LEXINGTON INSURANCE COMPANY, Plaintiff-Appellant, v. HOTAI INSURANCE COMPANY, LTD., and TAIAN INSURANCE COMPANY, LTD., Defendants-Appellees.
No. 18-1141
United States Court of Appeals For the Seventh Circuit
ARGUED NOVEMBER 27, 2018 — DECIDED SEPTEMBER 12, 2019
Before BAUER, HAMILTON, and BARRETT, Circuit Judges.
Before BAUER, HAMILTON, and BARRETT, Circuit Judges.
On the basis of that additional-insured status, Trek‘s primary insurer, Lexington Insurance Company, which is based in Massachusetts, sued Zurich and Taian in Wisconsin seeking indemnification for a products-liability settlement paid on Trek‘s behalf involving an accident that took place in Texas. The district court correctly concluded
I.
Trek, a bicycle manufacturer, maintains its corporate offices in Waterloo, Wisconsin. It is party to two purchase order agreements, both with Taiwanese companies, that are relevant to this appeal. One is an agreement with Giant Manufacturing Company to purchase bicycles that Trek markets and sells under its own brand name. The other is an agreement to purchase bicycle parts from Formula Hubs, Inc.
Giant‘s purchase order agreement with Trek required it to have Trek named as an additional insured in its products-liability insurance policy with Zurich, a Taiwanese insurer. Under that policy, Zurich agreed to indemnify Giant and its listed vendors, including Trek, for judgments, expenses, and legal costs incurred “worldwide.” In addition, the Zurich policy (1) allowed Zurich to control the litigation or settlement of a covered claim but did not require it to do so; (2) included a Taiwanese choice of law provision; and (3) required disputes between Zurich and its insureds regarding the policy to be resolved by arbitration in Taiwan.2
Trek‘s purchase order with Formula involved a similar insurance arrangement. In it, Formula agreed to have Trek included as an additional insured in its products-liability insurance policy with Taian, another Taiwanese insurer. Under the policy, Taian agreed to indemnify Formula and its vendors, including Trek, for liability and defense costs incurred “worldwide.” Like the Zurich policy, the Taian policy gave Taian the right but not the obligation to control the litigation of a covered claim against an insured. Finally, it dictated that disputes concerning the policy would be subject to Taiwanese law and would have to submit to the jurisdiction of a Taiwanese court.
In 2012, John Giessler, a Louisiana resident, was seriously injured while riding a rented Trek bicycle in Travis County, Texas. During his ride, the front wheel detached from the frame of the bicycle, Giessler fell, and the resulting injuries rendered him a quadriplegic. Giessler, his wife, and his son sued Trek, among others, in Texas. Although Giant had manufactured the bicycle that Giessler was riding, and Formula had manufactured the front-wheel release, neither was a party to Giessler‘s lawsuit. Lexington Insurance Company, which insures Trek through comprehensive general liability and commercial umbrella policies, defended Trek in the Giessler suit. Trek and Lexington attempted to notify Giant and Formula — and their respective insurers, Zurich and Taian — of Giessler‘s lawsuit. In the end, though, the case settled, and Lexington paid Giessler on Trek‘s behalf. Lexington sought reimbursement from Zurich and Taian; after they refused to pay, it sued them in the Western District of Wisconsin. It argued that both were obligated to indemnify Trek under their respective insurance policies with Giant and Formula. And presenting theories of contribution and equitable subrogation, Lexington contended that the Taiwanese insurers must pay it the money that they owed Trek.
Both Zurich and Taian moved to dismiss the case for lack of personal jurisdiction and improper venue. With respect to the former, the insurers argued, among other things, that they lacked the necessary minimum contacts with Wisconsin to justify
II.
A federal court may exercise personal jurisdiction over a foreign defendant only to the extent permitted by the forum state‘s long-arm statute and by the Due Process Clause. Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012). The parties agree that Wisconsin‘s long-arm statute,
To satisfy due process, a defendant‘s physical presence within the state is not required. Walden v. Fiore, 571 U.S. 277, 283 (2014). But a foreign defendant “generally must have ‘certain minimum contacts … such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.‘” Id. (alteration in original) (quoting Int‘l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). In other words, the defendant‘s relationship with the forum state must be such that the defendant “should reasonably anticipate being haled into court there.” Felland, 682 F.3d at 673 (citation omitted).
