Long Arm Statute: Definition & Example

Long Arm Statute: Definition & Example
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  • 0:03 Long-Arm Statute Defined
  • 0:49 Minimum Contact Rule
  • 1:59 Int'l Shoe Co. v.…
  • 4:35 To Sum Things Up
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

Long-arm statute refers to the jurisdiction a court has over out-of-state defendant corporations. International Shoe v. State of Washington was a landmark case that set precedent for establishing the right for government to use the long-arm statute to bring an action against a defendant corporation.

Long Arm Statute Defined

If a corporation is located in one state, does business in another state and employs people in yet another state, they just may fall under the long arm statute. This sounds confusing, but it really boils down to this: long arm statute allows a state to exercise jurisdiction over out-of-state defendants, provided that the government can prove that the defendant has at least minimum contacts in the forum state.

This means if a corporation was to be sued in a state that they do not actually do business in but have a connection to the state - say, by employing people within that state, and the employees receive regular compensation for their work - the corporation is considered to have minimum contact sufficient enough to be sued within the forum state.

Minimum Contact Rule

Just what makes for minimum contact? Minimum contact rule establishes that so long as a corporation had a degree of contact within the state bringing suit, they are subject to the laws of the state and can be sued by and within the forum state in court.

This is not exactly black and white. The law says minimal, or very few contacts, are enough to establish contact. But there is also a right to fair play and substantial justice, which sets three distinct factors needed to extend long arm statute jurisdiction to bring a defendant corporation to court:

  • Closeness of the relationship between the claim and the contact
  • Convenience of bringing the defendant corporation to the forum state
  • State has an interest in protecting the rights of its citizens

To put this all together, minimum contact rule may apply so long as it does not interfere with fair play and substantial justice. Let's use a precedent setting case to demonstrate how long arm statute and minimum contact rule applied in a civil suit filed by a large company against the State of Washington to appeal a lower court's decision in favor of the State of Washington.

Int'l Shoe Co. v. State of Washington

International Shoe Company was a Delaware shoe manufacturer with its principle place of business in Missouri. The State of Washington brought suit against International Shoe for unpaid unemployment taxes for employees who resided and worked for the company from their Washington residences. Even though International Shoe did not conduct official business in Washington, the state sought to collect taxes from the company by reason of minimum contact.

To better understand this complex case, let's set out the facts:

  • International Shoe employed several salespeople who resided and worked within the state.
  • These employees earned a collective $31,000 in commissions per year, establishing systematic and continuous sales from the Washington agents.
  • The employees were reimbursed for expenses.
  • The employees had no authority to set prices, negotiate contracts, reject orders or to make collections.
  • All decisions regarding the price and sale of shoes were mandated through the Missouri office.
  • Both agent (or salesperson) in Washington and an agent in Missouri were served with the suit.

In the court of first instance, International Shoe lost the case and appealed to a higher court to have the decision rescinded, claiming that long arm statute did not apply. International Shoe further argued their 14th Amendment right to due process and personal jurisdiction. Their rationale for the decision relied on the question of what exactly established minimum contact and whether long arm statute applied.

Here is how the appellate court saw it:

  • Due process was established based on the quality and nature of the activity with respect to the claim of non-payment of taxes.
  • International Shoe benefited from the laws of the State of Washington and thereby, was obligated to the laws.
  • International Shoe benefited from the business in Washington.
  • There was an impact on the local economy.

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