Addison Insurance Company Vs. Knight, Hoppe, Kurnik & Knight, L.L.C. ( 2007 )

IN THE SUPREME COURT OF IOWA
No. 52 / 05-0306
Filed June 29, 2007
ADDISON INSURANCE COMPANY,
Appellee,
vs.
KNIGHT, HOPPE, KURNIK & KNIGHT, L.L.C.,
Appellant.
Appeal from the Iowa District Court for Linn County, Kristin L. Hibbs,
Judge.
An Illinois company appeals the district court’s ruling that the court
had personal jurisdiction over the company. AFFIRMED.
James E. Shipman and Chad M. Von Kampen of Simmons, Perrine,
Albright & Elwood, P.L.C., Cedar Rapids, and David M. Macksey and Victor
J. Pioli of Johnson & Bell, Ltd., Chicago, Illinois, for appellant.
Patrick M. Roby and Robert M. Hogg of Elderkin & Pirnie, P.L.C.,
Cedar Rapids, for appellee.
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STREIT, Justice.
An Illinois law firm regularly represented an Iowa insurance
company’s insureds in Illinois. After the law firm allegedly botched an
appeal to the Illinois Appellate Court, the Iowa company filed a legal
malpractice claim against the law firm in Linn County, Iowa. In a
preanswer motion, the law firm alleged lack of personal jurisdiction,
improper venue, and forum non conveniens. The district court denied the
motion and we granted the law firm’s interlocutory appeal. We find the law
firm had sufficient minimum contacts with the state of Iowa to warrant
personal jurisdiction. The parties had a long-term business arrangement
that caused the law firm to have substantial, ongoing communications with
the insurance company in Iowa. We also find Linn County is proper for
venue. The law firm failed to preserve for appeal the issue of forum non
conveniens. We affirm the district court.
I. Facts and Prior Proceedings
Addison Insurance Company is an Illinois corporation with its
principal place of business in Cedar Rapids, Iowa. It is a subsidiary of
United Fire & Casualty and is part of the United Fire Group. Addison was
originally located in Lombard, Illinois. However, since mid-1998, Addison’s
primary operations (including underwriting, marketing, claims handling,
accounting, and support services) have been located in Cedar Rapids.
Addison writes insurance in Iowa, Illinois, and several other states.
The law firm of Knight, Hoppe, Kurnik & Knight (“Knight”) is an
Illinois limited liability company. Knight’s principal place of business is
Des Plaines, Illinois.
In March 1993, Knight agreed to represent Addison’s insureds in
Illinois cases. When Addison informed Knight it was relocating its primary
operations to Cedar Rapids in 1998, Knight expressed a strong interest in
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continuing their relationship. Knight and Addison regularly communicated
via telephone, facsimile and mail regarding the cases Knight was handling
for Addison. Additionally, Pat Fanning, a partner at Knight, visited Addison
in Cedar Rapids shortly after the company’s relocation. 1 Fanning
conducted a seminar on recent changes to Illinois law and discussed
current cases with management. From 1998 through 2003, Addison paid
Knight $823,871 for its services.
In September 2000, Knight on behalf of Addison, filed an action
seeking a declaratory judgment against Knoedler Manufacturing, Inc. in
Cook County, Illinois. Addison claimed Knoedler had a duty to indemnify
Addison pursuant to a 1993 purchase agreement between Knoedler and one
of Addison’s insureds. Addison sought $683,419 for its attorney fees, costs,
and settlement paid in connection with a products liability claim. The
district court granted Knoedler’s motion to dismiss. After Addison’s motion
to reconsider was denied, Knight filed a notice of appeal on Addison’s
behalf. However, Knight failed to either file the record or brief the issues
with the Illinois Appellate Court. In June 2002, the Illinois Appellate Court
granted Knoedler’s motion to dismiss for failure to timely file the record on
appeal. John Pearson, a partner at Knight, traveled to Cedar Rapids to
break the news to Addison.
