The Out-of-State Manufacturer and the Forum Question
Your supervising attorney asks you to prepare a filing recommendation in a breach-of-contract suit. The plaintiff, Pinecrest Components LLC, is organized under the laws of State A with its principal place of business in State A. It contracted with Halvern Manufacturing Inc., a State B corporation with its only factory in State B, to produce 12,000 custom brackets for $240,000. Halvern shipped the brackets from State B directly to Pinecrest's customer in State C. The contract was negotiated by email and two video calls; Halvern has no offices, employees, or bank accounts in State A, but it maintains a website that lists Pinecrest as a customer and generates about $60,000 in annual sales to State A buyers. Pinecrest wants to sue in State A federal court for $180,000 in damages plus $40,000 in lost profits. Halvern has threatened to challenge both jurisdiction and venue.
1. Does the federal court in State A have subject-matter jurisdiction? Identify the statutory basis, the citizenship facts you must verify, and the amount-in-controversy analysis.
Read the worked answer
Subject-matter jurisdiction would rest on diversity under 28 U.S.C. § 1332(a). Two requirements must be met.
First, complete diversity: no plaintiff may share citizenship with any defendant. A corporation is a citizen of its state of incorporation and its principal place of business, so Halvern is a State B citizen. An LLC, however, takes the citizenship of each of its members; Pinecrest's state of organization and principal place of business do not by themselves establish its citizenship. Before filing, I would obtain the membership list and confirm that no member is a State B citizen (or, if a member is an entity, trace its citizenship).
Second, the amount in controversy must exceed $75,000. Pinecrest pleads $180,000 in damages plus $40,000 in lost profits, totaling $220,000. Lost profits may be included if claimed in good faith and not legally impossible; the sum is well above the threshold.
If any member is a State B citizen, diversity fails and the case cannot proceed in federal court on that basis. I would also check whether any defendant is a State A citizen, which would defeat diversity.
2. Halvern has threatened to challenge personal jurisdiction in State A. Evaluate whether the State A federal court can exercise specific personal jurisdiction over Halvern for this contract claim, and state your filing recommendation.
Read the worked answer
Specific jurisdiction requires purposeful availment, relatedness, and reasonableness. Halvern's contacts with State A are the contract with a State A buyer, email and video-call negotiations, a website listing Pinecrest as a customer, and roughly $60,000 in annual State A sales. A single contract with a resident is usually not enough for purposeful availment when the defendant did not enter the state, and the claim must arise out of or relate to the forum contacts. Here, the claim arises from the contract, but performance was shipped to State C; the website sales are unrelated to this breach. Under cases like Walden v. Fiore and Bristol-Myers Squibb, the defendant's own contacts with the forum must be the basis. The website may support purposeful availment only if it is interactive and the claim relates to it, which it does not. General jurisdiction is unavailable because Halvern is not "at home" in State A.
Accordingly, I would not file in State A federal court without a stronger forum contact. I would evaluate State B (defendant's home) or State C (where goods were delivered and harm may have occurred), check the long-arm statute, and confirm venue. Filing in State A risks dismissal under Rule 12(b)(2).
3. What internal checks should you complete before the complaint is filed, and how would you document them?
Read the worked answer
I would complete and document the following: (1) a conflict check, including the LLC's members and Halvern's affiliates; (2) verification of Pinecrest's membership and citizenship; (3) verification of the amount in controversy and the supporting damages calculation; (4) a check for any forum-selection or arbitration clause in the contract; (5) a review of the applicable statute of limitations and any notice requirements; (6) confirmation of Halvern's registered agent and principal address; (7) a venue analysis under 28 U.S.C. § 1391; (8) a check of the State A long-arm statute and due-process cases; and (9) a calendar entry for removal deadlines. I would preserve the negotiation emails and contract documents with metadata. Each step should be recorded in a contemporaneous memo or checklist so the attorney can rely on it and so the firm can show reasonable inquiry if jurisdiction or venue is challenged.