Case Information
*1 IN THE SUPREME COURT OF IOWA
No. 12–0036
Filed April 19, 2013
SAMIR M. SHAMS,
Appellant,
vs.
SONA HASSAN,
Appellee. On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Scott D.
Rosenberg, Judge.
Plaintiff seeks further review of a court of appeals decision affirming a decision of the district court dismissing a petition for lack of personal jurisdiction. DECISION OF COURT OF APPEALS AND DISTRICT COURT JUDGMENT REVERSED; CASE REMANDED.
Andrew B. Howie of Hudson, Mallaney, Shindler & Anderson, P.C., West Des Moines, for appellant.
Steven C. Reed, West Des Moines, for appellee.
CADY, Chief Justice.
In this appeal, we must determine whether the exercise of personal jurisdiction over a nonresident defendant to a lawsuit filed in Iowa that alleged misappropriated funds from an Iowa bank account comports with the guarantees of the Due Process Clause of the Fourteenth Amendment. The district court held sufficient minimum contacts were lacking and dismissed the lawsuit. The court of appeals affirmed the decision of the district court. On further review, we reverse the decisions of the court of appeals and the district court and conclude the nonresident defendant is subject to personal jurisdiction in Iowa. We remand the case for further proceedings.
I. Background Facts and Proceedings.
Sona Hassan and Samir Shams are sister and brother. Hassan has been a resident of Maryland for many years and has not visited Iowa since 1983. In 2003, Shams allegedly lived in Iowa. He had two children who resided in Iowa and one child who resided in Arizona.
Shams obtained employment in Iraq in 2003. To provide for his children in his absence, he opened a checking account at Bankers Trust in Des Moines before leaving for Iraq. He planned to use the account to deposit the money he would earn from his employment. Shams claimed Hassan orally agreed to use the account in his absence to provide for the needs of his children and to pay his bills. To carry out the agreement, Shams provided Hassan with checks that could be used to draw on the account. Shams signed the checks as the drawer, but otherwise left the checks blank. Shams delivered the checks to Hassan in Maryland, where she was to negotiate them when needed and mail them to the payee. Shams and Hassan discussed the terms of the agreement over the telephone.
Instead of using the checks to provide for the children as agreed, Shams claimed Hassan used the checks to withdraw funds from the Iowa account for her personal use. Shams alleged Hassan ultimately misappropriated $271,773.93.
Shams filed a lawsuit against Hassan in Iowa district court for breach of contract, conversion, bad faith, fraud, and breach of fiduciary duty. Hassan moved to dismiss for lack of personal jurisdiction. See Iowa R. Civ. P. 1.421(1)( b ) (permitting a defendant to make a preanswer motion to dismiss for “[l]ack of jurisdiction over the person”). In her motion to dismiss the lawsuit, Hassan claimed Shams had no meaningful contact with Iowa. She asserted Shams actually resided in Maryland at the time he gave her the checks, after Shams return from Iraq, and as recently as March 2011. Hassan argued Shams randomly opened the bank account in Iowa “solely on his own initiative.” Hassan indicated in an affidavit the account should have been opened in Maryland where she lived with her husband, and she had no role in opening the account in Iowa.
Shams resisted the motion, relying on the purported 2003 agreement, which according to Shams “was to be performed in whole or in part in Iowa, using an Iowa Bank, for Iowa beneficiaries.” In Shams’s view, the breach of that contract and the attendant claims (conversion, bad faith, breach of a fiduciary duty) necessarily arose out of the agreement and the actions of Hassan in misappropriating funds located in an Iowa bank account. Shams also argued he had substantial ties to Iowa. He claimed he purchased a home in Iowa in 2009 and obtained an Iowa driver’s license in 2010.
The district court granted the motion to dismiss. The court reasoned that, even if an agreement was reached, the formation of a contract in Iowa did not justify jurisdiction. Similarly, the court found phone conversations would not be enough to satisfy the due process standard for exercising personal jurisdiction. The court concluded, “The only connection between Ms. Hassan, Iowa, and the cause of action in this case is the fact that the checks were drawn upon an Iowa bank account and [Hassan] may or may not have entered into an oral agreement with [Shams] while he was residing in Iowa.” Shams appealed, and we transferred the case to the court of appeals.
The court of appeals affirmed the decision of the district court. It considered the unilateral actions by Shams in opening the Iowa account, making himself the drawer on the account, and providing checks to Hassan in Maryland did not establish purposeful conduct by Hassan with an Iowa resident. Shams sought, and we granted, further review.
