IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 91,702
HEATH MERRIMAN, On Behalf of Himself
and all Others Similarly Situated,
Appellant,
v.
CROMPTON CORPORATION, UNIROYAL CHEMICAL COMPANY,
INC.,
UNIROYAL CHEMICAL COMPANY LIMITED, FLEXSYS NV,
FLEXSYS AMERICA L.P., BAYER AG, and BAYER CORPORATION,
Appellees.
SYLLABUS BY THE COURT
1. Whether jurisdiction exists is a question of law.
2. The plaintiff bears the burden of establishing personal jurisdiction over the defendants.
3. Where the issue of personal jurisdiction is decided pretrial on the basis of the pleadings,
affidavits, and other written materials, any factual disputes must be resolved in the
plaintiff's favor and the plaintiff need only make a prima facie showing of jurisdiction. An
appellate court reviews a trial court's dismissal for lack of personal jurisdiction under a de
novo standard.
4. A two-step analysis is required to determine if a Kansas court has personal jurisdiction.
First, the court must determine if Kansas statutes or case law provide a basis for the
exercise of jurisdiction over a particular defendant. Second, if statutory and other
requirements are satisfied, the court inquires if the exercise of personal jurisdiction
complies with the due process requirements of the Fourteenth Amendment to the United
States Constitution.
5. There are two broad types of personal jurisdiction which a state can exercise: specific and
general. Specific jurisdiction refers to jurisdiction over causes of action arising from or
related to a defendant's actions within a forum state. The Kansas long arm statute, K.S.A.
60-308(b), defines when Kansas exercises specific jurisdiction over a nonresident
defendant. 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.
6. A foreign corporation applying for authority to do business in Kansas under K.S.A. 2005
Supp. 17-7301(b)(7) expressly consents to personal jurisdiction.
7. K.S.A. 17-7307(c) provides a basis for general jurisdiction over foreign corporations.
8. The Due Process Clause is not violated when jurisdiction over a foreign corporation is
based upon the corporation's express written consent to jurisdiction under K.S.A. 2005
Supp. 17-7301(b)(7).
9. When general jurisdiction is asserted pursuant to K.S.A. 17-7307(c) and the corporate
defendant has not consented to jurisdiction, due process requires continuous and
systematic general business contacts to sustain a forum's exercise of jurisdiction.
10. In order for general jurisdiction to lie, a foreign corporation must have a
substantial
amount of contacts with the forum state. In assessing contacts with a forum, courts
consider (1) whether the corporation solicits business in the state through a local office or
agents; (2) whether the corporation sends agents into the state on a regular basis to solicit
business; (3) the extent to which the corporation holds itself out as doing business in the
forum state, through advertisements, listings, or bank accounts; and (4) the volume of
business conducted in the state by the corporation.
11. The Kansas long arm statute, K.S.A. 60-308(b), is to be construed liberally to
assert
jurisdiction over nonresident defendants to the full extent allowed by due process.
12. Jurisdiction can be obtained under K.S.A. 60-308(b)(2) if either physical or
economic
injury occurs in the state as a result of a negligent act outside the state.
13. A price-fixing conspiracy may be a tortious act under K.S.A. 60-308(b)(2).
14. K.S.A. 60-308(b) provides jurisdiction over any person who in person or through
an
agent or instrumentality does any act falling under the provisions of the long arm statute.
If one conspirator commits acts in Kansas in furtherance of the conspiracy and that
conspirator falls under the act, jurisdiction can be obtained as to all conspirators.
15. When specific jurisdiction is asserted under the Kansas long arm statute, K.S.A.
60-308(b), due process requires that the nonresident defendant have certain minimum
contacts with the forum in order for the exercise of jurisdiction to be constitutional. In
considering whether the corporation's minimum contacts meet this standard, courts
should consider the quality and nature of the defendant's activity in determining whether
it is reasonable and fair to require defense in the forum, rendering jurisdiction consistent
with traditional notions of fair play and substantial justice. Due process requires a
demonstration that the nonresident defendant purposely established minimum contacts
with the forum state, thereby invoking the benefits and protections of its laws.
16. Under the stream of commerce theory of jurisdiction, amenability to suit does not
blindly
travel with the chattel through the stream of commerce, but is limited by foreseeability.
The foreseeability that is critical to a due process analysis is not the mere likelihood that a
product will find its way into the forum state. Rather, it is that the defendant's conduct
and connection with the forum state are such that the defendant should reasonably
anticipate being haled into court there.
17. The stream of commerce theory can be applied to provide a basis for personal
jurisdiction
in a case alleging price fixing.
18. It is essential that there be 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. The purposeful availment requirement ensures that a
defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or
attenuated contacts. Rather, to satisfy due process foreseeability, a defendant's contacts
must proximately result from actions by the defendant that create a substantial connection
with the forum.
19. Because the conspiracy theory gives one subject to personal jurisdiction in a
forum the
ability to avoid in advance being subject to suit in the forum, it satisfies the fundamental
due process requirement that a defendant can be involuntarily subjected to the personal
jurisdiction of a forum only if the defendant purposefully avails itself of the privilege of
conducting activities in the forum state.
Review of the judgment of the Court of Appeals in an unpublished opinion filed June 24,
2005. Appeal
from Pratt district court; ROBERT J. SCHMISSEUR, judge. Judgment of the Court of Appeals
affirming the
district court is reversed. Judgment of the district court is reversed and the case is remanded.
Opinion filed
November 9, 2006.
Rex A. Sharp, of Gunderson, Sharp & Walke, L.L.P., of Prairie Village,
Kansas, argued the cause, and
Isaac L. Diel, of Law Offices of Isaac L. Diel, of Bonner Springs, Kansas,
Michael Flannery, of The David Danis
Law Firm, P.C., of St. Louis, Missouri, Alexander E. Barnett, of The David Danis
Law Firm, P.C., of New York,
New York, Bonny E. Sweeney and Alreen Haeggquist, of Lerach
Coughlin Stoia & Robbins, LLP, of San Diego,
California, and Brian J. Robbins, of Robbins Umeda & Fink, LLP, of San
Diego, California, were with him on the
briefs for appellant.
D. Jarrett Arp, of Gibson, Dunn & Crutcher, LLP, of Washington, D.C.,
argued the cause, and James D.
Slear, of the same firm, Stephen E. Robison and Lyndon W. Vix,
of Fleeson, Gooing, Coulson & Kitch, LLC, of
Wichita, Kansas, William D. Iverson and Michael J. Fanelli, of
Covington & Burling, of Washington, D.C., and
Daniel G. Swanson, of Gibson, Dunn & Crutcher, LLP, of Los Angeles,
California, were with him on the briefs for
appellees Flexsys America L.P. and Flexsys NV.
James A. Walker, of Triplett, Woolf & Garretson, LLC, of Wichita,
Kansas, Amy W. Ray, William V.
O'Reilly, and J. Andrew Read, of Jones Day, of Washington, D.C., and
Brian K. Grube, of Jones Day, of Cleveland,
Ohio, were on the briefs for appellees Bayer AG and Bayer Corporation.
Bill V. Hampton, Jr., of Hampton & Hampton, of Pratt, Kansas,
Robert R. Eisenhauer, of Johnston &
Eisenhauer, of Pratt, Kansas, and Ian Simmons and Benjamin G.
Bradshaw, of O'Melveny & Myers, LLP, of
Washington, D.C., were on the briefs for appellees Crompton Corporation, Uniroyal Chemical
Company, Inc., and
Uniroyal Chemical Company Limited.
The opinion was delivered by
LUCKERT, J.: Plaintiff Heath Merriman, a Kansas resident, appeals from the trial court
and Court of Appeals' determinations that Kansas courts could not exercise personal jurisdiction
over foreign corporations which allegedly conspired to fix the price of chemicals used in the
out-of-state manufacturing of two tires which Merriman purchased from a Kansas retailer. The
plaintiff argues these rulings should be reversed because the lower courts failed to recognize
general jurisdiction over the foreign corporations, erroneously applied the Kansas long arm
statute, and erroneously determined that the exercise of jurisdiction over these defendants would
violate due process.
We reverse and remand.
Allegations Regarding Jurisdiction
The plaintiff alleges he, and others similarly situated, paid an inflated price for tires
purchased in Kansas because of an out-of-state price-fixing agreement entered into by the
defendants. The plaintiff seeks class certification and treble damages pursuant to the Kansas
Restraint of Trade Act, K.S.A. 50-101 et seq., as well as attorney fees, costs, and
other relief.
The various defendants, collectively known as "The Big Three" of rubber-processing
chemical producers, separate into three groups of affiliated corporations: (1) Crompton
Corporation which owns Uniroyal Chemical Company, Inc., and Uniroyal Chemical Company
Limited; (2) Flexsys NV which owns Flexsys America, L.P.; and (3) Bayer AG which owns
Bayer Corporation.
Collectively, the defendants are the principal suppliers of most of the rubber- processing
chemicals sold in the United States. During the class period (1994 to present), plaintiff alleges
that the defendants' sales of rubber-processing chemicals for use in tire manufacturing in the
United States totaled more than $2.7 billion. The defendants sell the chemicals to major tire
manufacturers such as Pirelli, Goodyear, Michelin, and Bridgestone. After the tires are
manufactured, the tires proceed through the distribution stream, eventually arriving in retail
facilities such as the one in Pratt, Kansas, where the plaintiff purchased two tires. It is undisputed
that the tires purchased by the plaintiff were manufactured outside of Kansas; there is no
allegation that the chemicals used in those tires were sold in Kansas.
However, the plaintiff estimates that the defendants derived revenues greater than $10.8
million from Kansas sales of tires containing their chemicals. The plaintiff also alleges that a
portion of the revenues earned by the defendants are derived from chemical sales to a Goodyear
manufacturing facility located in Topeka. According to records as part of the limited discovery
allowed by the court relating to the jurisdiction issue, Flexsys shipped approximately $23 million
of chemicals to the Topeka facility from 1998 to 2002 and Crompton shipped approximately
$9.85 million in chemicals between 1994 and 1998. Bayer also sold products to the Topeka
Goodyear facility during a portion of the class period. The plaintiff did not purchase Goodyear
tires.
The plaintiff also alleges that Bayer Corporation had other contacts with the state of
Kansas through its Animal Health Division, which develops and markets veterinary
pharmaceuticals and insecticides in Shawnee, Kansas, and its Crop Science Division, which
conducts research on crop science products in Stillwell, Kansas. These activities are unrelated to
plaintiff's claim regarding overpriced rubber-processing chemicals.
The plaintiff also alleges that the defendants consented to jurisdiction in Kansas through
registering to do business or by conducting business in Kansas. None of the defendants is
incorporated or headquartered in Kansas. Crompton, Uniroyal Chemical Company, Inc., Flexsys
America, L.P., and Bayer Corporation are incorporated and headquartered in other states.
