The Subrogation Strategist

The court granted the third-party defendant’s first motion to dismiss for lack of general jurisdiction but permitted the parties to conduct jurisdictional discovery. After the close of jurisdictional discovery, the third-party defendant renewed its motion to dismiss for lack of jurisdiction. This time, the court found that, In Federal Ins. Co. v. J. Gallant Elec. Servs., Inc. No. 1-22- CV-00123-MSM-LDA, 2024 U.S. Dist. LEXIS 218185, the United States District Court for the District of Rhode Island considered whether it could exercise personal jurisdiction over an out-of-state, third-party defendant. based on the record, it could exercise specific personal jurisdiction over the third-party defendant.

The plaintiff, Federal Insurance Company (Insurer), brought this subrogation action after its insured, the Town of Westerly, sustained a water loss at a public elementary school in 2020. The water loss occurred while the school was undergoing renovations. A defendant, Advanced Safety Systems (Advanced), was retained to replace the fire suppression system in the computer server room. Advanced subcontracted with defendant J. Gallant Electrical Services (Gallant) to replace the electrical service panel for the sprinkler system. Gallant was in process of deenergizing the fire suppression system when the system discharged, causing damage to the equipment in the server room. After paying its insured for the damage, Insurer sued Advanced and Gallant for negligence and breach of contract, alleging that Gallant was careless in causing the system to discharge.  

Gallant filed a third-party complaint for contribution and indemnity against Fireaway Inc. (Fireaway), the manufacturer of the sprinkler system. Gallant alleged that the system discharged because of a defect within the system. Fireaway, a Minnesota-based company, moved to dismiss Gallant’s claims for lack of personal jurisdiction. The court held that it could not assert general jurisdiction over Fireaway and ordered Gallant to conduct jurisdictional discovery to determine whether the court could exercise specific personal jurisdiction. Fireaway renewed its motion to dismiss following the close of jurisdictional discovery.

The court was tasked with determining whether Fireaway’s “contacts with the state satisfy both the state’s long-arm statute as well as the Due Process Clause of the Fourteenth Amendment.” The court stated that Fireaway must have certain minimum contacts with Rhode Island such that the maintenance of the lawsuit does not offend “traditional notions of fair play and substantial justice.” 

For specific jurisdiction to apply, Fireaway must have purposefully availed itself of the forum state and the claims asserted must have arisen out of or related to those contacts with the forum. The court boiled this down a three-part test—relatedness, purposeful availment and reasonableness. The relatedness factor required that the litigation be directly related to Fireaway’s forum-state’s activities. The purposeful availment factor required that the Fireaway’s in-state contacts represent a purposeful availment of the privilege of conducting activities in the state, thus invoking the benefits and protections of Rhode Island’s laws and making the defendant’s presence before the state’s courts foreseeable. The third part of the test was simply that the exercise of jurisdiction was reasonable.

Fireaway argued that the relatedness part was not met because the company’s Rhode Island-based distributor did not sell the subject sprinkler system. The subject system was sold by a Colorado-based distributor. The court disagreed, holding that if Fireaway marketed and/or sold the system in Rhode Island (through its website and state distributor), then the relatedness factor was satisfied even if the product at issue was not directly related to those state-forum contacts.

The purposeful availment part rested on two aspects: voluntariness and foreseeability. The court found that Fireaway purposefully availed itself to the forum because of its in-state distributor, its out-state distributors’ direct sales into the state, and its contacts with state customers.      

Lastly, the court found the specific personal jurisdiction over Fireaway was reasonable. The court noted five factors to consider in determining reasonableness, the: 1) defendant’s burden of appearing in the forum, 2) state’s interest in adjudicating the dispute, 3) plaintiff’s interest in convenient and effective relief, 4) court’s interest in obtaining effective resolution, and 5) common interests of all sovereigns in promoting substantive social policies. The court found that Fireaway was not burdened by appearing in a Rhode Island court because its appearance was not so onerous as to be unconstitutional. The court held that the state had an interest in adjudicating the dispute because the case relates to damage to a public school. The remaining factors were satisfied because the plaintiff chose the forum and there was no other forum more convenient for the other parties. The court denied Fireaway’s motion to dismiss, holding that jurisdiction over Fireaway did not offend notions of fair play and substantial justice.    

The Gallant case establishes that, in Rhode Island, an out-of-state defendant can be subject to specific personal jurisdiction even if the claim is not directly related to the party’s contacts within the forum. If the party conducts business in the forum and intentionally sells or distributes products in the state, then the party may have availed itself to personal jurisdiction of the state’s courts.