This week, the Court considers when a contractual relationship can establish a defendant's purposeful availment of a forum state and addresses an equal protection challenge to a shelter-in-place order.
DAVIS v. CRANFIELD AEROSPACE SOLUTIONS, LTD.
The Court holds that a nonresident defendant's multi-year business relationship with a resident of Idaho did not suffice to establish personal jurisdiction in that state.
The panel: Judges Bumatay, Sanchez, and Baker (Ct. Int. Trade), with Judge Bumatay writing the opinion and Judge Baker dissenting in part.
Key highlight: "Both purposeful availment and purposeful direction ask whether defendants have voluntarily derived some benefit from their interstate activities such that they will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts. So there's no need to adhere to an iron-clad doctrinal dichotomy to analyze specific jurisdiction. Rather, when considering specific jurisdiction, courts should comprehensively evaluate the extent of the defendant's contacts with the forum state and those contacts' relationship to the plaintiffs' claims—which may mean looking at both purposeful availment and purposeful direction." (Quotation marks, citations, and alterations omitted.)
Background: In 2018, a corporate jet crashed in Indiana, killing the pilot and passengers. The decedents' representatives—citizens of Indiana and Louisiana—alleged that a defective load alleviation system called the ATLAS system caused the crash. The ATLAS system was manufactured and installed by Tamarack Aerospace Group, Inc., a Washington corporation with its principal place of business in Idaho. But the plaintiffs did not sue just Tamarack: they also sued Cranfield Aerospace Solutions, LLC, an English company that had helped Tamarack obtain the FAA certification to install the ATLAS system. The plaintiffs brought their lawsuit in the District of Idaho. Cranfield successfully moved to dismiss for lack of personal jurisdiction.
Result: The Ninth Circuit affirmed, holding that Cranfield had neither purposefully directed its activities to Idaho nor purposefully availed itself of the privilege of conducting activities in Idaho. As a threshold matter, the Court explained that it was appropriate to consider both "purposeful direction" and "purposeful availment" in its analysis. Although prior cases had stated that the purposeful-direction test typically applies to tort cases and the purposeful-availment test typically applies to contract cases, there is no "rigid dividing line." Rather, "courts should comprehensively evaluate the extent of the defendant's contacts with the forum state and those contacts' relationship to the plaintiffs' claims—which may mean looking at both purposeful availment and purposeful direction." Here, the plaintiffs failed to satisfy both tests.
First, the Court held, Cranfield had not purposefully directed any activities to Idaho. Purposeful direction requires that the defendant "(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Under this test, a plaintiff must have suffered harm in the forum state—but the plaintiffs failed to allege Cranfield caused any injury in Idaho.
Second, the Court held, Cranfield had not purposefully availed itself of the privilege of conducting activities in Idaho. In analyzing purposeful availment, courts "examine whether the defendant deliberately reached out beyond its home—by, for example, exploiting a market in the forum State or entering a contractual relationship centered there." While Cranfield had previous dealings with Tamarack, there was "no evidence that Cranfield sought out Tamarack in Idaho or benefitted from Tamarack's residence in Idaho." And while Cranfield and Tamarack had a contractual relationship, nothing about the contract's "negotiations, its terms, its contemplated future consequences, and the parties' actual course of dealing" created a "substantial connection" between Cranfield and Idaho. The Court assessed the two facts that were strongest for the plaintiffs: (1) Cranfield held the FAA certification on Tamarack's behalf at the time of the crash and (2) Cranfield representatives had traveled to Idaho multiple times. As to the first, the Court concluded that this "legal obligation" alone was insufficient to show purposeful availment. As to the second, the Court deemed the two visits to Idaho "attenuated" because they did not represent a "special place" in Cranfield's contract with Tamarack.
Judge Baker dissented in part. He would have held that Cranfield purposefully availed itself of Idaho because the terms of the contract created a multi-year business relationship that envisioned continuing and wide-reaching contacts with Tamarack in Idaho and that contemplated consequences in Idaho. He opined that "no federal court—until today—has ever held that continuous supervision or management of forum-state activities is insufficient to establish personal jurisdiction."
The Court rejects an equal protection challenge to Marin County's enforcement of its order, at the onset of the pandemic, barring non-essential business activities.
The panel: Judges Gould, Ikuta and Korman (E.D.N.Y.), with Judge Gould writing the majority opinion and Judge Ikuta concurring in the judgment.
Key highlight: "Rational basis review does not require the County to behave optimally, but only rationally."
Background: In March 2020, in response to the COVID-19 pandemic, the County of Marin issued a shelter-in-place order that required all but "essential businesses" to cease operations. As of May 15, 2020, that order provided that commercial airlines could operate only if they provided "transportation services necessary for Essential Activities." Seaplane Adventures LLC, which offers commercial sight-seeing and recreational flights, reopened in June 2020. The County received a number of complaints that Seaplane was violating the County's Order by conducting non-essential travel. After the County repeatedly directed Seaplane to cease non-essential services, Seaplane came into compliance and filed suit against the County.
Seaplane raised an equal protection "class of one" claim, arguing that the County "intentionally treated Seaplane differently from other similarly situated groups." Seaplane also claimed that federal aviation law preempted the County's Order. The district court granted summary judgment to the County on the equal protection claim, while granting Seaplane limited declaratory relief on its preemption claim. Both parties appealed.
Result: The Ninth Circuit affirmed the district court's summary judgment order and vacated the preemption order. As the Court explained, to prevail on its equal protection claim, Seaplane was required to demonstrate that the County "(1) intentionally (2) treated Seaplane differently than other similarly situated individuals or groups, (3) without a rational basis." The Court held that Seaplane had failed to raise any triable dispute on this third element. Seaplane argued that the County lacked a rational basis to bar recreational travel. Emphasizing the deference accorded to local government officials in such matters, the Court identified "ample bases" for the County's distinction, including rates of COVID-19 infection, county demographics, and guidance from experts in communicable disease. "[G]iven that a deadly virus was tearing into the most vulnerable throughout the County, country, and world," the Court observed, "the rational basis is abundantly clear: to lower transmission of COVID-19 by restricting activities not defined as essential." The Court also rejected Seaplane's suggestion that the County had treated it differently from other recreational air carriers, explaining that "the rational basis for the County's action is also abundantly clear: it simply did not know of the other violators."
The Court also vacated the preemption order as moot. As the Court explained, as of August 2020, the County had allowed recreational flights, and there was no indication that Seaplane would be subject to a similar restriction again.
Judge Ikuta concurred only in the judgment. Judge Ikuta preferred to affirm summary judgment "on the simple ground that there is no evidence . . . the County knew of any similarly situated violators." She would not have opined on the legitimacy of the County's Order or the degree of deference due legislative health orders generally.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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