F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 6 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
ROBERT PEAY, as guardian of minor
child Jennifer McCluskey; TEEN HELP,
doing business as Brightway Adolescent
Hospital; DELBERT E. GOATES, M.D.,
Plaintiffs - Appellants,
v. No. 98-4180
BELLSOUTH MEDICAL ASSISTANCE
PLAN; BLUE CROSS BLUE SHIELD OF
ALABAMA,
Defendants - Appellees.
--------------------------------
UNITED STATES DEPARTMENT OF
LABOR,
Amicus Curiae.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D. Ct. No. 97-CV-916-K)
Brian S. King and Marcie E. Schaap, King & Isaacson, P.C., Salt Lake City, Utah,
appearing for Plaintiffs-Appellants.
Keith W. Kochler, BellSouth Telecommunications, Inc., Atlanta, Georgia (Gary
L. Johnson, Richards, Brandt, Miller & Nelson, Salt Lake City, Utah, with him on
the brief), appearing for Defendants-Appellees.
Henry L. Solano, Solicitor of Labor, Allen H. Feldman, Associate Solicitor for
Special Appellate and Supreme Court Litigation, and Edward D. Sieger, Senior
Appellate Attorney, United States Department of Labor, filed an amicus curiae
brief in support of Appellants.
Before TACHA , BRORBY , and EBEL , Circuit Judges.
TACHA , Circuit Judge.
Plaintiffs appeal the district court’s order granting defendants’ motion to
dismiss for lack of personal jurisdiction or, in the alternative, to transfer for
improper venue. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and
reverse.
I.
At the time of the events in this case, plaintiff Jennifer McCluskey lived in
Tennessee with her guardian, plaintiff Robert Peay. Peay’s employer, BellSouth
Telecommunications, Inc. (BST), provided both Peay and McCluskey with
insurance through defendant BellSouth Medical Assistance Plan (“Plan”). BST is
headquartered in Atlanta, Georgia, and operates in nine southeastern states.
Defendant Blue Cross & Blue Shield of Alabama (BCBS), located in Birmingham,
Alabama, provided third-party administration services to the Plan.
In 1993, McCluskey received in-patient psychiatric care at plaintiff
Brightway Adolescent Hospital (“Brightway”), a Utah facility. Plaintiff Delbert
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Goates, a Utah resident, was McCluskey’s treating physician. The Plan’s
utilization review agent precertified McCluskey’s treatment, and the Plan and
BCBS paid Goates for a portion of McCluskey’s care. However, the Plan refused
to pay 100% of the covered charges because McCluskey did not use a preferred
provider’s services. McCluskey and Peay executed an assignment of benefits in
favor of Brightway and Goates.
McCluskey, Peay, Brightway, and Goates then sued the Plan and BCBS in
Utah federal district court for a determination of medical benefits due under the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§ 1132(a)(1)(B). Plaintiffs served a summons and the complaint on BCBS in
Birmingham, and the Plan waived service of process.
Pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3),
defendants moved to dismiss for lack of jurisdiction or, in the alternative, to
transfer for improper venue. The district court granted defendants’ motion to
dismiss, and plaintiffs appealed.
II.
A.
We review de novo the district court’s legal determination that it lacks
personal jurisdiction over defendants. Application to Enforce Admin. Subpoenas
Duces Tecem of the SEC v. Knowles , 87 F.3d 413, 415 (10th Cir. 1996). The
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district court found that neither the Plan nor BCBS has an address, an office, a
statutory agent, a telephone listing, employees, active Plan participants, or other
operations in Utah. McCluskey v. BellSouth Med. Assistance Plan , 23 F. Supp.2d
1312, 1315 (D. Utah 1998). Applying a “traditional personal jurisdiction test,”
the lower court held that defendants lacked “sufficient contacts” with Utah to
support the exercise of personal jurisdiction and thus dismissed the suit. Id.
On appeal, plaintiffs argue that ERISA, 29 U.S.C. § 1132(e)(2), authorizes
nationwide service of process and consequently nationwide personal jurisdiction.
