U.S. Court of Appeals for the Tenth Circuit, Dental Dynamics, LLC, v. Jolly Dental Group, LLC, Docket No. 18-6107

Personal Jurisdiction

Specific Jurisdiction

Bill of Sale

Opinion Letter Sent from an Out-of-State Law Firm

Due Process Clause of the Fourteenth Amendment

Oklahoma Law

This case presents a question of personal jurisdiction. Namely, whether a federal court sitting in Oklahoma has specific personal jurisdiction over Dr. Scott Jolly—a dentist and Arkansas resident—and the limited liability company through which he runs his dentistry practice, Jolly Dental Group, LLC. The plaintiff below, Dental Dynamics, LLC, argues that three isolated business interactions and an allegedly fraudulent contract suffice to establish federal court jurisdiction over its breach of contract and fraud claims.

We disagree. With respect to Dental Dynamics’s breach of contract claim, Jolly Dental’s contacts with Oklahoma are too random, fortuitous, and attenuated to establish personal jurisdiction there. With respect to Dental Dynamics’s fraud claim, we conclude that Dental Dynamics fails to show Dr. Jolly’s allegedly tortious conduct sufficiently targeted Oklahoma to establish personal jurisdiction there. Accordingly, we AFFIRM the district court’s dismissal of Dental Dynamics’s claims for lack of personal jurisdiction.

Since 2008, Dr. Jolly has inquired into prospective business transactions with Dental Dynamics on three occasions. First, in 2008, Dr. Jolly contacted Dental Dynamics regarding the potential sale of a pre-owned piece of equipment he owned. Haller informed Dr. Jolly that she could not sell the machine. Next, in May 2017, Dr. Jolly engaged Dental Dynamics to broker the sale of a 2014 Planmex Promax MID X-Ray Unit (X-Ray unit) that is the subject of the present lawsuit. Third, in June 2017, Dr. Jolly contacted Dental Dynamics regarding the purchase of a separate X-Ray unit. Jolly Dental paid Dental Dynamics the purchase price for this unit. But after a defect was discovered with the machine, Dental Dynamics returned the purchase price to Jolly Dental.1 The parties prepared and executed these transactions through telephonic, email, and text communications.

Dental Dynamics’s present claims arise out of the second transaction. On or around May 20, 2017, Dental Dynamics secured the sale of the X-Ray unit from Jolly Dental to Dr. Joiner, a dentist practicing in California. On May 26, 2017, Jolly Dental, through Dr. Jolly, executed a bill of sale selling the X-Ray unit to Dental Dynamics. The bill of sale represents that the X-Ray unit is in “perfect working condition” and that the sale includes the X-Ray unit’s hardware, software, manuals, and “all accessories and any other items pertaining” to the X- Ray unit. Id. at 14–15. The negotiations pertaining to the bill of sale were conducted through text messages and email. To pay for the X-Ray unit and associated items, “Dr. Joiner tendered the sales price to Dental Dynamics in Oklahoma, and Dental Dynamics subsequently mailed a check . . . to Dr. Jolly.” Id. at 36.

The bill of sale notes that “disassembly, packaging, and shipment” would be handled by an independent support company. Id. at 14. Dental Dynamics does not dispute that the X-Ray unit was shipped directly from Dr. Jolly’s offices in Arkansas to Dr. Joiner’s offices in California without ever entering Oklahoma. After receipt of the X-Ray unit, Dr. Joiner discovered that it was not in perfect working condition as represented. Due to certain defects and missing hardware and software, the X-Ray unit Dr. Joiner received was “worthless” in that it would “cost more to repair than to purchase a brand new unit.” Id. at 9–10. Dr. Joiner notified Dental Dynamics of the X-Ray unit’s unsatisfactory condition.

In turn, Dental Dynamics brought the present action in federal court in Oklahoma, alleging breach of contract against Jolly Dental and fraud against Dr. Jolly. Dental Dynamics alleges Jolly Dental breached its contractual obligations outlined in the bill of sale by “failing to properly disassemble and crate the X-Ray Unit; failing to provide the software and computer hardware required . . . and materially misrepresenting the condition of the X-Ray Unit.” Id. at 10. With respect to its fraud allegations, Dental Dynamics alleges Dr. Jolly knowingly made false representations regarding the X-Ray unit’s condition and his intention to satisfactorily disassemble and crate the X-Ray unit to induce Dental Dynamics to secure the sale of the unit.