Addison filed the present action against Knight and attorney James
Meece for legal malpractice in Linn County, Iowa. Meece was the attorney
at Knight assigned to the Knoedler action. Meece and Knight each filed a
preanswer motion to dismiss for lack of personal jurisdiction, improper
venue, and forum non conveniens. The district court found Knight’s
1 Fanning also traveled to Cedar Rapids in 1996 and gave a presentation to United
Fire claims personnel. These visits to Cedar Rapids were part of Knight’s efforts to
strengthen the law firm’s business relationships with Addison and United Fire.
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contacts with Iowa were sufficient to confer personal jurisdiction and that
venue was proper in Linn County. It granted Meece’s motion to dismiss for
lack of personal jurisdiction. Knight filed an application for interlocutory
appeal which this court granted.
II. Standard of Review
“[W]e accept as true the allegations of the petition and
the contents of uncontroverted affidavits. The plaintiff has the
burden to sustain the requisite jurisdiction, but when he [or
she] establishes a prima facie case the defendant has the
burden of producing evidence to rebut that showing. The trial
court's findings of fact have the effect of a jury verdict and are
subject to challenge only if not supported by substantial
evidence in the record; we are not bound, however, by the trial
court's application of legal principles or its conclusions of law.”
Aquadrill, Inc. v. Envtl. Compliance Consulting Servs., Inc., 558 N.W.2d 391,
392 (Iowa 1997) (quoting Percival v. Bankers Trust Co., 450 N.W.2d 860, 861
(Iowa 1990)). Thus, we review the trial court’s ruling dismissing Knight’s
motion to dismiss for errors at law. Iowa R. App. P. 6.4.
III. Merits
A. Personal Jurisdiction
Iowa Rule of Civil Procedure 1.306 “expands Iowa’s jurisdictional
reach to the widest due process parameters allowed by the United States
Constitution.” Hammond v. Fla. Asset Fin. Corp., 695 N.W.2d 1, 5 (Iowa
2005) (citing Hodges v. Hodges, 572 N.W.2d 549, 552 (Iowa 1997)). It
provides in pertinent part:
Every corporation, individual, personal representative,
partnership or association that shall have the necessary
minimum contact with the state of Iowa shall be subject to the
jurisdiction of the courts of this state, and the courts of this
state shall hold such corporation, individual, personal
representative, partnership or association amenable to suit in
Iowa in every case not contrary to the provisions of the
Constitution of the United States.
Iowa R. Civ. P. 1.306.
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The Due Process Clause requires a nonresident to have “certain
minimum contacts with [the forum state] such that the maintenance of the
suit does not offend ‘traditional notions of fair play and substantial
justice.’ ” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154,
158, 90 L. Ed. 95, 102 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463,
61 S. Ct. 339, 343, 85 L. Ed. 278, 283 (1940)). In applying the standard,
we consider five factors:
1. the quantity of the contacts;
2. the nature and quality of the contacts;
3. the source and connection of the cause of action with
those contacts;
4. the interest of the forum state; and
5. the convenience of the parties.
Larsen v. Scholl, 296 N.W.2d 785, 788 (Iowa 1980). Of these factors, the
first three are the most important. Aquadrill, 558 N.W.2d at 393.
“The minimum contacts test is meant to insure the fairness and
reasonableness of requiring a nonresident to defend a lawsuit in the forum
state.” Taylor v. Trans-Action Assoc., Inc., 509 N.W.2d 501, 504 (Iowa Ct.
App. 1993) (citing Int’l Shoe, 326 U.S. at 317, 66 S. Ct. at 158, 90 L. Ed. at
102). A defendant's conduct relative to the forum state must be such that
the defendant should “ ‘reasonably anticipate being haled into court there.’ ”
Heslinga v. Bollman, 482 N.W.2d 921, 922 (Iowa 1992) (quoting World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62
L. Ed. 2d 490, 501 (1980)). This requires “some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the
forum State, thus invoking the benefits and protections of its laws.” Hager
v. Doubletree, 440 N.W.2d 603, 607 (Iowa 1989), cert. denied, 493 U.S. 934,
110 S. Ct. 325, 107 L. Ed. 2d 315 (1989) (quoting Hanson v. Denckla, 357
U.S. 235, 253, 78 S. Ct. 1228, 1239, 2 L. Ed. 2d 1283, 1298 (1958)). In
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determining whether minimum contacts exist, we focus on “ ‘the
relationship among the defendant, the forum, and the litigation.’ ” Rush v.
