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Old Republic Insurance Co. v. Continental Motors, Inc.

United States Court of Appeals, Tenth Circuit

December 15, 2017

OLD REPUBLIC INSURANCE COMPANY, Plaintiff - Appellant,
v.
CONTINENTAL MOTORS, INC., Defendant-Appellee.

         Appeal from the United States District Court for the District of Colorado (D.C. No. 1:16-CV-00046-JLK)

          Michael L. Poindexter, The Law Offices of Michael L. Poindexter, Golden, Colorado, for Plaintiff-Appellant.

          Norman E. Waldrop, Jr., Armbrecht Jackson LLP, Mobile, Alabama (Sherri R. Ginger and Benjamin Y. Ford, Armbrecht Jackson LLP, Mobile, Alabama; and Theresa R. Warden and Jennifer L. Parker, Wheeler Trigg O'Donnell, Denver, Colorado, on the brief), for Defendant-Appellee.

          Before MATHESON, McKAY, and McHUGH, Circuit Judges.

          MATHESON, CIRCUIT JUDGE.

         This appeal addresses whether the federal district court in Colorado may exercise specific personal jurisdiction over out-of-state defendant Continental Motors, Inc., a manufacturer of airplane engines, based upon its contacts with Colorado through its website. Continental Motors' website allows airplane repair businesses known as fixed-base operators ("FBOs") to obtain unlimited access to its online service manuals in exchange for an annual fee. Arapahoe Aero, a Colorado-based FBO participating in the program, accessed and consulted the manuals in servicing an airplane that contained engine components manufactured by Continental Motors. The airplane later crashed in Idaho on a flight from Colorado.

         After the crash, Old Republic Insurance Company, the airplane's insurer, paid the owner for the property loss and filed a subrogation action against Continental Motors in Colorado federal district court, seeking reimbursement. Old Republic alleged that Continental Motors' online service manuals and bulletins contained defective information, thereby causing the crash. Continental Motors moved to dismiss the lawsuit for lack of personal jurisdiction, arguing that it did not purposely direct its activities at Colorado. In response, Old Republic contended that Continental Motors had targeted its website and online manuals toward Colorado residents, thereby subjecting itself to personal jurisdiction as to claims arising out of these contacts. Old Republic conceded that Continental Motors did not maintain sufficient contacts with Colorado to support jurisdiction for all purposes. The district court granted the motion to dismiss, ruling that it did not have specific jurisdiction over Continental Motors.

         On appeal, Old Republic maintains that Continental Motors is subject to specific personal jurisdiction in the State of Colorado for purposes of this case. It bases its jurisdictional argument entirely on Continental Motors' contacts with Colorado through its website and online manuals. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

         I. BACKGROUND

         A. Factual History

         The following facts, except where otherwise indicated, are drawn from the operative complaint and the written materials that Old Republic submitted to the district court in support of the court's jurisdiction over Continental Motors. See Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995) (on motion to dismiss for lack of personal jurisdiction, "[t]he allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits" (quotations omitted)); OMI Holdings, Inc. v. Royal Ins. Co. of Can., 149 F.3d 1086, 1091 (10th Cir. 1998) (a plaintiff may satisfy its prima facie burden by submitting an "affidavit or other written materials [containing] facts that if true would support jurisdiction over the defendant").

         1. The Parties

         Plaintiff-Appellant Old Republic is an insurance company incorporated in Pennsylvania, with its principal place of business in Illinois. Defendant-Appellee Continental Motors is an aircraft engine and parts manufacturer incorporated in Delaware, with its principal place of business in Alabama. Arapahoe Aero, a Colorado corporation and FBO, [1] is not a party to this case. Arapahoe Aero operates a repair station, certified by the Federal Aviation Administration ("FAA"), out of the Centennial Airport in Englewood, Colorado.

         2. The Aircraft Accident

         On January 9, 2014, an airplane insured by Old Republic (the "Aircraft") crashed in Idaho on a flight from Colorado. The Aircraft's engine contained magnetos[2]manufactured by Continental Motors and serviced by Arapahoe Aero in reliance on one of Continental Motors' online manuals and two bulletins. Because the service manual and bulletins allegedly provided inadequate instructions, Arapahoe Aero failed to properly inspect and replace the magnetos' nylon distributor gears when it serviced the Aircraft in September of 2009 and again in December of 2013. The gears later failed during the Aircraft's flight on January 9, 2014, resulting in the crash.

         When the Aircraft crashed, it belonged to Nylund Imports, Inc. ("Nylund"), a Colorado corporation. Nylund kept the Aircraft at the Centennial Airport in Englewood, Colorado. After the crash, Old Republic paid Nylund a $329, 500 settlement for the value of the Aircraft[3] and also incurred other expenses in mitigating damages. In exchange for this payment, Nylund assigned its rights and interest in the Aircraft, including claims for property damage, to Old Republic.