Personal jurisdiction takes two forms — general and specific. General jurisdiction is all-purpose; it permits a defendant to be sued in a forum for any claim, regardless of whether the claim has any connection to the forum state. Goodyear Dunlop Tires Operations v. Brown, 564 U.S. 915, 919 (2011). For a state to have such extensive jurisdiction over a defendant, however, the defendant‘s contacts must be “so ‘continuous and systematic’ as to render [it] essentially at home in the forum state.” Id. (citation omitted). Lexington does not contend that either Zurich or Taian is “at home” in Wisconsin. Instead, it argues that the federal district court in Wisconsin has specific jurisdiction over the insurers. Specific jurisdiction “is confined to adjudication of ‘issues deriving from, or connected with, the very controversy that establishes jurisdiction.‘” Id. (citation omitted).
Specific jurisdiction has three “essential requirements.” Felland, 682 F.3d at 673. First, the defendant‘s contacts with the forum state must show that it “purposefully availed [itself] of the privilege of conducting business in the forum state or purposefully directed [its] activities at the state.” Id. Second, the plaintiff‘s alleged injury must have arisen out of the defendant‘s forum-related activities. Id. And finally, any exercise of personal jurisdiction must comport with traditional notions of fair play and substantial justice. Id.
We begin with whether Zurich and Taian “purposefully availed [themselves] of the privilege of conducting business in the forum state or purposefully
Lexington has failed to demonstrate that either Zurich or Taian made any purposeful contact with Wisconsin before, during, or after the formation of the insurance contracts. They did not solicit Trek‘s business or target the Wisconsin market. See Int‘l Shoe, 326 U.S. at 314 (defendant had salesmen in the forum exhibiting samples and soliciting orders from potential buyers); see also Daniel J. Hartwig Assocs. v. Kanner, 913 F.2d 1213, 1218–19 (7th Cir. 1990) (whether the defendant solicited the plaintiff‘s services is “significant” in the minimum-contacts analysis). They negotiated and drafted these contracts in Taiwan with Taiwanese companies. Cf. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 467 (1985) (defendants negotiated with Burger King‘s headquarters, which were located in the forum state). Both policies required disputes to be resolved in Taiwan according to the laws of Taiwan. Cf. id. at 465–66 (contract dictated that the relationship between the parties be governed by the law in the forum state). Zurich and Taian did not visit Wisconsin or contact anyone residing there. Cf. id. at 466, 468 (defendant attended management courses in the forum state in addition to communicating with headquarters in the forum state by mail and telephone). Indeed, Lexington points to no evidence that Zurich or Taian ever sent anything — even a copy of either insurance policy — to Wisconsin.4 Cf. Walden, 571 U.S. at 289 (“Petitioner never traveled to, conducted activities within, contacted anyone in, or sent anything or anyone to Nevada. In short, when viewed through the proper lens — whether the defendant‘s actions connect him to the forum — petitioner formed no jurisdictionally relevant
Notwithstanding all of this, Lexington contends that two provisions in the insurance policies constitute sufficient contacts with the state of Wisconsin to satisfy the demands of due process. Both contracts acknowledged Trek as an additional insured and extended coverage for liabilities incurred “worldwide.” But neither of these provisions constitutes a contact with the state of Wisconsin, so they do not singly or together provide a basis for personal jurisdiction.
We can easily dispose of the first argument because it flatly contradicts Supreme Court precedent. The fact that Zurich and Taian may be liable to Trek does not give Wisconsin jurisdiction over them. As we have already explained, it is a defendant‘s contacts with the forum state, not with the plaintiff, that count. Even if Zurich and Taian had contracts with Trek — as opposed to contracts with Giant and Formula — a contract with a forum resident is not enough, standing alone, to establish jurisdiction in that forum. See Burger King, 471 U.S. at 478 (“If the question is whether an individual‘s contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party‘s home forum, we believe the answer clearly is that it cannot.“); see also Walden, 571 U.S. at 286 (“[A] defendant‘s relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.“). To conclude that personal jurisdiction exists, we need to see evidence that Zurich and Taian reached out to Wisconsin during the formation and execution of these contracts. Burger King, 471 U.S. at 479 (“It is these factors — prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing — that must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum.“). There is no such evidence. In fact, the insurers never had any communication with Trek during the formation and execution of these contracts, much less any purposeful contact that touched the state of Wisconsin. A straightforward application of Burger King and Walden forecloses Lexington‘s argument.