Uniroyal Chemical Company Limited is a Delaware domesticated corporation incorporated in the
Bahamas and does not have a headquarters; Bayer AG and Flexsys NV are incorporated and
headquartered in other countries. Based upon plaintiff's allegations, it appears that several, but
not all, of the defendants are authorized to do business in Kansas pursuant to K.S.A. 2005 Supp.
17-7301 or have designated registered agents for service pursuant to K.S.A. 2005 Supp. 17-6202.
Arguing that these allegations did not provide a basis for personal jurisdiction, the
defendants filed motions to dismiss, alleging: (1) the tires which plaintiff purchased were not
manufactured in Kansas and, therefore, there was no basis for specific jurisdiction in Kansas; (2)
Kansas does not recognize general jurisdiction; and (3) due process would not allow the exercise
of jurisdiction over the defendants. The motions to dismiss were granted after the district court
allowed discovery regarding jurisdiction. The district court held that "[t]he nexus between Mr.
Merriman's purchase of automobile tires in Pratt, Kansas, that were not manufactured in Kansas
allegedly overpriced because of an alleged conspiracy made far from Kansas between foreign
corporations not otherwise subject to Kansas Court jurisdiction is simply too remote to justify
jurisdiction over this claim."
The Court of Appeals affirmed, holding that Kansas does not recognize the concept of
general jurisdiction and that due process did not allow the exercise of specific jurisdiction under
the long arm statute. Merriman v. Crompton Corporation, No. 91,702, unpublished
opinion filed
June 24, 2005.
We granted the plaintiff's petition for review.
Analysis
Whether jurisdiction exists is a question of law. Mid-Continent Specialists, Inc. v.
Capital
Homes, 279 Kan. 178, 185, 106 P.3d 483 (2005). The plaintiff bears the burden of
establishing
personal jurisdiction over the defendants. Where, as here, the issue of personal jurisdiction is
decided pretrial on the basis of the pleadings, affidavits, and other written materials, any factual
disputes must be resolved in the plaintiff's favor and the plaintiff need only make a prima facie
showing of jurisdiction. An appellate court reviews a trial court's dismissal for lack of personal
jurisdiction under a de novo standard. Kluin v. American Suzuki Motor Corp., 274
Kan. 888, 893,
56 P.3d 829 (2002).
In the context of this class action, only the claims of the named class representative, not
absent members of a potential class, are examined to determine jurisdiction. Barry v.
Mortgage
Servicing Acquisition Corp., 909 F. Supp. 65, 73 (D.R.I. 1995) ("It is the named class
representative . . . whose claims must satisfy this test in order for the Court to have personal
jurisdiction over [defendant] in this action."). See generally Calagaz v. Calhoon, 309
F.2d 248,
253 (5th Cir. 1962) (under class action rule, court must have in personam jurisdiction over
named individual representative of class); Selman v. Harvard Medical Sch., 494 F.
Supp. 603,
613 n.6 (S.D.N.Y.), aff'd 636 F.2d 1204 (2d Cir. 1980) (named class representative
must satisfy
all jurisdictional prerequisites before class action can go forward). Thus, our inquiry is focused
solely upon the jurisdictional allegations related to the plaintiff's purchase of tires which were not
manufactured in Kansas and, therefore, do not directly involve the sale of rubber-processing
chemicals in Kansas.
Generally, a two-step analysis is required to determine if a Kansas court has personal
jurisdiction. First, the court must determine if Kansas statutes or case law provide a basis for the
exercise of jurisdiction over a particular defendant. Second, if statutory and other requirements
are satisfied, "the court inquires if the exercise of personal jurisdiction complies with the due
process requirements of the Fourteenth Amendment to the United States Constitution."
Kluin,
274 Kan. at 894; see Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408,
413-14, 80 L.
Ed. 2d 404, 104 S. Ct. 1868 (1984) (citing Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed.
565 [1878]);
1 Casad & Richman, Jurisdiction in Civil Actions § 3.1, p. 222 (3d ed. 1998).
In Helicopteros, 466 U.S. at 414-16, the United States Supreme Court
recognized a State
could exercise two broad types of personal jurisdiction: specific and general. Specific jurisdiction
refers to jurisdiction over causes of action arising from or related to a defendant's actions within a
forum state. 466 U.S. at 414. The Kansas long arm statute, K.S.A. 60-308(b), defines when
Kansas exercises specific jurisdiction over a nonresident defendant. Kluin, 274 Kan.
at 896.
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. Helicopteros, 466
U.S. at
415; see Kluin, 274 Kan. at 895.
In this case, plaintiff alleges specific and general jurisdiction as alternative bases for
personal jurisdiction over the defendants.
ISSUE 1: Does Kansas Recognize General Jurisdiction Over Foreign Corporations
Doing
Business in Kansas?
The United States Supreme Court has recognized that a State can assert personal
jurisdiction over a corporation which is organized under the laws of another State (i.e,
a "foreign"
corporation) even when the cause of action does not arise out of or relate to the foreign
corporation's activities in the state. E.g., Perkins v. Benguet Mining Co., 342 U.S.
437, 446-48,
96 L. Ed. 485, 72 S. Ct. 413, reh. denied 343 U.S. 917 (1952). Despite the United
States
Supreme Court's recognition of this concept, the Court of Appeals held and the defendants argue
that Kansas does not recognize general jurisdiction as a basis for asserting jurisdiction over a
corporate defendant. In reaching this holding, the Court of Appeals relied upon this court's
decision in Kluin. Plaintiff contends that the Court of Appeals misread
Kluin and erred in
reaching this holding.
In Kluin, a Kansas resident purchased a motorcycle from an Oklahoma
Suzuki dealer and
returned to Oklahoma for warranty repairs. When he sued Suzuki in Kansas for breach of express
and implied warranties and violation of the Kansas Consumer Protection Act, he argued Kansas
had jurisdiction over Suzuki under the Kansas long arm statute, K.S.A. 60-308(b). The district
court dismissed the case for lack of personal jurisdiction and improper venue.
On appeal, Kluin argued that Suzuki had transacted business in Kansas by, among other
things, entering into contracts with at least five authorized dealerships. Noting that Kluin's
injuries did not arise from these contracts, the Kluin court observed that these factual
allegations,
therefore, related to an allegation of general jurisdiction. However, the only basis on which Kluin
had asserted jurisdiction was the Kansas long arm statute, K.S.A. 60-308(b), which the court held
was limited to cases of specific jurisdiction. 274 Kan. at 896.
The Kluin court rejected general jurisdiction under the Kansas long arm
statute, ruling
that "there must be a nexus between the transaction of business and the alleged claim" in order to
support jurisdiction under the long arm statute, K.S.A. 60-308(b). 274 Kan. at 896. Because
Kluin's claims did not arise out of Suzuki's alleged contacts with Kansas, there was no such
nexus. 274 Kan. at 898-99.
The defendants in this case argue the Kluin court rejected general jurisdiction
as a basis
for a Kansas court to exercise personal jurisdiction over a foreign corporation. In large part,
defendants build their argument on two aspects of the decision. First, the court limited the issue
to whether "there is jurisdiction under K.S.A. 60-308(b), the Kansas long arm statute."
Kluin,
274 Kan. at 894. The defendants remove this sentence from its context when they argue
that it
was a statement that Kansas does not recognize general jurisdiction. The Kluin court
was merely
phrasing the argument presented by the plaintiff and that argument was limited to application of
the Kansas long arm statute. Kluin, 274 Kan. at 888, 894, 896. The second aspect of
the decision
which the defendants cite is the Kluin court's reliance on a Court of Appeals'
decision in Three
Ten Enterprises, Inc. v. State Farm Fire & Cas. Co., 24 Kan. App. 2d 85, 89, 942 P.2d
62, rev.
denied 262 Kan. 970 (1997), a case which defendants argue rejected general jurisdiction as
an
available basis for jurisdiction over a foreign corporation. In discussing the Three
Ten decision,
the Kluin court stated:
"[T]he Court of Appeals held that the district court erred in applying the doctrine of
general
jurisdiction. It noted that 'general jurisdiction' is a due process concept which 'does not excuse a
plaintiff who invokes the jurisdiction of Kansas state courts from satisfying the statutory test for
long arm jurisdiction under [K.S.A.] 60-308(b).' 24 Kan. App. 2d at 89. The Three
Ten court
observed that the legislature could have enacted a statute providing for general jurisdiction, but it
has not done so. Therefore, [the long arm statute of] K.S.A. 60-308(b) does not provide for the
exercise of general jurisdiction by Kansas courts. 24 Kan. App. 2d at 91." 274 Kan. at 896.
However, immediately after this discussion of Three Ten, the
Kluin court noted: "Three
Ten failed to argue jurisdiction under [K.S.A.] 40-218, and the Three Ten court did
not address
service under 40-218." Kluin, 274 Kan. at 896. The Kluin court then
cited Novak v. Mutual of
Omaha Ins. Co., 29 Kan. App. 2d 526, 530-33, 28 P.3d 1033, rev. denied 272
Kan. 1419 (2001),
in which the Court of Appeals held Kansas courts have general jurisdiction over a foreign
insurance company required under K.S.A. 40-218 to consent to service of process as part of its
application for authority to transact business in Kansas.
By citing K.S.A. 40-218 and Novak, the Kluin court implicitly
recognized that, while the
long arm statute is a specific jurisdiction statute, other statutes might give rise to general
jurisdiction. Moreover, the Kluin court did not explicitly deny the existence of
general
jurisdiction in Kansas. Hence, we do not read Kluin as holding that Kansas does not
recognize
general jurisdiction. Rather, it appears that this court has never explicitly rejected or recognized
the doctrine of general jurisdiction over foreign corporations.
The plaintiff, using the decision in Novak as a springboard, argues we should
recognize
general jurisdiction as a basis for personal jurisdiction over foreign corporations and can do so
under statutes which he argues are similar to the statute at issue in Novak, K.S.A.
40-218. K.S.A.
40-218 requires each foreign insurance company applying for authority to transact business in
Kansas to file a consent for service of process to be accomplished through the Insurance
Commissioner. In Novak, the insurer argued that K.S.A. 40-218 provided a
mechanism for
service but did not provide a basis for jurisdiction. Further, the insurer argued the plaintiffs' cause
of action did not arise in Kansas and that jurisdiction must be predicated on the long arm statute,
K.S.A. 60-308(b). The trial court agreed and dismissed for lack of personal jurisdiction. On
appeal, the Court of Appeals reversed, noting that the long arm statute only covers certain
situations, and when it does not apply, "resort must be had to the traditional bases of jurisdiction
such as citizenship; domicile and residence; or consent, actual or implied." 29 Kan. App. 2d at
532. Novak held that where the insurer was present within Kansas, had been served
with process
while in Kansas, and had consented to jurisdiction under K.S.A. 40-218, the trial court had
personal jurisdiction. 29 Kan. App. 2d at 533.
