Hirsch v. Blue Cross, Blue Shield of Kansas City

• Citation: 800 F.2d 1474
• Decision Date: 29 September 1986
• Docket Number: No. 85-6277,85-6277
• Parties: , 7 Employee Benefits Ca 2378 Terrance HIRSCH and Margaret Hirsch, Plaintiffs-Appellants, v. BLUE CROSS, BLUE SHIELD OF KANSAS CITY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1474

800 F.2d 1474

55 USLW 2262, 7 Employee Benefits Ca 2378

Terrance HIRSCH and Margaret Hirsch, Plaintiffs-Appellants, v. BLUE CROSS, BLUE SHIELD OF KANSAS CITY, Defendant-Appellee.

No. 85-6277.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 3, 1986.

Decided Sept. 29, 1986.

Walter Tribbey, Robert W. Nowack, Law Offices of Walter Tribbey, Ontario, Cal., for plaintiffs-appellants.

Daniel Garcia, Sally Kingsberg, Munger, Tolles, & Rickershauser, Los Angeles, Cal., for defendant-appellee.

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

Before GOODWIN, TANG, and FLETCHER, Circuit Judges.

FLETCHER, Circuit Judge:

Terrance and Margaret Hirsch appeal the district court's dismissal of their action against Blue Cross, Blue Shield of Kansas City. The district court held that Blue Cross did not have sufficient contacts with the State of California to permit an exercise of personal jurisdiction. We reverse.

I. BACKGROUND

The facts in this case are not in dispute. Defendant Blue Cross, Blue Shield of Kansas City (Blue Cross) is incorporated in Missouri and is also authorized to conduct business in Kansas. Its principal place of business is in Missouri. Southwest Freight Lines, Terrance Hirsch's former employer, has its home office in Kansas City, Kansas.

Blue Cross is not licensed nor authorized to do business in states other than Kansas and Missouri. Blue Cross enters into prepaid health care agreements only with employers or individuals who do business in or reside in one of a limited number of counties in Missouri or Kansas.

In January 1983, Southwest contracted with Blue Cross to provide group health care coverage for Southwest's employees. Under the Enrollment Agreement, all of Southwest's full-time employees were eligible to participate. The eligibility clause did not contain any geographical exclusions, nor did it restrict participation to employees as of the Agreement's execution date. At the time Blue Cross and Southwest signed the contract, Southwest had 64 employees, forty percent of whom lived outside the Kansas and Missouri area. Although the employees were located in several states, none of them lived in California.

After the contract was signed, Southwest hired Terrance Hirsch, who with his wife, lived in California. During the period covered by the Agreement, Southwest added the Hirsches and two other new California employees to the Southwest group policy. Terrance Hirsch filled out enrollment application forms in California and returned them to Southwest's Kansas City office. In return, the Hirsches received a Blue Cross membership card, generated by Blue Cross offices in Kansas City, with his California address written on its face. Southwest deducted health care premiums from Hirsch's payroll checks, and forwarded the payments to Blue Cross.

Starting in October 1983, the Hirsches' daughter received medical treatment in California. The Hirsches allege that in March 1984, Blue Cross refused to pay incurred medical expenses. The Hirsches filed an action in California state court, claiming breach of contract and bad faith.

Blue Cross removed the action to federal court on diversity grounds, and then filed a motion under Fed.R.Civ.P. 12(b)(2) to dismiss for lack of personal jurisdiction. The district court concluded that the case presented a "tough call," and granted the motion. The Hirsches timely appeal.

II. DISCUSSION

The district court's determination that an exercise of personal jurisdiction would violate due process is a question of law, reviewable de novo when the underlying facts are undisputed. Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir.1986). The burden rests with the party seeking to invoke the court's jurisdiction to establish that jurisdiction exists. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir.1986).

To establish personal jurisdiction, the plaintiff must show that the law of the forum state confers jurisdiction, and that its exercise would not be inconsistent with federal due process. Haisten, 784 F.2d at 1396.

