First American First, Inc., v. National Ass'n of Bank Women

• Decision Date: 10 October 1986
• Docket Number: No. 85-2138,85-2138
• Parties: FIRST AMERICAN FIRST, INC., and Gilbert R. Leake, III, Appellants, v. NATIONAL ASSOCIATION OF BANK WOMEN, and Sharon K. Bennett, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1511

802 F.2d 1511

55 USLW 2219

FIRST AMERICAN FIRST, INC., and Gilbert R. Leake, III, Appellants, v. NATIONAL ASSOCIATION OF BANK WOMEN, and Sharon K. Bennett, Appellees.

No. 85-2138.

United States Court of Appeals, Fourth Circuit.

Argued May 6, 1986.

Decided Oct. 10, 1986.

Jonathan Mook (Bernard J. DiMuro, Hirschkop & Associates, P.C., Alexandria, Va., on brief), for appellants.

David P. Sanders (Thomas J. McCarthy, Jenner & Block, Chicago, Ill., Wiley R. Wright, Jr., Susan M. Cardenas, Thomas & Fiske, P.C., Alexandria, Va., on brief), for appellees.

Before WINTER, Chief Judge, and RUSSELL and PHILLIPS, Circuit Judges.

JAMES DICKSON PHILLIPS, Circuit Judge:

Plaintiffs First American First, Inc. (First American) and Gilbert Leake, III, appeal the district court's dismissal without prejudice, for lack of personal jurisdiction, of their claim based upon allegedly defamatory letters published by defendants, National Association of Bank Women (NABW) and Sharon Bennett. The court found that although the Virginia long-arm statute authorized the exercise of personal jurisdiction over NABW and Bennett, the exercise of jurisdiction in this case would violate the Due Process Clause. We agree that Virginia statutory law authorizes the exercise of personal jurisdiction over these defendants. We also conclude, however, that such an exercise of jurisdiction would comport as well with the requirements of due process. We therefore hold that personal jurisdiction may properly be exercised under the Virginia long-arm statute, and accordingly, we reverse and remand for further proceedings.

I

First American is a travel agency incorporated in Virginia with Leake as its managing director, vice-president, and sole shareholder. NABW, a 28,000 member national membership organization established as an Illinois non-profit corporation, was created to help foster career opportunities for women in banking and finance. NABW's sole office is in Chicago, and it maintains no office, telephone number or business facility of any kind in Virginia. Bennett, NABW's administrative director, is a Chicago resident who has visited Virginia only two times in the past decade.

NABW publishes and distributes to its members a variety of procedural manuals and informational journals. All of these materials are published in and distributed from Chicago. NABW also sells specialty items to its members. Virginia sales accounted for approximately $200-$300 of the $6,000 in gross sales for these items. In addition, NABW offers certain group health and life insurance benefits and group travel services to its members, including those in Virginia. Illinois providers offer all of these services. The various activities and programs sponsored by NABW are developed and implemented by national standing committees which operate out of Chicago.

NABW's members reside throughout the United States. Approximately 1,150 NABW members live in Virginia. NABW's contacts with Virginia do not differ from those with other states. NABW's income derives primarily from annual membership dues and a one-time initiation fee from new members. Three percent of the total fees were collected from Virginia members in 1984. Other limited income derives from national convention registration, though a convention has never been held in Virginia.

NABW members may also form local groups. These groups are separate and autonomous from NABW and maintain separate tax identification numbers and financial records. NABW does not exercise control over these groups except to provide a core set of bylaws guiding the organization and operation of the local groups. Leaders of the local groups in each state form a state council which oversees the operations of the group on a statewide level. The state councils are also separate legal entities from NABW. Though NABW exercises no control over the councils, it requires the groups to meet at least once a year in the state. NABW retains any sums in excess of the state council's expenses and subsidizes any losses incurred in the Council's meetings.

The incidents giving rise to this litigation began in 1982 when NABW contracted with an Illinois travel service to act as NABW's official travel agent and to provide travel services for NABW members attending the 1984 NABW national convention. Shortly thereafter, First American contacted local NABW group leaders throughout the country to solicit travel package business from NABW members for the national convention. First American claimed that it could provide services at lower prices than those provided for by the Illinois service and that Bennett had given First American, through Leake, permission to solicit local NABW members and groups. Bennett denied that Leake ever sought or was granted such permission for First American.

