FRL MIDTERM
Question One: Prepare a one to two-page “IRAC”(Issue, Rule, Application, and Conclusion) brief of “Elayyan v. Sol Melia, SA” – (please write one page for this question)
Elayyan v. Sol Melia, SA
BACKGROUND AND FACTS
Plaintiffs Ayah and Rania Elayyan (the Elayyans) are residents of Indiana. Defendant Sol Melia is a Spanish corporation with its principal place of business in Palma de Mallorca, Spain. Sol Melia manages hotels under a variety of brands, all of which are located outside of the United States. The Elayyans filed a lawsuit against Sol Melia as a result of injuries suffered by Ayah Elayyan while in the pool of the Hotel Melia Puerto Vallarta located in Puerto Vallarta, Mexico. Sol Melia filed a motion to dismiss for lack of personal jurisdiction. Sol Melia maintained a website which permitted users to make reservations directly with Sol-brand hotels. Potential guests were not charged when they made a reservation but rather paid the hotel upon the commencement of their stay. Sol Melia’s website was available in nine languages and targeted a worldwide audience. Guests were also able to make reservations with Sol-brand hotels through third-party websites, such as “www.expedia.com” and “www.hotels.com.” Sol Melia did not control the content of such websites and did not enter into contracts with guests through these websites. The Elayyans booked their hotel stay at the Melia Puerto Vallarta through Fantasy Travel, a travel agency located in Gary, Indiana. Sol Melia was not involved in the reservations for or the booking of the Elayyan’s vacation package and did not have a contract or agency relationship with Fantasy Travel, nor paid it a commission. The all-inclusive vacation package was offered by Apple Vacations, a vacation-package wholesaler, based in Illinois. Apple Vacations had purchased an allotment of rooms from the owner of the Melia Puerto Vallarta. Sol Melia was not a party to the purchase agreement.
CHERRY, U.S. MAGISTRATE JUDGE
Due Process mandates the dismissal of a case when personal jurisdiction is properly challenged and found to be lacking. See Int’l Shoe Co. v. Washington, 326 U.S. 310, 315 (1945). Due Process mandates that a non-resident defendant have “certain minimum contacts with the [forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe, 326 U.S. at 316; see also Asahi Metal Indus. Co., Ltd. v. Superior Court of California, 480 U.S. 102, 113 (1987). A court must examine whether a defendant’s contacts with the state are such that the defendant “should reasonably anticipate being haled into court [in the forum State],” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)), because the defendant has “purposefully avail[ed] itself of the privilege of conducting activities within the forum State.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).
General jurisdiction permits a federal district court to exercise personal jurisdiction over a nonresident defendant regardless of the subject matter of the litigation only when the defendant has “continuous and systematic general business contacts.” Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 787 (7th Cir. 2003). The Seventh Circuit has explained that “[t] hese contacts must be so extensive to be tantamount to [the nonresident defendant] being constructively present in [Indiana] to such a degree that it would be fundamentally fair to require it to answer in [an Indiana court] in any litigation arising out of any transaction or occurrence taking place anywhere in the world.” “In general, the standard for establishing general jurisdiction is a high one.” Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239, 1245 (7th Cir. 1990). A court’s ability to exercise personal jurisdiction based upon the maintenance of a website is dependent on the level of interactivity between the consumer and the operator. See Litmer v. PDQUSA.com, 326 F. Supp. 2d 952, 957 (N.D. Ind. 2004). The mere fact that a state’s resident can access a defendant’s website does not subject a nonresident defendant to general jurisdiction in that state. “Premising personal jurisdiction on the maintenance of a website, without requiring some level of ‘interactivity’ . . . would create almost universal personal jurisdiction because of the virtually unlimited accessibility of websites across the country.” Jennings v. AC Hydraulic A/S, 383 F.3d 546, 550 (7th Cir. 2004). Therefore, “the likelihood that personal jurisdiction can be exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.” Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). To determine whether personal jurisdiction can be properly exercised, this Court has adopted the threestep sliding scale test established in Zippo. At one end of the scale are “passive websites.” Aero Indus., Inc. v. DeMonte Fabricating, Ltd., 396 F. Supp. 2d 961, 968 (S.D. Ind. 2005). A passive website is one that only provides “contact information and descriptions of its various product lines, but [does] not enable customers to order products online.” U.S. Sch. of Golf, Inc. v. Biltmore Golf, Inc., 2005 U.S. Dist. LEXIS 28235, 2005 WL 3022005, at *6 (S.D. Ind. Nov. 10, 2005). Contacts with the forum state through a passive website are insufficient to establish general jurisdiction. At the other end of the sliding scale are “transactional websites,” through which defendants enter into contracts and conduct highly commercial business activities with residents of the forum state. The exercise of personal jurisdiction is proper in such cases. Located in the middle of the sliding scale are “interactive websites,” which allow users to exchange information with the operator but do not allow contracts to be entered into by the user and operator of the website. For interactive websites, “the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the [website].” Zippo, 952 F. Supp. at 1124.
