In re Clean Energy Collective LLC v. Borrego Solar Systems, Inc

1 Opinions of the Colorado Supreme Court are available to the
2 public and can be accessed through the Judicial Branch’s homepage at
3 http://www.courts.state.co.us. Opinions are also posted on the
4 Colorado Bar Association’s homepage at http://www.cobar.org.
5
6 ADVANCE SHEET HEADNOTE
7 April 17, 2017
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9 2017 CO 27
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1 No. 16SA324, In Re Clean Energy Collective LLC v. Borrego Solar Sys., Inc.—
2 Constitutional Law—Personal Jurisdiction—General Jurisdiction—Corporations and
3 Business Organizations.
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5 The supreme court issued a rule to show cause to review the trial court’s

6 conclusion that defendant Borrego Solar Systems, Inc. (“Borrego”) is subject to general

7 personal jurisdiction in Colorado. Because the trial court did not assess whether

8 Borrego was essentially at home in Colorado, the supreme court concludes it did not

9 fully apply the test announced in Magill v. Ford Motor Co., 2016 CO 57, 379 P.3d 1033,

0 and therefore erred in exercising general personal jurisdiction over Borrego. Applying

1 the complete test, the court further concludes Borrego is not subject to general

2 jurisdiction in this state.

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1 The Supreme Court of the State of Colorado
2 2 East 14th Avenue • Denver, Colorado 80203

3 2017 CO 27

4 Supreme Court Case No. 16SA324
5 Original Proceeding Pursuant to C.A.R. 21
6 Boulder County District Court Case No. 16CV30545
7 Honorable Norma A. Sierra, Judge

8 In Re
9 Plaintiff:
0 Clean Energy Collective LLC, a Colorado limited liability company,

1 v.

2 Defendants:
3 Borrego Solar Systems, Inc., a California corporation; and 1115 Solar Development, LLC, a
4 Delaware limited liability company.

5 Rule Made Absolute
6 en banc
7 April, 17, 2017
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9 Attorneys for Plaintiff:
0 Roy W. Penny, Jr., P.C.
1 Roy W. Penny, Jr.
2 Denver, Colorado
3
4 Attorneys for Defendants:
5 Skaggs Faucette LLP
6 Jeffrey E. Faucette
7 San Francisco, California
8
9 Haddon, Morgan and Foreman, P.C.
0 Ty Gee
1 Denver, Colorado
2
3
4
5
6
7 JUSTICE HOOD delivered the Opinion of the Court.
¶1 We issued a rule to show cause in this case to review the trial court’s conclusion

that defendant Borrego Solar Systems, Inc. (“Borrego”) is subject to general personal

jurisdiction in Colorado. Because the trial court did not assess whether Borrego was

essentially at home in Colorado, we conclude it did not fully apply the test we

announced in Magill v. Ford Motor Co., 2016 CO 57, 379 P.3d 1033, and therefore erred

in exercising general personal jurisdiction over Borrego. Applying the complete test

ourselves, we conclude Borrego is not subject to general jurisdiction in this state.

Accordingly, we now make the rule to show cause absolute.

I. Facts and Procedural History

¶2 This action concerns a contractual dispute between Clean Energy Collective LLC

(“CEC”) and two defendants, Borrego and 1115 Solar Development, LLC (“1115 Solar”).

CEC is a Colorado limited liability company headquartered in Louisville. Borrego is a

California corporation headquartered in San Diego, and 1115 Solar is a Delaware

limited liability company with its principal place of business in California. Borrego is

1115 Solar’s parent company and owns the latter in its entirety.

¶3 CEC’s claims against Borrego and 1115 Solar arise from an asset purchase

agreement (“APA”) to construct several solar photovoltaic projects. The APA specified

that CEC would pay the defendants to construct three power-generation projects in

Massachusetts and allowed for additional projects pursuant to separate contracts

governed by the APA’s terms. After the parties were unable to resolve disagreements

regarding pricing and payments for projects subject to the APA—all of which were to

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be completed outside Colorado—CEC sued the defendants in Boulder County District

Court, asserting claims for breach of contract and breach of warranty.

¶4 Borrego and 1115 Solar moved to dismiss CEC’s claims, asserting among other

defenses lack of personal jurisdiction under C.R.C.P. 12(b)(2). Borrego argued then, as

it does now, that it is not “essentially at home” in Colorado and that, as a result, it is not

subject to general personal jurisdiction here.

