Venuti v. Continental Motors , 414 P.3d 943 ( 2018 )

2018 UT App 4THE UTAH COURT OF APPEALS
KERI VENUTI, DANA VENUTI, AND CORINNE RUBIO,
Appellees,
v.
CONTINENTAL MOTORS INC.,
Appellant.
Opinion
No. 20160645-CA
Filed January 5, 2018
Third District Court, Salt Lake Department
The Honorable Bruce C. Lubeck
No. 160902043
Heidi G. Goebel, Timothy J. Curtis, Sherri R. Ginger,
and Timothy A. Heisterhagen, Attorneys
for Appellant
Craig G. Adamson, Joelle S. Kesler, and Cynthia M.
Devers, Attorneys for Appellees
JUDGE DIANA HAGEN authored this Opinion, in which JUDGES
GREGORY K. ORME and KATE A. TOOMEY concurred.
HAGEN, Judge:
¶1 This lawsuit stems from a deadly helicopter crash in Utah
allegedly caused by a defective engine part manufactured by
Continental Motors, Inc. (CMI). CMI, a nonresident corporation,
moved to dismiss for lack of personal jurisdiction. The district
court denied the motion, concluding that CMI had sufficient
minimum contacts with Utah to support specific jurisdiction.
Because CMI’s minimum contacts with Utah are not suit-related,
we reverse.
Venuti v. Continental Motors
BACKGROUND
¶2 Robin Venuti and Albert Rubio were killed in a helicopter
crash near Green River, Utah, on April 6, 2014. The guardians of
each victim’s children and the personal representatives of their
estates (collectively, Plaintiffs) sued several defendants,
including CMI, a Delaware corporation with its principal place
of business in Mobile, Alabama. Plaintiffs alleged that the crash
was caused by, among other things, a defective engine part
manufactured by CMI. Specifically, Plaintiffs claimed that a CMI
magneto 1 used in the helicopter’s ignition system caused the
engine to lose power during flight.
¶3 Nothing in the record suggests that CMI sold the
allegedly defective magneto—or any other magneto—in Utah.
While the record does not identify the original purchaser, it does
indicate that the magneto was acquired at some point by Aircraft
Electrical, a California company. In 2001, Aircraft Electrical
overhauled the magneto at its California facility and then
transferred it to Nevada Aircraft, a Nevada company. Nevada
Aircraft overhauled the helicopter’s engine at its facility in
Nevada, installing the magneto overhauled by Aircraft
Electrical. The magneto appears to have entered Utah when
Nevada Aircraft sold the engine to Upper Limit Aviation, a Utah
company.
¶4 CMI filed a motion to dismiss the claims against it for lack
of personal jurisdiction. In support of its motion, CMI filed an
affidavit from its chief financial officer stating that CMI is not
1. A magneto or “magnetoelectric machine” is “an alternator
with permanent magnets used to generate current for the
ignition in an internal combustion engine.” Magneto, Merriam-
Webster Online, https://www.merriam-webster.com/dictionary/
magneto [https://perma.cc/XY2S-6WKX].
20160645-CA 2 2018 UT App 4Venuti v. Continental Motors
licensed to do business in Utah and maintains no “offices, places
of business, post office boxes[,] or telephone listings in Utah.”
CMI does not have “a registered agent for service of process in
Utah,” nor does it “have any warehouses, repair stations, agents,
dealers, or other sales representatives located in Utah.” In
addition, CMI has “no real estate, bank accounts, or other
interests in property in Utah” and “did not incur any obligation
to pay, and has not paid, income taxes in Utah.” CMI also
represented that it “has not conducted any regular ongoing
advertising, solicitation, marketing, or other sales promotions
directed toward residents of Utah.”
¶5 In response, Plaintiffs asserted that CMI should be subject
to the court’s jurisdiction because it “regularly does business in
Utah” and “CMI’s business in this State caused this accident in
Utah.” Among CMI’s business activities in Utah, Plaintiffs cited
its collection of customer demographic information for
marketing purposes, its “ongoing business relationship” with
eight fixed-base operators 2 in Utah, and CMI’s advertisements in
nationally circulated publications. Plaintiffs also alleged that
CMI ships parts and literature into Utah, offers services to Utah
residents, and receives “money from those businesses in this
State who order goods, services[,] and parts.” Plaintiffs asserted
that they had established a prima facie showing of jurisdiction
on the affidavits but requested discovery if the court determined
otherwise.