In response, Dr. Jolly and Jolly Dental (together Jolly Dental) moved to dismiss the action for lack of specific personal jurisdiction. Jolly Dental argues it lacks the requisite minimum contacts with Oklahoma to establish jurisdiction and that, even if the minimum contacts test is satisfied, exercising jurisdiction would be unreasonable.

The district court granted Jolly Dental’s motion, holding Dental Dynamics failed to establish specific personal jurisdiction over either its breach of contract or fraud claim.

To show personal jurisdiction over a nonresident in a diversity action, Dental Dynamics must demonstrate that jurisdiction is proper under the laws of the forum state—in this case Oklahoma—and that the exercise of jurisdiction complies with the Due Process Clause of the Fourteenth Amendment. Walden v. Fiore, 571 U.S. 277, 282 (2014); Fed. R. Civ. P. 4(k)(1)(A). This requires us to focus on state law, and particularly, the relevant state’s long-arm statute. That statute establishes the extent to which the state intends its courts to exercise jurisdiction over nonresidents. Oklahoma’s long-arm statute authorizes courts to “exercise jurisdiction on any basis consistent with the Constitution of this state and the Constitution of the United States.” Okla. Stat. Ann., tit. 12, § 2004(F). Neither party raises any objection based on the Oklahoma constitution. Accordingly, the analysis collapses into a single due process inquiry. See Old Republic, 877 F.3d at 903; Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013).

The Due Process Clause authorizes personal jurisdiction if two elements are met. First, a defendant must have “purposefully established minimum contacts within the forum state.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Second, the assertion of personal jurisdiction must comport with traditional notions of fair play and substantial justice. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).

The minimum contacts test for specific personal jurisdiction has two requirements: (1) a defendant must have “purposefully directed its activities at residents of the forum state,” and (2) the plaintiff’s injuries must arise out of the defendant’s forum-related activities. Old Republic, 877 F.3d at 904. With respect to the first requirement, purposeful direction ensures that defendants will not be haled into court in foreign jurisdictions solely as a result of “random, fortuitous, or attenuated contacts.” Burger King, 471 U.S. at 475. The mere foreseeability of causing injury in another state is insufficient on its own to establish purposeful direction. See Old Republic, 877 F.3d at 905.

The “purposeful direction” prong of the minimum contacts test is sometimes referred to as the “purposeful availment” prong. See, e.g., Dudnikov, 514 F.3d at 1071 (noting the interchangeability of these terms).

If the minimum contacts test is met, we must then assess whether exercising personal jurisdiction would offend traditional notions of fair play and substantial justice. See id. at 909. To do so, we consider the following factors: (1) the burden on the defendant; (2) the forum state’s interest in resolving the dispute;
(3) the plaintiff’s interest in receiving convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental social policies. See id.; see also Pro Axess, Inc. v. Orlux Distrib., Inc., 428 F.3d 1270, 1279–80 (10th Cir. 2005).

Analyzing purposeful direction with respect to Dental Dynamics’s breach of contract claim requires us to look to Jolly Dental’s continuing “relationships with the forum state and its residents.” Old Republic, 877 F.3d at 905; see also Burger King, 471 U.S. at 472. Although contractual obligations may create sufficient ties to establish jurisdiction, an out-of-state resident’s contract with a resident of the forum state is insufficient, standing alone, to create personal jurisdiction. See Burger King, 471 U.S. at 478; Benton v. Cameco Corp., 375 F.3d 1070, 1077 (10th Cir. 2004). In Burger King, the Supreme Court eschewed such “mechanical” tests in favor of looking to the “business negotiations,” “future consequences” of the contract, and the “actual course of dealing” between the parties. Burger King, 471 U.S. at 478–79.

Here, the record shows that the parties’ entire business relationship comprises three transactions over nine years. None of these transactions was negotiated or executed in person. Each transaction was a discrete occurrence, unrelated to the others in any meaningful way. On only two occasions did the parties reach an agreement, and only once—in the transaction subject to this lawsuit—was that agreement substantially performed.

These contacts are insufficient to show purposeful direction. Each transaction concerned the isolated sale or prospective sale of a piece of dental equipment without any long-term or continuing obligations involving Oklahoma. See Old Republic, 877 F.3d at 910 (finding no purposeful direction even where a contract with a forum-state entity was accompanied by the parties’ contemplation of “some potentially ongoing consequences” because the record lacked evidence of “any significant course of dealing” or long-term contractual commitments associated with the forum state). Moreover, the transactions implicated Oklahoma in only an attenuated fashion, as Dental Dynamics serves as a broker in transactions between dentists located across the United States. See C5 Med. Werks, LLC v. CeramTec GMBH, 937 F.3d 1319, 1325 (10th Cir. 2019) (holding no purposeful direction established where a party attended numerous trade shows in the forum state, but the location was selected by a third-party).