Although K.S.A. 40-218 does not apply in this case, the plaintiff suggests that a similar
analysis applies to K.S.A. 2005 Supp. 17-7301 and K.S.A. 17-7307(c).
K.S.A. 2005 Supp. 17-7301
K.S.A. 2005 Supp. 17-7301 requires foreign corporations wishing to do business in
Kansas to file an application for authority including
"an irrevocable written consent of the foreign corporation that actions may be commenced
against
it in the proper court of any county where there is proper venue by service of process on the
secretary of state as provided for in K.S.A. 60-304, and amendments thereto, and stipulating and
agreeing that such service shall be taken and held, in all courts, to be as valid and binding as if
due
service had been made upon an officer of the corporation."
Many courts have recognized that such consent statutes provide a basis for exercising
general jurisdiction. E.g., Sondergard v. Miles, Inc., 985 F.2d 1389, 1393-96 (8th
Cir. 1993)
(South Dakota); Bane v. Netlink, Inc., 925 F.2d 637, 640 (3d Cir. 1991)
(Pennsylvania);
Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1200 (8th Cir. 1990)
(Minnesota); Holloway
v. Wright & Morrissey, Inc., 739 F.2d 695, 698 (1st Cir. 1984) (New Hampshire);
Sternberg v.
O'Neil, 550 A.2d 1105, 1109 (Del. 1988); Werner v. Wal-Mart Stores, Inc.,
116 N.M. 229, 231-33, 861 P.2d 270 (Ct. App. 1993); Sharkey v. Washington Nat. Ins.
Co., 373 N.W.2d 421, 425-26
(S.D. 1985).
In general, the analysis of these decisions is based upon the general rule that, although
parties may not waive subject matter jurisdiction, they may waive personal jurisdiction.
Insurance Corp. v. Compagnie des Bauxites, 456 U.S. 694, 703, 72 L. Ed. 2d 492,
102 S. Ct.
2099 (1982). Additionally, these cases cite to United States Supreme Court decisions holding
that a foreign corporation expressly consents to jurisdiction when it appoints an agent for service
of process. See Neirbo Co. v. Bethlehem Corp., 308 U.S. 165, 170-71, 84 L. Ed.
167, 60 S. Ct.
153 (1939); Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U.S. 93, 95,
61 L. Ed. 610,
37 S. Ct. 344 (1917); Restatement (Second) of Conflict of Laws § 44 (1969).
As to K.S.A. 2005 Supp. 17-7301, the defendants argue that the statute contains no
jurisdictional language and deals only with the required content of a foreign corporation's
application to do business in Kansas. The defendants construe K.S.A. 2005 Supp. 17-7301(b)(7)
as merely a "consent . . . to accept as valid service the service of process upon the secretary of
state for 'actions' that may be commenced against them." Noting that service of process and
jurisdiction are distinct legal concepts, the defendants assert that consent to one does not equal
consent to the other.
In fact, K.S.A. 2005 Supp. 17-7301(b)(7) requires a foreign corporation applying for
authority to do business in Kansas to consent not only to service of process on the Secretary of
State, but also to consent "that actions may be commenced against it in the proper
court of any
county where there is proper venue by service of process on the secretary of state as provided for
in K.S.A. 60-304." (Emphasis added.) Different statutory provisions require the designation of a
registered agent for the service of process. See K.S.A. 2005 Supp. 17-6202 (requiring designation
of registered agent); K.S.A. 2005 Supp. 17-7301(b)(5) (requiring application to do business in
Kansas to include name of registered agent).
Read together, these statutory provisions make clear that K.S.A. 2005 Supp.
17-7301(b)(7) requires, as plaintiff suggests, a consent to personal jurisdiction. Thus, a foreign
corporation applying for authority to do business in Kansas under K.S.A. 2005 Supp.
17-7301(b)(7) expressly consents to personal jurisdiction and K.S.A. 2005 Supp. 17-7301(b)(7)
provides a statutory basis for jurisdiction. The issue remains whether such consent, by itself,
satisfies due process. Since not all of the defendants have consented to jurisdiction under K.S.A.
2005 Supp. 17-7301(b)(7), we will discuss alternative grounds for satisfying the first step of the
analysis – finding a statutory or case law basis for jurisdiction – before
considering whether the
exercise of general jurisdiction under the statutes satisfies due process.
K.S.A. 17-7307(c)
Additionally, the plaintiff argues that Kansas specifically recognized general jurisdiction
by adopting K.S.A. 17-7307(c), which provides:
"Any person having a cause of action against any foreign corporation, whether or
not
such corporation is qualified to do business in this state, which cause of action arose in Kansas
out of such corporation doing business in Kansas, or arose while such corporation was doing
business in Kansas, may file suit against the corporation in the proper court of a county in which
there is proper venue."
Two cases applying this provision support plaintiff's argument. Most recently, a federal
district court concluded Kansas has chosen to exercise general jurisdiction over foreign
corporations by adopting K.S.A. 17-7307(c). Scharff v. CRST, Inc., 2002 WL
922131 (D. Kan.
unpublished opinion filed May 2, 2002). In Scharff, the plaintiff was injured in an
auto accident
in California. He filed suit in Kansas against the defendants, three Iowa corporations which were
doing business in Kansas at the time of the accident. The defendants moved to dismiss for lack of
personal jurisdiction, arguing that the accident in California was unrelated to any business they
conducted in Kansas. However, the plaintiff asserted jurisdiction under K.S.A. 17-7307(c), not
the long arm statute. While the defendants had not applied for a certificate of authority to do
business in Kansas pursuant to K.S.A. 2005 Supp. 17-7301, the court found they were "doing
business" in Kansas such that K.S.A. 17-7307(c) was satisfied. Scharff, at *2-3.
The Scharff court cited Novak, and a case discussed therein,
State ex rel. K-Mart Corp. v.
Holliger, 986 S.W.2d 165 (Mo. 1999). In Holliger, K-Mart relied on the
Missouri long arm
statute for its argument that Missouri did not have personal jurisdiction because the claim did not
arise out of one of the activities enumerated in the long arm statute. The Holliger
court rejected
the argument that jurisdiction had to be based on the long arm statute, finding that to do
otherwise "would severely limit the reach of Missouri law and the protection that law gives
Missouri residents and others authorized to use our state's courts." 986 S.W. 2d at 168. The court
further explained that "long-arm statutes, as the name implies, are intended to expand the reach
of the law of the state to authorize jurisdiction over foreign corporations that are not necessarily
authorized to do business in the state but whose activities justify personal jurisdiction." 986
S.W.2d at 168. The Missouri Supreme Court concluded "there is no need for a 'long arm' to reach
K-Mart outside of Missouri, because K-Mart has a registered agent in Missouri." 986 S.W.2d at
168.
Applying this reasoning, the Scharff court concluded K.S.A. 17-7307(c)
provided general
jurisdiction and it, rather than the Kansas long arm statute, served as the basis for jurisdiction
over the defendants. Scharff, *4-5.
Similarly, in Scrivner v. Twin Americas Agricultural & Industrial
Developers, Inc., 1
Kan. App. 2d 404, 573 P.2d 614, rev. denied 222 Kan. 749 (1977), a case not cited
by any of the
parties, the Kansas Court of Appeals recognized general jurisdiction under K.S.A. 1976 Supp.
17-7301 (virtually same language as K.S.A. 2005 Supp. 17-7301) and K.S.A. 17-7307(c). In that
case, Kansas shareholders filed suit against a Panamanian corporation seeking primarily a
supervised election of directors and to enjoin a proposed stock issue. The district court dismissed
the suit for lack of personal jurisdiction over the defendant, and the Court of Appeals affirmed.
In analyzing whether there was a basis for personal jurisdiction, the Scrivner
court noted
that the plaintiffs had disclaimed any reliance on the long arm statute, K.S.A. 60-308, and were
not arguing that their cause of action arose out of the transaction of any business by the defendant
in Kansas. 1 Kan. App. 2d at 408. This left the plaintiffs with two possible avenues for
establishing jurisdiction: K.S.A. 1976 Supp. 17-7301 or K.S.A. 17-7307(c). Because the
defendant had never applied for a certificate of authority to do business in Kansas, K.S.A. 1976
Supp. 17-7301 did not apply. The court then considered K.S.A. 17-7307(c), noting that under
that statute "the cause of action must have arisen either 'out of such corporation doing business in
Kansas,' or 'while such corporation was doing business in Kansas.'" 1 Kan. App. 2d at 408. The
first clause did not apply because the cause of action did not arise out of any business done by the
defendant in Kansas; however, the second clause might apply if the defendant was doing
business in Kansas when the cause of action arose. As stated in the syllabus, the court held:
"A foreign corporation may be sued in this state on a cause of action arising
elsewhere if,
at the time the cause of action arose, it was doing business in this state so as to be required to
register and qualify."
"A foreign corporation may be sued here on any cause of action arising 'while' it
was
doing business here, even if it was not qualified." 1 Kan. App. 2d 404, Syl. ¶¶ 2, 3.
In other words, the Scrivner court held general jurisdiction exists under
K.S.A. 17-7307(c) where a foreign corporation is doing business in Kansas. Thus, the remaining
question
for the court to resolve was whether the plaintiffs' cause of action arose while the defendant was
doing business in Kansas; the court concluded it was. 1 Kan. App. 2d at 415. (The statute applied
by the court was subsequently amended. See L. 2004, ch. 143, sec. 80. Now, rather than defining
"doing business," the statute lists "[a]ctivities of a foreign corporation which do not constitute
doing business within the meaning of K.S.A. 17-7301" and provides that it "does not apply in
determining the contacts or activities that may subject a foreign corporation to service of process
. . . ." K.S.A. 2005 Supp. 17-7303[a] and [c].).
Beyond these cases, there are other authorities which support the plaintiff's argument.
Notably, Judge Gard and Professor Casad, cited with approval in Kluin, 274 Kan. at
896, agree
with plaintiff's position:
"It is important to note that the long-arm statute, K.S.A. 60-308, deals with
service of
process outside of Kansas. Section 308(d) expressly states that 'nothing contained in
this section
limits or affects the right to serve any process in any other manner provided by law.' Thus,
foreign
insurers can be served under K.S.A. 40-218, which authorizes 'general jurisdiction.' See
Novak v.
Mutual of Omaha Ins. Co., 29 Kan. App. 2d 526, 28 P.3d 1033 (2001). Other foreign
corporations
that are 'doing business' in Kansas can be served under K.S.A. 17-7301 (which requires consent
to
general jurisdiction) if the corporation is qualified to do business in Kansas, or under K.S.A.
17-7307(c), which authorizes general jurisdiction over a non-qualifying corporation for causes of
action that arose while the corporation was 'doing business' in Kansas, even though the cause of
action arose elsewhere. See Scharff v. CRST Inc., 2002 WL 922131 (D. Kan.
2002)." 4 Gard &
Casad, Kansas Law and Practice, Kan. C. Civ. Proc. Annot. § 60-308, pp. 423-24 (4th ed.
