Citation Numbers： 138 N.J. 106, 649 A.2d 379, 1994 N.J. LEXIS 863
Judges： Clifford, Hern
Filed Date： 10/13/1994
Status： Precedential
Modified Date： 11/11/2024
The opinion of the Court was delivered by
On this interlocutory appeal, two rulings of the trial court raise issues of first impression. In denying defense motions to dismiss this declaratory-judgment action, the court held, first, that a “territory of coverage” clause in an insurance policy, without more, is a sufficient basis on which to rest in personam jurisdiction over a nonresident insurance carrier. With that holding the trial court became the only court in this or any other jurisdiction to declare that a “territory of coverage” clause standing alone confers jurisdiction over an alien insurer. Second, the trial court
Because we conclude that both holdings are erroneous, we vacate the trial court’s order and remand for entry of judgment for defendants-appellants.
I
Plaintiffs are Waste Management, Inc., fifty-four of its present subsidiaries, and one of its former subsidiaries. They are engaged in the disposal of solid- and hazardous-waste products. Plaintiffs are subject to environmental damage claims by customers, governmental agencies, and others. Defendants, various insurers of plaintiffs, have denied coverage for those claims. Plaintiffs therefore brought this declaratory-judgment action to establish liability coverage for pollution-related damage at ninety-seven sites in twenty-two states and Canada. Seventeen of those sites lie in New Jersey.
Among the 150 defendant insurers are out-of-state carriers that have conducted no activities of any sort in New Jersey and whose policies, written elsewhere, contain no reference to New Jersey risks. Each of the policies, however, contains a “territory of coverage” clause, generally extending coverage to the United States and Canada. Examples of such clauses are: “The policy applies only to bodily injury or property damage * * * [that] occurs during the policy term as stated in the Declarations within the United States of America, its territories or possessions, Canada or Mexico * * and “This policy covers only within Canada and the Continental Limits of the United States of America (excluding Alaska).”
Many of the out-of-state insurers brought motions to have the declaratory-judgment action dismissed, principally on grounds of lack of personal jurisdiction and forum non conveniens. When the trial court denied the motions to dismiss, five of the defendant
The five carriers before us on this appeal have no connection with New Jersey, but their policies all contain “territory of coverage” clauses providing liability coverage for losses occurring in the United States or Canada. Four of those carriers are referred to as the Canadian Insurers: Canadian General Insurance Company, Commercial Union Assurance Company of Canada, Royal Insurance Company of Canada, and Wellington Insurance Company. The Canadian Insurers do no business in New Jersey, are not licensed to do business in New Jersey, and claim that they issued their respective policies only after ascertaining that their single insured in this litigation conducted operations in Canada alone. That insured, WMU Waste Management of Canada, Inc. (Waste Management of Canada), is neither licensed to do business in New Jersey nor involved in sites related to New Jersey. The sole site insured by the Canadian Insurers lies in Ontario and is the subject of litigation in that province’s Supreme' Court. Waste Management of Canada seeks, as part of this suit in New Jersey, a declaration that the Canadian Insurers are liable for any judgment entered by the Supreme Court of Ontario.
The Canadian Insurers appeal the denial of their motions to dismiss on both the jurisdiction and forum non conveniens issues. They argue that they will suffer irreparable injury, as contemplated by Rule 2:2-2(b) governing interlocutory appeals to this Court, if the decision below is sustained. They contend that if forced to defend in New Jersey on the coverage issue, they will lose the right to contest the resulting judgment in Canadian courts; that Canada is the appropriate forum because the insuring transaction and any insured event took place in Canada, where the site and the witnesses are located; and that subjecting them to the cost and complexity of this tangled litigation is unfair.
The fifth carrier on this appeal, Auto Owners Insurance Company (Auto Owners), raises only the claim that New Jersey courts
II
A
The basic question is whether the trial court’s determination that New Jersey has personal jurisdiction over these defendants runs afoul of due-process considerations. Our discussion of that issue starts with a restatement of some fundamental propositions.
