Choice of Law and Venue — What Law Applies and Where?

Posted: 07/02/2003 In Category(s):

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We are often asked how plaintiffs choose where to file a lawsuit, if that can be changed, how a court determines what particular law to apply to a case, and when a court does and does not have the ability to hear a case. If a plaintiff files a lawsuit, the ruling court must consider (among other things) whether, under notions of fairness and law, a defendant can be brought into that particular court (whether the court has “personal jurisdiction”). The following cases illustrate how two New York courts handle this issue.

Case in Point:

In Re Ski Train Fire in Kaprun, Austria, et al., 2003 WL 1918296 (S.D.N.Y. 2003), parents and grandparents brought negligence and products liability claims in New York against various Austrian entities after their children and grandchildren were killed in a “funicular” train fire while vacationing in Austria. All cases had been merged in a New York court: a “multi district panel” to efficiently handle the matters.

Some of the defendants asked the Court to dismiss the case against them, claiming, among other things, that plaintiffs had no basis for suing them in California (the cases were originally filed in California, but transferred to New York). The New York court looked to California law to determine whether there was a basis to bring the Austrian defendants into court there — what is termed “personal jurisdiction.” The Court found that California looked to federal law in deciding this question, which is commonly cited by many state courts. The Court noted the rule that for a court to exercise personal jurisdiction over a “non-resident” (in this case Austrian) defendant, that non-resident must have had enough contacts (“minimum contacts”) with the state to justify bringing the entity into court there. These contacts must be sufficient to satisfy notions of “fair play and justice.” In other words, an entity must make contacts in such a way as to …purposefully avail itself of the privilege of conducting activities within…that state…such that [it] should reasonably anticipate being haled into court there. (Through these contacts, the entity seeks the benefits and protections of that state’s laws, and so, in all fairness, should expect to be subject to lawsuit in that state’s courts.) The Court noted that a defendant’s contacts with a state could be either general (“substantial,” or “continuous and systematic”) or specific to the matter in litigation (and, if so, much less substantial).

The Court found that the only contact that defendants had with the state of California was the sale of a single Ferris wheel several years before to a California amusement park (totally unrelated to the litigation at issue). The Court found this insufficient to establish the type of continuous and systematic contacts needed for purposes of obtaining jurisdiction over the defendants. Typically, general personal jurisdiction is justified when a defendant is incorporated in the state, has bank accounts there, or markets and sells products there. However, the Court found that plaintiffs had presented evidence that they could obtain jurisdiction over the defendants in Colorado. The Court therefore allowed a transfer of the case to Colorado, to allow plaintiffs to pursue their claims against the defendants, and attempt to substantiate the “minimum contacts” under that jurisdiction’s laws. (Interestingly, the “place” of suit was immediately bounced back to the New York multi district panel, which would apply the law of Colorado to ultimately determine the jurisdiction question, and whether or not the case could proceed.)

Case in Point:

In Carey v. C Lazy U Ranch, Inc., 758 N.Y. Supp. 2d 371 (N.Y.A.D. April, 2003), Robert Carey suffered injuries when he fell off a horse during a horseback ride at the C Lazy U Ranch in Colorado. Carey (plaintiff) filed a lawsuit in New York (his place of residence) against C Lazy U (defendant), claiming that the ranch’s negligence caused his injuries.

The case facts indicate that the C Lazy U, working through a public relations firm hired by the ranch, solicited Carey, a travel writer, to come on an all expenses paid trip to the ranch in exchange for writing a favorable article on the ranch in a travel magazine. The firm communicated with Carey through the mail and fax, and mailed him a “press kit.”

The Appeals Court affirmed the lower court in dismissing the New York case against C Lazy U. The Court found that the Colorado Ranch’s …lone act of soliciting a horseback rider to visit the ranch in Colorado with the hope that he might write a favorable article…plus the mailing of a press kit… was not enough to justify an action against the Ranch in New York. It was not a …purposeful act performed by the defendants in New York so as to constitute the transaction of business in the State. The Court noted that the Ranch was not a New York corporation, did not have any bank accounts in New York, and did not conduct any other business in New York.

The Austrian Ski Train and C Lazy U cases are typical of the way courts handle the issue of “haling” a defendant into a certain court. The rules are designed for courts to examine principles of fairness and justice in making this decision: when should a defendant (through its own activities) expect to be subject to a lawsuit in a certain state or jurisdiction?

Note, however, that sometimes a defendant attempts to dictate, up front, where it can be sued (the defendant “submits themselves” to the jurisdiction of that state). Frequently, a document signed by the participant before agreeing to participate contains a “choice of law and venue” provision. In signing the defendant’s document, the participant agrees that if a lawsuit is filed, it shall be filed in a certain state (and possibly county), and that a certain state’s law will apply. Courts do not necessarily have to honor these provisions, but oftentimes will if these requests are reasonable under the law. In Umali, the Pennsylvania and Vermont Courts looked favorably on just such a provision contained in the “release” section of plaintiff’s Official Entry form, in choosing to transfer the case to Vermont and apply Vermont law to the controversy.

This Law Review article was researched and written by:
Charles R. (Reb) Gregg and Cathy Hansen-Stamp