II. Standard of Review.
We review a district court’s decision on a motion to dismiss for lack
of personal jurisdiction for correction of errors at law.
Addison Ins. Co. v.
Knight, Hoppe, Kurnik & Knight, L.L.C.
,
Unlike other grounds for dismissal, however, a court considering a motion to dismiss for lack of personal jurisdiction must make factual findings to determine whether it has personal jurisdiction over the defendant. Capital Promotions, L.L.C. v. Don King Prods., Inc. , 756 N.W.2d 828, 832 (Iowa 2008). Those findings are binding if supported by substantial evidence. Hodges v. Hodges , 572 N.W.2d 549, 551 (Iowa 1997).
While the plaintiff has the burden to establish jurisdiction may be
had over the defendant, “ ‘we accept as true the allegations of the petition
and the contents of uncontroverted affidavits.’ ”
Addison Ins. Co.
, 734
N.W.2d at 476 (quoting
Aquadrill, Inc. v. Envtl. Compliance Consulting
Servs., Inc.
,
III. Discussion.
A. Legal Framework.
[1]
Section 1 of the Fourteenth Amendment to
the United States Constitution declares that no state shall “deprive any
person of life, liberty, or property, without due process of law . . . .” U.S.
Const. amend. XIV, § 1. One application of this Clause limits a state’s
power to exercise personal jurisdiction over a nonresident defendant.
Ross
, 675 N.W.2d at 815 (citing
Helicopteros Nacionales de Colombia,
S.A. v. Hall
,
Therefore, a court may constitutionally exercise personal jurisdiction over the nonresident defendant when the defendant has “ ‘certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” ’ ” Universal Coops., Inc. v. Tasco, Inc. , 300 N.W.2d 139, 143 (Iowa 1981) (quoting Int’l Shoe , 326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102). Fairness is the crux of the minimum- contacts analysis. “The minimum contacts must show ‘a sufficient connection between the defendant and the forum state so as to make it fair’ and reasonable to require the defendant to come to the state and defend the action.” Ross , 675 N.W.2d at 815 (quoting Hodges , 572 N.W.2d at 551); accord Kulko v. Super. Ct. of Cal. , 436 U.S. 84, 91, 98 S. Ct. 1690, 1696, 56 L. Ed. 2d 132, 141 (1978) (“The existence of personal jurisdiction . . . depends upon . . . a sufficient connection between the defendant and the forum State to make it fair to require defense of the action in the forum.” (Citation omitted.)).
“This test makes it ‘essential in each case that there be some act
by which the defendant purposely avails itself of the privilege of
conducting activities within the forum State, thus invoking the benefits
and protections of its laws.’ ”
Ross
, 675 N.W.2d at 815–16 (quoting
Hanson v. Denckla
,
There are two categories of cases in which the defendant’s contacts
with the forum state are sufficient to make the exercise of personal
jurisdiction over them proper.
See id.
In one group of cases, the
defendants maintain “ ‘continuous and systematic’ ” contacts with the
forum state such that they should anticipate defending the suit in the
state even when the suit is unrelated to their contacts with the forum
state.
Helicopteros
,
In the second group of cases, jurisdiction is appropriate, even
when the defendant’s contacts with the forum state are limited, as long
as the “controversy is related to or ‘arises out of’ a defendant’s contacts
with the forum.”
Helicopteros
, 466 U.S. at 414, 104 S. Ct. at 1872, 80
L. Ed. 2d at 411. A single contact with the forum state can be sufficient
to satisfy due process concerns when the plaintiff’s claim arises out of
the contact.
McGee v. Int’l Life Ins. Co.
,
When we consider whether an assertion of personal jurisdiction
passes constitutional muster in the specific jurisdiction context, “the
critical focus is on the relationship among the defendant, the forum and
the litigation.”
Meyers v. Kallestead
, 476 N.W.2d 65, 67 (Iowa 1991).
Due process is concerned with “the defendant’s connection with the
litigation
in the forum state, not the defendant’s connection with
residents
in that state.”
In re Marriage of Crew
, 549 N.W.2d 527, 530
(Iowa 1996). “The unilateral activity of those who claim some
relationship with a nonresident defendant cannot satisfy the requirement
of contact with the forum State.”
Hanson
,
In contrast to cases in which defendants purposefully avail
themselves of the protection of a state’s laws, the mere foreseeability of
causing an injury in another state “alone has never been a sufficient
benchmark for personal jurisdiction under the Due Process Clause.”
