[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS FILED FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS ELEVENTH CIRCUIT MAR 30 2000 THOMAS K. KAHN No. 98-6958 CLERK
D. C. Docket No. 96-03166-CV-N-S
ELADIO RUIZ de MOLINA, Plaintiff-Appellant,
versus
MERRITT & FURMAN INSURANCE AGENCY, INC., a corporation; SKIP SMITH,
Defendants-Appellees,
WORLDWIDE MARINE UNDERWRITERS, a corporation; BOB LUELLEN, an individual,
Defendants-Cross Defendants-Appellees.
________________
No. 98-6975 ________________ D.C. No. 96-03166-CV-N-S
ELADIO RUIZ de MOLINA,
Plaintiff,
versus MERRITT & FURMAN INSURANCE AGENCY, INC., a corporation; SKIP SMITH, an individual,
Defendants-Cross-claimants- Appellants,
WORLDWIDE MARINE UNDERWRITERS, a corporation; BOB LUELLEN, an individual,
Defendants-Cross-defendants- Appellees.
Appeals from the United States District Court for the Northern District of Alabama
(March 30, 2000)
Before ANDERSON, Chief Judge, WILSON, Circuit Judge, and HILL, Senior Circuit Judge.
HILL, Senior Circuit Judge:
Plaintiff sued defendants for damages incurred when his boat was damaged and
defendants denied insurance coverage. Two defendants moved to dismiss for lack of
personal jurisdiction. The district court construed the motion as one for summary
judgment and granted it. After trial, plaintiff won a judgment against the remaining
defendants and was awarded damages including $90,000 for mental anguish. Upon
motion, the district court struck the mental anguish damages. Plaintiff appeals both
judgments.
2 I.
Eladio Ruiz de Molina purchased a sloop named Ariel in June of 1994.1 The
boat was moored in Alabama at the time and was part of a fleet of charter boats. In
August or September of 1995, Ruiz de Molina telephoned Frank Smith, an insurance
broker, at his office in Pompano Beach, Florida to inquire about insurance for the boat
were it moored in Mexico. Smith contacted Robert Luellen, an insurance broker who
worked for Worldwide Underwriters Marine, Inc. (Worldwide Marine) in Michigan,
and obtained a verbal quote, followed by a fax, for insurance for the boat if moored
in Mexico. Smith transmitted the quote to Ruiz de Molina in Alabama. Sometime
later, Ruiz de Molina decided to moor the boat in Ft. Myers, Florida instead of
Mexico. In early December 1995, he again contacted Smith and requested that
insurance be bound on the boat with a mooring in Florida. He asked Smith to provide
him with a written binder setting forth the coverage obtained. Smith contacted
Luellen to obtain a new quote for the premium and, on December 6, sent a fax to
Luellen in Michigan requesting that coverage be bound. According to Smith, he had
several phone conversations that day with Luellen in Michigan concerning the
placement of this coverage and Luellen informed him that a binder could be issued to
1 Although the district court treated the motion to dismiss as one for summary judgment, Fed. R. Civ. P. 12(b), we still assume the allegations of ultimate fact to be true for the purposes of resolving the motion. See Cox v. Administrator U.S. Steel & Carnegie, 17 F.3d 1386, 1400 (11th Cir. 1994).
3 Ruiz de Molina. Following these conversations, Smith faxed a binder to Ruiz de
Molina in Alabama. The binder indicated that the coverage would be effective that
day, December 6, 1995.
On December 8, 1995, Ruiz de Molina set sail from Alabama destined for Ft.
Myers, Florida. On or about December 9, 1995, the boat was damaged at sea. On
December 11, 1995, Ruiz de Molina telephoned Smith in Pompano Beach, Florida,
and reported the loss. Smith faxed a notice of the claim to Luellen in Michigan. Later
that day, Luellen and Smith discussed the claim by telephone. After these discussions,
Luellen telephoned an insurance broker in Georgia and obtained coverage for the boat
as of December 12, 1995, with an effective date of December 6, 1995, provided no
known or reported losses had occurred. Sometime in January 1996, an employee of
Worldwide Marine telephoned Ruiz de Molina and told him that he would “help the
plaintiff get his boat repaired” and that he was helping Smith. Subsequently, however,
Luellen told Ruiz de Molina that he had no effective coverage through Worldwide
Marine at the time of the damage to the boat.