2003).
Professor Casad reiterated this view as part of the Kansas Judicial Council's testimony to
a legislative committee considering 2006 House Bill (HB) 2610, legislation which makes our
decision on this issue one of first and last impression. 2006 HB 2610 amended the long arm
statute, effective upon its publication in the statute books, by among other things, adding the
following emphasized language: "Nothing contained in this section limits or affects the right to
serve any process in other manner provided by law, including, but not limited to, K.S.A.
17-7301,
17-7307, 40-218 and 50-631, and amendments thereto." The Judicial Council testimony,
which
was supported by a memorandum authored by Professor Casad, stated that Kansas had
recognized general jurisdiction long before the Kansas long arm statute was enacted and the long
arm statute "was intended to extend the reach of Kansas courts, not to limit it."
Judicial Council
testimony on 2006 HB 2610, February 28, 2006; Minutes, Sen. Judiciary Comm. March 1, 2006
(attach. 2). Additionally, the testimony stated: "General jurisdiction over foreign corporations is
clearly allowed pursuant to K.S.A. 17-7301." However, the testimony noted that confusion has
developed over whether Kansas recognizes general jurisdiction and the amendments would
"clarify the law as it has long existed in this state."
Contrary to this view, the defendants offer a severely strained interpretation of K.S.A.
17-7307(c), focusing upon the portion of the statute which states that, regardless of whether a
foreign corporation has qualified to do business in Kansas, it may be sued for a cause of action
which "arose in Kansas out of such corporation doing business in Kansas, or arose while such
corporation was doing business in Kansas." The defendants argue the first clause authorizes suits
for causes of action arising out of a foreign corporation currently doing business in
Kansas while
the second clause authorizes suits for causes of action arising out of a foreign corporation
formerly but no longer doing business in Kansas. The defendants' interpretation of
the statute is
contrary to the plain language of the statute which clearly authorizes general jurisdiction as
argued by plaintiff.
Furthermore, a different statute, K.S.A. 2005 Supp. 17-7306, sets out the procedure when
claims are filed against a foreign corporation formerly but no longer doing business in Kansas.
K.S.A. 2005 Supp. 17-7306 provides that a foreign corporation authorized to do business in
Kansas may surrender its authority and withdraw from the state by filing certain documents with
the Secretary of State. Upon such filing,
"the appointment of the resident agent of the corporation in this state shall be revoked,
and the
corporation shall be deemed to have consented that service of process in any action, suit or
proceeding based upon any cause of action arising in this state, during the time the corporation
was authorized to transact business in this state, may thereafter be made by service upon the
secretary of state in the manner prescribed by K.S.A. 60-304, and amendments thereto." K.S.A.
2005 Supp. 17-7306(c).
This statutory provision reinforces plaintiff's argument that K.S.A. 17-7307(c) authorizes
general jurisdiction over foreign corporations still doing business in Kansas.
We hold that K.S.A.17-7307(c) provides a basis for general jurisdiction over foreign
corporations.
ISSUE 2: Does the Exercise of Jurisdiction Over the Defendants Pursuant to K.S.A.
2005
Supp. 17-7301(b)(7) and K.S.A. 17-7307(c) Comport With Due Process?
Having determined that K.S.A. 2005 Supp. 17-7301(b)(7) and K.S.A. 17-7307(c) can
provide the statutory basis for the exercise of general jurisdiction, we must determine whether the
exercise of jurisdiction would offend due process.
Due Process Under K.S.A. 2005 Supp. 17-7301
The principle issue in most cases addressing consent statutes such as K.S.A. 2005 Supp.
17-7301 is not whether the statute provides a basis for jurisdiction but whether the exercise of
jurisdiction under the provision comports with due process.
Consent jurisdiction over corporations was recognized by the United States Supreme
Court in the 1917 decision of Pennsylvania Fire Ins. Co., 243 U.S. at 95. The Court
held that the
Missouri requirement of consent to service of process did not deprive a foreign insurance
company of due process even though the consent was its only apparent contact with Missouri.
Pennsylvania Fire has not been expressly overruled and subsequently many
courts have
determined that a corporation's consent to jurisdiction satisfies due process. E.g.,
Bane, 925 F.2d
at 640; Knowlton, 900 F.2d at 1199-1200; Holloway, 739 F.2d at
696-97; Sternberg, 550 A.2d at
1109, 1111. Novak is consistent with this line of cases. With little discussion and
without
engaging in any analysis of minimum contacts, the Novak court held that an insurer's
presence in
the state and consent to jurisdiction under K.S.A. 40-218 established personal jurisdiction. 29
Kan. App. 2d at 532-33.
Summarizing the issue and the case law, one commentator has stated:
"[T]he modern rule is that a foreign corporation which, as a condition of doing business
in the
state, appoints an agent upon whom service of process may be made, has thereby given effective
consent to be sued not only in the state court of that state, but in the federal courts as well. A
foreign corporation's qualification to do business within a state, and its formal registration there,
are sometimes viewed as 'consenting' to be treated as a domestic corporation, thus permitting it to
be sued there on causes of action over which the state's courts would otherwise decline to
exercise
jurisdiction. If a foreign corporation has not expressly consented to a state's jurisdiction by
registration, 'minimum contacts' with that state may provide a due process basis for the state's
jurisdiction. However, if a foreign corporation has expressly consented to the jurisdiction of a
state by registration, due process is satisfied and an examination of 'minimum contacts' is
unnecessary. Due process is satisfied by express consent, since express consent constitutes a
waiver of all other personal jurisdiction requirements." 18 Fletcher, Cyclopedia of the Law of
Private Corporations § 8641, pp. 123-24 (rev. ed. 1999).
However, some courts have rejected consent as a sole ground for finding that the exercise
of jurisdiction comports with due process, concluding the due process holding in
Pennsylvania
Fire was implicitly overruled by International Shoe Co. v. Washington, 326
U.S. 310, 90 L. Ed.
95, 66 S. Ct. 154 (1945). In International Shoe, the Court considered whether
Washington courts
could subject a Missouri-based Delaware corporation to a suit to collect a tax based upon the
presence of several salesman in the state. The case departed from the traditional foundation of
jurisdiction, physical presence, and adopted a minimum contacts test, stating:
"Historically the jurisdiction of courts to render judgment in
personam is grounded on
their de facto power over the defendant's person. Hence his presence within the territorial
jurisdiction of court was prerequisite to its rendition of a judgment
personally binding him.
[Citation omitted.] But now that the capias ad respondendum has given way to
personal service of
summons or other form of notice, due process requires only that in order to subject a defendant to
a judgment in personam, if he be not present within the territory of the forum, he
have certain
minimum contacts with it such that the maintenance of the suit does not offend 'traditional
notions
of fair play and substantial justice.' [Citations omitted.]." 326 U.S. at 316.
Based upon this holding, some courts have concluded that this test is not satisfied by
consent alone; other "minimum contacts" are required. See, e.g., Consolidated
Development
Corp. v. Sherritt, Inc., 216 F.3d 1286, 1292-93 (11th Cir. 2000); Wenche Siemer v.
Learjet
Acquisition Corp., 966 F.2d 179, 183 (5th Cir. 1992); Ratliff v. Cooper Laboratories,
Inc., 444
F.2d 745, 748 (4th Cir. 1971). Some commentators have also criticized the consent theory of
jurisdiction based on corporate registration. See, e.g., Note, General
Jurisdiction Over Foreign
Corporations: All that Glitters is not Gold Issue Mining, 14 Rev. Litig. 741 (1995);
Kipp,
Inferring Express Consent: The Paradox of Permitting Registration Statutes to Confer General
Jurisdiction, 9 Rev. Litig. 1 (1990).
In the Tenth Circuit Court of Appeals, the issue has not been clearly resolved.
Schreiber
v. Allis-Chalmers Corp., 611 F.2d 790, 793-94 (10th Cir. 1979), following transfer from a
Mississippi district court, considered whether Mississippi could exercise jurisdiction in a suit
brought for injuries which occurred in Kansas and which were caused by a product manufactured
by a Delaware corporation, headquartered in Wisconsin, and qualified to do business in
Mississippi. The Tenth Circuit Court of Appeals considered both the continuous and systematic
activities of the corporation and the fact it was registered to do business in Mississippi in holding
that Mississippi could sustain jurisdiction. The federal district courts in Kansas have been
inconsistent. In Slawson v. Dome Petroleum Corp., 561 F. Supp. 67, 73 (D. Kan.
1983), the court
concluded the defendant corporation's appointment of a resident agent coupled with proper
service on that agent were sufficient to subject it to personal jurisdiction. Assuming, but not
deciding, that the defendant must also have sufficient minimum contacts to validate jurisdiction,
the court found such minimum contacts existed. In two unpublished opinions of Kansas federal
district courts, each followed a different approach: see 2000 International Ltd. v.
Chambers,
2000 WL 1801835 (D. Kan. unpublished opinion filed November 6, 2000) (citing
Consolidated
Development, Wenche, Siemer, and Ratliff for
premise that "registration to do business in a state
is of little consequence in general personal jurisdiction analysis"); Executive Aircraft
Consulting,
Inc., v. Tower Financial Corp., 1992 WL 402032 (D. Kan. unpublished opinion filed
December
1, 1992) (citing Knowlton and Slawson for premise that registration to
do business as a foreign
corporation in Kansas constitutes a consent to personal jurisdiction on any cause of action and no
further due process analysis is necessary).
Thus, we have the benefit of well-reasoned authority on both sides of this issue. The
Delaware Supreme Court's decision in Sternberg v. O'Neil, 550 A.2d 1105 (Del.
1988), is one of
the more thorough discussions of the view that International Shoe does not alter
Pennsylvania
Fire. Rather, "[i]t would appear that the due process holdings of Pennsylvania Fire
Ins. Co.
(express consent by registration) and International Shoe (implied consent by
minimum contacts)
complement one another and are neither inconsistent nor mutually exclusive."
Sternberg, 550
A.2d at 1110. As the Delaware court noted, many of the cases adopting the opposing view rely
upon the reference in International Shoe to the "legal fiction that [a corporation] has
given
consent to service and suit" and ignore the clarification that this reference applies to "consent
being implied from [the corporation's] presence in the state through the acts of its
authorized
agent. [Emphasis added.]." International Shoe, 326 U.S. at 318. Thus, the Court in
International
Shoe was not referring to the express consent obtained through qualifying to
do business.
