Sioux Pharm, Inc. and Sioux Biochemical, Inc. v. Summit Nutritionals International, Inc. , 859 N.W.2d 182 ( 2015 )

IN THE SUPREME COURT OF IOWA
No. 13–1756
Filed January 30, 2015
SIOUX PHARM, INC. and SIOUX BIOCHEMICAL, INC.,
Appellees,
vs.
SUMMIT NUTRITIONALS INTERNATIONAL, INC.,
Appellant.
Appeal from the Iowa District Court for Sioux County, Duane E.
Hoffmeyer, Judge.
Defendant appeals order denying motion to dismiss for lack of
personal jurisdiction. AFFIRMED.
Daniel J. Fischer, Brian J. Koenig, and J. Daniel Weidner of Koley
Jessen, P.C., L.L.O., Omaha, Nebraska, for appellant.
Anthony L. Osborn and Jeana L. Goosmann of Goosmann Law
Firm, PLC, Sioux City, for appellees.
2
WATERMAN, Justice.
This appeal provides our first opportunity to address when
statements on a website support personal jurisdiction and the impact of
recent United States Supreme Court precedent on the showing required
for general jurisdiction. Specifically, we must decide whether a
nonresident corporation’s inaccurate statement on its passive website—
that it had a manufacturing facility in Sioux Center, Iowa—subjected it
to personal jurisdiction in Iowa in a lawsuit by an Iowa plaintiff alleging
unfair competition. The district court denied the nonresident
defendant’s motion to dismiss, ruling that general jurisdiction was
established simply because its website held this defendant out as having
an Iowa manufacturing facility. The Sioux Center facility actually is
owned and operated by a separate Iowa defendant that supplies the
product to the nonresident defendant. We allowed the nonresident
defendant’s interlocutory appeal of the jurisdictional ruling.
For the reasons explained below, we hold the district court erred
by exercising general jurisdiction over Summit based solely on the
inaccurate statement on its passive website. Recent precedent requires
proof the nonresident defendant is “essentially at home in the forum
State” to establish general jurisdiction. See Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. ___, ___, 131 S. Ct. 2846, 2851, 180
L. Ed. 2d 796, 803 (2011). That proof is lacking here. Nevertheless, we
hold the totality of the nonresident’s contacts with Iowa, including its
website statement, Iowa supply contract, and its sale of the product to
the plaintiff in Iowa were sufficient to subject it to specific jurisdiction
here on claims related to those contacts. We therefore affirm the order
denying its motion to dismiss on this alternative ground.
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I. Background Facts and Proceedings.
Plaintiff Sioux Pharm, Inc. 1 is an Iowa corporation that
manufactures chondroitin sulfate, a supplement for joint health usually
mixed with glucosamine to help lessen the effects of osteoarthritis. Eagle
Laboratories, Inc. (Eagle Labs) is an Iowa corporation and a competitor of
Sioux Pharm. Eagle Labs sells and ships chondroitin sulfate monthly to
Summit Nutritionals International, Inc. (Summit), a New Jersey
corporation with its principal place of business in Branchburg,
New Jersey. Summit packages and resells the chondroitin sulfate.
At the time this lawsuit was filed, Summit’s website erroneously
claimed that Summit had a manufacturing facility in Sioux Center, Iowa.
The website read, “Manufacturing Facility, Summit Nutritionals
International, Inc.,” and for contact information listed a Sioux Center,
Iowa, physical address and an email address. In fact, the Sioux Center
facility at that physical address has always been owned and operated by
Eagle Labs. Summit admits it listed the facility on its website to inform
its customers as to the Iowa source of Summit’s chondroitin sulfate,
which is derived from bovine organs.
Summit actually has no Iowa office, agent, or employees. It has
never been registered to do business in Iowa, and neither owns nor
leases any real or personal property in Iowa. Summit has no Iowa bank
accounts and has never been a party in litigation in Iowa before this
case. Summit has never specifically directed advertising at Iowa markets
or sold its product to anyone in Iowa except for a sample purchased by
Sioux Pharm to test for purposes of this lawsuit. Summit purchases its
1Plaintiff Sioux Biochemical, Inc. is a sister corporation to Sioux Pharm, Inc. We
will refer to the entities together as Sioux Pharm.
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chondroitin sulfate from Eagle Labs under an annual contract to supply
Summit’s requirements through monthly shipments. Summit’s president
traveled to Iowa once to inspect Eagle Labs’ facility, but he flew in and
out of an airport in South Dakota and only spent a few hours in Iowa.
No other employee of Summit has ever visited Iowa on its behalf.