Ruiz de Molina filed this action against Luellen and Worldwide Marine,
alleging that they had misled him into believing that his coverage was bound as of
December 6, 1995. He claimed that defendants had negligently, wantonly, willfully
or recklessly caused him to be denied benefits under the policy of insurance. He also
4 claimed that defendants had defrauded him concerning his coverage and that they had
acted in bad faith.
He also named Frank Smith and the Merritt & Furman Insurance Agency, Inc.
(Merritt & Furman) as defendants. He alleged that these defendants had breached
their contract to procure insurance for him and that they were also guilty of negligence
and innocent misrepresentation with respect to the effective date of the coverage.
Luellen and Worldwide Marine moved to dismiss the complaint on the grounds
that the district court lacked personal jurisdiction over them because they had
insufficient contact with Alabama. The district court converted the motion into one
for summary judgment, see Fed. R. Civ. P. 12(b); Fikes v. City of Daphne, 79 F.3d
1079, 1083 (11th Cir. 1996), and granted it. The first issue on appeal is whether the
district court erred in so doing. We review the grant of summary judgment de novo.
Alexander Proudfoot Co. World Headquarters v. Thayer, 877 F.2d 912, 916 (11th Cir.
1989).2
The case proceeded to trial against the remaining defendants – Smith and his
agency, Merritt & Furman. The jury found Merritt & Furman liable for breach of
contract and both Smith and Merritt & Furman liable for negligence and innocent
2 Merritt & Furman also cross-claimed against Luellen and Worldwide Marine and appeals their dismissal as well.
5 misrepresentation. The jury awarded damages, including $90,000 for mental anguish.
The second issue on appeal is whether the jury’s verdict can support the award for
mental anguish. We review this issue of law de novo. Hibiscus Assocs. Ltd. v. Bd.
of Trustees of Policemen and Firemen Retirement Sys., 50 F.3d 908, 920 (11th Cir.
1995).
II.
A. Personal Jurisdiction
A federal court sitting in diversity may exercise jurisdiction over a nonresident
defendant to the same extent as a court of that state. Prejean v. Sonatrach, Inc., 652
F.2d 1260 (5th Cir. Unit A 1981). Alabama permits its courts to exercise jurisdiction
over nonresidents to the fullest extent allowed under the Due Process Clause of the
Fourteenth Amendment to the Constitution. Ala. R. Civ. P. 4.2(a)(2)(I); Martin v.
Robbins, 628 So.2d 614, 617 (Ala. 1993); Horn v. Effort Shipping Co., Ltd., 777 F.
Supp. 927, 929 (S.D. Ala. 1991). The Due Process Clause permits a court to summon
a nonresident to defend himself in the forum so long as that person has some
“minimum contacts” with that state and, the exercise of personal jurisdiction over the
defendant would not offend “traditional notions of fair play and substantial justice.”
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); Williams Elec. Co.
v. Honeywell, Inc., 854 F.2d 389, 392 (11th Cir. 1988).
6 The nonresident defendant’s contacts with the forum must be such that he has
“fair warning” that a particular activity may subject him to the jurisdiction of a foreign
sovereign. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). A person has
fair warning if he “purposefully directs” his activities at the forum, and claims of
injury result from these activities. Id. The exercise of jurisdiction over him does not
“offend traditional notions of fair play and substantial justice” because his conduct
and connection with the forum are such that he should reasonably anticipated being
haled into court there. Id. The Supreme Court has made very clear that:
[i]t 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.
Hanson v. Denckla, 357 U.S. 235, 253 (1958); Francosteel Corp. v. M/V Charm, 19
F.3d 624, 627 (11th Cir. 1994) (quoting Vermeulen v. Renault, U.S.A., Inc., 985 F.2d
1534, 1546 (11th Cir. 1993)).
In resolving a motion for summary judgment based upon lack of personal
jurisdiction, the court is required to accept as true the allegations of plaintiff’s
complaint, and deny the motion if these allegations state a prima facie case of
jurisdiction. Bracewell v. Nicholson Air Services, Inc., 748 F.2d 1499, 1504 (11th Cir.
