“Responsive service and practical advice when you need it.”

Bulletin

Volume 6 Issue 1

January 2007

Creditor Overcomes Challenge of Jurisdiction

 

             The Court of Appeals of Oregon has determined that an Ohio resident who guaranteed debt of an Ohio corporation is liable to suit in Oregon because, by virtue of his contact with a creditor located in Oregon, he “availed himself of the privilege of causing important economic consequences in the State of Oregon.”

 

             Javed Iqbal, President of Pro Sports Wear, Inc., contacted Nike USA, Inc. in an attempt to obtain Nike’s products to sell at his stores.  After meeting Nike’s regional sales representative in Cleveland, Iqbal sent an application on behalf of Pro Sports Wear and his personal guaranty form to Oregon for processing.  Nike relied on these forms in its decisions to extend credit to Pro Sports Wear and to require Iqbal to guarantee Pro Sports Wear’s debt.  On November 20, 2000 Nike sent Iqbal a letter on Nike stationary from its Oregon office notifying Iqbal of its decision to approve a $15,000 line of credit.  During the next 3 years, Iqbal received an invoice for each of his purchases of Nike products, each of which specifically stated that “Customer consents to…jurisdiction…in the State of Oregon.”  Iqbal, however, was unable to pay for the merchandise he purchased, and in March, 2004, he faxed a note to Nike’s Oregon office regarding a payment plan.  Nike then filed suit in Oregon against Pro Sports Wear and Iqbal to recover over $100,000 worth of funds advanced under the line of credit.  Iqbal filed a motion to dismiss for lack of personal jurisdiction, claiming he had never consented to jurisdiction in Oregon and had never done business with the Oregon office.  The trial court agreed with Iqbal, stating that Iqbal did not have sufficient contact with Oregon to provide a basis for jurisdiction.

 

             Nike appealed.  While the Court of Appeals disagreed with Nike that Iqbal had consented to jurisdiction in Oregon (because he was a guarantor of the loan and the credit agreement he signed contained no forum selection clause), the Court did find him subject to personal jurisdiction there.  Referring to cases decided by the United States Supreme Court, the Court of Appeals cited the rule that, in order to subject someone to foreign jurisdiction, they must have had “minimum contacts” with the forum state in which they “purposefully directed” activities toward causing important economic consequences in the forum state.  Here, because Iqbal corresponded with Nike’s offices in Oregon and the decision to extend credit to Pro Sports Wear with Iqbal’s personal guaranty was made in Oregon, the Court found the requisite minimum contacts.  Although Iqbal claimed ignorance of the location of Nike’s offices, the Court stated that in a “sophisticated commercial transaction such as this it was [defendants’] obligation to determine with whom they were contracting…[and that]…defendants under these circumstances may [not] rely on their own failure to investigate as a shield….”  The Court further stated that Iqbal should have realized that he would be subject to jurisdiction in Oregon if a problem ever arose under the transactions.