They assert that when a court’s jurisdiction is invoked based on ERISA’s
nationwide service of process provision, minimum contacts with the forum are
unnecessary. Under these circumstances, plaintiffs insist, a federal district court
can exercise jurisdiction over defendants as long as defendants have minimum
contacts with the United States. Plaintiffs claim that defendants have the
requisite minimum contacts because defendants are large corporations carrying on
day-to-day business throughout this country. 1
Defendants contend that even if § 1132(e)(2) authorizes nationwide service
of process, it does not authorize nationwide jurisdiction. They argue that under
Plaintiffs also argue that venue is proper in Utah. Because the district
1
court dismissed plaintiffs’ case on the ground that it lacked jurisdiction over
defendants, the lower court did not reach venue. Therefore, we do not decide
whether Utah is an appropriate venue for this suit.
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the plain language of § 1132(e)(2), personal jurisdiction in ERISA cases is co-
extensive with venue and plaintiffs cannot establish either of these procedural
requirements.
B.
Before a federal court can assert personal jurisdiction over a defendant in a
federal question case, the court must determine (1) “whether the applicable statute
potentially confers jurisdiction” by authorizing service of process on the
defendant and (2) “whether the exercise of jurisdiction comports with due
process.” Republic of Panama v. BCCI Holdings (Luxembourg) S.A. , 119 F.3d
935, 942 (11th Cir. 1997); see also Omni Capital Int’l v. Rudolf Wolff & Co. , 484
U.S. 97, 104 (1987) (finding, in a federal question case, that before a federal
court may exercise personal jurisdiction over a defendant, there must be “a basis
for the defendant’s amenability to service of summons”).
While service of process and personal jurisdiction both must be satisfied
before a suit can proceed, they are distinct concepts that require separate
inquiries. Willingway Hosp., Inc. v. Blue Cross & Blue Shield , 870 F. Supp.
1102, 1104 (S.D. Ga. 1994) (citing 4 Charles Alan Wright and Arthur R. Miller,
Federal Practice & Procedure § 1063 (1987)). In the federal system, service of
process is governed by Rule 4 of the Federal Rules of Civil Procedure. By
contrast, “‘[t]he requirement that a court have personal jurisdiction flows . . .
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from the Due Process Clause. . . . It represents a restriction on judicial power not
as a matter of sovereignty, but as a matter of individual liberty.’” Omni Capital
Int’l , 484 U.S. at 104 (quoting Insurance Corp. of Ireland v. Compagnie des
Bauxites de Guinee , 456 U.S. 694, 702 (1982)). More specifically, in federal
question cases, personal jurisdiction flows from the Due Process Clause of the
Fifth Amendment. 2
See id. at 103-04 (assuming, in a federal question case, that a
court’s exercise of personal jurisdiction must comport with Fifth Amendment due
process principles); Republic of Panama , 119 F.3d at 942 (“It is well established
that when . . . a federal statute provides the basis for jurisdiction, the
constitutional limits of due process derive from the Fifth, rather than the
Fourteenth, Amendment.”).
C.
To determine whether the applicable statute potentially confers jurisdiction
over defendants by authorizing service of process, we begin with Fed. R. Civ. P.
4(h)(1). Rule 4(h)(1) governs service upon domestic corporations. In pertinent
part, Rule 4(h)(1) provides that, unless a defendant waives service, service must
be made “in a judicial district of the United States in the manner prescribed for
individuals by” Rule 4(e)(1). Rule 4(e)(1) states, “Unless otherwise provided by
“No person shall be . . . deprived of life, liberty, or property, without due
2
process of law . . . .” U.S. Const. amend. V.
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federal law, service upon an individual . . . may be effected in any judicial district
of the United States pursuant to the law of the state in which the district court is
located . . . .”
In ERISA cases, federal law provides:
Where an action under this subchapter is brought in a
district court of the United States, it may be brought in
the district where the plan is administered, where
the breach took place, or where a defendant resides or
may be found, and process may be served in any other
district where a defendant resides or may be found .
29 U.S.C. § 1132(e)(2) (emphasis added). There is no question that the last
clause of § 1132(e)(2) authorizes nationwide service of process. “When a federal
statute provides for nationwide service of process, it becomes the statutory basis
for personal jurisdiction.” Republic of Panama , 119 F.3d at 942; see also Fed. R.
