The Virginia Business Litigation Blog
Virginia’s long-arm statute extends personal jurisdiction to the fullest extent permitted by due process. A Virginia court may exercise specific jurisdiction over a defendant when the defendant has sufficient minimum contracts with Virginia such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. To establish “minimum contacts,” a plaintiff must show that the defendant purposefully directed activities at Virginia residents and that the litigation results from alleged injuries arising out of those activities. A court may exercise general jurisdiction over a defendant whose activities in Virginia have been continuous and systematic. A court with general jurisdiction over a defendant may adjudicate claims entirely distinct from the defendant’s in-state activities. To survive a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure Rule 12(b)(2), a plaintiff must demonstrate personal jurisdiction by a preponderance of the evidence. In Hunt v. Calhoun County Bank, the United States District Court for the Eastern District of Virginia analyzed whether it could exercise personal jurisdiction over non-residents in a contract dispute.
James L. Bennett (“Bennett”) is the president and a board member of Calhoun County Bank (the “Bank”), a West Virginia corporation. In June 2007, William H.G. Hunt, Sr. (“Hunt”), a Virginia resident, entered a contract with the Bank in which the Bank agreed to sell Hunt royalty interests for $40,000. Hunt sued the Bank and Bennett for breach of contract and fraud alleging that he transferred $40,000 to an agent of the Bank but that the Bank refused to transfer the royalty interests. He asserts that he suffered over $180,000 in damages as a result of the Bank’s breach and he seeks specific performance or compensatory damages. Hunt also alleges that Bennett fraudulently misrepresented his intention to transfer the royalty interests. The Bank and Bennett moved to dismiss for lack of personal jurisdiction and also for failure to state a claim upon which relief can be granted.
The court first rejected Hunt’s argument that the Bank and Bennett waived personal jurisdiction by filing their motions, and it went on to analyze whether it had specific jurisdiction over defendants. To determine whether specific jurisdiction comports with due process, a court considers: (1) the extent to which the defendant purposefully availed itself of the privilege of conducting 
activities in the state; (2) whether the plaintiffs’ claims arise out of those activities directed at the state; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable. In analyzing whether a business defendant has purposefully availed itself of the forum state, courts consider whether the defendant (1) maintains offices or agent in the forum state, (2) owns property in the forum state, (3) reached into the forum state to solicit or initiate business, (4) deliberately engaged in significant or long-term business activities in the forum state, (5) contractually agreed that the law of the forum state would govern disputes, (6) made in-person contact with the resident of the forum in the forum state regarding the business relationship, the nature, quality and extent of the parties’ communications about the business being transacted, and (7) whether the performance of contractual duties was to occur in the forum. Considering these factors, the court found that plaintiff had not presented sufficient evidence that defendants purposefully availed themselves of Virginia.
Hunt did not allege that the Bank had any offices, agents, property or in-person contact in Virginia. Rather, the Bank is located in West Virginia and had never operated a branch in Virginia. Neither the Bank nor Bennett had conducted any other business in Virginia. Hunt did not allege that defendants reached into Virginia to initiate business with him via in person or electronic contacts. Instead, the contract was negotiated between Bennett and Hunt’s attorney in West Virginia. The contract at issue would not have resulted in defendants’ performance of significant or long term business activity in Virginia but rather concerned the transfer of rights and interest in property in West Virginia.
Hunt argued that the Bank’s website created jurisdiction, but the court noted that Hunt’s claims did not arise out of the Bank’s on-line activities. Jurisdiction based on electronic contacts is appropriate only when a person directs electronic activity into the state with the manifest intent of engaging in business in the state and the activity creates a potential cause of action cognizable in the state. Here, the Bank’s semi-interactive website allowed existing customers to engage in online banking but did not allow potential customers to open new accounts and was not intended to solicit customers from outside West Virginia. Regardless, Hunt’s claims were not related to the online banking services but rather stemmed from a contract transaction wholly independent of the Bank’s online services.
After finding that specific jurisdiction did not exist, the court examined whether it had general jurisdiction. Hunt alleged that the Bank conducts business and has depositors in Virginia and is engaged in business in Virginia via the internet. However, Bennett stated via affidavit that the Bank does not market itself outside of West Virginia nor advertise in media directed at customers outside of West Virginia. Additionally, at the time of the alleged contract, the Bank had only nine borrowers in Virginia and five of those took out their loans while residing in West Virginia. The other four loans were used to buy real estate in West Virginia. The court held that Bennett and the Bank did not engage in activities in Virginia sufficiently continuous and systematic to warrant an exercise of personal jurisdiction. Further, the Bank’s online banking service did not provide a basis for general jurisdiction as the Fourth Circuit has found that a mere online presence alone is not sufficient to establish general jurisdiction. Rather, something more must be demonstrated.