Creative Calling Solutions Inc v. LF Beauty Ltd.

Filing

OPINION FILED - THE COURT: William Jay Riley, Steven M. Colloton and Jane Kelly AUTHORING JUDGE:Steven M. Colloton (PUBLISHED) [4308256] [14-3054]

United States Court of Appeals
For the Eighth Circuit
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No. 14-3054
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Creative Calling Solutions, Inc.,
lllllllllllllllllllll Plaintiff - Appellant,
v.
LF Beauty Ltd.,
lllllllllllllllllllll Defendant - Appellee.
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: March 24, 2015
Filed: August 21, 2015
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Before RILEY, Chief Judge, COLLOTON and KELLY, Circuit Judges.
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COLLOTON, Circuit Judge.
Creative Calling Solutions, Inc., an Iowa corporation, sued LF Beauty Ltd. of
Hong Kong for breach of contract. The district court granted LF Beauty’s motion to
dismiss for lack of personal jurisdiction, after considering the contract and affidavits
submitted by both parties. We reverse the dismissal because a reasonable jury could
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personal jurisdiction and that the exercise of jurisdiction would not offend traditional
notions of fair play and substantial justice.
I.
Creative Calling, an Iowa corporation with its principal place of business in
Iowa, designs, develops, and sells beauty products. LF Beauty is a Hong Kong
corporation, with its principal place of business in Hong Kong, that provides services,
including product and sample development, shipping oversight, and production
planning. LF Beauty contacted Alan Unger, the President and CEO of Creative
Calling, in Iowa to solicit business. LF Beauty sought to manage Creative Calling’s
operations infrastructure in China in exchange for a fee and e-mailed Unger a
PowerPoint presentation describing the proposed services. After three months of
negotiation, Unger traveled to Hong Kong to execute the contract between LF Beauty
and Creative Calling in March 2012.
The contract provided that LF Beauty would oversee Creative Calling’s
operations in China, including managing production processes at factories of third
parties. LF Beauty managed Creative Calling’s supply chain pursuant to the contract
and communicated extensively with Creative Calling electronically and by telephone
for nearly two years.
The contract also required that LF Beauty make pre-production samples, that
Creative Calling approve those samples, and that LF Beauty’s expenditures on freight
to send samples to Creative Calling would be passed through with no additional fee.
LF Beauty shipped thousands of both pre-production and production samples that
were made in China by third party factories from its office in Hong Kong to Creative
Calling in Iowa for close to two years.

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In exchange for these services, the contract required Creative Calling to pay LF
Beauty a fee or, in some circumstances, to reimburse LF Beauty for costs. LF Beauty
was to receive payments from Creative Calling’s customers on its behalf, and then
remit to Creative Calling the proceeds less certain deductions. Pursuant to those
provisions, LF Beauty made significant payments to Creative Calling in Iowa. No LF
Beauty agents or employees visited Iowa to establish or maintain its business
relationship with Creative Calling, and LF Beauty has no connection with Iowa
outside of this business relationship.
Almost two years after Creative Calling and LF Beauty executed the contract,
Creative Calling filed suit in Iowa court. Creative Calling alleged that LF Beauty
breached the contract by sending samples that could not be used for marketing or
sales for various reasons, including that the sample containers were incorrectly
labeled, that the samples were contaminated, and that the samples were improperly
packaged. LF Beauty removed the suit to federal court and moved to dismiss for lack
of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). Both parties submitted
affidavits with their briefing on the motion to dismiss, and LF Beauty filed the
contract as an exhibit. The district court granted LF Beauty’s motion, relying in part
on the contract and the parties’ affidavits. Creative Calling appeals, and we review
the district court’s decision de novo. Dever v. Hentzen Coatings, Inc., 380 F.3d 1070,
1072 (8th Cir. 2004).
II.