1984). If there is conflict between the plaintiff’s and the defendant’s allegations or in
the evidence, the plaintiff’s evidence is to be believed and all reasonable inferences
7 must be drawn in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986); Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990).
Furthermore, it is important to remember that the conduct at issue is that of the
defendants. No plaintiff can establish jurisdiction over a defendant through his own
actions. Hanson, 357 U.S. at 253. The unilateral activity of those who claim some
relationship with a nonresident defendant cannot satisfy the requirement of contact
with the forum state. Id. Therefore, we must determine what these defendants did
to purposefully avail themselves of the benefits of doing business in Alabama such
that the notions of reasonableness and fairness are not offended by requiring them to
defend themselves in an Alabama court.
Defendants Luellen and Worldwide Marine are insurance brokers. They were
contacted by Smith, the insurance broker in Florida, to locate marine insurance for
Ruiz de Molina’s boat anchored in Alabama. Ruiz de Molina contends that
jurisdiction in Alabama is proper because these defendants “expected to make a
commission off selling an insurance policy to an Alabama resident that covered a boat
that would be departing an Alabama port once a binder was issued.” Ruiz de Molina
argues that Worldwide Marine and Luellen foresaw or should have foreseen that they
would be called upon to defend themselves in an Alabama court against a claim of
fraud arising out of the issuance of the binder.
8 Luellen and Worldwide Marine concede that they were in the business of
brokering insurance, that they communicated with Smith and agreed to procure
insurance for the boat, and that they knew the boat was owned by an Alabama resident
and anchored in Alabama. Nevertheless, because they never had any direct contact
whatsoever with Ruiz de Molina in Alabama and all of their dealings were with Smith
in Florida, they argue that they did not have the necessary “minimum contacts” with
Alabama to support its exercise of jurisdiction over them.
We disagree. Although it is true that these defendants had no direct contact
whatsoever with Alabama in connection with these events, the following facts are
assumed to be true for the purposes of this motion: Luellen and Worldwide Marine
chose to do business with an Alabama resident; they expected to receive a benefit
from that business; they knew that the insurance they were procuring was for a boat
owned by an Alabama resident which was located in Alabama and which would
necessarily traverse Alabama waters; they undertook to and did procure insurance for
the boat; they authorized Smith to issue a binder for that insurance and to send it to
Ruiz de Molina in Alabama; and they received a commission from the insurance
premium. If proved at trial, these facts are sufficient to establish that Luellen and
Worldwide Marine purposefully availed themselves of the opportunity to do business
9 with an Alabama resident in Alabama.3 Since plaintiff’s claim arises out of
defendants’ forum-related activities – the procurement of his insurance policy –
jurisdiction over them for this specific claim is appropriate.4
Defendants’ contention that Ruiz de Molina must come to Michigan to assert
his claim against them because they had no direct contact with him in Alabama prior
to the loss is without merit. Direct contact by a nonresident defendant with the forum
is not required. The Supreme Court has held that a nonresident defendant may be
subject to specific jurisdiction even if his actions giving rise to the suit occurred
outside the forum state and he had no direct contact with the plaintiff. World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980). The Court stated that the
“forum State does not exceed its powers under the Due Process Clause if it asserts
personal jurisdiction over a corporation that delivers its product into the stream of
commerce with the expectation that it will be purchased by consumers in the forum
State.” Id.
3 For a case finding personal jurisdiction on very similar facts, see Port Lynch, Inc. v. New England Int’l Surety Inc., 1990 A.M.C. (W.D. Wash. 1990). 4 If a person has only “minimal contacts” with the forum, the court may summon him to defend himself in that forum only so long as the cause of action is related to his specific contacts with that forum. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 nn. 8 & 9 (1984). Of course, a court may summon a nonresident to answer claims unrelated to his contacts with the forum so long as those contacts are substantial, persistent, continuous and systematic. Id. Ruiz de Molina makes no argument that these defendants are subject to such general jurisdiction.
