Reference no: EM131915134

Problem: Arnold Schwarzenegger v. Fred Martin Motor Company 374 F. 3d 797 (9th Cir. 2004)

Circuit Judge Fletcher Arnold Schwarzenegger, an internationally known movie star and, currently, the governor of California, appeals the district court's dismissal of his suit against Fred Martin Motor Company ("Fred Martin"), an Ohio car dealership, for lack of personal jurisdiction. Fred Martin had run a series of five full-page color advertisements in the Akron Beacon Journal, a locally circulated Ohio newspaper. Each advertisement included a small photograph of Schwarzenegger, portrayed as the "Terminator," without his permission. Schwarzenegger brought suit in California, alleging that these unauthorized uses of his image infringed his right of publicity. We affirm the district court's dismissal for lack of personal jurisdiction.

I. BACKGROUND Schwarzenegger is a resident of California. When Schwarzenegger brought this suit, he was a private citizen and movie star, best known for his roles as a muscle-bound hero of action films and distinctive Austrian accent. As explained in his complaint, Schwarzenegger was generally cast as the lead character in so-called star-driven films. One of Schwarzenegger's most popular and readily recognizable film roles is that of the title character in "The Terminator" (1984). Fred Martin is an automobile dealership incorporated under the laws of Ohio and located in Barberton, Ohio, a few miles southwest of Akron. There is no evidence in the record that Fred Martin has any operations or employees in California, has ever advertised in California, or has ever sold a car to anyone in California. Fred Martin maintains an Internet website that is available for viewing in California and, for that matter, from any Internet cafe in Istanbul, Bangkok, or anywhere else in the world. In early 2002, Fred Martin engaged defendant Zimmerman & Partners Advertising, Inc. ("Zimmerman") to design and place a full-page color advertisement in the Akron Beacon Journal, a local Akron-based newspaper. The advertisement ran in the Akron Beacon Journal five times in April 2002. Most of the advertisement consists of small photographs and descriptions of various cars available for purchase or lease from Fred Martin. Just below a large-font promise that Fred Martin "WON'T BE BEAT," the advertisement includes a small, but clearly recognizable photograph of Schwarzenegger as the Terminator.

A "bubble quotation," like those found in comic strips, is drawn next to Schwarzenegger's mouth, reading, "Arnold says: ‘Terminate EARLY at Fred Martin!'" This part of the advertisement refers to a special offer from Fred Martin to customers, inviting them to close out their current leases before the expected termination date, and to buy or lease a new car from Fred Martin. Neither Fred Martin nor Zimmerman ever sought or received Schwarzenegger's permission to use his photograph in the advertisement. Schwarzenegger states in his complaint that, had such a request been made, it would have been refused. The advertisement, as far as the record reveals, was never circulated outside of Ohio. Schwarzenegger brought suit against Fred Martin and Zimmerman in Los Angeles County Superior Court alleging six state law causes of action arising out of the unauthorized use of his image in the advertisement. He claims that the defendants caused him financial harm in that the use of his photograph to endorse Fred Martin "diminishes his hard earned reputation as a major motion picture star, and risks the potential for overexposure of his image to the public, thereby potentially diminishing the compensation he would otherwise garner from his career as a major motion picture star." According to Schwarzenegger's complaint, his compensation as the lead actor in star-driven films was based on his ability to draw crowds to the box office, and his ability to do so depended in part on the scarcity of his image. According to his complaint, if Schwarzenegger's image were to become ubiquitous-in advertisements and on television, for example-the movie-going public would be less likely to spend their money to see his films, and his compensation would diminish accordingly. Therefore, Schwarzenegger maintains, it is vital for him to avoid "oversaturation of his image." According to his complaint, he has steadfastly refused to endorse any products in the United States, despite being offered substantial sums to do so.

Defendants removed the action to federal district court in California, and Fred Martin moved to dismiss the complaint for lack of personal jurisdiction. The district court granted Fred Martin's motion, and Schwarzenegger appealed.

II. PERSONAL JURISDICTION

For a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least "minimum contacts" with the relevant forum such that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316. (1945)

General Jurisdiction Schwarzenegger argues, quite implausibly, that California has general personal jurisdiction over Fred Martin. For general jurisdiction to exist over a nonresident defendant such as Fred Martin, the defendant must engage in "continuous and systematic general business contacts," Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984) that "approximate physical presence" in the forum state. Bancroft & Masters, 223 F. 3d at 1086. This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world. Schwarzenegger contends that Fred Martin's contacts with California are so extensive that it is subject to general jurisdiction. He points to the following contacts: Fred Martin regularly purchases Asian-made automobiles that are imported by California entities. However, in purchasing these automobiles, Fred Martin dealt directly with representatives in Illinois and New Jersey, but never dealt directly with the California-based importers. Some of Fred Martin's sales contracts with its automobile suppliers include a choice-of-law provision specifying California law. In addition, Fred Martin regularly retains the services of a California-based direct-mail marketing company; has hired a sales training company, incorporated in California, for consulting services; and maintains an Internet website accessible by anyone capable of using the Internet, including people living in California. These contacts fall well short of the "continuous and systematic" contacts that the Supreme Court and this court have held to constitute sufficient "presence" to warrant general jurisdiction. Schwarzenegger has therefore failed to establish a prima facie case of general jurisdiction.

