Supreme Court Rules that A One-Time Purchase Was Insufficient Basis for Personal Jurisdiction.
Jan. 18, 2013
In a case that was orally argued in front of the Supreme Court of Alabama by one of the lawyers at Ritchey & Ritchey, P.A., the Supreme Court on a Petition for Writ of Mandamus, granted the writ finding that a one-time purchase was an insufficient basis for personal jurisdiction over an out of state company. (Read more) In Ex parte No. 1 Steel Products, Inc., a Massachusetts corporation, No. 1 Steel Products, Inc., was sued by Garrison Steel Fabricators, Inc., an Alabama corporation, in St. Clair County, Alabama based on a purchase order for the fabrication of steel for a project in Centerville, Massachusetts. The lawsuit alleged claims for open account, implied contract and labor and work performed. No. 1 Steel moved to dismiss the action, or in the alternative, to enter a summary judgment in No. 1 Steel’s favor asserting that the Alabama court did not have personal jurisdiction over No. 1 Steel. In addition, No. 1 Steel submitted an affidavit from a company representative noting that it went through a list of fabricators posted on a website called the Blue Book and sent emails to various companies through the Blue Book website. If a company was interested, it would contact No. 1 Steel. Garrison Steel sent a proposal to No. 1 Steel’s offices in Massachusetts which was later accepted.
In response to the motion filed by No. 1 Steel, Garrison Steel submitted an affidavit stating that sales representatives from Garrison were contacted by representatives from No. 1 Steel. A reply was filed by No. 1 Steel, which included an affidavit from a former employee of Garrison. The former employee stated that he learned of No. 1 Steel’s need for steel fabrication from his previous employer, Smith Ironworks, a Georgia company, and that he was the one that initiated contact with No. 1 Steel. In response, Garrison Steel filed another affidavit asserting that the former employee of Garrison Steel was disgruntled. The trial court denied the motion and No. 1 Steel filed a Petition for Writ of Mandamus.
After Greg Ritchey of Ritchey & Ritchey, P.A. presented oral argument before the Supreme Court of Alabama, the petition was granted and the writ issued. The Supreme Court of Alabama determined that a petition for writ of mandamus is the appropriate manner in which to challenge a trial court’s order deciding the question of personal jurisdiction. Because there was no allegation that in personam jurisdiction was based on general contacts with the State of Alabama, the Court determined the question of whether No. 1 Steel’s contacts with Alabama in connection with its transaction with Garrison Steel, i.e., the specific contacts, were sufficient such that No. 1 Steel should have anticipated being haled into court in Alabama. The Supreme Court of Alabama held that they were not.
The Supreme Court of Alabama found that No. 1 Steel’s contacts with Alabama consisted entirely of telephone, fax and email correspondence between it and Garrison Steel concerning the negotiation and subsequent fabrication and delivery to Massachusetts of the ordered steel. The question of which party initiated contact was hotly disputed. The Court in Ex parte Troncalli Chrysler Plymouth Dodge, Inc., 876 So. 2d 459, 465 (Ala. 2003) previously stated that fact is “of particular relevance” in determining whether an out-of-state defendant has purposefully availed itself of the privilege of conducting business activities within Alabama. However, that fact is not controlling. Vista Land &
Equip., L.L.C. v. Computer Programs & Sys., Inc., 953 So. 2d 1170, 1176 n. 3 (Ala. 2006). The Supreme Court of Alabama also held that the mere fact that an out-of-state party initiates telephone calls to Alabama or otherwise makes use of interstate forms of communications in also not controlling as such factors are secondary or ancillary and cannot alone provide the “minimum contacts” required by due process. Steel
Processors, Inc. v. Sue’s Pumps, Inc. Rentals, 622 So. 2d 910, 913 (Ala. 1993) (quoting Scullin Steel Co. v. National Ry. Utilization Corp., 676 F.2d 309, 314 (8th Cir. 1982)).
The Supreme Court determined that “[w]hat is controlling is the nature and extent of the relationship between the out-of-state defendant and the Alabama resident with which it engaged.” No. 1 Steel’s relationship with Garrison Steel was limited to a one-time purchase of goods. While it was true that No. 1 Steel purchased a customized product as opposed to off-the-shelf goods, that fact, alone, did not merit the Supreme Court of Alabama to deviate from established case law. The Supreme Court noted that in previous cases it has “explicitly recognized that a one-time contract for the purchase of goods is an insufficient basis for jurisdiction,” citing Vista Land & Equip., L.L.C. v. Computer Programs & Sys., Inc., 953 So. 2d at 1177, and the Supreme Court reaffirmed that principle. Based on the foregoing, No. 1 Steel’s petition for writ of mandamus was granted and the trial court was directed to enter an order dismissing the action filed by Garrison Steel against No. 1 Steel because the court lacked personal jurisdiction over No. 1 Steel.