Civ. P. 4(k)(1)(D) (“Service of a summons or filing a waiver of service is
effective to establish jurisdiction over the person of a defendant when authorized
by a statute of the United States.”). Thus, provided that due process is satisfied,
§ 1132(e)(2) confers jurisdiction over defendants by authorizing service of
process on them. 3
3
Section 1132(e)(2) states that process may be served in the district where
the defendant resides. Because BCBS is a corporation, we must determine where
it resides. The statute does not define resides; however, the first part of §
1132(e)(2) which discusses venue also uses the word resides. When Congress
uses the same word twice in the same sentence, we presume that it intended the
word to carry the same definition. In determining the definition of resides in the
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D.
Next, we must determine whether the Utah district court’s exercise of
jurisdiction over defendants comports with due process. Plaintiffs argue that
because ERISA authorizes nationwide service of process, the district court can
constitutionally exercise jurisdiction over defendants as long as they have
minimum contacts with the United States as a whole. Under this approach, the
so-called “national contacts” test, a plaintiff could sue a defendant in any federal
court in the United States, regardless of the defendant’s contacts with the forum
or the burden on the defendant of litigating in that forum. We are convinced that
due process requires something more. 4
venue context, we supplement the specific venue statute in § 1132(e)(2) with the
more general venue provision applicable in all civil cases found in 28 U.S.C. §
1391(c). See Monument Builders, Inc. v. American Cemetery Ass’n , 891 F.2d
1473, 1477 (10th Cir. 1989). The general provision states that “[f]or purposes of
venue . . . a defendant that is a corporation shall be deemed to reside in any
judicial district in which it is subject to personal jurisdiction at the time the action
is commenced.” 28 U.S.C. § 1391(c). Thus, under § 1132(e)(2), a corporation
resides wherever personal jurisdiction is proper. Although this reading seems to
negate the rest of the venue provisions for corporations, it still has meaning when
a plaintiff sues an individual or a partnership.
Thus, in this case, because plaintiffs served a summons and complaint on
BCBS in Birmingham, where it has its offices, and the Plan waived service of
process, service was proper.
4
On two occasions, the Supreme Court has declined to decide whether the
national contacts approach is constitutional under the Fifth Amendment. Omni
Capital Int’l , 484 U.S. at 103 n.5; Asahi Metal Indus. Co. v. Superior Court of
Cal. , 480 U.S. 102, 113 n.* (1987). Some jurisdictions have adopted the national
contacts test. Federal Fountain, Inc. v. KR Entertainment, Inc. (In re Federal
Fountain, Inc.) , 165 F.3d 600, 601-02 (8th Cir. 1999) (en banc) (bankruptcy);
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As we noted above, the personal jurisdiction requirement flows from the
Due Process Clause of the Fifth Amendment and restricts judicial power in order
to protect the individual’s liberty interest. Bauxites , 456 U.S. at 702. Thus, the
“proper focus for a personal jurisdiction test should be on protecting an
individual’s liberty interest in avoiding the burdens of litigating” in an unfair or
unreasonable forum. Busch v. Buchman, Buchman & O’Brien , 11 F.3d 1255,
1259 (5th Cir. 1994) (Garza, J., dissenting). “Requiring that the individual
defendant in a national service of process case only reside somewhere in the
Bellaire Gen. Hosp. v. Blue Cross Blue Shield , 97 F.3d 822, 825-26 (5th Cir.
1996) (following precedent “dutifully” and applying the national contacts test in
an ERISA case, but criticizing this approach because it separates personal
jurisdiction from due process); see also Robert C. Casad, Personal Jurisdiction in
Federal Question Cases , 70 Tex. L. Rev. 1589, 1606 (1992) (advocating the
national contacts approach).
Plaintiffs contend that we adopted the national contacts test in Application
to Enforce Admin. Subpoenas Duces Tecem of the SEC v. Knowles , 87 F.3d 413
(10th Cir. 1996). In Knowles , the SEC filed an application for an order to show
cause and for an order compelling the defendant to comply with administrative
subpoenas duces tecum. Id. at 415. The district court issued an order to show
cause, and the SEC served the defendant with the order in Nassau, Bahamas. Id.
