In 2017 in Bristol Meyers Squibb Co. v. Superior Court of California, the United States Supreme Court narrowed the concept of personal jurisdiction. Bristol Meyers requires that the state where the plaintiff brings suit must have some affiliation with an act or occurrence that forms the controversy. Basically, whatever bad happened, some of it must have occurred in the state where the plaintiff has sued. Bristol Meyers dealt with a bunch of plaintiffs, not from California, suing in California over a drug that was certainly marketed and sold in California. Typically you’d think no problem with personal jurisdiction. Well, SCOTUS said nope, no personal jurisdiction because the bad acts didn’t occur there and the plaintiffs’ beef was about marketing that occurred outside of California.
What does this have to do with state court in Connecticut? A lot, now that Judge Moukawsher (who we wrote about here, and here) has weighed in. In a very well-written, easy to read, simple and short decision he said that Connecticut does not have personal jurisdiction over an Austrian company that had purchased a license from a Connecticut company to sell its surfboards, and had also promised to brand those boards only with the Connecticut company’s name. Well, it broke that promise and faced a breach of contract suit here in Connecticut. But it got the case dismissed because the wrongful conduct occurred outside of Connecticut – indeed in Europe.
Bizarre you think? Yes, at first glance, because the Austrian company had entered into a contract with a Connecticut business, and had contacts both in person and electronically with the Connecticut company in Connecticut. It most certainly must have also sent licensing fees to Connecticut, and the Connecticut company suffered harm in Connecticut (maybe). Usually that’s enough (contract made or to be performed in this state is usually enough to confer personal jurisdiction, and even a single purposeful business transaction directed at Connecticut is enough). You can check out the long arm statute at issue in this case here. We have another one, here, that Judge Moukawsher’s reasoning likely also applies to.
Now, the Connecticut company has to either hope for a successful appeal (which it filed on June 28, 2018), or sue in Austria, the bad actor’s home country. Ouch.
What could’ve avoided this? A clause in the contract in which the defendant consents to exclusive personal jurisdiction in Connecticut. Something like “Company XYZ hereby consents to the state and federal courts of Connecticut having exclusive personal jurisdiction over it for any dispute arising out of this agreement, its enforcement or interpretation, or arising out of the relationship it creates.”
The plaintiff’s licensing agreement didn’t have such a clause, but only had a choice of law provision that said “This agreement shall be governed by and construed in accordance with the internal laws (what are internal laws anyway?) of the State of Wisconsin, USA, excluding its choice of law rules.” Interestingly that clause was called “Applicable Law and JURISDICTION” but didn’t even mention jurisdiction.
L4UB (LESSON FOR YOUR BUSINESS): If you hold the bargaining power – you have what the other side wants – (especially a company from another country!!) negotiate so that the lawsuit has to be in your backyard!