If a cause of action arises directly out of a defendant’s contacts with the forum state, the court’s jurisdiction is “specific.” Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322, 558 A.2d 1252 (1989). If, however, the suit is not related directly to the defendant’s contacts with the forum state, but is based instead on the defendant’s continuous and systematic activities in the forum, then the State’s exercise of jurisdiction is “general.” Id. at 323, 558 A.2d 1252; see also Helicopteros Nacionales de Colum., S.A v. Hall, 466 U.S. 408, 414 n. 9, 104 S.Ct. 1868, 1872 n. 9, 80 L.Ed.2d 404, 411 n. 9 (1984) (discussing general jurisdiction).
In Hanson v. Denckla, 357 U.S. 235, 251, 78 S.Ct. 1228, 1238, 2 L.Ed.2d 1283, 1296 (1958), the Supreme Court, striking down an exercise of personal jurisdiction over out-of-state defendants, pointed to a shift from the rigid rule of Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878), which had required actual presence in a state, to a more flexible standard of “minimum contacts” under International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). “Minimum contacts” are the threshold requirements for specific personal jurisdiction. Hanson, supra, 357 U.S.
In World-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), the Supreme Court clarified the purposes of the “minimum contacts” doctrine: to protect a defendant against litigating in an inconvenient forum and to ensure that States not exceed their jurisdictional limits under our federal system. Id. at 291-92, 100 S.Ct. at 564, 62 L.Ed.2d at 498. The first interest, that of ensuring against litigating in inconvenient forums, requires that “maintenance of the suit ‘ * * * not offend “traditional notions of fair play and substantial justice.” ’ ” Id. at 292, 100 S.Ct. at 564, 62 L.Ed.2d at 498 (quoting International Shoe, supra, 326 U.S. at 316, 66 S.Ct. at 154, 90 L.Ed. at 102 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278, 283 (1940))). That end is achieved through the requirement that “[t]he relationship between the defendant and the forum * * * be such that it is ‘reasonable * * * to require the corporation to defend the particular suit which is brought there.’ ” Ibid. (quoting International Shoe, supra, 326 U.S. at 317, 66 S.Ct. at 158, 90 L.Ed. at 102 (omission in original)). The second interest, the jurisdictional limitations, “has been relaxed substantially over the years” because of the “fundamental transformation in the American economy.” Id. at 292-93, 100 S.Ct. at 565, 62 L.Ed.2d at 498. Nonetheless, minimum contacts remain the threshold requirement of jurisdiction. Id. at 294, 100 S.Ct. at 565-66, 62 L.Ed.2d at 499-500.
Critical to the due-process analysis is the question whether the defendant should reasonably anticipate being haled into court in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528, 542 (1985). The record must demonstrate that the defendant has purposefully
Once the court finds that a defendant has purposefully established minimum contacts within the forum state, other factors, such as the State’s interests in adjudicating the suit and the plaintiffs interest in obtaining relief, may properly be weighed in determining whether those minimum contacts establish jurisdiction consistent with considerations of fair play and substantial justice. Those considerations may even “serve to establish the reasonableness of jurisdiction upon a lesser showing of jurisdiction than would otherwise be required.” Id. at 477, 105 S.Ct. at 2184, 85 L.Ed.2d at 543-44. However, a court may not weigh those other factors until it has found that the defendant has experienced sufficient minimum contacts to satisfy the threshold determination.
