Two cases decided by the Eighth Circuit in the latter half of 2011, Viasystems and KV Pharmaceutical, serve as a reminder that activities undertaken while negotiating and performing contracts can have a bearing on personal jurisdiction issues if the contracts are litigated.
In Viasystems, a corporation based in Missouri sued a foreign supplier for breach of contract, among other things. Viasystems sued in the United States District Court for the Eastern District of Missouri and the supplier moved to dismiss for lack of personal jurisdiction. The trial court dismissed the case, and the Eighth Circuit affirmed on appeal.
The Eighth Circuit considered various activities of the supplier in the performance of the contract, but determined that “[The supplier’s] incidental contacts with Missouri — scattered emails, phone calls, and a wire transfer of money to Viasystems in Missouri — do not constitute a ‘deliberate’ and ‘substantial connection’ with the state such that [the supplier] could ‘reasonably anticipate being haled into court there’.”
K-V Pharmaceutical sued Uriach for breach of contract and misappropriation of trade secrets. The two companies had entered into a development agreement relating to an antifungal cream. K-V Pharmaceutical terminated the agreement after years of performance under the agreement, but Uriach allegedly failed to return certain trade secrets and confidential information to K-V Pharmaceutical as required under the contract and began selling a cream using K-V Pharmaceutical’s technology.
K-V Pharmaceutical sued in the United States District Court for the Eastern District of Missouri, and Uriach, a Spanish corporation with its principal place of business in Barcelona, moved to dismiss for lack of personal jurisdiction, arguing that its only contact with Missouri was its contract with K-V Pharmaceutical.
Personal Jurisdiction Analysis
Because of constitutional due process issues, a U.S. court has personal jurisdiction over a party to a law suit only if the party has sufficient dealings with the U.S. forum. Although entering into a contract with a party that is located in the U.S. forum isn’t sufficient by itself to give rise to personal jurisdiction over a foreign entity, activities relating to the negotiation and performance under the contract can weigh in favor of finding personal jurisdiction.
Contract Negotiation and Course of Performance
The Eighth Circuit found that Uriach’s contacts with Missouri were sufficient to give rise to personal jurisdiction and reversed the district court’s dismissal of the case. Here’s a quote from the Eighth Circuit’s opinion, listing some of the facts relating to the parties’ negotiations and course of performance that the court found significant:
- Letters, emails, and telephone calls to KV before May 1993 that were part of the contract negotiations.
- Letters, emails, and telephone calls to KV after the contract was executed but before the contract was amended for the second time in 2002. The head of Uriach’s legal department, Joaquin Uriach, admits that the parties had numerous communications from July 1993 to February 1994 “regarding the information Uriach needed, among other things, to prepare the pharmaceutical dossier to obtain regulatory approval in Spain.” He also admits that “[a]t least twenty Uriach personnel were actively involved in the contract negotiations with KV, the years of communication with KV[,] and the work Uriach undertook to develop the vaginal cream.” The fact that at least twenty of Uriach’s employees were engaged with KV at some level in contract negotiations and in years of communications supports the conclusion that the parties had significant contacts over the life of the contract.
- In a July 2001 letter, Uriach specifically proposed meeting in Missouri to renegotiate the contract’s payment terms in light of concerns that Uriach had with KV’s performance. This meeting occurred in September 2001 when personnel from Uriach traveled to KV’s facility in Missouri to discuss these matters. The meeting, together with communications that occurred afterwards, led to the renegotiation of the contract in June 2002.
- Uriach requested that KV send it samples of a competitor’s currently marketed product of antifungal cream so that Uriach could see how the finished product would look and how the applicators were used. KV sent these samples to Uriach in September 1993.
- Uriach made payments to KV under the contract. An email in 2005 from Uriach to KV stated that “we will pay you milestones and royalties as we have always done until now.” The record suggests that these payments were significant. A letter from KV to Uriach in May 2000 asks when KV “can expect to receive the $100,000 which is currently payable under article 2.1 of the Agreement.”
The Eighth Circuit also considered the terms of the contract itself, including the contract’s choice of Missouri law provision and the delivery term, which required Uriach to deliver product to K-V Pharmaceutical in Missouri. The court stated, “A delivery term that requires a nonresident defendant to deliver an item to a plaintiff in the plaintiff’s forum state supports the existence of personal jurisdiction over the nonresident defendant.”
Although the court also considered additional factors, the actions taken by the parties during their negotiations and their course of performance under the contract, as well as certain terms of the contract itself, were important factors in the appeals court’s decision to conclude that Missouri courts have personal jurisdiction over Uriach.
Triple H Debris Removal disputed a premium under its workers’ compensation insurance policy, which had been issued by Companion Property and Casualty. Companion cancelled the policy due to non-payment of premium. Triple H eventually paid the premium, but an incident that gave rise to an insurance claim occurred in the interim. Companion denied the claim and Triple H sued in Arkansas state court. The case was removed to the United States District Court for the Western District of Arkansas.
Triple H argued, among other things, that it had properly disputed the amount of the premium charged by Companion in accordance with the requirements of the policy, and that Companion had no right to cancel the policy while a dispute was pending. The trial court ruled in favor of Companion and the Eighth Circuit affirmed the lower court’s judgment.
Dr. Roudavcheski was terminated from All American Care Centers, Inc., and he filed suit in Arkansas state court alleging, among other things, that All-American’s actions tortiously interfered with his contract or business expectancy. He sought a temporary restraining order and a preliminary injunction requesting access to his former patients. The case was removed to the United States District Court for the Eastern District Court of Arkansas, and the trial court denied Dr. Roudavcheski’s motion. The Eighth Circuit affirmed.