Can Utah courts exercise jurisdiction over out-of-state businesses conducting transactions by phone and fax? SII MegaDiamond, Inc. v. American Superabrasives Corp. Explained

Background and Facts

SII MegaDiamond, a Utah manufacturer of industrial diamonds, entered into a three-year distribution agreement with American Superabrasives Corp. (ASC), a company that later reincorporated from New York to New Jersey. Over nearly two years, ASC placed orders via telephone and fax, with SII shipping products from Utah either to ASC in New Jersey or directly to ASC’s customers. ASC failed to pay 170 invoices totaling $118,000. When SII sued in Utah state court, ASC moved to dismiss for lack of personal jurisdiction, arguing it had insufficient contacts with Utah.

Key Legal Issues

The court addressed whether ASC’s business activities satisfied Utah’s long-arm statute requirement for “transaction of any business within this state” and whether exercising jurisdiction would violate due process under the Fourteenth Amendment. The court also considered whether defendants waived jurisdictional objections by not raising them in federal court before remand.

Court’s Analysis and Holding

The Utah Supreme Court found ASC transacted business in Utah through its regular course of dealing with SII. Each fax or telephone order constituted an offer received in Utah, with SII’s shipment constituting acceptance, making Utah the place where contracts were formed. The court emphasized that ASC’s activities went beyond isolated transactions—it engaged in a substantial ongoing commercial relationship pursuant to a three-year agreement, with projected sales of $2.6 million. This purposeful availment satisfied both the long-arm statute and due process requirements. The court distinguished cases involving mere mail-order purchases, noting ASC’s relationship involved continuous wholesale transactions under a distribution agreement.

Practice Implications

This decision establishes that Utah courts can exercise jurisdiction over nonresident defendants who engage in substantial ongoing business relationships with Utah entities, even when conducted primarily through remote communications. Practitioners should focus on the totality of the commercial relationship rather than individual transactions when asserting jurisdiction. The decision also clarifies that defendants cannot avoid state court jurisdiction by initially appearing in federal court without objection, then raising jurisdictional defenses after remand.