FRALEY, D.B.A. FRALEY TRUCKING, APPELLEE, v. ESTATE OF OEDING ET AL., APPELLANTS.
No. 2012-1994
Supreme Court of Ohio
February 12, 2014
138 Ohio St.3d 250, 2014-Ohio-452
FRENCH, J.
Submitted October 9, 2013
{11} In this аppeal, we address whether Ohio courts may exercise in-personam jurisdiction over a nonresident defendant based solely on the conduct of the defendant‘s insurer. We hold that they may not.
Facts and Procedural History
{12} Appellee, David Fraley, d.b.a. Fraley Trucking, an Ohio resident, filed this negligence action against appellants, the estate of Timothy J. Oeding, J & R Equipment and Storing (“J & R“), and Auto-Owners Insurance Company (“Auto-Owners“), in the Butler County Court of Common Pleas. Fraley‘s action arises out of a motor-vehicle accident that occurred in November 2008 in Indiana. Fraley‘s complaint identifies an Indiana address for each appellant, and service of process was direсted to appellants in Indiana.
{13} Fraley alleged that Timothy Oeding, while acting within the course of his employment with J & R, negligently caused a collision between the motor vehicle Oeding was operating and a truck owned by Fraley and operated by Fraley‘s employee, Craig Farler, who was also acting within the course of his employment. Oeding died as a result of injuries sustained in the collision. Fraley alleged that Auto-Owners, which insured J & R and Oeding, conducted an independent investigation into the facts of the accident and, as part of its investigation, placed
{14} Appellants moved the trial court to dismiss Fraley‘s complaint for lack of personal jurisdiction, pursuant to
{15} In response to appellants’ motion, Fraley submitted an affidavit in which he restated relevant facts from the complaint and further stated that he suffered economic loss in Ohio due to Auto-Owners’ investigative hold. Fraley‘s affidavit additionally stated that Auto-Owners directed correspondenсe and calls to Fraley and his counsel in Ohio to resolve Fraley‘s claims and that Auto-Owners is licensed to transact business in Ohio. In his memorandum opposing dismissal, Fraley did not argue that Oeding or J & R had any personal contacts with Ohio, but argued that personal jurisdiction exists over all appellants because Auto-Owners transacted business in Ohio and caused tortious injury to Fraley in Ohio while acting as an agent of J & R and Oeding.
{16} The trial court granted appellants’ motion to dismiss. The court held that it could not exercise personal jurisdiction over Oeding and J & R solely because their insurer did business in Ohio and further held that Fraley was not entitled to maintain a direct action against Auto-Owners, because he had not obtained a judgment against Auto-Owners’ insureds.
{17} On appeal, Fraley conceded that Ohio law precludes him from bringing a direct action against Auto-Owners, but he argued that the trial court erred in determining that it lacked personal jurisdiction over Oeding and J & R. The Twelfth District Court of Appeals agreed and reversed the trial court‘s judgment. 2012-Ohio-4770, 981 N.E.2d 911 (12th Dist.).
{18} The court of appeals recognized that the record contains no indication that Oeding or J & R had any contact with Ohio and that Fraley‘s jurisdictional argument could prevail only if Auto-Owners’ activities are imputed to J & R and Oeding. Id. at ¶ 9. The court of appeals acknowledged instancеs in which this court has imputed an insurer‘s action or inaction to its insured, see, e.g., Griffey v. Rajan, 33 Ohio St.3d 75, 77-78, 514 N.E.2d 1122 (1987), but it recognized that the question whether an insurer‘s actions can be imputed to a nonresident insured for purposes of obtaining personal jurisdiction over the insured is one of first impression in this state. Id. at ¶ 9-13. The court answered that question in the affirmative and held that Auto-Owners’ investigatory hold and its correspondence and calls to Fraley and his attorney brought Auto-Owners, and by extension J & R and Oeding, within Ohio‘s long-arm statute. Id. at ¶ 19. The court also held that Ohio‘s exercise of jurisdiction over appellants would not contravene principles of due process. Id. at ¶ 23-24.
