Limitations on Jurisdiction

OK, in the last post we discussed the long arm statutes of various states and if you were left with anything at all, it was that states try to exert their jurisdiction to the maximum extent possible. 

Conceivably, if one reads some of the long arm statutes literally you could find yourself in court in a different state simply because you have a website that someone in that state visited. 

Surely there has to be some limit to this kind of unbridled exercise of jurisdiction, because if not, we would find ourselves embroiled in lawsuit all over the country.

Actually there are some very good limitations in the form of the due process clause of the fourteenth amendment to the Constitution. Stated differently, the federal courts have developed a long history of judicial decisions that sharply limit when and how states can impose personal jurisdiction upon non-residents.

The United States is really a bit unusual compared to other countries in that the states under the Constitution retain a considerable amount of power, independent of the federal government. Because of this, as soon as interstate commerce developed in the early United States, it became quickly obvious that there were going to be conflicts between the laws of different states and even between state and federal law. There was, early on, a need to sort out where and how disputes would be resolved in situations that involved several states. With the development of railroads, which astronomically accelerated interstate commerce, the need became even greater. 

A man in Colorado orders a machine that is made from steel forged in Ohio, but is assembled with other parts from Pennsylvania. The seller of the final machine is in New York. Upon delivery and installation in Colorado the machine breaks because of a crack in the steel. The buyer wants refuses to pay the balance of what he owes, and demands refund of what he has already paid. It becomes the classic case of everyone pointing fingers at everyone else, and of course no one wants to pay.

Where do you go to resolve this? Does the buyer have to go to New York? Can the seller be required to litigate in Colorado. What about the steelmaker in Ohio who had no idea the steel would end up in a machine on its way to Colorado? As you can see, the issues are endless, but to resolve this, somebody is going to end up in court outside of where they do business.

In reality, at least two states in this scenario could try to impose personal jurisdiction. Colorado because that’s where the machine ended up, and the seller knew that he was shipping to Colorado, or, New York, because the seller will argue that that was where the contract was entered into.

Early on this issue hit the U.S. Supreme Court which, in the case of International Shoe v. Washington, held that notwithstanding state long arm statutes, a state court could only exercise personal jurisdiction over a non-resident defendant that had minimum contacts with the forum state. 

Of course, if you’ve been reading this blog at all, you can appreciate how that kind of decision could only result in endless litigation over issues like “what are minimum contacts”, does it matter who initiated the contact, who must the minimum contacts be with and so forth.

The result is the inevitable chain of federal court decisions, which today leave us with the premise that in order for a non-resident defendant to be subject to the jurisdiction of the courts of a state, they must not only have had minimum contacts with that states, but they must have purposely availed themselves of the right to do or conduct business in the state.

Sounds simple – but as with most things legal, it’s not.

The federal decisions, and the state’s responses in the form of different legislation have also left us with the somewhat twisted dichotomy of general versus specific jurisdiction.

We’ll talk about that and some specific considerations regarding jurisdiction soon.

Long Arm Statutes or Why Selling on the Internet Can be Harmful to your mental well-being!

So far we’ve talked about the general idea of a court exercising jurisdiction over a non-resident, and I think by now you understand the issues that creates. So now, let’s look at some specific circumstances where you might find yourself hauled into court in a different state, or conversely, if you’re doing the suing, how you can get someone from another state into court in your state.

In the last post I talked about two concepts – long arm statutes and due process. Quick recap, and to put things into perspective….  Long arm statutes are the state laws that give courts of a state the power to exercise jurisdiction over a non-resident. Due process refers to the constitutional limitations on the exercise of the power. It will make more sense, and be easier to understand if we look first at the long arm statutes and then, later look at the limitations on jurisdiction that courts have imposed on it.

Every state in the country has some form of long arm statute. These statutes set forth the circumstances under which a person or company not resident in the state can nonetheless be made a defendant in a lawsuit in the state. They are not identical from state to state, but are always very broad.

   

The long arm statutes of states fall into two broad categories. Those that specify the acts and conduct that will subject a non-resident to jurisdiction. Others simply say that the courts of the state have as much extra-territorial jurisdiction as the constitution allows.