         3. Continental Motors' FBO Services and Rewards Program

         Continental Motors offers the FBO Services and Rewards Program (the "FBO Program"), which it advertises on its website's FBO Program webpage. In the five-year period preceding the crash, 20 FBOs from Colorado-including Arapahoe Aero- participated in the FBO Program. Arapahoe Aero first enrolled in 1996.

         Membership in the FBO Program, which in 1996 cost about $1, 000 annually, now costs about $240 annually.[4] In addition to paying the fee, participating members of the FBO Program must agree to a set of terms and conditions imposed by Continental Motors ("FBO T&C"). The FBO T&C provides, among other things, that members must complete an online profile, which involves submitting their addresses. The FBO T&C also provides that Continental Motors "reserves the right to make changes or terminate [the FBO Program] at any time." App., Vol. I at 63.

         At all relevant times, the FBO Program provided member FBOs with complete access to Continental Motors' online service manuals, some of which were also made available for free to the public.[5] Over time, Continental Motors has made more of its online service manuals free to the public. When Arapahoe Aero serviced the Aircraft in September of 2009, online access to the particular manual it referenced (the "Manual") was still restricted to members of the FBO Program.[6] By the time Arapahoe Aero serviced the Aircraft in December of 2013, however, anyone could access the Manual online for free.[7] In contrast to its service manuals, Continental Motors' online service bulletins-including the ones relied on by Arapahoe Aero in servicing the Aircraft-were freely accessible to the public at all relevant times.

         Besides unrestricted access to online service manuals, participating FBOs received additional benefits from enrolling in the FBO Program. First, Continental Motors listed participating FBOs on its FBO Locator webpage. App., Vol. I at 58 ("As a member your shop will be listed in the query locator on our website. Your customers will have the ability to search for FBO's . . . by Country, State, and City bringing more customers to your business.").[8] Second, Continental Motors allowed participating FBOs to send two representatives to a week-long training school at the Continental Motors factory in Mobile, Alabama. Id. Third, Continental Motors rewarded a participating FBO $500 for every one of its engines it installs. Id. Fourth, Continental Motors provided participating FBOs with dedicated customer support. Id. ("Highly-trained technical staff located in our Global Customer Support Center are available to help you learn the system and will assist you with your service and maintenance needs as well. It's like having your own dedicated technical service representative at your facility.").

         B. Procedural History

         Old Republic brought a subrogation action against Continental Motors in the U.S. District Court for the District of Colorado. Old Republic's amended complaint-the operative one here-sought damages for one claim of strict liability in tort based on the Aircraft's magnetos' allegedly defective design, manufacture, and instructions.

         Continental Motors moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. Following a period of jurisdictional discovery, but without conducting an evidentiary hearing, the district court granted the motion to dismiss. It held that Old Republic failed to show that Continental Motors purposely directed its "website or electronic information" specifically at the forum state of Colorado. Old Republic Ins. Co. v. Cont'l Motors, Inc., 207 F.Supp.3d 1213, 1215 (D. Colo. 2016). Apart from the website and online service manuals and bulletins, the court did not credit any other contacts between Continental Motors and Colorado alleged by Old Republic. Id. at 1215-16.

         Old Republic filed a timely notice of appeal.

         II. DISCUSSION

         We first discuss our standard of review and the constitutional requirements for exercising specific personal jurisdiction over an out-of-state defendant. We then analyze whether Old Republic has made a prima facie showing that these requirements have been met as to Continental Motors. We begin and end our jurisdictional analysis at the first step-whether Continental Motors purposefully directed its activities at Colorado. To answer this question, we consider the contacts alleged by Old Republic under their appropriate legal frameworks, as presented below. Comparing our case to other specific jurisdiction cases involving similar contacts, we conclude that the record does not contain evidence sufficient to establish jurisdiction here. We therefore affirm because Old Republic has not met its burden.

         A. Standard of Review

         "We review de novo the district court's dismissal for lack of personal jurisdiction." Soma Med. Int'l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999). "When, as in this case, a district court grants a motion to dismiss for lack of personal jurisdiction without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion." Id. (quotations omitted).[9] "We resolve all factual disputes in favor of the plaintiff in determining whether plaintiff has made a prima facie showing." Benton v. Cameco Corp., 375 F.3d 1070, 1074 (10th Cir. 2004) (quotations omitted).

