Dealing With the “Catch Me If You Can” Defense

In Products liability litigation in Florida, the defendants are frequently not Florida corporations, nor even domestic U.S. Corporations. Although these corporations spend millions getting their products into the hands of Florida consumers, when it comes time to answer for injuries caused by their defective products, they frequently run for cover behind motions to dismiss for lack of personal jurisdiction.

Some of the most challenging situations for Plaintiffs involve reaching the foreign parent of a U.S. based subsidiary. At least one Florida court has held that the presence of a subsidiary in Florida is not sufficient to confer personal jurisdiction on the parent, unless the Plaintiff can “pierce the corporate veil” and demonstrate that the subsidiary is the alter ego of the parent, or unless the parent’s activities independently satisfy the test for conferring jurisdiction.1

The plaintiff’s challenge is to ferret out the facts necessary to link the parent to Florida, armed with nothing more than jurisdictional interrogatories and information that is either publicly available or has been produced in other lawsuits.

This challenge is particularly common in vehicle defect cases. A large number of cars, tires and component parts sold in the U.S. are manufactured and/or sold by U.S. subsidiaries of Japanese or other foreign corporations. There would be very little value or efficiency in the relationship between, for example, Car Company A of America, Inc. and Car Company A Japan if Car Company A of Japan did not provide any design or marketing direction or support, among other things, to Car Company A of America. Yet, there is always someone in Car Company A of Japan willing to sign a self serving affidavit, designed by the corporation’s attorneys to create the impression that Car Company A of Japan has never even heard of the United States, much less worked with Car Company A of America to get its products into the U.S. market.

A good example of this involved a Plaintiff our firm represents in a case that is presently on appeal to the Fifth DCA in which Kumho Korea, a Korean tire manufacturer that is the parent company of Kumho Tire USA filed a motion to dismiss for lack of personal jurisdiction. The Orange County Circuit Court denied Kumho’s motion and Kumho appealed.2 Kumho Korea has contended in this case that it did not have minimum contacts with Florida that would permit it to be sued in Florida. Plaintiff alleged that sufficient jurisdictional facts existed to bring Kumho Korea within the Florida long-arm statute, and that sufficient minimum contacts existed between Kumho Korea and Florida to satisfy federal due process requirements.

Kumho Korea submitted an affidavit stating that it had no presence in Florida and conducted no business in Florida in spite of overwhelming evidence submitted by the Plaintiff of extensive business dealings in Florida. Further, the identical issue had already been decided against Kumho Korea under nearly identical circumstances by the Second DCA, which also found that Kumho Korea had sufficient contacts with Florida.3

Legal Procedure for Resolving Personal Jurisdiction Challenges

In Venetian Salami v. Parthenais, 554 So.2d 499 (Fla. 1989), the Florida Supreme Court outlined the legal procedure for resolving challenges to personal jurisdiction. This procedure was summarized in Belz Invesco Ltd. Partnership v. Groupo Immobiliano Cababie, S.A, 721 So.2d 787, 789 (Fla. 3d DCA 1998), as follows:

Procedurally, the plaintiff bears the initial burden of pleading sufficient facts to bring the action within the ambit of the long-arm statute. [citations omitted.] This may be done by alleging facts sufficient to show that the defendant’s actions fit within one or more of the subsections of Florida’s long-arm statute. [citation omitted.] It may also be done merely by tracking the language of the long-arm statute without pleading supporting facts. See Fla. R. Civ. P. 1.070(h) . . . .

If the allegations in the complaint sufficiently establish long-arm jurisdiction, then the burden shifts to the defendant to contest the jurisdictional allegations in the complaint, or to claim that the federal minimum contacts requirement is not met, by way of affidavit or other similar sworn proof. [citations omitted.] If properly contested, the burden then returns to the plaintiff to refute the evidence submitted by the defendant, also by affidavit or similar sworn proof. [citations omitted.]

The trial court can resolve the jurisdictional question solely on the basis of the affidavits, so long as they do not conflict. [citations omitted.] If the affidavits do conflict, however, then the trial court must conduct a limited evidentiary hearing to resolve the dispute.

(Emphasis added); accord, Pennington Grain & Seed Co. v. Murrow Brothers Seed Co., 400 So.2d 157 (1st DCA 1981) (finding personal jurisdiction against a nonresident).

