Tag Archives: minimum contacts

WHY INTERNATIONAL BUSINESS CONTRACTS SHOULD CONTAIN PROVISIONS REQUIRING THE APPLICATION OF UNITED STATES LAW

     More than two hundred years after its birth, the United States of America is still a magnet for immigrants.  All over Europe and Asia, people still wish to immigrate here to obtain the best possible education, the greatest business opportunities and to succeed.      The other reason is that the United States Constitution is, in reality, only second to the Tenth Commandments as one of the greatest sets of legal regulations ever created.   Even though the Constitution can be vague in places, the framework it sets out has established a legal system in the United States that is second to none.   The legal systems of foreign countries which which do not have the protections of our Constitution often involve laws which would shock many Americans.   Here are some good reasons to stipulate in your business contracts to the laws of one of the states of the United States[1].

1.            Service of Process.

     In the United States, service of process is accomplished by a process server who is generally required to hand you the paper reflecting a lawsuit.   Sometimes there is a possibility for posting the process on your door, or handing it to a relative who lives with you.   However, it is the rare circumstance that process can simply be accomplished by publication without prior efforts to effectuate service.   Nonetheless, service by publication, and posting outside of the courthouse is often the norm in foreign countries.   Imagine if the only way that you could learn about a potential lawsuit is if you are lucky enough to be walking past the courthouse and see your name on the bulletin board.   To Americans, this may seem ridiculous but it is, in fact, reality in many countries.

2.            Jurisdiction.

            In many countries, whether the Court can obtain jurisdiction can be based on citizenship.   Here, in the United States, jurisdiction is most often based upon “minimum contacts” – – the idea that you must have some connection to the forum state before you are sued there.   There is a stark contrast between countries who apply jurisdiction based upon citizenship than the United States in which it is based upon “minimum contacts.”   In sum, for countries that apply a citizenship analysis, there is no reason for there to be minimum contacts.  In fact, it doesn’t matter whether the individual and/or corporation has been present in that particular jurisdiction for many years since citizenship is the test.   This leads to the anomalous result that two citizens of a foreign country, living in the United States, who have a child can make that child subject to jurisdiction of a foreign country even when the child has never even been to that country !   To American lawyers, this may seem silly but it is, in fact, the norm in many countries.

 

3.            Ex Parte Hearings.

     Most of the time, in the United States, the law requires that both sides be present at a hearing.   Not so in other countries.   In certain foreign countries there is ample opportunity for one side to approach the Judge alone.   This is often done informally in the courthouse or even on the street.   What may seem preposterous to Americans, can be routine in other countries.    

4.            Access to Court Files.

     In the United States, anyone can pull up an internet website and search court files.   Sometimes, files are protected for privacy reasons, particularly in family law cases.   However, most of the litigation in the United States Federal courts is available for review by anyone.   Do you think that this is the case in every country in the world?   It is not.   In many countries, the court file is not open to a review by anyone.   In fact, if you wish to inspect the court file, often you must file a motion with the court which has the discretion to deny you access.  So much for free speech! 

5.            Discovery.

     In the United States, in the typical lawsuit both parties are allowed to discover facts about the other party’s case.   That is often done with depositions, interrogatories and document requests.   Parties are required to produce documents and show them to the other side prior to trial.   You would think that this practice would be routine.   This is not the case either.  In fact, in many countries there is no such thing as discovery.   There are countries in which the Judge conducts discovery if there is discovery conducted at all.   And, guess what?   If the Judge is conducting the discovery, there is no opportunity to complain about it.   You just have to presume that the Judge conducted adequate discovery procedures and that the information that the Judge discovered was accurate.  There is no such thing as a “Motion to Compel.”   

6.            Restrictions on Speech.

     In some countries, you are not allowed to mention the names of your clients or witnesses.   Thus, at a deposition or similar proceeding it is entirely permissible for the witness to decline to answer certain questions on the grounds of “privacy.”   There is simply no way to get around this and the person being questioned may, in certain instances, be subject to criminal penalties.   Imagine being subject to criminal penalties for saying the wrong thing!   This is a concept that is totally foreign to Americans.

7.            Conclusion.

  Companies which do business abroad would be well-advised to include provisions in their agreements which provide for the application of American law and jurisdiction in the United States.   Otherwise, there is a possibility that the company could be subject to jurisdiction in a foreign country, with foreign laws, which do not contain the familiar concepts of the United States Constitution.  


[1] The actual state chosen is dependent upon the type of contracts and the lawyers involved. 