Sioux Pharm filed suit against Eagle Labs and its principals, Dana
Summers, Robert Den Hoed, and John Ymker on March 8, 2012. The
initial pleading alleged claims for the misappropriation of trade secrets,
which are the subject of a separate, pending interlocutory appeal. See
Sioux Pharm, Inc. v. Eagle Labs, Inc., No. 13–1756 (Iowa filed
September 27, 2013). Sioux Pharm’s second amended petition, the
operative pleading here, was filed April 23, 2013. That pleading added
claims of unfair competition, intentional interference with contractual
relationships, and civil conspiracy and named Summit and Federal
Laboratories Corporation (Federal Labs), a New York corporation, as
additional defendants. Sioux Pharm specifically alleged Summit, Federal
Labs, and Eagle Labs conspired to distribute adulterated and diluted
chondroitin sulfate while misrepresenting its purity, in violation of
§ 1125(a) of the Lanham Act, 15 U.S.C. §§ 1051–1141n (2012). On June
7, the district court, pursuant to Iowa Rule of Civil Procedure 1.914,
granted Summit’s motion to bifurcate the trade-secret claims from the
unfair-competition claims.
Both Summit and Federal Labs moved to dismiss for lack of
personal jurisdiction. Both nonresident defendants filed affidavits
attesting to their lack of contacts with Iowa. Sioux Pharm filed
resistances and argued as to Summit that its website statement along
with its contract with Eagle Labs and site visit there were sufficient to
subject it to general jurisdiction or, alternatively, specific jurisdiction.
5
The district court granted Federal Labs’ motion, determining that
Sioux Pharm “failed to present a prima facie case” sufficient to justify
personal jurisdiction on a conspiracy theory and that Federal Labs lacks
contacts with Iowa sufficient for general jurisdiction. However, the
district court denied Summit’s motion, stating:
Although Summit presents this Court with many facts
to establish that it has no systematic or continuous ties to
the State of Iowa, this Court does not find those facts to be
persuasive. Although Summit may not have an office or real
property in Iowa, it holds itself out as having both.
Summit’s website clearly states that it has a manufacturing
facility in Sioux Center, Iowa. . . . Regardless of Summit’s
intent when posting that information, and regardless of what
ties Summit has to the manufacturing facility, by asserting
that it has continuous and systematic ties with Iowa,
Summit has availed itself [of] Iowa Courts.
The district court did not reach the specific jurisdiction theory. The
district court also granted motions for partial summary judgment,
dismissing the civil conspiracy claims against all defendants, including
Summit, by finding “[t]here has been no evidence presented to show a
meeting of the minds” or an overt act required to establish liability for
civil conspiracy.
We granted Summit’s application for interlocutory appeal and
retained the appeal to determine if that defendant is subject to personal
jurisdiction in Iowa.
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.” Shams v.
Hassan, 829 N.W.2d 848, 853 (Iowa 2013); see also Iowa R. App. P.
6.907. We are not bound by the court’s conclusions of law or application
of legal principles. Shams, 829 N.W.2d at 853. The district court’s
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factual findings are binding on appeal if supported by substantial
evidence. Id.
“ ‘ “[W]e accept as true the allegations of the petition and the
contents of uncontroverted affidavits.” ’ ” Id. (quoting Addison Ins. Co. v.
Knight, Hoppe, Kurnik & Knight, L.L.C., 734 N.W.2d 473, 476 (Iowa
2007)). “After the plaintiff makes a prima facie case showing that
personal jurisdiction is appropriate, the burden shifts to the defendant to
rebut that showing.” Id.
We may affirm the district court on an alternative ground that is
supported by the record and urged by the prevailing party in district
court and on appeal. Hawkeye Foodserv. Distrib., Inc. v. Iowa Educators
Corp., 812 N.W.2d 600, 609 (Iowa 2012).
III. Analysis.
We must decide whether the Due Process Clause of the United
States Constitution permits the exercise of personal jurisdiction over
Summit. This case requires us to determine the jurisdictional effect of
an erroneous statement on defendant’s passive website that it has a
manufacturing facility in Iowa. We conclude the district court erred in
ruling that Summit was subject to general jurisdiction in Iowa based on
that website statement alone. We further conclude that the totality of
Summit’s contacts with Iowa falls short of establishing general
jurisdiction under Goodyear. 564 U.S. at ___, 131 S. Ct. at 2851, 180
L. Ed. 2d at 803. But, we affirm the jurisdictional ruling on the
alternative ground, supported by the record and urged by Sioux Pharm
in district court and on appeal, that Summit is subject to specific
jurisdiction here.
We begin by reviewing well-established principles of personal
jurisdiction. A state’s power to exercise personal jurisdiction over a
7
nonresident defendant is limited by both the state’s jurisdictional rules
and the Due Process Clause of the Fourteenth Amendment. See Ostrem
v. Prideco Secure Loan Fund, LP, 841 N.W.2d 882, 891 (Iowa 2014).
Iowa’s jurisdictional rule authorizes the widest exercise of personal
jurisdiction allowed by the Due Process Clause. Id. (citing Iowa R. Civ. P.
1.306, which states that “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”). Therefore, we will focus on the
constitutional requirements for personal jurisdiction.
“The touchstone of the due-process analysis remains whether the
defendant has sufficient ‘minimum contacts with [the forum state] such
that the maintenance of the suit does not offend “ ‘traditional notions of
fair play and substantial justice.” ’ ” Id. (quoting Viasys., Inc. v. EBM–
Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 594 (8th Cir. 2011)).
“Fairness is the crux of the minimum-contacts analysis.” Shams, 829
N.W.2d at 854. The defendant must have sufficient contacts to
“ ‘reasonably anticipate being haled into court’ in the forum state.”