Additionally, the Delaware court noted that many courts which require more than consent
have cited the United States Supreme Court's decision in Perkins v. Benguet Mining
Co., 342
U.S. 437, 96 L. Ed. 2d 485, 72 S. Ct. 413, reh. denied 343 U.S. 917 (1952); the
Delaware court
rejected the view that Perkins requires more than consent. Sternberg,
550 A.2d at 1111. The
courts citing Perkins as a basis for concluding consent alone does not satisfy due
process rely on
the following sentence in Perkins: "The corporate activities of a foreign corporation
which, under
state statute, make it necessary for it to secure a license and to designate a statutory agent upon
whom process may be served provide a helpful but not a conclusive test." 342 U.S. at 445. See,
e.g., Freeman v. Dist. Ct., 116 Nev. 550, 1 P.3d 963 (2000). However, as the
Delaware court
correctly noted in Sternberg, the context of the quoted language from
Perkins is the Court's
minimum contacts analysis utilized for implied consent rather than its consideration of whether
there was jurisdiction conferred by express consent. The implied consent analysis was necessary
because the corporation was not qualified to do business in the state and had not appointed an
agent. At another point in the decision, the Court reaffirmed the concept of express consent as a
basis for jurisdiction, stating:
"Today if an authorized representative of a foreign corporation be physically
present in
the state of the forum and be there engaged in activities appropriate to accepting service and
receiving notice on its behalf, we recognize that there is no unfairness in subjecting that
corporation to the jurisdiction of the courts of that state through such service of process upon that
representative." Perkins, 342 U.S. at 444.
The Delaware court also noted the concept of express consent was recognized in
Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985)
("Where a
forum seeks to assert specific jurisdiction over an out-of-state defendant who has not
consented
to suit there," due process is satisfied if the defendant has minimum contacts with the
forum),
and Bendix Autolite Corp. v. Midwesco Enterprises, 486 U.S. 888, 893, 100 L. Ed.
2d 896, 108
S. Ct. 2218 (1988) (appointment of an agent for service of process would operate as a consent to
general jurisdiction in any cause of action, "including those in which it did not have minimum
contacts necessary for supporting personal jurisdiction," without offending the requirements of
due process). Sternberg, 550 A.2d at 1112; see also Burnham v. Superior Court
of Cal., Marin
County, 495 U.S. 604, 616, 109 L. Ed. 2d 631, 110 S. Ct. 2105 (1990) (rejecting argument
that
there must be continuous and systematic contacts even where an individual defendant was served
with process in the state; finding the argument "rests on a thorough misunderstanding" of cases).
The Delaware court's analysis in Sternberg is persuasive and effectively
refutes the
arguments of courts adopting the opposing view. Moreover, much of the opposing analysis is
based upon the argument that the consent is not an express agreement because the statutes often
relate to service, not jurisdiction. One commentator argues that if states want their corporate
registration statutes to establish general jurisdiction over foreign corporations, they should
include an express consent provision in the statute, rather than simply inferring consent from the
corporation's appointment of a resident agent. Kipp, 9 Rev. Litig. at 43-44. As an example of a
state statute which successfully establishes general jurisdiction, Kipp cites Arkansas' statute,
which provides:
"'Before authority is granted to any foreign corporation to do business in the State, it must
file
with the Secretary of State a resolution adopted by its board of directors, consenting that service
of process upon the registered agent of the company in this state, or upon the Secretary of State
of
this state, in any action brought or pending in this state, shall be a valid service upon said
company.'" Kipp, 9 Rev. Litig. at 44 (quoting Ark. Stat. Ann. § 64-1223 [1980]).
The Kansas statute is virtually identical and contains an equally clear provision requiring
a foreign corporation to file "an irrevocable written consent . . . that actions may be commenced
against it . . . by service of process on the secretary of state . . . and stipulating and agreeing that
such service shall be taken and held, in all courts, to be as valid and binding as if due service had
been made upon an officer of the corporation." K.S.A. 2005 Supp. 17-7301(b)(7). In other words,
Kansas does not merely infer consent to jurisdiction from a foreign corporation's
registration to
do business and appointment of a resident agent; Kansas requires express written
consent to
jurisdiction.
We hold that the Due Process Clause is not violated when jurisdiction over a foreign
corporation is based upon the corporation's express written consent to jurisdiction under K.S.A.
2005 Supp. 17-7301(b)(7).
In this case, the plaintiff alleges that some defendants have expressly consented and
others have consented through the actions of an affiliated company. This later theory seems to
suggest an alter ego theory. See Farha v. Signal Companies, Inc., 216 Kan. 471,
479-81, 532
P.2d 1330 (1975) (jurisdiction over a parent corporation will give the state jurisdiction over a
subsidiary corporation, and vice versa, "if the parent so controls and dominates the subsidiary as
in effect to disregard the latter's independent corporate existence").
The record is not entirely clear which corporations have agents and which corporations
are merely alleged to have an agent because an affiliated corporation has a registered agent.
However, the plaintiff alleges that Crompton Corporation, both of its Uniroyal subsidiaries, and
Bayer Corporation were authorized to do business in Kansas pursuant to K.S.A. 2005 Supp.
17-7301 and had designated an agent for service of process. These defendants have not raised the
alter ego theory as an issue on appeal. We, therefore, will not address the merits or application of
the theory in the context of consent jurisdiction. Rather, we accept for purposes of considering a
motion to dismiss that the plaintiff has made a prima facie case that K.S.A. 2005 Supp. 17-7301
applies to these defendants based upon each corporation's express consent to jurisdiction.
The plaintiff suggests that the two Flexsys corporations were "arguably" authorized to do
business in Kansas as well. The argument is based upon the allegation that the corporations are
owned in part by Solutia, Inc., a corporation which had designated an agent for service of process
in Kansas. Plaintiff seems to suggest that service on Solutia's resident agent would also give the
court jurisdiction over the two Flexsys corporations based on the alter ego theory. However, the
plaintiff has not named Solutia as a party, so service on Solutia would not equate to jurisdiction
over Solutia; therefore, plaintiff cannot reach Flexsys through Solutia in this manner. Thus, we
must examine whether there are other bases for jurisdiction over the Flexys corporations and any
other defendant which has not consented to jurisdiction.
General Jurisdiction Under K.S.A.
17-7307(c)
When general jurisdiction is asserted and a corporate defendant has not consented to
jurisdiction, due process requires "continuous and systematic general business contacts" to
sustain a forum's exercise of jurisdiction. Helicopteros Nacionales de Colombia v. Hall,
466 U.S.
408, 416, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984); see Benton v. Cameco Corp.,
375 F.3d 1070,
1080 (10th Cir. 2004) (quoting OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149
F.3d 1086,
1091 [10th Cir. 1998]) (rejecting general jurisdiction where the defendant had two dozen "spot
market" transactions over 8-year period and where defendant's wholly owned subsidiary was
licensed to do business in state).
This test of "continuous and systematic general business contacts" applies when general
jurisdiction is asserted under K.S.A. 17-7307(c). See 4 Gard & Casad, Kansas Law and
Practice,
Kan. C. Civ. Proc. Annot. § 60-308, p. 424 (4th ed. 2003) ("doing business" under K.S.A.
17-7307[c] "requires ongoing, systematic activity" and "even if the statute purports to authorize
jurisdiction, the constitutional due process requirements for general jurisdiction must be
satisfied.") Consistent with this principle, the federal district court applying K.S.A. 17-7307(c) in
Scharff v. CRST, Inc., 2002 WL 922131 (D. Kan. unpublished opinion filed May 2,
2002),
considered whether the exercise of personal jurisdiction comported with due process
requirements, including whether the defendants had "contacts with the forum state [that were] so
pervasive that personal jurisdiction is conferred by the 'continuous and systematic' nature of the
defendant's in-state activities" and whether "the exercise of personal jurisdiction offends
traditional notions of fair play and substantial justice." Scharff, at *5-7.
Two United States Supreme Court opinions have addressed what constitutes continuous
and systematic contacts. In Perkins, 342 U.S. at 447-48, the Supreme Court held that
a Philippine
corporation had continuous and systematic contacts with Ohio where the corporation operated
part of its general business out of Ohio and its president kept his wartime office in Ohio, kept
company files there, held directors' meetings there, carried on corporate correspondence from his
Ohio office, deposited corporate funds in two Ohio bank accounts,
engaged an Ohio bank to act
as the corporation's transfer agent, and supervised the rehabilitation of
the corporation's
Philippine properties from Ohio.
Reaching the opposite holding in Helicopteros, 466 U.S. 408, the Supreme
Court found
the defendant's contacts with Texas were insufficient to support general personal jurisdiction
where the defendant had ventured to Texas to negotiate a contract, had purchased helicopters and
related equipment from Texas vendors at regular intervals, and had sent prospective pilots and
other personnel to Texas for training.
Application of these two cases to different facts is less than clear. While the Supreme
Court has refrained from stating factors to be applied in determining if contacts are continuous
and systematic, other courts have attempted to do so. Often it is stated:
"In order for general jurisdiction to lie, a foreign corporation must have a substantial
amount of
contacts with the forum state. In assessing contacts with a forum, courts consider (1) whether the
corporation solicits business in the state through a local office or agents; (2) whether the
corporation sends agents into the state on a regular basis to solicit business; (3) the extent to
which the corporation holds itself out as doing business in the forum state, through
advertisements, listings or bank accounts; and (4) the volume of business conducted in the state
by
the corporation. 4 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure at
§
1069, at 348-55 (2d ed. 1987)." Systems Material Handling Company v. Greenstein,
84 F. Supp.
2d 1203, 1209 (D. Kan. 2000).
Applying these factors to Bayer Corporation, we conclude it had continuous and
systematic contacts with Kansas by virtue of its Animal Health Division operating in Shawnee,
Kansas, and its Crop Science Division operating in Stillwell, Kansas.
However, the other defendants' contacts with Kansas in this case fall short of being the
type of continuous and systematic contacts required to satisfy traditional notions of fair play and
substantial justice. The plaintiff did not allege that any of the other defendants had a local office
or agents in Kansas; sent agents to Kansas on a regular basis to solicit business from Goodyear or
others; or held themselves out as doing business in Kansas through advertisements, listings, or
bank accounts. While the volume of business the defendants conducted with Goodyear was
financially substantial, all of the defendants' sales were to a single Kansas customer. See
D.J.'s
Rock Creek Marina, Inc. v. Imperial Foam and Insulation Mfg. Co., 2003 WL 262495 (D.
Kan.
unpublished opinion filed January 29, 2003) (finding no authority that contact with a forum
consisting of a single customer constituted systematic and continuous contacts necessary to
confer general jurisdiction; much more than single contact in the forum required, citing
Morrison
v. WCCO Belting, Inc., 35 F. Supp. 2d 1293 [D. Kan. 1999], which held a defendant
lacked
continuous and systematic contacts despite continuous sales in
Kansas, making sales calls to
Kansas customers, directly shipping products into Kansas, and having
a Kansas-based sales
representative).
Thus, under the facts of this case, due process does not allow the exercise of general
jurisdiction under K.S.A. 17-7307(c) as to any defendant except Bayer Corporation. Thus, we
must consider the plaintiff's other arguments as to why jurisdiction can be asserted over Flexys.
ISSUE 3: Does the Kansas Long Arm Statute, K.S.A. 60-308(b), Provide a Basis for
Specific
Jurisdiction Over the Defendants?
