State ex rel. Miller v. Baxter Chrysler Plymouth, Inc.

• Decision Date: 23 May 1990
• Docket Number: No. 89-680,89-680
• Parties: STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, Appellant, v. BAXTER CHRYSLER PLYMOUTH, INC., and Talton K. Anderson, In His Corporate Capacity as President of Baxter Chrysler Plymouth, Inc., John Markel, Inc., and Timothy S. Markel, In His Corporate Capacity as President of John Markel, Inc., Dean Rawson Nissan, Inc., and Dean C. Rawson, In His Corporate Capacity as President of Dean Rawson Nissan, Inc., John Kraft Chevrolet, Inc. d/b/a John Kraft Chevrolet-Isuzu, Inc., and John E. Kraft, In His Corporate Capacity as President of John Kraft Chevrolet, Inc., Stan Olsen Pontiac, Inc. d/b/a Olsen Auto World and Olsen Family Discount Center, Metropolitan Lincoln-Mercury, Inc. d/b/a Olsen Auto World, Olsen Family Discount Center, and Metro Motors, Olsen Dodge, Inc. d/b/a Olsen Family Discount Center and Olsen Auto World, Stanley Olsen, In His Corporate Capacity as President of Metropolitan Lincoln-Mercury, Inc., and Stan Olsen Pontiac, Inc., and Ronald Olsen, In His Corporate Capacity as President of Olsen Dodge, Inc., Appellees.
• Court: Iowa Supreme Court

Page 371

456 N.W.2d 371

STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, Appellant, v. BAXTER CHRYSLER PLYMOUTH, INC., and Talton K. Anderson, In His Corporate Capacity as President of Baxter Chrysler Plymouth, Inc., John Markel, Inc., and Timothy S. Markel, In His Corporate Capacity as President of John Markel, Inc., Dean Rawson Nissan, Inc., and Dean C. Rawson, In His Corporate Capacity as President of Dean Rawson Nissan, Inc., John Kraft Chevrolet, Inc. d/b/a John Kraft Chevrolet-Isuzu, Inc., and John E. Kraft, In His Corporate Capacity as President of John Kraft Chevrolet, Inc., Stan Olsen Pontiac, Inc. d/b/a Olsen Auto World and Olsen Family Discount Center, Metropolitan Lincoln-Mercury, Inc. d/b/a Olsen Auto World, Olsen Family Discount Center, and Metro Motors, Olsen Dodge, Inc. d/b/a Olsen Family Discount Center and Olsen Auto World, Stanley Olsen, In His Corporate Capacity as President of Metropolitan Lincoln-Mercury, Inc., and Stan Olsen Pontiac, Inc., and Ronald Olsen, In His Corporate Capacity as President of Olsen Dodge, Inc., Appellees.

No. 89-680.

Supreme Court of Iowa.

May 23, 1990.

Rehearing Denied June 20, 1990.

Thomas J. Miller, Atty. Gen., Richard L. Cleland, Sp. Asst. Atty. Gen., and William L. Brauch, Asst. Atty. Gen., for appellant.

Gregory G. Barntsen of Smith, Peterson, Beckman & Willson, Council Bluffs, for appellee Dean Rawson Nissan, Inc., and Dean C. Rawson.

James D. Sherrets and Mark A. Weber of Sherrets & Smith, Omaha, Neb., and Sheldon Gallner of Gallner & Gallner, Council Bluffs, for all other appellees.

Considered by HARRIS, P.J., and SCHULTZ, CARTER, SNELL, and ANDREASEN, JJ.

CARTER, Justice.

The State, ex relatione the attorney general (the attorney general), appeals from the dismissal of want of in personam jurisdiction of unlawful advertising claims brought against five Nebraska automobile dealers pursuant to the Iowa Consumer Fraud Act, Iowa Code § 714.16 (1987). The ten defendants are automobile dealerships and their respective corporate presidents whose businesses are located in Omaha, Nebraska.

These five separate actions were filed on September 4, 1987, in the Iowa District Court for Pottawattamie County. The attorney general alleges that the defendants caused advertisements to be circulated in this state which were deceptive and misleading and in violation of the Iowa Consumer Fraud Act, Iowa Code § 714.16 (1987), and the Iowa Consumer Credit Code, §§ 537.6104(2), 537.6110, 537.6112, and 537.6113 (1987). The actions seek to enjoin defendants from advertising, offering for sale or lease, attempting to sell or lease, or selling or leasing motor vehicles in violation of these statutes. The actions also seek to enjoin defendants from employing deceptive or unfair advertising practices and seek restitution for Iowa citizens of any monies wrongfully acquired by means of the allegedly unlawful advertising practices.

The defendants in each of the actions filed motions to dismiss, urging that the Iowa courts lacked in personam jurisdiction over them. The district court found that all of the defendants lacked sufficient contacts with the State of Iowa for purposes of establishing in personam jurisdiction of an Iowa court to hear these claims. The court granted the motions to dismiss the actions. After considering the arguments of the parties on the jurisdictional issue, we affirm the district court's decision concerning the individual defendants but reverse its decision concerning the corporate defendants. As to the corporate defendants, we hold that in personam jurisdiction has been established with respect to the claims asserted.