Ostrem, 841 N.W.2d at 891–92 (quoting World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490, 501
(1980)). Therefore, “it is essential in each case that there be 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, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528, 542 (1985) (citation
and internal quotation marks omitted). The purposeful-availment
requirement prevents defendants from being forced to defend themselves
in a jurisdiction “as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’
8
contacts.” Id. It also prevents defendants from being haled into court by
the unilateral actions of plaintiffs. Id.
There are two forms of personal jurisdiction, general jurisdiction
and specific jurisdiction. Shams, 829 N.W.2d at 855. General
jurisdiction “ ‘refers to the power of a state to adjudicate any cause of
action involving a particular defendant, regardless of where the cause of
action arose.’ ” Ostrem, 841 N.W.2d at 892 (quoting Sondergard v. Miles,
Inc., 985 F.2d 1389, 1392 (8th Cir. 1993)). General jurisdiction allows
suits on claims unrelated to the defendant’s contacts with the forum and
exists if the defendant’s “ ‘affiliations with the State are so “continuous
and systematic” as to render [the defendant] essentially at home in the
forum State.’ ” Daimler AG v. Bauman, 571 U.S. ___, ___, 134 S. Ct. 746,
754, 187 L. Ed. 2d 624, 633–34 (2014) (quoting Goodyear, 564 U.S. at
___, 131 S. Ct. at 2851, 180 L. Ed. 2d at 803). “For an individual, the
paradigm forum for the exercise of general jurisdiction is the individual’s
domicile; for a corporation, it is an equivalent place, one in which the
corporation is fairly regarded as at home.” Goodyear, 564 U.S. at ___,
131 S. Ct. at 2853–54, 180 L. Ed. 2d at 806 (emphasis added).
By contrast, specific jurisdiction “ ‘refers to jurisdiction over causes
of action arising from or related to a defendant’s actions within the forum
state.’ ” Ostrem, 841 N.W.2d at 892 (quoting Sondergard, 985 F.2d at
1392). Specific personal jurisdiction has two requirements:
“Where a forum seeks to assert specific jurisdiction over an
out-of-state defendant who has not consented to suit there,
[due process] is satisfied if the defendant has ‘purposefully
directed’ his activities at residents of the forum and the
litigation results from alleged injuries that ‘arise out of or
relate to’ those activities.”
Capital Promotions, L.L.C. v. Don King Prods., Inc., 756 N.W.2d 828, 834
(Iowa 2008) (alteration in original) (quoting Burger King Corp., 471 U.S. at
9
472, 105 S. Ct. at 2182, 85 L. Ed. 2d at 540–41). “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.” Shams, 829 N.W.2d at
855. Physical presence in the forum is not essential, but the court must
investigate the nature and quality of the contacts between the defendant
and the forum. See Addison Ins. Co., 734 N.W.2d at 478.
With these principles in mind, we examine whether Summit’s
contacts with Iowa give rise to either general or specific personal
jurisdiction. Sioux Pharm relies on three grounds to establish personal
jurisdiction over Summit in Iowa: (1) the erroneous statement on
Summit’s website that it has a manufacturing facility in Iowa, (2)
Summit’s supply contract purchasing its chondroitin sulfate from Eagle
Labs, and (3) the brief Iowa visit and inspection of Eagle Labs by
Summit’s president. 2 Sioux Pharm argues these grounds support both
general and specific jurisdiction over Summit. We begin with the website
statement that the district court concluded subjected Summit to general
jurisdiction here. We then examine whether the totality of Summit’s
2Summit also sold one sample of its product in Iowa to Sioux Pharm, which
used the sample to test for the purposes of this lawsuit. Summit has made no other
sales in Iowa, nor has it specifically directed any advertising at Iowa markets. Sioux
Pharm’s appellate brief does not argue the lone Iowa sale supports its position, but at
oral argument, its counsel urged us to consider that sale as “a factor” establishing
personal jurisdiction over Summit. Some federal district courts have noted plaintiffs
cannot create personal jurisdiction over a defendant seller merely by purchasing the
defendant’s product in the forum state. See, e.g., Mor-Dall Enters., Inc. v. Dark Horse
Distillery, LLC, 16 F. Supp. 3d 874, 880 (W.D. Mich. 2014) (“ ‘[A] plaintiff may not
manufacture jurisdiction by engaging in a sale merely to confer jurisdiction in a
particular forum.’ ”) (quoting Dawson v. Pepin, No. 1:99-CV-316, 2001 WL 822346, at *4
(W.D. Mich. Mar. 29, 2001)); Foreign Candy Co. v. Tropical Paradise, Inc., 950
F. Supp. 2d 1017, 1032–33 & n.5 (N.D. Iowa 2013) (holding a single sale to plaintiff’s
representative through a third-party retailer is insufficient to subject defendant to
personal jurisdiction in trademark action); Krepps v. Reiner, 588 F. Supp. 2d 471, 479
(S.D.N.Y. 2008) (“[P]laintiffs are not permitted to ‘manufacture’ personal jurisdiction
over defendants by orchestrating an in-state web-based purchase of their goods.”), aff’d,
377 F. App’x 65 (2d Cir. 2010).
10
contacts with Iowa support general jurisdiction. Finally, we examine
whether specific jurisdiction over Summit has been established.