World-Wide Volkswagen Corp.
, 444 U.S. at 295, 100 S. Ct. at 566, 62
L. Ed. 2d at 500. However, foreseeability is not wholly irrelevant.
Id.
at
297,
To be sure, “ Calder did not ‘carve out a special intentional torts exception to the traditional specific jurisdiction analysis.’ ” Capital Promotions , 756 N.W.2d at 836 (quoting IMO Indus., Inc. v. Kiekert AG , 155 F.3d 254, 265 (3d Cir. 1998)). “[A] majority of courts have interpreted Calder to require ‘more than a finding that the harm caused by the defendant’s intentional tort is primarily felt within the forum.’ ” Id. (quoting IMO Indus., Inc. , 155 F.3d at 265). “Thus, even under the Calder effects test, ‘a court must undertake a particularized inquiry as to the extent to which the defendant has purposefully availed itself of the benefits of the forum’s laws.’ ” Id. at 837 (quoting Far W. Capital, Inc. v. Towne , 46 F.3d 1071, 1079 (10th Cir. 1995)). A plaintiff attempting to obtain personal jurisdiction under Calder must show:
“(1) the defendant’s acts were intentional; (2) these actions were uniquely or expressly aimed at the forum state; and (3) the brunt of the harm was suffered in the forum state, and the defendant knew the harm was likely to be suffered there.”
Id.
(quoting
Roquette Am., Inc. v. Gerber
,
In short, the Calder test permits an intentional tort conducted in another forum to count as a contact within the forum state under certain circumstances. In determining whether the plaintiff has satisfied this test, we look at the location of the tortious activities and the “focal point” of the alleged tort. See id.
In the past, we have utilized an arguably different test from the federal model. We have articulated a five-factor test to evaluate whether a nonresident defendant had sufficient minimum contacts with Iowa. Id. at 833. The five factors are:
“(1) the quantity of the contacts;
(2) the nature and quality of the contacts; (3) the source of and connection of the cause of action with those contacts;
(4) the interest of the forum state; and
(5) the convenience of the parties.”
Ross
, 675 N.W.2d at 816 (quoting
Cascade Lumber Co. v. Edward Rose
Bldg. Co.
,
Without expressly disavowing our five-factor test, we have followed the modern federal framework more closely in recent years, relying on its two main criteria. Capitol Promotions , 756 N.W.2d at 834. The two criteria are (1) whether “ ‘the defendant has “purposefully directed” his activities at residents of the forum,’ ” and (2) whether “ ‘the litigation results from alleged injures that “arise out of or relate to” those activities.’ ” Id. (quoting Burger King Corp. , 471 U.S. at 472–73, 105 S. Ct. at 2182, 85 L. Ed. 2d at 540–41). Nonetheless, our older five- factor test remains a useful tool, even if it may have less primacy. See id.
If sufficient minimum contacts exist, the court must then
“ ‘determine whether the assertion of personal jurisdiction would
comport with “fair play and substantial justice.” ’ ”
Id.
(quoting
Burger
King Corp.
,
“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.”
Burger King Corp.
, 471 U.S. at 477, 105 S. Ct. at 2184, 85 L. Ed. 2d at
543) (quoting
World-Wide Volkswagen Corp.
,
“ ‘These considerations sometimes serve to establish the
reasonableness of jurisdiction upon a lesser showing of minimum
contacts than would otherwise be required.’ ”
Capitol Promotions
, 756
N.W.2d at 837 (quoting
Burger King Corp.
,
B. Sufficiency of Hassan’s Contacts with Iowa.
The heart of the
analysis in this case concerns whether the location of the bank account
in Iowa constitutes a mere unilateral contact of the plaintiff,
see Hanson
,
357 U.S. at 253, 78 S. Ct. at 1239–40, 2 L. Ed. 2d at 1298, or a
foreseeable effect in Iowa from an intentional tort out of state,
see Calder
,
465 U.S. at 789, 104 S. Ct. at 1486–87, 79 L. Ed. 2d at 812. Hassan
had, at most, three contacts with the State of Iowa for purposes of the
minimum-contacts analysis.
[2]
First, Shams suggests at various points
that the parties may have technically formed the contract in Iowa.