10 The stream of commerce test for jurisdiction is met if the nonresident’s product
is purchased by or delivered to a consumer in the forum state, so long as the
nonresidents’s conduct and connection with the forum state are such that he should
reasonably anticipate being haled into court there for claims arising out of that
conduct. Id. In this case, even Luellen and Worldwide do not dispute that they put
the insurance policy into the stream of commerce knowing full well that it was to be
purchased by and delivered to an Alabama resident for a boat anchored in Alabama
which would, of necessity, move in Alabama waters.
Furthermore, Luellen and Worldwide Marine are not charged with mere
negligence; they are charged with fraud and fraudulent deceit. See Ala. Code §§ 6-5-
101, 6-5-103, 6-5-104 (1975). Assuming the allegations of the complaint to be true,
Luellen and Worldwide Marine should certainly have anticipated being haled into an
Alabama court should a claim arise out of their conduct. See Shrout v. Thorsen, 470
So.2d 1222, 1224 (Ala. 1985) (defendant charged with fraud knew or should have
known what the consequences of his actions would be, and must certainly have
expected that a suit would be filed against him in Alabama). The Supreme Court has
recognized the significance of the circumstances under which a plaintiff’s claim
arises:
[The] petitioners are not charged with mere untargeted negligence. Rather, their intentional, and allegedly tortuous, actions were expressly
11 aimed at [the forum]. . . . And they knew that the brunt of that injury would be felt by respondent in the [forum]. . . . An individual injured in [the forum] need not go to [the nonresident’s state] to seek redress from persons who, though remaining in [their state], knowingly cause the injury in [the forum].
Calder v. Jones, 465 U.S. 783, 788 (1984) (citations omitted). Under these
circumstances, we are satisfied that these defendants have sufficient contacts with
Alabama to justify Alabama’s exercise of jurisdiction over them.
Furthermore, traditional notions of fair play and substantial justice are not
offended by permitting jurisdiction in Alabama. Once it is decided that defendants
have at least minimum contacts with a forum, the burden is on the defendants to show
that the imposition of jurisdiction in the forum is unreasonable. Several factors are
relevant to this showing: (1) the defendant’s burden; (2) the forum state’s interest; (3)
the plaintiff’s interest in convenient and effective relief; (4) the judicial system’s
interest in efficient resolution of controversies; and (5) the state’s shared interest in
furthering fundamental social policies. Burger King, 471 U.S. at 477; World-Wide
Volkswagen, 444 U.S. at 292; Madara, 916 F.2d at 1517.
Our review of these factors leads us to conclude that the exercise of jurisdiction
over these defendants is not unreasonable. Alabama has a substantial interest in
providing an effective means of recovery for a resident who has been damaged in
these circumstances. See Shrout, 470 So.2d at 1225. Ruiz de Molina also has a very
12 significant interest in obtaining convenient and effective relief. Indeed, if the
allegations of the complaint are true and service of process were not permitted, these
defendants would be immunized to a significant extent from the consequences of their
actions. Id. Furthermore, we note that the judicial system has a strong interest in
resolving this litigation in one piece, instead of piecemeal – part in Alabama, part in
Michigan. Finally, although defendant objects to the inconvenience of defending in
a foreign jurisdiction, a corporation doing business all over the southeast United States
may be required to bear that risk. We conclude that the requirements of “fair play and
substantial justice” do not defeat the reasonableness of asserting personal jurisdiction
in this case. See Madara, 916 F.2d at 1517 (citing Burger King, 471 U.S. at 477-78).
In fact, because these considerations serve to establish the reasonableness of
jurisdiction in this case, a lesser showing of minimum contacts than otherwise would
be required is sufficient. Id. (citing Burger King, 471 U.S. at 477).
B. Mental Anguish Damages
The jury awarded Ruiz de Molina $90,000 in damages for mental anguish
suffered as a result of his loss. After trial, defendants moved to reduce the judgment
by this amount. They argued that Alabama law does not permit damages for mental
anguish for any of the claims on which the jury found them liable. Ruiz de Molina
concedes that neither the negligence nor the innocent misrepresentation claim is
13 capable of supporting an award of damages for mental anguish. See Pacific Mut. Life
Ins. Co. v. Haslip, 553 So. 2d 537, 540 (Ala. 1989) (mental anguish damages not
available for negligent fraud). He argues, however, that the jury’s finding of a breach
of contract does allow them to award these damages.