In Burger King, the Supreme Court considered whether a “contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party’s forum.” 471 U.S. at 478, 105 S.Ct. at 2185, 85 L.Ed.2d at 545. “[T]he answer,” the Court declared, “clearly is that it cannot.” Ibid. That answer is based on the fact that a contract is “ ‘ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.’” Id. at 479, 105 S.Ct. at 2185, 85 L.Ed.2d at 545 (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 317, 63 S.Ct. 602, 604-05, 87 L.Ed. 777, 782 (1943)). Thus, “in determining whether the defendant purposefully established minimum contacts with the forum,” courts must consider such factors as “prior negotiations and contemplated future consequences, along with the
In Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), the Supreme Court affirmed the rule that the substantial connection between the defendant and the forum state necessary for a finding of minimum contacts “must come about by an action of the defendant purposefully directed toward the forum State.” Id. at 112, 107 S.Ct. at 1032, 94 L.Ed.2d at 104. The Court also listed several factors for courts to evaluate when determining the reasonableness of an exercise of jurisdiction: the burden on the defendant, the interests of the forum state, the plaintiffs interest in obtaining relief, the interstate judicial system’s interest in efficient resolution of controversies, and the shared interest of the States in furthering fundamental substantive social policies. Id. at 113, 107 S.Ct. at 1033, 94 L.Ed.2d at 105. Moreover, when the suit involves an alien defendant, a court must be “unwiUing[ ] to find the serious burdens on an alien defendant outweighed by minimal interests on the part of the plaintiff or the forum State.” Id. at 115, 107 S.Ct. at 1034, 94 L.Ed.2d at 106.
B
Ensuring that an application of the minimum-contacts test satisfies the jurisdictional requirement of due process calls for a case-by-case analysis of a defendant’s relationship with the forum state. Charles Gendler & Co. v. Telecom Equip. Corp., 102 N.J. 460, 470, 508 A.2d 1127 (1986). That analysis has two parts. The first is to determine whether minimum contacts exist at all. That first step “ensures that a state’s grasp does not exceed its jurisdictional reach,” and, in doing so, protects the primary interest of the restriction: preserving “the defendant’s liberty interest in not being subject to the entry of a judgment in a jurisdiction with which the defendant does not have sufficient minimum contacts.” Ibid. The second part of the analysis is to weigh “the sufficiency of the contacts for jurisdictional purposes[, which]
The sufficiency of those contacts depends on “the purposeful act of the defendant, not the unilateral activity of another who merely claims a relationship to the defendant.” Ibid. In weighing the sufficiency of the contacts, this Court considers whether the cause of action arose out of the defendant’s contacts within this State. If the two are related, the contacts support the exercise of jurisdiction. Ibid. If the cause of action is unrelated to the contacts, “the defendant’s contacts must be so continuous and substantial as to justify subjecting the defendant to jurisdiction.” Id. at 472, 508 A.2d 1127. The more the defendant has purposefully directed its activities to the forum state, and the greater the benefits it has received from its contacts with the forum state, the more reasonable the exercise of jurisdiction becomes. Id. at 473, 508 A.2d 1127.
The Supreme Court has established a trend of “ ‘expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents.’ ” Ibid, (quoting McGee v. International Life Ins. Co., 355 U.S. 220, 222, 78 S.Ct. 199, 201, 2 L.Ed.2d 223, 226 (1957)). “Focusing on the foreseeability of being haled into court,” id. at 475, 508 A.2d 1127, the Court adopted the stream-of-commerce theory as an “independent basis to satisfy the minimum-contacts standard.” Id. at 476, 508 A.2d 1127. In Gendler, we adopted that theory, noting that it would not subject local retailers and distributors to foreign jurisdiction, because unlike the markets of major distributors, the local operators’ foreseeable market is constrained. Id. at 477, 508 A.2d 1127. Moreover, a defendant that “prohibits distribution of its products in a particular state would not reasonably expect its products to be sold in that state,” id. at 481, 508 A.2d 1127, and would therefore not be subject to the jurisdiction of that state on a stream-of-commerce theory.
Such a finding of enhancement of defendant’s contacts must be based on the relationship of the plaintiffs residence in the forum state to the transaction with the defendant that gives rise to the suit — that is, the defendant must avail itself of the plaintiffs residence in the transaction. Put differently, the defendant must be aware that the transaction “will have direct consequences in [the forum state] such that it should [be] aware of the possibility of litigation arising in that forum.” Id. at 328, 558 A.2d 1252. In measuring the defendant’s expectations concerning that possibility, we consider the facts of the case under the World-Wide Volkswagen standard of reasonable anticipation of being haled into court. See Lebel, supra, 115 N.J. at 330, 558 A.2d 1252.