2. The term “fixed-base operator” refers to a commercial
business allowed to operate on an airport’s property. A
“certified repair station offering engine maintenance, repair and
replacement to retail customers or fleet operators” may sign up
to be listed as a fixed-base operator on CMI’s website by
completing an online form and paying an annual fee.
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¶6 After considering the briefs and oral arguments, the
district court denied the motion to dismiss. Noting that there
was no dispute that the court lacked general personal
jurisdiction over CMI, it focused instead on the question of
whether CMI was subject to the court’s specific personal
jurisdiction for this particular case. The court ruled that Plaintiffs
had made a prima facie showing of specific jurisdiction because
CMI transacts business in Utah and, “[w]hile those contacts may
not give rise to the cause of action, they do relate to the cause of
action alleged herein.” Furthermore, the court found that
requiring CMI “to respond in a Utah court does not offend
traditional notions of fair play and substantial justice,” because
CMI directed its business to Utah and Plaintiffs have a strong
interest in adjudicating the dispute in Utah. CMI filed an
interlocutory appeal challenging the court’s denial of its motion
to dismiss.
ISSUE AND STANDARD OF REVIEW
¶7 At issue in this case is whether Plaintiffs made a prima
facie showing of personal jurisdiction over CMI. “Where a
pretrial jurisdictional decision has been made on documentary
evidence only, an appeal from that decision presents only legal
questions that are reviewed for correctness.” Arguello v. Industrial
Woodworking Mach. Co., 838 P.2d 1120, 1121 (Utah 1992), modified
on other grounds by State ex rel. W.A., 2002 UT 127, 63 P.3d 607.
The district court’s decision is “reviewed de novo, giving no
deference to the trial court’s conclusion.” Salt Lake City v. Silver
Fork Pipeline Corp., 913 P.2d 731, 733 (Utah 1995).
ANALYSIS
¶8 To subject a nonresident defendant to a court’s judgment,
the court must have personal jurisdiction. Gardner v. SPX Corp.,
2012 UT App 45, ¶ 12, 272 P.3d 175. Where the court bases its
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decision on documentary evidence alone, “the plaintiff must
simply make a prima facie showing of personal jurisdiction.” Go
Invest Wisely LLC v. Barnes, 2016 UT App 184, ¶ 9, 382 P.3d 623(citation and internal quotation marks omitted). “The plaintiff’s
factual allegations are accepted as true unless specifically
controverted by the defendant’s affidavits or by depositions, but
any disputes in the documentary evidence are resolved in the
plaintiff’s favor.” Id. (citation and internal quotation marks
omitted).
¶9 There are two types of personal jurisdiction: general and
specific. “General personal jurisdiction permits a court to
exercise power over a defendant without regard to the subject of
the claim asserted. For such jurisdiction to exist, the defendant
must be conducting substantial and continuous local activity in
the forum state.” Arguello, 838 P.2d at 1122 (emphasis omitted).
Plaintiffs do not claim that CMI is subject to general personal
jurisdiction in Utah.
¶10 “[S]pecific personal jurisdiction gives a court power over
a defendant only with respect to claims arising out of the
particular activities of the defendant in the forum state. For such
jurisdiction to exist, the defendant must have certain minimum
local contacts.” Id. (emphasis omitted). To determine whether a
state court can exercise specific jurisdiction, courts conduct a
two-part inquiry: (1) do the plaintiff’s claims come within the
reach of the state’s long-arm statute, and (2) are the defendant’s
contacts with the state sufficient to satisfy constitutional due
process? See id. “If the relevant state statute does not permit
jurisdiction, then the inquiry is ended; if it does, then the
question is whether the statute’s reach comports with due
process.” Id.
¶11 Utah’s long-arm statute “provides that a nonresident may
become subject to the jurisdiction of Utah courts by transacting
business or causing injury within the state.” Gardner, 2012 UT
App 45, ¶ 14. The legislature has directed us to construe this
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statute “so as to assert jurisdiction over nonresident defendants
to the fullest extent permitted by the due process clause of the
Fourteenth Amendment to the United States Constitution.” Utah
Code Ann. § 78B-3-201 (LexisNexis 2012). As a result, Utah
courts often assume that the long-arm statute will be satisfied if
the exercise of specific jurisdiction comports with due process.
See, e.g., Arguello, 838 P.2d at 1122–23 (“We assume that . . . the
long-arm statute will be satisfied if Utah’s exercise of specific
personal jurisdiction over [nonresident defendants] satisfies due
process.”); Gardner, 2012 UT App 45, ¶ 15 (“[We] often assume
the application of the [long-arm] statute” and “go directly to the
due process prong of the analysis” (first alteration in original)
(citation and internal quotation marks omitted)). Adopting that
course here, we proceed directly to the due process analysis.