To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must
plead “sufficient facts to support a reasonable inference that the defendant[] can be
subjected to jurisdiction within the state.” K-V Pharm. Co. v. J. Uriach & CIA, S.A.,
648 F.3d 588, 591-92 (8th Cir. 2011) (alteration in original) (internal quotation marks
omitted). But where, as here, the parties submit affidavits to bolster their positions
on the motion, and the district court relies on the evidence, the motion is in substance
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one for summary judgment. Radaszewski ex rel. Radaszewski v. Telecom Corp., 981
F.2d 305, 309-10 (8th Cir. 1992); cf. Blair v. Wills, 420 F.3d 823, 826-27 (8th Cir.
2005). The plaintiff bears the burden of proof on the issue of personal jurisdiction,
and must establish jurisdiction by a preponderance of the evidence at trial or when the
court holds an evidentiary hearing. Dakota Indus., Inc. v. Dakota Sportswear, Inc.,
946 F.2d 1384, 1387 (8th Cir. 1991). At the motion stage, the action should not be
dismissed for lack of jurisdiction if the evidence, viewed in the light most favorable
to Creative Calling, is sufficient to support a conclusion that the exercise of personal
jurisdiction over LF Beauty is proper. See Radaszewski ex rel. Radaszewski, 981 F.2d
at 309-10; Fed. R. Civ. P. 56(a).
A federal court may assume jurisdiction over a defendant in a diversity action
if the forum State’s long-arm statute permits the exercise of personal jurisdiction and
that exercise is consistent with the Due Process Clause of the Fourteenth Amendment.
K-V Pharm. Co., 648 F.3d at 592. Iowa’s long-arm statute is co-extensive with “the
widest due process parameters” permitted by the Constitution. Hammond v. Fla.
Asset Fin. Corp., 695 N.W.2d 1, 5 (Iowa 2005). The district court may thus assert
personal jurisdiction over LF Beauty if the exercise of jurisdiction comports with due
process.
The Due Process Clause permits the exercise of “general jurisdiction” to hear
“any and all claims against” a defendant if its “affiliations with the State are so
continuous and systematic as to render [it] essentially at home in the forum State.”
Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014) (internal quotation marks
omitted). “Specific jurisdiction,” by contrast, is proper when a defendant has certain
contacts with the forum State and the cause of action arises out of those contacts. Id.
Creative Calling argues that LF Beauty is subject to specific jurisdiction in Iowa to
answer Creative Calling’s breach of contract claim.

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Due process requires that a defendant have certain “minimum contacts” with
the forum State for the State to exercise specific jurisdiction. See World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980). This connection must be
based on “some act by which the defendant purposefully avails itself of the privilege
of conducting activities within the forum State, thus invoking the benefits and
protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75
(1985) (internal quotation mark omitted). The defendant’s contacts with the forum
must thus be more than “random, fortuitous, or attenuated,” and must permit the
defendant to “reasonably anticipate being haled into court there.” Id. (internal
quotation marks omitted).
To assess whether a defendant has purposefully availed itself of the forum and
established minimum contacts, we examine the nature, quality, and quantity of the
defendant’s contacts with the forum State and the connection between the cause of
action and those contacts. See Digi-Tel Holdings, Inc. v. Proteq Telecomm. (PTE),
Ltd., 89 F.3d 519, 522-23 (8th Cir. 1996). For contractual claims, personal
jurisdiction is proper where the defendant “reach[es] out beyond one state and
create[s] continuing relationships and obligations with citizens of another state.”
Burger King Corp., 471 U.S. at 473 (internal quotation marks omitted). But a
contract with a citizen of a State alone is insufficient to establish minimum contacts
with that forum. Id. at 478. To determine whether a defendant purposefully
established minimum contacts with the forum, we must evaluate “prior negotiations
and contemplated future consequences, along with the terms of the contract and the
parties’ actual course of dealing.” Id. at 479.
