District court grants motion to dismiss for lack of personal jurisdiction where non-resident Defendant negotiated contract and shipped product in China, and thus had not directed its activities to the forum state such that it had established sufficient contacts to be subject to jurisdiction there.

Jacobs Trading, LLC v. Ningbo Hicon International Industry Co., Ltd., No. 11-354 (D. Minn. May 30, 2012)

Plaintiff, a Minnesota company, bought counterfeit espresso machines through an agent from Defendant, a company formed under the laws of China with its principal place of business in China.  Plaintiff sued Defendant in Minnesota, asserting claims of common law fraud and consumer fraud.  Defendant moved to dismiss for lack of personal jurisdiction.

Since Minnesota’s long-arm statute confers jurisdiction to the fullest extent permitted by the Due Process Clause of the U.S. Constitution, the court needed only to consider whether the requirements of Due Process are satisfied to resolve the jurisdictional challenges.  In Minnesota, to determine whether the court’s exercise of personal jurisdiction over a defendant comports with Due Process, the courts look to: (1) the nature and quality of the defendant’s contacts with the forum state; (2) the quantity of contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the forum state’s interest in providing a forum for its residents; and (5) the convenience of the parties.  The last two factors are secondary, and the third factor distinguishes between general and specific jurisdiction: a defendant may be subject to the general jurisdiction of the court where its contacts with the forum are “continuous and systematic;” a defendant may be subject to the specific jurisdiction were the suit arises out of or relates to the defendant’s contacts with the state.

Plaintiff asserted specific jurisdiction over Defendant was proper, since Defendant (1) knew it was transacting business with a Minnesota company; (2) Defendant’s invoice was addressed to Plaintiff in Minnesota; (3) Defendant arranged for product to be shipped to Minnesota, albeit “F.O.B. Ningbo” and (4) Defendant contracted with a Minnesota-based shipping/freight forwarding company to ship the goods.  The court held, however, that these contacts were insufficient to support a finding of personal jurisdiction.

First, the fact that Defendant entered into a contract and transacted business with a Minnesota company does not alone subject Defendant to personal jurisdiction in Minnesota.  It is Defendant’s contacts with the forum state, not the contacts with the resident, that are relevant.  In this case, the relationship between the parties was initiated by Defendant’s agent, who was living in China, and who traveled to Defendant’s warehouse in China to inspect the goods and negotiate their sale.  Second, in this context, according to the court, the lone invoice addressed to Plaintiff in Minnesota does not demonstrate that Defendant purposefully availed itself of the privilege of conducting its activities in Minnesota.

Third, although the products were shipped to Minnesota, they were shipped “F.O.B. Ningbo,” and delivery terms are relevant to the finding of personal jurisdiction.  While delivery terms outside the forum state do not necessarily preclude a finding of jurisdiction, here there are no other contacts and no other evidence of a “quantity and regularity of shipments” to Minnesota that would suggest jurisdiction is proper.

Fourth, the use of a Minnesota-based shipping/freight forwarding company was also insufficient to confer personal jurisdiction over Defendant.  The lawsuit against Defendant did not arise from or relate to the shipping contract.  The court also rejected Plaintiff’s argument that a Minnesota forum selection clause in the shipping contract is relevant to the personal jurisdiction question here since the clause was contained in Defendant’s contract with the shipper, not its contract with Plaintiff.

In rejecting Plaintiff’s specific jurisdiction argument, the court further noted that Defendant has no other contacts with Minnesota: it has no offices, manufacturing plants, facilities, bank accounts, property, employees, phone numbers, mailing addresses, or registered agents in Minnesota.  All of the events related to the sale of the coffeemakers at issue occurred in China.

Plaintiff also argued that the court had jurisdiction under the “effects test” as articulated in Calder v. Jones, 465 U.S. 783, 790 (1984), because Defendant had directed an intentional, tortious act at a resident in the forum, and so it may reasonably anticipate being hailed into court there.  The court held that, to invoke Calder, Defendant must have had more that just knowledge that a Minnesota corporation would feel the injury arising from the alleged tortious conduct.  Here, Plaintiff, through its agent, had initiated contact with Defendant.  Any fraudulent statements were not directed to Defendant in Minnesota, but rather were made to the agent in China.  The allegedly tortious activities were thus not directed at Minnesota.

Finally, the court rejected Plaintiff’s argument that Defendant was subject to general jurisdiction in Minnesota.  To support its argument, Plaintiff relied on conclusory and unsupported assertions from other unnamed retailers that Defendant had made sales in Minnesota.  Plaintiff also directed the court to Defendant’s website which boasted its products “sell well” in numerous markets, including the United States.  The court noted, however, that the website does not indicate any contacts with Minnesota, nor does it target residents of Minnesota as a passive website.  Plaintiff alleged a total of twenty individual shipments to four Minnesota companies by Defendant over four years, but the court held this does not constitute “continuous and systematic” contacts with the forum such that the court could exercise personal jurisdiction over Defendant.

Plaintiff requested in the alternative that it be granted leave to amend its complaint to add a federal claim, as it would be able to satisfy the jurisdictional requirements of Federal Rule of Civil Procedure 4(k)(2).  Because Plaintiff neither filed a motion to amend nor submitted a copy of a proposed amended pleading as required by Local Rule of Civil Procedure 15.1, the court denied the request to amend the complaint and dismissed the complaint for lack of personal jurisdiction.