Here are a couple of examples:

Utah’s long-arm statute goes into detail:

§ 78-27-24. Jurisdiction over nonresidents – Acts submitting person to

jurisdiction.

Any person, notwithstanding Section 16-10a-1501, whether or not a citizen

or resident of this state, who in person or through an agent does any of the following

enumerated acts, submits himself, and if an individual, his personal representative,

to the jurisdiction of the courts of this state as to any claim arising out of or related

to:

(1) the transaction of any business within this state;

(2) contracting to supply services or goods in this state;

(3) the causing of any injury within this state whether tortious or by breach of warranty;

(4) the ownership, use, or possession of any real estate situated in this state;

(5) contracting to insure any person, property, or risk located within this state at the time of contracting;

(6) with respect to actions of divorce, separate maintenance, or child support, having resided, in the marital relationship, within this state notwithstanding subsequent departure from the state; or the commission in this state of the act giving rise to the claim, so long as that act is not a mere omission, failure to act, or occurrence over which the defendant had no control; or

(7) the commission of sexual intercourse within this state which gives

rise to a paternity suit under Title 78, Chapter 45a, to determine paternity for the purpose of establishing responsibility for child support.

As you can see, this statute spells out in detail the things that will subject a non-resident to jurisdiction. Compare this to Arizona’s statute which simply states:

A court of this state may exercise personal jurisdiction over parties, whether found within or outside the state, to the maximum extent permitted by the Constitution of this state and the Constitution of the United States. Service upon

any such party located outside the state may be made as provided in this Rule 4.2, and when so made shall be of the same effect as personal service within the state

Within the statutes that are more detailed, there are of course differences from state to state. In some states, owning property in the state is in and of itself enough to confer jurisdiction, while in other states, property ownership, without more, is not enough. The thing to remember about all of the long arm statutes however is that they are always written as broadly as possible. If you take time to study some of these statutes you will see that virtually anything that you do that even remotely affects the state or a resident of the state could subject you to jurisdiction there.

This overly broad exercise of personal jurisdiction by states was historically troublesome enough, but today, with internet marketing and transactions the norm rather than the exception, it becomes even scarier.

For example, taking the long arm statute literally, you could fi yourself as a defendant in a state hundreds of miles away because you had sold a resident of that state something on ebay, and shipped it to that state.

As you can see, jurisdiction is not an academic issue to be pondered abstractly by legal scholars. It can affect all of us and potentially have serious consequences.

Personal Jurisdiction

Time to explore this concept of “jurisdiction” of state courts a little more.

First, it will help to understand where it comes from. All states, just like the United States have some form of constitution that creates and empowers their court system. The original problem is that states by definition are limited in their authority to what lies within the geographical borders of that state. It is fundamentally clear for example that the legislature of California cannot pass a law that governs the citizens of another state, say Georgia. So too, the courts of  a state are initially limited in their power and authority to things within the state.

Of course we all know and understand that in order to effectively function, a court system must in certain circumstances be allowed to reach beyond the borders of their state or country. A motorist from California for example that comes to Nevada and causes injury must be answerable in the courts of Nevada. It would be neither just, or realistic to require an injured Nevada citizen to travel to California to seek justice simply because the car that struck him, in Nevada, was being driven be a California resident.

There is nothing illegal, unfair or wrong with a state court exercising jurisdiction upon residents of other states who commit acts within the forum state. That principle has been upheld by the federal courts as far back as 1842. The questions that matter to you is not whether a state court can exercise jurisdiction of residents of another state – they clearly can – but instead when, how and under what circumstances?

That’s what we’re going to discuss.

And do not for one minute think that this is an unimportant issue. As I said in the previous post, as people interact more and more on the internet, and things are marketed all over the country, where disputes are resolved becomes more and more important.

Why?

