Domtar, Inc. v. Niagara Fire Ins. Co.

• Citation: 518 N.W.2d 58
• Decision Date: 21 June 1994
• Docket Number: No. CX-93-2449,CX-93-2449
• Parties: DOMTAR, INC., Respondent, v. NIAGARA FIRE INSURANCE CO., et al., Defendants, Canadian General Insurance Co., Appellant.
• Court: Minnesota Court of Appeals

Page 58

518 N.W.2d 58

DOMTAR, INC., Respondent, v. NIAGARA FIRE INSURANCE CO., et al., Defendants Canadian General Insurance Co., Appellant.

No. CX-93-2449.

Court of Appeals of Minnesota.

June 21, 1994.

Review Granted Aug. 29, 1994.

Syllabus by the Court

A Minnesota court can exercise personal jurisdiction over a Canadian insurer in a declaratory judgment action brought in Minnesota by its insured, a Canadian corporation, when the insured has been sued in Minnesota for property damage in Minnesota alleged to have been caused by the insured's manufacturing operation in Minnesota.

Larry A. Hanson, Leonard W. Glewwe, Moore, Costello & Hart, St. Paul, for appellant.

Douglas L. Skor, Kathleen Erickson DiGiorno, Briggs and Morgan, St. Paul, and Paul Anton Zevnik, John Osborne, Zevnik, Horton, Guibord & McGovern, Washington, DC, for respondent.

Considered and decided by SCHUMACHER, P.J., and LANSING and RANDALL, JJ.

OPINION

SCHUMACHER, Judge.

Canadian General Insurance Company appeals from the district court's denial of Canadian General's motion to dismiss for lack of personal jurisdiction. We affirm.

FACTS

Respondent Domtar, Inc. is a Canadian corporation with its principal place of business in Montreal, Quebec. Canadian General is also a Canadian corporation; its principal offices are in Scarborough, Ontario.

In 1924, Dominion Tar & Chemical Company Ltd., a predecessor to Domtar, opened and began operating a tar plant in Duluth, Minnesota. The plant was in operation from 1924 until 1948, when it was shut down permanently. Domtar sold the property on which the plant was located in 1955.

The Domtar plant was located in an industrial area on the north bank of the St. Louis River in West Duluth, approximately four river miles from Lake Superior. The plant was on a peninsula, with the Stryker Embayment to the west. Pollutants have been found in the river. The peninsula, an adjoining boat slip and the Stryker Embayment are part of a 230-acre superfund site that was placed on the Environmental Protection Agency's national priorities list in 1983 and on the Minnesota Pollution Control Agency's (PCA) permanent list of priorities in 1984.

On March 26, 1991, the PCA issued a request for response action to, among others, Domtar. The request for response action identified Domtar as a potentially responsible party and requested that Domtar conduct investigations and submit reports to the PCA.

Domtar tendered the PCA's claim to its insurers, who refused the tender. Domtar commenced a declaratory judgment action in Ramsey County, Minnesota against its insurers, asserting the insurers were obligated to investigate the PCA's claims, and to defend and indemnify Domtar in the PCA proceedings. Canadian General moved to dismiss, asserting that the Minnesota court lacked personal jurisdiction over Canadian General.

Canadian General is not licensed to do business in Minnesota and has never sold insurance in its own name in this state. ¹ Canadian General maintains no offices outside of Canada and is not licensed to do business in any state of the United States. In addition, Canadian General rarely insures U.S. operations and charges a higher premium for coverage of U.S. sales than Canadian sales.

According to Domtar, Canadian General issued primary liability insurance to Domtar from 1956 through 1965. The only Canadian General policy found so far covered Domtar between January 1, 1960 and January 1, 1963, and was a renewal of a previous policy. The property damage endorsement to the 1960-63 policy provided that Canadian General would

PAY on behalf of the Insured all sums which the Insured shall become obligated to pay * * * for damages because of damage to or destruction of property caused by accident occurring within the Policy Period and while this Endorsement is in force.

At the time the policy was issued, the customary practice was to issue policies for three-year terms. Although Canadian General did not retain the underwriting file from 1960, it surmised that the file should have contained information on Domtar's operations, including estimated sales broken down by various types of operations, prior claims history and inspection reports of Domtar's main operations and main locations.

