The World in U.S. Courts: Spring 2015 - Personal Jurisdiction | March.23.2015
Plaintiff Tradin Organics filed breach of contract and breach of covenant of good faith and fair dealing claims against Defendant Advantage Health Matters. Tradin is a wholesaler supplier of raw food ingredients, including organic chia. It is a Delaware corporation with its principal place of business in California. Advantage is an independent retail marketer of whole food and natural health products. It is a Canadian corporation with its principal place of business in Ontario, Canada. The parties' contract provided organic chia to be delivered to Advantage at a warehouse in New Jersey. Tradin alleged that Advantage failed to accept various shipments and terminated the contract. It sued for breach of contract, and Advantage moved to dismiss based on, among other grounds, lack of personal jurisdiction.
After summarily finding no basis to invoke general personal jurisdiction, the District Court considered whether specific personal jurisdiction over Advantage existed pursuant to a three-part test asking whether: (1) Advantage purposefully directed its activities or consummated some transaction with California or a resident thereof, or performed some act by which it purposefully availed itself of the privilege of conducting activities in California, thereby invoking the benefits and protections of the State's laws; (2) the claim arises out of or relates to the Advantage's forum-related activities; and (3) whether the exercise of jurisdiction comports with fair play and substantial justice (i.e., is reasonable). As to the last prong, the court employed the Ninth Circuit's reasonableness factors: (1) the extent of defendant's purposeful interjection into the forum state; (2) the burden on the defendant in defending the forum; (3) the extent of the conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum.
The District Court systematically walked through each prong, ultimately finding that: (1) Tradin offered sufficient facts to demonstrate that Advantage purposefully availed itself of the privilege of doing business in California through its contacts with Tradin, (2) Tradin made a prima facie showing to satisfy the "but for" test of the second prong, which required demonstrating that but for defendant's negotiations with California-based Plaintiff to purchase chia, Plaintiff's claims for breach would not have arisen; and (3) the court's exercise of jurisdiction would be reasonable. In support of its findings, the District Court pointed to Advantage's sales contract with Tradin for the organic chia, as well as several additional contracts the parties negotiated for the procurement of various organic food products, and the fact that Advantage engaged in negotiations with Tradin's California employees. With respect to reasonableness, the District Court determined that only two factors weighed against the exercise of jurisdiction—the burden on Advantage and the existence of an alternative forum (Canada)—but neither offered a compelling reason that the exercise of jurisdiction would be unreasonable. The court thus denied Defendant's motion to dismiss.