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April 30, 2015 Articles

Does Merely Registering to Do Business in a State Create General Jurisdiction by Consent?

By James M. Beck

It is well known that a nonresident plaintiff cannot assert “specific” personal jurisdiction over a nonresident defendant unless that plaintiff was injured in the forum state. As a result, nonresident plaintiffs traditionally have relied on general jurisdiction principles to maintain an action against a nonresident defendant in the plaintiff’s favored jurisdiction. The Supreme Court’s decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), has severely curtailed general personal jurisdiction and, thus, the ability of nonresident plaintiffs to maintain claims against nonresident defendants.

The “at home” test as applied in Bauman restricts general personal jurisdiction to little more than the state of incorporation or principal place of business—the “exceptional circumstances” exception is truly exceptional. After Bauman, it has become “incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.” Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429, 432 (5th Cir. 2014). In the intervening period, plaintiffs in mass torts litigation, from asbestos to Zyprexa, have been seeking other arguments that might keep nonresident defendants tied to litigation pending in jurisdictions where neither party resides.

Plaintiffs seeking to hold onto jurisdiction over nonresident corporations have argued that nonresident defendants impliedly consent to general jurisdiction by registering to do business in a state or by appointing an agent for service of process, or both. Because most large corporations are registered to do business in many, if not all, states, this approach is in tension with the underpinnings of the Supreme Court’s decision in Bauman:

Plaintiffs would have us look beyond the exemplar bases Goodyear identified, and approve the exercise of general jurisdiction in every State in which a corporation “engages in a substantial, continuous, and systematic course of business.” That formulation, we hold, is unacceptably grasping.

*          *          *          *

Here, neither [defendant] is incorporated in [the forum], nor does either entity have its principal place of business there. If [defendants’ forum] activities sufficed to allow adjudication of this [non-forum] case in [the forum], the same global reach would presumably be available in every other State in which [defendants’] sales are sizable. Such exorbitant exercises of all-purpose jurisdiction would not “permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.”

134 S. Ct. at 760–62 (citations and quotation marks omitted).

The practical effect of basing general jurisdiction on a low standard for “consent” could be as “grasping” and “exorbitant” as the test disapproved in Bauman. Nor would it allow corporations the freedom to “structure” general personal jurisdiction as recognized by the Supreme Court. Because Bauman applied constitutional due process principles, any theory of general personal jurisdiction producing the result that the Supreme Court rejected in Bauman would not likely pass constitutional muster. Accordingly, most courts have rejected the theory.

A “consent” theory based on the mere fact of being registered to do business in the state did succeed in Acorda Therapeutics, Inc. v. Mylan Pharmaceuticals, Inc., 2015 WL 186833 (D. Del. Jan. 14, 2015), a patent case. Based on 1920s-era Supreme Court decisions and pre-Bauman Delaware state decisions, the district court concluded that personal jurisdiction could lie on the basis of “consent”—even though neither general nor specific personal jurisdiction over the action existed:

Given the analysis above, the undersigned Judge concludes that this Court may exercise general jurisdiction over [the defendant] based on [its] consent, consent which [the defendant] gave when it complied with the Delaware business registration statute by appointing a registered agent in Delaware to accept service of process.

Acorda, 2015 WL 186833, at *11.

Another Delaware district court, however, has reached the opposite conclusion—in a case involving the same defendant—concluding that to read “consent” in this fashion would subject corporations “with a national presence” to general jurisdiction “all over the country, a result specifically at odds with” Bauman. In AstraZeneca AB v. Mylan Pharmaceuticals, Inc., 2014 WL 5778016, at *5 (D. Del. Nov. 5, 2014), the court held:

[Bauman] does weigh on this issue. Both consent and minimum contacts (and all questions regarding personal jurisdiction) are rooted in due process. . . . The Supreme Court’s discussion of due process in [Bauman], therefore, informs the court’s analysis here. In holding that “continuous and systematic contacts” alone are insufficient to establish general jurisdiction, the Supreme Court rejected the idea that a company could be haled into court merely for “doing business” in a state. Such a theory, the Court held, “would scarcely permit out-of-state defendants ‘to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.’”

