Day on Torts
The Court of Appeals recently addressed the requirements of personal jurisdiction within the context of a misrepresentation case. In Wall Transportation, LLC v. Damiron Corp., No. M2014-00487-COA-R3-CV (Tenn. Ct. App. Dec. 19, 2014), plaintiff was a Tennessee limited liability company and defendant was an Indiana corporation. Defendant had a website where it listed heavy-duty trucks for sale, and plaintiff located a truck on said website that it was interested in purchasing. Plaintiff called defendant’s Indiana location from Tennessee to inquire about the truck and was allegedly told certain things about its condition and mileage. Thereafter, plaintiff traveled to Indiana where he inspected the truck, negotiated a price, entered into a contract for sale, and took delivery of the truck.
Several months later plaintiff filed suit in Robertson County, Tennessee alleging that defendant had made “false and fraudulent representations about the truck concerning its mileage, gear ratio, and the condition of the truck’s body[.]” Defendant made a special appearance for the sole purpose of filing a motion to dismiss for lack of personal jurisdiction under Tennessee Rule of Civil Procedure 12.02(2). The trial court granted this motion, finding specifically that defendant was an Indiana corporation, did not routinely do business in Tennessee, did not own property or have employees in Tennessee, did not direct advertising to Tennessee, did not purchase substantial amounts of materials from Tennessee, and did not routinely sell products to Tennessee customers. Further, the trial court found that all of the events related to the sale of the truck occurred in Indiana except for the initial phone call, which was initiated in Tennessee by plaintiff. Accordingly, the trial court held that defendant did not have the minimum contacts sufficient to establish personal jurisdiction.
Based on the same facts cited by the trial court, the Court of Appeals affirmed the lack of personal jurisdiction finding. The Court explained that personal jurisdiction is based on the existence of minimum contacts, and that it can be established through either specific or general jurisdiction. Specific personal jurisdiction exists where a plaintiff can “show that the nonresident defendant has purposely established significant contact with the forum state and that the plaintiff’s cause of action arises out of or is related to those activities or contacts.” General personal jurisdiction requires a showing that the defendant had “continuous and systematic” contacts in the state. Here, neither requirements were met. The Court called defendant’s contacts with Tennessee “tenuous at best,” noting that it was not registered to do business in Tennessee and had no office, employees, vehicles, contact information, or bank accounts in Tennessee. Although defendant’s website could clearly be accessed from Tennessee, the Court specifically stated that “[t]he mere existence of a website is not a sufficient basis to support a finding that [defendant] could reasonably anticipate being haled into court [here].” (internal quotations omitted).
According to the Court of Appeals, although the effects of the alleged misrepresentation were felt in Tennessee, the damages were sustained and able to be initially ascertained in Indiana. Plaintiff’s unilateral action in initiating the first phone call from Tennessee was not sufficient to bring defendant within the reach of Tennessee’s personal jurisdiction.
In the current state of business affairs where almost all transactions have some online component, this case is a good reminder that it takes more than just access to a website to establish personal jurisdiction over a foreign defendant. When considering whether a misrepresentation suit can be maintained against an out-of-state party, this case offers valuable insight regarding the factors a court will examine and consider.