In Alabama, “[i]t is settled that the law in this state does not permit recovery for
personal injury, inconvenience, annoyance or mental anguish and suffering in an
action for breach of a contract of insurance.” Vincent v. Blue Cross-Blue Shield, Inc.,
373 So. 2d 1054, 1056 (Ala. 1979). Alabama does, however, recognize a limited
exception to this rule. Under Alabama law, “[d]amages for mental anguish can be
recovered . . . where the contractual duty or obligation is so coupled with matters of
mental concern or solicitude, or with the feelings of the party to whom the duty is
owed, that a breach of that duty will necessarily or reasonably result in mental anguish
or suffering.” Liberty Homes, Inc. v. Epperson, 581 So.2d 449, 454 (Ala. 1991)
(quoting F. Becker Asphaltum Roofing Co. v. Murphy, 141 So. 630, 631 (1932). Ruiz
de Molina contends that his loss fits within this exception and that he is entitled to the
mental anguish damages awarded by the jury.
We disagree. The majority of the cases in which a plaintiff has been allowed
to recover damages for mental anguish involved actions on “contracts for the repair
or construction of a house or dwelling or the delivery of utilities thereto, where the
14 breach affected habitability.” See, e.g., Epperson, 581 So. 2d at 454; Orkin
Exterminating Co. v. Donovan, 519 So. 2d 1330 (Ala. 1988); Lawler Mobile Homes,
Inc. v. Tarver, 492 So. 2d 297 (Ala. 1986); Alabama Power Co. v. Harmon, 483 So.
2d 386 (Ala. 1986). Because a person’s home is said to be his “castle” and the
“largest single individual investment the average American family will make,” these
contracts are “so coupled with matters of mental concern or solicitude or with the
feelings of the party to whom the duty is owed, that a breach of that duty will
necessarily or reasonably result in mental anguish or suffering. B & M Homes, Inc.
v. Hogan, 376 So. 2d 667, 671-72 (Ala. 1979). Where such a contractual duty
breached, the Alabama Supreme Court has said that “it is just that damages therefor
be taken into consideration and awarded.” Id. at 671.
A smaller number of cases has permitted such recovery in actions involving the
burial of loved ones, suits based on a physician’s promises to deliver a child, and
claims based on the breach of a new car warranty where the owner suffers significant
fear, anxiety, and embarrassment. See Taylor v. Baptist Medical Center, Inc., 400 So.
2d 369 (Ala. 1981); Volkswagen of America, Inc. v. Dillard, 579 So. 2d 1301 (Ala.
1991).
The Alabama Supreme Court has made very clear, however, that all these cases
represent an exception to the general rule prohibiting mental anguish damages for
15 breach of contract. These cases deserve special treatment because it is highly
foreseeable that egregious breaches of certain contracts – involving one’s home or
deceased loved one, for example – will result in significant emotional distress. See
Sexton v. St. Clair Federal Sav. Bank, 653 So.2d 959, 962 (Ala. 1995). The
contractual duties imposed by these contracts are so sensitive that a breach will
necessarily and foreseeably result in mental anguish. Orkin Exterminating, 519 So.
2d at 1333.
This special treatment does not extend, however, to cases involving contracts
to insure pleasure boats. Wellcraft Marine v. Zarzour, 577 So.2d 414, 419 (Ala.
1990). In Zarzour, the Alabama Supreme Court expressly rejected the plaintiff’s
invitation to extend this narrow exception for especially sensitive contractual duties
to a contract for the sale of a boat. Id. In declining to do so, the court held that a
contract for the sale of a boat is not “so related to matters of mental concern or
solicitude as to bring it within the . . . exception to the rule.” Id. (quoting B & M
Homes, 376 So.2d at 667).
Ruiz de Molina attempts to distinguish Zarzour on the grounds that it does not
apply to this case because it concerned a sales contract rather than a contract of
16 insurance.5 He contends that “property insurance policies are one of the types of
contracts that are ‘coupled with matters of mental solicitude’.” He finds support for
this theory in Independent Fire Ins. Co. v. Lunsford, 621 So. 2d 977 (Ala. 1993), in
which the Alabama Supreme court approved an award of mental anguish damages to
the Lunsfords when their insurer failed to pay them for damage on their mobile home.