Sol Melia operates an interactive website, located in the middle of the sliding scale test. Sol Melia’s website does not allow contracts to be formed over the website, but it does allow consumers to place reservations. However, courts have consistently refused to exercise jurisdiction based solely on the fact that reservations can be placed and paid for through a hotel’s website. Courts treat hotel websites that allow the placing of reservations similarly to other forms of national advertising, such as toll-free reservation hotlines, which are themselves insufficient to establish general jurisdiction. Sol Melia’s website allows customers to contact Sol Melia to make reservations, which is not qualitatively different from an advertisement in another medium that provides a toll-free number for reservations. Therefore, it is improper to assert general jurisdiction over Sol Melia based solely upon the ability of its website to take reservations. Furthermore, consumers placing reservations through Sol Melia’s website do not pay Sol Melia directly. Payment is completed directly with the hotel. Sol Melia’s website simply makes the products and services available to the consumer, which alone is not enough to establish jurisdiction without purposeful targeting. For personal jurisdiction to be established through the maintenance of a website, the defendant must direct its business activities toward consumers in the forum state. The website is available in nine languages, evidencing Sol Melia’s intent to reach a worldwide audience. The website contains no evidence that it is targeted at Indiana. Therefore, the Court cannot exercise general jurisdiction over Sol Melia based solely upon the maintenance of an interactive website. The Plaintiffs also contend that the Court can exercise jurisdiction over the Defendant based on thirdparty websites, which allow reservations to be placed at Sol-brand hotels. Sol Melia does pay commissions to third-party websites for reservations placed at Solbrand hotels. The third-party websites operate as independent sales agents, maintain their own businesses, are paid according to the results they produce, promote products for various companies, and are not under the control or direction of the companies whose products they are promoting. Sol Melia does not have an exclusive contract with or exercise control over the thirdparty websites. Moreover, Sol Melia pays the third-party websites according to the results they produce. Therefore, the third-party websites operate as independent sales agents. The Court has already established that sales and sales promotion activities through independent nonexclusive sales representatives are not enough by themselves to subject an out of state company to local jurisdiction in actions unrelated to those activities. Without more, such as direct shipments to customers in the forum state—which is not the case in this matter, general jurisdiction over Sol Melia cannot be based upon the functions of third-party websites.
Having found that the Court lacks general personal jurisdiction over the Defendant, the Court turns to the issue of specific jurisdiction. An Indiana court may exercise specific jurisdiction only when the nonresident defendant purposefully availed itself of the privilege of conducting activities within Indiana and the plaintiff’s claims arise out of the defendant’s contacts with Indiana. The only contact Sol Melia has with Indiana that could potentially constitute purposeful availment is the maintenance of its interactive website that is available for use in Indiana. As noted above, a website does not satisfy the purposeful availment test when there is no evidence that the website was specifically targeted at the forum’s residents. The website is accessible worldwide and available in nine languages, evidencing its intent to target a worldwide audience, not specifically Indiana. However, because an individual Indiana resident could book a reservation through Sol Melia’s website in Indiana, it is conceivable that such a contact may constitute purposeful availment for the purposes of specific jurisdiction if the individual used the website and if the alleged injury then arose out of that individual’s use of the website. Neither contingency is present in this case. Here, there is no allegation that Plaintiffs made their reservation through Sol Melia’s website; rather, the Complaint alleges that Plaintiffs entered into a contract with Apple Vacations for the vacation at issue. Sol Melia is not a party to any contract with Apple Vacations. Therefore, there is no connection between Sol Melia’s contacts with Indiana and Plaintiffs’ injuries, and the alleged injuries could not have arisen out of Sol Melia’s contacts with Indiana.
