The Connecticut General Assembly

OFFICE OF LEGISLATIVE RESEARCH

March 4, 1994 94-R-0216

TO:

FROM: Pamela Lucas, Research Attorney

You asked whether under Connecticut's long arm statute a Connecticut court could exercise personal jurisdiction over nonresidents who finance vexatious lawsuits.

SUMMARY

A Connecticut court could exercise personal jurisdiction over a nonresident who finances a vexatious lawsuit if the court has subject matter jurisdiction over a case involving that nonresident, the requirements of the long arm statute are met, and the exercise of jurisdiction is consistent with due process requirements.

If legislation is enacted to prohibit the financing of vexatious lawsuits, a state court would have subject matter jurisdiction over a case arising from such financing. Several provisions of the long arm statute would appear to permit the court to exercise personal jurisdiction over the nonresident financier, depending upon the facts surrounding the case. Finally, the exercise of personal jurisdiction would appear to comply with due process' requirements of minimum contacts between the financier and Connecticut, unless under the particular circumstances it would be too difficult and inconvenient to haul the nonresident financier into court here.

APPLICATION OF LONG ARM STATUTE

The relevant provisions of the long arm statute, CGS § 52-59b, are those which would permit the exercise of jurisdiction over nonresidents who (1) transact business within the state, (2) commit a tort within the state, or (3) commit a tort outside the state causing injury to a person or property within the state. For jurisdiction exercised under the out-of-state tort provision, it is also necessary that the nonresident either (a) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue in the state or (b) expects or reasonably should expect the tortious act to have consequences in the state and derives substantial revenue from interstate or international commerce.

We have not located any Connecticut jurisdiction cases with facts analogous to the financing of a vexatious lawsuit by a nonresident. But, it is likely that jurisdiction could be exercised over a nonresident financier under at least one of the long arm provisions.

It is possible that under the transacting business provision, jurisdiction might be exercised even if the financing arrangements are made out of state and the defendant never entered this state. The phrase “transact business” embraces a single purposeful business transaction (see Zartolas v. Nisenfeld, 184 Conn. 471, 474 (1981)). The use of terms and procedures commonly associated with business and the involvement of a financial transaction are likely to result in such financing being treated by a court as a business transaction (see e.g., id. at 475 (execution of warranty deed using terms and procedures commonly associated with business and involving a financial transaction within broad meaning of term “business”). Furthermore, the fact that defendants engaged in purposeful Connecticut related activity by financing Connecticut based litigation might be sufficient to locate the transaction within Connecticut for the purposes of the statute (cf. id. (execution of warranty deed in Iowa for land in Connecticut considered transacting business within Connecticut under long arm statute)).

Jurisdiction might also attach under the long arm provisions pertaining to tortious conduct (see CGS §§ 52-59b(a) and 52-59b(b)). If the court finds that the actual tort was committed outside the state, jurisdiction attaches under somewhat more limited conditions than for torts committed in the state. For out-of-state torts the long arm statute requires that the injured person or property be within the state. In addition, the nonresident must regularly do or solicit business, engage in persistent conduct, or derive substantial revenue in Connecticut. Alternatively, the nonresident must reasonably expect the financing to have consequences in Connecticut and derive substantial revenue from interstate or international commerce. (Presumably a court would find that by financing Connecticut based litigation, the financier should have expected consequences in Connecticut.)

DUE PROCESS IMPLICATIONS

Once it is clear personal jurisdiction attaches under the provisions of the long arm statute, the next issue to be considered is whether the exercise of such jurisdiction complies with due process requirements (see United States Trust Co. v. Bohart, 197 Conn. 34, 39 (1985)). A court may not exercise personal jurisdiction over a nonresident unless the nonresident has certain minimum contacts within the forum state such that “traditional notions of fair play and substantial justice” are not offended (International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The two elements of due process analysis under the minimum contacts doctrine are foreseeability and fairness. Foreseeability means that the “defendant's conduct and connection with the forum state are such that he should reasonably anticipate being hauled into court there” (World-wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); see also United States Trust Co., 197 Conn. at 41). Fairness prohibits jurisdiction from being asserted “in such a way as to make litigation `so gravely difficult and inconvenient' that a party unfairly is at a severe disadvantage' in comparison to his opponent” (Burger King Corp. v. Rudzeiwicz, 471 U.S. 462, 478 (1984) [citations omitted]; see also United States Trust Co., 197 Conn. at 41).

Whether the “minimum contacts”criteria are satisfied is an issue of fact, dependent upon the particular circumstances of the case before the court (Kulko v. California Superior Court, 436 U.S. 84, 92, reh. denied, 438 U.S. 908 (1978)). Thus, whether a particular financier can be hauled into a Connecticut court in a vexatious litigation suit will depend upon the particular circumstances of the parties and the case. Because the financier purposefully financed Connecticut based litigation, it would appear that the foreseeability requirement could easily be met. However, whether the fairness requirement could be met can only be answered by examining the difficulty and inconvenience faced by the particular individual in defending the case in Connecticut.

PL:lav