A. General Jurisdiction Based on Summit’s Website. The
district court ruled that Summit is subject to general jurisdiction in Iowa
because its website held the corporation out as having an Iowa
manufacturing facility, regardless of whether that representation was
true. The manufacturing facility is in fact owned and operated by a
separate corporation, codefendant Eagle Labs. We hold that website
statement is insufficient to subject Summit to general jurisdiction in
Iowa under the recent United States Supreme Court decisions requiring
a showing that the defendant’s “ ‘affiliations with the State are so
“continuous and systematic” as to render [it] essentially at home in the
forum State.’ ” Daimler AG, 571 U.S. at ___, 134 S. Ct. at 754, 187
L. Ed. 2d at 633 (quoting Goodyear, 564 U.S. at ___, 131 S. Ct. at 2851,
180 L. Ed. 2d at 803). It is undisputed that Summit is a New Jersey
corporation with its principal place of business in New Jersey.
Sioux Pharm contends that personal jurisdiction over Summit is
established by waiver or estoppel based on Summit’s website
representation it has an Iowa manufacturing facility. We acknowledge
there are circumstances under which personal jurisdiction may be
established by waiver, consent, or estoppel. See, e.g., Ins. Corp. of Ir.,
Ltd. v. Compagnie des Bauxites de Guinea, 456 U.S. 694, 704, 102 S. Ct.
2099, 2105, 72 L. Ed. 2d 492, 502 (1982) (“[T]he requirement of personal
jurisdiction may be intentionally waived, or for various reasons a
defendant may be estopped from raising the issue.”). Personal
jurisdiction can be waived in several ways. A party could submit to the
jurisdiction of the court by appearance. Id. at 703, 102 S. Ct. at 2105,
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72 L. Ed. 2d at 502. 3 Moreover, parties may agree contractually to
submit to jurisdiction and venue in a given court, which operates as a
waiver. See id. at 703–04, 102 S. Ct. at 2105, 72 L. Ed. 2d at 502; EFCO
Corp. v. Norman Highway Constructors, Inc., 606 N.W.2d 297, 299 (Iowa
2000) (noting that contractual choice-of-forum clauses have “long been
recognized under Iowa law”). Further, the United States Supreme Court
has recognized “constructive consent to the personal jurisdiction of the
state court in the voluntary use of certain state procedures.” Ins. Corp.
of Ir., 456 U.S. at 704, 102 S. Ct. at 2105, 72 L. Ed. 2d at 502 (upholding
jurisdiction as discovery sanction). But, Summit has not waived its
objection to jurisdiction in such a manner or otherwise consented to
jurisdiction here. See Cent. Life Assurance Co. v. Aetna Cas. & Sur. Co.,
466 N.W.2d 257, 261 (Iowa 1991) (describing waiver as the voluntary
relinquishment of a known right). Summit’s representation that it has a
manufacturing facility in Iowa, even if true, does not render Summit at
home in this state for purposes of general jurisdiction. See Goodyear,
564 U.S. at ___, 131 S. Ct at 2853–54, 180 L. Ed. 2d at 806 (equating at-
home status with domicile).
Nor does the record support a finding of jurisdiction by estoppel
based on the website statement. Sioux Pharm bears the burden to prove
equitable estoppel by a clear and convincing preponderance of the
evidence. See Christy v. Miulli, 692 N.W.2d 694, 702 (Iowa 2005).
Sioux Pharm must prove the following elements:
“(1) The defendant has made a false representation or has
concealed material facts; (2) the plaintiff lacks knowledge of
the true facts; (3) the defendant intended the plaintiff to act
3Iowa abolished the special appearance in 1987. Antolik v. McMahon, 744
N.W.2d 82, 83 (Iowa 2007). Defendants may now preserve a defense of lack of personal
jurisdiction by pleading it in the answer to the petition. Iowa R. Civ. P. 1.421(1).
12
upon such representations; and (4) the plaintiff did in fact
rely upon such representations to his prejudice.”
Id. (quoting Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 578–79 (1990)).
Because Sioux Pharm did not rely on Summit’s website statement, it
cannot prove equitable estoppel to establish personal jurisdiction.
Sioux Pharm relies on Turpin v. Mori Seiki Co., a case involving the
exercise of specific jurisdiction. 56 F. Supp. 2d 121, 124 (D. Mass.
1999). There, the federal district court ruled that a Japanese
manufacturer of an engine lathe was subject to personal jurisdiction in
Massachusetts in a product-liability action. Id. at 124, 127–28. The
plaintiff’s employer had acquired the lathe made and sold by the
Japanese defendant. Id. at 123–24. The plaintiff was injured when he
was dragged into the lathe. Id. at 124. The workplace accident occurred
in Massachusetts. Id. The lathe had been sold to plaintiff’s employer
through intermediaries, and the Japanese defendant moved to dismiss
for lack of personal jurisdiction. See id. Plaintiff submitted evidence that
the defendant’s brochures represented it “has an overseas office in
Boston.” Id. at 127. In response, the defendant “contend[ed] that it does
not actually have an overseas office in Boston and that whenever it made
such a representation, it was merely designating an authorized dealer or
the office of its wholly-owned subsidiary as an overseas office.” Id. The
district court concluded:
The defendant can explain the facts, but it can’t change
them. Whether MS Ltd. was designating its own facility or
the facility of an intermediary or subsidiary, the fact remains
that it was explicitly holding itself out to the public as ready,
willing and able to do business in Boston. It is difficult to
imagine a more intentional or deliberate effort to “serve the
market in the forum” of the Commonwealth.