Savchuk, 444 U.S. 320, 327, 100 S. Ct. 571, 577, 62 L. Ed. 2d 516, 524
(1980) (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S. Ct. 2569, 2580,
53 L. Ed. 2d 683, 698 (1977)).
There are two types of personal jurisdiction: specific jurisdiction and
general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466
U.S. 408, 414–15, 104 S. Ct. 1868, 1872, 80 L. Ed. 2d 404, 410–11 (1984).
“ ‘Specific jurisdiction refers to jurisdiction over causes of action arising
from or related to a defendant’s actions within the forum state, while
general jurisdiction refers to the power of a state to adjudicate any cause of
action involving a particular defendant, regardless of where the cause of
action arose.’ ” Roquette Am., Inc. v. Gerber, 651 N.W.2d 896, 900 (Iowa Ct.
App. 2002) (quoting Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819
(8th Cir. 1994)). General jurisdiction requires the defendant’s contacts with
the forum state to be “continuous and systematic.” Davenport Mach. &
Foundry Co. v. Adolph Coors Co., 314 N.W.2d 432, 434 (Iowa 1982) (quoting
Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445, 72 S. Ct. 413,
418, 96 L. Ed. 485, 492 (1952)). Addison concedes Knight’s contacts are
not sufficient for general jurisdiction. Thus, we consider whether Knight’s
contacts satisfy the due process requirements for specific jurisdiction.
In support of its contention personal jurisdiction does not exist,
Knight notes it does not maintain an office or own any property in the state
of Iowa. None of its attorneys is licensed to practice law in Iowa and none
resides in Iowa. Knight claims its contacts with Iowa are simply too
attenuated to satisfy the Due Process Clause. Moreover, it claims the
alleged malpractice did not “arise out of or relate” to these contacts.
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Addison, on the other hand, argues the regular communication
between the two parties concerning Knight’s representation of Addison’s
insureds over many years is sufficient for personal jurisdiction. It contends
the underlying action arose out of or relates to these contacts.
We find the district court correctly held it had personal jurisdiction
over Knight. The parties entered into a contract for services that lasted for
ten years. The written guidelines for the attorneys to follow envisioned close
supervision by Addison and constant communication between the two
parties. For example, all settlement demands were required to be
immediately communicated to Addison in writing. All offers to settle made
on behalf of Addison’s insureds had to be approved by Addison. Legal
research in excess of two hours required Addison’s preapproval. Prior to
paying for any research time, a memorandum outlining the facts, law, and
conclusion had to be submitted to Addison. All depositions, with the
exception of the plaintiff, had to be discussed with Addison prior to
scheduling. Within twenty-one days of any motion, deposition, or other
development, a report had to be submitted to Addison including copies of
any pleadings or other legal documents. During trials, daily verbal reports
from Knight had to be made to Addison’s management. Needless to say, the
Knight attorneys had extensive contact with Addison over the years.
While the original agreement was created in Illinois, the relationship
between the parties continued unabated after Addison moved to Iowa.
Since the move, Addison paid Knight approximately $800,000 for its
services, which indicates Knight represented many of Addison’s insureds
over the years. See Hager, 440 N.W.2d at 607 (finding Iowa had personal
jurisdiction over nonresident defendants who entered into “a contractual
relationship which lasted several years and involved frequent contacts by
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telephone and mailed correspondence, together with substantial oversight
by the [plaintiff’s] home office in Iowa”).