Relevant Law

In substance, a Plaintiff in this situation must overcome two hurdles. First, he must demonstrate sufficient jurisdictional facts to bring the action within the Florida long-arm jurisdiction statute. Secondly, he must demonstrate sufficient minimum contacts with Florida to satisfy federal due process requirements. Execu-Tech Bus. Sys., Inc. v. New Oji Paper Co., 752 So. 2d 582, 585 (Fla. 2000); Doe v. Thompson, 620 So.2d 1004, 1005 (Fla. 1993); Venitian Salami, 554 So. 2d 499, 502 (Fla. 1989).

Florida’s Long-Arm Statute

Florida’s long-arm statute § 48.193, has been interpreted as bestowing “broad jurisdiction,” reaching as far as the Constitution permits. Execu-Tech Business Systems, 752 So.2d at 584. Fortunately for Plaintiff’s, the party asserting that jurisdiction exists is entitled to have all disputes concerning the relevant facts, and all reasonable inferences, determined in its favor. Weidner Communications, Inc. v. H.R.H. Prince BandarAl Faisal, 859 F.2d 1302, 1306 n.7 (7th Cir. 1988); United States Securities & Exchange Comm. v. Carrillo, 115 F.3d 1540, 1542 (11th Cir. 1997).

Under the long-arm statute, personal jurisdiction can take two forms: specific and general. Specific jurisdiction involves a direct link between the cause of action alleged and the defendant’s contacts with the forum state, i.e., the claims against the defendant in the particular lawsuit “arise out of” or are “related to” the defendant’s conduct in the forum state. Helicopteros Nacionales de Columbia, S.A., v. Hall, 466 U.S. 408, 415, 104 S. Ct. 1868, 1872-73 (1984); J.D. Nichols v. Paulucci, 652 So. 2d 389 (Fla. 5th DCA 1995). General jurisdiction, on the other hand, is based upon a defendant’s “continuous and systematic general business contacts” with the forum, whether or not the claim arises from that activity. Id.

Specific Jurisdiction Under the Long-Arm Statute

The long-arm statute enumerates the following acts that will subject a person (or corporate entity) to specific jurisdiction:

§ 48.193(1) Acts subjecting person to jurisdiction of courts of state.–

(1) Any person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from the doing of any of the following acts:

(a) Operating, conducting, engaging in, or carrying on a business venture in this state or having an office or agency in this state.

(b) Committing a tortious act within this state.

(c) Owning, using, processing, or holding a mortgage or other lien on any real property within this state.

(d) Contracting to insure any person, property, or risk located within this state at the time of contracting.

(f) Causing injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of injury, either:

1. The defendant was engaged in solicitation or service activities within this state; or

2. Products, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of commerce, trade or use.4

The term “arising from” has been interpreted broadly. See, Citicorp Ins. Brokers v. J.R. Charman, 635 So.2d 79 (1st DCA 1994) (finding jurisdiction). In that case, the First DCA held that the phrase “arising from”“ does not mean proximately caused by , but only requires a direct affiliation, nexus, or substantial connection to exist between the basis for the cause of action and the business activity.” Id. at 81.

General Jurisdiction Under the Long-Arm Statute

The acts subjecting a defendant to general jurisdiction under the long-arm statute are set forth in subsection (2) of Fla. Stat. §48.193:

A defendant who is engaged in substantial and not isolated activity within this state, whether such activity is wholly interstate, intrastate, or otherwise, is subject to the jurisdiction of the courts of this state, whether or not the claim arises from that activity.

Fla. Stat. §48.181(3), which is not part of the long arm statute, but rather, deals with service of process, creates a conclusive presumption that selling products in Florida constitutes “substantial and not isolated activity”:

§48.181(3) Service on nonresident engaging in business in state.–

(3) Any person, firm, or corporation which sells, consigns, or leases by any means whatsoever tangible or intangible personal property, through brokers, jobbers, wholesalers, or distributors to any person, firm, or corporation in this state is conclusively presumed to be both engaged in substantial and not isolated activities within this state and operating, conducting, engaging in, or carrying on a business or business venture in this state.

The language of Fla. Stat. §48.193(1)(f) makes it clear that “Specific” and “General” jurisdiction over a nonresident defendant is appropriate where a product made outside of Florida causes injury within the Florida if the product was used or consumed within Florida in the ordinary course of business. The statute makes it equally clear that personal jurisdiction can be predicated not only on personal acts, but also on the acts of an agent. Thus, one important avenue of investigation for a Plaintiff is whether an agency relationship can be established between the foreign parent and its U.S. subsidiary.

Actual physical presence in Florida is not required in order to establish personal jurisdiction. In Execu-Tech Business Systems, Inc. v. New Oji Paper Co., 752 So.2d 587 (Fla. 2000), the Florida Supreme Court noted that intentional impact on Florida, rather than presence therein, is the jurisdictional touchstone.

