Does a federal court's exercise of personal jurisdiction over a nonresident franchisee, in a suit by a Florida franchisor for breach of a franchise agreement, comport with the Due Process Clause where the franchisee never visited Florida but entered a 20-year relationship with the franchisor's Miami headquarters?

Burger King Corporation, a Florida corporation headquartered in Miami, conducts most of its business through franchises. Franchisees pay an initial fee, monthly royalties, and rent, and submit to extensive regulation. The franchise contracts provide that the relationship is established in Miami, that payments and notices go to Miami, and that Florida law governs. Day-to-day oversight runs through district offices that report to Miami.

John Rudzewicz, a Michigan resident and accountant, and Brian MacShara applied for a Burger King franchise in Michigan through the Birmingham district office. The application was forwarded to Miami, which entered a preliminary agreement in February 1979. MacShara attended a training course in Miami, and the franchisees bought $165,000 in equipment from a Burger King division in Miami. The parties negotiated disputes over fees, rent, and assignment with both the district office and Miami headquarters, and Rudzewicz obtained limited concessions from Miami. By signing the final agreements, Rudzewicz personally obligated himself to more than $1 million over 20 years. Rudzewicz never visited Florida and maintained no office there. After a recession, the franchisees fell behind on payments. Miami headquarters negotiated with them by mail and telephone, then terminated the franchise. They refused to vacate and continued operating as a Burger King restaurant.

Burger King sued Rudzewicz and MacShara in the United States District Court for the Southern District of Florida in May 1981, invoking diversity and federal trademark jurisdiction and alleging breach of the franchise agreement and trademark infringement. The defendants entered special appearances and moved to dismiss for lack of personal jurisdiction. The District Court denied the motions under Florida's long-arm statute, Fla. Stat. § 48.193(1)(g). The defendants answered and counterclaimed under Michigan's Franchise Investment Law. After a three-day bench trial, the court again found jurisdiction, ruled for Burger King, awarded $228,875 in contract damages, ordered the defendants to close or surrender the restaurant, rejected the counterclaim, and awarded costs and fees. Rudzewicz appealed to the Eleventh Circuit, and a divided panel reversed, holding that jurisdiction would offend fundamental fairness and due process. Burger King appealed to the Supreme Court. The Court dismissed the appeal because it was unclear that the Eleventh Circuit had held the statute itself unconstitutional, treated the jurisdictional statement as a petition for certiorari, granted it, and reversed.

(Brennan, J.)

Yes. The Due Process Clause permits Florida to exercise personal jurisdiction over Rudzewicz.

The Due Process Clause protects a defendant from binding judgments of a forum with which he has established no meaningful contacts, ties, or relations. International Shoe Co. v. Washington, 326 U.S. 310 (1945). Specific jurisdiction is proper where the defendant has purposefully directed his activities at forum residents and the litigation arises out of or relates to those activities. The defendant must have purposefully availed himself of the privilege of conducting activities in the forum, Hanson v. Denckla, 357 U.S. 235 (1958), so that he should reasonably anticipate being haled into court there, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). Physical presence is unnecessary because commerce is routinely conducted by mail and wire across state lines.

A contract with an out-of-state party does not by itself establish minimum contacts. The inquiry looks to prior negotiations, contemplated future consequences, the contract's terms, and the parties' actual course of dealing. Rudzewicz deliberately reached out beyond Michigan to negotiate with a Florida corporation for a 20-year franchise and accepted exacting regulation from Miami headquarters. The contract documents stressed that operations were supervised from Miami and that payments and notices went there. The course of dealing confirmed that Miami made the key decisions while the district office was only an intermediate link. The choice-of-law clause selecting Florida law, though insufficient alone, reinforced his deliberate affiliation with Florida and the foreseeability of suit there.

Once minimum contacts exist, the defendant must present a compelling case that jurisdiction is unreasonable under the fair play and substantial justice factors. Florida has a manifest interest in providing a forum for its resident franchisor, and Michigan's interests can be accommodated through choice-of-law rules. The inconvenience claims were unsupported by the record and could be addressed by change of venue. The District Court's findings that Rudzewicz was an experienced, sophisticated businessman who was not misled and acted under no duress were not clearly erroneous. Jurisdiction therefore did not offend due process. The judgment is reversed and remanded.

Dissent (Stevens, J., joined by White, J.) Requiring a franchisee to defend in the franchisor's chosen forum is fundamentally unfair. Rudzewicz had no place of business, employees, or license in Florida, did business and paid taxes only in Michigan, and dealt principally with the Michigan district office. The majority relies on little more than standard boilerplate language in the contract documents to find purposeful availment, a superficial analysis that invites unfairness in franchisor-franchisee negotiations and disputes. I find the Eleventh Circuit's reasoning persuasive: Rudzewicz lacked reasonable notice of suit in Florida, was financially unprepared for distant litigation, and faced a characteristic disparity of bargaining power under a non-negotiable standard form contract. The judgment should be affirmed. (The majority answered that the choice-of-law clause was not enough alone but reinforced a 20-year relationship with Miami headquarters, and that the District Court's findings that Rudzewicz was sophisticated, represented by counsel, and under no duress were not clearly erroneous.)