Once the defendant is found to have minimum contacts to the forum, “the ‘fair play and substantial justice’ inquiry must still be made.” Id. at 328, 558 A.2d 1252. That inquiry places the burden on the defendant to make a “ ‘compelling case’ ” that some consideration makes the exercise of jurisdiction unreasonable.
Ill
A
The Supreme Court eases discussed above reveal a common thread in their factual determinations on the existence of minimum contacts. In Hanson, supra, the Court ruled that no minimum contacts with Florida existed when the defendant, an administrator of a trust, had no offices or trust assets and did no business or solicitation in Florida. 357 U.S. at 251, 78 S.Ct. at 1238, 2 L.Ed.2d at 1296. The defendant in World-Wide Volkswagen, supra, who had made no attempt to serve the Oklahoma market or avail itself of the privileges and benefits of Oklahoma law, was held not to have had minimum contacts sufficient to support that State’s
The foregoing cases demonstrate that the existence of minimum contacts turns on the presence or absence of intentional acts of the defendant to avail itself of some benefit of a forum state. An intentional act calculated to create an actionable event in a forum state will give that state jurisdiction over the actor. Colder v. Jones, 465 U.S. 783, 791, 104 S.Ct. 1482, 1488, 79 L.Ed.2d 804, 813 (1984) (publishing libelous article in magazine sold in California, and causing greatest degree of harm in California, gave that state jurisdiction over reporter and editor). A defendant may constructively consent to the personal jurisdiction of a state court through voluntary use of certain procedures of that state. Insurance Corp. of Ire. Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704, 102 S.Ct. 2099, 2105, 72 L.Ed.2d 492, 502 (1982). Jurisdiction may be created through a contract that has substantial connections to the forum state. McGee, supra, 355 U.S. at 223, 78 S.Ct. at 201, 2 L.Ed.2d at 226 (holding that insurance contract delivered in California to a California resident, and premiums mailed from California created sufficient contacts to support finding of jurisdiction on contract). Similarly, an arbitration clause evidences consent to in personam jurisdiction for
However, not every act of a potential defendant is sufficient to satisfy the jurisdictional requirement of intentional availment. “[M]ere purchases, even if occurring at regular intervals, are not enough to warrant a State’s assertion of jurisdiction over a nonresident [defendant] in a cause of action not related to those purchase transactions.” Helicopteros, supra, 466 U.S. at 418, 104 S.Ct. at 1874, 80 L.Ed.2d at 413. The Ninth Circuit has decided that a nonresident defendant insurer’s “failure to structure its policy to exclude the possibility of defending a suit wherever an injured claimant requires medical care cannot * * * fairly be characterized as an act by which [defendant] has purposefully availed itself of the privilege of conducting activities in California.” Hunt v. Erie Ins. Group, 728 F.2d 1244, 1247 (1984). We adopt the proposition that absent a duty to act, “purposeful availment” of the privileges of a forum state cannot normally include what a nonresident defendant has failed to do. Finally, if a suit contains multiple defendants, their individual contacts to the forum state cannot be aggregated to find minimum contacts for a single defendant. Similarly, jurisdiction over one defendant may not' be based on the activities of another defendant, nor on the plaintiffs connection to the forum state. The requirements of minimum contacts analysis “must be met as to each defendant over whom a state court exercises jurisdiction.” Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 579, 62 L.Ed.2d 516, 527 (1980).
B
In light of the foregoing analysis, we consider the Canadian Insurers’ and Auto Owners’ contacts to New Jersey. The Canadian Insurers engage in no activity in this state, are not licensed to do business in New Jersey, and they insured Waste Management of Canada only after ascertaining that their insured had no operations in this country. The sole connection to New Jersey found by the trial court was the “territory of coverage”
Similarly, we find no contacts by defendant Auto Insurers with New Jersey. As with the Canadian Insurers, Auto Insurers has insured entities that have no connection of their own to this state. Its insureds’ sole tie to New Jersey is their parent conglomerate. That does not satisfy the requirement of the insurer’s purposeful availment of the benefits and privileges of doing business in New Jersey. Because we again conclude that the threshold requirement of minimum contacts is absent, we do not consider whether jurisdiction could be exercised consistent with “traditional notions of fair play and substantial justice.” As a result, our state courts may not exercise jurisdiction over defendant Auto Insurers.