In light of the holding in [Bauman], the court finds that [the defendant’s] compliance with Delaware’s registration statutes—mandatory for doing business within the state—cannot constitute consent to jurisdiction, and the Delaware Supreme Court’s [prior] decision . . . can no longer be said to comport with federal due process.

Id. (Bauman citations omitted), certified for interlocutory appeal on another issue, 2014 WL 7533913 (D. Del. Dec. 17, 2014).

The issue has arisen in New York as well. In Sonera Holding B.V. v. Cukurova Holding A.S., 750 F.3d 221 (2d Cir. 2014), the court noted that Bauman cast doubt on that state’s previous personal jurisdiction jurisprudence:

[W]e note some tension between [Bauman’s] “at home” requirement and New York’s “doing business” test for corporate “presence,” which subjects a corporation to general jurisdiction. . . . Not every company that regularly “does business” in New York is “at home” there. [Bauman’s] gloss on due process may lead New York courts to revisit Judge Cardozo’s well-known and oft-repeated jurisdictional incantation.

Id. at 224 n.2.

The court then refused to read ambiguous contractual language as “waiv[ing] any defense based on lack of personal jurisdiction and to consent to the jurisdiction of any court . . . with subject matter jurisdiction.” Id. at 226–27. Similarly, in Magdalena v. Lins, 999 N.Y.S.2d 44 (N.Y. App. Div. 2014), the court found no general jurisdiction under Bauman and, further, that the trial court “erroneously concluded that the parties had consented to jurisdiction in New York based on a forum selection clause.” Id. at 45. Simply being registered to do business was similarly held not to constitute consent in Chatwal Hotels & Resorts LLC v. Dollywood Co., 2015 WL 539460 (S.D.N.Y. Feb. 6, 2015):

The strongest argument for establishing general jurisdiction over any of the defendants stems from [one defendant] being registered to do business in the forum. Prior to [Bauman], some courts concluded that registering to do business in the state of New York automatically confers general jurisdiction on that person or entity. However, other courts were unwilling to find that registering to do business in the state, without more, was enough to confer general jurisdiction over an entity. . . .

After [Bauman], with the Second Circuit cautioning against adopting “an overly expansive view of general jurisdiction,” the mere fact of [the defendant’s] being registered to do business is insufficient to confer general jurisdiction in a state that is neither its state of incorporation or its principal place of business.

Id. at *5–6 (citations omitted). See Chambers v. Weinstein, 2014 WL 4276910, at *16, 997 N.Y.S.2d 668 (table) (N.Y. Sup. N.Y. Cnty. Aug. 22, 2014) (after Bauman, the “mere fact” nonresident attorneys and their firm “are licensed to practice in New York does not subject them . . . to the personal jurisdiction” in New York); Gliklad v. Bank Hapoalim B.M., 2014 WL 3899209, at *1 (N.Y. Sup. N.Y. Cnty. Aug. 4, 2014) (after Bauman, being “licensed . . . to conduct business in New York” and having a “designated” New York “agent for service of process” was insufficient to support general personal jurisdiction). But cf. Beach v. Citigroup Alternative Invs. LLC, 2014 WL 904650, at *6 (S.D.N.Y. Mar. 7, 2014) (dictum suggesting that registration created general jurisdiction in case where defendant was “not registered to do business in New York”).