The defendant filed a motion to dismiss, arguing that the district court did not
have jurisdiction over him. Id. We recognized that 15 U.S.C. § 77v(a) provides
for “worldwide service of process in cases of the enforcement of subpoenas
issued by the SEC” and upheld the district court’s order to the defendant to
comply with the subpoenas. Id. at 417, 419. In so doing, we limited our decision
“to the question of the jurisdiction of the district court, based upon the
extraterritorial service of the Order to Show Cause, to enforce the SEC’s
subpoenas duces tecum against [the defendant].” Id. at 416. Thus, Knowles
merely stands for the narrow proposition that under the facts and circumstances
presented in that case, § 77v(a) authorized the district court to exercise and
enforce its subpoena power worldwide.
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United States does not protect this interest.” Id. (Garza, J., dissenting); see also
Willingway Hosp., Inc. , 870 F. Supp. at 1106 (“To allow Congress to dictate
personal jurisdiction through the enactment of nationwide service of process
provisions, unquestioned by the judiciary[,] is nonsensical.”).
The Supreme Court has not yet defined Fifth Amendment due process limits
on personal jurisdiction. However, the Court has held that due process under the
Fourteenth Amendment requires that “maintenance of [a] suit . . . not offend
traditional notions of fair play and substantial justice.” International Shoe Co. v.
Washington , 326 U.S. 310, 316 (1945) (internal quotation marks and citation
omitted). Due process limits on a court’s ability to exercise jurisdiction “are
designed to protect [defendants] by providing them with fair notice that their
activities will render them liable to suit in a particular forum.” Republic of
Panama , 119 F.3d at 945 (citing Burger King Corp. v. Rudzewicz , 471 U.S. 462,
470-77 (1985)). A defendant is deemed to have “fair warning” if it has
“purposefully directed [its] activities at residents of the forum.” Burger King
Corp. , 471 U.S. at 472 (internal quotation marks and citation omitted). However,
even if a defendant has “minimum contacts” with the forum, due process is not
satisfied unless “the assertion of personal jurisdiction would comport with fair
play and substantial justice.” Id. at 476 (internal quotation marks and citation
omitted).
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Like the Eleventh Circuit, we discern no reason why the Fourteenth
Amendment’s fairness and reasonableness requirements “should be discarded
completely when jurisdiction is asserted under a federal statute.” Republic of
Panama , 119 F.3d at 945. The Due Process Clauses of the Fourteenth and Fifth
Amendments are virtually identical, 5
and both “were designed to protect
individual liberties from the same types of government infringement.” Id. (citing
Mathews v. Eldridge , 424 U.S. 319, 331-32 (1976)). Accordingly, we hold that in
a federal question case where jurisdiction is invoked based on nationwide service
of process, the Fifth Amendment requires the plaintiff’s choice of forum to be fair
and reasonable to the defendant. In other words, the Fifth Amendment “protects
individual litigants against the burdens of litigation in an unduly inconvenient
forum.” Id.
To establish that jurisdiction does not comport with Fifth Amendment due
process principles, a defendant must first demonstrate “that his liberty interests
actually have been infringed.” Id. at 946. The burden is on the defendant to
show that the exercise of jurisdiction in the chosen forum will “make litigation so
gravely difficult and inconvenient that [he] unfairly is at a severe disadvantage in
Compare U.S. Const. amend. XIV, § 1 (“No State shall . . . deprive any
5
person of life, liberty, or property, without due process of law . . . .”), with U.S.
Const. amend. V (“No person shall be . . . deprived of life, liberty, or property,
without due process of law . . . .”).
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comparison to his opponent.” Burger King Corp. , 471 U.S. at 478 (internal
quotation marks and citations omitted); accord Republic of Panama , 119 F.3d at
948 (following Burger King Corp. ).
However, as Judge Becker has pointed out, given the “practical
considerations emanating from the realities of contemporary litigation, . . . any
constitutional due process limitations upon a federal extraterritorial (nationwide)
service of process statute must be broadly defined.” Oxford First Corp. v. PNC
Liquidating Corp. , 372 F. Supp. 191, 201 (E.D. Pa. 1974). Thus, in evaluating
whether the defendant has met his burden “of establishing constitutionally
significant inconvenience,” Republic of Panama , 119 F.3d at 946, courts should
consider the following factors: (1) the extent of the defendant’s contacts with the
place where the action was filed; (2) the inconvenience to the defendant of having
to defend in a jurisdiction other than that of his residence or place of business,
including (a) the nature and extent and interstate character of the defendant’s
business, (b) the defendant’s access to counsel, and (c) the distance from the
defendant to the place where the action was brought; (3) judicial economy; (4) the
probable situs of the discovery proceedings and the extent to which the discovery
proceedings will take place outside the state of the defendant’s residence or place
of business; and (5) the nature of the regulated activity in question and the extent
of impact that the defendant’s activities have beyond the borders of his state of
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residence or business. Oxford First Corp. , 372 F. Supp. at 203.
