The U.S. Court of Appeals for the Tenth Circuit recently reversed the dismissal for lack of personal jurisdiction of a Colorado consumer’s claims raised under the federal Telephone Consumer Protection Act against a company that provides extended car warranties.
Here, the defendant company’s call was placed from a Vermont area code to the Colorado resident consumer’s Vermont phone number, and the defendant argued that its call to the consumer’s Vermont phone number at issue did not ‘arise out of or relate to’ the defendant’s calls to Colorado phone numbers.
Following the Supreme Court of the United States’ recent ruling in Ford Motor Co. v. Montana Eighth Judicial District Court, 141 S. Ct. 1017 (2021), the Tenth Circuit concluded that specific personal jurisdiction existed between the plaintiff consumer and the defendant company, as Ford implicitly and explicitly rejected the defendant company’s arguments. The Tenth Circuit further concluded that subjecting the company to litigation over federal claims in Colorado would not violate traditional notions of fair play and substantial justice.
A copy of the opinion in Hood v. American Auto Care, et al. is available at: Link to Opinion.
Following his purchase of a used automobile, a consumer who resided in Colorado began receiving prerecorded calls to his cell phone offering to sell him an extended warranty for his car.
The calls came from numbers with a Vermont area code, where the consumer previously lived and still maintained a cell phone number with a Vermont area code. He traced one such call to a Florida limited liability company whose sole office is in Florida, which sells service contracts providing extended vehicle warranties (the “Extended Car Warranty Company”).
The consumer filed a putative class action suit against the Extended Car Warranty Company and related entities in Colorado federal court alleging violations of the TCPA, 47 U.S.C. § 227, and invasions of the consumer’s and class members’ privacy by directing unwanted automated calls to their cell phones without consent.
Specifically, the consumer alleged that the Extended Car Warranty Company “used telemarketing to sell vehicle service contracts . . . nationwide, including in Colorado by calling Colorado phone numbers.”
Several defendants moved to dismiss the case for lack of personal jurisdiction in Colorado. The trial court determined that the consumer had alleged sufficient facts to establish that the Extended Car Warranty Company purposefully directed telemarketing at Colorado. However, the trial court also found that the call at issue to the consumer’s Vermont phone number did not arise out of, or relate to, its calls to Colorado phone numbers, and therefore granted the motions to dismiss for lack of jurisdiction. This appeal followed.
The Tenth Circuit’s analysis began by restating that personal jurisdiction over nonresident defendants is proper if an applicable statute authorizes service of process and if the exercise of jurisdiction comports with constitutional due process. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008).
The parties agreed that the TCPA does not address service of process, but that the Federal Rules of Civil Procedure incorporate the Colorado long-arm statute, which confers personal jurisdiction to the extent permitted by the United States Constitution. Id.; Fed. R. Civ. P. 4(k)(1)(A). Thus, the Tenth Circuit was tasked to determine whether Colorado jurisdiction over the consumer’s and class members’ claims was consistent with due process. Id.
The parties also agreed that only specific, rather than general personal jurisdiction was at issue here, to determine whether the Extended Car Warranty Company was subject to the state’s regulation.
To determine when specific jurisdiction is properly exercised, courts are to assess two requirements: (1) that the defendant has “purposefully directed [its] activities at residents of the forum,” and (2) that the suit “arise out of or relate to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) Bristol-Myers Squibb Co. v. Superior Ct. of Cal., S.F. Cnty., 137 S. Ct. 1773, 1780 (2017). Even when both requirements are satisfied, a defendant may still escape jurisdiction by establishing that it would be incompatible with traditional notions of fair play and substantial justice. See Burger King, 471 U.S. at 476–77.