The relatively small number of personal visits by Knight
representatives to Addison and United Fire’s headquarters in Cedar Rapids
is not significant. See Cascade Lumber Co. v. Edward Rose Bldg. Co., 596
N.W.2d 90, 93 (Iowa 1999) (holding “multiple phone conversations” between
an Iowa company and a nonresident company were sufficient to confer
personal jurisdiction over the nonresident company); Bankers Trust Co. v.
Fidata Trust Co. N.Y., 452 N.W.2d 411, 414 (Iowa 1990) (stating “[t]he
nonresident corporation’s physical presence within the forum state is not
essential to a finding of sufficient minimum contacts; contacts by telephone
or mail may suffice”). In this modern era, business is typically conducted
by telephone, facsimile, mail, and electronic mail. Hager, 440 N.W.2d at
607 (stating “ ‘it is an inescapable fact of modern commercial life that a
substantial amount of business is transacted solely by mail and wire
communications across state lines, thus obviating the need for physical
presence within a State in which business is conducted’ ” (quoting Burger
King v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 2184, 85 L. Ed. 2d
528, 543 (1985))). The nature and quality of Knight’s communications to
Iowa were such that the law firm “should have reasonably anticipated being
haled into state court.” Bankers Trust, 452 N.W.2d at 414 (citing World-
Wide Volkswagen, 444 U.S. at 297, 100 S. Ct. at 567, 62 L. Ed. 2d at 501).
Rather than the ministerial-type contacts which were found not to be
sufficient for personal jurisdiction in Bankers Trust, Knight’s contacts with
Iowa were high quality communications which assisted Addison in making
critical decisions concerning litigation.
Moreover, we find the alleged malpractice arose out of or was related
to these contacts. Knight acknowledges communicating with Addison in
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Cedar Rapids concerning the Knoedler case. Knight filed a notice of appeal
on Addison’s behalf. It would have only done so at Addison’s direction.
Neither party alleges Addison representatives traveled to Des Plaines to
discuss the case. Thus, we must conclude the directive to file the appeal
occurred with Addison representatives in Cedar Rapids and Knight
representatives in Des Plaines.
Certainly Illinois has an interest in this lawsuit since it involves an
Illinois resident and requires the application of Illinois law. Nevertheless,
Iowa has a “ ‘manifest interest’ in providing its residents with a convenient
forum for redressing injuries inflicted by out-of-state actors.” Aquadrill, 558
N.W.2d at 393. Thus, Iowa’s interest is at least equal to that of Illinois and
Iowa provides as convenient a forum. Cascade Lumber, 596 N.W.2d at 93.
Because Knight voluntarily entered into a long-term relationship with
Addison, which required substantial, ongoing connections with the
company’s headquarters in Cedar Rapids, Iowa, we cannot say the “ ‘quality
and nature’ ” of its relationship to Addison is “random,” “fortuitous,” or
“attenuated.” Burger King, 471 U.S. at 480, 105 S. Ct. at 2186, 85
L. Ed. 2d at 545–46 (quoting Hanson, 357 U.S. at 253, 78 S. Ct. at 1240, 2
L. Ed. 2d at 1298). The Supreme Court in Burger King said:
Jurisdiction is proper . . . where the contacts proximately
result from actions by the defendant himself that create a
“substantial connection” with the forum State. Thus where the
defendant “deliberately” has engaged in significant activities
within a State, or has created “continuing obligations” between
himself and residents of the forum, he manifestly has availed
himself of the privilege of conducting business there, and
because his activities are shielded by “the benefits and
protections” of the forum's laws it is presumptively not
unreasonable to require him to submit to the burdens of
litigation in that forum as well.
Id. at 475–76, 105 S. Ct. at 2184, 85 L. Ed. 2d at 542–43 (citations omitted).
Under the circumstances of this case, we find it reasonable for Knight to be
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called to answer in an Iowa court. Id. at 480, 105 S. Ct. at 2186, 85
L. Ed. 2d at 546.
B. Venue
Knight argues that even if the district court has personal jurisdiction
over it, Linn County is not the proper venue. We find this argument has no
merit.
