Batton v. Tennessee Farmers Mut. Ins. Co., CV-86-0392-PR

• Decision Date: 16 April 1987
• Docket Number: No. CV-86-0392-PR,CV-86-0392-PR
• Citation: 153 Ariz. 268,736 P.2d 2
• Parties: Robert O. BATTON and Linda Batton, Plaintiffs/Appellants, v. TENNESSEE FARMERS MUTUAL INSURANCE COMPANY, Defendant/Appellee.
• Court: Arizona Supreme Court

Page 2

736 P.2d 2

153 Ariz. 268

Robert O. BATTON and Linda Batton, Plaintiffs/Appellants, v. TENNESSEE FARMERS MUTUAL INSURANCE COMPANY, Defendant/Appellee.

No. CV-86-0392-PR.

Supreme Court of Arizona, In Banc.

April 16, 1987.

Hofmann, Salcito, Stevens & Myers, P.A. by Leroy W. Hofmann, Kenneth W. Burford, Phoenix, for plaintiffs/appellants.

Jennings, Strouss & Salmon by Michael A. Beale, Jefferson L. Lankford, Phoenix, for defendant/appellee.

FELDMAN, Vice Chief Justice.

Robert and Linda Batton sued their automobile insurer, Tennessee Farmers Mutual Insurance Company (Tennessee Farmers), for breach of contract and bad faith. The trial court dismissed the Battons' suit on the ground that Arizona lacked personal jurisdiction over Tennessee Farmers. The court of appeals affirmed the dismissal, concluding "that exercise of jurisdiction in this case would be unconstitutional." Batton v. Tennessee Farmers Mutual Insurance Co., 153 Ariz. 267, 736 P.2d 1 (Ct.App.1986).

We granted review to clarify Arizona's personal-jurisdiction law under the "minimum contacts" rule of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and to reexamine our law in light of recent decisions. Rule 23(c), Ariz.R.Civ.App.P., 17A A.R.S. (Supp.1986). We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

I. FACTS

Robert Batton (Batton) purchased automobile insurance from Tennessee Farmers while he was a Tennessee resident. Batton's insurance provided coverage in all 50 states and included medical benefits. Tennessee Farmers issued Batton's policy in Tennessee and, as far as the record discloses, Batton paid all his premiums in Tennessee.

During a 1983 visit to Arizona, Batton was severely injured while riding as a passenger in his brother's car. Batton's Arizona attorney requested medical benefits from Tennessee Farmers in January 1984. Tennessee Farmers responded by requesting formal proof of loss and various other information, much of it seemingly irrelevant, from Batton and his brother's insurer. Eventually, Tennessee Farmers cancelled Batton's policy, sending notice to his Tennessee address. After additional correspondence with Batton's Arizona attorney, Tennessee Farmers denied Batton's claim for reimbursement of medical expenses on the ground that "the medical portion of [Batton's] policy is subrogatable," whatever that means.

Although Batton had left Arizona and had moved his family from Tennessee to Florida shortly after the accident, he sued Tennessee Farmers in Arizona, alleging breach of contract and bad faith. Tennessee Farmers has no offices or agents in Arizona, is not licensed to do business in Arizona, and, aside from Batton's claim, has never investigated, adjusted, settled, or defended a claim in Arizona. Tennessee Farmers therefore responded with a motion to dismiss for lack of personal jurisdiction. The trial court granted the motion and the court of appeals affirmed.

II. DISCUSSION

A. The Relationship Between the Arizona Long-Arm Rule and Due Process

Batton first argues that Arizona's long-arm rule, Rule 4(e)(2), Ariz.R.Civ.P., 16 A.R.S., covers this case. That rule authorizes jurisdiction over Arizona residents, persons "doing business in this state," and persons who have "caused an event to occur in this state out of which the claim which is the subject of the complaint arose...." According to Batton, by adjusting, investigating, and eventually denying his claim, Tennessee Farmers transacted insurance business in Arizona, see A.R.S. §§ 20-106(B)(5), -403, and caused an event--bad faith breach of contract--to occur in Arizona.

The second part of Batton's argument recognizes that state court jurisdiction over foreign defendants is limited by the due process clause of the fourteenth amendment. Foreign defendants have a liberty interest, protected by the due process clause, "in not being subject to the binding judgments of a forum with which [they have] established no meaningful 'contacts, ties, or relations.' " Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 105 S.Ct. 2174, 2181-82, 85 L.Ed.2d 528 (1985) (quoting International Shoe, 326 U.S. at 319, 66 S.Ct. at 160). Batton argues that Tennessee Farmers' contacts with Arizona, although minimal, satisfy the threshold requirement of due process.