Dental Dynamics analogizes to Burger King, but the comparison confirms no purposeful direction exists here. In Burger King, the Supreme Court found minimal contacts satisfied due to a heavily negotiated and “carefully structured” 20-year franchise agreement that “envisioned continuing and wide-reaching contacts” with the forum state. 471 U.S. at 478–80. But in this case none of Burger King’s persuasive factors are present. The primary contract that Dental Dynamics relies on is a two-page bill of sale negotiated over email that envisions no enduring relationship between the parties and concerns only the sale of a single piece of equipment that never physically passed through the forum state.

(…) Rambo v. Am. S. Ins. Co., 839 F.2d 1415, 1418 (10th Cir. 1988) (“Ordinarily ‘use of the mails, telephone, or other international communications simply do not qualify as purposeful activity.’” (quoting Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985))).

In sum, the contemplated and executed business transactions between the parties are too attenuated to demonstrate Jolly Dental established sufficient minimum contacts with Oklahoma.

When analyzing tort-based claims such as Dental Dynamics’s fraud claim, we look to “the harmful effects [of Dr. Jolly’s conduct] in the forum state” to assess purposeful direction. Old Republic, 877 F.3d at 905. Purposeful direction in this context has three elements: (1) an intentional action; (2) expressly aimed at the forum state; and (3) with knowledge that the brunt of the injury would be felt in the forum state. See Newsome, 722 F.3d at 1264–65; see also Dudnikov, 514 F.3d at 1072.

This framework for analyzing personal jurisdiction in the intentional tort context stems originally from the Supreme Court’s decision in Calder v. Jones. 465 U.S. 783, 790 (1984) (holding personal jurisdiction in California proper in a libel suit by a California resident against a Florida reporter). In Walden v. Fiore, the Supreme Court elaborated on its holding in Calder. See 571 U.S. 277, 286–91 (2014). In Walden, a DEA agent in Georgia stopped two Nevadans who claimed to be professional gamblers returning home with approximately $97,000 in cash winnings. The DEA agent seized the currency and drafted an affidavit in conjunction with the forfeiture proceedings. The Nevadans filed suit in federal court in Nevada alleging that the DEA agent tortiously drafted a false affidavit.

A divided Ninth Circuit held personal jurisdiction existed under Calder and its progeny because the DEA agent “expressly aimed” his submission of the allegedly false affidavit at Nevada by submitting the affidavit with knowledge that it would affect persons with a significant connection to Nevada. See id. at 282.

The Supreme Court reversed. In doing so, the Court clarified that knowledge of an alleged victim’s out-of-state status, standing alone, cannot confer personal jurisdiction over a defendant engaging in allegedly tortious activity. The Court reiterated that the focus of the personal jurisdiction analysis is on the defendant’s relationship with the forum state, even in the intentional tort context. See id. at 282–83 (“The plaintiff cannot be the only link between the defendant and the forum.”).

Subsequent case law from this court confirms a defendant’s interaction with a plaintiff—even when allegedly tortious—is insufficient to establish personal jurisdiction. See Rockwood Select Asset Fund XI (6)-1, LLC v. Devine, 750 F.3d 1178, 1180 (10th Cir. 2014) (holding alleged falsehoods in an opinion letter sent from an out-of-state law firm defendant to a plaintiff in the forum state failed to establish jurisdiction).

These principles dictate the outcome here. As discussed above, Dental Dynamics fails to show Dr. Jolly had any connections with Oklahoma outside of the allegedly fraudulent misrepresentations and isolated incidents of outreach to Dental Dynamics. These communications into the forum-state are insufficient to establish Dr. Jolly “expressly aimed” his allegedly tortious misrepresentations at Oklahoma. See Rockwood, 750 F.3d at 1180. Nor does the fact that Dr. Jolly knew Dental Dynamics was an Oklahoma entity change this analysis. See C5 Med. Werks, 937 F.3d at 1324.

Secondary sources: Charles A. Wright, Arthur R. Miller & Adam N. Steinman, Federal Practice and Procedure § 1069.7 (4th ed. 2015).

(U.S. Court of Appeals for the Tenth Circuit, January 9, 2020, Dental Dynamics, LLC, v. Jolly Dental Group, LLC, Docket No. 18-6107, For Publication)