Venue is statutory. Iowa Code section 616.18 (2003) provides:
Actions arising out of injuries to a person or damage to
property may be brought in the county in which the defendant,
or one of the defendants, is a resident or in the county in which
the injury or damage is sustained.
Since Knight is not a resident of Iowa, the issue is whether Addison’s injury
or damage was “sustained” in Linn County. Knight draws our attention to
Johnson v. Nelson, 275 N.W.2d 427 (Iowa 1979). There, an Iowa resident
brought a legal malpractice suit against an Iowa attorney for allowing his
case to be dismissed for want of prosecution. Johnson, 275 N.W.2d at 428.
We held the injury or damage to the plaintiff’s lawsuit was sustained in Polk
County, where the case was dismissed, rather than Clay County, where the
plaintiff resided. Id. at 431.
We find Johnson not to be controlling because both parties were two
Iowa residents. If we extended Johnson to the present case, we would be
left with the odd result of personal jurisdiction over a defendant without a
county in the state proper for venue. Such an absurd result is contrary to
the legislature’s intent to subject nonresidents to the jurisdiction of this
state’s courts to the outer limits of the Due Process Clause of the United
States Constitution. State v. Schultz, 604 N.W.2d 60, 62 (Iowa 1999)
(stating “we will not construe a statute in a way which creates an
impractical or absurd result”). Thus, we find the damage alleged to have
been suffered by Addison took place, at least in part, in Linn County.
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C. Forum Non Conveniens
Alternatively, in its motion to dismiss, Knight asked the district court
to transfer the case to Cook County, Illinois under the doctrine of forum
non conveniens. Although the district court acknowledged at the outset of
its ruling that forum non conveniens was an issue to be decided, it did not
rule on the matter and Knight did not file a motion to enlarge.
Consequently, Addison argues the issue was not preserved for appeal. We
have previously said “[w]hen a trial court fails to rule on an issue properly
raised, the party raising the issue must file a motion asking the court for a
ruling in order to preserve the issue for appeal.” Benavides v. J.C. Penny
Life Ins. Co., 539 N.W.2d 352, 356 (Iowa 1995) (citing State Farm Mut. Auto.
Ins. Co. v. Pfibsen, 350 N.W.2d 202, 206 (Iowa 1984)).
Knight argues error was preserved because the district court implicitly
rejected forum non conveniens. We disagree. The only reference to
convenience in the district court’s decision was in the context of its analysis
of personal jurisdiction. The use of the word “convenience” in the
jurisdictional analysis is insufficient to preserve error in regards to the
doctrine of forum non conveniens. The court’s failure to rule on this issue
precludes our review. Although the district court weighed “convenience of
the parties” (the fifth factor of any personal jurisdiction analysis, see
Larsen, 296 N.W.2d at 788), forum non conveniens requires a separate
analysis which we will not do for the first time on appeal. 2
2In In re Marriage of Kimura, 471 N.W.2d 869 (Iowa 1991), we explained the proper
analysis for forum non conveniens:
[T]he moving party must show . . . that the relative inconveniences
are so unbalanced that jurisdiction should be declined on an equitable
basis. Factors that bear on this determination include the following: the
relative ease of access to sources of proof; the availability of compulsory
process for attendance of unwilling, and the cost of obtaining attendance of
willing, witnesses; the possibility of view of the premises, if view would be
appropriate to the action; the enforceability of the judgment if one is
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IV. Conclusion
We find Knight’s contacts with Iowa are sufficient to confer personal
jurisdiction on the district court and Linn County is proper for venue. We
affirm the district court.
AFFIRMED.
________________________
obtained; and all other practical problems that make trial of a case easy,
expeditious, and inexpensive. All of these factors pertain to the private
interest of the litigant.
Factors of public interest are also considered. They include the
administrative difficulties for courts, trial in the forum that is the home of
the state law which governs the case, and the burden of jury duty imposed
on citizens of a forum with no relation to the litigation. Residency of the
plaintiff is also considered but only as one of the many factors in the
balancing process.
In re Marriage of Kimura, 471 N.W.2d at 878–79 (citations omitted).