The “Long Arm” of the Law, or How to Pull Out-of-State Opponents into Court
Picture this: you provide services to an out-of-state company, and the company then refuses to pay. The company ignores your reasonable requests to pay, so you initiate an Indiana lawsuit against the out-of-state company. The out-of-state company then seeks dismissal of the lawsuit, claiming that the Indiana court has no power over them. What happens next?
The answer depends on whether the Indiana court has “personal jurisdiction” over the out-of-state defendant. This is because the law generally does not allow someone to be pulled into any court, anywhere, for any reason. There generally must be a connection between the defendant being pulled into court, and the location in which it is being pulled into court.
In particular, Indiana has what is known as a “long-arm” rule which allows an Indiana court to exercise power (also known as exercising jurisdiction) over an out-of-state defendant. This rule plays hand-in-hand with the Due Process Clause of the Fourteenth Amendment to the United States Constitution, which prohibits any state from depriving any person (including a corporation) from any property (including money) “without due process of law.” Courts have held that “due process” requires that, before a court may exercise jurisdiction over an out-of-state defendant, the defendant must have sufficient minimum contacts with the state so that it would not be unfair or unjust for the defendant to be sued in that state.
There are two types of jurisdiction: general jurisdiction and specific jurisdiction. General jurisdiction exists when a defendant’s contacts with Indiana are so “continuous and systematic” that the defendant should reasonably anticipate being called into court in Indiana for any matter. Specific jurisdiction exists when a defendant takes advantage of the privilege of conducting business within Indiana such that the defendant should reasonably anticipate being called into court in Indiana. And, even if jurisdiction exists, it must be “reasonable” for a court to exercise jurisdiction over the defendant.
For example, in Oswald v. Shehadeh, 108 N.E.3d 911, 916 (Ind. Ct. App. 2018), the Indiana Court of Appeals determined that personal jurisdiction did exist so the Indiana plaintiff could sue the Arkansas defendants in Indiana for breach of contract. Facts which supported the existence of personal jurisdiction included: (1) the defendants solicited the plaintiff in Indiana to sell the plaintiff’s restaurants; (2) the sale contract was an agreement requiring the defendants to make payments to the plaintiff in Indiana; and (3) after the contract was executed the defendants maintained business relationships with Indiana companies and residents and maintained a mailbox in Indiana.
However, in Wolf’s Marine, Inc. v. Brar, 3 N.E.3d 12 (Ind. Ct. App. 2014), the Indiana Court of Appeals determined that personal jurisdiction did not exist, so the Indiana plaintiff could not sue the Michigan defendant in Indiana for property damage. The only deliberate contacts the defendant had with Indiana were limited to general advertising, emailing a form contract to the plaintiff at the plaintiff’s request, and invoicing and receiving payment from the plaintiff. No goods were delivered to or from Indiana, nor were any services performed in Indiana.
The takeaway is that, if you cannot establish that Indiana has jurisdiction over an out-of-state company, you likely will need to pursue your claims in the state where that company is located. In other words, doing business with out-of-state companies can create complicated issues. If you are conducting business with an out-of-state company, or considering doing so, we recommend consulting with an attorney to seek advice regarding the various issues which may arise.
Author Justin O. Sorrell
Justin is an experienced litigator who represents and advises business clients in many types of disputes in federal and state courts across Indiana. He regularly defends employers in lawsuits including wage and retaliation claims, trade secret and confidentiality claims, non-competition and non-solicitation covenants, and breach of contract claims. Additionally, Justin has experience in defending claims involving construction-related commercial property damage, products liability, insurance coverage, collections, and appeals, and he has served as local counsel in federal and state courts across Indiana. He defends employers before the Indiana Worker’s Compensation Board, and has experience in other business-related areas, including bank loan transactions, loan work-outs, and bankruptcy. He also has significant experience in discovery of electronically-stored information (“ESI”), and advises clients on how to maximize value and minimize expense.
He is a problem-solver, and seeks creative solutions to his clients’ issues while emphasizing the business impact of litigation choices to help guide his clients’ decision-making. When an amicable resolution is not possible, he aggressively and diligently pursues his clients’ interests.
© Riley Bennett Egloff LLP
Disclaimer: Article is made available for educational purposes only and is not intended as legal advice. If you have questions about any matters in this article, please contact the author directly.
Permissions: You are permitted to reproduce this material in any format, provided that you do not alter the content in any way and do not charge a fee beyond the cost of reproduction. Please include the following statement on any distributed copy: “Justin O. Sorrell© Riley Bennett Egloff LLP – Indianapolis, Indiana. www.rbelaw.com”
Posted on Mar. 13 2019 , by Justin O. Sorrell