Suing out-of-state firms

Due process requires such a defendant to have ‘minimum contacts’ with NM to meet jurisdictional standards

In a recent case, Trei v. AMTX Corp., the New Mexico Court of Appeals explored the outer constitutional limits of personal jurisdiction over an out-of-state company sued in this state.

The plaintiff, Trei, was injured in a motel gym in an Amarillo, Texas, Holiday Inn. The defendant, AMTX Corp., operated the Amarillo motel under a Holiday Inn franchise.

Plaintiff sued AMTX Corp. in Valencia County, N.M. Plaintiff claimed that AMTX could be sued in New Mexico because she was drawn to AMTX’s Holiday Inn by national advertisements by national Holiday Inn.

As background, both the U.S. and New Mexico constitutions require that, in order to have personal jurisdiction over a defendant and sue that defendant in New Mexico, due process requires that the out-of-state defendant have “minimum contacts” with New Mexico. Maintenance of the suit cannot offend “traditional notions of fair play and justice.”

In the Trei case, AMTX Corp. had no direct contact with New Mexico. It had no facilities, offices, hotels, agents or employees in the state. It did not advertise its motel in New Mexico and had no business of any kind in the state. As the court stated, it “had no presence whatsoever in New Mexico.”

Plaintiff argued that defendant AMTX had a purposeful contact with New Mexico because Holiday Inn national advertised generally in the state. She claimed that this national Holiday Inn advertising campaign should be “imputed” to AMTX. She claimed that an agency or apparent agency relationship existed between AMTX and national Holiday Inn, and that AMTX benefited from the advertisements and promotional activities of national Holiday Inn.

The court held that the franchisor-franchisee relationship between AMTX and Holiday Inn was not enough to create an agency relationship. Holiday Inn’s national advertising beamed to New Mexico was not sufficient to bind AMTX to an agency relationship in New Mexico. The agency relationship could not be created unless AMTX exerted some control over national Holiday Inn in its advertising.

The court compared the plaintiff’s case to a similar case from outside New Mexico involving Walt Disney World national advertising that held that advertising to the general public alone cannot supply jurisdiction over a nonresident defendant. The Court of Appeals affirmed the lower court’s dismissal of the case on jurisdictional grounds.

Do not be misled by the Trei case. It does not take much to satisfy the “minimum contacts” test. The court noted that, if the nonresident defendant had purposefully solicited New Mexico customers, the result might have different, although the court did not back off its view that the advertisements must come directly from the defendant or done at the defendant’s direction.

For example, if AMTX had advertised on New Mexico television about an Amarillo special event, such as a grand rodeo, and promoted its property, it is almost certain that the court would have found “minimum contacts” and personal jurisdiction for litigation in New Mexico.