Fair Play and Substantial Justice

Fair Play and Substantial Justice

International Shoe Co. v. Washington lets a state bind a nonresident defendant only if the defendant has such minimum contacts with the forum that maintaining the suit does not offend “traditional notions of fair play and substantial justice.” The earlier sections worked through the contacts half of that formula. Purposeful availment showed that the defendant itself reached toward the forum, and relatedness showed that the claim grows out of that reach. The fairness half asks one more question, which a court takes up only after those two: given a defendant that chose the forum and a claim that arose from the choice, is it reasonable to make the defendant litigate there?

That question calls for a balancing, and the balance draws in people and sovereigns the contacts inquiry leaves out. The court sets the burden on the defendant against the interests of the plaintiff, the forum state, and the interstate system. Minimum contacts shields a defendant from distant forums with which it has no meaningful tie and keeps each state within its place in a federal system; the fairness factors account for the people and governments on the other side of the lawsuit. Once contacts are shown, the weighing leans toward the plaintiff. A defendant that purposefully directed activities at the forum took the benefit of its laws and had notice that suit there was possible, so the ordinary costs of defending in that state follow from its own choice. Burger King Corp. v. Rudzewicz illustrates the point. Burger King sued a franchisee for breach of contract, a consensual transaction in which the parties’ shared intent or understanding is typically in evidence.¹ The Court held that jurisdiction remains fair unless the defendant shows that the forum is so gravely inconvenient as to place it at a severe disadvantage.² Ordinary expense and travel do not meet that standard, so in the usual case the fairness step confirms what the first two steps found.

Even so, the step can defeat jurisdiction in unusual circumstances. In Asahi Metal Industry Co. v. Superior Court, an indemnity suit between two foreign companies, the Court held that exercising jurisdiction was unreasonable because of the severe burden on the foreign defendant and the slight interests of the plaintiff and the forum. The two cases differ in what stands on each side of the scale. In Burger King, a defendant that had taken the forum’s benefits faced a plaintiff with a legitimate stake in the forum. In Asahi, a foreign defendant faced a claim in which the forum had almost no stake. The first subsection below sets out the factors and how courts weigh them; the second returns to Asahi to show why those circumstances alone required reversal.

Weighing Reasonableness Factors

After a court finds purposeful availment and a claim that relates to the defendant’s forum contacts, one question remains: whether maintaining the suit offends “traditional notions of fair play and substantial justice.” That phrase comes from the second half of the International Shoe formula, and World-Wide Volkswagen gave it working content by asking whether the defendant’s relationship to the forum makes it “reasonable . . . to require the corporation to defend the particular suit which is brought there.”³ The question grows out of the two jobs the Court assigned to minimum contacts. The concept protects the defendant against the burdens of litigating in a distant or inconvenient forum, and it keeps the states, as coequal sovereigns in a federal system, from reaching beyond their limits.⁴ The fairness half carries out the first job, so it begins with the defendant’s burden and then asks what stands on the other side of the scale.

World-Wide Volkswagen identified the considerations that bear on that question, and Burger King later repeated them in the same order as matters a court may evaluate in an appropriate case.⁵ There are five:

1. The burden on the defendant, which remains always a primary concern.
2. The forum state’s interest in adjudicating the dispute.
3. The plaintiff’s interest in obtaining convenient and effective relief.
4. The interstate judicial system’s interest in obtaining the most efficient resolution of controversies.
5. The shared interest of the several states in furthering fundamental substantive social policies.

The five form one balancing test, and no single consideration decides the outcome.⁶ Take them in the order the Court gives, beginning with the defendant’s burden, particularly if the defendant is an alien, and treat them as weights on a single scale.⁷ The defendant’s burden anchors the weighing because the fairness half exists to protect a defendant from litigating in an unreasonably distant or inconvenient place. Even so, the Court calls that burden “always a primary concern” and considers it “in light of other relevant factors.”⁸

The forum state’s interest is the consideration most often found on the plaintiff’s side. A state frequently has a “manifest interest in providing effective means of redress for its residents,” and that stake justifies asking its courts to spend their resources on the dispute and asking an outsider to accept their judgment.⁹

The plaintiff’s interest in convenient and effective relief counts “at least when that interest is not adequately protected by the plaintiff’s power to choose the forum,” so it adds weight mainly where relief elsewhere would be impractical for the plaintiff.¹⁰ The last two considerations look past the parties to the court system and the states. The system’s interest in efficient resolution turns on practical matters: where the witnesses and evidence are located, whether an alternative forum exists, and whether one suit can replace several.¹¹ The shared interest in substantive social policies reflects federalism. The sovereignty of each state implies a limit on the sovereignty of its sister states, and a state with little legitimate interest in a suit should not encroach on states more affected by the controversy.¹²