“We emphasize that it is only in highly unusual cases that inconvenience
will rise to a level of constitutional concern.” Republic of Panama , 119 F.3d at
947. Certainly, “[i]n this age of instant communication,” Oxford First Corp. , 372
F. Supp. at 201, and modern transportation, the burdens of litigating in a distant
forum have lessened, Republic of Panama , 119 F.3d at 947-48. 6
If a defendant successfully demonstrates that litigation in the plaintiff’s
chosen forum is unduly inconvenient, then “jurisdiction will comport with due
process only if the federal interest in litigating the dispute in the chosen forum
outweighs the burden imposed on the defendant.” Republic of Panama , 119 F.3d
at 948. To determine whether infringement on the defendant’s liberty is justified
sufficiently by government interests,
courts should examine the federal policies advanced by
the statute, the relationship between nationwide service
of process and the advancement of these policies, the
connection between the exercise of jurisdiction in the
chosen forum and the plaintiff’s vindication of his federal
right, and concerns of judicial efficiency and economy.
Where . . . Congress has provided for nationwide service
of process, courts should presume that nationwide personal
6
“We note that inconvenience ‘most frequently can be accommodated
through a change of venue.’ Alternative methods of addressing inconvenience do
not, however, do away with the need for a constitutional floor to protect litigants
against truly undue burdens. ‘[I]nconvenience may at some point become so
substantial as to achieve constitutional magnitude.’” Republic of Panama , 119
F.3d at 947 n.25 (quoting Burger King Corp. , 471 U.S. at 484).
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jurisdiction is necessary to further congressional objectives.
Id.
III.
We conclude that under the broad standard set forth above, defendants
cannot show that their liberty interests actually have been infringed. First,
defendants have sufficient contacts with Utah: they precertified plaintiff
McCluskey’s treatment at a Utah hospital and paid plaintiff Goates, a Utah
resident, for a portion of McCluskey’s care. Because defendants rendered
benefits in Utah, they knew or should have known that a dispute over benefits
could arise in Utah.
Second, even though defendants may be inconvenienced by defending this
action in Utah, they cannot show that this burden rises to the level of
constitutional concern. Defendants are large corporations operating throughout
the southeastern United States. They surely have the resources to access counsel
in Utah. And, while Utah may be some distance from the southeast, modern
methods of communication and transportation greatly reduce the significance of
this physical burden.
Third, nothing in the record indicates that considerations of judicial
economy or the probable location of discovery in this case make Utah an unfair
forum. Finally, because defendants operate and administer a multi-state insurance
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plan regulated by federal law, their activities unquestionably have a significant
impact beyond the borders of Alabama and Georgia. Indeed, as this case
demonstrates, defendants’ activities reach far beyond the southeastern United
States.
Thus, defendants have not met their burden of demonstrating that the
district court’s assertion of jurisdiction will make litigation so difficult and
inconvenient that they unfairly will be at a severe disadvantage compared to
plaintiffs. See ESAB Group, Inc. v. Centricut, Inc. , 126 F.3d 617, 627 (11th Cir.
1997) (finding, in a RICO case, that jurisdiction was consistent with the Fifth
Amendment because there was no evidence in the record of “extreme
inconvenience or unfairness” to the defendants), cert. denied , 523 U.S. 1048
(1998); Republic of Panama , 119 F.3d at 948 (same); Oxford First Corp. , 372 F.
Supp. at 203-05 (applying the “fairness test” set forth above in a securities case
and finding that it was not unfair to subject defendants to the court’s jurisdiction).
Because defendants have not shown that the district court’s assertion of
jurisdiction will infringe upon their liberty interests, we need not balance the
federal interests at stake in this suit. We hold that the district court erred in
granting defendants’ motion to dismiss for lack of personal jurisdiction.
REVERSED AND REMANDED.
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