IN THE SUPREME COURT OF TEXAS
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No. 04-0432
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Moki Mac River Expeditions,
Petitioner,
v.
Charles Drugg and Betsy
Drugg, Individually, and as Representatives of the Estate of Andrew Patrick
Drugg, Respondents
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On Petition for Review from the
Court of Appeals for the Fifth District of
Texas
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Argued November
17, 2005
Justice Johnson, joined by Justice Medina, dissenting.
Texas’
long-arm jurisdiction over non residents reaches as far as the federal
constitution allows. See Guardian Royal Exch. Assurance, Ltd. v. English
China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991). But, just how far the
constitution allows has not been a simple question since International Shoe
Co. v. Washington, 326 U.S. 310 (1945). See Mark Maloney, Specific
Personal Jurisdiction and the “Arise From or Relate To”
Requirement . . . What Does It Mean?, 50 Wash. & Lee L. Rev. 1265, 1266-67
(1993). As to a state’s exercising in personam jurisdiction over a non resident,
federal 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.’” International Shoe, 326 U.S. at 316 (quoting Milliken v.
Meyer, 311 U.S. 457, 463 (1940)). Specific jurisdiction over a nonresident
defendant comports with federal constitutional due process if the defendant’s
alleged liability arises from or is related to an activity conducted within the
forum state. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408,
414 & n.8 (1984). It is “the defendant’s conduct and connection with the
forum” that are critical. Michiana Easy Livin’ Country, Inc. v. Holten,
168 S.W.3d 777, 789 (Tex. 2005) (citing Burger King Corp. v. Rudzewicz,
471 U.S. 462, 474 (1985)).
There is
nothing wrong with an enterprise arranging its affairs so that it avoids doing
business in or engaging in activities directed toward a particular forum and
thereby precludes that forum’s exercise of jurisdiction over it. See
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). The key
inquiry is whether a defendant has so arranged its affairs. If not, then
“he should reasonably anticipate being haled into court” in the forum.
Id. The Supreme Court has not been overly restrictive in its view of
federal due process limits on a forum’s exercise of jurisdiction over
nonresidents that purposefully direct activities toward the forum’s
residents:
[W]here a
defendant who purposefully has directed his activities at forum residents seeks
to defeat jurisdiction, he must present a compelling case that the presence of
some other considerations would render jurisdiction unreasonable. Most such
considerations usually may be accommodated through means short of finding
jurisdiction unconstitutional. For example, the potential clash of the forum’s
law with the “fundamental substantive social policies” of another State may be
accommodated through application of the forum’s choice-of-law rules. Similarly,
a defendant claiming substantial inconvenience may seek a change of venue.
Burger
King, 471 U.S. at 477.
Moki Mac is a
Utah company which has conducted guided tours in the Grand Canyon for many
years. In addition to general advertising and maintaining a website for
potential clients to access, Moki Mac’s efforts to attract customers include
targeting particular persons to whom it sends brochures describing Moki Mac’s
rafting and hiking trips. Its targeted audience includes persons who previously
inquired about or have taken its trips. At and for several years prior to the
time reservations were made for Andy’s trip in 2001, Moki Mac’s targeted
audience included Texas residents. As the Court sets out, some of Moki Mac’s
efforts which were directed toward Texas residents included regular advertising
in Texas, hiring public relations firms to target media groups and tour
operators in Texas, soliciting Texas residents through mass and targeted
direct-mail campaigns, and utilizing particular customers to become de
facto group leaders to plan, organize and promote Moki Mac trips. Moki Mac
also has given discounted trip prices to some Texas clients who brought
potential customers to Moki Mac’s attention.
Participants
on Moki Mac’s guided rafting and hiking trips engage in activities and encounter
conditions which Moki Mac recognizes pose risks of injury and death. Its
brochures and “Visitors Acknowledgment of Risk” form (the VAR agreement)
identify certain risks, warn that enumerated risks and “other unknown or
unanticipated risks may cause injury or death,” and state that Moki Mac has
taken reasonable steps to provide “appropriate equipment and/or skilled guides
so you can enjoy an activity for which you may not be skilled.” One of the
specific dangers warned of was falling during a hike with resulting injury or
death. Andy Drugg fell during a hike and was killed.