Second, Shams argues the contract was to be performed in Iowa, of
which he says Hassan was well aware. Third, the funds were drawn on
an Iowa bank account. According to Shams, the repeated withdrawal of
the funds constituted tortious conversions in Iowa. As we make this
inquiry, we must remember that the constitutional minimum-contacts
analysis is a fact-intensive one; and we apply it on a case-by-case basis.
Heslinga v. Bollman
,
Broadly speaking, Shams relies on a counterfactual argument: “Had [Hassan] not contacted the Iowa bank by cashing the checks, she would not have accessed the money, she would not have used the money for her personal desires, and the factual basis of this lawsuit would never have arisen.” Hassan rejoins that her contacts with Iowa were insignificant. In fact, Hassan argues that no contact with Iowa was purposefully directed at the state. Consequently, she argues, it is unnecessary to consider whether Shams’s claim arises out of or is related to contacts she might have with Iowa.
We recognize that checks drawn on an in-state bank are often of
“negligible significance” in the determination of whether defendants have
purposely availed themselves of Iowa law.
See Helicopteros
, 466 U.S. at
416, 104 S. Ct. at 1873, 80 L. Ed. 2d at 412. Commensurate with the
fairness inherent in constitutional personal jurisdiction analysis, most
claims ordinarily do not arise out of or relate to the bank account on
which the check is drawn or to be deposited.
See Twaddle v. Twaddle
,
But,
Helicopteros
and
Twaddle
are distinguishable because the
checking accounts in both cases were, at most, of passing legal
significance. The Houston checking account in
Helicopteros
was offered
as one of several contacts alleged to be continuous and systematic,
which—if they were in fact continuous and systematic—would have
provided the Texas court with general jurisdiction.
See
In this case, the contacts by Hassan in allegedly using the Iowa
bank account make personal jurisdiction appropriate under the
Calder
theory we adopted in
Capital Promotions
. The first prong of the
Calder
test is easily met. Shams alleged Hassan’s acts were intentional.
See
Capital Promotions
,
The key questions derived from the second and third prongs turn
on whether Hassan’s actions were “ ‘uniquely or expressly aimed’ ” at
Iowa and whether the harm was felt primarily in Iowa.
See id.
(quoting
Roquette Am., Inc.
,
This case presents the inverse scenario. While Shams’s residence
in Iowa is perhaps dubious, it is clear Hassan was aware of the location
of the bank from which she was allegedly misappropriating Shams’s
funds. While Hassan might have preferred the bank account to be
located in Maryland, this preference was irrelevant under the
Calder
test
so long as Iowa was the focal point of Hassan’s alleged tort.
Calder
illustrates this conclusion: The harm in that case was directed by the
defendant to the forum state.
See Calder
,
Turning to the third prong of the Calder test, the legal injury in a conversion occurs where the conversion takes place. United States v. Swiss Am. Bank, Ltd. , 191 F.3d 30, 37 (1st Cir. 1999). Thus, wrongful depletion of accounts located in one place occurs in that place. Id. ; see also Wenz v. Memery Crystal , 55 F.3d 1503, 1507–08 (10th Cir. 1995) (holding conversion of funds in a London bank account by London-based tortfeasors occurred in London). It is true that money is increasingly fungible, and an injury that occurs in one bank account does not mean that the harm is not felt elsewhere. In other words, the economic harm Shams suffered could be viewed as primarily occurring wherever he was located at the moment. But, the point of our formulation of the Calder test was to avoid this type of reasoning, though from the opposite perspective. As we noted in Capital Promotions ,
basing jurisdiction solely on the fact the plaintiff felt harm in
the forum jurisdiction would make jurisdiction “depend on a
plaintiff’s
decision about where to establish residence,”
rather than “grounding jurisdiction on a defendant’s decision
to ‘purposely avail[] itself of the privilege of conducting
activities within the forum [s]tate,’ or on a defendant’s
activities “expressly aimed” at the forum state.”
The injury in this case occurred almost totally in Iowa. Not only were funds removed from a bank account located in Iowa, but two of the three children who were to benefit from the funds in the account were residents of Iowa. Of course, the more remote effects of the conversion may also have occurred outside of Iowa. Some of the harm may have caused injury in Arizona because Hassan had allegedly promised to pay bills for one of the children in that state. Yet, our Calder test asks where the primary effect of the tortious act occurred. Thus, injuries occurring elsewhere will not deprive the forum state of personal jurisdiction when the primary effect of the tort occurred in the forum state.
