Burger King Corp. v. Rudzewicz – Case Brief Summary

Summary of Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985).

Facts

Rudzewicz (D) and MacShara entered into a franchise contract with Burger King Corp. (P) to open a restaurant in Michigan. Burger King was incorporated in Florida and a choice of law clause in the contract indicated that Florida law was controlling. The contract allowed Rudzewicz to use Burger King’s trademarks and service marks for 20 years in Michigan. All financial obligations owed to Burger King were sent to Florida and D received training in Florida. An economic downturn led to decreased sales and Rudzewicz failed to meet his obligations under the contract.

Burger King brought a diversity suit against Rudzewicz in the Southern District of Florida. Rudzewicz and MacShara moved to dismiss on the grounds that the court did not have personal jurisdiction over them because they did not have sufficient minimum contacts with the state. The court denied Rudzewicz motion and ruled that jurisdiction was proper under Florida’s long arm statute. The court entered judgment in favor of Burger King and Rudzewicz appealed.

On appeal, the court held that while Rudzewicz had sufficient contacts with the state of Florida to satisfy the state’s long arm statute, the exercise of personal jurisdiction was fundamentally unfair and was a violation of due process. Burger King appealed.

Issues

  1. Must a plaintiff show that an out of state defendant has both minimum contacts with the forum state and that it is fair and equitable to require a defendant to defend a suit in the state?
  2. What factors must the court balance in addressing reasonableness in jurisdictional analysis?

Holding and Rule (Brennan)

  1. No. A plaintiff need not show that an out of state defendant has both minimum contacts with the forum state and that it is fair and equitable to require the defendant to defend a suit in the state.
  2. The factors the court must balance in addressing reasonableness in an analysis of personal jurisdiction are:

    (1) the extent of a defendant’s purposeful interjection in the forum state;

    (2) the burden on the defendant in defending in the forum;

    (3) the extent of conflict with the sovereignty of the defendant’s state;

    (4) the forum state’s interest in adjudicating the dispute;

    (5) the most efficient judicial resolution of the controversy;

    (6) the importance of the forum to the plaintiff’s interest in convenient and effective relief; and

    (7) the existence of an alternative forum.

The court held that jurisdiction is proper when the defendant’s contact proximately results from actions by the defendant such that they create a substantial connection with the forum state.

Due Process protects an individual’s liberty interests in not being bound by judgments of a forum in which he has established no meaningful contacts, ties, or relations. See International Shoe Co. v. Washington.

The court held that there must be fair warning that a particular activity may subject a party to suit in another jurisdiction. See Shaffer v. Heitner. The fair warning requirement is satisfied when a party has purposefully directed his activities at the forum. See Keeton v. Hustler Magazine, Inc. Parties who reach out and create continuing relationships and obligations in another state are subject to regulation and sanctions in that state for the consequences of their activities. The foreseeability that is critical for due process is that the defendant’s conduct and connection with the forum are such that he would reasonably anticipate being haled into court there. See World-Wide Volkswagen Corp. v. Woodson.

Reasonable anticipation is demonstrated when a party purposefully avails itself of the privilege of conducting activities within the forum thus invoking the benefits and protections of its laws. See Hanson v. Denckla. Once purposeful availment and minimum contacts are satisfied, the four World Wide factors must be analyzed.

Establishing that the defendant has minimum contacts creates a rebuttable presumption that it is fair to require him to defend there. The burden shifts to the defendant to show that it would be unfair to defend in the state. The question of fairness requires a balancing of: the forum’s interest in the litigation, the plaintiff’s interest in efficient and convenient relief, the demands of the federal system as a whole, the best interests of the federal system, and the defendant’s interest in not having to defend a suit in a remote or disadvantageous forum.

The court held that in this case the franchise agreement with Burger King allowed Rudzewicz to benefit from an association with a Florida corporation for twenty years. Rudzewicz had continuing and direct contacts with Burger King. The fact that Rudzewicz’s contacts were purposeful allowed the state to exercise personal jurisdiction despite that those contacts were minimal. The contract indicated that Florida law would apply. It cannot be a shock that Burger King would sue Rudzewicz there for a breach of the contract in light of the clear contractual terms of the agreement.

Rudzewicz had not shown that he would be unfairly prejudiced or harmed by a trial in Florida and the purposeful involvement of Rudzewicz in the contract met the minimum contact requirements.

Disposition

Judgment for defendant Rudzewicz reversed.

Dissent (Stevens)

It is unfair to require a franchisee to defend a case of this kind in a forum chosen by the franchisor. Rudzewicz did no business in the state of Florida. The principal contacts were in Michigan with the local office of Burger King. Rudzewicz had a local operation with far less resources than Burger King. It would be fundamentally unfair for Rudzewicz to be required to defend in Florida.

Note: It is important to remember that the contract had choice of law clause, but not a forum selection clause.

See Hoffman v. Red Owl Stores, Inc. for another contract law case involving a franchise agreement.


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