Although Batton's two-step argument--looking first at the long-arm rule and then at due process--is based on well-established Arizona case law, e.g., Meyers v. Hamilton Corp., 143 Ariz. 249, 251, 693 P.2d 904, 906 (1984); Manufacturers' Lease Plans, Inc. v. Alverson Draughon College, 115 Ariz. 358, 359, 565 P.2d 864, 865 (1977), it unnecessarily complicates the jurisdictional inquiry. As we implicitly recognized in Northern Propane Gas Co. v. Kipps, 127 Ariz. 522, 525-27, 622 P.2d 469, 472-74 (1980) (skipping the first step and analyzing jurisdiction solely in terms of minimum contacts), this two-step inquiry is redundant because our interpretation extends Rule 4(e)(2) to the permissible limits of due process. Meyers, 143 Ariz. at 252, 693 P.2d at 908; Northern Propane, 127 Ariz. at 527, 622 P.2d at 474; Manufacturers' Lease Plans, 115 Ariz. at 359, 565 P.2d at 865. Consequently, if the constitutionally required minimum contacts are present, the defendant's conduct necessarily satisfies Rule 4(e)(2). See Northern Propane, supra; Maake v. L & J Press Corp., 147 Ariz. 362, 363, 710 P.2d 472, 473 (App.1985).

We therefore limit our inquiry in this case to whether Arizona may constitutionally assert jurisdiction over Tennessee Farmers. See Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir.1985) (if state long-arm statute has been interpreted to extend to the limits of due process, the court need only inquire whether the assertion of jurisdiction would be constitutionally permissible).

B. General or Specific Jurisdiction

Depending on the type and extent of defendant's contacts, states may assert either general or specific jurisdiction. Compare Helicopteros Nacionales v. Hall, 466 U.S. 408, 414-15, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984) (general) with Burger King, 471 U.S. at 472-73, 105 S.Ct. at 2182 (specific). General jurisdiction subjects the defendant to suit on virtually any claim, "[e]ven when the cause of action does not arise out of or relate to the [defendant's] activities in the forum State...." Helicopteros Nacionales, 466 U.S. at 414, 104 S.Ct. at 1872. General jurisdiction is unavailable, however, unless the defendant has "substantial" or "continuous and systematic" contacts with the forum state. Id. Batton concedes that general jurisdiction is inappropriate in this case. Tennessee Farmers has not conducted business in Arizona, or even adjusted or litigated a prior claim here. Indeed, rather than "continuous and systematic," Tennessee Farmers' alleged contacts with Arizona are limited to the conduct being litigated in this case.

Thus, the jurisdictional issue before us is confined by the facts to whether Arizona may constitutionally assert specific jurisdiction over Tennessee Farmers for the limited purpose of resolving this single lawsuit. Specific jurisdiction is proper only if Tennessee Farmers' alleged breach of contract and bad faith--the conduct being litigated--establish the necessary "minimum contacts" between Tennessee Farmers and Arizona. See Burger King, 471 U.S. at 471-74, 105 S.Ct. at 2181-83.

C. Minimum Contacts--General Principles

When specific jurisdiction is at issue, the minimum-contacts inquiry focuses on the relationship between the defendant, the forum, and the litigation. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984); Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977). The question is whether "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980) (emphasis added). In defining when a defendant should "reasonably anticipate" out-of-state litigation, the Supreme Court has consistently held that the foreseeability of an injury or event in another state is "not a 'sufficient benchmark' for exercising personal jurisdiction." Burger King, 471 U.S. at 474, 105 S.Ct. at 2183 (quoting World-Wide Volkswagen, 444 U.S. at 295, 100 S.Ct. at 566). Thus, instead of limiting our inquiry to the foreseeability of out-of-state litigation, we must determine whether defendant purposefully created contacts with the forum state:

The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283 (1958) (emphasis added), quoted with approval in Burger King, 471 U.S. at 474-75, 105 S.Ct. at 2183.

"This 'purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts, ... or of the 'unilateral activity of another party or a third person'...." Burger King, 471 U.S. at 475, 105 S.Ct. at 2183 (citing Keeton, World-Wide Volkswagen, and Helicopteros ). Jurisdiction is proper only if "the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State." 471 U.S. at 476, 105 S.Ct. at 2183-84 (emphasis in original); accord Asahi Metal Industry Co. v. Superior Court, --- U.S. ----, ----, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987)....