The World in U.S. Courts: Summer 2015 - Personal Jurisdiction/Forum Non Conveniens
May.28.2015
Maxitrate is a Brazilian company that makes heat-treated metal products. It purchased control panels for its industrial furnaces from Super Systems, Inc., an Ohio company. In 2008, Super Systems sent Hedman, a Super Systems employee and Ohio resident, to Brazil to work on a furnace at Maxitrate's factory. While was working on the furnace, Hedman was seriously injured when pressurized gas escaped and caused an explosion.
Maxitrate sued Super Systems and Hedman in a U.S. District Court in Ohio, alleging that Super System's products were defective, and that Hedman had been negligent. Hedman filed a counterclaim against Maxitrate, alleging that Maxitrate's negligence caused the explosion and was therefore liable for his injuries. Maxitrate notified its insurer, Seguros, a Brazilian company that only sells insurance in Brazil, of Hedman's counterclaim. Seguros declined to defend Maxitrate. Maxitrate and Hedman ultimately settled the counterclaim, and as part of the settlement Maxitrate assigned to Hedman its claims against its insurer, Seguros.
After the settlement, Hedman filed a complaint against Seguros alleging that Seguros breached its contract with Maxitrate when it denied Maxitrate coverage for Hedman's counterclaim. Seguros moved to dismiss the complaint for lack of personal jurisdiction. The district court dismissed the case. Hedman appealed.
The Court of Appeals noted that personal jurisdiction over Seguros could be asserted if consistent with Ohio law and the Due Process Clause of the U.S. Constitution. Since Seguros conceded that jurisdiction would be proper under the expansive Ohio law, the Court of Appeals considered only the Due Process question. Hedman conceded that Seguros was not subject to general jurisdiction in Ohio, and so the only question was specific personal jurisdiction, which required a showing that Seguros purposefully availed itself of the privilege of acting in the forum state (Ohio), and that the assertion of jurisdiction did not offend "traditional notions" of fair play and substantial justice.
The Court of Appeals determined that this standard had not been satisfied. Seguros is a Brazilian insurance company that contracted with another Brazilian company to insure property and persons situated in Brazil, and thus did not create any contacts with Ohio. Rather, the Court of Appeals found, Seguros's decision to deny coverage was an affirmative decision not to avail itself of Ohio's laws; any effects of Seguros's decision on Ohio were the result of Hedman's and Maxitrate's decisions to litigate there, which decisions could not be imputed to Seguros.
Hedman also pointed to Seguros's decision to sell an insurance policy to Maxitrate, a company that does considerable business in Ohio, and argued that Seguros should have known that the policy might require Seguros to defend Maxitrate in many places, including Ohio. The Court of Appeals disagreed, observing that the policy's "Geographical Scope" provision limits coverage to "property, liabilities, or persons situated on Brazilian territory" and provides that "[t]he competent jurisdiction to resolve litigation in relation to this contract shall be that of the domicile of the insured," which was Brazil.
Finally, Hedman cited an Ohio law allowing direct claims against a defendant's insurance company. The Court of Appeals concluded, however, that no state law could create jurisdiction if not permitted by the Due Process Clause.