The Druggs
received Moki Mac’s brochures from a Texas acquaintance. After reviewing the
brochures and corresponding with Moki Mac from Texas, the Druggs decided to
allow thirteen-year-old Andy to go on one of the trips. Moki Mac confirmed
Andy’s reservation and in accordance with its usual procedures forwarded to the
Druggs a VAR agreement which Moki Mac required to be signed before persons could
take one of their trips. Betsy and Andy signed the agreement in Texas and
returned it to Moki Mac. The agreement set out several risks which could be
encountered on a Moki Mac trip and specified the possibility of injury or
death:
In
consideration of the services of Moki Mac River Expeditions, Inc., their
officers, agents, employees, and stockholders, and all other persons or entities
associated with those businesses, (hereinafter collectively referred to as “Moki
Mac”), I agree as follows: . . .
I agree
to assume responsibility for the risks identified . . . .
Therefore, I assume full responsibility for myself, including my minor children,
for bodily injury, death, loss of personal property, and expenses thereof as a
result of those inherent risks an/or of my negligence in participating in this
activity.
. .
.
[T]his
agreement shall be effective and binding upon myself, my heirs, assigns,
personal representatives, estate, and all members of my family, including any
minors accompanying me.
At its special
appearance hearing, Moki Mac’s representative testified that Moki Mac considered
the VAR agreement to have been effective when and where it was signed by the
Druggs—in this case, Texas.
The Court
notes that for Texas courts to properly exercise specific jurisdiction over Moki
Mac as a non resident, Moki Mac must have had (1) minimum contacts with Texas by
purposefully availing itself of the privilege of conducting activities here, and
(2) liability arising from or related to those contacts. ___ S.W.3d ___. The
Court concludes that Moki Mac’s contacts with Texas were targeted to a
particular audience, were purposeful, not a “mere fortuity,” and thus satisfied
the first prong of the jurisdictional due process inquiry. See id. at
___. However, the Court determines that the Druggs’ suit did not “arise
from or relate to” Moki Mac’s activities in Texas and that the second prong of
the due process inquiry was not met.
As part of
its analysis the Court references a “restrictive proximate-cause” test used by
the First Circuit Court of Appeals. See Nowak v. Tak How Invs., Ltd., 94
F.3d 708 (1st Cir. 1996), cert. denied 520 U.S. 1155 (1997). The
Nowak facts are analogous to those before us and in my view the opinion
sets out a fair and reasonable approach to the relatedness aspect of the
jurisdictional question.
Tak How was a
Hong Kong corporation which owned a hotel in Hong Kong and had no place of
business outside Hong Kong. It had no shareholders, assets, or employees in
Massachusetts. It advertised in national and international magazines and listed
the hotel in various hotel guides used at travel agencies in Massachusetts. On
one occasion it sent direct mail solicitations to former Tak How guests,
including previous guests living in Massachusetts. The company employing Mr.
Nowak in Massachusetts had an agreement with Tak How for rates when its
employees stayed at the hotel. When its employees went to Hong Kong for business
the company booked reservations at the hotel. Mrs. Nowak accompanied her husband
to Hong Kong on a business trip and they stayed at the hotel pursuant to
reservations made by the company. Mrs. Nowak drowned in the hotel swimming pool.
Mr. Nowak and his children sued Tak How in Massachusetts. Tak How removed the
case to federal court and the federal district court refused to dismiss for lack
of personal jurisdiction. The First Circuit affirmed. In doing so, the court
surveyed and discussed the various approaches taken to the due process
relatedness issue, just as the Court does in its opinion. The Nowak court
then noted the First Circuit’s reputation as a proponent of the more restrictive
“proximate-cause” standard as to the relatedness issue and the importance of
foreseeability in the due process analysis: “Foreseeability is a critical
component in the due process inquiry, particularly in evaluating purposeful
availment, and we think it also informs the relatedness prong.”
Id. at 715 (emphasis added). See also Burger King, 471 U.S. at 474
(“[T]he foreseeability that is critical to due process analysis . . . is that
the defendant’s conduct and connection with the forum State are such that he
should reasonably anticipate being haled into court there.”) (quoting
World-Wide Volkswagen, 444 U.S. at 297). The Nowak court concluded
that adherence to the proximate cause construct in jurisdictional issues should
not be so strict as in tort issues:
We see no
reason why, in the context of a relationship between a contractual or business
association and a subsequent tort, the absence of proximate cause per se should
always render the exercise of specific jurisdiction unconstitutional.
