Christina Carlini, et al., Respondents, vs. Kari Larson, et al., Respondents, Miss Universe L.P., LLLP, Appellant.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-1474

 

 

Christina Carlini, et al.,

Respondents,

 

vs.

 

Kari Larson, et al.,

Respondents,

 

Miss Universe L.P., LLLP,

Appellant.

 

 

Filed May 11, 2004

Affirmed

Randall, Judge

 

Hennepin County District Court

File No. CT 03-6684

 

Michael B. Chase, 2102 U.S. Bank Center, 101 East Fifth Street, St. Paul, MN  55101 (for respondents Carlini, et al.)

 

David K. Snyder, Eckberg, Lammers, Briggs, Wolff & Vierling, 1835 Northwestern Avenue, Stillwater, MN 55082 (for respondents Larson, et al.)

 

Michael R. Gray, Kelly W. Hoversten, Gray, Plant, Mooty, Mooty & Bennett, P.A., 3400 City Center, 33 South Sixth Street, Minneapolis, MN  55402 (for appellant Miss Universe)

 

            Considered and decided by Randall, Presiding Judge, Willis, Judge, and Harten, Judge.

U N P U B L I S H E D   O P I N I O N

RANDALL, Judge

            Appellant Miss Universe L.P., LLLP, appeals from the district court's order denying its motion to dismiss for lack of personal jurisdiction.  Appellant argues that its contacts with the State of Minnesota were not sufficient to justify assumption of jurisdiction. 

            Although appellant's contacts with Minnesota are modest, appellant maintained and exerted control over its franchisees to an extent that exhibits purposeful availment of the privilege of conducting activities within the state and invocation of the benefits and protections of Minnesota's laws.  We conclude that the district court did not err by assuming personal jurisdiction over appellant.

FACTS

Appellant Miss Universe L.P., LLLP, is a Delaware limited liability partnership with a principal place of business in New York and a secondary office in Los Angeles.  Appellant runs the national Miss USA/Miss Teen USA pageants and owns various marks, symbols, emblems, and other types of intellectual property, including the Miss USA/Miss Teen USA System, a proprietary system for running the Miss USA/Miss Teen USA beauty pageants and their qualifying state pageants. Respondents, who were contestants in the Miss Minnesota USA or Miss Teen Minnesota pageants held November 2-3, 2003, sued defendants Kari Larson, Wendy Hinz, Maria Ojile, Midwest Pageants, Inc., Agency Models and Talent, Inc. (collectively, defendants), and appellant, alleging fraud and various consumer violations by the defendants and charging appellant with vicarious liability for defendants' actions.  The defendants and respondents are all Minnesota residents.

Appellant does not directly operate individual state pageants, but licenses an entity in each state to operate a qualifying pageant.  It grants a license to only one entity in each state and agrees that this license will be exclusive so long as the licensee is not in default under its licensing agreement.  Appellant receives a license fee from each licensee.  The licensee agrees to operate its state pageant in accordance with strict standards prescribed by appellant and to adhere to the Miss USA/Miss Teen USA System.  The licensee must agree to hold the state pageant between certain dates, must insure that contestants are qualified, and must meet many other requirements including procurement of insurance, use of sponsors, use of proprietary marks, adherence to state and federal laws, and so on.  The licensee agrees that appellant has the right to enter and conduct both operational and financial audits to determine whether the licensee has abided by the requirements of the license.  Appellant granted a license to defendants to operate the Miss Minnesota USA/Miss Teen Minnesota USA pageants for the year 2002.  Winners of these pageants became contestants in the Miss USA/Miss Teen USA 2003 pageant. 

The women who enter the state pageants as contestants must meet certain standards specified by appellant.  Each contestant signs an agreement to abide by eligibility determinations made by the state licensee and appellant.  This state contestant agreement is composed of five pages of rules, many of which require the contestant to adhere to certain standards for the benefit of both the state licensee and appellant.  Although the agreement is for the state pageant only, each contestant must agree to participate in the national contest if she wins.  Likewise, each contestant agrees that if selected to be Miss USA/Miss Teen USA, she will assist in advertising, promotion, endorsements, and travel on behalf of appellant and will act as a spokesperson for appellant.  This agreement states that although appellant is not a party to the agreement, it is a third-party beneficiary of the agreement who "will enjoy the fruits of this Agreement and will be entitled to enforce the terms of this Agreement" (emphasis added). 

