Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)
While the existence of a contract by itself cannot establish minimum contacts with a jurisdiction, a court may find that the defendant purposefully established minimum contacts after considering the prior negotiations between the parties, the contemplated future consequences of entering into the contract, the contract terms, and the course of dealing between the parties.
Burger King's contracts with its franchisees required that these business relationships were established in Miami and governed by Florida law. Burger King was a Florida corporation headquartered in Miami, and its Miami office resolved any major problems with the franchisees and received payment of their fees. However, many different officers at Burger King shared responsibility for regularly monitoring the franchises, which were subject to substantial regulations and supervisory control under the contract terms.
When Rudzewicz and MacShara applied for a franchise through the Burger King regional office in Michigan, their application was forwarded to the Miami headquarters. They were assigned an existing facility in Drayton Plains, Michigan, and they bought equipment for their restaurant from Burger King in Miami. MacShara also attended a required training course in Miami. Both men negotiated with both the Michigan and the Miami offices. During the course of a 20-year franchise relationship, Rudzewicz became liable for over $1 million in payments. Burger King eventually terminated the franchise after lengthy negotiations with the two men produced no results. Rudzewicz remained on the location and continued to operate the restaurant as a Burger King.
Filing a claim in Florida federal court, Burger King pointed out that the Florida long-arm statute provided personal jurisdiction over residents of other states who breached contracts that were formed in Florida. However, Rudzewicz and MacShara argued that the claim did not arise within Florida. The court agreed with Burger King and entered judgment in its favor, but the appellate court reversed on the grounds that the defendants had not received proper notice that they might be involved in litigation in Florida.
- William Joseph Brennan, Jr. (Author)
- Warren Earl Burger
- Thurgood Marshall
- Harry Andrew Blackmun
- William Hubbs Rehnquist
- Sandra Day O'Connor
The standard to apply in these situations is whether the non-resident purposefully availed himself of the benefits and privileges of transacting business within the forum state. This is comprised of a minimum contacts inquiry as well as an evaluation of whether asserting jurisdiction meets notions of fundamental fairness and substantial justice. While the existence of the contract itself is not enough to find jurisdiction, the defendants had regular and long-lasting interactions with the plaintiff within the forum state during the negotiations over the contract and the ensuing business relationship. The defendants' actions caused foreseeable harm to the plaintiff, a resident of the forum state, and there was no evidence that the defendants were under duress or lacked experience in business matters. No argument was raised that the Florida long-arm statute was unconstitutional. However, the choice of law provision in the contract should not be interpreted as a forum-selection clause.
- John Paul Stevens (Author)
- Byron Raymond White
The defendants were unprepared for the possibility of litigation in Florida, since they did not conduct business outside Michigan and communicated largely with the regional Michigan office. They were financially disadvantaged by being forced into litigation outside the state, and the unequal bargaining position between the parties should make the court particularly reluctant to assert personal jurisdiction.
- Lewis Franklin Powell, Jr. (Author)
There may be a distinction between a choice of law provision and a choice of forum provision that is provided in these contracts, although the court did not provide guidance on this issue.
U.S. Supreme CourtBurger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)
Burger King Corp. v. Rudzewicz
Argued January 8, 1985
Decided May 20, 1985
471 U.S. 462
Appellant is a Florida corporation whose principal offices are in Miami. It conducts most of its restaurant business through a franchise operation, under which franchisees are licensed to use appellant's trademarks and service marks in leased standardized restaurant facilities for a period of 20 years. The governing contracts provide that the franchise relationship is established in Miami and governed by Florida law, and call for payment of all required monthly fees and forwarding of all relevant notices to the Miami headquarters. The Miami headquarters sets policy and works directly with the franchisees in attempting to resolve major problems. Day-to-day monitoring of franchisees, however, is conducted through district offices that, in turn, report to the Miami headquarters. Appellee is a Michigan resident who, along with another Michigan resident, entered into a 20-year franchise contract with appellant to operate a restaurant in Michigan. Subsequently, when the restaurant's patronage declined, the franchisees fell behind in their monthly payments. After extended negotiations among the franchisees, the Michigan district office, and the Miami headquarters proved unsuccessful in solving the problem, headquarters terminated the franchise and ordered the franchisees to vacate the premises. They refused, and continued to operate the restaurant. Appellant then brought a diversity action in Federal District Court in Florida, alleging that the franchisees had breached their franchise obligations and requesting damages and injunctive relief. The franchisees claimed that, because they were Michigan residents and because appellant's claim did not "arise" within Florida, the District Court lacked personal jurisdiction over them. But the court held that the franchisees were subject to personal jurisdiction pursuant to Florida's long-arm statute, which extends jurisdiction to any person, whether or not a citizen or resident of the State, who breaches a contract in the State by failing to perform acts that the contract requires to be performed there. Thereafter, the court entered judgment against the franchisees on the merits. The Court of Appeals reversed, holding that "[j]urisdiction under these circumstances would offend the fundamental fairness which is the touchstone of due process."
Held: The District Court's exercise of jurisdiction pursuant to Florida's long-arm statute did not violate the Due Process Clause of the Fourteenth Amendment. Pp. 471 U. S. 471-487.
(a) A forum may assert specific jurisdiction over a nonresident defendant where an alleged injury arises out of or relates to actions by the defendant himself that are purposeful directed toward forum residents, and where jurisdiction would not otherwise offend "fair play and substantial justice." Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum. Pp. 471 U. S. 471-478.
(b) An individual's contract with an out-of-state party cannot alone automatically establish sufficient minimum contacts in the other party's home forum. Instead, the prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing, must be evaluated to determine whether a defendant purposefully established minimum contacts within the forum. Pp. 471 U. S. 478-479.
(c) Here, appellee established a substantial and continuing relationship with appellant's Miami headquarters, and received fair notice from the contract documents and the course of dealings that he might be subject to suit in Florida. The District Court found that appellee is an "experienced and sophisticated" businessman who did not act under economic duress or disadvantage imposed by appellant, and appellee has pointed to no other factors that would establish the unconstitutionality of Florida's assertion of jurisdiction. Pp. 471 U. S. 479-487.
724 F.2d 1505, reversed and remanded.
BRENNAN, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, BLACKMUN, REHNQUIST, and O'CONNOR, JJ., joined. STEVENS, J., filed a dissenting opinion, in which WHITE, J., joined, post, p. 471 U. S. 487. POWELL, J., took no part in the consideration or decision of the case.