A Recent Colorado Supreme Court Decision lowers the requirements to be brought into the state to defend a lawsuit.Posted: November 29, 2010
Email, phone calls and a vague contract were enough to bring a Rhode Island defendant to Colorado to defend a claim.
In The Foundation for Knowledge in Development, v. Interactive Design Consultants, LLC, 2010 Colo. LEXIS 505 the Colorado Supreme Court held that a foreign defendant had to come to Colorado to defend a lawsuit. In this case, foreign means someone from another state.
This case resolves around the legal issues jurisdiction and venue. Venue is the place where any litigation will take place. Jurisdiction is the law that will be applied to the case. Jurisdiction and venue decisions deal with where a lawsuit will be brought and what law will be applied to the lawsuit. You can have a court sitting in one state applying the law of another state. However, that is rare.
Normally, to bring someone into a specific state court, that person or business must be in that state, do business in a physical manner in that state or the accident or reason for the suit must be in the state. The final way is to have a clause in your contract that says the jurisdiction of any suit will be in a specific state.
Venue and jurisdiction are critical determining the outcome or settlement issues of a trial. If a defendant has to travel to another state, hire an attorney in another state and deal with laws he or she may not be familiar with, there is a greater incentive to settle a case. Additionally, the laws of the foreign state may not be as conducive to the defendant.
The perfect example of laws that are not friendly to a party would be release law. Virginia, Montana and Louisiana, among others, do not support releases. If a plaintiff from one of those states was able to sue you in one of those states and apply the law of that state, your release only be good to prove assumption of the risk.
The jurisdiction and venue clause are the second most important clause in your release or assumption of risk document after your negligence clause.
In The Foundation for Knowledge in Development, v. Interactive Design Consultants, LLC, 2010 Colo. LEXIS 505 the defendant never came to Colorado. He just negotiated a contract to provide work over the phone and email to do work for the Colorado plaintiff. The agreement was silent as to jurisdiction and venue.
The court applied a two part test to decide whether the defendant should have to defend in Colorado:
“(1) whether the defendant purposefully availed himself of the privilege of conducting business in the forum state, and (2), whether the litigation arises out of the defendant’s forum-related contacts.” Archangel [Diamond Corp. v. Lukoil,] 123 P.3d 1187, 1192 at 1194 (Colo. 2005).
As you can see, by doing business with a Colorado business with a contract where the benefits were to arise in Colorado the court easily found Colorado was the correct state for the litigation.
The court also held the decision as to whether the litigation should be in Colorado must be reasonable. The reasonableness test is a three part test:
(1) the burden on the defendant;
(2) the forum state’s interest in resolving the controversy; and
(3) the plaintiff’s interest in attaining effective and convenient relief.
The Supreme Court looked at the burden on the defendant to defend in Colorado. The court found the evidence was electronic, so there was no evidence or witness burden to the defendant to force the defendant to litigate in Colorado. Evidence or witness burden means the cost of bringing witnesses and evidence from one state to another.
Here the court found that a contract, for a Colorado client, which was to be used in Colorado, was enough to bring someone being sued to Colorado. The only contact the defendant had with Colorado, the normal test was minimal, emails and phone calls, but was enough to subject the defendant to a Colorado lawsuit and Colorado law.
Outdoor recreation companies are reaching further across state lines to attract customers. It is critical that your documentation requires any litigation to be in their state and county. This will save the defendant money, make it easier on witnesses and place the litigation in an environment where jurors understand the issues and the risks.
Imagine trying to explain snow to someone who has lived their entire life in Louisiana?
A jurisdiction and venue clause should be in your release or your VAR if you are a concessionaire or permittee.
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