T.M. Hylwa, M.D., Inc. v. Palka

• Decision Date: 28 July 1987
• Docket Number: No. 86-5604,86-5604
• Citation: 823 F.2d 310
• Parties: T.M. HYLWA, M.D., INC.; T.M. Hylwa, M.D., Plaintiffs-Appellants, v. Gary PALKA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 310

823 F.2d 310

T.M. HYLWA, M.D., INC.; T.M. Hylwa, M.D., Plaintiffs-Appellants, v. Gary PALKA, Defendant-Appellee.

No. 86-5604.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 6, 1987.

Decided July 28, 1987.

Kenneth J. Catanzarite and Henry Nicholls, Bellflower, Cal., for plaintiffs-appellants.

J. Michael Echevarria, Los Angeles, Cal., for defendant-appellee.

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

Before PREGERSON and NORRIS, Circuit Judges, and BURNS, ^* District Judge.

NORRIS, Circuit Judge:

In the 1970's appellee Gary Palka was hired by appellant T.M. Hylwa, M.D. to render accounting services for Hylwa's medical practice in Kansas. In 1981 Hylwa discontinued his practice in Kansas and moved to California where he established a new medical practice through a newly formed California corporation, appellant T.M. Hylwa, M.D., Inc. ¹ Even though Palka continued to live in Kansas, he went on providing accounting services to Hylwa's California medical practice. Palka performed most of the accounting services while at home in Kansas but traveled to California to work in Hylwa's offices for seven to ten days during each June from 1981 to 1983, and in August 1983 he returned to California to work on Hylwa's tax audit.

In 1985 Hylwa sued Palka in the Central District of California pursuant to the Employees Retirement Income Security Act ("ERISA"), 29 U.S.C. Secs. 1001 et seq., and the Federal Declaratory Judgment Act, 28 U.S.C. Secs. 2201-02, seeking a declaratory judgment establishing the amount of benefits owed Palka under Hylwa's various pension plans. Hylwa also asserted pendent state claims against Palka for negligence, breach of contract, and money had and received. The district court dismissed the complaint for want of personal jurisdiction over Palka because Palka "does not have the minimum contacts with California which are sufficient to satisfy traditional notions of fair play and substantial justice" within the meaning of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Hylwa appeals, ² and we reverse.

I

Under Fed.R.Civ.P. 4(e), a federal district court can assert personal jurisdiction to the extent authorized by a particular federal statute governing service of process for the action being heard or, where no such particularized statute applies, to the extent authorized by the law of the state in which the district court sits. See Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 418-19 (9th Cir.1977). ³

Hylwa argues that section 1132(e)(2) of ERISA authorizes nationwide service of process ⁴ and that therefore the district court can constitutionally exercise personal jurisdiction over Palka even absent minimum contacts with California. ⁵ Palka responds that Hylwa cannot invoke section 1132(e)(2) in this declaratory judgment action and that Hylwa must rely instead on California's long-arm statute to acquire personal jurisdiction over him.

We assume without deciding that Hylwa cannot invoke ERISA's nationwide service of process provision here, ⁶ for we hold that the district court can constitutionally exercise personal jurisdiction over Palka pursuant to California's long-arm statute. ⁷ This statute provides that a "court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." Cal.Civ.Proc.Code Sec. 410.10 (West 1973). Because the statute "manifests an intent to exercise the broadest possible jurisdiction," Sibley v. Superior Court, 16 Cal.3d 442, 446, 128 Cal.Rptr. 34, 546 P.2d 322 (1976), its outer limit is " 'coextensive with the outer limits of due process under the state and federal constitutions, as those limits have been defined by the United States Supreme Court.' " Data Disk, Inc. v. Systems Technology Associates, 557 F.2d 1280, 1286 (9th Cir.1977) (citation omitted). Therefore, the district court can exercise personal jurisdiction over Palka pursuant to this statute if Palka has sufficient contacts with the state of California so that requiring him to appear in the district court does not offend " 'traditional notions of fair play and substantial justice.' " International Shoe, 326 U.S. at 316, 66 S.Ct. at 158 (citation omitted). ⁸

II

"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." Hirsch v. Blue Cross, Blue Shield of Kansas City, 800 F.2d 1474, 1477 (9th Cir.1986). ⁹ The district court can assert "limited jurisdiction" over Hylwa's ERISA and state law claims if the following three-part test is satisfied:

(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.

Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir.1986); Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1397 (9th Cir.1986).

A. Purposeful Availment

Hylwa argues that Palka purposefully availed himself of the privilege of conducting business in California because, although Palka refused to move to California, he continued to render accounting services for Hylwa's California practice and he periodically traveled to California for that purpose. We agree with Hylwa that these undisputed facts show that Palka purposefully engaged in a business relationship with a California employer "such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). By contracting to provide personal services after Hylwa reincorporated in California, Palka deliberately "created 'continuing obligations' between himself and residents of the forum ... [and] manifestly has availed himself of the privilege of conducting business there...." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1984) (quoting Travelers Health Assn. v. Virginia, 339 U.S. 643, 648, 70 S.Ct. 927, 930, 94 L.Ed. 1154 (1950)). That Palka rarely came into physical contact with the forum does not defeat jurisdiction; the Supreme Court has recognized that

a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are "purposefully directed" toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.

Id.; see Lake v. Lake, 817 F.2d 1416 (9th Cir.1987) (California attorney subject to suit in Idaho for torts arising out of his use of deceit to obtain ex parte order in California because he knew order would be executed in Idaho).

Palka suggests that the exercise of jurisdiction in California is not reasonable in light of the fact that Hylwa originally hired him to work in Kansas and that he remained there even after Hylwa moved his medical practice to California. Palka apparently contends that his contacts with California arose, not from any affirmative conduct on his part, but rather from the "unilateral activity of another party or a third person." Burger King Corp., 471 U.S. at 475, 105 S.Ct. at 2183 (citation omitted). We agree that when the defendant cannot reasonably control his own vulnerability to suit, personal jurisdiction does not lie. See, e.g., World-Wide Volkswagen, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (no personal jurisdiction over nonresident automobile distributor whose only tie to the forum resulted from a customer's decision to drive there); Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978) (no jurisdiction over nonresident husband sued for child-support payments whose only affiliation with the forum arose from ex-wife's and daughter's decision to settle there); Hunt v. Erie Insurance Group, 728 F.2d 1244 (9th Cir.1984) (no jurisdiction over nonresident insurer whose only affiliation with the forum arose from accident victim's decision to move there for treatment).

While arguably Palka's initial contact with California was created by Hylwa's unilateral decision to move there, Palka's decision to continue serving as an accountant for Hylwa's California practice from 1981 to 1984 arose not from Hylwa's unexpected relocation but from Palka's continuing desire to benefit from the contractual relationship. Based on his ongoing performance of accounting services for a California enterprise, including his annual business trips to California, he should have reasonably anticipated being haled into court in California for claims arising out of his employment. See, e.g., Hirsch, 800 F.2d at 1478-80 (when insurance company agreed to insure all employees of a second company, insurance company was subject to suit in California by new employee despite fact that no employees lived in California when insurance contract was signed, because insurance conpany subsequently accepted application from the new employee in California); Plant Food Co-op v. Wolfkill Feed & Fertilizer Corp., 633 F.2d 155, 159 (9th Cir.1980) (shipper delivering fertilizer to Washington was subject to personal jurisdiction in Montana after someone else transported the fertilizer there because "[w]hen it knew the fertilizer was bound for Montana [the shipper] could have objected or made other arrangements if it found exposure to Montana's long-arm jurisdiction unacceptable").

B. Forum-Related Activities

The dispute over the extent of...