Ski areas are increasingly receiving complaints filed in a state where there is no snow, no mountains and no ski areas, and where they do not “do business,” or so they would think! As the world gets smaller via marketing efforts and technology, resorts may want to closely examine where they do business. Some areas may be unknowingly, or unintentionally, doing business in states never thought of.
     What am I talking about? It’s called subject matter jurisdiction, and it will get you hauled into court in a state where you wish you were not, i.e., South Texas, Florida or Louisiana—not many skiers, strange laws and large verdicts too!

As the world gets smaller via marketing efforts and technology, you may want to closely examine where you do business. Some of you may be unknowingly or unintentionally doing business in states you never thought of.

Here are the nuts and bolts of subject matter jurisdiction:

     Imagine you are sued in Federal Court in a foreign jurisdiction, such as Texas. In diversity cases (those in which the plaintiff and defendant are citizens of different states) the existence of personal jurisdiction is a two-step analysis. First, the court must determine whether the law of the forum state, the state the suit is brought in, permits the exercise of jurisdiction over your resort. Second, the exercise of jurisdiction under state law must comport with the Fourteenth Amendment due process clause. However, most courts will hold that a state’s Long Arm Statute, a law which allows a foreign state to reach into your state of domicile and pull you within its authority, stretches to the limits of federal due process. Thus, the inquiry of subject matter jurisdiction will ultimately turn on whether the exercise of personal jurisdiction over your resort comports with the due process clause of the Fourteenth Amendment.
     Due process clause analysis under the Fourteenth Amendment has two components. The first prong of the analysis is that your resort must have “purposefully availed itself of the benefits and protections of the forum state by establishing ‘minimum contacts’ with that forum state.” International Shoe Co. v. Washington, 326 U.S. 310, 315-17 (1945). This “purposeful availment” requirement ensures that a non-resident defendant will not be hauled into a jurisdiction based upon “random,” “fortuitous,” or “attenuated,” contacts or the “unilateral activity of another party or a third person.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).
     The second prong is that the exercise of personal jurisdiction over the nonresident defendant must not “offend traditional notions of fair play and substantial justice.” Asahi Metal Industry Co., Ltd. v. Superior Court of Cal., Solano County, 480 U.S. 102 (1987).

Prong Number One >
     The purposeful availment prong of the due process analysis is twofold: specific personal jurisdiction versus general personal jurisdiction.
     Specific jurisdiction arises when your resort’s relationships or contacts within the state where the suit is filed arise from, or are directly related to, the cause of action. For example: you are being sued in Texas as a result of an injury sustained by a person who was injured when the resort’s Texas group sales representative ran her over. General jurisdiction, however, will attach, even if your resort’s contacts with the forum state are not directly related to the cause of action. For instance, if your resort is “in” Texas on a “continuous and systematic” basis (example, putting on presentations for and soliciting business from Texas ski clubs), a court may find general jurisdiction in a case involving a Texas resident who is injured in your state of domicile. What does this mean in English? It means watch what you do in other states!
     There are numerous factors a court may look at in reaching its determination whether a resort purposefully availed itself to jurisdiction in that state, for example, the court may consider whether your resort maintains or conducts some or all of the following in its jurisdiction: employees; tradeshows; marketing; advertising; public relations; contracts; bank accounts; owns property; maintains independent contractors; loans; recruits employees; attends ski shows, employment shows, consumer shows; maintains a presence in the airports; conducts meetings; broadcasts radio or television promotions; maintains a website from which people can purchase lift tickets; books vacations; retains any services including legal or financial; directs mail to residents; advertises in magazines; places telephone calls to the jurisdiction; visits the jurisdiction; receives revenue from the jurisdiction; maintains relationships with ski clubs in the jurisdiction; maintains relations with travel agencies or companies of any kind; or purchases products from the jurisdiction. (Is Compaq the official computer of your resort? Is Chevy the official truck?)
     In summary, take a look at the above factors and determine what contacts your resort has with various states. You may be shocked!

Prong Number Two
     The second prong of the due process analysis relates to the traditional notions of fair play and substantial justice; in other words, the unfairness of forcing your resort to defend an action in another state.
     The best approach is not to maintain a bank account in a foreign state, not to have employees residing in a foreign state, and retain an advertising agency in your home state, etc. Marketing and public relations can be effectively conducted while still minimizing the chances that a plaintiff can exert jurisdiction over your resort in a foreign state.

This analysis considers a number of factors:

1.) The burden upon the nonresident defendant; 2.) the interests of the forum state; 3.) the plaintiff’s interest in securing relief; 4.) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; 5.) the shared interest of the several States in furthering fundamental substantive social policies. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980).
     Arguably, your resort’(s) defenses would be that it is prejudiced because its witnesses, resources, and documents are located in your state. Moreover, your home state clearly has a substantial interest in the resolution of disputes involving a major industry such as skiing and tourism. Plaintiffs would be equally able to pursue their claim against your resort in your state and would arguably not be prejudiced. Further, the resolution of the potential claims of the plaintiffs would be more efficient in your state, as a local court is familiar with the applicable law.
     In reality, if a court finds the first prong of the test is met, the second prong of the test usually follows suit.
     Now you are asking yourself, so what if we are sued in South Texas, we receive a lot of revenue from our presence in Texas? That is a business question your resort must ask itself. The best approach is not to maintain a bank account in a foreign state, not to have employees residing in a foreign state, and retain an advertising agency in your home state, etc. Marketing and public relations can be effectively conducted while still minimizing the chances that a plaintiff can exert jurisdiction over your resort in a foreign state. Take a look, it is worth your time and maybe your money.

Kimberly A. Viergever is an attorney with the Rietz Law Firm L.L.C. in Dillon, Colo.