Lexington‘s second contention — that personal jurisdiction exists because the policies contained worldwide coverage provisions — also fails. The thrust of the argument is that Zurich and Taian derived financial benefit from affirmatively including Wisconsin (and Texas, and the rest of the world) in their territory of coverage — because the more extensive the geographic coverage, the higher the premium. The fact that the insurers generated income by including Wisconsin, Lexington says, means that the insurers did business in the state and can be sued there. And it argues that by agreeing to cover Trek for liabilities and defense costs incurred “worldwide,” Zurich and Taian bargained for the expectation of being sued anywhere, including Wisconsin.5
In fact, the Supreme Court has squarely rejected the proposition that such collateral financial benefits are purposeful contacts. See World-Wide Volkswagen, 444 U.S. at 298–99. In World-Wide Volkswagen, the plaintiffs purchased a vehicle in New York but later sustained personal injuries when they got into an accident while driving through Oklahoma. Id. at 288. They brought a products-liability action against the automobile retailer and wholesaler (both New York corporations that did no business in Oklahoma) in Oklahoma. Id. at 288, 295. The plaintiffs argued that because the automobile‘s “design and purpose” made it foreseeable that it would cause an injury in Oklahoma, id. at 295, and because the automobile companies received a financial benefit from selling a product with the ability to travel to across vast geographic areas (including the distance between New York and Oklahoma), they were subject to personal jurisdiction in Oklahoma, id. at 298. But the Supreme Court concluded that all of that added up to “no activity whatsoever in Oklahoma,” id. at 295:
[I]t is contended that jurisdiction can be supported by the fact that petitioners earn substantial revenue from goods used in Oklahoma.… This argument seems to make the point that the purchase of automobiles in New York, from which the petitioners earn substantial revenue, would not occur but for the fact that the automobiles are capable of use in distant States like Oklahoma.… [T]he very purpose of an automobile is to travel …. However, financial benefits accruing to the defendant from a collateral relation to the forum State will not support jurisdiction if they do not stem from a constitutionally cognizable contact with the State.
Id. at 298–99. Just as the financial benefit gained by selling a product with the purpose and ability to travel to a vast number of distant forums is not itself business activity within those forums, so too here the financial benefit gained from broad geographic insurance coverage does not constitute “doing business” within the entire covered territory.
World-Wide Volkswagen also forecloses Lexington‘s argument that Zurich and Taian are subject to Wisconsin‘s jurisdiction because the “worldwide coverage” clause made it foreseeable that Trek might sue them anywhere in the world where Trek incurred liability. “‘[F]oreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause.” Id. at 295; see also Burger King, 471 U.S. at 474–75; Hanson, 357 U.S. at 251, 254; Advanced Tactical, 751 F.3d at 802. On the contrary,
The “worldwide coverage” clause defined the territorial scope of the insurers’ obligation to Trek. But the presence of a state within the scope of coverage creates no purposeful connection between the insurers and that state. Consider Texas, which was the location of the accident, the suit, and the settlement. Zurich and Taian could have covered Trek‘s claim for this liability without ever touching Texas — for example, they could have mailed a check to Trek‘s headquarters in Wisconsin or sent the money electronically to an account located in another state or even another country. Indeed, if the covered territory had been limited, Zurich and Taian could have discharged their obligation by sending funds to an account located outside the covered territory. Jurisdiction depends on the defendant‘s actions, and payment of a covered claim is the only act that these policies required the insurers to perform. It is doubtful that the act of sending payment to an account located within a state is a contact sufficient to support personal jurisdiction. But even if it were, there is no necessary connection between the territory of coverage and the location of payment.