Therefore, sufficient minimum contacts exist to justify the exercise
of jurisdiction over Hassan. To defeat jurisdiction, Hassan must present
a “compelling case that the presence of some other considerations would
render jurisdiction unreasonable.”
Burger King Corp.
, 471 U.S. at 477,
these compelling cases “are limited to the rare situation in
which the plaintiff’s interest and the state’s interest in
adjudicating the dispute in the forum are so attenuated that
they are clearly outweighed by the burden of subjecting the
defendant to litigation within the forum.”
Patent Rights Prot. Grp., LLC v. Video Gaming Techs., Inc.
,
In reviewing the fairness factors identified in World-Wide Volkswagen Corp. , 444 U.S. at 292, 100 S. Ct. at 564, 62 L. Ed. 2d at 498, we conclude the exercise of jurisdiction is reasonable. Some burden will undoubtedly fall on Hassan, but such a burden falls on all out-of- state defendants. See Burstein v. State Bar of Cal. , 693 F.2d 511, 522 (5th Cir. 1982) (“Unquestionably, it would be inconvenient for the Bar to litigate in Louisiana, but that is an aspect of every suit against a nonresident defendant.”). Iowa’s interest in adjudicating a dispute concerning a tort that incurred within its borders and Shams’s interest in obtaining convenient relief outweigh any inconvenience to Hassan. See Asahi Metal , 480 U.S. at 114, 107 S. Ct. at 1033, 94 L. Ed. 2d at 105–06 (“When minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant.”); see also McGee , 355 U.S. at 223, 78 S. Ct. at 201, 2 L. Ed. 2d at 226 (“It cannot be denied that [a state] has a manifest interest in providing effective means of redress for its residents . . . .”).
Moreover, some, if not all, of the evidence in this case—bank
records—will likely be in Des Moines.
See Ellicott Mach. Corp. v. John
Holland Party Ltd.
, 995 F.2d 474, 480 (4th Cir. 1993) (holding
jurisdiction in Maryland was unreasonable when most of the evidence
and witnesses were located in Australia);
Domtar, Inc. v. Niagara Fire Ins.
Co.
, 533 N.W.2d 25, 34 (Minn. 1995) (holding jurisdiction was
appropriate when the bulk of the relevant evidence was located in
Minnesota). Because Hassan is the only defendant in this case,
efficiency appears to be satisfied by exercise of jurisdiction in Iowa.
See
Domtar, Inc.
,
Accordingly, the exercise of personal jurisdiction does not offend the Due Process Clause in this case. There were sufficient minimum contacts in Iowa. It is fair for Iowa to exercise personal jurisdiction.
IV. Conclusion.
Hassan is subject to personal jurisdiction in Iowa under the Calder effects test based on the claim of an intentional tort in Iowa. Accordingly, we reverse the decision of the court of appeals and the district court. We remand the case for further proceedings.
DECISION OF COURT OF APPEALS AND DISTRICT COURT JUDGMENT REVERSED; CASE REMANDED.
All justices concur except Wiggins, J., who takes no part.
Notes
[1] Historically, assessing the propriety of asserting personal jurisdiction over a
nonresident was analytically “a two-step process: (1) is there a statute or rule
authorizing exercise of jurisdiction, and (2) does such jurisdiction offend due process
principles?”
See Hodges
, 572 N.W.2d at 551–52. The Iowa Rules of Civil Procedure
provide:
Every corporation, individual, personal representative, partnership or
association that shall have the necessary minimum contact with the
state of Iowa shall be subject to the jurisdiction of the courts of this
state, and the courts of this state shall hold such corporation, individual,
personal representative, partnership or association amenable to suit in
Iowa in every case not contrary to the provisions of the Constitution of
the United States.
Iowa R. Civ. P. 1.306. We have interpreted this language as reaching to the widest
parameters permitted by the Due Process Clause.
Hammond v. Fla. Asset Fin. Corp.
,
[2] Shams and Hassan both argue fairly extensively Shams’s residence during all
material events of this case. As
Hanson
dictates, Shams’s residence is immaterial to a
determination of whether personal jurisdiction is appropriate over Hassan. Of course, if
Hassan has sufficient contacts with Iowa to justify jurisdiction, Shams’s residence in
Iowa would be relevant to the determination of whether exercise of jurisdiction based on
those sufficient contacts is fair; after all, a state has an interest in providing a forum in
which its residents may seek relief.
Cf. Asahi Metal
, 480 U.S. at 114, 107 S. Ct. at
1033,