BK (P) is a FL corporation. Rudzewicz (D) is a MI resident.
Rudzewicz applied for a franchise to BK. The franchise would be in MI.
Before the final agreements were signed, the two sides began to disagree. During the disputes, Rudzewicz negotiated with the BK offices in MI and in Miami, FL.
Rudzewicz fell behind in his monthly payments to BK in Miami, engaged in negotiations with Miami office while trying to work out issues.
BK terminated the franchise, but Rudzewicz refused and continued to operate as a BK franchise.
BK sued for $228,875 in damages.
Procedural History:
District Court found for BK.
Circuit Court reversed.
SCOTUS reversed, found for BK.
Issues:
To what extent can a contract constitute a contact for the purposes of due process analysis (through minimum contacts analysis needed for personal jurisdiction)?
How do you apply the minimum contacts test for a person who has never entered the forum state?
Holding/Rule:
Alone, signing a contract with a party in the forum state is not sufficient to meet the minimum contacts requirement for that forum state. However, if the contract in that state is an intermediate step to tie up prior negotiations and contemplated future consequences, the party may be seen as having purposefully established minimum contacts in that forum state, especially when the consequences arise proximately from the activities allowed by the contract. Purposeful availment!
Reasoning:
The franchise grew out of a contract which had a substantial connection with FL.
"In light of D's voluntary acceptance of the long-term and exacting regulation of his business from BK's Miami headquarters, the "quality and nature" of his relationship to the company in FL can in no sense be viewed as random, fortuitous, or attenuated."
During the disputes, D carried on a continuous course of communication with FL office, and it was the FL office that made the key negotiating decisions out of which this case came.
The contract documents emphasize that BK's operations are conducted and supervised form the Miami headquarters.
Various franchise documents provided that all disputes would be governed by FL law.
Dissent:
MI had a much larger stake in this litigation.
D never sold anything in FL.
It is unfair for the franchisor to choose the venue where the franchisee will be sued.
Notes:
Various franchise documents provided that all disputes would be governed by FL law. This is called a choice of law provision.
The battles over which state has jurisdiction are hugely significant.
Federal courts borrow the jurisdictional rules of the state where they are located.
It doesn't matter where the "best" place to litigate the case is.
At no point are the jurisdictions compared…
The lawsuit could have been brought by the Ds in MI if they had filed first.
Both states are fine for jurisdiction
Most important part of the minimum contacts analysis in this case is the 20 year agreement with BK.