¶5 The trial court denied that motion without holding an evidentiary hearing.1

Although the court concluded it lacked specific personal jurisdiction over Borrego, it

ultimately exercised general personal jurisdiction (alternatively, “general jurisdiction”),

reasoning that Borrego’s general business contacts with Colorado were “continuous and

systematic.” The court relied on the following facts to support its conclusion:

 “Borrego had maintained an agent in Colorado for eight years” before the

present action began, although “[the] agent was not established in Colorado at

the time of service”;

 Borrego contracted with a company in Colorado;

1 In the same order, the trial court declined to dismiss CEC’s claims against 1115 Solar
before receiving additional discovery regarding the relationship between Borrego and
1115 Solar. The court considered that discovery necessary because CEC sought to
impute Borrego’s liability and jurisdictional contacts to 1115 Solar under a theory of
“reverse” veil piercing. See In re Phillips, 139 P.3d 639, 645 (Colo. 2006) (holding
Colorado law permits corporate outsider to obligate corporation for debts of dominant
shareholder or other corporate insider when justice so requires). The court also noted
that if the additional discovery failed to prove an alter-ego relationship, it would then
consider whether it could independently exercise personal jurisdiction over 1115 Solar.
Thus, this proceeding concerns only whether the trial court could properly exercise
general personal jurisdiction over Borrego.

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  although unrelated to the events at issue, Borrego unsuccessfully bid on several

of CEC’s projects; and

 although unrelated to the events at issue, Borrego hired a Colorado employee

“specifically to facilitate business with [CEC].”

The court did not make a specific finding that Borrego was essentially at home in

Colorado and did not consider Borrego’s Colorado activities in relation to its activities

elsewhere.

¶6 Borrego sought this court’s review of that order pursuant to C.A.R. 21, and its

petition presents the following issue: “Whether the trial court erred in ruling that it

could, consistent with the state and federal due process clauses, exercise general

personal jurisdiction over a non-resident California corporation without a finding that

the corporation was ‘essentially at home’ in Colorado.” We issued the requested rule to

show cause.

II. Original Jurisdiction

¶7 Original relief under C.A.R. 21 is an extraordinary remedy, limited in both

purpose and availability, yet “[w]e often elect to hear challenges to ‘the exercise of

personal jurisdiction by district courts over out-of-state defendants’ because they ‘raise

the question whether it is unfair to force such a party to defend here at all.’” Magill,

¶ 9, 379 P.3d at 1036 (quoting Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d

1267, 1270 (Colo. 2002)). Because the trial court exercised jurisdiction over Borrego

exclusively on the ground that Borrego was subject to general personal jurisdiction in

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Colorado, and because we worry more generally that trial courts may be misapplying

the test we articulated in Magill, we elect to hear this challenge.2

III. Standard of Review

¶8 Interpreting the scope of general personal jurisdiction presents a question of law

that we review de novo. Magill, ¶ 11, 379 P.3d at 1036. Similarly, because the trial court

relied on documentary evidence alone to determine whether it could exercise

jurisdiction, we review de novo whether CEC established the prima facie case necessary

to defeat Borrego’s 12(b)(2) motion. See Archangel Diamond Corp. v. Lukoil, 123 P.3d

1187, 1192 (Colo. 2005).

IV. Analysis

¶9 To exercise jurisdiction over a nonresident defendant, a Colorado court must

comply with Colorado’s long-arm statute and constitutional due process. Archangel,

123 P.3d at 1193. Colorado’s long-arm statute confers “the maximum jurisdiction

permitted by the due process clauses of the United States and Colorado constitutions.”

Id. Due process in turn requires that a defendant have certain minimum contacts with

the forum state so that maintaining a suit against it in that state “does not offend

traditional notions of fair play and substantial justice.” Magill, ¶ 15, 379 P.3d at 1037

2 In its reply, CEC essentially concedes the trial court misapplied the Magill test and
instead argues that we should conclude the record allows the trial court to exercise
specific personal jurisdiction over Borrego. A C.A.R. 21 proceeding is not a substitute
for an appeal, however, Bell v. Simpson, 918 P.2d 1123, 1125 n.3 (Colo. 1996), and we
will not now address the trial court’s refusal to exercise specific personal jurisdiction
over Borrego; that question lies beyond the scope of this original proceeding. See
Magill, ¶ 26, 379 P.3d at 1040 (declining, in proceeding pursuant to C.A.R. 21, to
consider whether trial court could exercise specific jurisdiction after concluding it
lacked general personal jurisdiction).

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(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “The quantity and

nature of the minimum contacts required depends on whether the plaintiff alleges

specific or general jurisdiction.” Archangel, 123 P.3d at 1194. This case concerns the

contacts required for general jurisdiction.

¶10 General jurisdiction permits a court to exercise jurisdiction over a defendant for

any cause of action arising from the defendant’s activities, even if those activities

occurred outside the forum state. Magill, ¶ 16, 379 P.3d at 1037. The “paradigmatic

fora” for general jurisdiction are a corporation’s place of incorporation and principal

place of business. Id. But general jurisdiction is also appropriate when a nonresident

corporate defendant’s connections with the forum state are “so continuous and

systematic as to render [it] essentially at home in the forum State.” Id. at ¶ 17 (emphasis

added) (quoting Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014)). In that latter

context, “even if a company conducts significant business in a state, if that business

represents a relatively small portion of the company’s national or international reach,

then the company cannot be considered at home in the state.” Id. at ¶ 18, 379 P.3d at

1038. That requirement sets a high bar, such that “[a] nonresident defendant’s contacts

with the state will rarely justify exercising general jurisdiction.” Id. at ¶ 17, 379 P.3d at

1037.