When Canadian General moved for dismissal, the district court ordered further discovery on the jurisdiction issue. Following discovery, the district court determined that it could exercise personal jurisdiction over Canadian General. Canadian General appeals.

ISSUE

Did the district court err in concluding it could exercise personal jurisdiction over the Canadian insurer of a Canadian corporation for property damage in Minnesota which occurred during the policy period and was allegedly caused by the insured's activities in Minnesota?

ANALYSIS

Standard of Review

An order denying a motion to dismiss for lack of personal jurisdiction is appealable as a matter of right. Stanek v. A.P.I., Inc., 474 N.W.2d 829, 831 (Minn.App.1991), pet. for rev. denied (Minn. Oct. 31, 1991), and cert. denied, --- U.S. ----, 112 S.Ct. 1603, 118 L.Ed.2d 316 (1992). Whether personal jurisdiction exists presents a question of law that this court reviews de novo on appeal. Id. at 832.

1. The Long Arm Statutes

Whether personal jurisdiction over a nonresident exists depends on two criteria: (1) whether the requirements of Minn.Stat. Sec. 543.19 (1992), the long arm statute, have been satisfied; and (2) whether there are sufficient "minimum contacts" to satisfy constitutional due process requirements. Stanek, 474 N.W.2d at 832. Whether the requirements of the long arm statute have been met presents a question of state law; whether there are sufficient minimum contacts to satisfy due process is a question of federal law. Id.

The legislature intended the long arm statute to have the maximum extraterritorial effect allowed under the United States Constitution. Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 410 (Minn.1992). Because the legislature intends the long arm statute to be coextensive with the limits of due process, the only issue presented in this appeal is whether the exercise of personal jurisdiction over Domtar is consistent with the requirements of the federal Constitution. Id. at 411. Any doubt regarding the sufficiency of contacts to allow the exercise of personal jurisdiction should be resolved in favor of jurisdiction. Id. at 412.

2. Due Process

The minimum-contacts test for long arm jurisdiction was first recognized in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). See Note, Minimum Contacts in Contract Cases: A Forward Looking Reevaluation, 58 Notre Dame L.Rev. 635 n. 1 (1983). Under International Shoe, a nonresident defendant may be subject to the personal jurisdiction of a state's courts if the defendant has sufficient minimum contacts with the foreign state so that the exercise of jurisdiction over the nonresident does not offend " 'traditional notions of fair play and substantial justice.' " International Shoe, 326 U.S. at 316, 66 S.Ct. at 158 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)); see also Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Kulko v. Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978); Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). In making this determination, the focus is on "the relationship among the defendant, the forum, and the litigation." Shaffer, 433 U.S. at 204, 97 S.Ct. at 2580.

The decision in International Shoe recognized that modern travel and communication technologies have greatly reduced the burden on a defendant imposed by litigating outside of its home state. McGee v. International Life Ins., 355 U.S. 220, 222-23, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957). With respect to insurance, the Court weighs heavily the consequences of the insurer's contractual obligations in the state where the insurer's obligations are to be carried out. Travelers Health Ass'n v. Commonwealth of Virginia, 339 U.S. 643, 648, 70 S.Ct. 927, 930, 94 L.Ed. 1154 (1950).

Personal jurisdiction over a foreign corporation is consistent with due process requirements when the corporation has "purposefully avail[ed] 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, 1240, 2 L.Ed.2d 1283 (1958) (citing International Shoe, 326 U.S. at 319, 66 S.Ct. at 154). If a corporation has purposefully availed itself of the benefits and protections of the forum state's laws, the corporation has "clear notice that it is subject to suit" in the forum state. World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. It can then protect itself from the burden of litigation by procuring insurance. Id.

The purposeful availment must consist of actions taken by the defendant that "create a 'substantial connection' with the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985) (quoting McGee, 355 U.S. at 223, 78 S.Ct. at 201). A customer's unilateral act of bringing the corporation's product into the forum state is insufficient to create personal jurisdiction. World-Wide Volkswagen, 444 U.S. at 295-96, 100 S.Ct. at 566.

Courts must exercise greater caution in exercising personal jurisdiction across international boundaries than across interstate boundaries. Asahi Metal Indus. v. Superior Court, Solano County, 480 U.S. 102, 114, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987). When a court exercises personal jurisdiction across state lines, two interests are implicated: the right of the defendant not to be burdened by unfair litigation in a distant forum and the proper role of one state's courts in a federal system. World-Wide...