Defendants Suable in State Where Calls Inadvertently Received, If Similar Calls Purposefully Directed at Forum Residents, Tenth Circuit Holds

Last week, the U.S. Court of Appeals for the Tenth Circuit applied the Supreme Court’s recent Ford Motor decision on personal jurisdiction to a Rule 12(b)(2) motion to dismiss a TCPA claim.

In Hood v. American Auto Care, LLC, the plaintiff, Alexander Hood, alleged that the defendant (American Auto Care or “AAC,” a Florida company) violated the TCPA by directing automated calls to Mr. Hood’s cell phone without his consent.  No. 20-1157, 2021 WL 6122400, at *1 (10th Cir. Dec. 28, 2021).  According to the complaint, the calls were part of a sweeping telemarketing campaign by AAC that involved calling people from various states, including Vermont and Colorado, to advertise extended vehicle warranties sold by AAC.  Id.  Mr. Hood had previously lived in Vermont and had a Vermont cell phone number, but was living in Colorado at the time he received the calls.  Id.  The U.S. District Court for the District of Colorado granted AAC’s motion to dismiss for lack of personal jurisdiction, finding that the calls to Mr. Hood’s Vermont cell phone number did not “arise out of or relate to” calls that AAC directed at forum residents.  Id. 

The Tenth Circuit reversed, holding that, so long as AAC’s telemarketing activities directed at Colorado residents were “essentially the same” as those directed at Vermont residents, then the calls to Mr. Hood adequately “relate to” AAC’s activity in Colorado such that AAC must answer suit there for calls directed at the other state.  Id.

To determine when specific jurisdiction may be exercised, courts must assess whether the defendant has “purposefully directed” its activities at forum residents and whether the plaintiff’s claims “arise out of or relate to” those activities.  Id. at *3 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).  Even when both requirements are met, the defendant can “escape” jurisdiction by showing that it would be “incompatible with traditional notions of fair play and substantial justice” to require it to defend suit in the selected forum.  Id. (citing Burger King, 471 U.S. at 47­6-77).

Relationship Between Mr. Hood’s Claim and AAC’s Forum Contacts

In the ruling reversed on appeal, the district court had agreed with AAC that the “arise out of or relate to” element of specific jurisdiction requires a causal connection between the plaintiff’s claims and the defendant’s activities that it purposefully directed at the forum.  Id.  Although AAC purposefully directed its activities at Colorado residents by calling such individuals, the calls to Mr. Hood’s Vermont cell phone number did not establish a sufficient connection to Colorado to allow the state to exercise specific jurisdiction over AAC, the district court reasoned.  Id. 

The Tenth Circuit concluded that the district court’s decision could not stand after the Supreme Court’s ruling in Ford Motor Co. v. Montana Eighth Judicial District Court, 141 S. Ct. 1017 (2021), which was handed down after the district court’s judgment.  Hood, supra, at *3.

In Ford Motor, the Supreme Court held that a Montana court could exercise specific jurisdiction over a car manufacturer whose product injured a plaintiff there, despite the fact that the vehicle in question was not designed, manufactured, nor first sold in that state.  Id. at *4 (citing 141 S. Ct. at 1026).  Ford acknowledged that it had availed itself of Montana through extensive advertising, local dealerships, and vehicle service.  Id. (citing 141 S. Ct. at 1026, 1028).  But Ford contended that the plaintiff’s claims did not “arise out of or relate to” those directed activities because the vehicle that caused the alleged injury was not first sold in Montana, having entered the forum only after the owner’s relocation to that state.  Id. (citing 141 S. Ct. at 1022-23).

The Supreme Court rejected a causal test for specific jurisdiction, explaining that “arise out of or relate to” “contemplates that some relationships will support jurisdiction without a causal showing.”  Id. (citing 141 S. Ct. at 1026) (emphasis in original).  In support of this proposition, the high court cited World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), where it held that a plaintiff from New York who was driving through Oklahoma could sue the car manufacturer in that state for an injury she sustained there, since the defendant had “deliberately extended” itself into Oklahoma through business activities related to its vehicles.  Hood, supra, (quoting Ford, 141 S. Ct. at 1027).  Similarly, the plaintiff in Ford Motor could sue in Montana (where the injury occurred) because the defendant had for years engaged in commerce related to its vehicles in that state.  Id. at *5 (citing 141 S. Ct. at 1028).

Under Ford Motor, the Tenth Circuit explained, the forum state can exercise specific jurisdiction over an out-of-state defendant who has injured a resident plaintiff in the forum state if “(1) the defendant has purposefully directed activity to market a product or service at residents of the forum state and (2) the plaintiff’s claim arises from essentially the same type of activity, even if the activity that gave rise to the claim was not directed at forum residents.”  Id. (emphasis added).

Applying this test, the Tenth Circuit concluded that, although the calls to Mr. Hood’s Vermont phone number were not a direct result of AAC’s telemarketing activities directed at Colorado, the state nevertheless could exercise specific jurisdiction over AAC because Mr. Hood was injured in Colorado by activity that was “essentially identical” to telemarketing activity that AAC purposefully directed at the forum.  Id.  The court said that this outcome would have been different if there was a “substantial relevant difference” between AAC’s activities directed at Colorado versus those directed at Vermont.  Id.

Purposeful Direction of AAC’s Activity Towards Forum State

Mr. Hood alleged that AAC maintained “continuous and systematic contacts” with Colorado through targeted telemarketing efforts.  Id. at *6.  The district court found this uncontroverted allegation sufficient to establish a prima facie showing of “purposeful direction.”  Id. 

On appeal, AAC contended that its calls to Colorado phone numbers did not satisfy purposeful direction in Mr. Hood’s case because this element, AAC argued, depends exclusively on the forum contacts out of which the plaintiff’s claims arise.  Id. 

The Tenth Circuit disagreed with AAC’s position that purposeful direction must be based solely on the contacts that generated the cause of action.  Id.  AAC’s argument, the court reasoned, is incompatible with the Supreme Court’s conclusion in Ford Motor that purposefully directed in-state activity can be sufficiently related to the plaintiff’s injury despite the absence of a causal connection.  Id. at *7 (citing 141 S. Ct. at 1026).  “The whole point of Ford was that it is enough if the activity forming the basis of the claim against the defendant is related to the activity of the defendant that establishes that it purposefully directed [its] activities at residents of the forum.”  Id. (internal quotation and citation omitted) (emphasis in original).

Fair Play and Substantial Justice

The Tenth Circuit found that the instant case was not one of the “rare” ones in which a valid exercise of personal jurisdiction would be unreasonable.  Id. at *8.  The court noted that out-of-state defendants are often expected to litigate cases in fora whose residents have been harmed by the defendant’s purposefully directed conduct.  Id.

Accordingly, the Tenth Circuit reversed the district court’s order dismissing Mr. Hood’s claim for lack of personal jurisdiction and remanded the case for continued proceedings.  Id. at *9.

Conclusion

Under Hood, entities conducting telemarketing campaigns directed at residents of Tenth Circuit states may be answerable to suit in those fora even where the phone calls to the plaintiffs were not purposefully directed to  residents of those states, as long as the telemarketing activities directed at residents in those states are “essentially the same” as the telemarketing activity that allegedly injured the plaintiffs.  It remains to be seen how other circuit courts will deal with this personal jurisdiction issue in TCPA cases in light of the Supreme Court’s decision in Ford Motor.