Id.
13
The Turpin court relied in part on defendant’s representations
about the Boston office and on the fact the Massachusetts plaintiff was
injured in the forum using defendant’s product there. See id. at 127–28.
Turpin is distinguishable for that reason. Here, Summit’s website merely
identified an Iowa facility as the source of its raw product it repackaged
and sold elsewhere. By contrast, in Turpin, the office in Boston was
admittedly open for the purpose of selling that defendant’s products in
the forum state. See id. at 127. And most importantly, the product-
liability claims arose in the forum when plaintiff was hurt using
defendant’s product in that state. As the court said:
The Commonwealth has a significant interest in
obtaining jurisdiction over a defendant who causes tortious
injury within its borders and in providing its citizens with a
convenient forum in which to assert their claims.
Massachusetts also has a strong policy interest in protecting
its citizens from injuries caused by defective products,
regardless of where those products were originally
manufactured.
Id. at 127 (citation and internal quotation marks omitted). Thus, Turpin
is a specific jurisdiction decision. We do not see Turpin as persuasive
authority for general jurisdiction.
There are policy reasons against basing general jurisdiction solely
on Internet activity.
The fact that many companies have established virtual
beachheads on the Internet and the fact that the Internet is
now accessible from almost any point on the globe have
created complex, new considerations in counting minimum
contacts for purposes of determining personal jurisdiction.
Butler v. Beer Across Am., 83 F. Supp. 2d 1261, 1267–68 (N.D. Ala.
2000). Given the economic importance of the Internet, courts should
consider the ripple effects before subjecting nonresidents to general
jurisdiction based solely on information posted on defendants’ websites.
14
See David C. Tunick, Passive Internet Websites and Personal Jurisdiction,
28 Okla. City U.L. Rev. 739, 750–51 (2003) (“Would an Internet company
stop doing business on the Internet . . . if the company knew that
personal jurisdiction could attach in a distant forum even if no products
were sold?”). Summit denies it intended to consent to jurisdiction in
Iowa and contends that it placed the statement on its website merely to
inform customers as to the Iowa source of its chondroitin sulfate.
Commentators have expressed the concern that vague or expansive views
of personal jurisdiction may subject new business owners to litigation in
distant states through innocent misstatements on websites.
“[B]ecause the Internet is bringing unsophisticated and
poorly capitalized people into new situations where they are
more likely than ever to make innocent mistakes and be
sued for them, due process guarantees should be more
robust in this new environment than they have been in more
traditional commercial settings.” Individual Web designers
and bloggers can, and will, make mistakes concerning the
content of their Web sites and electronic communications.
With a vague standard for personal jurisdiction, suits for
defamation, copyright infringement, and trademark
infringement, as well as suits for relief in connection with
other content-related claims, will be filed against these
"unsophisticated and undercapitalized" designers.
Mark D. Standridge, Passive Voice: The Unclear Standards for
Establishing Personal Jurisdiction in New Mexico via the World Wide Web,
35 N.M. L. Rev. 679, 697 (2005) (footnotes omitted). We share this
concern.
Courts have relied on two tests to evaluate personal jurisdiction
based on website activity, the Calder effects test and the Zippo sliding-
scale approach. See, e.g., Johnson v. Arden, 614 F.3d 785, 796 (8th Cir.
2010) (citing Calder v. Jones, 465 U.S. 783, 789–90, 104 S. Ct. 1482,
1487, 79 L. Ed. 2d 804, 812 (1984), and Zippo Mfg. Co. v. Zippo Dot Com,
Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)). We conclude both tests
15
may be used to determine the jurisdictional import of websites. Although
Calder, a libel case, predated the growth of the public Internet, it
established a useful framework to evaluate whether website
communications give rise to specific jurisdiction in tort cases. Under the
Calder effects test, “foreseeable effects from an intentional tort can
occasionally support jurisdiction” when the primary effect of the tort is
felt within the forum. Shams, 829 N.W.2d at 856. “[W]e look at the
location of the tortious activities and the ‘focal point’ of the alleged tort.”
Id.