{19} This court accepted appellants’ discretionary appeal. 134 Ohio St.3d 1484, 2013-Ohio-902, 984 N.E.2d 28.
Question Presented
{110} We are asked to determine whether an Ohio court may impute an insurance company‘s conduct to its nonresident insured for purposes of establishing personal jurisdiction over the insured. We hold that it may not. An Ohio court may not exercise personal jurisdiction over a nonresident based solely on the conduct of the nonresident‘s insurance company.
Analysis
{111} Appellants’ motion to dismiss placed upon Fraley the burden to show that the trial court had personal jurisdiction over appellants. Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, ¶ 27, citing Fallang v. Hickey, 40 Ohio St.3d 106, 107, 532 N.E.2d 117 (1988). When, as here, a trial court determines a
{12} The determination whether an Ohio court has personal jurisdiction over an out-of-state defendant requires a two-step inquiry. First, the court must determine whether the defendant‘s conduct falls within Ohio‘s long-arm statute or the applicable civil rule. Kentucky Oaks Mall Co. v. Mitchell‘s Formal Wear, Inc., 53 Ohio St.3d 73, 75, 559 N.E.2d 477 (1990). If it does, then the court must consider whether the assertion of jurisdiction over the nonresident defendant would deprive the defendant of due process of law under the Fourteenth Amendment to the United States Constitution. Id.
(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person‘s:
(1) Transacting any business in this state;
* * *
(4) Causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state.
For purposes of
{14}
{15} Because Fraley concedes that he is not entitled to maintain a direct action against Auto-Owners, we consider only whether the trial court had personal jurisdiction over J & R and Oeding. The court of appeals characterized Auto-Owners as J & R and Oeding‘s agent, concluded that Auto-Owners’ actions fell within
{16} Our paramount concern in construing a statute is legislative intent. State ex rel. Steele v. Morrissey, 103 Ohio St.3d 355, 2004-Ohio-4960, 815 N.E.2d 1107, ¶ 21. To discern legislative intent, “we first consider the statutory lan-
{17} Under
{18} To be subject to personal jurisdiction under
{19}
{120} Under
{21} Fraley also argues that the
{122} We must accord undefined statutory terms their plain and ordinary meaning. Am. Fiber Sys., Inc. v. Levin, 125 Ohio St.3d 374, 2010-Ohio-1468, 928 N.E.2d 695, ¶ 24. Black‘s Law Dictionary 651 (9th Ed.2009) defines “executor” as follows: “1. * * * One who performs or carries out some act. 2. * * * A person named by a testator to carry out the provisions in the testator‘s will. Cf. ADMINISTRATOR (2).” As relevant to one who acts in a representative capacity, Black‘s defines “administrator” as “2. A person appointed by the court to manage the assets and liabilities of an intestate decedent. * * * Cf. EXECUTOR (2).” Id. at 52. Review of those definitions reveals that the terms executor and administrator are related.
{123} When, as in
{125} Even if an agent‘s doing business in Ohio could satisfy
{26} The plaintiffs in Kirchen, who were Wisconsin residents, initiated suit in a Wisconsin federal district court. They argued that the nonresident defendant-driver engaged in substantial activitiеs in Wisconsin by way of settlement negotiations between his insurance company and the plaintiffs, that the insurance company was acting as the driver‘s agent, and that the insurance company‘s activities were attributable to the driver for purposes of determining jurisdiction. Id. at 315-316.