B. Specific Jurisdiction Alternatively, Schwarzenegger argues that Fred Martin has sufficient "minimum contacts" with California arising from, or related to, its actions in creating and distributing the advertisement such that the forum may assert specific personal jurisdiction. We have established a three-prong test for analyzing a claim of specific personal jurisdiction:

(1) The nonresident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.

The plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to "present a compelling case" that the exercise of jurisdiction would not be reasonable. For the reasons that follow, we hold that Schwarzenegger has failed to satisfy the first prong.

1. Purposeful Availment or Direction Generally Under the first prong of our three-part specific jurisdiction test, Schwarzenegger must establish that Fred Martin either purposefully availed itself of the privilege of conducting activities in California, or purposefully directed its activities toward California.

A showing that a defendant purposefully availed himself of the privilege of doing business in a forum state typically consists of evidence of the defendant's actions in the forum, such as executing or performing a contract there. By taking such actions, a defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). In return for these "benefits and protections," a defendant must-as a quid pro quo-"submit to the burdens of litigation in that forum." Burger King, 471 U.S. at 476. A showing that a defendant purposefully directed his conduct toward a forum state, by contrast, usually consists of evidence of the defendant's actions outside the forum state that are directed at the forum, such as the distribution in the forum state of goods originating elsewhere.

2. Purposeful Direction Schwarzenegger does not point to any conduct by Fred Martin in California related to the advertisement that would be readily susceptible to a purposeful availment analysis. Rather, the conduct of which Schwarzenegger complains-the unauthorized inclusion of the photograph in the advertisement and its distribution in the Akron Beacon Journal-took place in Ohio, not California. Fred Martin received no benefit, privilege, or protection from California in connection with the advertisement, and the traditional quid pro quo justification for finding purposeful availment thus does not apply. Therefore, to the extent that Fred Martin's conduct might justify the exercise of personal jurisdiction in California, that conduct must have been purposefully directed at California.

Here, Fred Martin's intentional act-the creation and publication of the advertisement-was expressly aimed at Ohio rather than California. The purpose of the advertisement was to entice Ohioans to buy or lease cars from Fred Martin and, in particular, to "terminate" their current car leases. The advertisement was never circulated in California, and Fred Martin had no reason to believe that any Californians would see it and pay a visit to the dealership. Fred Martin certainly had no reason to believe that a Californian had a current car lease with Fred Martin that could be "terminated" as recommended in the advertisement. It may be true that Fred Martin's intentional act eventually caused harm to Schwarzenegger in California and Fred Martin may have known that Schwarzenegger lived in California. But this does not confer jurisdiction, for Fred Martin's express aim was local. We therefore conclude that the advertisement was not expressly aimed at California.

CONCLUSION We hold that Schwarzenegger has established neither general nor specific jurisdiction over Fred Martin in California. Schwarzenegger has not shown that Fred Martin has "continuous and systematic general business contacts," Helicopteros, 466 U.S. at 416, that "approximate physical presence" in California, Bancroft & Masters, 223 F. 3d at 1086, such that it can be sued there for any act it has committed anywhere in the world. Further, while Schwarzenegger has made out a prima facie case that Fred Martin committed intentional acts that may have caused harm to Schwarzenegger in California, he has not made out a prima facie case that Fred Martin expressly aimed its acts at California.

AFTERWORD Schwarzenegger's claim was settled out of court in 2004 when the Fred Martin Motor Company issued a written apology and agreed to pay a "substantial" sum to Arnold's All-Stars, an after-school program founded by Schwarzenegger.

Questions

1. Explain Schwarzenegger's complaint.

2. Why was Schwarzenegger unable to sue Fred Martin in California?

3. Nica stro injured his hand while using a metal-shearing machine in New Jersey manufactured by J. McIntyre Machinery, a company incorporated and operating in England. Nicastro filed a products liability lawsuit against J. McIntyre Machinery in a New Jersey state court, basing personal jurisdiction in New Jersey on three primary facts: A U.S. distributor agreed to sell the company's machines in the United States; J. McIntyre officials attended trade shows in several other states; and four of the company's machines were located in New Jersey. J. McIntyre Machinery had not advertised in or sent goods to New Jersey.

a. Build an argument to support the claim of jurisdiction in the New Jersey court.

b. Decide. See J. McIntyre Machines Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).

4. Burger King conducted a franchise, fast-food operation from its Miami, Florida, headquarters. John Rudzewicz and a partner, both residents of Michigan, secured a Burger King franchise in Michigan. Subsequently, the franchisees allegedly fell behind in payments, and after negotiations failed, Burger King ordered the franchisees to vacate the premises. They declined to do so, and continued to operate the franchise. Burger King brought suit in a federal district court in Florida. The defendant franchisees argued that the Florida court did not have personal jurisdiction over them because they were Michigan residents and because the claim did not arise in Florida. However, the district court found the defendants to be subject to the Florida long-arm statute, which extends jurisdiction to "[a]ny person, whether or not a citizen or resident of this state" who, "[b]reach[es] a contract in this state by failing to perform acts required by the contract to be performed in this state." The franchise contract provided for governance of the relationship by Florida law. Policy was set in Miami, although day-to-day supervision was managed through various district offices. The case ultimately reached the U.S. Supreme Court.

a. What constitutional argument would you raise on behalf of the defendant franchisees?

b. Decide. See Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).