The Missouri "Long-Arm" Statute and Fraudulent Conduct by an Out-of-State Defendant
The Missouri long-arm statute provides that an out-of-state defendant can be subject to personal jurisdiction in Missouri when it commits a tortious act within Missouri. See R.S.Mo. §506.500.1(3). The issue of what constitutes a tortious act within Missouri is not always evident, especially when a defendant solely acted outside of the state. A recent case decided by the Missouri Court of Appeals for the Western District squarely addressed the issue of when alleged out-of-state tortious acts give rise to long-arm jurisdiction in Missouri. In Good World Deals, LLC v. Gallagher, et al., the court held that letters or telephone calls containing fraudulent representations from an out-of-state defendant to a Missouri resident are sufficient to subject the out-of-state defendant to long-arm jurisdiction in Missouri under its tortious act provision.
In Good World, the plaintiff appealed the trial court’s finding that defendant Xcess was not subject to personal jurisdiction in Missouri. Good World, a Missouri limited liability company located in Kansas City, received an email from Xcess, an Ohio limited liability company with its principal place of business in Wooster, Ohio, regarding merchandise that Xcess had for sale.
Following the email, defendant Gallagher, on behalf of Xcess, and Good World engaged in telephone communications and text messages regarding the merchandise. Xcess represented that it had approximately 1,500 Xbox games and 200 Fitbits to offer, among other items, and that the items were overstock and could have damaged boxes. Good World informed Xcess it was interested in the merchandise because of the Xbox games and Fitbits. Following an agreement on the price, Good World arranged its own shipping and picked up the merchandise in Ohio.
Upon receipt of the merchandise and after discovering that there were fewer than 700 Xbox games, no Fitbits and many boxes were empty or contained broken items, Good World notified Xcess that the goods were nonconforming and gave them the opportunity to cure. When Xcess refused, Good World filed suit, alleging misrepresentation and breach of contract.
Xcess moved to dismiss the lawsuit, claiming it was not subject to personal jurisdiction in Missouri. The circuit court agreed. The Missouri Court of Appeals, however, reversed and remanded after employing a two-step analysis to determine if personal jurisdiction existed over Xcess. First, it examined whether Xcess’ conduct satisfied the Missouri long-arm statute and, once it determined that it did, it examined whether Xcess had sufficient minimum contacts with Missouri such that asserting personal jurisdiction over it comports with the principles of due process.
The Missouri long-arm statute vests jurisdiction in the Missouri courts when a defendant personally transacts business, makes a contract, or commits a tortious act in the state. See R.S.Mo. §506.500.1(1)-(3). It provides in relevant part as follows:
Any person or firm, whether or not a citizen or resident of this state, or any corporation, who in person or through an agent does any of the acts enumerated in this section, thereby submits such person, firm, or corporation, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts:
(1) The transaction of any business within this state;
(2) The making of any contract within this state;
(3) The commission of a tortious act within this state.
Plaintiff claimed that personal jurisdiction existed over Xcess because it transacted business within Missouri, it entered into a contract in Missouri and it committed a tortious act within Missouri. Because the conduct of Xcess only needed to satisfy one of these subdivisions, the appellate court found that Good World sufficiently alleged that Xcess committed a tortious act, i.e. making false and material misrepresentations about the conformity of the merchandise, within Missouri. Since it was dispositive, the court only addressed the tortious act provision of the long-arm statute.
While Xcess denied any tortious act, it also argued that if there were alleged misrepresentations, they occurred in Ohio and not in Missouri. The Good World court therefore was faced with the issue of what constitutes the commission of a tort “within the state” for purposes of the long-arm statute. In analyzing this issue, the Good World court rejected Xcess’ argument that any such acts did not occur in Missouri because of well-established precedent holding that “‘[e]xtraterritorial acts that produce consequences in the state’ such as fraud, are subsumed under the tortious act section of the long-arm statute.” Because Good World alleged fraudulent acts of Xcess that created consequences in Missouri, the long-arm statute was satisfied and Missouri courts could exercise jurisdiction over Xcess.
Having decided that the long-arm statute was satisfied, the court turned to the second prong of the analysis, which is whether Xcess had sufficient minimum contacts with Missouri such that asserting personal jurisdiction over it comports with due process. The court recognized that the focus of such an evaluation is “whether ‘there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’” The Court of Appeals held that plaintiff established Xcess purposefully engaged plaintiff in Missouri through emails, text messages and phone calls which contained misrepresentations about the merchandise. Citing the Missouri Supreme Court’s earlier ruling in Bryant v. Smith Interior Design Grp., Inc. 310 S.W.3d 227, 235 (Mo. banc 2010), the Court reasoned that when the actual content of communications in a forum gives rise to intentional tort causes of action, i.e. when the communications contain fraudulent content, there is purposeful availment.
The Good World holding does not limit Missouri precedent holding that communications from an out-of-state defendant to a Missouri resident alone do not amount to transacting business in the state for purposes of the long-arm statute. To the contrary, the court did not address whether Xcess transacted business in Missouri. Instead, this holding is limited to cases in which a plaintiff alleges that an out-of-state defendant sent communications into Missouri that were false and misleading, therefore satisfying the tortious act section of the Missouri long-arm statute.