The Zippo approach recognizes a sliding scale from passive to
interactive websites and is widely followed. See Thomas A. Dickerson
et al., Personal Jurisdiction and the Marketing of Goods and Services on
the Internet, 41 Hofstra L. Rev. 31, 41–42 & n.29 (Fall 2012) (surveying
caselaw holding passive websites insufficient to support personal
jurisdiction). The Zippo sliding-scale approach works as follows:
[T]he likelihood that personal jurisdiction can be
constitutionally exercised is directly proportionate to the
nature and quality of commercial activity that an entity
conducts over the Internet. This sliding scale is consistent
with well developed personal jurisdiction principles. At one
end of the spectrum are situations where a defendant clearly
does business over the Internet. If the defendant enters into
contracts with residents of a foreign jurisdiction that involve
the knowing and repeated transmission of computer files
over the Internet, personal jurisdiction is proper. At the
opposite end are situations where a defendant has simply
posted information on an Internet Web site which is
accessible to users in foreign jurisdictions. A passive Web
site that does little more than make information available to
those who are interested in it is not grounds for the exercise
[of] personal jurisdiction. The middle ground is occupied by
interactive Web sites where a user can exchange information
with the host computer. In these cases, the exercise of
jurisdiction is determined by examining the level of
interactivity and commercial nature of the exchange of
information that occurs on the Web site.
Zippo, 952 F. Supp. at 1124 (emphasis added) (citations omitted).
16
The Zippo sliding-scale approach is used to evaluate specific
jurisdiction, but also can be considered along with other contacts in a
general jurisdiction analysis, as the United States Court of Appeals for
the Eighth Circuit has noted:
[I]n a general jurisdiction case, . . . we consider the “nature
and quality of the contacts” as well as the “quantity of the
contacts.” This is precisely why the Zippo test alone is
insufficient for the general jurisdiction setting.
. . . As a result, we will first apply the Zippo [quality]
test and then also look at the quantity of those contacts with
[forum] residents.
Lakin v. Prudential Sec., Inc., 348 F.3d 704, 712 (8th Cir. 2003) (quoting
Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819 (8th Cir. 1994)). If
sufficient contacts are found, the court must still subject the defendant’s
activities to the traditional test of “fair play and substantial justice,”
including the burden on the defendant, the interest of the forum state,
and plaintiff’s interest in relief. Id. at 713.
The erroneous statement on Summit’s website does not establish
general jurisdiction. The Calder effects test is used to analyze specific
jurisdiction and is inapplicable to the analysis of general jurisdiction.
Nor is the Zippo sliding-scale approach met here for general jurisdiction
purposes. Summit’s website merely gave the address of the facility where
Summit acquires its chondroitin sulfate. Summit’s website is not
interactive and falls on the passive end of Zippo’s sliding-scale approach.
Moreover, there is no evidence anyone in Iowa accessed Summit’s
website before this litigation. See Johnson, 614 F.3d at 797–98 (holding
defendant’s interactive website did not support personal jurisdiction
without evidence defendant transacted business with forum residents
through the website or that its website was “uniquely or expressly aimed”
at the forum state). We conclude the district court erred in ruling
17
Summit’s website statement alone subjected Summit to general
jurisdiction in Iowa.
B. General Jurisdiction Based on the Totality of Summit’s
Contacts with Iowa. Sioux Pharm argues in the alternative that general
jurisdiction exists based on Summit’s long-standing contract to purchase
chondroitin sulfate from Eagle Labs and the Iowa site visit by Summit’s
president. Sioux Pharm relies on Iowa Code section 617.3(2) (2011),
which states:
If a foreign corporation makes a contract with a resident of
Iowa to be performed in whole or in part by either party in
Iowa, or if such foreign corporation commits a tort in whole
or in part in Iowa against a resident of Iowa, such acts shall
be deemed to be doing business in Iowa by such foreign
corporation for the purpose of service of process . . . .
Therefore, Sioux Pharm argues, Summit’s contract with Eagle Labs
represents continuous and systematic business contacts with Iowa and
subjects Summit to general personal jurisdiction.
As noted above, general personal jurisdiction requires that the
defendant’s contacts “are sufficiently substantial or continuous and
systematic.” Bankers Trust Co. v. Fidata Trust Co. NY, 452 N.W.2d 411,
415 (Iowa 1990). The corporation must be “essentially at home in the
forum State.” Goodyear, 564 U.S. at ___, 131 S. Ct. at 2851, 180
L. Ed. 2d at 803 (holding tire manufacturer was not subject to general
jurisdiction in North Carolina on claims arising from bus accident in
France); see also Daimler AG, 571 U.S. at ___, 134 S. Ct. at 751, 187
L. Ed. 2d at 633 (holding German parent corporation was not subject to
general jurisdiction in California on tort claims arising from Argentinian
subsidiary’s conduct aiding government security forces who kidnapped
dissidents in so-called “Dirty War”). In Helicopteros Nacionales de
Colombia, S.A. v. Hall, the United States Supreme Court concluded a
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nonresident purchaser was not subject to general jurisdiction in Texas
on claims arising out of a helicopter accident in Peru. 466 U.S. 408,
409–10, 416, 418, 104 S. Ct. 1868, 1870, 1873–74, 80 L. Ed. 2d 404,
408–09, 412–14 (1984) (holding that general jurisdiction did not exist
when the Colombian defendant negotiated a contract in Texas, accepted
checks from Texas, and sent employees to purchase helicopters and
attend training sessions in Texas). Similarly, in Bankers Trust, we
determined that personal jurisdiction over Fidata was lacking even
though it sent its employees to Iowa to train Bankers Trust employees on
multiple occasions and did business with Bankers Trust annually. 452
N.W.2d at 416. In these cases, general personal jurisdiction was lacking
over the nonresident despite multiple in-person visits to the forum and
ongoing contracts with the resident plaintiff.