After learning of First American's solicitation, Bennett wrote to NABW group leaders, including those in Virginia where First American conducted its primary business, in April 1984. She warned them that First American was not the official travel agent for the convention, that NABW had been unable to obtain any information about First American's business, and that First American had made certain untruthful and misleading statements in its solicitation letters. NABW later sent First American two letters demanding the cessation of its unauthorized solicitation of NABW members. These letters were all written in, and mailed from, Chicago.

First American then brought this diversity action seeking compensatory and punitive damages for business defamation and malicious interference with contractual relationships resulting from the defendants' allegedly libelous letters. In addition, Leake sought compensatory and punitive damages for slander, invasion of privacy, and intentional infliction of emotional distress arising out of the letters. The defendants moved for dismissal for lack of personal jurisdiction or, in the alternative, to transfer the case to federal court in Illinois. The district court granted the motion to dismiss for lack of personal jurisdiction. The court first found that because the writing and mailing of the letters occurred outside Virginia, Sec. (A)(3) of Virginia's long-arm statute, Va.Code Sec. 8.01-328.1, et seq., (act or omission in this Commonwealth) did not confer personal jurisdiction over the defendants in Virginia. ¹ The court then ruled, however, that NABW's "ongoing interactions" with Virginia amounted to a "persistent course of conduct" within the state sufficient to confer jurisdiction under Sec. (A)(4) of the long-arm statute ("out-of-state act causing injury within"). Va.Code Sec. 8.01-328.1(A)(4).

Though the district court thus found that the exercise of jurisdiction was authorized by the Virginia statute, the court then concluded that the exercise of personal jurisdiction over NABW violated due process. The court reasoned that NABW, as a foreign non-profit membership organization, had never purposefully availed itself of the benefits and protections of Virginia law and that NABW could not reasonably have anticipated being haled into court in Virginia in light of its "extremely attenuated" contacts with the state. ²

This appeal followed.

II

As indicated, the district court properly analyzed the challenge to jurisdiction by considering first, whether its exercise was authorized by state law, then, having found statutory authorization, by considering whether the jurisdiction authorized comported with constitutional due process requirements, Blue Ridge Bank v. Veribanc, Inc., 755 F.2d 371, 373 (4th Cir.1985), and concluded that jurisdiction was authorized by statute, but that it was not permitted by the constitution. We agree with the first conclusion, but disagree with the second, and will discuss the two in turn.

A

NABW challenges the district court's conclusion that the defendant's "ongoing interactions" with Virginia brought its conduct within the intended jurisdictional reach of Section (A)(4) of Sec. 328.1 of Virginia's long-arm statute. That section provides that--

A. A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's:

....

4. Causing tortious injury in this Commonwealth by an act or omission outside this Commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this Commonwealth.

We agree that this section authorizes, by its terms, the exercise of jurisdiction over defendants on the claim here asserted.

The section has two requirements for the exercise of jurisdiction: (1) a tortious injury in Virginia caused by an out of state act or omission; and (2) a relationship between the defendant and the state which exists in any one of the three ways specified in subsection (4).

The writing and mailing of NABW's letters out of state and the resulting alleged libel and other injuries suffered within Virginia clearly meet the first requirement. St. Clair v. Righter, 250 F.Supp. 148 (W.D.Va.1966).

As to the second requirement, the district court assumed that NABW did not "regularly do[ ] or solicit[ ] business in Virginia" and did not "derive substantial revenue from goods used or consumed or services rendered," in the state. The court concluded, however, that NABW engaged in a "persistent course of conduct" in Virginia within the meaning of Willis v. Semmes, Bowen & Semmes, 441 F.Supp. 1235 (E.D.Va.1977). In Willis, the court defined a "persistent course of conduct" under Sec. (A)(4) as requiring that "[a]t a minimum, the plaintiff must prove that the defendant maintained some sort of ongoing interactions with the forum state." 441 F.Supp. at 1242.

Here, the court found--and its basic fact findings are not challenged--that the NABW made bi-monthly mailings of the NABW journal and annual mailings of its national...