Alternatively, the plaintiff argues the Kansas long arm statute, K.S.A. 60-308(b), provides
a statutory basis for asserting jurisdiction over the defendants under the theory that the
price-fixing damages arose from actions by the defendants in Kansas. In Kansas, the long arm
statute is
construed liberally to assert jurisdiction over nonresident defendants to the full extent allowed by
the Due Process Clause. Kluin v. American Suzuki Motor Corp., 274 Kan. 888, 893,
56 P.3d 829
(2002).
The long arm statute provides, in pertinent part:
"(b) Any person, whether or not a citizen or resident of this state, who in person or
through an agent or instrumentality does any of the acts hereinafter enumerated, thereby submits
the person and, if an individual, the individual's personal representative, to the jurisdiction of the
courts of this state as to any cause of action arising from the doing of any of these
acts:
"(1) Transaction of any business within this state;
"(2) commission of a tortious act within this state;
. . . .
"(7) causing to persons or property within this state any injury arising out of an act
or
omission outside of this state by the defendant if, at the time of the injury either (A) the
defendant
was engaged in solicitation or service activities within this state; or (B) products, materials or
things processed, serviced or manufactured by the defendant anywhere were used or consumed
within this state in the ordinary course of trade or use." (Emphasis added.) K.S.A. 2005 Supp.
60-308(b).
The Court of Appeals concluded the plaintiff failed to establish specific jurisdiction under
K.S.A. 60-308(b)(1) (transaction of business within the state) and (b)(7) (local injury from
transaction outside the state). However, the Court of Appeals assumed that K.S.A. 60-308(b)(2)
(tortious act within the state) would apply because antitrust violations are generally recognized to
be torts. Merriman, slip op. at 7-8. Applying this provision, the plaintiff suggested to
the Court of
Appeals that specific jurisdiction could be acquired over the defendant who sold the chemicals
which were used to manufacture the tires plaintiff purchased in Kansas at an inflated price. See
Ling v. Jan's Liquors, 237 Kan. 629, 632-33, 703 P.2d 731 (1985) (K.S.A.
60-308[b][2] supports
the exercise of personal jurisdiction where act occurs outside of the state but injury occurs in
state; the "'tortious act' is deemed to have occurred in the state where the injury occurs." 237 Kan.
at 633). Once specific jurisdiction was acquired over one defendant, the plaintiff argued that,
under a conspiracy theory of jurisdiction, jurisdiction exists over all of the defendants because
each coconspirator is "an agent or instrumentality" of the other pursuant to K.S.A. 60-308(b) and
the action of one coconspirator is considered to be the act of all. See Professional Investors
Life
Ins. Co. v. Roussel, 445 F. Supp. 687 (D. Kan. 1978).
The Court of Appeals accepted that the statutory basis for jurisdiction might
be satisfied
under this theory. But, the court ruled that the constitutional due process test was not met where
the defendants merely placed a product into the stream of commerce and did not purposefully
direct their products to serve the market in Kansas, citing Asahi Metal Industry Co. v.
Superior
Court, 480 U.S. 102, 112, 94 L. Ed. 2d 92, 107 S. Ct. 1026 (1987). Merriman,
slip op. at 8.
The first step of analysis is to determine if the Court of Appeals was correct in its analysis
and application of the various provisions of the long arm statute. Because the Court of Appeals
determined that K.S.A. 60-308(b)(2) was the only possible basis for jurisdiction, we will begin
our analysis with that provision.
K.S.A. 60-308(b)(2) – Tortious Act Within the State
The Court of Appeals assumed that K.S.A. 60-308(b)(2) would apply because antitrust
violations are generally recognized to be torts. Merriman, slip op. at 7.
The defendants argue that K.S.A. 60-308(b)(2) cannot provide the basis for specific
jurisdiction for two reasons: (1) because the alleged tortious act did not occur in Kansas and (2)
because price fixing is not a tortious act.
The defendants recognize this court has held that when an injury occurs in this state as a
result of a negligent act outside the state, the tortious act provision of the long arm statute will
support the exercise of personal jurisdiction. See Ling, 237 Kan. at 632-33. The
Ling court
reasoned: "[T]he 'tortious act' is not complete until the injury has occurred. In other words, the
'tortious act' is deemed to have occurred in the state where the injury occurs." 237 Kan. at 633.
Contrary to the holding of Ling, the defendants contend that, under the facts
of this case,
any tortious act was necessarily completed, not when plaintiff sustained economic injury, but
when the defendants sold price-fixed chemicals to the manufacturer (outside Kansas) who made
the plaintiff's tires. The defendants contend that a contrary conclusion would mean that any tort
which has economic ramifications in Kansas is subject to the jurisdiction of the Kansas courts.
The defendants argue that Ling's holding should be limited to situations
where physical
injury occurs in this state as the result of a tortious act occurring outside the state. The defendants
point out that the tortious act provision of the Kansas long arm statute was based upon the
tortious act provision of the Illinois long arm statute (see Woodring v. Hall, 200
Kan. 597, 600,
438 P.2d 135 [1968]) and that the Illinois Supreme Court has refused to extend long arm
jurisdiction based on a tortious act outside the state which causes only economic injury within the
state. See R.W. Sawant & Co. v. Allied Programs, 111 Ill. 2d 304, 312, 489
N.E.2d 1360 (1986);
Green v. Advance Ross Electronics Corp., 86 Ill. 2d 431, 437-39, 427 N.E.2d 1203 (1981).
However, several cases applying Kansas law have not made any distinction between
physical and economic injury. See Dazey Corp. v. Wolfman, 948 F. Supp. 969, 973
(D.
Kan.1996) (exercise of personal jurisdiction under K.S.A. 60-308[b][2] proper where plaintiff's
financial loss, allegedly caused by defendant's fraudulent conduct, occurred in Kansas);
National
Gypsum Co. v. Dalemark Industries, Inc., 779 F. Supp. 147 (D. Kan. 1991);
Loeffelbein v.
Milberg Weiss Bershad Hynes & Lerach LLP, 33 Kan. App. 2d 593, 598, 106 P.3d
74, rev.
denied 280 Kan. ___ (2005). There is no persuasive reason not to adopt the view of these
cases.
The legislature did not make application of K.S.A. 60-308(b) dependent upon the nature of the
injury. Jurisdiction can be obtained under K.S.A. 60-308(b)(2) if either physical or economic
injury occurs in the state as a result of a negligent act outside the state.
The defendants also argue that price fixing is not a tortious act because, at common law,
while some antitrust violations were recognized as torts, other antitrust violations such as price
fixing were not. In support, the defendants cite a law review Note, Contribution in Private
Antitrust Suits, 63 Cornell L. Rev. 682, 692-97 (1978), which opines that whether a
particular
antitrust suit sounds in tort depends on the nature of the violation and argues that price-fixing
actions more closely resemble quasi-contract than tort. The defendants also cite several cases
which have refused to recognize price-fixing as a tort. See, e.g., Free v. Abbott
Laboratories,
Inc., 164 F.3d 270, 273-74 (5th Cir. 1999) (declining to recognize tort cause of action for
price
fixing in violation of Louisiana antitrust laws where neither Louisiana Supreme Court nor
legislature had done so); Four B Corp. v. Ueno Fine Chemicals Industry, Ltd., 241 F.
Supp. 2d
1258, 1262 (D. Kan. 2003) (in price-fixing case, finding plaintiffs had "provided no legal support
for their contention that a violation of Kansas antitrust laws constitutes tortious behavior");
Indiana Grocery Co. v. Super Valu Stores, Inc., 684 F. Supp. 561, 584 (S.D. Ind.
1988) ("no
Indiana precedent establishes price fixing or predatory pricing as a tort"); see also Apex
Hosiery
Co. v. Leader, 310 U.S. 469, 497, 84 L. Ed. 1311, 60 S. Ct. 982 (1940) (prior to Sherman
Act,
agreements to fix prices "gave rise to no actionable wrong").
According to the defendants, the cases cited by the plaintiff stand only for the premise
that antitrust actions in general are tort actions, or that certain kinds of antitrust
violations or
other wrongs, other than price fixing, constitute torts. See, e.g., Williams Elec.
Co., Inc. v.
Honeywell, Inc., 854 F.2d 389, 394 (11th Cir. 1988) ("antitrust violations do encompass
some
business torts" including negotiation and execution of contracts that violated antitrust laws);
Bangor Punta Operations v. Universal Marine Co., 543 F.2d 1107, 1109 (5th Cir.
1976)
(violation of Lanham Act – trademark infringement – constitutes federal tort of
unfair
competition); Albert Levine Associates v. Bertoni & Cotti, 314 F. Supp. 169,
171 (S.D.N.Y.
1970) (violation of Clayton Act – group boycott – is a tort); McDonald v.
Amtel, Inc., 633 P.2d
743 (Okla. 1981) (cause of action under state antitrust statute is tortious rather than contractual in
nature).
However, the Illinois courts have held that the term "tortious act" as used in their long
arm statute "is not limited to those acts which constituted torts at common law. Rather, it
encompasses any act that constitutes a breach of duty to another imposed by law." Florendo
v.
Pan Hemisphere Transport, Inc., 419 F. Supp. 16, 17 (N.D. Ill. 1976). Furthermore, there
are a
few cases, not cited by either party, which have held that price-fixing actions involve the
infliction of tortious injury and that injury occurs at the place of sale because the consumer is
injured when he or she pays the artificially inflated price. See In re Cardizem CD Antitrust
Litigation, 105 F. Supp. 2d 618, 675 n.29 (E.D. Mich. 2000) (plaintiffs alleged conspiracy
to
restrain trade, reduce competition and fix prices; court accepted argument that "antitrust injuries,
by their nature, involve infliction of tortious injury, . . . and that . . . 'the place of injury from a
price-fixing conspiracy is the place of sale, since the consumer is injured at the time he pays the
artificially inflated price'"); In re Mid-Atlantic Toyota Antitrust Litigation, 525 F.
Supp. 1265,
1274 (D. Md. 1981).
Another such case, Hitt v. Nissan Motor Company, Ltd., 399 F. Supp. 838,
847-48 (S.D.
Fla. 1975), explained the policy reasons in favor of applying the tortious act provisions of state
long arm statutes to a price-fixing conspiracy:
"[L]ike a defective product, the injury within the forums which could result from a price
fixing
conspiracy by a manufacturer, its distributor and franchised dealers, is certainly foreseeable even
though such injury is only of a pecuniary nature. It is a distinction without merit that a products
liability injury arises out of the use of the product because injury as a result of a price fixing
conspiracy is incident to the transaction of sale itself. The buyer who pays higher prices due to
such a conspiracy is injured at the time such sale is consummated. The analogy is obvious. From
a
policy point of view an even greater reason can be envisioned for reaching a manufacturer in a
case such as the present one – every buyer of such a 'tainted' product is injured and thus
the injury
is widespread whereas injuries due to defective products are generally relatively rare in
proportion
to the total number of a given product sold."