Respondents allege that defendants solicited several women who were affiliated with the defendants' modeling and talent agencies to take part in the state pageant and waived a substantial part of the entry fee for these women, in violation of the licensing agreement between defendants and appellant.  Based on these allegations, respondents have charged defendants with fraud, misrepresentation, breach of contract, and consumer-law violations.  Respondents' complaint alleges that appellant, by retaining significant control over its licensees' operations, was vicariously liable for defendants' actions.  Respondents allege that eight of ten finalists in the 2003 pageants were solicited in violation of the licensing agreement, including the two winners of the pageants.  In essence, respondents argue that they were competing in a beauty contest against a "stacked deck."

            Appellant moved for dismissal of the complaint for lack of personal jurisdiction and for failure to state a claim on which relief can be granted.  The district court denied appellant's motions.  Appellant filed this appeal from the denial based on personal jurisdiction and a discretionary appeal from the denial of its motion for failure to state a claim.   This court denied appellant's discretionary appeal and refused to consolidate it with the personal jurisdiction appeal.

D E C I S I O N

            Minnesota's long-arm statute is sufficiently broad that the question of personal jurisdiction over a foreign corporation may be resolved by applying federal due-process law considerations.  Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 673 (Minn. App. 2000).  The appellate court reviews personal jurisdiction as a question of law, applying federal law to determine whether due-process requirements are met.  Id. 

            The basic due-process consideration is whether a defendant has sufficient minimum contacts with the forum state, such that "traditional notions of fair play and substantial justice" are not offended.  Int'l. Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945).  The burden of proof is on the plaintiff to establish a prima facie case that sufficient contacts with the forum state exist to justify the assumption of jurisdiction.  In re Minn. Asbestos Litig., 552 N.W.2d 242, 246 (Minn. 1996).  At the pretrial stage, the plaintiff's allegations and supporting evidence must be taken as true, even if disputed by the defendant.  S.B. Schmidt Paper Co. v. A to Z Paper Co., Inc. 452 N.W.2d 485, 487 (Minn. App. 1990).  A plaintiff may not rely solely on conclusory allegations of fact or law.  Prof'l. Mgmt. Assocs., Inc. v. Coss, 574 N.W.2d 107, 110 (Minn. App. 1998), review denied (Minn. Apr. 14, 1998).  Any doubts should be resolved in favor of jurisdiction.  Stanek v. A.P.I., 474 N.W.2d 829, 832 (Minn. App. 1991), review denied (Minn. Oct. 31, 1991). 

            The courts distinguish between general and specific personal jurisdiction.  General jurisdiction exists when a nonresident has such extensive contacts with the forum state that the court may exercise jurisdiction over the nonresident for any purpose.  KSTP-FM v. Spec'd. Comms., Inc., 602 N.W.2d 919, 923 (Minn. App. 1999).  Specific personal jurisdiction may arise where the nonresident's contacts with the state are minimal, but the cause of action arises out of or is related to those contacts.  Id.  Even a single contact can support jurisdiction, if it creates a substantial connection with the forum state and the cause of action arises out of that contact.  See, e.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 2184, n.18 (1985).  The defendant must "purposefully avail[ ] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."  Wessels, Anderson & Henderson v. Nat'l. Medical Waste, Inc., 65 F.3d 1427, 1432 (8th Cir. 1995) (quotation omitted).   Put another way, "the defendant's conduct and connection with the forum state are such that [it] should reasonably anticipate being haled into court there."  World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980).

            Minnesota appliesa five-part test to determine whether a defendant has sufficient minimum contacts with the state to permit an exercise of jurisdiction.  Rostad v. On-Deck, Inc., 372 N.W.2d 717, 719-20 (Minn. 1985), cert. denied 474 U.S. 1006, 106 S. Ct. 528 (1985).  The five factors include:

1.         The quantity of contacts with the forum state;

2.         The nature and quality of the contacts;

3.         The source and connection of the cause of action with these contacts;

4.         The interest of the state in providing a forum; and

5.         Convenience of the parties.

 

Id. 

I.  Quantity of Contacts

            "A nonresident's contacts with the forum state, not with residents of the forum state, determine whether minimal contacts exist."  KSTP-FM, 602 N.W.2d at 923.  Appellant's contacts with Minnesota are limited; it owns no property and has no office or employees in the state.  It does enter into contracts each year in Minnesota with Minnesota residents and businesses, with the specific purpose of ensuring that pageants will be held in Minnesota and that appellant will benefit by the pageants.  Although this is a limited contact, it is not an inadvertent or unplanned contact, such as when a business sells a product that randomly ends up in the forum state.  See, e.g., Juelich v. Yamazaki Mazak Optionics Corp., 670 N.W.2d 11, 17-18 (Minn. App. 2003) (finding no personal jurisdiction where Japanese manufacturer sold equipment to Illinois distributor who sold part to Minnesota company; manufacturer had no expectation that part would be sold in Minnesota).  In contrast, appellant makes specific contacts with Minnesota residents and businesses year after year to license a specific activity in Minnesota for its benefit.  Although the quantity of contacts is limited, they are intentionally purposeful contacts with Minnesota.