The balance can move in either direction. Burger King explains that the considerations sometimes establish the reasonableness of jurisdiction on a lesser showing of minimum contacts than would otherwise be required.¹³ A strong forum interest and a plaintiff with no practical alternative make it fairer to hold a defendant that made a deliberate contact, even a modest one. The adjustment has a floor, because the threshold still demands contacts that the defendant itself made. A forum convenient for the witnesses and parties cannot supply contacts the defendant never created, and neither can the plaintiff’s dire need for a forum.¹⁴ International Shoe does not permit suit simply because the defendant has some contact with the state. It holds that a defendant who commits limited acts within a state submits to jurisdiction for claims arising out of those acts.¹⁵

Once the defendant has purposefully directed its activities at forum residents, the weighing tilts toward the forum, and a defendant that wants to defeat jurisdiction “must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.”¹⁶ The tilt follows from what purposeful availment has already established. A defendant that deliberately reached into the forum took the benefit and protection of its laws and had fair warning that suit there was possible, so it could structure its conduct to lessen or avoid that exposure.¹⁷ The ordinary costs of defending in that state therefore come from the defendant’s own choice, and jurisdiction is presumptively reasonable.¹⁸

Rudzewicz raised the kind of argument the compelling-case standard is built to test, and Burger King shows why it failed. The Court could not conclude that Florida lacked a legitimate interest in holding him answerable on a claim related to the contacts he had established there.¹⁹ He pointed to Michigan’s franchise statute but did not demonstrate how Michigan’s acknowledged interest could render jurisdiction in Florida unconstitutional, and his assertion that Florida litigation would impair his ability to call essential Michigan witnesses was wholly without support in the record.²⁰ The Court added that inconvenience to a party with minimum contacts most frequently can be accommodated through a change of venue.²¹ Each answer maps onto the list: the forum’s interest was real, the franchisee’s burden was asserted and not shown, and nothing else offered a counterweight.

The Court nonetheless left a door open. Jurisdictional rules may not make litigation “so gravely difficult and inconvenient” that a party is at a “severe disadvantage” in comparison to the opponent, and inconvenience may at some point become so substantial as to achieve constitutional magnitude, although the franchise dispute was not such a case.²² The bar is high. Distance and expense standing alone are the ordinary inconvenience that a change of venue usually addresses.

In that hypothetical, the plaintiff’s residence supplies the second and third considerations, while the owner’s burden stays ordinary. The configuration that defeats jurisdiction reverses the scale: a real burden on the defendant paired with almost no stake for the forum. The Court held jurisdiction unreasonable on that configuration in Asahi, which rested on the special burden imposed on a foreign defendant and the forum’s minimal interest.²³ The next section returns to it.

Most arguments of this kind never reach the constitutional question, because other tools resolve them. The Court has said that most such considerations usually may be accommodated through means short of finding jurisdiction unconstitutional. A clash between the forum’s law and the fundamental social policies of another state can be handled through the forum’s choice-of-law rules, and a defendant claiming substantial inconvenience may seek a change of venue.²⁴ Each remedy repairs a different problem. A holding that the forum lacks power over the defendant ends the case there, so a court reserves it for problems that nothing narrower can fix. A transfer moves the case to a more convenient court, and a choice-of-law ruling lets another state’s policy govern. A complaint about convenience, or about the forum’s law, usually finds its remedy in one of those two tools.

On an exam, run the five considerations in order once the contacts and relatedness steps are satisfied, and expect the first three to do most of the work. A defendant’s burden of cross-country travel is typically outweighed by the plaintiff’s interest in suing where the plaintiff lives and was injured and by the forum’s interest in a resident’s claim, and a defendant that has purposefully directed activities at the forum rarely presents a compelling case.²⁵ When the claim arises out of the defendant’s contacts, a court will very likely find jurisdiction established even if some of the considerations do not favor the forum.²⁶ An answer that stops after relatedness has skipped a step, and an answer that lets a convenient forum stand in for missing contacts has reversed the order of the analysis.

Unreasonable Despite Contacts

Asahi Metal Industry Co. v. Superior Court shows the fairness step defeating jurisdiction. A California court had exercised jurisdiction over a Japanese valve maker in an indemnity suit brought by a Taiwanese company, and a majority of the Court held that the burden on the foreign defendant was severe and the interests of the plaintiff and the forum were slight. That agreement is separate from the stream-of-commerce disagreement taught earlier. The fairness holding produced the reversal, which makes Asahi the leading example of the third step of the specific-jurisdiction analysis defeating jurisdiction in a case where the defendant’s contacts may well have been enough.