This reasoning is persuasive.
We hold that a price-fixing conspiracy may be a tortious act under K.S.A. 60-308(b)(2).
Additionally, we must consider the plaintiff's contention that, under a conspiracy theory
of jurisdiction, if personal jurisdiction exists over one defendant pursuant to K.S.A. 60-308(b)(2),
jurisdiction exists over all of the defendants.
K.S.A. 60-308(b) provides jurisdiction over any person "who in person or through an
agent or instrumentality does any" act falling under the provisions of the long arm statute. Thus,
if one conspirator commits acts in Kansas in furtherance of the conspiracy and that conspirator
falls under the act, jurisdiction can be obtained as to all conspirators. See Professional
Investors
Life Ins. Co., 445 F. Supp. 687. This method of acquiring personal jurisdiction pursuant to
long
arm statutes has been adopted by a majority of courts. Courts have used the civil conspiracy
theory to assert jurisdiction "over [those] whom jurisdiction would otherwise be lacking."
In re
Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398, 411 (E.D. Pa. 1981). See generally
Althouse, The Use of Conspiracy Theory to Establish In Personam Jurisdiction: A Due
Process
Analysis, 52 Fordham L. Rev. 234 (1983).
Because we conclude that the provisions of K.S.A. 60-308(b)(2) may apply as alleged by
the plaintiff, we need not consider the other provisions of 60-308 under which the plaintiff
asserts jurisdiction.
ISSUE 4: Does the Exercise of Jurisidiction Over the Defendants Pursuant to K.S.A.
60-
308(b)(2) Comport With Due Process?
Having determined that K.S.A. 60-308(b)(2) may apply, the next consideration is whether
application of the provision in this case would comport with due process.
International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S.
Ct. 154
(1945), established the analytical scheme which gave rise to long arm statutes such as K.S.A.
60-308(b), stating due process was not offended when jurisdiction is exercised over a defendant
that,
although not present within the territory of the forum, has "certain minimum contacts" with the
forum. In considering whether the corporation's minimum contacts meet this standard, courts
should consider "the quality and nature" of the defendant's activity in determining whether it is
reasonable and fair to require defense in that state (326 U.S. at 317, 319), rendering jurisdiction
consistent with "'traditional notions of fair play and substantial justice. [Citation omitted.].'" 326
U.S. at 316; see In re Marriage of Brown, 247 Kan. 152, 161, 795 P.2d 375 (1990).
Due process requires "a demonstration that the nonresident defendant purposely
established minimum contacts with the forum state, thereby invoking the benefits and
protections
of its laws." (Emphasis added.) In re Hesston Corp., 254 Kan. 941, Syl. ¶ 3,
870 P.2d 17 (1994);
see Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 85 L. Ed. 2d 528, 105 S.
Ct. 2174
(1985). "The requirement of purposeful availment ensures that an out-of-state defendant will not
be haled into a jurisdiction as a result of the unilateral acts of another party." Loeffelbein,
33 Kan.
App. 2d at 600.
In this case, the plaintiff's claim arose from the sale of tires which were manufactured in
another state. Therefore, the defendants' sales of rubber-processing chemicals to Goodyear in
Kansas are not the basis for the claim. Nor are Bayer's agricultural activities.
Rather, the plaintiff argues that the defendants purposefully established contacts with
Kansas by selling price-fixed chemicals to national tire manufacturers known to sell tires in
Kansas. In other words, according to the plaintiff, the defendants placed their products into the
stream of commerce with the expectation that the chemicals would be utilized in products which
would be purchased by consumers in Kansas.
The United States Supreme Court recognized the stream of commerce theory as being
sufficient to establish minimum contacts in World-Wide Volkswagen Corp. v.
Woodson, 444 U.S.
286, 297-98, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980). In World-Wide Volkswagen,
the plaintiffs
were involved in a car accident in Oklahoma and brought a products liability action in Oklahoma
against the New York wholesaler and dealer who sold them their car. The plaintiffs argued that
the defendants had placed the car into the stream of commerce, that it was foreseeable that the car
would be driven in Oklahoma, and that the assertion of personal jurisdiction in that state was
therefore proper. The Court rejected that argument. It held that amenability to suit does not
blindly "travel with the chattel" through the stream of commerce, but is limited by foreseeability.
444 U.S. at 296.
"[T]he foreseeability that is critical to due process analysis is not the mere likelihood that
a
product will find its way into the forum State. Rather, it is that the defendant's conduct and
connection with the forum State are such that he [or she] should reasonably anticipate being
haled
into court there." 444 U.S. at 297.
A corporation can reasonably anticipate being haled into court in a state if it "delivers its
products into the stream of commerce with the expectation that they will be purchased by
consumers in the forum State," 444 U.S. at 298, and "if the sale of [its] 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." 444 U.S. at 297.
Four years later, the Court again considered the "stream of commerce" theory in
Asahi
Metal Industry Co. v. Superior Court, 480 U.S. 102, 94 L. Ed. 2d 92, 107 S. Ct. 1026
(1987). In
Asahi, a Japanese company had manufactured a valve that was incorporated into a
tire by a
Taiwanese tire manufacturer that was placed on a Honda motorcycle that was sold at retail in
California. After an accident in California, the motorcycle purchaser sued Honda and the
Taiwanese tire manufacturer in a products liability action. The tire manufacturer impleaded the
valve manufacturer and settled its claim with the plaintiff. That left only the question of
indemnification between the Taiwanese tire manufacturer and the Japanese valve manufacturer to
be determined by the California court.
The Supreme Court unanimously held that the valve manufacturer could not be
constitutionally required to defend in California; however, four justices, in a plurality opinion
authored by Justice O'Connor, also believed the fact that the valve manufacturer introduced its
products into the stream of commerce with awareness that a significant portion of them would be
sold in California was not sufficient to establish purposeful availment. Some additional evidence,
such as evidence that the manufacturer advertised its products in California showing an intent to
serve that market, was required. 480 U.S. at 112-13. The Court of Appeals in this case relied
upon this decision in ruling that due process was not met because the defendants had not
purposefully directed its sales to Kansas. See Merriman, slip op. at 8-9.
The plaintiff argues that the Court of Appeals' reliance on the opinion was erroneous
because Asahi was a plurality decision. Relying upon the stream of commerce
theory, the
plaintiff contends the court can infer from the defendants' sales of chemicals to major national
tire manufacturers that the defendants knew their product would be used to manufacture tires that
would be sold in all 50 states, including Kansas. This argument garners some support in the
concurring opinion in Asahi, in which four justices, led by Justice Brennan,
disagreed with the
idea that "additional conduct" was needed for the application of the stream of commerce theory.
Justice Brennan stated:
"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. . . . A defendant who
has placed goods in the stream of commerce benefits economically from the retail sale of the
final
product in the forum State, and indirectly benefits from the State's laws that regulate and
facilitate
commercial activity." 480 U.S. at 117 (Brennan, J., concurring).
In the aftermath of Asahi, some courts have adopted the approach taken by
Justice
Brennan, designating it as the broad approach, while others have followed the approach taken by
Justice O'Connor, designating it as the restrictive approach. Compare Ruston Gas Turbines,
Inc.
v. Donaldson Co., Inc., 9 F.3d 415 (5th Cir. 1993), and Dehmlow v. Austin
Fireworks, 963 F.2d
941 (7th Cir. 1992), with Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939
(4th Cir. 1994), and
Boit v. Gar-Tec Products, Inc., 967 F.2d 671 (1st Cir. 1992).
As applied in this case, there are several considerations to be weighed in considering the
conflicting views regarding the application of Asahi and World-Wide
Volkswagen. First, both
Asahi and World-Wide Volkswagen are products liability cases, raising
the question of whether
the theory should be applied in a price-fixing case. Other courts have expanded the application of
the stream of commerce theory to provide a basis for personal jurisdiction in cases involving
patent, copyright, and trademark infringement and violations of federal antitrust, tax, and
environmental laws. See Dayton, Personal Jurisdiction and the Stream of Commerce,
7 Rev.
Litig. 239, 261 n.73 (1988) (digesting cases). And, at least one court has used the theory to find
jurisdiction over an antitrust claim involving a price-fixing conspiracy. See Hitt, 399
F. Supp.
838 (upholding jurisdiction under tortious act provisions of various state long arm statutes where
foreign defendant caused its products to be shipped and sold in U.S.). We see no basis to depart
from this generally accepted view and, therefore, conclude that the stream of commerce theory
can be applied to provide a basis for personal jurisdiction in a case involving a price-fixing
conspiracy.
Next, we must consider the statements in the plurality opinions in Asahi in
the context of
World-Wide Volkswagen and other decisions of the Supreme Court. See 4 Gard
& Casad, Kansas
Law and Practice, Kan. C. Civ. Proc. Annot. § 60-308, p. 427 (4th ed. 2003) (because
Asahi did
not overrule World-Wide Volkswagen stream of commerce theory still valid without
considering
stream of commerce plus). When other cases are considered, it becomes apparent that even the
broad view of the stream of commerce theory is not as broad as the plaintiff would suggest.
World-Wide Volkswagen requires something more than the mere placing of goods
into the stream
of commerce and the ability to foresee that the product would eventually make its way into goods
sold in Kansas. The decision requires that the sale of a product arise "from the efforts of the
manufacturer or distributor to serve directly or indirectly, the market for its product in other
States." 444 U.S. at 297.
In an earlier decision, Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d
1283, 78 S. Ct.
1228 (1958), the Court stated "it is essential in each case that there be 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." In yet another case, the Court
explained: "The 'purposeful availment' requirement ensures that a defendant will not be hailed
into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts." Burger
King
Corp., 471 U.S. at 475. Rather, to satisfy due process foreseeability, a defendant's contacts
must
"proximately result from actions by the defendant himself that create a 'substantial
connection'
with the forum State. [Citation omitted.]." 471 U.S. at 476. Our reading of World-Wide
Volkswagen and Asahi is that the Supreme Court has not abandoned the
International Shoe test
as further articulated in Burger King. Notwithstanding the breadth of the stream of
commerce
language in World-Wide Volkswagen, the entire opinion indicated that jurisdiction
must rest on a
person's activity deliberately directed toward the forum state. This remains the touchstone of the
minimum contacts analysis. Furthermore, the decisions of this court have consistently required a
purposeful availment. See In re Hesston Corp., 254 Kan. at 959.
As the defendants in this case point out, the burden of making even a prima facie case of
purposeful availment is more difficult when the defendant is the supplier of raw materials or
component parts used in a manufacturing process. Some courts have upheld the exercise of
jurisdiction over suppliers of component parts and raw materials where knowledge that the
product would be used in other states could be inferred from the suppliers' business dealings with
manufacturers of the completed product. See, e.g., In re San Juan Dupont Plaza
Hotel Fire Lit.,
742 F. Supp. 717 (D.P.R. 1990); Louis Winer v. San Francisco Mercantile, 501 So.
2d 171 (Fla.