{128} The insurance policy issued to J & R is not part of the record, but Fraley has never argued, and there is nothing in the record to suggest, that J & R and/or Oeding had any control over Auto-Owners’ actions, including its investigative hold on Fraley‘s truck or its negotiations to settle Fraley‘s claims. There is simply no prima facie showing that Auto-Owners acted as its insureds’ agent in this case for purposes of
{29} In addition to concluding that Ohio may not exercise personal jurisdiction over J & R and Oeding under its long-arm statute, we further conclude that exercise of personal jurisdiction in this case would violate established principles of due process. Because Ohio‘s long-arm statute is not coterminous with due process, Goldstein, 70 Ohio St.3d at 238, 638 N.E.2d 541, fn. 1, even satisfaction of the long-arm statute does not justify the exercise of jurisdiction unless that exercise also comports with the defendant‘s constitutional right to due process. Kauffman Racing Equip., 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, at ¶ 45. Here, it would not.
{130} We must evaluate all assertions of state-court jurisdiction according to thе due-process standards set out in Internatl. Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny. Shaffer v. Heitner, 433 U.S. 186, 212, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). A state may exercise jurisdiction over an out-of-state defendant only if the defendant has “certain minimum contacts with [the forum] such that the maintenance of the suit does not
{131} To satisfy the minimum-contacts requirement, “it is essential in each case that there be some act by which the defеndant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). A determination whether a court‘s exercise of jurisdiction is consistent with due process must focus on “the relationship among the defendant, the forum, and the litigation.” Shaffer at 204. A court must assess each defendant‘s contacts with the forum state individually. Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984), citing Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980).
{132} The only alleged connections in this case between appellants and the state of Ohio are Auto-Owners’ registration with the Ohio Department of Insurance and its telephone and written correspondence with Fraley and his attorney in Ohio. Fraley maintains that those connections demonstrate sufficient minimum contacts for the trial court to exercise personal jurisdiction over all three appellants. Appellants, on the other hand, argue that the imputation of Auto-Owners’ conduct to J & R and Oeding for purposes of determining their amenability to personal jurisdiction violates traditional notions of fair play and substantial justice.
{133} Subjecting an insured to personal jurisdiction wherever its insurer chooses to conduct settlement negotiations is offensive to due process. Kirchen, 390 F.Supp. at 317. When a defendant has engaged in no purposeful and willful conduct with the forum state and has no control over his insurer‘s settlement activity in that state, the defendant “cannot be said to have willfully associated himself with the state nor purposefully invoked the benefit and protections of its laws.” Id.
{134} The United States Supreme Court addressed due-process concerns raised by the exercise of personal jurisdiction over a nonresident defendant based on the conduct of the defendant‘s insurer in Rush, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516. Rush arose out of a single-vehicle accident in Indiana. At the time of the accident, the driver, Randal Rush, and the injured passenger, Jeffrey
{135} Savchuk attempted to invoke the Minnesota court‘s quasi-in-rem jurisdiction by garnishing State Farm‘s policy obligation to defend and indemnify Rush. Id. at 323. The Minnesota Supreme Court upheld the trial court‘s denial of the defendants’ motions to dismiss and held that fairness supported the exercise of quasi-in-rem jurisdiction “because in accident litigation the insurer controls the defense of the case, State Farm does business in and is regulated by [Minnesota], and [Minnesota] has an interest in protecting its residents and providing them with a forum in which to litigate their claims.” Id. at 324, citing Savchuk v. Rush, 311 Minn. 480, 245 N.W.2d 624 (1976) (“Savchuk I“). As summarized in the United States Supreme Court‘s opinion, the Minnesota Supreme Court “recognized that Rush had engaged in no voluntary activity that would justify the exercise of in personam jurisdiction” but held that the assertion of quasi-in-rem jurisdiction through garnishment of State Farm‘s obligation to Rush complied with due process. Id. at 324-325; see Savchuk v. Rush, 272 N.W.2d 888 (Minn.1978) (“Savchuk II“).
{136} The United States Supreme Court rejected Savchuk‘s “ingenious jurisdictional theory,” holding that the fictitious presence in Minnesota of State Farm‘s obligation to defend and indemnify Rush “does not, without more, provide a basis for concluding that there is any contact in the International Shoe sense” between Minnesota and Rush. (Emphasis sic.) Id. at 328-330. “[I]t cannot be said that the defendant engaged in any purpоseful activity related to the forum that would make the exercise of jurisdiction fair, just, or reasonable * * * merely because his insurer does business there.” (Emphasis sic.) Id. at 329.