¶11 In Magill, this court identified Perkins v. Benguet Consolidated Mining Co., 342

U.S. 437 (1952), as an example of that rare case allowing a court to exercise general

jurisdiction over a nonresident corporate defendant. Magill, ¶ 17, 379 P.3d at 1037. The

defendant mining company in Perkins was incorporated in the Philippines and

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operated mines there but decamped to Ohio to escape World War II in the Pacific. 342

U.S. at 447–48. The company’s president made the move as well, and although the war

halted mining activity, the president carried on the rest of Benguet’s business from just

outside Cincinnati. Id. Those facts indicated the company had temporarily moved its

principal place of business to Ohio and therefore allowed the Ohio court to exercise

general jurisdiction. Id.

¶12 Conversely, we have looked to the Supreme Court’s opinion in Daimler as

illustrating when a nonresident corporate defendant’s significant contacts with the

forum state might still fall short of supporting general jurisdiction. See Magill, ¶ 18, 379

P.3d at 1038. There, the defendant automaker’s U.S. subsidiary, from which the Court

imputed the defendant’s contacts, had established a regional office and other facilities

in the forum state of California and was the state’s largest supplier of luxury vehicles.

Daimler, 134 S. Ct. at 752. Analyzing those contacts against the backdrop of Daimler’s

national and international operations, however, the Court concluded the company was

not at home in California and could not be subjected to general jurisdiction there. See

id. at 760–62.

¶13 Magill itself offers further insight into the significant evidence required to prove

a corporation is essentially at home in Colorado. There, Ford Motor Co., a Delaware

corporation with its principal place of business in Michigan, shared the following

connections with Colorado:

 “aggressive” in-state marketing;

 sales through more than thirty Colorado dealerships;

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  presence of a registered agent;

 maintenance of several offices and businesses;

 training and certification of mechanics to work in Colorado; and

 participation in active litigation, as both plaintiff and defendant.

Magill, ¶ 20, 379 P.3d at 1038. Comparing these facts to those the U.S. Supreme Court

considered too slim to support general jurisdiction in Daimler, this court concluded

Ford’s contacts were also insufficient to support general jurisdiction. Magill, ¶ 21, 379

P.3d at 1038–39.

¶14 Here, the district court failed to apply the Magill test in full. The court

considered whether Borrego’s contacts with Colorado were “continuous and

systematic” without going on to conclude that those contacts rendered Borrego

essentially at home in this state. But as we stated in Magill, even if a nonresident

corporate defendant’s contacts with Colorado are “continuous and systematic” or

“significant,” general jurisdiction is available only if those contacts also compel the

conclusion that the defendant is essentially at home in Colorado. Id. at ¶¶ 17–18, 379

P.3d at 1037–38. Thus, after concluding Borrego’s contacts with Colorado were

“continuous and systematic,” the trial court should have gone on to determine whether

they amounted to more than a “relatively small portion of the company’s national or

international reach,” such that Borrego could be considered essentially at home in this

state. See id. at ¶ 18, 379 P.3d at 1038.

¶15 Perhaps because the trial court stopped short in its analysis, it exercised general

jurisdiction on facts seemingly weaker than those presented in Magill, Perkins, and

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Daimler. Borrego may have solicited and facilitated some business in Colorado, but its

relationship with this state ended there. Its contacts with Colorado fall short of those

present in Magill, where the defendant not only solicited and facilitated business in

Colorado, but also operated multiple dealerships and offices here—and we did not find

general jurisdiction appropriate in that case. Magill, ¶¶ 20, 24, 379 P.3d at 1038–39.

Neither does the record evidence support the conclusion that Borrego treated Colorado

as a principal place of business or temporarily oversaw its national operations from this

state, as was the case in Perkins, 342 U.S. at 448. And whereas a regional office and

substantial forum-state sales could not justify the exercise of general jurisdiction over a

defendant with significant out-of-state-operations in Daimler, 134 S. Ct. at 752, 760, CEC

alleges the even weaker ties noted above.

¶16 Thus, on the slim jurisdictional facts alleged, we conclude Borrego is not

essentially at home in this state, and the trial court therefore erred in exercising general

jurisdiction over Borrego.

V. Conclusion

¶17 Because the trial court did not assess whether Borrego was essentially at home in

Colorado, we conclude it did not fully apply the test we announced in Magill and

therefore erred in exercising general personal jurisdiction over Borrego. Applying the

complete test ourselves, we conclude Borrego is not subject to general jurisdiction in

this state. We now make the rule to show cause absolute and remand the case for

further proceedings consistent with this opinion.

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