Creative Calling has presented sufficient facts for a reasonable jury to conclude
that LF Beauty established minimum contacts with Iowa that permit the exercise of
personal jurisdiction. A defendant’s solicitation of a business relationship with a
company incorporated in the forum State that takes place within that State is a
relevant contact in determining whether its courts may exercise personal jurisdiction.
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See Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 822-24 (8th Cir. 2014). LF
Beauty first contacted Creative Calling in Iowa to solicit business. LF Beauty then
corresponded numerous times with Creative Calling via e-mail and telephone while
negotiating the contract for the next three months. After the contract negotiations had
concluded and the contract was executed, Creative Calling and LF Beauty
communicated daily via e-mail and telephone for close to two years. While such
communications “do not themselves establish jurisdiction,” they “may be used to
support the exercise of personal jurisdiction.” Digi-Tel Holdings, Inc., 89 F.3d at
523. At least sixteen LF Beauty employees corresponded with Creative Calling in
Iowa via e-mail during this time, thus supporting the conclusion that LF Beauty
purposefully established numerous contacts within the forum state. See K-V Pharm.
Co., 648 F.3d at 593-95.
Creative Calling argues that LF Beauty’s shipment of samples to Creative
Calling in Iowa is a significant contact with the forum. LF Beauty, citing Digi-Tel
Holdings, responds that mailing samples is not a significant contact because the
samples were not LF Beauty products and the shipping was only incidental to LF
Beauty’s performance of the contract. We said in Digi-Tel Holdings that a
defendant’s shipment of cell phone samples “into the forum represents a ‘casual’ or
‘fortuitous’ contact rather than a significant contact with the forum.” 89 F.3d at 523.
But in Digi-Tel Holdings, the defendant shipped only four samples to the plaintiff in
the forum State, and there is no indication that the contract required or contemplated
that shipment. See id.
The contract in this case explicitly called for LF Beauty to make pre-production
samples and required Creative Calling to approve those samples. The agreement thus
contemplated that LF Beauty would send those samples to Creative Calling at its only
place of business in Iowa. The contract also plainly implied that LF Beauty was
responsible for shipping pre-production and production samples, as it required
Creative Calling to reimburse LF Beauty for the costs of shipping samples. LF
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Beauty mailed thousands of both pre-production and production samples fabricated
in China to Creative Calling in Iowa, according to an affidavit introduced by Creative
Calling. Although LF Beauty countered this affidavit with evidence that some of the
production samples were mailed directly from the factories in China to Creative
Calling, we must consider the evidence in the light most favorable to Creative Calling
at this stage of the proceeding. Thus, unlike in Digi-Tel Holdings, “the terms of the
contract and the parties’ actual course of dealing” demonstrate that LF Beauty
purposefully established significant contacts with Iowa by mailing thousands of
samples. See Burger King Corp., 471 U.S. at 479. That LF Beauty did not itself
manufacture the samples, and that the samples were of Creative Calling’s products,
does not alter the conclusion that LF Beauty’s shipment of thousands of samples
pursuant to the contract constitutes a significant and purposeful connection with the
forum.
The contract in this case also provided for LF Beauty to receive payment from
customers on behalf of Creative Calling and to forward these payments (less a
deduction for LF Beauty) to Creative Calling. This type of contractual provision,
requiring a defendant to remit payment to a company located in the forum State, and
the defendant’s performance of that term, is a purposeful contact with the forum. K-V
Pharm. Co., 648 F.3d at 593-94. According to Unger of Creative Calling, LF Beauty
in fact made significant payments to Creative Calling in Iowa.
In sum, we conclude that Creative Calling has identified sufficient facts to
support a reasonable inference that LF Beauty established contacts with Iowa that
permit the exercise of personal jurisdiction. LF Beauty first contacted Creative
Calling in Iowa to solicit its business, engaged in daily communications with Creative
Calling for almost two years after contractual negotiations had concluded, shipped
thousands of pre-production and production samples to Iowa pursuant to the contract,
and remitted payments to Creative Calling in Iowa under the agreement. Because
Creative Calling’s breach of contract claim alleges that LF Beauty delivered defective
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samples and thus arises out of and relates to this connection with Iowa, LF Beauty’s
minimum contacts permit the exercise of specific jurisdiction in this case. See Burger
King Corp., 471 U.S. at 472.
