Consider the following hypothetical:
Assume that I wrote a story about a restaurant patron from Oklahoma who filed a claim in the case of a Texas restaurant claiming that he got food poisoning from eating a batch of bad French fries. In the course of describing the patron's travails, I state that the patron must have felt like he was living in his own private Idaho hell and then quote the following lyrics from the B-52s:
You're livin' in your own Private Idaho. Idaho.
You're out of control, the rivers that roll,you fell into the water and down to Idaho.Get out of that state,get out of that state you're in.You better beware.
Shortly thereafter, the potato market crashes and an Idaho potato farmer is forced to file Chapter 12. He blames my blog article for his bankruptcy and files an adversary proceeding in Idaho bankruptcy court accusing me of defamation against food (which I think is an actual cause of action in some states). I have seen Idaho on a map before but have never been there. Is there personal jurisdiction? Having just read a recent Fifth Circuit case on personal jurisdiction in a defamation case, I feel pretty good. But does it make a difference that the case I just read concerned personal jurisdiction in a diversity case and the hypothetical case against me would be brought under bankruptcy jurisdiction?
No Personal Jurisdiction to Sue Huffington Post in Texas
A recent decision from the Fifth Circuit illustrates the limits on personal jurisdiction for a defamatory web-based publication when the suit is based on diversity. In Case No. 21-20022, Johnson v. TheHuffingtonPost.com, Inc. (5th Cir. 12/23/21). which you can read here, a Texas man filed suit against the Huffington Post in the Southern District of Texas over an article it ran which described the man as a “noted Holocaust denier and white nationalist.” The District Court dismissed the suit for lack of personal jurisdiction and the Fifth Circuit (in an opinion written by the venerable Jerry E. Smith) affirmed.
The plaintiff had alleged that The Huffington Post could be sued in Texas because the offending article was visible on the internet in Texas, the Huffington Post sells an ad-free experience and merchandise to people anywhere, which includes Texas, advertisers from Texas have contacted the Huffington Post to buy ads and The Huffington Post collects data on its readers' locations to enable it to sell ads.
The Huffington Post replied it has no physical ties to Texas and that its story did not target Texas or rely on Texas in any way.
Judge Smith explained that a plaintiff can only establish personal jurisdiction under Texas law (which applies in a diversity case) "where the defendant has established enough purposeful contacts with the forum and where jurisdiction would comport with 'traditional notions of fair play and substantial justice.'” Opinion, p. 3. He explained that the "fair warning" test applies:
Those limits derive from and reflect two sets of values—treating defendants fairly and protecting interstate federalism. Put another way, a defendant must have “fair warning” that his activities may subject him to another state’s jurisdiction. That warning permits the defendant to structure its primary conduct to lessen or avoid exposure to a given State’s courts. The limits on specific jurisdiction also ensure that States with little legitimate interest in a suit cannot wrest that suit from States more affected by the controversy. (cleaned up).
Opinion, p. 4. It is worth noting that this test only applies where the defendant is not physically located in the state.
When a person posting information on a website is not located in the forum state and the website is passive, meaning that it posts information that people can see but does not interact with its readers, jurisdiction is not available "full stop." If the website is interactive, then the usual rules for determining jurisdiction apply. This is why the plaintiff stressed the ways that the Huffington Post interacted with people in Texas.
However, just interacting is not enough. The Court must examine "whether the virtual contacts that give rise to the plaintiff’s suit arise from the defendant’s purposeful targeting of the forum state." Opinion, p. 5. Thus, in another case, an article about the California activities of a California man which was drawn from California sources resulting in harm in California, purposefully targeted the state of California allowing for personal jurisdiction there. However, in the HuffingtonPost case, "(t)he story said nothing about Texas, nor did it rely on sources based in Texas or recount conduct that occurred in Texas." Therefore, jurisdiction was not present.
Under my hypothetical, personal jurisdiction would almost certain be absent if I was sued in U.S. District Court based on diversity jurisdiction. First, this website is not very interactive. Years ago, the Blogger platform shut down the comments feature. I email links to my articles to a list of people I hope will read these posts, but none of them are in Idaho. Readers of the blog can look up my email address and write me back, but they can't do that on the blog itself. The hypothetical blog post had little contact with Idaho other than using lyricis from a song I like to talk about the plight of an Oklahoman who got sick in a restaurant in Texas. The fact that the article supposedly had an impact on an Idaho potato farmer should not be sufficient to convey personal jurisdiction in Idaho.
Personal Jurisdiction in Bankruptcy Court
But what if the suit was brough in the U.S. Bankruptcy Court for the District of Idaho based on bankruptcy jurisdiction? As I will show in a moment, the answer would almost certainly be yes. The topic of personal jurisdiction does not come up very often in Bankruptcy Court, but I found a handful of cases which illustrate how it works.
The first difference between in personam jurisdiction in bankruptcy and in personam jurisdiction in diversity cases is that in bankruptcy court, jurisdiction is based on contacts with the United States rather than an individual state.
After the 1996 Amendments, courts have recognized in federal question cases that no inquiry into a defendant's "minimum contacts" with the forum state is needed to exercise jurisdiction pursuant to Bankruptcy Rule 7004; rather, only a federal "minimum contacts" test is required, whereby the Fifth Amendment's Due Process Clause limits a bankruptcy court's exercise of personal jurisdiction over a defendant.