We rejected a similar jurisdictional argument based on Iowa Code
section 617.3 in Rath Packing Co. v. Intercont’l Meat Traders, Inc., holding
no personal jurisdiction existed over a nonresident purchaser despite its
contract with an Iowa seller. 181 N.W.2d 184, 186–87 (Iowa 1970). In
Rath Packing Co., we found it significant that the nonresident defendant
was a purchaser rather than a seller. Id. at 188. We concluded an out-
of-state purchaser does not purposefully avail itself of the privilege of
conducting business in Iowa the same way a seller does. Id. “The state
also has an interest in protecting its citizens from damages sustained
from a product brought into the state which is not present when a
resident seller seeks to collect for a product shipped out of state.” Id. at
189. “ ‘[A] contract alone cannot automatically establish sufficient
contacts.’ ” Ross v. First Sav. Bank of Arlington, 675 N.W.2d 812, 816
(Iowa 2004) (quoting Hager v. Doubletree, 440 N.W.2d 603, 607 (Iowa
19
1989)). Rather, the defendant must “purposely avail[] itself of the
benefits of dealing with Iowa residents.” Id. at 819.
We conclude the totality of Summit’s contacts with Iowa falls short
of establishing that it is “essentially at home in the forum State.”
Goodyear, 564 U.S. at ___, 131 S. Ct. at 2851, 180 L. Ed. 2d at 803.
Accordingly, the district court erred in ruling that Summit was subject to
general jurisdiction in Iowa.
C. Specific Jurisdiction Based on Summit’s Alleged Unfair
Competition. 4 We now turn to Sioux Pharm’s alternative argument
raised in district court and on appeal that Summit’s Iowa contacts are
sufficient to establish specific jurisdiction in this lawsuit, alleging unfair
competition. Specific jurisdiction may be based on “ ‘single or occasional
acts . . . with respect to suits relating to that in-state activity.’ ” Daimler
AG, 571 U.S. at ___, 134 S. Ct. at 754, 187 L. Ed. 2d at 633 (quoting Int’l
Shoe Co. v. Washington, 326 U.S. 310, 318, 66 S. Ct. 154, 159, 90 L. Ed.
95, 103 (1945)). Thus, we have upheld the exercise of specific
jurisdiction over a nonresident corporation based on a single, harassing
phone call to an Iowan in a lawsuit alleging that phone call violated our
consumer credit code. Norton v. Local Loan, 251 N.W.2d 520, 522 (Iowa
4In district court, Sioux Pharm argued that the court could exercise personal
jurisdiction on a theory of civil conspiracy to impute Eagle Labs’ Iowa contacts to
Summit. See Remmes v. Int’l Flavors & Fragrances, Inc., 389 F. Supp. 2d 1080, 1093–
95 (N.D. Iowa 2005) (noting split in authorities and predicting our court “would
recognize civil conspiracy as a basis to support the exercise of in personam
jurisdiction”). But see Brown v. Kerkhoff, 504 F. Supp. 2d 464, 518 (S.D. Iowa 2007)
(surveying authorities to reject civil liability as a basis for establishing personal
jurisdiction). We have never decided whether to adopt a civil conspiracy theory of
personal jurisdiction and do not reach that question today because the district court
dismissed the civil conspiracy claims against all defendants, including Summit, based
on lack of evidence of an overt act or agreement to conspire. Sioux Pharm did not
cross-appeal the ruling dismissing the conspiracy claims and does not argue in this
appeal that Eagle Labs’ Iowa contacts may be imputed to Summit under a civil
conspiracy theory of personal jurisdiction.
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1977). More recently, in Shams, we held specific jurisdiction could be
asserted over a nonresident who by mail misappropriated money from an
Iowa bank account set up to benefit children, two of whom lived here,
even though the defendant lacked any other contacts with this state.
829 N.W.2d at 859–60.
Two criteria must be met to subject a nonresident defendant to
specific jurisdiction: (1) the defendant must purposefully direct its
activities at residents of the forum, and (2) the litigation results from
alleged injuries that “arise out of or relate to” those activities. Id. at 856
(internal quotation marks omitted). “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. at
857 (internal quotation marks omitted).
We conclude the unfair-competition claims Sioux Pharm alleges
against Summit are related to Summit’s Iowa contacts, and those
contacts in their totality are sufficient to subject it to specific jurisdiction
here. Sioux Pharm alleges Summit competes unfairly in the sale of
chondroitin sulfate by distributing diluted product that is mislabeled as
at least ninety percent pure, in violation of § 1125(a) of the Lanham Act,
as well as Iowa common law. The source of Summit’s raw product is
codefendant Eagle Labs in Sioux Center, shipped monthly from Iowa to
Summit under their long-standing supply contract. For its own
competitive marketing purposes, Summit touted the Iowa source of its
product on its website, listing the Sioux Center manufacturing facility as
its own. Summit’s website statement, by holding itself out as operating
its own Iowa manufacturing facility, supports specific jurisdiction
notwithstanding that Eagle Labs actually owns the Iowa location. See
Turpin, 56 F. Supp. 2d at 127 (holding that a brochure claiming Boston
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office supported finding of specific jurisdiction even though another
entity operated that office). Summit falsely touted Iowa roots to enhance
its sales. Subjecting Summit to Iowa jurisdiction comports with fair play
and substantial justice. As the district court concluded, “Any party that
claims to operate within a forum state should expect to be haled into
court there, whether or not the claims are true.”
