Shams v. Hassan

• Decision Date: 19 April 2013
• Docket Number: No. 12–0036.,12–0036.
• Citation: 829 N.W.2d 848
• Parties: Samir M. SHAMS, Appellant, v. Sona HASSAN, Appellee.
• Court: Iowa Supreme Court

829 N.W.2d 848

Samir M. SHAMS, Appellant,

v.Sona HASSAN, Appellee.

No. 12–0036.

Supreme Court of Iowa.

April 19, 2013.

Andrew B. Howie of Hudson, Mallaney, Shindler & Anderson, P.C., West Des Moines, for appellant.

Steven C. Reed, West Des Moines, for appellee.

CADY, Chief Justice.

In this appeal, we must determine whether the exercise of personal jurisdiction over a nonresident defendant to a lawsuit filed in Iowa that alleged misappropriated funds from an Iowa bank account comports with the guarantees of the Due Process Clause of the Fourteenth Amendment. The district court held sufficient minimum contacts were lacking and dismissed the lawsuit. The court of appeals affirmed the decision of the district court. On further review, we reverse the decisions of the court of appeals and the district court and conclude the nonresident defendant is subject to personal jurisdiction in Iowa. We remand the case for further proceedings.

I. Background Facts and Proceedings.

Sona Hassan and Samir Shams are sister and brother. Hassan has been a resident of Maryland for many years and has not visited Iowa since 1983. In 2003, Shams allegedly lived in Iowa. He had two children who resided in Iowa and one child who resided in Arizona.

Shams obtained employment in Iraq in 2003. To provide for his children in his absence, he opened a checking account at Bankers Trust in Des Moines before leaving for Iraq. He planned to use the account to deposit the money he would earn from his employment. Shams claimed Hassan orally agreed to use the account in his absence to provide for the needs of his children and to pay his bills. To carry out the agreement, Shams provided Hassan with checks that could be used to draw on the account. Shams signed the checks as the drawer, but otherwise left the checks blank. Shams delivered the checks to Hassan in Maryland, where she was to negotiate them when needed and mail them to the payee. Shams and Hassan discussed the terms of the agreement over the telephone.

Instead of using the checks to provide for the children as agreed, Shams claimed Hassan used the checks to withdraw funds from the Iowa account for her personal use. Shams alleged Hassan ultimately misappropriated $271,773.93.

Shams filed a lawsuit against Hassan in Iowa district court for breach of contract, conversion, bad faith, fraud, and breach of fiduciary duty. Hassan moved to dismiss for lack of personal jurisdiction. SeeIowa R. Civ. P. 1.421(1) (b)(permitting a defendant to make a preanswer motion to dismiss for “[l]ack of jurisdiction over the person”). In her motion to dismiss the lawsuit, Hassan claimed Shams had no meaningful contact with Iowa. She asserted Shams actually resided in Maryland at the time he gave her the checks, after Shams return from Iraq, and as recently as March 2011. Hassan argued Shams randomly opened the bank account in Iowa “solely on his own initiative.” Hassan indicated in an affidavit the account should have been opened in Maryland where she lived with her husband, and she had no role in opening the account in Iowa.

Shams resisted the motion, relying on the purported 2003 agreement, which according to Shams “was to be performed in whole or in part in Iowa, using an Iowa Bank, for Iowa beneficiaries.” In Shams's view, the breach of that contract and the attendant claims (conversion, bad faith, breach of a fiduciary duty) necessarily arose out of the agreement and the actions of Hassan in misappropriating funds located in an Iowa bank account. Shams also argued he had substantial ties to Iowa. He claimed he purchased a home in Iowa in 2009 and obtained an Iowa driver's license in 2010.

The district court granted the motion to dismiss. The court reasoned that, even if an agreement was reached, the formation of a contract in Iowa did not justify jurisdiction. Similarly, the court found phone conversations would not be enough to satisfy the due process standard for exercising personal jurisdiction. The court concluded, “The only connection between Ms. Hassan, Iowa, and the cause of action in this case is the fact that the checks were drawn upon an Iowa bank account and [Hassan] may or may not have entered into an oral agreement with [Shams] while he was residing in Iowa.” Shams appealed, and we transferred the case to the court of appeals.

The court of appeals affirmed the decision of the district court. It considered the unilateral actions by Shams in opening the Iowa account, making himself the drawer on the account, and providing checks to Hassan in Maryland did not establish purposeful conduct by Hassan with an Iowa resident. Shams sought, and we granted, further review.