         B. Legal Background

         "The Due Process Clause of the Fourteenth Amendment constrains a State's authority to bind a nonresident defendant to a judgment of its courts." Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). The law of the forum state and constitutional due process limitations govern personal jurisdiction in federal court. Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000); see Fed. R. Civ. P. 4(k)(1)(A). Colorado's long-arm statute, Colo. Rev. Stat. § 13-1-124, extends jurisdiction to the Constitution's full extent. Benton, 375 F.3d at 1075; Mr. Steak, Inc. v. District Court, 574 P.2d 95, 96 (Colo. 1978) (en banc). The personal jurisdiction analysis here is thus a single due process inquiry. See Benton, 375 F.3d at 1075.

         Due process requires both that the defendant "purposefully established minimum contacts within the forum State" and that the "assertion of personal jurisdiction would comport with 'fair play and substantial justice.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)). Depending on their relationship to the plaintiff's cause of action, an out-of-state defendant's contacts with the forum state may give rise to either general (all-purpose) jurisdiction or specific (case-linked) jurisdiction. See Intercon, 205 F.3d at 1247; see also Daimler AG v. Bauman, 134 S.Ct. 746, 754 (2014).

         1. General Jurisdiction

         General personal jurisdiction means that a court may exercise jurisdiction over an out-of-state party for all purposes. See Daimler, 134 S.Ct. at 754. "A court may assert general jurisdiction over foreign . . . corporations to hear any and all claims against them when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quoting Int'l Shoe, 326 U.S. at 317). "Because general jurisdiction is not related to the events giving rise to the suit, courts impose a more stringent minimum contacts test, requiring the plaintiff to demonstrate the defendant's continuous and systematic general business contacts." Benton, 375 F.3d at 1080 (quotations omitted). Old Republic does not contend that Continental Motors' Colorado contacts satisfy the general jurisdiction standard, so only specific jurisdiction is at issue in this appeal.

         2. Specific Jurisdiction

         Specific jurisdiction means that a court may exercise jurisdiction over an out-of-state party only if the cause of action relates to the party's contacts with the forum state. See Daimler, 134 S.Ct. at 754. Even though a defendant's forum state contacts may not support general jurisdiction, they may still meet the less stringent standard for specific jurisdiction if sufficiently related to the cause of action. See id. Specific jurisdiction calls for a two-step inquiry: (a) whether the plaintiff has shown that the defendant has minimum contacts with the forum state; and, if so, (b) whether the defendant has presented a "compelling case that the presence of some other considerations would render jurisdiction unreasonable." Burger King, 471 U.S. at 476-77; Shrader v. Biddinger, 633 F.3d 1235, 1239-40 (10th Cir. 2011) (quotations omitted).

         a. Minimum contacts

         The minimum contacts test for specific jurisdiction encompasses two distinct requirements: (i) that the defendant must have "purposefully directed its activities at residents of the forum state, " and (ii) that "the plaintiff's injuries must arise out of [the] defendant's forum-related activities." Shrader, 633 F.3d at 1239 (quotations omitted); see also Burger King, 471 U.S. at 475.[10]

         i. "Purposeful direction" requirement[11]

         The purposeful direction requirement "ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, . . . or of the unilateral activity of another party or a third person." Burger King, 471 U.S. at 475 (quotations omitted). Mere foreseeability of causing injury in another state is insufficient to establish purposeful direction. See id. at 474. But "where the defendant deliberately has engaged in significant activities within a State, . . . he manifestly has availed himself of the privilege of conducting business there." Id. at 475-76 (citations and quotations omitted). Accordingly, "[i]t is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum." Id. at 476.

         This appeal implicates three frameworks for determining whether an out-of-state defendant's activities satisfy the purposeful direction requirement: (1) continuing relationships with forum state residents ("continuing relationships"); (2) deliberate exploitation of the forum state market ("market exploitation"); and (3) harmful effects in the forum state ("harmful effects"). In cases involving contractual contacts between the defendant and forum state residents, the purposeful direction analysis often employs the first framework. See id. at 472-73. The Supreme Court articulated the latter two frameworks in specific jurisdiction cases involving out-of-state media defendants' national distribution of their printed material: Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984) (market exploitation) and Calder v. Jones, 465 U.S. 783 (1984) (harmful effects). The lower courts have since extended these latter frameworks to specific jurisdiction cases involving internet content.

         1) Continuing relationships with forum state residents

         The typical purposeful direction analysis looks to the out-of-state defendant's "continuing relationships and obligations with citizens of [the forum state]." Burger King, 471 U.S. at 473 (quotations omitted). The Supreme Court "ha[s] upheld the assertion of jurisdiction over defendants who have purposefully 'reached out beyond' their State and into another by, for example, entering a contractual relationship that 'envisioned continuing and wide-reaching contacts' ...


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