Dist. App. 1987); Dahmes v. Champagne Elevators, Inc., 869 So. 2d 904 (La. App.
2004); State
ex rel. CSR Ltd. v. McQueen, 190 W. Va. 695, 441 S.E.2d 658 (1994).
However, many other courts have rejected this view. In suits similar to this case, at least
two courts have determined it would violate due process to exercise jurisdiction over Crompton,
Flexsys, and Bayer when faced with price-fixing allegations similar to those raised in this case
and under similar jurisdictional facts (these cases did not involve general jurisdiction issues and
did not allege any chemical sales in the state such as alleged in this case with the sales to the
Topeka Goodyear plant): Lorix v. Crompton Corp., 680 N.W.2d 574 (Minn. App.
2004), and
Frankenfeld v. Crompton Corp., 697 N.W.2d 378 (S.D. 2005). Other courts have
reached the
same conclusions in cases involving other component parts or raw materials. E.g.,
In re
Minnesota Asbestos Litigation, 552 N.W.2d 242 (Minn. 1996); CSR Ltd. v.
Link, 925 S.W.2d
591 (Tex. 1996).
One such case has many factual similarities to the present case and applied the Kansas
long arm statute. Four B Corp. v. Ueno Fine Chemicals Industry, Ltd., 241 F. Supp.
2d 1258 (D.
Kan. 2003), involved a class action arising out of an alleged international conspiracy to fix the
prices of sorbates, including potassium sorbate and sorbic acid, which are chemical preservatives
used in food products. Plaintiffs allegedly purchased products containing sorbates that were
manufactured and sold by defendants. The defendants did not manufacture the products in
Kansas and did not sell their products directly to consumers. The court applied the restrictive
view of Justice O'Connor's opinion and determined that due process did not allow asserting
jurisdiction over the defendants. 241 F. Supp. 2d at 1268-70. Citing OMI Holdings, Inc. v.
Royal
Ins. Co., 149 F.3d 1086, 1095-96 (10th Cir. 1998), the court applied a test similar to that
adopted
in Kansas in White v. Goldthwaite, 204 Kan. 83, Syl. ¶ 3, 460 P.2d 578
(1969). The first prong of
each test embodies the concept of purposeful availment; the second requires the nexus between
that action and the harm.
When the analysis in this case is limited to the product stream resulting in the plaintiff's
purchase of two tires not manufactured in Kansas, the nexus is lacking in this case. All that
connects the defendants' actions and the plaintiff's injury arising from the purchase of tires is the
fortuitousness of the plaintiff's residence. There is no indication that the defendants have any
control over or collaboration with the tire manufacturers as to where they market their tires.
Thus, as it relates to the sales of chemicals to a manufacturer in another state that made the tires
which the plaintiff purchased, there is no showing that a defendant's contacts with Kansas
"proximately result[ed] from actions by the defendant himself that create a
'substantial
connection' with the forum State. [Citations omitted.]." Burger King, 471 U.S. at
476.
The plaintiff urges us to look more broadly than at the tire purchase which injured the
plaintiff and to consider the nexus established with Kansas because of the defendants' sales to
Goodyear in Topeka. This argument blurs the distinction, at least somewhat, between general and
specific jurisdiction. The stream of commerce theory does not apply to a general jurisdiction
analysis. See Huffy Corp. v. Overload Industries, 246 F. Supp. 2d 1093, 1099 (D.
Nev. 2003)
(holding that defendant's "placement of products into the stream of commerce does not support
this Court's exercise of general jurisdiction"); see also Purdue Research v.
Sanofi-Synthelabo,
S.A., 338 F.3d 773, 788 (7th Cir. 2003) (stream of commerce theory "is relevant only to
the
exercise of specific jurisdiction; it provides no basis for exercising general jurisdiction over a
nonresident defendant"); Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208,
216 (5th Cir.
2000) ("We have specifically rejected a party's reliance on the stream-of-commerce theory to
support asserting general jurisdiction over a nonresident defendant.").
However, as the plaintiff argues, the sales to Goodyear are in furtherance of the same
conspiracy that led to his paying an inflated price and, thus, to his damages. Thus, plaintiff argues
there is a nexus and a purposeful availment of the protection of Kansas laws when the defendants
entered into business transactions in the State of Kansas where those transactions were a part of
the conspiracy at issue.
Some courts have concluded that knowledge of and voluntary participation in a
conspiracy with other individuals who have physical, in-state presence does not offend due
process and allows the court to extend personal jurisdiction over a nonresident who may lack
specific, individualized contacts with the forum state. See Istituto Bancario Italiano v.
Hunter
Eng. Co., 449 A.2d 210, 225 (Del. 1982) ("[A] defendant who has so voluntarily
participated in a
conspiracy with knowledge of its acts in or effects in the forum state can be said to have
purposefully availed himself of the privilege of conducting activities in the forum state, thereby
fairly invoking the benefits and burdens of its laws."); Rudo v. Stubbs, 221 Ga. App.
702, 703-04,
472 S.E.2d 515 (1996) (recognizing that coconspirators are agents of each other for purposes of
personal jurisdiction when acting in furtherance of conspiracy but requiring specific facts of
activity purposefully directed toward Georgia residents).
In Execu-Tech Bus. Sys. v. New Oji Paper Co., 752 So. 2d 582 (Fla. 2000),
the plaintiff
alleged the manufacturers of thermal facsimile paper conspired to fix the wholesale price of
jumbo rolls of paper in violation of the Florida Deceptive and Unfair Trade and Practices Act.
The Florida Supreme Court held the Japanese manufacturer was subject to personal jurisdiction
in Florida. First, the court concluded that the statutory prong of the analysis was satisfied,
observing that New Oji and the other conspirators committed a tortious act on Florida soil. The
Florida long arm statute was remarkably similar to the Kansas long arm statute. Second, the court
determined that the plaintiff's complaint satisfied the constitutional prong of the test because it
alleged "sufficient minimum contacts between Florida and New Oji to satisfy due process
concerns." The court focused on "the nexus between the (1) forum state, (2) the foreign
corporation, and (3) the price (i.e., the inflated price paid by Florida consumers for
the
conspirators' price-fixed paper)." 752 So. 2d at 585. The court further pointed out the plaintiff
alleged the paper produced and distributed by the conspirators was sold at a correspondingly
inflated retail price in every state, including Florida.
Likewise, in Mackey v. Compass, 391 Md. 117, 892 A.2d 479 (2006), the
Maryland
Supreme Court found the conspiracy theory of jurisdiction to be consistent with due process. The
court observed that, under the conspiracy theory of personal jurisdiction, a coconspirator to
whom the acts of another coconspirator are attributed must have agreed to participate in a
conspiracy that he or she could reasonably have expected at the time of the agreement to involve
forum-related actions, and, therefore, the acts attributed are not simply unilateral acts of the
coconspirator who literally performed them. The jurisdiction is based on the coconspirator's
deliberate choice to enter into the coconspiracy. The Mackey court succinctly stated:
"Because the conspiracy theory gives one subject to personal jurisdiction in a
forum the
ability to avoid in advance being subject to suit in the forum, it satisfies the fundamental due
process requirement that a defendant can be involuntarily subjected to the personal jurisdiction of
a forum only if the defendant 'purposefully avails itself of the privilege of conducting activities in
the forum state.' [Citations omitted.]." 391 Md. at 135.
Further, it has been observed that asymmetry would result if coconspirators are allowed to
enjoy the benefits and protections of the forum state's laws without being subject to personal
jurisdiction in that forum. See Hunt v. Nevada State Bank, 285 Minn. 77, 111-12,
172 N.W.2d
292 (1969). For other cases recognizing conspiracy theory jurisdiction, see,
e.g., Remmes v.
International F lavors & Fragrances, Inc., 435 F. Supp. 2d 936 (N.D. Iowa 2006);
Jung v.
Association of American Medical Colleges, 300 F. Supp. 2d 119 (D.D.C. 2004);
Kohler Co. v.
Kohler Intern., Ltd., 196 F. Supp. 2d 690 (N.D. Ill. 2002); Simon v.
Philip Morris, Inc., 86 F.
Supp. 2d 95 (E.D.N.Y. 2000); Sante Fe Technologies v. Argus Networks, 131 N.M.
772, 42 P.3d
1221 (Ct. App. 2001); Chenault v. Walker, 36 S.W.3d 45 (Tenn. 2001).
With regard to cases which have not recognized the conspiracy theory of jurisdiction,
some criticism appears to focus on whether the Due Process Clause permits a state to assert
extra-territorial jurisdiction over a person or entity that did not foresee that the conspirators
would commit acts within that state. See, e.g., In re New Motor Vehicles
Canadian Export., 307
F. Supp. 2d 145, 157-58 (D. Me. 2004); Steinke v. Safeco Ins. Co. of America, 270
F. Supp. 2d
1196, 1200 (D. Mont. 2003); Insolia v. Philip Morris Inc., 31 F. Supp. 2d 660, 672
(W.D. Wis.
1998); Karsten Mfg. Corp. v. United States Golf Ass'n, 728 F. Supp. 1429, 1434 (D.
Ariz. 1990).
This concern does not apply in this case, at least under the allegations made by the
plaintiff. Each defendant, as an alleged coconspirator to which the acts of another coconspirator
are attributed, agreed to participate in a conspiracy that, at the time of the agreement, could
reasonably have been expected to reach Kansas consumers. Indeed the conspiracy was aimed at
wide-spread price fixing. Furthermore, acts in furtherance of the conspiracy were committed in
Kansas through the sales to Goodyear. These acts are not simply unilateral acts of one or two of
the coconspirators but of all the conspirators. At least one of the affiliated companies in each of
the three affiliated groups of companies – Crompton/Uniroyal, Flexsys, Bayer –
sold products in
Kansas pursuant to the alleged conspiracy. The alleged conspiracy resulted in alleged economic
harm to the plaintiff in Kansas. Jurisdiction over this tortious action can be based on the
coconspirators' deliberate choice to enter into the coconspiracy.
Another strong factor in the plaintiff's favor is the consideration of what benefits and
protection of the laws of the forum state are afforded to the respective parties. Kansas has a
strong interest in protecting the rights of its citizens and providing a forum convenient for the
redress of wrongs done to Kansans. Moreover, the plaintiff is seeking application of the Kansas
Restraint of Trade Act, K.S.A. 50-101 et seq. The interpretation of this Act is better
left to
Kansas courts than those of a foreign forum where the plaintiff would otherwise be forced to
seek redress.
Therefore, considering the allegations of the plaintiff's petition and in balancing the
general equities of the situation, we conclude the exercise of specific jurisdiction pursuant to
K.S.A. 60-308(b)(2) against price-fixing coconspirators under the facts alleged in the plaintiff's
petition would not violate due process.
Reversed and remanded.
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