Thursday, January 17, 2008
Last week's 5th Circuit Stroman decision is worth noting. Stroman Reality was a large timeshare dealer headquartered in Texas. Stroman received cease-and-desist letters from the Arizona Commissioner of the Department of Real Estate. The letters ordered Stroman to cease Arizona-related brokerage activities. Stroman sued the Commissioner in a Texas federal court under Ex Parte Young, alleging that "Arizona's attempted exercise of regulatory jurisdiction to license timeshare resales violated the Commerce Clause by discriminatorily and unduly burdening nonresident participation in the interstate timeshare market." The Fifth Circuit held that personal jurisdiction did not exist. Two of the key passages:
Arizona is simply trying to uniformly apply its laws. If the court adopted the approach urged by Stroman, we would endorse an interpretation of personal jurisdiction under which ... any state official seeking to enforce her state's laws ... could potentially be subjected to suit in any state where the validity of her state's laws were in question. We are unwilling to establish such a broad principle. ***
Important questions of federalism are present here, and thus, for this case, "the shared interest of the several states" is the most significant reasonableness consideration outlined by the Supreme Court. *** The effect of holding that a federal district court in Texas had personal jurisdiction over a nonresident state official would create an avenue for challenging the validity of one state's laws in courts located in another state. This practice would greatly diminish the independence of the states.