Even where a party has minimum contacts with a forum, jurisdiction can still
be unreasonable. The Due Process Clause forbids the exercise of personal
jurisdiction “under circumstances that would offend ‘traditional notions of fair play
and substantial justice.’” Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102,
113 (1987) (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); see
Ferrell v. W. Bend Mut. Ins. Co., 393 F.3d 786, 790 (8th Cir. 2005). To assess
whether the exercise of jurisdiction over LF Beauty, a foreign defendant, is
reasonable, we consider the interests of the forum State, the burden on the defendant,
and the plaintiff’s interest in obtaining relief. See Asahi Metal Indus. Co., 480 U.S.
at 113-15. “Great care and reserve should be exercised when extending our notions
of personal jurisdiction into the international field,” id. at 115 (internal quotation
marks omitted), although “[w]hen 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.” Id. at 114.
Minimum contacts have been established here, and Iowa “has an obvious
interest in providing a local forum in which its residents may litigate claims.” DigiTel Holdings, Inc., 89 F.3d at 525. The parties’ respective interests do not militate
strongly against personal jurisdiction in Iowa. While defending a suit in Iowa would
be burdensome for LF Beauty, obtaining relief through litigation in Hong Kong
would be burdensome for Creative Calling. The allegedly defective samples that are
the focus of this breach of contract suit are located in Iowa; at least some of the
samples likely would be introduced at trial. LF Beauty contends that five necessary
witnesses—three current and two former LF Beauty employees—are located in Hong
Kong. Creative Calling responds that three LF Beauty employees who will be
important witnesses are located in New York and Texas, and that other witnesses are
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located in Iowa. Because the samples are in Iowa, there are witnesses in both Hong
Kong and Iowa, and three witnesses who are LF Beauty employees are in the United
States, the respective interests of the two parties do not weigh against the exercise of
jurisdiction over LF Beauty in Iowa. Cf. K-V Pharm. Co., 648 F.3d at 595; Digi-Tel
Holdings, Inc., 89 F.3d at 525. In these circumstances, the exercise of personal
jurisdiction would not offend traditional notions of fair play and substantial justice.
LF Beauty responds by citing the contract’s selection of Hong Kong courts as
a non-exclusive forum and its choice of Hong Kong law. LF Beauty contends that
these provisions diminish Iowa’s interest in providing a forum for its residents and
show that litigation in Hong Kong is not inconvenient for Creative Calling. Creative
Calling’s assent to non-exclusive jurisdiction in Hong Kong, if enforceable, could
establish that Hong Kong courts may exercise personal jurisdiction over Creative
Calling under United States law. Burger King Corp., 471 U.S. at 472 n.14. But the
forum selection clause, which contemplates the possibility of a forum other than
Hong Kong, does not impact significantly whether a federal court in Iowa may
assume personal jurisdiction over LF Beauty. Similarly, the selection of Hong Kong
law would be a relevant, but not dispositive, factor in determining whether Creative
Calling established minimum contacts with Hong Kong, see Bell Paper Box, Inc. v.
Trans Western Polymers, Inc., 53 F.3d 920, 923 (8th Cir. 1995), but the choice-of-law
clause does not make the exercise of jurisdiction in Iowa unreasonable. As we said
in Minnesota Mining & Manufacturing Co. v. Nippon Carbide Industries Co., 63 F.3d
694 (8th Cir. 1995), “we must determine whether [the forum State] has jurisdiction
before we consider what law will be applied,” and a forum with jurisdiction often
must “apply the law of another State or country.” Id. at 698.
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For these reasons, we reverse the district court’s judgment dismissing the
action for lack of personal jurisdiction over LF Beauty, and remand the case for
further proceedings.
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