Most other post-Bauman courts have also agreed with AstraZeneca rather than Acorda. This issue has already been litigated several times in asbestos cases. In Brown v. CBS Corp., 19 F. Supp. 3d 390 (D. Conn. 2014), the court ruled that, regardless of the effect of the defendant’s registration to do business on Connecticut statutes conferring personal jurisdiction, “the requirements of the due process clause must also be met.” Id. at 394. A nonresident asbestos plaintiff could not obtain jurisdiction over a nonresident defendant over exposure that was likewise out of state:

It is undisputed that the plaintiff’s claims in this case do not arise out of or relate to [the defendant’s] activities within Connecticut. Therefore the court is only able to exercise personal jurisdiction over [the defendant] if its contacts with Connecticut are “so substantial and of such a nature” that it can fairly be said to be “at home” here. The plaintiff has not made a prima facie showing that [the defendant] has such contacts.

Id. at 397 (Bauman citations omitted).

In an asbestos case involving claimed exposure in the Virgin Islands, that a defendant was “licensed to do business in the forum; has an agent for service; and sails vessels in Virgin Islands waters and docks at their ports” was not enough to establish that “[the defendant] is fairly regarded as at home in the forum.” In re Asbestos Prods. Liab. Litig. (No. VI), 2014 WL 5394310, at *11 (E.D. Pa. Oct. 23, 2014) (Bauman citations omitted). Another asbestos case, this time in St. Louis, produced a similar result:

The limitation on such assertion [of personal jurisdiction] may be, of course, the due process clause of the United States Constitution. Here . . . [the defendant] argues in its Motion to Dismiss that the due process requirements of the United States Constitution have not been met. Thus, the Court finds that the due process analysis set forth in [Bauman] must be applied to determine general personal jurisdiction. . . . [S]ervice on a foreign corporation’s registered agent . . . does not automatically establish general personal jurisdiction. Plaintiff still must show that the exercise of general personal jurisdiction over the foreign corporation complies with the Due Process Clause of the United States Constitution. . . . [T]he Court finds that [the defendant] is not incorporated in Missouri, nor does it have its principal place of business here. Plaintiff has not presented evidence indicating that this case is an “exceptional case” under [Bauman] such that general personal jurisdiction should be extended beyond these paradigmatic forums. Accordingly, the Court holds, based on the facts of this case, that it lacks personal jurisdiction over [the defendant] under the Due Process Clause.

Smith v. Union Carbide Corp., 2015 WL 191118, at *2–3 (Mo. Cir. St. Louis City Jan. 12, 2015) (citations omitted).

The court in Shrum v. Big Lots Stores, Inc., 2014 WL 68884467 (C.D. Ill. Dec. 8, 2014), no doubt bolstered by supportive pre-Bauman precedent, held that a defendant’s “maintenance of an agent for the service of process does not rise to the level of continuous and systematic contacts needed for the court to exercise general jurisdiction.” Id. at *7 (quoting Rawlins v. Select Specialty Hosp., 2014 WL 1647182, at *5 (N.D. Ill. Apr. 23, 2014)), and citing several pre-Bauman decisions). In another Illinois case, the “[p]laintiffs . . . failed to carry their burden of establishing that [the defendant] is subject to general jurisdiction in Illinois” simply “because it is registered to do business in Illinois [and] maintains a registered agent for service of process in the state.” Sullivan v. Sony Music Entm’t, 2014 WL 5473142, at *3 (N.D. Ill. Oct. 29, 2014).

Similarly, the defendant’s maintenance of debt collection licenses in various “states requiring such licensure” was insufficient to support general jurisdiction in Cutcher v. Midland Funding, LLC, 2014 WL 2109916, at *7 (D. Md. May 19, 2014). A foreign bank’s registration of a subsidiary subject to American law did not constitute “consent” to jurisdiction anywhere in the United States in AM Trust v. UBS AG, 2015 WL 395465, at *8 (N.D. Cal. Jan. 29, 2015). A law firm’s status as a “registered lobbyist” in a state is insufficient to create general jurisdiction. Fulbright & Jaworski v. Eighth Judicial District Court, 2015 WL 481177, at *4 (Nev. Feb. 5, 2015). See United States ex rel. Imco Gen. Constr., Inc. v. Ins. Co. of Pa., 2014 WL 4364854, at *3 (W.D. Wash. Sept. 3, 2014) (although “defendant is registered to do business here” “has been registered to do business here since 1909,” and “has 217 agents registered” in the state, “these facts . . . considered individually or together . . . do not establish that defendant is ‘at home’”); NExTT Solutions, LLC v. XOS Techs., Inc., 2014 WL 6674619, at *6–7 (N.D. Ind. Nov. 25, 2014) (plaintiff “failed to make a prima facie showing that general jurisdiction can be asserted” although defendant was “registered as a foreign corporation doing business in the state”). Thus, it appears that most post-Bauman precedent rejects the argument that registration to do business and the concomitant appointment of statutory agents to receive process can be a foundation for the assertion of personal jurisdiction by consent.