There are no allegations in the Complaint related to the booking of the hotel such as breach of contract or that the Plaintiffs’ injuries sustained in Mexico occurred as the result of Sol Melia’s website or the booking of the reservation. Therefore, even if Plaintiffs had booked their reservation in Indiana through Sol Melia’s website, the tort claim occurring in Mexico could not have arisen out of any such reservation. Accordingly, the Court does not have specific personal jurisdiction over Sol Melia.
Decision.
The Court dismissed the Elayyan’s complaint. The maintenance of the website did not constitute a “continuous and systematic presence” in Indiana or “purposeful availment” to the protections of Indiana law as to support the court’s exercise of personal jurisdiction.
Question Two: Write a analytical essay answer to problem-case number 2 (i.e., Bende vs. Kiffe) – which is on page 116 of our textbook. Answer only subpart questions a, b, and c. (please write one page for this question)
Bende had a contract to sell boots to the government of Ghana for $158,500. Bende promised to deliver the boots “as soon as possible.” Bende then contracted with Kiffe, who agreed to make the boots in Korea and to deliver them in Ghana within 60 to 90 days at a price of $95,000. The contract contained no force majeure clause. Kiffe knew that Bende was going to resell the boots. Kiffe failed to deliver the boots on the agreed date because a train carrying the boots had derailed in Nebraska. Bende brought this action against Kiffe for breach of contract. Bende and Sons, Inc. v. Crown Recreation and Kiffe Products, 548 F. Supp. 1018 (E.D.N.Y. 1982).
- Kiffe claimed that the contract had been rendered commercially impracticable and that performance was excused. Do you agree? Why or why not? Was the train wreck foreseeable or unforeseeable?
- What could Kiffe have done in negotiating the contract to protect itself from this contingency?
- If Bende would have incurred an additional $18,815 in freight charges and miscellaneous costs had the breach not occurred, what would be its measure of damages? Is Bende entitled to lost profits? How are damages measured in a case such as this?
Question Three: Write an analytical essay answer to problem-case number 4 (i.e., Hanwa vs. Cedar Petroleum) – which is on page 117 of our textbook. Answer fully. (please write one page for this question)
In May 2009, Hanwha submitted a bid for the purchase of 1,000 metric tons of the petrochemical Toluene at $640 per metric ton. Cedar accepted the bid and followed up its acceptance by sending Hanwha, via e-mail, a signed contract sheet and a document setting forth Cedar’s standard terms and conditions. Cedar provided that New York law, the UCC, and Incoterms 2000 would govern the contract. Hanwha modified the provision providing for governing law, crossing out New York law and the UCC, leaving only the provision that Incoterms 2000 was to govern the contract. Hanwha also provided a new set of “standard” terms and conditions; in relevant part, Hanwha’s new set of conditions provided that Singapore law would govern the contract, rather than New York law. Hanwha further provided that no contract would enter into force unless Cedar countersigned Hanwha’s proposed version of the contract documents. Cedar refused to accept Hanwha’s terms, and sent Hanwha an e-mail explaining that the contract would be finalized only if Hanwha accepted Cedar’s original terms. The e-mail asked Hanwha to sign and return an unaltered version of the contract documents. In June 2009, Cedar advised Hanwha that because of its failure to sign the version of the contract tendered by Cedar, there was no contract between the parties, and Cedar had the right to sell the Toluene to another party. The price of Toluene as of that date had risen from $640 per metric ton to $790.50. In November 2009, Hanwha sued Cedar for breach of contract. The court was faced with the questions of applicable law and whether the parties’ attempt to form a contract succeeded.
What law should apply to this transaction?
Did the parties succeed in creating an enforceable contract? Why or why not?
Hanwha Corp. v. Cedar Petrochemical, Inc., 760 F.Supp.2d 426 (S.D.N.Y. 2011).