II. Standard of Review.

We review a district court's decision on a motion to dismiss for lack of personal jurisdiction for correction of errors at law. Addison Ins. Co. v. Knight, Hoppe, Kurnik & Knight, L.L.C., 734 N.W.2d 473, 476 (Iowa 2007); see alsoIowa R.App. P. 6.907. We are thus not bound by the district court's conclusions of law or application of legal principles. Ross v. First Sav. Bank of Arlington, 675 N.W.2d 812, 815 (Iowa 2004).

Unlike other grounds for dismissal, however, a court considering a motion to dismiss for lack of personal jurisdiction must make factual findings to determine whether it has personal jurisdiction over the defendant. Capital Promotions, L.L.C. v. Don King Prods., Inc., 756 N.W.2d 828, 832 (Iowa 2008). Those findings are binding if supported by substantial evidence. Hodges v. Hodges, 572 N.W.2d 549, 551 (Iowa 1997).

While the plaintiff has the burden to establish jurisdiction may be had over the defendant, “ ‘we accept as true the allegations of the petition and the contents of uncontroverted affidavits.’ ” Addison Ins. Co., 734 N.W.2d at 476 (quoting Aquadrill, Inc. v. Envtl. Compliance Consulting Servs., Inc., 558 N.W.2d 391, 392 (Iowa 1997)). After the plaintiff makes a prima facie case showing that personal jurisdiction is appropriate, the burden shifts to the defendant to rebut that showing. State ex rel. Miller v. Internal Energy Mgmt. Corp., 324 N.W.2d 707, 710 (Iowa 1982).

III. Discussion.

A. Legal Framework.¹ Section 1 of the Fourteenth Amendment to the United States Constitution declares that no state shall “deprive any person of life, liberty, or property, without due process of law....” U.S. Const. amend. XIV, § 1. One application of this Clause limits a state's power to exercise personal jurisdiction over a nonresident defendant. Ross, 675 N.W.2d at 815 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413–14, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404, 410 (1984)); see also Pennoyer v. Neff, 95 U.S. (5 Otto) 714, 729–30, 24 L.Ed. 565, 571 (1878) (holding a judgment obtained in the absence of proper personal jurisdiction over the defendant is not entitled to full faith and credit from other jurisdictions), overruled on other grounds by Shaffer v. Heitner, 433 U.S. 186, 212 & n. 39, 97 S.Ct. 2569, 2584 & n. 39, 53 L.Ed.2d 683, 703 & n. 39 (1977). “The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.’ ” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471–72, 105 S.Ct. 2174, 2181, 85 L.Ed.2d 528, 540 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 160, 90 L.Ed. 95, 104 (1945)).

Therefore, a court may constitutionally exercise personal jurisdiction over the nonresident defendant when the defendant has “ ‘certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” ’ ” Universal Coops., Inc. v. Tasco, Inc., 300 N.W.2d 139, 143 (Iowa 1981) (quoting Int'l Shoe, 326 U.S. at 316, 66 S.Ct. at 158, 90 L.Ed. at 102). Fairness is the crux of the minimum-contacts analysis. “The minimum contacts must show ‘a sufficient connection between the defendant and the forum state so as to make it fair’ and reasonable to require the defendant to come to the state and defend the action.” Ross, 675 N.W.2d at 815 (quoting Hodges, 572 N.W.2d at 551);accord Kulko v. Super. Ct. of Cal., 436 U.S. 84, 91, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132, 141 (1978) (“The existence of personal jurisdiction ... depends upon ... a sufficient connection between the defendant and the forum State to make it fair to require defense of the action in the forum.” (Citation omitted.)).

“This test makes it ‘essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’ ” Ross, 675 N.W.2d at 815–16 (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283, 1298 (1958)). As such, the “ ‘purposeful availment’ requirement”is the “constitutional touchstone” of the personal jurisdiction analysis. Burger King Corp., 471 U.S. at 474–75, 105 S.Ct. at 2183–84, 85 L.Ed.2d at 542. It guarantees a defendant will not be required to defend a lawsuit in a state court “solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts,” id. at 475, 105 S.Ct. at 2183, 85 L.Ed.2d at 542 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 773–74, 104 S.Ct. 1473, 1477–78, 79 L.Ed.2d 790, 796–97 (1984)), but rather only when the defendant “ ‘should reasonably anticipate being haled into court’ ” in that state, Capital Promotions, 756 N.W.2d at 833 (quoting World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 501 (1980)).

There are two categories of cases in which the defendant's contacts with the forum state are sufficient to make the exercise of personal jurisdiction over them proper. See id. In one group of cases, the defendants maintain “ ‘continuous and systematic’ ” contacts with the forum state such that they should anticipate...