II.  Nature and Quality of Contact

            If the contacts are few in number, the nature and quality of the contacts is more important.  KSTP-FM, 602 N.W.2d at 924.  The court reviews the nature and quality of the contacts with the forum state to determine whether the contact is casual or a purposeful attempt to gain a commercial benefit in the forum state.  Marshall, 610 N.W.2d at 675.  Thus, the single purchase of goods by a Minnesota resident may be insufficient to support personal jurisdiction.  Id.  But, "[w]hen a defendant deliberately engages in significant activities in a state or creates continuing obligations between itself and residents of the state, the defendant purposefully avails itself of the protections of the law, as required to support the exercise of personal jurisdiction under the Due Process Clause."  Id. at 675-76 (quotation omitted). 

            Here, appellant, by virtue of its business of a pageant consisting of finalists from all states, has targeted Minnesota residents and businesses.  Under the terms of its contract with the defendants, appellant reserved the right to conduct operational and financial audits at its pleasure, and to demand that defendants meet certain strictly defined practices laid out in appellant's "system."  Further, appellant reserves the right to enjoy the benefits of the contestants' agreements with defendants as a third-party beneficiary and to enforce its rights as such.

            Appellant cites a number of foreign decisions where the existence of a franchise has not supported personal jurisdiction.  Many of appellant's strongest arguments are based on cases involving fast-food franchises.  By contrast, this unique set of facts, created by appellant, which insists on one and only one pageant in each of 50 specific locations (states), differs significantly from any fast-food franchise.  A successful fast-food franchise can exist in fewer than all states of the United States; you could have one to several hundred franchises in the same state; you could concentrate on just one state, or a number of states, or just one of the many regions of this country.  In other words, there is nothing specific to any one town or any one county or any one state other than, will cheeseburgers and/or fried chicken sell there.  In contrast, the Miss USA/Miss Teen USA competitions require representatives from all 50 states, is limited to one contest/competition per state, and each state is targeted by appellant to fulfill this goal to enhance appellant's own image and to set the stage for Miss USA and then Miss Universe competitions.

            In addition, each state's name, here Minnesota, is an indelible part of appellant's merchandising, marketing, and image in that state.  It is "Miss Minnesota" this and "Miss Minnesota" that.  By contrast, you do not label cheeseburgers and/or fried chicken in Minnesota or Wisconsin or Idaho by the state name, but rather just by the name of the fast-food franchise.

            Appellant's activities in Minnesota are purposeful and directed toward a goal of gaining a financial advantage for itself by ensuring that it has a contestant from the state of Minnesota for the national pageant.

III.  Connection of Cause of Action with Contacts

            Specific personal jurisdiction requires that there be a connection between the cause of action and the defendant's contacts with the forum state.  Marshall, 610 N.W.2d at 676.  In Marshall, respondent, who suffered injuries while a guest at a Wisconsin inn, alleged that the inn's advertising in Minnesota supported personal jurisdiction.  Id.  This court concluded that the inn's advertising had no nexus with respondent's injury and advertising in Minnesota alone would not create personal jurisdiction.  Id.

            Respondents' cause of action here alleges that defendants violated the terms of their license with appellant and that appellant was vicariously liable for defendants' tortious conduct because it retained "absolute control and final decision making authority" over the state pageants under the license terms.  The causes of action are thus directly related to appellant's contacts with Minnesota.  We find specific jurisdiction.

IV.  Interest in Providing a Forum and Convenience of the Parties

            The last two factors of the five-part test are considered to be less significant than the others.  Stanek, 474 N.W.2d at 833.  Generally, Minnesota has an interest in providing a forum for residents injured by tortious conduct.  Marshall, 610 N.W.2d at 676.  For respondents, Minnesota is easily the most convenient forum.

            We conclude that the five-factor test weighs in favor of finding personal jurisdiction over appellant and that the district court properly concluded the State of Minnesota has jurisdiction.  Our decision considers only the issue of jurisdiction, and we take no position on the merits of respondents' complaint or the viability of the allegation of vicarious liability against appellant.

            Affirmed.