Chung v. NANA Development Corp.

• Decision Date: 19 February 1986
• Docket Number: No. 84-2273,84-2273
• Citation: 783 F.2d 1124
• Parties: Choon Young CHUNG, Appellee, v. NANA DEVELOPMENT CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1124

783 F.2d 1124

54 USLW 2433

Choon Young CHUNG, Appellee, v. NANA DEVELOPMENT CORPORATION, Appellant.

No. 84-2273.

United States Court of Appeals,

Fourth Circuit.

Argued June 6, 1985.

Decided Feb. 19, 1986.

Richard Anthony Baenen (Patricia A. Gotschalk, Wilkinson, Barker, Knauer & Quinn, on brief), Washington, D.C., for appellant.

Myron Solter, Washington, D.C., for appellee.

Before SPROUSE, ERVIN and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

The issue on appeal is whether an Alaska corporation, defendant NANA Development Corp., is subject to the personal jurisdiction of a federal district court sitting in diversity in Virginia, based upon a single sale in Alaska of reindeer antlers to plaintiff Choon Young Chung, where part of the purchase was subsequently shipped by common carrier to plaintiff in Virginia. The district court found personal jurisdiction to exist under the Virginia long-arm statute, Va.Code Sec. 8.01-328.1(A)(2) (1984). We hold that the "minimum contacts" between NANA and Virginia required by International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) are lacking. Therefore, exercise of jurisdiction over defendant in Virginia is barred by Fourteenth Amendment due process.

I

NANA Development Corp. is an Alaska corporation, with its principal place of business in Anchorage. It is engaged in selling frozen reindeer antlers, which after processing are sent to the Orient for medicinal purposes. ¹ NANA has never solicited any business in Virginia.

Chung, a Virginia resident, initiated dealings with NANA in May 1982, telephoning NANA's Alaska offices to inquire about the possibility of purchasing reindeer antlers. After several conversations between Chung, NANA officials in Alaska, and NANA's joint venturer in San Francisco, John Wang, Chung was told by John Schaeffer of NANA that he could buy 500 pounds of antlers at $35.00 per pound after the June roundup, but would have to take delivery in Nome, Alaska. Chung agreed to these terms.

On June 9, 1982 Chung travelled to Alaska, where he met with NANA officials and watched the reindeer roundup. While in Alaska, Chung purchased 500 pounds of reindeer antlers on June 14. The total price was $17,500, at the spot market price of $35.00 per pound, and the transaction was evidenced in writing by a NANA invoice. Payment was made at the time of sale by a cashier's check for $12,000 and a personal check for $5,500.

The parties originally contemplated that the entire order of 500 pounds of antlers would be delivered to Chung at the Nome airport. When Chung was ready to depart on June 14, however, only 120 pounds of antlers were ready for him at the airport. Chung could not wait for the delayed 380 pounds to be delivered to him personally in Nome, as his flight was leaving shortly, and Schaeffer thereupon agreed to ship the remainder of the antlers by air to Chung in Virginia within 24 hours. Chung left Alaska with the available 120 pounds of antlers. On June 15, NANA consigned to an air carrier three boxes of "frozen reindeer horns," weighing 378 pounds, freight charges collect to Chung in Washington, D.C. The boxes and airbill were marked with the instruction "keep frozen." No insurance was obtained or value declared on the shipment of antlers.

Chung received notice on June 18 that the shipment had arrived at National Airport in Arlington, Virginia. He promptly went to the airport, where he discovered that the boxes were leaking blood and emitting a "terrible" odor. The antlers had thawed in transit, becoming spoiled and unusable. Chung complained to the carrier, and promptly notified NANA of the loss. Because the shipment was uninsured and had no declared value, however, the carrier offered only the minimum reimbursement of $.50 per pound, or $190. Chung stopped payment on his $5,500 personal check to NANA, and brought this suit to recover the balance of his loss.

The district court, finding personal jurisdiction over NANA in Virginia, determined after a bench trial that NANA had breached its duty to insure the shipment of antlers. Damages were awarded to Chung of $8,207. NANA appeals solely on the question of personal jurisdiction.

