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Italian Supplier of Olive Oil Forced to Defend Lawsuit in California

A California Appeals Court ruled that an Italian corporation based in Sicily is subject to the court’s jurisdiction in a lawsuit filed by a California corporation for non-delivery of olive oil. Luberski Inc. v. Oleficio F.LLI Amato S.R.L. (Feb 23rd 2009).

In that case, a California buyer purchased 12,000 cases of olive oil from an Italian seller in Partanna, Sicily and paid over $400,000. When the product was not delivered, it sued the seller in California state court for breach of contract and fraud.

The seller tried to avoid the California lawsuit by making a “special appearance” to contest personal jurisdiction over it (clearly not wanting to travel half way around the world to defend the case). The president claimed his company had sold olive oil to only 2 California buyers over the years, provided no services in California, and shipped the product months earlier. The trial court agreed and decided it had neither “general” nor “specific” personal jurisdiction over the Italian seller.

Not to be outdone, the California buyer appealed the trial court’s decision.

The appellate court found negotiations were conducted in both Italy and California; the buyer initiated the order from California but did not travel to Italy; and the terms were exchanged by fax – there was no written contract, only a purchase order and confirmation. The seller (which had no direct presence in California via personnel or advertising) agreed to ship the product to the port of Long Beach, but retained responsibility until it arrived in California by paying freight and insurance.

Based on these facts, the appellate court held it was clear there was no basis for general personal jurisdiction over the Italian seller – its contacts with California related only to a small number of customers and were not “substantial, continuous or systematic.” However, it held there was specific personal jurisdiction:

First, the case arose out of contact with the forum, as the seller agreed to ship product to a California company, with delivery in California. Second, the seller purposefully availed itself of the benefits of the forum by contracting with a California company for the sale of olive oil and shipping (or failing to ship) it to Long Beach. Third, the transaction (over $400,000) was substantial by almost any definition for the sale of goods, and it was fair to the buyer to resolve its case in the forum where the product was to have been delivered.

The appellate court was aware the Italian seller would be inconvenienced by having to defend a lawsuit in California rather than Italy, but pointed out California courts have a strong interest in enforcing contracts that provide for performance within the state. Interestingly, the appellate court opined that the seller could have insisted on an appropriate forum in the event of a dispute through a forum selection clause in its contract, before shipping goods to a foreign jurisdiction.

1 California law (similar to the laws of other states in the U.S.) provides that a court has personal jurisdiction over a non-resident defendant that has had “minimum contacts” with the state and that jurisdiction would not violate “traditional notions of fair play and substantial justice.”

2 Personal jurisdiction can be “general” or “specific.” The former requires “substantial, continuous and systematic” contacts (and the claim does not have to be connected to defendants’ business relationship with the forum); the latter requires (1) the defendant must have “purposefully availed itself of forum benefits,” (2) the controversy must be “related to or arise out of defendant’s contacts” with the state, and (3) personal jurisdiction would constitute “fair play and substantial justice.”

Article written by:
Neil Klein