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May 31, 2017 Practice Points

Shop until the International Shoe Drops: SCOTUS Restricts Forum Shopping Against an Out-Of-State Employer

Out-of-state corporation must still have “continuous and systematic” contacts with forum state to be “at home” and subject to general personal jurisdiction

by Kathryn Dietrich Perreault

In BNSF Railway Co. v. Tyrrell, No. 16-405 (May 30, 2017), the U.S. Supreme Court reversed a Montana Supreme Court decision that had allowed the exercise of personal jurisdiction over BNSF Railway Company (BNSF) in a personal injury action filed by two BNSF employees under the Federal Employers' Liability Act (FELA). In doing so, the U.S. Supreme Court held that (1) FELA § 56 does not provide a legal basis for personal jurisdiction; and (2) the exercise of general personal jurisdiction over BNSF—an out-of-state corporation that conducted a relatively small portion of its business in Montana—violated the Fourteenth Amendment's Due Process Clause.

The Montana Supreme Court Decision
The Montana Supreme Court had upheld the exercise of personal jurisdiction over BNSF, based on the fact that BNSF conducted a portion of its business in the state. As legal support for its decision, the Montana Supreme Court relied on FELA § 56, which sets forth the available venues for a FELA action, including the district "in which the defendant shall be doing business" at the time the action is filed. Alternatively, the Court relied on Montana Rule of Civil Procedure 4(b)(1), which provides that Montana courts may exercise personal jurisdiction over "persons found within . . . Montana."

The U.S. Supreme Court Decision
In reversing the Montana Supreme Court's decision, the U.S. Supreme Court reasoned that FELA § 56 does not address personal jurisdiction, but rather venue and concurrent subject matter jurisdiction. Accordingly, the U.S. Supreme Court held that § 56 did not provide a lawful basis for the exercise of personal jurisdiction over BNSF.

Turning to the constitutional question, the U.S. Supreme Court determined that the exercise of personal jurisdiction over BNSF under Montana law violated the Due Process Clause. Harkening back to International Shoe, the Court explained that a state court "may exercise personal jurisdiction over an out-of-state defendant who has 'certain minimum contacts with [the state] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Whether an out-of-state defendant has sufficient contacts with the forum state depends, in part, on whether the defendant's conduct in the forum state is at issue. In Tyrrell, the plaintiffs' alleged injuries did not arise from BNSF's contacts with Montana. Therefore, the Court examined whether BNSF's contacts with Montana supported the exercise of "general or all-purpose jurisdiction" by the Montana courts.

Relying on its holdings in Daimler AG v. Bauman, 571 U.S. ___, 134 S. Ct. 746 (2014), and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), the Court explained that courts may exercise general personal jurisdiction over out-of-state corporations if the corporations' contacts with the state "are so 'continuous and systematic' as to render them essentially at home in the forum State.'" According to the Court, a corporation is "at home" in the forum state if it is incorporated there, has its principal place of business there, or its operations there are "so substantial and of such nature as to render the corporation at home in that State."

In Tyrrell, the Court held that BNSF's contacts with the State of Montana were insufficient to make Montana its "home." BNSF was incorporated in Delaware and has its principal place of business in Texas. Less than 5% of its employees work in Montana, and approximately 6% of its railway tracks run through Montana. According to the Court, BNSF's in-state contacts did not provide a basis for the Montana courts to exercise jurisdiction over claims that were "unrelated to any activity occurring in Montana." On this basis, the Court reversed the decision of the Montana Supreme Court.

The Bottom Line
The U.S. Supreme Court's decision in Tyrrell restricts a non-resident employee's ability to shop for the most favorable forum in actions against out-of-state employers who are not "at home" in the forum state. Whether the employer is "at home" is a case-specific inquiry. Where possible, out-of-state employers should demonstrate to the Court that their activities in the forum state (1) do not constitute a significant percentage of their operations, activities, or revenue; and (2) do not give rise to the claims at issue.

Keywords: commercial and business, continuous and systematic, corporations, due process, Federal Employers' Liability Act, FELA, litigation, personal jurisdiction, venue

Kathryn Dietrich Perreault is a member with Bressler, Amery & Ross, P.C., in Birmingham, Alabama.

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