¶12 The Due Process Clause of the Fourteenth Amendment
requires a defendant to have “‘certain minimum contacts with
[the forum] such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.’” Pohl, Inc.
of America v. Webelhuth, 2008 UT 89, ¶ 23, 201 P.3d 944 (alteration
in original) (quoting International Shoe Co. v. Washington, 326 U.S.
310, 316 (1945)). When a defendant “purposefully avails itself of
the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws,” Hanson v.
Denckla, 357 U.S. 235, 253 (1958), courts will generally conclude
that due process is satisfied. The nature of the contacts between
the defendant and the forum state should allow the defendant to
“reasonably anticipate being haled into court there.” World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
¶13 For purposes of specific jurisdiction, these contacts “must
be the basis for the plaintiff’s claim.” Arguello, 838 P.2d at 1123.
This analysis focuses the court’s attention on “the relationship of
the defendant, the forum, and the litigation to each other.” Id.
(citation and internal quotation marks omitted).
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¶14 “The United States Supreme Court has suggested two
modes of analyzing the question of whether minimum contacts
are present: the ‘arising out of’ test and the ‘stream of commerce’
test.” Id. Neither test supports the exercise of specific jurisdiction
in this case.
I. “Arising Out Of” Test
¶15 Under the “arising out of” test, the defendant’s contacts
must be sufficiently related to the plaintiff’s claim so that it can
be said that the claim arises out of these contacts. Arguello, 838
P.2d at 1124 (providing that when “the contacts of the out-of-
state defendant are unrelated to plaintiff's claims, [then] the
claim cannot be said to ‘arise out of’ the contacts with the state”).
Ultimately, “due process is not satisfied by the quantity of the
contacts with the state, but ‘rather upon the quality and nature’
of the minimum contacts and their relationship to the claim
asserted.” Id. at 1123 (emphases omitted) (quoting International
Shoe, 326 U.S. at 319).
¶16 In this case, CMI’s contacts with Utah are not related to
the claims asserted. Plaintiffs have brought products liability,
negligence, and breach of warranty claims against CMI, alleging
that it designed, manufactured, marketed, and supplied a faulty
magneto that caused the accident in Utah. However, Plaintiffs
have not made a prima facie case that these claims arose from
CMI’s contacts with the state.
¶17 In its ruling, the district court acknowledged that CMI’s
contacts with Utah “may not give rise to this cause of action” but
concluded that they “do relate to the causes of actions alleged
herein.” The district court identified the following contacts CMI
has with Utah: (1) CMI has “fixed base operators” in Utah that
have “some association” with CMI; (2) CMI “maintains an
interactive website and allows contacts with its headquarters
through that website,” although the persons “desiring to
communicate with [CMI] must initiate that contact”; and (3) CMI
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“supplies literature to those who request it, ships parts to Utah,
and receives money from Utah customers.”
¶18 None of these contacts are suit-related. There is no
allegation that CMI’s fixed-base operators played any role in the
accident or had any connection to the helicopter or the allegedly
defective magneto. Plaintiffs have not suggested that anyone in
Utah initiated contact with CMI through its website, much less
that such contacts were related to or contributed to the accident.
And nothing in the record suggests that the accident was caused
by parts CMI sold in Utah, by literature CMI distributed in Utah,
or from any of CMI’s revenue-generating activities in Utah.
¶19 The facts of this case are similar to Arguello, in which the
Utah Supreme Court held that Utah lacked specific jurisdiction
over a nonresident manufacturer of an allegedly defective
product. 838 P.2d at 1125. Arguello was injured in Utah while
operating a woodworking machine that had a tendency to allow
wood to pop out during operation. Id. at 1121. The manufacturer
sold the machine to a third party in another state who ultimately
resold the machine to Arguello’s employer in Utah. Id. At the
employer’s request, the manufacturer sent a representative to
Utah to advise on the problem of wood being ejected from the
machine. Id. Other than that visit, the manufacturer’s contacts
with the state were limited to selling parts to Utah residents for
other machines and advertising “the availability of parts for its
machines in national trade publications that possibly reached
Utah.” Id. at 1123. The court determined that these contacts were
“unrelated to the plaintiff’s claims, and the claim cannot be said
to ‘arise out of’ the contacts with the state.” Id. at 1124.