{137} The Supreme Court also rejected as “plainly unconstitutional” the Minnesota court‘s aggregation of State Farm‘s and Rush‘s forum contacts in a situation in which the resulting assertion of jurisdiction over Rush was based solely on State Farm‘s activities: “The requirements of International Shoe * * * must be met as to each defendant over whom a state court exercises jurisdiction.” Id. at 332. Despite State Farm‘s conducting of business in Minnesota and its attempts to settle Savchuk‘s claims there, the court held that Rush “has no contaсts with the forum, and the Due Process Clause ‘does not contemplate that a state may make binding a judgment * * * against an individual or corporate defendant with which the state has no contacts, ties, or relations.‘” (Emphasis
{138} The same rationale applies here. The requirements of Internatl. Shoe, which must be met as to each defendant, have not been met with respect to J & R or Oeding. It cannot be said that either J & R or Oeding engaged in any purposeful activity related to the state of Ohio that would make the exercise of jurisdiction fair, just, or reasonable merely because their insurer did business in Ohio. Simply put, neither J & R nor Oeding have any contacts with the state of Ohio, and the exercise of jurisdiction over those appellants would violate due process.
{139} The court of appeals here stated that “in some instances, minimum contacts can be established regarding the insured solely by the actions of the insurer negotiating on his behalf in the forum state.” 2012-Ohio-4770, 981 N.E.2d 911, at ¶ 22, citing Univ. of S. Alabama v. S. Farm Bur. Cas. Ins. Co., S.D.Ala. No. CA 05-00275-C, 2005 WL 1840238 (July 27, 2005). Univ. of S. Alabama, however, is not only distinguishable but is also inconsistent with the reasoning of Rush, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516, as pertinent to this case.
{40} Univ. of S. Alabama involved a Mississippi automobile accident between Roosevelt Jackson and Virginia Hamilton, both of whom were Mississippi residents. As a result of the accident, Jackson received medical care from an Alabama hospital, which filed a notice of hospital lien in Alabama. Despite knowledge of the hospital lien, Jackson, Hamilton, and Hamilton‘s insurer, Mississippi Farm Bureau, settled Jackson‘s claims without providing for payment of the lien, and Jackson executed a release of all claims against Hamilton and Mississippi Farm Bureau in exchange for $25,000, paid by Mississippi Farm Bureau. 2005 WL 1840238 at *1-2.
{41} The hospital sued Mississippi Farm Bureau, Jackson, and Hamilton in the United States District Court for the Southern District of Alabama for impairment of its lien, and Mississippi Farm Bureau and Hamilton moved the court to dismiss for lack of personal jurisdiction. Id. at *3. The district court held thаt Mississippi Farm Bureau was subject to the court‘s specific jurisdiction because the plaintiff‘s claim—a direct claim against Mississippi Farm Bureau—arose from the insurer‘s contacts with Alabama. Id. at *8. The court also concluded that in light of deposition testimony that Mississippi Farm Bureau acted as Hamilton‘s agent during settlement negotiations, it could exercise specific personal jurisdiction over Hamilton. Id., fn. 7.
Conclusion
{143} An Ohio court may not exercise personal jurisdiction over a nonresident based solely on the conduct of the nonresident‘s insurance company. The assertion of personal jurisdiction over J & R and Oeding, based solely on the conduct of their insurer, is inconsistent with both Ohio‘s long-arm statute and principles of due process. Neither J & R nor Oeding has any contact with the state of Ohio, and fundamental fairness precludes Ohio from subjecting appellants to the burdens of litigating and the possibility of binding judgments in this state merely because their insurance company engages in business here. Accordingly, we rеverse the judgment of the Twelfth District Court of Appeals and reinstate the judgment of the trial court.