Due Process Analysis

The mere proof of the applicability of one of the provisions of Florida’s Long Arm Statute as the basis for obtaining personal jurisdiction over a nonresident defendant does not, by itself, automatically satisfy the due process requirement of minimum contacts. Venetian Salami, 554 So.2d 499. The court will also engage in a due process analysis. Id.

In making its due process analysis, the Court must decide whether (1) the nonresident has sufficient minimum contacts with Florida, and (2) the exercise of personal jurisdiction over the nonresident defendant would “offend traditional notions of fair play and substantial justice." Vacation Ventures v. Holiday Promotions, 687 So. 2d 286, 288 (Fla. 5th DCA 1997); Magic Pan Int’l, Inc. v. Colonial Promenade (“Magic Pan”), 605 So.2d 563, 565 (Fla. 5th DCA 1992).

With regard to our firm’s Kumho Korea case, we were able to locate a great deal of information through publicly available sources, including from Kumho’s own website and press releases, that evidenced Kumho Korea’s “substantial and not isolated activity” in Florida. For example, Kumho Korea’s own website contained extensive information about their sponsorship of cars in numerous races in Florida. Information on Kumho’s website indicated that a distribution center was opened in Atlanta that would permit delivery of tires to “all of our Southeastern dealers-even those in Southern Florida-within 24 hours after they place their orders." Its website published testimonials from satisfied customers in Florida, and directed Florida customers where to find Kumho USA dealers throughout Florida. Its annual report referred to its Kumho USA as “the overseas sales division”. When facing cleverly crafted affidavits and interrogatory answers denying any connection between domestic corporations and their foreign parents, it is essential to throughly research other sources. Documents such as a company’s marketing materials or reports to shareholders often tell a very different story than their litigation documents.

Constitutional Standard for Determining Personal Jurisdiction

A defendant’s contacts with the forum under a constitutional analysis, just like the long-arm analysis, can support two types of personal jurisdiction: specific and general.Specific jurisdiction exists where the defendant’s contacts give rise to the plaintiff’s claims. Helicopteros Nacionales de Colombia, S.A.1, 466 U.S. at 414 n. 8 (1984). General jurisdiction involves a more stringent standard that is met where the defendant’s overall activity in the forum state is sufficiently “continuous and systematic” that the court’s exercise of jurisdiction is reasonable even though those contacts are unrelated to the plaintiff’s claims. Id., 416 U.S. at 414 n.9; Consol. Dev. Corp. v. Sherritt, Inc., 216 F.3d 1286, 1292 (11th Cir. 2000).

The Due Process clause protects nonresident defendants by requiring that the defendant have certain “minimum contacts” with the forum. International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). When a defendant has such minimum contacts, maintaining the suit does not offend “traditional notions of fair play and substantial justice.” Wilson v. Humphreys (Cayman) Limited, 916 F.2d 1239, 1243 (7th Cir. 1990). As the Supreme Court explained in Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958): . . . it 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, thus invoking the benefits and protections of its laws. . . . Moreover, the nonresident’s contacts with the forum must be substantial enough for the defendant to anticipate being brought into court in the forum state. World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62.

In World-Wide Volkswagen v. Woodson, the Supreme Court also held that a court may exercise personal jurisdiction “over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.” 444 U.S. at 297-298. Subsequent to the World-Wide Volkswagen decision, however, the Supreme Court held in a second case that: The “substantial connection” . . . between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. . . . The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forumState. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State.

Asahi Metal Industries v. Superior Court of California , 480 U.S. 102 at 112 (1989). Thus, it is critical to surviving a motion to dismiss for lack of personal jurisdiction to research information available on the internet, in marketing materials, in securities filings, or from whatever sources possible, in order to establish that the parent company’s actions were “purposely directed” at making sales in Florida.

Knowing the law and the particular phraseology in which your facts must be framed is important. However, the most critical task, which must be performed very quickly within the time period required to respond to a motion to dismiss, is to sift from the sea of public information about a corporation, the specific facts that will support jurisdiction.

1Qualley v. International Air Service Co., Ltd., 595 So.2d 194, 196 (Fla. 3rd DCA 1992).

2Kumho Industrial Co., Ltd. v. John Viel, et. al., 5DO3-3709 (Pending).

3Kumho Industrial co., Ltd. v. Felicia Shepard, 2D03-3765 (Order affirming denial of motion to dismiss entered December 5, 2003)

4Sections e., g. and h., which deal with domestic actions, contract actions and actions regarding paternity, respectfully, are omitted.