¶20 CMI’s contacts with Utah are even further removed from
the subject of the suit than the contacts determined to be
insufficient for specific jurisdiction in Arguello. There, the
manufacturer sent a representative to Utah to inspect the very
machine involved in the accident and to advise on the very issue
that allegedly caused the injury. Nonetheless, the supreme court
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held that the claim could not be said to have arisen from the
representative’s visit, “because the representative did not
undertake to make any changes or repairs to the machine related
to the problem that allegedly caused Arguello’s injury.” Id. at
1123. In other words, while the manufacturer had contact with
Utah related to the product, that contact did not give rise to the
injury. Id. at 1123. Here, there is even less connection between
CMI’s Utah contacts and the injury. CMI had absolutely no
contacts with Utah related to the allegedly defective magneto,
the engine, or the helicopter, let alone contact that gave rise to
the injury.
¶21 While Plaintiffs have made a prima facie case that CMI
engages in some continuous activity within Utah, that activity is
not suit-related and cannot form the basis for specific
jurisdiction.
II. “Stream of Commerce” Test
¶22 The “stream of commerce” theory of specific jurisdiction
developed in product-liability cases to address the situation
where “the seller does not come in direct contact with the forum
state but does so through intermediaries such as retailers or
distributors.” American Law of Prods. Liab. 3d Stream of
commerce theory § 48.85 (2017). “Typically, in such cases, a
nonresident defendant, acting outside the forum, places in the
stream of commerce a product that ultimately causes harm
inside the forum.” Goodyear Dunlop Tires Operations v. Brown, 564
U.S. 915, 926 (2011) (emphasis omitted). Under this theory, if the
sale of a product “is not simply an isolated occurrence, but arises
from the efforts of the manufacturer or distributor to serve
directly or indirectly, the market for its product in other States,”
then “it is not unreasonable to subject it to suit in one of those
States if its allegedly defective merchandise has there been the
source of injury to its owner or to others.” World-Wide
Volkswagen Corp., 444 U.S. at 297.
20160645-CA 9 2018 UT App 4Venuti v. Continental Motors
¶23 In this case, the “stream of commerce” analysis fails for
two reasons. First, CMI did not place the magneto into the
stream of commerce for distribution but sold the magneto as a
component part to an end user outside of Utah. Second, even if
the “stream of commerce” theory applies, there is no evidence
that CMI took any additional steps to target Utah for the sale of
the product that is the subject of this suit.
¶24 “The stream of commerce refers not to unpredictable
currents or eddies, but to the regular and anticipated flow of
products from manufacture to distribution to retail sale.” Asahi
Metal Indus. Co. v. Superior Court of Cali., 480 U.S. 102, 117 (1987)
(Brennan, J., concurring in part and concurring in the judgment).
Once a product has reached the end of the stream of commerce
and is purchased by a consumer, a third party’s unilateral
decision to take the product to the forum state is insufficient to
confer personal jurisdiction over the manufacturer. See American
Law of Prods. Liab. 3d Stream of commerce theory § 48.85 (2017).
¶25 The Utah Supreme Court encountered a similar factual
scenario in Arguello, where the woodworking machine at issue
was originally sold by the manufacturer to a California
company, which had requested customized features and paid
sales tax on the order. Arguello, 838 P.2d at 1121. The
manufacturer argued that “the machine never entered the
stream of commerce because it was sold to an ultimate buyer
and resale of the machine in Utah was wholly unforeseeable.” Id.
at 1125. The court agreed that the manufacturer “never
attempted to enter the machine into a stream of commerce that
ran to Utah.” Id. The machine arrived in Utah “due only to the
unforeseeable sale” by a third party, “not from any deliberate
action by defendant.” Id.
¶26 Similarly, the magneto did not arrive in Utah due to any
deliberate action on the part of CMI but instead through a series
of third-party sales. There is no evidence to suggest that the
original sale of the magneto occurred in Utah, either through
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CMI or a distributor. The record reflects that, in 2011, the
magneto was in the possession of Aircraft Electrical, a California
company, which overhauled it and transferred it to Nevada
Aircraft, a Nevada company. Nevada Aircraft installed the
magneto into an overhauled engine, which it sold to Upper
Limit Aviation in Utah. As CMI asserts, the magneto “did not
enter Utah as a result of any direct or indirect action of CMI or as
a result of any conduct by CMI purposefully directed at Utah”
but “as a result of the actions of Aircraft Electrical and Nevada
Aircraft.” Because this case does not involve the movement of
manufactured goods through distribution channels to retail sale
in the forum state, there is no “stream of commerce” connection
to support personal jurisdiction.