The Court reached that result through the second half of the International Shoe formula. The Due Process Clause forbids a state court to exercise jurisdiction that would offend “traditional notions of fair play and substantial justice,” and the reasonableness of a particular exercise turns on the World-Wide Volkswagen considerations listed in the preceding section.²⁸ Applying them, the Court found jurisdiction over Asahi clearly unreasonable “even apart from the question of the placement of goods in the stream of commerce.”²⁹ That phrase explains how a divided Court could agree on the judgment: fairness was an independent ground, and it required no answer to the contacts question. Justice Stevens made the point directly. An examination of minimum contacts is not always necessary, he wrote, and the fairness finding alone required reversal.³⁰ Justice Brennan disagreed with the plurality about purposeful availment, yet he joined the fairness holding because this was “one of those rare cases” in which fair play and substantial justice defeat the reasonableness of jurisdiction even though the defendant purposefully engaged in forum activities.³¹

The two halves of the formula measure different things. Contacts show what the defendant itself did to reach the forum. Fairness asks what this suit between these parties would cost and who has a stake in having it heard there. A defendant that passes the first inquiry ordinarily loses the second, since it took the forum’s benefits and had warning that suit there was possible. Asahi shows the unusual configuration in which the defendant’s burden is heavy and almost nothing sits on the forum’s side of the scale.³²

The facts matter because the weighing depends on who remained in the case. Gary Zurcher lost control of his motorcycle in California when a tire valve failed, and he sued the Taiwanese maker of the tire tube, Cheng Shin, which then impleaded the Japanese valve maker, Asahi, for indemnification.³³ Zurcher’s claim settled before the case reached the Supreme Court, leaving only Cheng Shin’s indemnity claim against Asahi.³⁴ A suit that began as an injured Californian’s thus became one foreign company asking another to reimburse it for a transaction that happened abroad. On the defendant’s side, the California Supreme Court had commanded Asahi not only to travel from Japan to the Superior Court in Solano County but also to submit its dispute with Cheng Shin to a foreign nation’s judicial system. The “unique burdens placed upon one who must defend oneself in a foreign legal system,” the Court said, deserve significant weight when jurisdiction is stretched across national borders.³⁵ The burden reaches beyond distance, since a defendant from abroad must defend under unfamiliar procedures and an unfamiliar body of law.

That burden does not decide the case alone, because once minimum contacts exist, the interests of the plaintiff and the forum often justify even serious burdens on an alien defendant.³⁶ Here the Court found those interests slight. All that remained was Cheng Shin’s claim for indemnification, the transaction behind it took place in Taiwan, Asahi’s components were shipped from Japan to Taiwan, and Cheng Shin had not shown that litigating in California was more convenient for it than litigating in Taiwan or Japan.³⁷ Because the plaintiff was not a California resident, California’s legitimate interest in the dispute had considerably diminished.³⁸ The California Supreme Court had pointed to the state’s interest in making foreign manufacturers comply with its safety standards, but the Court called that account overly broad, since the dispute was primarily about indemnification and not safety.³⁹

Two more considerations pointed the same direction. It was far from clear that California law should govern whether a Japanese corporation must indemnify a Taiwanese corporation over a sale made in Taiwan, which weakens California’s claim to regulate the dispute.⁴⁰ A California court also could not resolve an indemnity dispute between companies whose relationship was formed in Asia any more efficiently than a court in Taiwan or Japan, because the relevant evidence and witnesses are likely to be there.⁴¹ And the possibility that American tort law favors plaintiffs more than another country’s law cannot justify a forum by itself. If it could, nearly any foreign defendant could be sued in an American court.⁴²

The last consideration extends World-Wide Volkswagen’s concern for the interests of the “several States” to the international setting. Where the defendant is foreign, a court looks to the procedural and substantive interests of other nations that the exercise of jurisdiction affects, and to the Federal Government’s interest in its foreign relations policies.⁴³ Those interests belong to sovereigns that are not before the state court, which is why the Court called for a careful inquiry into reasonableness in each case and an unwillingness to find serious burdens on an alien defendant outweighed by minimal interests on the part of the plaintiff or the forum.⁴⁴ Weighing the international context, the heavy burden, and the slight interests together, the Court held that jurisdiction over Asahi in this instance would be unreasonable and unfair.⁴⁵

The defendant’s burden is the same in both situations. The departure of the California plaintiff and the foreign character of the remaining dispute, and not the defendant’s nationality alone, account for the outcome in Asahi. That is why the case before the settlement, with an injured Californian suing over a California accident, would have looked so different on the forum’s side of the scale.⁴⁶

The usual exam error is to read Asahi as protecting every foreign defendant. Justice Brennan was right to call it one of those rare cases, and only one Supreme Court holding has turned on the fairness step.⁴⁷ Foreign defendants do not all stand on the same footing, and Asahi gives none of them blanket immunity.⁴⁸ One court found jurisdiction reasonable over a Canadian company in part because of its proximity to the forum and the similarity of Canada’s legal system, and it left open that a similarly situated Japanese defendant might have fared differently.⁴⁹

Later decisions confirm where the check belongs. In Daimler AG v. Bauman the Court described the multipronged reasonableness check from Asahi as a second step to take when specific jurisdiction is at issue, after a court determines whether the connection between the forum and the episode in suit could justify jurisdiction. It added that when a corporation is genuinely at home in the forum, a second-step inquiry would be superfluous.⁵⁰ Justice Sotomayor, concurring in the judgment in Daimler, would have resolved that case on the reasonableness prong, reasoning that Asahi made it unreasonable for a California court to hear Argentine plaintiffs’ claims against a German defendant over conduct in Argentina.⁵¹ The majority decided the case on the at-home ground instead, so the concurrence shows how the same fact pattern reappears but not that fairness carries the day.