Cal.Civ.Pro.Code Sec. 410.10 (West 1973), provides that the court "may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." This statute confers jurisdiction that is coextensive with federal due process. See Scott, 792 F.2d at 927; Haisten, 784 F.2d at 1396.

In order for personal jurisdiction to lie, a defendant must have "meaningful 'contacts, ties, or relations' " with the forum. See Burger King Corporation v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 2181-82, 85 L.Ed.2d 528 (1985) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945)); Haisten, 784 F.2d at 1396. These ties may be formed in one of two ways.

If the non-resident defendant's activities in the state are "continuous and systematic," or "substantial," the court may assert general jurisdiction over a cause of action, even if it is unrelated to the defendant's forum activities. Scott, 792 F.2d at 927; see Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 & n. 9, 104 S.Ct. 1868, 1872 & n. 9, 80 L.Ed.2d 404 (1984). If the defendant's contacts are neither substantial, nor continuous and systematic, but the cause of action arises out of or is related to the defendant's forum activities, "limited" or "specific" personal jurisdiction exists. Scott, 792 F.2d at 927.

This court traditionally has applied a three-part test to determine if limited jurisdiction exists:

(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.

Haisten, 784 F.2d at 1397. In Haisten, we noted certain Supreme Court refinements to the purposeful availment and reasonableness prongs of the limited jurisdiction test that we consider in our analysis. Id.

A. General Jurisdiction

To determine if a defendant's activities qualify as "continuous and systematic" or "substantial" we examine all of the defendant's activities that impact the state, including whether the defendant makes sales, solicits or engages in business, serves the state's markets, designates an agent for service of process, holds a license, has employees, or is incorporated there. See Helicopteros, 466 U.S. at 411, 104 S.Ct. at 1870-71; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295, 100 S.Ct. 559, 566, 62 L.Ed.2d 490 (1980); Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445-49, 72 S.Ct. 413, 418-20, 96 L.Ed. 485 (1952); Cubbage v. Merchent, 744 F.2d 665, 667-68 (9th Cir.1984), cert. denied, 470 U.S. 1005, 105 S.Ct. 1359, 84 L.Ed.2d 380 (1985).

Blue Cross of Kansas City is not authorized nor licensed to do business in California; it is not registered with the California Department of Insurance; it does not maintain an office or mailing address there; it has no agent for service of process, sales representatives, or employees in California; and it pays no California taxes. The company's only proven contact with California was through its relationship with the Hirsches and Southwest's other California employees. Neither party contends that these contacts with California are sufficient to permit the exercise of general jurisdiction in this case. We also conclude that they are not. Therefore, our only task is to ascertain whether limited jurisdiction exists.

B. Limited Jurisdiction

1. Purposeful Availment

The due process clause protects a defendant's right to receive fair warning that his actions might subject him to suit in a given jurisdiction. This safeguard allows him to structure his conduct with a degree of assurance as to what will flow from his conduct. See Burger King, 105 S.Ct. at 2181-82. Thus, the court's focus in due process analysis is on the defendant's relationship to the forum, and the litigation, Cubbage, 744 F.2d at 668 (citing Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977)), rather than the plaintiff's relationships to them, see Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 579, 62 L.Ed.2d 516 (1980). As the court stated in Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958),

"The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State ... [I]t 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...."

Therefore, the purposeful availment analysis turns upon whether the defendant's contacts are attributable to "actions by the defendant himself," or conversely to the "unilateral activity of another party." Burger King, 105 S.Ct. at 2183-84 (emphasis in original); see also Hunt v. Erie Insurance Group, 728 F.2d 1244, 1247 (9th Cir.1984) ("To characterize [plaintiff's] decision [to move to California] as an intentional action by [defendant], for purposes of meeting the purposeful availment requirement of due process, would frustrate the very policy behind that requirement: ensuring that a 'defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there' ") (quoting World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567) (emphasis in Hunt).

The purposeful availment prong is satisfied when a defendant takes deliberate actions within the forum state or creates continuing obligations to forum residents. Burger King, 105 S.Ct. at 2184. It is not required that a defendant be physically present within, or have...