Ramsower

Practice Problem: Personal Jurisdiction, Venue, FNC

Donald, a North Dakota citizen, was a bright young man who had an idea for a business that might make him rich (he
thought). After making a brief survey of the possible market opportunities in North Dakota, Donald decided that he could
make a lot of money selling refrigerators during the months of November through February. He believed that North Dakota
citizens, a populace known to look for bargains, would enjoy the novelty of buying refrigerators in those months. Further,
Donald had seen an advertisement in a national trade journal in which Acme, Inc., a manufacturer of small
refrigerators in Alabama, had reported that it usually had refrigerators left over at the end of a year of production that it
could not sell.

Acme was a profitable company with a good reputation in southern states, which it had developed by concentrating all its
marketing efforts in Alabama, Georgia, Florida, North Carolina and South Carolina. In general, its customers bought the
small refrigerators to use in local camping, fishing, and vacation lodges that the customers would normally visit in the
summer. But because refrigerators changed from one year to the next (in much the same fashion that American
automobile manufacturers change models every year), surplus refrigerators were usually just thrown away.

Donald's plan was to buy the refrigerators at a heavy discount on their price; ship them to North Dakota; and then make
money by offering them to the local populace at a price just a little below the normal retail price. Donald also thought that if
he sold the refrigerators on credit, he could make additional money on the interest he could charge the customers.

When Donald approached Acme (by telephone), the company's officers were intrigued. Donald was careful not to
explain the details of his plan to the company. He insisted that he would take title to the refrigerators in Alabama and
arrange for his own shipping so that Acme could not copy his plan and just "take over" the North Dakota market.
Nevertheless, Acme's officers concluded that if Donald would pay, they could sell surplus refrigerators, even at a reduced
price, and be much better off than if they simply destroyed the surplus products at the end of the year.

So the deal was made. Acme checked out Donald's credit references, which were good, and concluded that it made
sense to sell him the refrigerators on credit, with payment to be made to Acme after Donald collected from his
own customers. Acme was experienced in making deals without a formal written contract, so except for a few letters
that went back and forth, the understanding was largely oral.

The small refrigerators got a very good reception in North Dakota. Customers visiting Donald's store (named "Donald's
Store") were intrigued, and loved the prices and credit that Donald offered. All over North Dakota and even into
Minnesota, word of mouth spread that Donald might have something special.

But then problems came. It turned out that North Dakota citizens liked to use the small refrigerators when they did their
cold weather camping and ice fishing -but this was happening in North Dakota in winter, not summer (as in Acme's normal
sales area). In North Dakota people wanted small refrigerators to sit outside their huts and regulate the temperature of
beer (to keep the beer cool without freezing it). Indeed, if they had wanted to freeze anything, they had only to put it
outside their winter cottages without a refrigerator. But the refrigerators were not designed to resist such extreme cold as
they faced in North Dakota. Some of them worked well, but enough failed so that Donald's reputation was in ruins and his
unhappy customers began to refuse to pay him, telling him in very harsh terms that his refrigerators were a huge
disappointment. He, in turn, stopped payments to Acme. Donald was not entirely sure that his customers were always
telling him the truth, because he knew that at least some of the refrigerators were operating satisfactorily. But he felt
caught between customers and Acme, and he also said he had been misled by the company's officers who promised him,
orally and in writing, that the refrigerators could resist temperature extremes. The officers responded by saying they were
talking about hot weather, not cold weather. In any case, Donald's reputation in North Dakota was so damaged that before
any lawsuit occurred he moved to Montana.

The exchanges between Donald and Acme became ever more hostile, and eventually Acme sued Donald in an Alabama
state court for $100,000. There were many reasons for their choice of Alabama, but two stood out: (1) they didn't want a
jury of angry citizens of North Dakota, who might blame Acme for the refrigerator problem; and (2) Alabama law
recognized and would enforce most oral contracts.

Two days after service of process, Donald's attorney responded with a motion to dismiss for failure of personal
jurisdiction. In the motion, Donald's lawyer conceded that notice and service of process had been satisfied, and that
venue and forum non conveniens were not issues. The lawyers for both sides agreed that Alabama's long arm
statute reached as far as constitutional due process would permit.

For purposes of this question, you may assume that all involved states have a long arm statute similar to that in Missouri.
 Ramsower
Evaluate the chances that Donald's motion to dismiss will be granted. Explain your answer.

ANSWER:

• Determining PJ should follow the “minimum contacts” test as described by International Shoe and further
explained in Burger King: (Asahi not relevant - not a ‘stream of commerce’ case)
• In this problem we are looking at general PJ
o Minimum contacts considerations: +’s
 Questionable as to whether Donald reached out to Acme (AL) – voluntarily established
connection – or the national trade magazine ad constituted Acme’s establishing contact first.
• Probable that under International Shoe the national trade ad does not constitute
availing oneself of the benefits and protections of state law for every jurisdiction
advertised in. (Also, contractual consideration – as an ad does not usually constitute
an offer, then in this case it would appear that Donald established the connection and
thus his conduct is purposive as to the availment of the benefits and protections of
the law in AL.)
 Donald’s contract recognized as valid under AL state law – benefits and protections of state
law
 Donald made payments and communicated with company based in AL.
o –‘s:
 D has no sales, advertising, offices, personnel, or other aspects of business in AL.
 Inconvenience in litigating (Donald)?
o Distinguishable from BK >> No dealings with “intermediate office” in ND – therefore stronger case for
minimum contacts to AL.
o Probable that minimum contacts are established; not a stream of commerce case – look at from D’s,
not P’s, point of view.
 P is aware of where fridges sold, BUT not being asked to litigate in ND (not Defendant)
• However, BK standard still useful -- Minimum contacts may not be determinative for PJ. Other considerations
can be brought in to make PJ proper.
o Interest of State: AL has interest in enforcing oral contracts (as they are one of few states that
recognize them, this interest is not served by litigating in another state)
o Inconvenience to D: This may be true, but nearly impossible to make a good showing in face of other
aspect
o D’s possibility of being ‘haled into court’ in AL is foreseeable given his contacts with AL company (BK)
• Therefore, given the probable establishment of contacts + AL’s interest in litigating case (because of unique
circumstances of oral contract, which would probably not be upheld in ND)  PJ is proper; motion to dismiss
for lack of PJ will fail.
o Admitting that venue and FNC not issues = does not affect the propriety of PJ, but do not help D in
this case by leaving him with fewer options??