Because the cost and trouble of litigating in another state can give one party a decided advantage in a dispute. In extreme cases, that factor alone can decide the outcome of a dispute. Years ago I had a client in South Carolina come to me with a contract dispute arising out of the leasing of credit card processing machines. He had been sold the a crappy deal by people travelling through the state and wanted to see what could be done. The problem was that the agreement he signed specified that any disputes would be resolved in Massachusetts.  The jurisdiction issue killed his ability to resolve his dispute given the amount if money involved and the potential costs.

So yes, jurisdiction can be a significant factor and is not to be taken lightly.

Now that we know it’s an important issue in potential disputes, and a big consideration when we do business across state lines, let’s look at how it can be addressed.

There are two sources of law when it comes to thinking about personal jurisdiction – state laws commonly referred to as “long arm statutes”; and federal court decisions that govern the exercise of personal jurisdiction in the context constitutional limitations; and more specifically,  due process requirements.

In terms of limiting the exercise of personal jurisdiction over non-residents, the long arm statutes are universally useless. Virtually every state’s long arm statute – the laws that define when a state can exercise jurisdiction over a non-resident – are written so that virtually anything that one does that affects the state, or the citizens of that state, no matter how indirectly, will subject a non-resident to jurisdiction. Most even contain language to the effect that the statute is to be construed so as to confer jurisdiction to the limits of constitutional due process limitations. Thus things like writing a business letter a resident of a state, owning property in the state, being an officer of a corporation that has done any business in the state, or entering into a contract with someone in the state have all been construed by state courts as sufficient to subject a non-resident to jurisdiction of the courts in that state.

Bottom line – if personal jurisdiction is going to be an issue in your court case, and it is becoming an issue more and more frequently - the determining factor will almost always be whether or not the exercise of personal jurisdiction complies with federal due process requirements. More on that in the next post.

As technology in general and the internet in general progress, one of the areas of the law that is becoming more and more important, especially if you are representing yourself, is jurisdiction. That will be the topic of this and the next several posts.

Imagine this scenario. You live in upstate New York. You make your living by going to estate sales and auctions, where you buy antiques which you later sell on Ebay. The doorbell rings.  You open the door to a person that hands you some papers. When you look at what you’ve received, you see that these are court papers and you in fact are the defendant in a lawsuit brought in Utah. You notice that you have twenty days to answer.  Your first response is “WTF – I’ve never been to Utah. I don’t know anybody there. What’s going on and what do I do?”

Technology and the way we do business has changed dramatically in just the last twenty years or so. When business used to be done locally, when you bought things from local stores, when transactions were done in person, the issue of where disputes would be settled was a simple one. Now everything is different. Ebay, Craigslist, the internet in general, make the whole country, perhaps the whole world a marketplace. When you provide services, or sell things on the internet, who have no way of knowing where a person that you might deal with is located. You have no way of knowing or controlling where your services or product will finally be delivered or used. The ballgame has changed!!

In this and the next few posts, we’ll talk about the issue of jurisdiction, and more specifically how and when the courts of one state can exercise jurisdiction over people in another state. And most important, how to deal with things if you find yourself in the position of our hypothetical antique seller.

Let’s talk a little about jurisdiction. In particular, we are going to be talking about personal jurisdiction (sometimes called in personam jurisdiction), as opposed to what the law refers to as subject matter jurisdiction. The latter is a separate topic, for another day. What we are talking about is how and when a court can exercise jurisdiction – that is exercise authority over you.

The topic of jurisdiction can be wildly complicated, but understanding a couple of principles will make it little easier to wade through.

First, while most people believe that a court can exercise control over anyone, that is simply not true. A court can do nothing regarding anyone until it has acquired jurisdiction.  Interestingly, it is a single document, when properly served that confers personal jurisdiction upon a court, and that is the summons. Until a plaintiff can demonstrate to a court that a defendant has been served with a summons, in a way authorized by law, that court has no jurisdiction over – that is it can take no action over that defendant. 

However, even if a person has received the summons, as with our antique seller, the question of whether or not a court can exercise jurisdiction can still be very complicated.

Before we talk about the different factors that determine whether or not a court in a different state may have jurisdiction over you, in that this blog and our website is all about representing yourself, there is one absolutely critical thing that you need to know, and there is no way to overstate the importance of this.