Judgment reversed.
O‘CONNOR, C.J., and O‘DONNELL, LANZINGER, and KENNEDY, JJ., concur.
PFEIFER and O‘NEILL, JJ., dissent.
PFEIFER, J., dissenting.
{144} Does Ohio law shield an insurance company that transacts business in this state from having to be subject to suit in an Ohio court when it engages in tortious activity that does harm to Ohioans? I would hold that Ohio‘s long-arm statute is broad enough to confer jurisdiction over a defendant whose Ohio-licensed insurer commits tortious acts against Ohio citizens and that exercising jurisdiction over the insured defendants in this case would not raise significant due-process concerns.
{46} We are left with a case that revolves around the actions of Auto-Owners only but that can be resolved only through a claim against the insureds. I agree with the appellate court below that just as the actions of an insurer can be imputed to the insured for purposes of liability, persоnal jurisdiction may also be imputed from the insurer to the insured. If direct actions against insurers are indeed forbidden by law, J & R Equipment and Storing and the Oeding estate are defendants here in name only. That legal fiction should not obscure who the true, sole defendant is in this case.
{147} If it were an available defendant through a direct action, Auto-Owners would be subject to long-arm jurisdiction under
(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person‘s:
* * *
(4) Causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state.
{48} Auto-Owners allegedly caused injury to Fraley in Fraley‘s home base of Ohio through wrongfully withholding the use of Fraley‘s truck; the existence of Auto-Owners’ insurance license from the Ohio Department of Insurance authorizing it to transact business in this state satisfies the “regularly does or solicits business” portion of the long-arm statute.
{149} To properly determine personal jurisdiction, we must also consider “whether the exercise of jurisdiction would deprive the nonresident defendant of the right to due process of law under the Fourteеnth Amendment to the United States Constitution.” Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, ¶ 28.
[D]ue process is satisfied if the defendant has “minimum contacts” with the forum state such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” [Internatl. Shoe Co. v. Washington] (1945), 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95, quoting Milliken v. Meyer (1940), 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278.
{150} I would hold that Auto-Owners’ license to do business in Ohio is sufficient to establish minimum contacts as to both Auto-Owners and its insureds. In Kentucky Oaks Mall Co. v. Mitchell‘s Formal Wear, Inc., 53 Ohio St.3d 73, 559 N.E.2d 477 (1990), this court set forth factors to consider in determining whether the exercise of jurisdiction comports with fair play and substantial justice:
“Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with ‘fair play and substantial justice.’ * * * Thus courts in ‘appropriate cases[s]’ may evaluate ‘the burden on the defendant,’ ‘the forum State‘s interest in adjudicating the dispute,’ ‘the plaintiff‘s interest in obtaining convenient and effective relief,’ ‘the interstate judicial system‘s interest in obtaining the most efficient resolution of controversies,’ and the ‘shared interest of the several States in furthering fundamental substantive social policies.’ * * * These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contаcts than would otherwise be required. * * * On the other hand, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” (Citations omitted and emphasis added.)
(Emphasis sic.) Id. at 77, quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).
{151} I would find that the burden on Auto-Owners and its insureds in this particular case is minimal. Auto-Owners would not rely on the testimony of anyone involved in the underlying accident; any witnesses would be people under its control, either employees or contractors. This state has great interest in seeing one of its citizens obtain relief for the alleged tortious acts of an insurer
{52} Accordingly, I would affirm the judgment of the court of appeals.
O‘NEILL, J., concurs in the foregoing opinion.
Repper, Pagan, Cook, Ltd., and Christopher J. Pagan, for appellee.
Smith, Rolfes & Skavdahl Co., L.P.A., and James P. Nolan II, for appellants.
Green & Green, Lawyers, and Erin B. Moore, urging reversal for amicus curiae, Ohio Association of Civil Trial Attorneys.
JUDITH L. FRENCH
JUSTICE, SUPREME COURT OF OHIO