Civil Procedure: Burger King (Personal Jurisdiction)

Burger King Corp. v. Rudzewicz:

471 U.S. 462 (1985)

Issue: Does Florida's Long-Arm Statute provide jurisdiction over the Michigan residents?

Rule: Extends Jurisdiction: To "any person, whether or not a citizen or resident of this state," who, inter alia, "breaches a contract in this state by failing to perform acts required by the contract to be performed in this state," so longs as the cause of action arises from the alleged contractual breach.

Application: Defendants argue that since they are Michigan residents, and because Burger King's claim did not "arise" within the Southern District of Florida, the District Court lacked personal jurisdiction over them.

-As long as a commercial actor's efforts are "purposefully directed" toward residents of another state the court has consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.

-The defendant deliberately "reached out beyond" Michigan and negotiated with a Florida corporation for the purchase of a long-term franchise and the manifold benefits that would derive from affiliation with a nationwide organization.

-Defendant was in a 20 year contract with Burger King in Florida

-The Court of Appeals overlooked the evidence that the defendant knew he was affiliating himself with a Florida enterprise

-The Contract emphasized this.

-Payments were sent there

-When problems arose, defendants learned that the Michigan office was powerless to resolve the disputes

-Nothing in the cases suggests that choice-of-law provisions are irrelevant in considering whether a defendant has "purposefully invoked the benefits and protections of a state's laws" for jurisdictional purposes

-Standing alone, this would be insufficient. Combined with the 20 year contract it is

-Although defendant has pointed to Michigan's Franchise Investment Law, he has not shown how jurisdiction in Florida might be unconstitutional

-A change of venue could solve the inconvenience problems that the defendant may face.

-Defendant argued to the district court that Burger King was guilty of misrepresentation, fraud, duress, and it gave insufficient notice in its dealings with him.

-Rule 52(a): Findings of fact shall not be set aside unless clearly erroneous

Conclusion: Yes

Dissent: It is unfair to require the franchisee to defend a case of this kind in the forum chosen by the franchisor

-Defendant did not prepare his French fries, shakes and hamburgers in Michigan, and then deliver them into the stream of commerce, with the expectation that it would be purchased by consumers in FL

-Defendant did business in MI, and was located there.

-Court relies on the language in the contract to conclude that the defendant "purposefully availed" himself of the benefits and protections of Fl laws.

History:

-Burger King: Florida Corporation, with principal office in Miami

-Franchisees pay Burger King an initial $40,000 franchise fee and commit themselves to payment of monthly royalties, advertising and sales promotion fees, and rent computed in part from monthly gross sales.

-Franchisees also submit to the national organizations exacting regulation of virtually every conceivable aspect of their organization

-Two-Tiered administrative structure.

-Contracts provide that the relationship is established in Miami and governed by Florida law, with payment of all required fees and forwarding of notices to the Miami HQ

-Miami HQ also sets policy and works directly with its franchisees in attempting to resolve major problems

-Day-to-Day monitoring of the franchisees, is conducted through 10 district offices, which report to the Miami HQ

-Defendant directly applied to the Birmingham, Michigan district office (autumn 1978)

-Application was forwarded to the Miami HQ

-Defendant's business partner attended management courses in Miami

-Defendant also purchased $165,000 worth of restaurant equipment from Miami

-During negotiations with the Miami HQ, the defendant obtained some concessions, including a $10,000 reduction in rent for the 3rd year.

-During the first year, the franchise saw profits, but later in the year, they declined.

-Eventually fell behind on payments, HQ terminated the franchise and ordered defendant to vacate

-Defendant refused, and continues to occupy the premises.

Trial:

-3 Day bench trial, court concluded that it had jurisdiction over defendant

-Ordered defendant to vacate, and pay $228,875

Appeal:

-Reversed, finding that the district court did not properly exercise personal jurisdiction over the defendant.

-Concluded that jurisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process.

-Found that the defendant reasonably believed that the Michigan offices was the embodiment of Burger King, and therefore had no reason to anticipated suit in Florida.

-Held that choice-of-law provisions were irrelevant to personal jurisdiction