On appeal, the Extended Car Warranty Company argued that (1) purposeful direction must be shown by suit-related contacts, and that its calls to Colorado residents at Colorado phone numbers cannot support personal jurisdiction for the consumer’s claim based on a call to a Vermont phone number; (2) the second requirement — the suit “arise out of or relate to those activities” — contemplates a causal connection between a defendant’s forum contacts and the suit, but its calls to Colorado phone numbers did not give rise to its call to the consumer’s Vermont phone number; and (3) subjecting the defendant to burdensome litigation in Colorado, where its contacts are weak, would violate traditional notions of fair play and substantial justice.
The Tenth Circuit’s analysis first looked to the relationship between the claim and forum contacts, and the requirement that the plaintiff’s claims “arise out of or relate to . . . activities” that the defendant purposefully directed at residents of the forum. Burger King, 471 U.S. at 472.
The trial court held that there was “an insufficient connection between the forum and the underlying controversy —- a phone call to a Vermont area code —- to allow the Court to exercise specific jurisdiction” in Colorado. However, the Tenth Circuit held that the Supreme Court of the United States’ recent opinion in Ford Motor Co. v. Montana Eighth Judicial District Court, 141 S. Ct. 1017 (2021), rendered after the trial court’s judgment, made clear that a causal connection is not required.
Ford considered two similar lawsuits, alleging death and injury, respectively, to residents of Montana and Michigan resulting from a malfunction/defect in vehicles manufactured by Ford. See Ford, 141 S. Ct. at 1023. Acknowledging that it purposefully availed itself of both markets through advertising and maintaining, repairing, and selling vehicles, Ford argued that because neither vehicle was designed, manufactured, or first sold in the state where the accident occurred, but entered the forum states only after resale or an owner’s relocation, that it was not subject to specific jurisdiction in either forum state. Id. at 1026, 1028. It insisted that “[j]urisdiction attaches only if the defendant’s forum conduct gave rise to the plaintiff’s claims.” Id. at 1026.
Although the Supreme Court agreed that “arise out of” is a causal test, it distinguished that language from the “relate to” component of the second requirement, noting that its prior decisions repeatedly endorsed the proposition that specific jurisdiction arises when a defendant “serves a market for a product in the forum State and the product malfunctions there.” Id. at 1027
The Tenth Circuit understood Ford to adopt the proposition that the forum state can exercise personal jurisdiction over an out-of-state defendant that has injured a resident plaintiff in the forum state if (1) the defendant has purposefully directed activity to market a product or service at residents of the forum state and (2) the plaintiff’s claim arises from essentially the same type of activity, even if the activity that gave rise to the claim was not directed at forum residents. In that circumstance, the activity giving rise to the claim “relates” to the defendant’s activity in the forum state. See id. at 1028–29 & n.5.
Adopting that rule here, the Tenth Circuit concluded that Colorado could exercise jurisdiction over the consumer’s claims because he is a Colorado resident who was allegedly injured by activity essentially identical to activity that the Extended Car Warranty Company allegedly directed at Colorado residents — even if the call at issue was not a direct result of its telemarketing efforts directed at Colorado.
It further concluded that exercising jurisdiction was consistent with due-process values as well, because the Extended Car Warranty Company was already on notice that it could be sued in Colorado where it sold service plans via telemarketing. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
The Tenth Circuit further rejected the Extended Car Warranty Company’s argument that it did not meet the ‘purposeful direction’ requirement to establish personal jurisdiction, concluding from Ford that purposeful direction need not be based solely on the contacts that generated the cause of action, but that it is enough if the activity forming the basis of the claim against the defendant is related to the activity of the defendant that establishes that it “purposefully directed [its] activities at residents of the forum.”
Lastly, the Tenth Circuit was not persuaded that requiring the Extended Car Warranty Company to litigate claims for alleged violation of federal law through telemarketing in Colorado was incompatible with fair play and substantial justice, merely due to inconvenience.
In sum, because the Extended Car Warranty Company’s arguments regarding ‘purposeful direction’ and ‘arise out of or relate to’ were respectively implicitly and explicitly rejected by Ford, and because the defendants failed to establish that proceedings in Colorado did not comport with fair play and substantial justice, the trial court’s dismissal was reversed, with the matter remanded for further proceedings.