¶27 In any event, merely placing a product into the stream of
commerce knowing that it could be swept into the forum state
does not subject a manufacturer to personal jurisdiction. The
stream-of-commerce theory “does not amend the general rule of
personal jurisdiction,” which 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.” J. McIntyre Machinery, Ltd.
v. Nicastro, 564 U.S. 873, 880, 882 (2011) (citation and internal
quotation marks omitted). To satisfy the purposeful-availment
requirement, “the defendant must have taken deliberate steps to
serve the forum state market with the product that is the subject
of the suit before being susceptible to jurisdiction in that state.”
Arguello, 838 P.2d at 1124. In other words, “[t]he defendant’s
transmission of goods permits the exercise of jurisdiction only
where the defendant can be said to have targeted the forum; as a
general rule, it is not enough that the defendant might have
predicted that its goods will reach the forum State.” Nicastro, 564
U.S. at 882.
¶28 In the present case, there is no evidence in the record that
CMI took “deliberate steps to serve the forum state market with
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the product that is the subject of the suit.” See Arguello, 838 P.2d
at 1124. The district court found that CMI transacted business in
Utah—including maintaining an association with fixed-base
operators, supplying literature to Utah residents on request, and
shipping parts to Utah—but there is no evidence that these
activities related to the allegedly defective product. Plaintiffs
have produced no documentary evidence to show that CMI
regularly sells magnetos in Utah, much less that it targeted the
Utah market with a state-specific design, advertising, or
customer support for magnetos. See Parry v. Ernst Home Center
Corp., 779 P.2d 659, 666 (Utah 1989) (holding that there was no
specific jurisdiction over a manufacturer of a maul that caused
an injury in Utah where the record did not contain “the number
or percentage of mauls manufactured which were actually sold
in Utah” or any evidence of “special designing for Utah’s
market, advertising in Utah, establishing channels for providing
regular advice to customers in Utah, or marketing the product
through a distributor who has agreed to act as a sales agent in
Utah”). In fact, the record does not establish a single sale,
communication, or other contact related to magnetos between
CMI and any Utah resident.
¶29 In determining that it had personal jurisdiction, the
district court relied on CMI’s general business activities in Utah,
rather than any activities related to the subject of this lawsuit. In
doing so, the court’s “stream-of-commerce analysis elided the
essential difference between case-specific and all-purpose
(general) jurisdiction.” See Goodyear, 564 U.S. at 927.
¶30 In Goodyear, the United States Supreme Court clarified
that the stream-of-commerce theory is “germane to specific
jurisdiction.” Id. “But ties serving to bolster the exercise of
specific jurisdiction do not warrant a determination that, based
on those ties, the forum has general jurisdiction over a
defendant.” Id. “In contrast to general, all-purpose jurisdiction,
specific jurisdiction is confined to adjudication of ‘issues
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deriving from, or connected with, the very controversy that
establishes jurisdiction.’” Id. at 919 (citation and internal
quotation marks omitted). The lower courts in Goodyear confused
or blended the general and specific jurisdiction inquiries so that
“any substantial manufacturer or seller of goods would be
amenable to suit, on any claim for relief, wherever its products
are distributed.” Id. at 929. But a manufacturer’s “‘continuous
activity of some sorts within a state . . . is not enough to support
the demand that the corporation be amenable to suits unrelated
to the activity.’” Id. at 927 (quoting International Shoe Co., 326 U.S.
at 318). When there is no connection between the forum and the
underlying controversy, “specific jurisdiction is lacking
regardless of the extent of a defendant’s unconnected activities
in the State.” Bristol-Myers Squibb Co. v. Superior Court of Cali., 137
S. Ct. 1773, 1781 (2017).
¶31 Here, it is undisputed that CMI has not engaged in the
type of substantial and continuous activity in Utah that would
subject it to general jurisdiction. While CMI’s limited in-state
activity could potentially give rise to specific or case-related
jurisdiction, there is no support for the district court’s conclusion
that “this litigation results from injuries that relate to those
activities.” Because Plaintiffs have not shown that CMI’s
activities in Utah are related to the subject matter of the lawsuit,
there is no basis for the exercise of specific jurisdiction.
CONCLUSION
¶32 The record does not establish that CMI has suit-related
contacts sufficient to give rise to personal jurisdiction in Utah. As
a result, we vacate the district court’s order denying CMI’s
motion to dismiss. On remand, the district court may, in its
discretion, entertain the Plaintiffs’ alternative motion for
jurisdictional discovery.
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