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Where You May Be Doing Business - The Personal Jurisdiction Snare

by James R. Chastain, Jr.

In New Investment Properties, L.L.C. v. ABC Company, et al, 2007 W.L. 4305464 (4^TH Cir. 2007), the Court of Appeals addressed the range of personal jurisdiction. Like that of a shepherd’s crook, the court exercised personal jurisdiction over a non-resident defendant. Plaintiffs, New Investment Properties, L.LC. and Creek Apartments Team, L.L.C. (“Creek Apartments) are both Louisiana corporations and the owners of two apartment complexes in New Orleans. Defendant, R. P. Beckendorf, is a California corporation with its principal place of business in Los Angeles. It is an independent insurance agency which obtained flood and wind policies for an apartment complex. The policies were delivered to the Champion Group, Inc., which is a California corporation with its principal place of business in Los Angeles.   The two managers of the plaintiffs are both residents of California, who are also managers of the Champion Group in California.

During Hurricane Katrina, the apartment complex incurred damages from the flood waters. Plaintiffs filed suit against R. P. Beckendorf alleging that it negligently advised them by improperly evaluating appellant’s property and not following federal flood insurance guidelines which resulted in their property being significantly underinsured for flood damages sustained during the hurricane. In response thereto, R. P. Beckendorf filed an exception of lack of personal jurisdiction arguing that it is not licensed to do business in the state of Louisiana, has no agent for service of process in Louisiana, has no officers or employees in Louisiana, and has not solicited or advertised for business in Louisiana. The trial court granted the exception.

The Court of Appeals reversed this ruling. It concluded that R. P. Beckendorf could have reasonably anticipated being brought into court in Louisiana as a result of the insurance policy it secured for the property. R. P. Beckendorf dispensed advice with regard to insurance policies and the levels of insurance coverage and ultimately secured the various insurance policies for the real property in Louisiana. The court found that it would be unreasonable to conclude that the minimum contacts were lacking simply because R.P. Beckendorf did not solicit business, place phone calls, or mail documents to Louisiana in connection with insurance for the Louisiana property. The court stated, “Although territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor’s efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.” The court concluded that R. P. Beckendorf was cognizant of the fact the policies were procured for property in Louisiana and thus it should have reasonably anticipated being hailed into court to defend a claim of failure to procure appropriate insurance coverage.