The court allowed the award to stand despite the fact that the mobile home was not the
Lunsford’s primary residence. Ruiz de Molina argues that this case established that
Alabama law permits a plaintiff to recover mental anguish damages for the breach of
any insurance policy.6
We disagree. The Alabama Supreme Court in Lunsford did no more than to
affirm an award of mental anguish damages for breach of an insurance contract on a
5 We are puzzled at this distinction since it is in the context of sales contracts that the Alabama Supreme Court first created the exception permitting mental anguish damages. See, e.g., Epperson, 581 So.2d at 454; Orkin, 519 So. 2d at 1330; Tarver, 492 So.2d at 297; Harmon, 483 So.2d at 386; B & M Homes, 376 So. 2d at 671-72. 6 Ruiz de Molina argues that: [i]ndividuals, like the Lunsfords . . . and Eladio Ruiz [de Molina], purchase property insurance to provide them with a degree of mental solicitude in the event of a loss. Without undue hassle, the insurance company is to pay the benefits due under the policy. There should be no need to fight the insurer and to cope with the stress accompanying such a fight while endeavoring to deal with the other stress caused by the loss. When buying the policy, the insureds thought that they were purchasing a certain degree of emotional peace, as well as financial security, in the event of a covered loss. . . . [T]he Supreme Court of Alabama has decided that such insurance contracts come within the exception to the general rule that damages for mental anguish are not recoverable in a breach of contract action.
17 mobile home. The court specifically noted that even though the mobile home was not
the primary residence of the Lunsfords, it was, nonetheless, used by their relatives.
621 So. 2d at 977.
We do not think that the Lunsford court intended their decision to broaden the
narrow exception permitting mental anguish damages for breach of especially
sensitive duties. On the contrary, the Alabama Supreme Court has made clear that it
is not eager to “widen the breach in the general rule [prohibiting such damages].”
Volkswagen of America, Inc. v. Dillard, 579 So.2d 1301, 1304 (Ala. 1991). The court
has permitted recovery of mental anguish damages only in those cases involving
breaches of contracts involving emotionally-freighted duties, such as the contract to
insure a home. The insurer of homes assumes “contractual duties . . . so coupled with
matters of mental solicitude as to the duty that is owed, that a breach of that duty will
necessarily or reasonably result in mental anguish.” See Orkin, 519 So. 2d at 1330.
We conclude, therefore, that Lunsford did not overrule Zarzour. Nor did it
abrogate the general rule against recovery for mental anguish associated with the
breach of a contract. Absent clearer evidence to the contrary than we find in Lunsford,
we believe that Alabama law does not presume that the parties to a contract meant to
“insure each other’s emotional tranquility.” See Douglas J. Whaley, Paying for the
Agony: The Recovery of Emotional Distress Damages in Contract Actions, 26 Suffolk
18 U.L. Rev. 935, 951 (1992). The breach of any contract which the parties consider
important will always lead to some emotional distress. Id. The rule in Alabama
remains, however, that recovery of mental anguish damages is permitted for breach
of contract only in a narrow range of cases involving contracts which create especially
sensitive duties, the breach of which cause highly foreseeable and significant mental
anguish. As there is no allegation that this boat was Ruiz de Molina’s home, the
reduction of the verdict awarding mental anguish damages for breach of the insurance
contract on Ruiz de Molina’s boat is due to be affirmed.
III.
We hold, therefore, that Luellen and Worldwide Marine purposefully availed
themselves of the benefits of selling an insurance contract to an Alabama resident
thereby subjecting themselves to the specific jurisdiction of the Alabama courts over
the cause of action which arose out of doing that business. We also hold that Alabama
does not permit Ruiz de Molina to recover mental anguish damages for the breach of
that contract of insurance.
Accordingly, the grant of summary judgment to Luellen and Worldwide Marine
is REVERSED and the case is remanded to the district court for further proceedings.
The district court’s reduction of the judgment against Smith and Merritt and Furman
is AFFIRMED.