Summit sold one shipment of the product to Sioux Pharm in Iowa.
Although that sale was arranged by Sioux Pharm, it shows Summit’s
willingness to sell the allegedly mislabeled product anywhere, including
in this forum. Courts have noted that a single sale in the forum may be
sufficient to establish specific jurisdiction over the seller in a Lanham Act
case. See Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 170
(2d Cir. 2010) (surveying caselaw and noting defendant’s “single act of
shipping a counterfeit Chloé bag might well be sufficient, by itself, to
subject him to the jurisdiction of a New York court”); Furminator, Inc. v.
Wahba, No. 4:10CV01941AGF, 2011 WL 3847390, at *5–6 (E.D. Mo.
Aug. 29, 2011) (finding specific jurisdiction over defendants based on
their sale of counterfeit goods over eBay.com and Amazon.com to the
forum state plaintiff who owned the trademark). The United States Court
of Appeals for the Second Circuit in Chloé held the defendant was subject
to specific jurisdiction based on his sale to an employee of the plaintiff’s
law firm as well as at least fifty additional sales to other New Yorkers.
Chloé, 616 F.3d at 165–67. Like the Second Circuit, we regard Summit’s
sale to Sioux Pharm in Iowa as a factor supporting specific jurisdiction.
We need not and do not decide whether a single sale to the plaintiff by
itself could support specific jurisdiction in an unfair-competition action.
Sioux Pharm alleges intentional tort claims against Summit.
Under the Calder effects test, we may consider the effects on Sioux
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Pharm in Iowa of Summit’s sales in other states. See Shams, 829
N.W.2d at 856. The Calder effects test applies if
(1) the defendant’s acts were intentional; (2) those 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. (internal quotation marks omitted). We apply the Calder effects test
narrowly “as an additional factor to consider when evaluating a
defendant’s relevant contacts with the forum state.” Johnson, 614 F.3d
at 796–97. “[A]bsent additional contacts, mere effects in the forum state
are insufficient to confer personal jurisdiction.” Id. at 797. The
foreseeability of causing injury in the forum alone is not enough to
establish jurisdiction, but it is a relevant factor. Shams, 829 N.W.2d at
855–56.
The record shows Sioux Pharm and Eagle Labs are the only
domestic producers of chrondroitin sulfate. Thus, it is reasonable to
infer Summit was aware its allegedly unfair competition would harm
Sioux Pharm in Iowa. See CollegeSource, Inc. v AcademyOne, Inc., 653
F.3d 1066, 1078 (9th Cir. 2011) (rejecting as “implausible” defendant’s
claim it was unaware plaintiff’s principle place of business was in the
forum state because they “were direct competitors in a relatively small
industry”).
Summit’s allegedly unfair competition harmed the Iowa plaintiff,
Sioux Pharm, in this state under the Calder effects test. See id. at 1079
(“We have repeatedly held that a corporation incurs economic loss, for
jurisdictional purposes, in the forum of its principal place of business.”);
Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1388–89
(8th Cir. 1991) (holding economic injury in trademark-infringement case
was suffered in forum state where plaintiff had its principal place of
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business and offending product was sold); Mor-Dall Enters., Inc. v. Dark
Horse Distillery, LLC, 16 F. Supp. 3d 874, 881–82 (W.D. Mich. 2014)
(noting Lanham Act violations cause economic harm to the plaintiff in its
home state).
Iowa has an interest in providing a forum for an “ ‘effective means
of redress for its residents.’ ” Ostrem, 841 N.W.2d at 903 (quoting McGee
v. Int’l Life Ins. Co., 355 U.S. 220, 223, 78 S. Ct. 199, 201, 2 L. Ed. 2d
223, 226 (1957)); see also Shams, 829 N.W.2d at 860 (“Iowa’s interest in
adjudicating a dispute concerning a tort that [oc]curred within its
borders and [plaintiff’s] interest in obtaining convenient relief outweigh
any inconvenience to [defendant].”).
We hold the totality of Summit’s contacts with Iowa, considered in
light of the Calder effects test, are sufficient to establish specific
jurisdiction here. We therefore affirm the order denying Summit’s motion
to dismiss.
IV. Disposition.
For the foregoing reasons, we hold Summit is not subject general
jurisdiction in Iowa, but specific jurisdiction has been established over
Summit in this unfair-competition action. We therefore affirm on that
alternative ground the district court’s ruling denying Summit’s motion to
dismiss for lack of personal jurisdiction. We remand the case to allow
Sioux Pharm’s claims against Summit to proceed.
AFFIRMED.
All justices concur except Hecht, J., who takes no part.