Enron Corp. v. Arora (In re Enron Corp.), 316 B.R. 434, 444 (Bankr. S.D. N.Y. 2004). This is so because of the interaction of Fed.R.Bankr.P. 7004(d) and (f) which state:
(d) Nationwide Service of Process. The summons and complaint and all other process except a subpoena may be served anywhere in the United States.
(f) Personal Jurisdiction. If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code.
Rule 7004(f) states that personal jurisdiction is established by serving the summons while Rule 7004(d) allows nationwide service of process.
There is a two-part test for in personam jurisdiction in bankruptcy court.
A challenge to a federal court's in personam jurisdiction may consist of two components. First, a court may focus upon a defendant's amenability to personal service of the complaint: i.e., whether the procedural requirement of service of the summons has been satisfied. The second component concerns the constitutional authority of the federal forum to enforce the procedure by which service has been or will be perfected. (cleaned up).
Anheuser Busch v. Pacques (In re Pacques), 277 B.R. 615, 624 (Bankr. E. D. Pa. 2000). Normally I would not rely on a twenty-year-old decision from a bankruptcy court in another circuit for an important proposition of law. However, in doing the research for this blog, I was not able to easily find much circuit court authority and the Pacques case was consistent with other lower court decisions I found, such as Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 543 B.R. 127 (Bankr. S.D. N.Y. 2016); Smith v. Matias (In re IFS Fin. Corp.), 2007 Bankr. LEXIS 3122 (Bankr. S.D. Tex. 2007); Enron Corp. v. Arora (In re Enron Corp.), supra. If a client is paying you to research this point, you might want to dig more deeply, but I think this is pretty solid.
Thus, there is both a procedural and a substantive component to in personam jurisdiction. The procedural part is whether the summons was served in accordance with Bankruptcy Rule 7004. Thus, a return of service which shows that the summons was served by first class mail upon the company's registered agent would be sufficient while one that said that the summons was left with the night watchman in the building where the defendant's affiliate had an office would probably not prevail.
The substantive component looks at whether it would be consistent with due process for the defendant to be sued in the United States. This means that there is always in personam jurisdiction over American defendants. In Enron Corp. v. Arora, two former employees who received bonuses contended that they lacked minimum contacts with the State of New York. The Court rejected this argument, finding that minimum contacts with the United States was all that was needed.
Courts have found minimum contacts with foreign defendants under a variety of circumstances. In one case, entities that contracted with the debtors signed contracts with a forum selection clause fixing venue in Texas. Smith v. Matias, supra. In another case, the debtor's shareholder, which was from the Netherlands, was alleged to be the debtor's alter ego and was alleged to have engaged in transactions in the United States. Anheuser Busch v. Pacques, supra.
Bankruptcy Court offers additional opportunities for defendants to consent to jurisdiction. A creditor that files a proof of claim consents to the Bankruptcy Court's equitable jurisdiction. Langenkamp v. Culp, 498 U.S. 92 (1990). Filing a claim is also consent to personal jurisdiction in the Bankruptcy Court. In re PNP Holding Corp., 99 F.3d 910 (9th Cir. 1996); United States v. Levoy (In re Levoy), 182 B.R. 827 (9th Cir. BAP 1995). Filing pleadings in a bankruptcy case can constitute consent to personal jurisdiction as well. In re Nakash, 190 B.R. 763, 767-68 (Bankr. S.D.N.Y. 1996). Finally, if a defendant appears in court without asserting lack of personal jurisdiction, he has consented to the court's jurisdiction. (This is different than subject matter jurisdiction which can never be waived).
In my hypothetical, there would almost certainly be in personam jurisdiction to sue me in the Bankruptcy Court for the District of Idaho because I am a citizen of the United States and have more than sufficient contacts with the United States. I could argue for a transfer of venue but that would be a difficult case as well. Since I would likely be subject to being sued in Idaho Bankruptcy Court, I hope that I would be able to lodge a compelling hypothetical defense.
A Personal Note
Civil Procedure was the first class that I took on the first day of law school and we started with personal jurisdiction. As I tried to get my not yet legally trained mind around International Shoe and Worldwide Volkswagon, I was completely lost. The concepts seemed so esoteric. However, now that I have the benefit of 30+ years of practice, the various doctrines about where a defendant can be sued (personal jurisdiction, venue, removal and remand, abstention and withdrawal of reference) come down to fairness, bright lines and squishy lines. A plaintiff wants to sue in a forum that is convenient to the plaintiff and his lawyers. A defendant does not want to get sued at all, but if sued, would prefer to be sued in a forum that is convenient to the defendant and his lawyers. The different "where to get sued doctrines" provide the court with some guidance as to whether it is permissible to keep a case and if so, whether the court should exercise its discretion to keep the case or toss it. All of the fancy doctrines and multi-part tests that courts use to answer the "where to get sued question" come to three considerations: (i) Is there a bright line rule that says that the court does or does not have authority to hear the case? (ii) Is it horribly unfair to the defendant to be sued in this court? and (iii) Should the court decline the case because there is another court better suited to hear the dispute? I wish someone had told me that on the first day of law school.
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