Lexington claims that “myriad cases around the country” have recognized personal jurisdiction under these same circumstances. Yet almost every case that it cites involves an insurance policy with a duty-to-defend clause — and if Zurich and Taian had assumed a duty to defend Trek in any jurisdiction in which it incurred liability and structured their financial benefits on that obligation, this might be a different case. In that situation, courts have described the “expectation of being haled into court in a foreign state [a]s an express feature of [the] policy.” Rossman v. State Farm Mut. Auto. Ins. Co., 832 F.2d 282, 286 (4th Cir. 1987); see also Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 914 (9th Cir. 1990) (“[When] automobile liability insurers contract to indemnify and defend the insured for claims that will foreseeably result in litigation in foreign states … litigation requiring the presence of the insurer is not only foreseeable, but it was purposefully contracted for by the insurer.“); see also, e.g., Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786, 790–91 (8th Cir. 2005); Payne v. Motorists Mut. Ins. Cos., 4 F.3d 452, 454–57 (6th Cir. 1993). But see Hunt v. Erie Ins. Grp., 728 F.2d 1244, 1247 (9th Cir. 1984) (“Erie‘s failure to structure its policy to exclude the possibility of defending a suit wherever an injured claimant requires medical care cannot, in our view, fairly be characterized as an act by which Erie has purposefully availed itself of the privilege of conducting activities in California.“). Here, though, Zurich and Taian contracted for the right, not the obligation, to control litigation against their insureds. Thus, “the expectation
Lexington has one case that is partly on its side: TH Agriculture & Nutrition, LLC v. Ace European Group Ltd. In that case, the Tenth Circuit said that “the issuance of an insurance policy that contains a worldwide territory-of-coverage clause and an option to defend the insured is sufficient to establish minimum contacts with the forum state.” Id. at 1288. Its “minimum contacts” analysis rests on the very premises that Lexington invokes to support jurisdiction here: “the foreseeability of litigation in foreign states … based on the insurer‘s own actions” of including those states within the coverage area and the resulting financial benefits to the insurance company from offering broad geographic coverage. Id. at 1290.
TH Agriculture offers Lexington very little help, because despite what it said about minimum contacts, the Tenth Circuit concluded that the forum state lacked personal jurisdiction over the insurers in that case. The presence of minimum contacts does not justify personal jurisdiction when haling a defendant into court in the forum state would violate traditional notions of fair play and substantial justice. Id. at 1292 (citing Burger King, 471 U.S. at 477–78). This factor was dispositive in TH Agriculture. Id. (“[We] conclude that the exercise of personal jurisdiction over the Insurers in Kansas would be unreasonable.“). Thus, TH Agriculture extends Lexington nothing more than an opportunity to win the battle and lose the war.
But in any event, we are unpersuaded by the Tenth Circuit‘s treatment of minimum contacts in TH Agriculture. Its discussion is not only inconsistent with Supreme Court precedent; it is also in significant tension with the Tenth Circuit‘s own precedent. In OMI Holdings, a duty-to-defend case decided almost a decade before TH Agriculture, the Tenth Circuit criticized the decisions of other circuits in duty-to-defend cases for relying heavily on “foreseeability — a position at odds with the Supreme Court‘s directive that foreseeability alone is an insufficient basis on which to establish minimum contacts.” OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1094 (10th Cir. 1998). It also expressed skepticism at the willingness of other circuits to assume “that by agreeing to defend its insured in any forum, an insurer foresees being sued by its own insured in any forum when a coverage dispute arises.” Id. at 1095. While it ultimately concluded that “contracting to defend the insured in the forum state” is a sufficient minimum contact with the forum, it stressed that this kind of contact is “qualitatively low on the due process scale.” Id.6 Notwithstanding these concerns, the Tenth Circuit inexplicably went even further in TH Agriculture by characterizing a territory-of-coverage clause as a sufficient contact with the forum state not only when an insurer assumes
In the years since the Tenth Circuit decided TH Agriculture, the Supreme Court has continued to stress that the foreseeability of suit in a forum is not enough to justify a state‘s exercise of jurisdiction over a defendant. See Walden, 571 U.S. at 284–86; Nicastro, 564 U.S. at 882–83 (plurality opinion). Given these cases, the Tenth Circuit might come out differently if it were presented with the “minimum contacts” question today. Regardless, we must follow the Court‘s admonition that the predictability of a plaintiff‘s action is not itself enough to justify a state‘s exercise of jurisdiction over a defendant. Walden, 571 U.S. at 286. Zurich and Taian had a relationship with Trek, not Wisconsin. That relationship may have made it foreseeable that Trek would sue them in Trek‘s home state or another forum it found convenient.7 But “it is the defendant‘s actions, not his expectations, that empower a [foreign state] to subject him to judgment.” Nicastro, 564 U.S. at 883 (plurality opinion). And Zurich and Taian did not make any purposeful contact with Wisconsin by promising to indemnify Trek for liability and defense costs that it incurred anywhere in the world.
* * *
Because Lexington failed to show that Zurich and Taian have sufficient minimum contacts with the state of Wisconsin, we agree with the district court that exercising jurisdiction over the insurance companies would violate due process. The district court‘s dismissal of the case for lack of personal jurisdiction is AFFIRMED.