If you are sued in another state, and you even think there is the slightest possibility that that state may not have jurisdiction over you, DO NOT ANSWER THE COMPLAINT.

That’s right. Take a deep breath, study and review things, but the LAST thing you want to be doing is firing off an answer in which you deny that you did anything wrong, etc.

Why?

Because in every state, in every court, you can be deemed to have waived any jurisdictional issue by filing a general answer, that is an answer that addresses anything other than jurisdiction. Admittedly, many states have rules that provide that as long as you object to jurisdiction, you have not waived it, but why take the chance? Why risk finding yourself defending a lawsuit in a court a thousand miles away, when you could have forced your opponent to come to you?

There are some options to dealing with the issue of jurisdiction, and we’ll deal with those in more detail.

In subsequent posts, I’ll talk about the concept of “long arm” jurisdiction, that Is the ability of courts to exercise jurisdiction of non-residents, and how to deal with jurisdictional issues.

One of the reasons people may elect to represent themselves is the high cost of lawyers. Being advised in the middle of the “free initial consultation”  that anything more will cost you $2500, $5000 or even $10,000 retainer against an hourly fee of two or three hundred dollars,  can be sobering at best. Some of us can afford this kind of expense, others can’t. The prospect of finding yourself having to go to court with no way to afford an attorney is a fear that unfortunately has been played upon by a sometimes less than scrupulous industry – prepaid legal services.

In this post Be Your Own Lawyer will examine this industry so that you can make an informed decision about whether or not one of the many plans available is right for you.

First, what is a prepaid legal plan? In its simplest terms it is an arrangement where in exchange for a monthly fee, which you pay whether or need legal help or not, if and when you do need legal help, the plan provides it.

Understand that any prepaid legal plan is nothing more than an insurance policy. It is not different that health insurance, auto mobile insurance, or even an extended warranty on your car or appliance. The theory is simple. Most people will not need legal representation, therefore by collecting payments from a large number of people, those who require it are provided help. Most people never use the service, but have the security and peace of mind, knowing that if they need it, the help is there.

The theory is good. However, it must also be considered in the context of a second principle underlying any kind of insurance. Insurance companies are in the business of collecting premiums (in this case plan payments) and preferably not in the business of paying claims. Common sense confirms this. If an insurance company collects a certain amount of monthly payments, say $X, then every dollar they pay out in claims or benefits reduces their profits.

This is as much true of the prepaid legal services industry as it is with any other kind of insurance. The result is that many of these plans are effectively worthless due to limitations and exclusions. For example, one popular program charges $9.95 per month for individuals and $19.95 for families. That may sound like a good deal until you take a look at what it does not include. Divorces, separation, bankruptcy, criminal defense, any income producing property, or any business related matter. Limitations for services that are included, likewise make the plan virtually worthless. For example IRS audit benefits not in a trial environment are limited to three and a half hours of attorney time.

If you examine the list of exclusions and limitations it becomes quickly apparent that for most of the things that the average person is likely to need legal help with, the plan either provides no benefits, or benefits that are so limited that they are basically worthless.

Suddenly shelling out $9.95 or $19.95 per month is not such a great prospect!

This is not to say that all prepaid legal plans are bad, or of no value. It would be wise though to read the plans carefully and be sure they will be of value to you when you need them.

More Planning

The last thing we discussed was the importance of planning. Of exploring options and doing enough research to know what those options were. Let’s look at that in a little more detail.

As I tried to get across, it is important to know long before you file a lawsuit whether or not you have a viable case, whether or not you’re suing the right people and whether or not you’re suing them for the right things.

Don’t take this lightly. At Be Your Own Lawyer we help people every day, and it would probably amaze you at how much time we spend, and of course money we charge to go back and fix things that were done wrong because they were in a rush to “get that lawsuit filed!”