When a
foreign corporation directly targets residents in an ongoing effort to further a
business relationship, and achieves its purpose, it may not necessarily be
unreasonable to subject that corporation to forum jurisdiction when the efforts
lead to a tortious result. The corporation’s own conduct increases the
likelihood that a specific resident will respond favorably. If the resident is
harmed while engaged in activities integral to the relationship the corporation
sought to establish, we think the nexus between the contacts and the cause of
action is sufficiently strong to survive the due process inquiry at least at the
relatedness stage.
. . .
While the
nexus between Tak How’s solicitation of [Nowak’s employer’s] business and Mrs.
Nowak’s death does not constitute a proximate cause relationship, it does
represent a meaningful link between Tak How’s contact and the harm suffered.
Id. at
715-16.
The court
then applied further considerations articulated by the Supreme Court as being
appropriate to determining if the exercise of personal jurisdiction by a forum
over a non resident defendant would be constitutional:
Our
conclusion . . . does not end the inquiry. Personal jurisdiction may only be
exercised if it comports with traditional notions of “fair play and substantial
justice.” International Shoe, 326 U.S. at 320. Out of this requirement,
courts have developed a series of factors that bear on the fairness of
subjecting a nonresident to a foreign tribunal . . . as
follows: “(1) the defendant’s burden of appearing, (2) the forum state’s
interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining
convenient and effective relief, (4) the judicial system’s interest in obtaining
the most effective resolution of the controversy, and (5) the common interests
of all sovereigns in promoting substantive social policies.”
Id. at
717 (quoting United Elec., Radio & Mach. Workers v. Pleasant St.
Corp., 960 F.2d 1080, 1088 (1st Cir. 1992)); see Burger King, 471
U.S. at 477-78. Such an approach properly focuses on and emphasizes the actions
of a nonresident defendant that has purposefully directed actions at a forum’s
residents, and on the reasonable foreseeability to the defendant that its
actions will make it amenable to suit in that forum.
While Moki
Mac might have a strong forum non conveniens argument, see Tex. Civ. Prac. & Rem. Code §
71.051, the facts before us do not present a compelling case that Texas’
exercise of jurisdiction over Moki Mac would be unreasonable. See
Burger King, 471 U.S. at 477. Moki Mac’s conduct was particularly designed
to and did increase the likelihood that Texas residents would respond favorably.
Andy Drugg’s death occurred while he was engaged in activities integral to the
relationship Moki Mac induced by its efforts specifically directed toward Texas
residents. Moki Mac should have reasonably foreseen that an injury to a client
such as Andy while the client participated in activities integral to the
relationship directly produced through Moki Mac’s activities directed toward
Texas residents would subject Moki Mac to being sued over the injury in Texas.
There was a meaningful link between Moki Mac’s actions directed toward Texas
residents and the Druggs’ suit. Accordingly, I would hold that the substance of
the Druggs’ suit is related to Moki Mac’s activities which were purposefully
directed toward Texas residents; the second prong of the due process inquiry is
satisfied; it is not unreasonable or unfair to Moki Mac for Texas to exercise
jurisdiction over Moki Mac as to the Druggs’ suit; and subject to a “fair play
and substantial justice” analysis, the exercise of jurisdiction by Texas in this
case falls within the boundaries of federal constitutional due process
requirements. See Nowak, 94 F.3d at 715-16.
The court of
appeals performed the “fair play and substantial justice” analysis which the
Supreme Court has indicated both protects a non resident from improper exercise
of jurisdiction by a forum, and yet might allow a lesser showing for the
exercise of jurisdiction over a defendant who purposefully directs activities
toward the forum. See Burger King, 471 U.S. at 477-78 (noting
considerations which sometimes “serve to establish the reasonableness of
jurisdiction upon a lesser showing of minimum contacts than would otherwise be
required”). I agree with the court of appeals’ analysis and determination that
the exercise of specific jurisdiction over Moki Mac by Texas would not offend
traditional notions of fair play and substantial justice. ___ S.W.3d ___.
I would
affirm the judgment of the court of appeals.
________________________________________
Phil
Johnson
Justice
OPINION DELIVERED: March
2, 2007