The unlawful advertising claims against defendants are based on advertising in the Omaha World Herald by all five dealerships and television advertising over an Omaha television station by the defendant Baxter Chrysler Plymouth. In addition to these advertisements, all five dealerships have placed telephone listings in the U.S. West Yellow Page Directory for Council Bluffs, Iowa. Defendants Baxter Chrysler Plymouth and Olsen Auto World accompanied their yellow page listings with large block advertisements in the Council Bluffs yellow pages.

The World Herald is a daily Nebraska newspaper serving the Omaha metropolitan area, including the City of Council Bluffs, Iowa, which is located directly across the Missouri River from Omaha. ¹ The World Herald publishes several editions including a metropolitan edition, which is distributed in the Omaha-Council Bluffs area, and an Iowa edition, which contains features specifically geared toward Iowans and is distributed to persons living in Iowa but outside the Omaha-Council Bluffs area. The advertisements which defendants placed in the World Herald were included in the metropolitan and Iowa editions which reach Iowa residents. Advertising policies at the World Herald are such that an advertiser cannot restrict its advertisements to just those versions of the World Herald distributed in Nebraska.

Although the parties are not in total agreement concerning the World Herald 's circulation statistics, our own review of the affidavits filed in support of and in response to the motion to dismiss suggests that at the times material to the attorney general's claims this newspaper had 221,091 daily subscriptions and 286,990 Sunday subscriptions. Of the daily subscriptions, 3700 were home delivered to residents of Council Bluffs, Iowa. Of the Sunday subscriptions, 5700 were home delivered to residents of Council Bluffs, Iowa, and over 27,000 were home delivered to subscribers residing in other Iowa locations. Daily subscriptions home delivered in Council Bluffs represented 1.8% of the paper's total subscriptions. Sunday subscriptions home delivered in Council Bluffs represented 2.0% of total subscriptions. Total Iowa home-delivered Sunday subscriptions represented approximately 11.5% of total Sunday subscriptions.

In seeking reversal of the district court's order, the attorney general argues that, by means of the broad language of Iowa Rule of Civil Procedure 56.2, the jurisdictional reach of the courts of this state has been expanded to the widest parameters permitted under the due process clause of the federal constitution. ² Recognizing that a state may only exercise jurisdiction over a nonresident defendant if that person has maintained "certain minimum contacts" with a forum state, the attorney general urges that defendants' contacts with this state have been substantial and are sufficient to satisfy the due process limitations on in personam jurisdiction.

The attorney general's argument emphasizes the fact that the defendants advertise on an almost daily basis in both the metropolitan edition (circulated in the Council Bluffs area) and the Iowa edition of the World Herald. This argument contends that advertising in a publication with the knowledge that it is regularly disseminated to subscribers in a particular state is an affirmative act to advertise in that state. From this premise, it is urged that, every time a copy of the World Herald which contains an advertisement by one of the defendants is sold to an Iowan in Iowa, that event constitutes a separate contact by that defendant with the State of Iowa. Considering only the Sunday edition of the World Herald, this adds up to 1,722,448 contacts per year. The attorney general urges that based on these figures defendants' contacts with the State of Iowa are substantial.

The defendants seek to uphold the district court's ruling on the ground that the mere likelihood that the advertisements placed in the Omaha newspaper will find their way into Iowa is insufficient to provide the requisite minimum contacts for in personam jurisdiction. They have not, defendants urge, purposefully availed themselves of the privilege of conducting activities within the State of Iowa thereby invoking the benefits and protections of its laws. Defendants assert that the World Herald is a third party whose Iowa activities are not attributable to its Nebraska advertisers for purposes of the attorney general's minimum-contact theory.

I. Scope of Review.

The standard of review for this type of case was discussed most recently in Smalley v. Dewberry, 379 N.W.2d 922 (Iowa 1986). The allegations made in the State's petitions and the affidavits submitted to the trial court, if uncontradicted, must be accepted as true. The plaintiff has the burden of establishing jurisdiction, but after a prima facie case has been established, the burden passes to the defendant to produce evidence to rebut or overcome the prima facie showing. The trial court's findings have the force and effect of a jury verdict, however, the court is not bound by the trial court's application of legal principles or conclusions of law. Smalley, 379 N.W.2d at 924 (quoting Svendsen v. Questor Corp., 304 N.W.2d 428, 429 (Iowa 1981)); see also Berkeley Int'l Co. v. Devine, 289 N.W.2d 600, 602 (Iowa 1980).

II. Jurisdiction Over Corporate Defendants.

A state may exercise jurisdiction over nonresident defendants under the due process clause of the fourteenth amendment only if the defendant has certain "minimum contacts" with the forum state. See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The defendants must have sufficient contacts such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." Id. at 316, 66 S.Ct. at 158, 90 L.Ed. at 102.

In Smalley, this court indicated that under International Shoe and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), the jurisdictional inquiry centers on five factors:

1. the quantity of the contacts;

2. the nature and quality of those contacts;

3. the source and connection of the cause of action with those contacts;

4. the interest of the forum state; and

5. the convenience of the parties.

Smalley, 379 N.W.2d at 924, ...