Finally, as mentioned, some states’ pre-Bauman law did allow general jurisdiction to be based on nothing more than registration to do business/appointment of an agent for service of process. See, e.g., Sternberg v. O’Neil, 550 A.2d 1105, 1115–16 (Del. 1988); Tauza v. Susquehanna Coal Co., 115 N.E. 915, 918 (N.Y. 1917) (Cardozo, J.). However, even before Bauman, many courts had declined to rest general personal jurisdiction on a defendant’s bare registering to do business in a state. In Washington Equipment Manufacturing Co. v. Concrete Placing Co., 931 P.2d 170 (Wash. Ct. App. 1997), the court held:

Consent, including consent to general jurisdiction, requires some knowing and voluntary act. A foreign corporation should not be deemed to have knowingly consented to general jurisdiction by doing an act required by the state—obtaining a certificate of authority to do business and appointing a registered agent—absent legislative intent. . . . [The relevant statute] sets out the requirements for doing business in [this state], not jurisdiction. A certificate of authority to do business and appointment of a registered agent do not then confer general jurisdiction over a foreign corporation.

Id. at 172–73. Accord Everdry Mktg. & Mgmt., Inc. v. Carter, 885 N.E.2d 6, 12 n.6 (Ind. Ct. App. 2008) (“[o]rdinarily, registration, standing alone, will not satisfy due process”); DVI, Inc. v. Superior Court, 128 Cal. Rptr. 2d 683, 694 (Cal. Ct. App. 2002) (“designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction”) (citing Gray Line Tours v. Reynolds Elec. & Eng’g Co., 238 Cal. Rptr. 419, 421 (Cal. Ct. App. 1987)).

Several federal courts of appeals also reached the same result before Bauman. In Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239 (7th Cir. 1990), the court refused to recognize general jurisdiction over a franchisor otherwise lacking “continuous and substantial” contact, solely because it was registered to do business in the forum state:

The Wilsons argue that the Indiana registration act . . . is sufficient to support general jurisdiction. Registering to do business is a necessary precursor to engaging in business activities in the forum state. However, it cannot satisfy . . . standing alone the demands of due process. Such an interpretation of the Indiana registration statute would render it constitutionally suspect and, accordingly, we decline to give it such a reading.

Id. at 1245 (citations omitted). See King v. Am. Family Mut. Ins. Co., 632 F.3d 570, 579 (9th Cir. 2011) (a defendant’s “sole contacts” being “Certificates of Authorization and their appointments of the Insurance Commissioner as an agent for service of process” does not support general persinal jurisdiction); Ratliff v. Cooper Labs., Inc., 444 F.2d 745, 748 (4th Cir. 1971) (“Applying for the privilege of doing business is one thing, but the actual exercise of that privilege is quite another. The principles of due process require a firmer foundation than mere compliance with state domestication statutes.”).

Thus, both the constitutional rationale that underlies Bauman and the initial results of a year of post-Bauman litigation suggest that compliance with state statutes requiring registration to do business and/or appointment of agents for service of process are too thin a reed to support the exercise of general jurisdiction.

Keywords: mass torts litigation, personal jurisdiction, general jurisdiction, registration, agent, Daimler AG v. Bauman

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