The potential dangers could go further. Every jurisdiction that we’re aware of has some form of cause of action for frivolous lawsuits, or abuse of process (filing lawsuits without merit) It’s no secret that the United States has for the last fifty years or so experienced a litigation explosion. “Sue the bastards” and “anyone can sue anybody for anything” became the bywords of the legal profession. In an effort to try to address the problem, legislatures crafted laws and statutes that created remedies for people that were sued without cause. These include actual damages, including attorney’s fees and court costs. They could include things like damage to reputation or emotional distress. They can also include punitive damages.

This is not to suggest that you should not consider filing a lawsuit if you feel aggrieved. None of these statutes penalize the commencement of a legitimate suit, but just make sure you have your ducks in a row before you go charging off to the courthouse.

So what planning should you be doing? I’ve touched on it before, but here are some things you should be considering.

What am I suing for?

You may feel cheated, hurt, wronged or just plain irritated about something, but it’s important to sit down and marry your grievance to some legal basis of recovery. If some one took your money without giving you in return what you thought you were paying for, what kind of case is it.

Breach of contract? Fraud? Conversion?

Now is the time to get help with researching the legal theories and principles that apply to your situation. 

Now here’s an important thing to be careful of. There are a lot of “self-help” legal sites out there with fill in the blank forms and sample court papers that you can download and edit. If you’re sure that these happen to match your case then great, go for it. But be careful. If there is one common message in legal stuff that comes up over and over again, it’s “one size does not fit all.”

Who Do I sue?

In my last post, Plan, Plan, Plan I touched on this issue. Let’s continue it a bit. Life is a complex maze of interconnected people, things and experiences. While I suppose there are those cases out there that are so straightforward and simple that there is only one option, they are far and few between.

Last time I talked about this I used a businessman and his corporation to show you that the first glance most obvious option may not be the only one, and may not even be the best.

Just to drive this home, let’s look at a different scenario. Let’s get away from contracts and fraud and look at a car accident. Car A is driving down Main Street when car B pulls out of  a business parking lot into its path causing an accident. 

Now the first thing that you will probably say is that it’s obvious who we sue. We sue the driver of car B.

Wow. You’ve just scratched the surface of the proverbial  iceberg in terms of potential or possible other defendants. Now it may in fact be as simple as what appears at first blush. Driver B may have just not been paying attention and “bam!”

The problem though is that even though no one was hurt, it turns that Driver B has only $5,000 in property damage insurance coverage, which will not quite pay for the totaled $25,000 car A.

What to do……

If you do not yourself understand, or have the resources to understand all of the potential theories of recovery, you could be making a very costly mistake.

Let’s look at some of the possible things that you might have missed were you the owner/driver of car A. Consider:

            -           The parking lot that Car B was exiting had some very beautiful planters decorating the entrance. Looked great but the problem was, they were close enough to the roadway that it blocked driver B’s ability to see oncoming traffic. A good potential defendant to add.

            -           The driver of car B was picking up her boss’s dry cleaning in the chopping center and was returning to work. A second great defendant to invite to the party.

            -           Or, the driver of car B had been visiting the little tavern located in the shopping center and had had several beers too many. A little checking would show you that the bar tender had suggested that he had had a bit much to drink and should take it easy. A third defendant to add to the mix.

It should be obvious by now, just from the two cases that we tossed out there, that the need for help and legal research comes long before you run to the courthouse, suit papers in hand.

The good thing is that if you let us at Be Your Own Lawyer help you with this, it won’t cost you a dime! That’s right. 

Visit to the website www.beyourownlawyer.org and read it for yourself. There is NO COST and NO OBLIGATION to have your case assessed.

Be Your Own Lawyer will assess your case at absolutely no cost and with no obligation whatsoever. That means you give us all the facts and we’ll check the law and tell you what your options are. We’ll give you an idea of who to sue and what for if you are the plaintiff. If you are the defendant, we’ll give you your options as far an challenging jurisdiction, filing a motion to dismiss, filing an answer, or even and answer an a counterclaim.

None of this will cost you one cent (email is very inexpensive)!

Let’s cut to the chase. Would you not feel foolish if you had missed a defendant or a cause of action, or missed getting out of a lawsuit altogether on jurisdiction, when all you had to so was ask for a free case assessment?