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THE BEST ADVICE FOR PRESERVING JURISDICTIONAL DEFENSES – – TREAD LIGHTLY

Your client is a foreign citizen.   He resides in a land far, far away.   The only time that he has been to Florida, he claims, is for a vacation five years ago where he stayed in South Beach for one week, swam in the ocean several times, had a few martinis and returned to his homeland.   He does not have an office in Florida.   He does not do business in Florida.   He does not own real property in Florida.   In fact, he does not have any contacts with Florida at all.   That, however, did not stop the XYZ Corporation from suing him in Florida.   The XYZ Corporation has alleged, among other things, that your client has “minimum contacts” with the forum state.   Based upon your telephone interview with the client, since he is now afraid to even travel here just to meet you, you have determined that there is no basis for personal jurisdiction.   What should you do next in order to avoid inadvertently subjecting him to the jurisdiction of the Florida Courts.

1. File a Motion to Dismiss for Lack of Personal Jurisdiction.

While this may seem obvious, it is not obvious to many lawyers.   The only way to preserve jurisdictional defenses is to assert those defenses early and timely.   Do not file anything else.  Do not file a Notice of Appearance.   Do not file any other motions.   Note in your Motion to Dismiss that you are “specially appearing”.

2. Seek an Immediate Hearing on Your Motion to Dismiss.

It is important that you seek an immediate hearing in order to avoid the potential that your adversary may claim that your client has submitted himself to the jurisdiction of the court through “conduct.”   It is a really bad idea to file a Motion to Dismiss and let it sit in the Court file without having a hearing on it.   The reason for this is that there is a strong likelihood that your adversary, an aggressive Plaintiff’s lawyer, will seek to move the case forward by serving discovery, both party and non-party, in order to establish the merits of his client’s claim and that your client’s position that he has no contact with the forum state is untrue.   At this point, the case becomes a race to see who can get to the Judge first.  You should get to the Judge first by having your motion timely heard.

3. Whatever You Do, Do Not Seek “Affirmative Relief” From the Court.

The concept of waiving your jurisdictional defenses by seeking “affirmative relief” is a tricky one.   Florida Courts have defined it differently.   Generally, a Florida Court will find that jurisdictional defenses have been waived if your client files a Motion which does anything to advance his case on the merits.   One Florida Court, which is in a minority position, has found that, in order for the Court to hold that your client has sought “affirmative relief” the Defendant must actually seek something which is the equivalent to a money judgment.   Be forewarned that this is a distinctly minority approach and the test employed by the Florida Courts is significantly more expansive.   In other words, you can get yourself, and your client, into trouble by seeking relief from the Court in addition to asserting jurisdictional objections.

4. Resolve the Jurisdictional Issue at the Outset.

Allowing a case to remain in the Court system for several months or years, without resolving the jurisdictional objections you raised at the beginning, will likely subject your client to an argument that he has agreed to the jurisdiction of the Florida Courts through conduct.   Every aspect of your client’s conduct, mostly taken through you and the pleadings you file, will be scrutinized by opposing counsel and the Court.  Thus, it is important, indeed critical, to have an early determination regarding whether the plaintiff has jurisdiction over your client within the first ninety days of the litigation.   Note also that filing a Motion to Quash Service of Process is not the same thing as filing a Motion to Dismiss.   If anything, both should be joined at the outset if service is at issue but, whatever you do, don’t file a Motion to Quash and let it sit there for several months or years while you wait to later file a Motion to Dismiss for Lack of Jurisdiction.   The Florida Courts frown upon this type of gamesmanship and have often found a waiver when this occurs. 

5. Be Ready to Respond to Jurisdictional Discovery

Your adversary has the right to take “jurisdictional discovery”.  This means that the XYZ corporation will be free to ask your client about his contact with the State of Florida in the form of document requests, requests for admission and both party and non-party depositions. You have to respond to this discovery. You don’t have to respond to discovery which is served upon your client directed to the merits of the dispute.  This type of discovery should be objected to and you should seek a ruling from the Court as soon as possible.

While the litigation of issues regarding jurisdiction may become the equivalent of a litigation within a litigation, it is important that this portion of the case be addressed as soon as possible, particularly since, if the case is dismissed, substantial legal fees will ultimately be saved since it may avoid the litigation of the case on the merits in a Florida Court.

Conclusion

Representing defendants from foreign states or countries in the Florida Courts can be tricky. Out of state lawyers should avoid this altogether or retain competent local counsel to assist since the case law and procedure in this area can be difficult to navigate.

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