II

The connection here presented between NANA and Virginia was not sufficiently substantial to permit the exercise of personal jurisdiction, consistent with the "traditional conception of fair play and substantial justice" embodied in due process. International Shoe, 326 U.S. at 320, 66 S.Ct. at 160. Rather, we view this contact as no more than the "isolated" or "attenuated" single transaction which has always been deemed inadequate to satisfy due process. See Burger King Corp. v. Rudzewicz, --- U.S. ----, 105 S.Ct. 2174, 2184 n. 18, 85 L.Ed.2d 528 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 299, 100 S.Ct. 559, 567, 568, 62 L.Ed.2d 490 (1980); International Shoe, 326 U.S. at 318, 66 S.Ct at 159. The expansion of interstate commerce, while inducing acceptance of flexible due process standards, has hardly dictated the abandonment of all limits on personal jurisdiction. World-Wide Volkswagen, 444 U.S. at 294, 100 S.Ct. at 565. Hanson v. Denckla, 357 U.S. 235, 250-51, 78 S.Ct. 1228, 1237-38, 2 L.Ed.2d 1283 (1958). Certain Supreme Court decisions have suggested that these jurisdictional restrictions are based upon federalism, see e.g. World-Wide Volkswagen, 444 U.S. at 294, 100 S.Ct. at 565, but more recent opinions establish that due process is concerned with a fundamental individual liberty interest. Burger King, 105 S.Ct. at 2181-82 & n. 13; Insurance Corp. v. Compagnie des Bauxites, 456 U.S. 694, 702-03 & n. 10, 102 S.Ct. 2099, 2104-05 & n. 10, 72 L.Ed.2d 492 (1982). A defendant is protected by due process against being bound in personam by judgments of a forum with which he lacks meaningful relations. Burger King, 105 S.Ct. at 2181-82; International Shoe, 326 U.S. at 319, 66 S.Ct. at 160. In this case, the only link offered between defendant and the forum state is so unique and unsolicited that to sustain jurisdiction would inevitably trench upon the personal liberty the Constitution safeguards. ²

For a defendant to be subject to suit in a forum where it is not physically present, due process demands certain "minimum contacts" with the forum such "as make it reasonable ... to require the corporation to defend the particular suit which is brought there." International Shoe, 326 U.S. at 316-17, 66 S.Ct. at 158-59. Ordinarily these contacts should be "continuous and systematic," as opposed to "casual ... single or isolated," id. at 317, 66 S.Ct. at 159, a requirement springing from the essential principle "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, 357 U.S. at 253, 78 S.Ct. at 1240.

The significant contacts considered are those actually generated by the defendant. It is firmly established that "[t]he unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State." Id. See also World-Wide Volkswagen, 444 U.S. at 298, 100 S.Ct. at 567. Jurisdiction may not be manufactured by the conduct of others. Rather, "the defendant's conduct and connection with the forum State [must be] ... such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. Absent foreseeability of this sort, derived from purposeful contacts, it is irrelevant that a defendant could foresee the likelihood that its product would arrive in the forum state. Id.

The focus on a defendant's own acts serves the underlying due process objective of fair notice, giving "a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." Id. Thus, a corporation may be subject to jurisdiction when it "delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State." Id. at 298, 100 S.Ct. at 567. But where contacts are of an "isolated" nature, the "reasonable foreseeability of litigation in the forum is substantially diminished." Burger King, 105 S.Ct. at 2184 n. 18. See also id. at 2189. Unique or insignificant relations with the forum suggest an absence of purposefulness, leading to the conclusion that subjecting the defendant to personal jurisdiction would be fundamentally unfair.

The contact between NANA and Virginia in this case was hardly so purposeful that litigation in Virginia could have been reasonably foreseen. NANA's ties with Virginia are virtually nonexistent; entirely so, apart from this single transaction. Although it is true that a single contractual relationship may furnish a basis for jurisdiction, Burger King, 105 S.Ct. at 2184 n. 18; McGee v. International Life Insurance Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957), the Court has expressly denied that an individual's contract with an out-of-state party can alone automatically establish sufficient minimum contacts. Burger King, 105 S.Ct. at 2185. It is essential that the contract relied upon have a "substantial connection" with the forum state. McGee, 355 U.S. at 223, 78 S.Ct. at 201. The factors considered in determining whether the defendant purposefully established minimum contacts with the forum include "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing." Burger King, 105 S.Ct. at 2186. In undertaking the minimum contacts analysis, it must be borne in mind that "unilateral activity of another party or a third person is not an appropriate consideration." Helicopteros Nacionales de...