We need not dwell at length on the trial court’s alternative basis for finding jurisdiction over these non-domiciliary defendants, namely, that even without a “territory of coverage” clause, New Jersey courts could assert in personam jurisdiction over nonresident insurers on the basis of this State’s interest in not fragmenting massive litigation. According to the court, the contact establishing a “substantial connection” with the forum state is New Jersey’s interest “in providing effective means of redress for its residents when the insurers refuse to pay claims.” Even assuming the validity of the trial court’s theory, plaintiffs-insureds in this action against defendants-appellants are all nonresidents seeking coverage for environmental damage occurring beyond New Jersey’s borders. Moreover, the rulings of the Supreme Court and of this Court, as discussed above, require at least some minimum contact of the defendant with the forum asserting in personam jurisdiction.
The trial court’s reliance on the ruling of the federal district court in Ashley v. Abbott Laboratories, 789 F.Supp. 552 (E.D.N.Y. 1992) (hereinafter DES Cases), for a contrary result is misplaced. In that case, the court fashioned a progressive jurisdictional approach to find nonresident manufacturers of the drug diethyl-stilbestrol (DES) amenable to a massive products-liability action brought in New York. The DES Cases test for mass torts requires a determination of whether the forum has an appreciable interest in the litigation and, if so, whether the defendant would experience a relatively substantial hardship were it required to defend in the forum state. Id. at 587. Comparing the massive insurance-coverage case before us to a mass-tort case, the trial court ruled that “sound judicial policy” justified application of the DES Cases test to insurance-coverage cases “since it is in the coverage cases that relief affects not only the tort claimant, but also the insureds.”
The trial court’s analogy breaks down in several critical areas. DES Cases was premised on the existence of a uniform tort of
In this case, other, perhaps even more appropriate, forums were available to the nonresident plaintiffs had they chosen to litigate the coverage claims separately. Most significantly, the court in DES Cases, despite its rejection of traditional “minimum contacts” analysis, rested its holding to a large extent on the theory that the nonresident DES manufacturers were participants and derived benefits from a national DES market whose alleged harms to plaintiffs in a major market segment (New York) were reasonably foreseeable to the defendants.
Similarly misplaced is the trial court’s reliance on the Appellate Division’s opinion in Westinghouse Electric Corp. v. Liberty Mutual Ins. Co., 233 N.J.Super. 463, 559 A.2d 435 (1989), another massive environmental-insurance coverage case. In that case, Westinghouse brought two declaratory-judgment actions against 144 American and foreign insurance carriers for coverage of pollution liability at eighty-one sites located in twenty-three states. The policies had been issued over the course of a twenty-five-year period as part of Westinghouse’s integrated corporate-insurance program. The Appellate Division determined that “[i]t is only the single comprehensive action, designed to adjudicate the entire controversy between the litigants, [that] can protect both the court
The requisite due-process analysis must focus principally on substantial justice and fundamental fairness, not on economy and convenience. New Jersey’s “interest nexus” therefore cannot serve as an independent basis for assertion of in personam jurisdiction.
V
In light of our disposition of the jurisdiction issue, we do not reach the Canadian Insurers’ claim that they are entitled to a dismissal on grounds of forúm non conveniens, the merits of which we perceive to be flimsy at best. See D’Agostino v. Johnson & Johnson, 115 N.J. 491, 495-97, 559 A.2d 420 (1989); Westinghouse Elec. Corp., supra, 233 N.J.Super. at 469-70, 559 A.2d 435.
VI
The order of the trial court is vacated and the cause remanded to the Law Division for entry there of a judgment of dismissal in favor of defendants-appellants.