magazines in New Hampshire may not support jurisdiction over cause of action unrelated to the magazines).

                due process."   Scott v. Breeland, 792 F.2d 925, 927 (9th Cir.1986).  Because California imposes no greater restrictions than does the United States Constitution, see id.;    Cal.Civ.Pro.Code Sec. 410.10 (West 1973), "federal courts in California may exercise jurisdiction to the fullest extent permitted by due process."   Scott, 792 F.2d at 927;  see Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir.1986)
                

At oral argument, Brand claimed that Menlove had "substantial" contacts with California. We disagree. Menlove's only contacts were occasional car sales in Utah to California residents, car sales to Patterson with knowledge that he occasionally resold them in California, and the sale of the Toyota at issue to Patterson, with knowledge that it would be resold in California. 4 In addition, many of the cars Menlove sold entered the country through California ports. These contacts are neither "substantial" nor "systematic and continuous."

III. Specific Jurisdiction

We have established a three-factor test to determine when a state may constitutionally exercise specific jurisdiction over a defendant:

1. The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws.

2. The claim must be one which arises out of or results from the defendant's forum-related activities.

3. Exercise of jurisdiction must be reasonable.

Scott, 792 F.2d at 927; Haisten, 784 F.2d at 1397. In our case, the injury to Brand arose out of the activities that Brand argues were purposefully directed at California. Thus we focus on the first and third prongs of the test.

When the test was originally formulated, a plaintiff had to demonstrate each of the three elements to establish jurisdiction. See Data Disc, Inc. v. Systems Technology Associates, 557 F.2d 1280, 1287 (9th Cir.1977). In response to recent Supreme Court opinions, we have adopted a more flexible approach. See Haisten, 784 F.2d at 1397. Jurisdiction may be established with a lesser showing of minimum contacts "if considerations of reasonableness dictate," and a presumption of reasonableness arises "upon a showing that the defendant purposefully directed [its] activities at forum residents which the defendant bears the burden of overcoming by presenting a compelling case that jurisdiction would be unreasonable." Id. (citing Burger King Corp. v. Rudzewicz, 105 S.Ct. 2174, 2184-85 (1985)). Under this analysis, there will be cases in which the defendant has not purposefully directed its activities at the forum state, but has created sufficient contacts to allow the state to exercise personal jurisdiction if such exercise is sufficiently reasonable.

A. Purposeful Availment

The requirement that the defendant do some act purposefully to avail himself of the laws of the forum state ensures that a person is not hailed into court as the result of random, fortuitous, or attenuated contacts or on account of the unilateral activity of third parties. Burger King, 105 S.Ct. at 2183; Haisten, 784 F.2d at 1397. We examine whether Menlove's activities were directed purposefully toward the forum. See Burger King, 105 S.Ct. at 2184.

Central to Brand's case is his allegation that Menlove sold the Toyota to Patterson knowing it would be resold in California. The alleged conduct places this case neatly between World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) and Plant Food Co-op v. Wolfkill Feed & Fertilizer, 633 F.2d 155 (9th Cir.1980). In World-Wide Volkswagen, defendant auto dealer sold a defective car to New York residents in New York. The car caused injury to plaintiffs in Oklahoma, and they sued in Oklahoma court. The Supreme Court held that Oklahoma courts did not have jurisdiction over the auto dealer or its distributor based on the sale of the car, even though it was foreseeable that the car might be driven in Oklahoma. 444 U.S. at 296, 100 S.Ct. at 566. The court set out the standards for asserting jurisdiction in product defect cases.

[I]f the sale of a product of a manufacturer or distributor ... is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.

Id. at 297-98, 100 S.Ct. at 567. The court emphasized that there was no evidence that the autos sold by the distributor were sold outside the New York-New Jersey-Connecticut area. Id. at 298, 100 S.Ct. at 567.

In Plant Food, a...

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