Analysis: The recent Court of Appeals decision of Precision Castings of Tennessee, Inc. v. H and H Manufacturing Co., Inc., No. M2012-00334-COA-R3-CV, 2012 WL 3608668, (Tenn. Ct. App. August 22, 2012) discussed when Tennessee courts can exercise jurisdiction over non-Tennessee entities. In this case, the defendant, H and H, contacted a Tennessee company, Precision, and requested Precision to manufacture and deliver certain metal castings and molds. H and H failed to pay for the product. A lawsuit was filed in Tennessee and a judgment was entered against H and H.
H and H contended the Tennessee court did not have jurisdiction over H and H. H and H argued it never agreed to come to Tennessee, had never been in Tennessee, had no prior business relationships in Tennessee, had not derived any revenue from people or entities in Tennessee and does not conduct any business enterprise in Tennessee. The court, however, determined the key facts as used to determine whether jurisdiction was appropriate was that H and H made electronic contact (email) with Precision in Tennessee and asked Precision to give H and H a quote to produce the products in question. Pursuant to this request, Precision provided an electronic quote to H and H and Precision delivered the product to H and H.
This case provides a good overview of when jurisdiction is appropriate in Tennessee. There are two types of jurisdiction, “general jurisdiction”, and “specific jurisdiction”. The court noted that general jurisdiction exists “when a defendant has ‘continuous and systematic contacts with the forum state sufficient to justify the state's exercise of judicial power with respect to any and all claims.” Precision Castings. at footnote 1 (citing Aristech Chem Int’l Ltd. V. Acrylic Fabricators LTD., 138 F.3d 624, 627 (6th Cir. 1998)). Specific jurisdiction on the other hand “confers jurisdiction only on claims that arise out of or relate to a defendant’s contacts with the forum.” Precision Castings at footnote 1.
The Tennessee long arm statute is found in T.C.A. § 20-2-214(a) and allows Tennessee Courts to “exercise in personam jurisdiction on any basis not inconsistent with the state or federal constitutions.” Chenault v. Walker, 36 S.W.3d 45, 52 (Tenn. 2001). Due process principles require that “an out-of-state defendant can be subject to personal jurisdiction only if he has such minimum contacts with the forum state that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Id. at p. 53. When general jurisdiction does not exist, then specific jurisdiction can exist under Tennessee law when “a commercial actor purposely directs his activities toward citizens of the forum state and litigation results from injuries arising out of or relating to those activities.” Chenault at 53.
Tennessee courts have adopted three primary factors and two lesser factors to be considered when determining whether “minimum contacts” exist for jurisdiction. Precision Castings at 3. (quoting Masada Investment Corp. v. Allen, 697 S.W.2d 332, 334 (Tenn. 1985)). The three primary factors are as follows:
1) The quantity of the contacts,
2) The nature and quality of the contacts, and
3) The source in connection of the cause of action with the contacts.
Masada at 334. The two lesser factors to be considered are “the interest of the foreign state and the convenience” to the parties. Id. at p. 334.
In the dispute between Precision and H and H the court concluded that minimum contacts existed between H and H and Tennessee in order to provide Tennessee jurisdiction over the dispute. The court found certain facts pertinent including that H and H intentionally contacted a Tennessee corporation to manufacture parts. Id. at 3. Additionally, H and H entered into a contract which provided that all disputes under the contract would be governed under Tennessee law. Id. at 3. The court also found the fact nobody from H and H came to Tennessee and that H and H did not conduct other business activities in Tennessee was irrelevant. This was mainly because the actual dispute arose from the fact H and H purposefully directed its activity to an entity in Tennessee and litigation came about due to that activity. Id. at 3. As a result, the court found H and H should “reasonably have anticipated it might be haled into court in Tennessee.” Id. at 3.
This case provides a good summary of Tennessee law on when a Tennessee court should exercise jurisdiction over an out of state entity. It is actually somewhat surprising that H and H tried to contest jurisdiction because the actual contract referenced the fact Tennessee law would govern any disputes. Further, the fact H and H contacted a Tennessee entity and requested that entity to manufacture and deliver certain items makes jurisdiction almost certain under Tennessee law when a dispute arises out of that same transaction.