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February 08, 2016 Articles

The Supreme Court's Clarification on the Scope of Personal Jurisdiction

By Evan P. Moltz

Personal jurisdiction is a fundamental aspect of every case. Without it, the court has no power to enter a judgment for or against a party. The precise boundary of a court's jurisdiction over a defendant has not always been clear even though the standards announced in iconic Supreme Court cases are all too familiar. The Supreme Court's decisions in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), and Walden v. Fiore, 134 S. Ct. 1115 (2014), provide some clarity on the issue, while also raising some new questions.

Notwithstanding these cases, the broad structure of the personal jurisdiction analysis has remained unchanged. The due process clause still provides the outermost limit for exercising jurisdiction over a nonresident of the forum. And jurisdiction can still either be general or specific. The change, like the devil, is in the details.

General Jurisdiction and the Need to Be "At Home"
The Supreme Court has largely ignored general jurisdiction, or jurisdiction for all claims regardless of whether they arise out of activities occurring in the forum, until the last few years. In the cases where the Court did address the topic, it historically held that due process is not offended by subjecting a defendant to general jurisdiction in forums where it has sufficient, continuous, and systematic business contacts. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415–16 (1984). The general jurisdiction standard began its transformation when the Court decided Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011). There, it was first announced that "[a] court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Goodyear, 131 S. Ct. at 2851. The Court went on to note that "[f]or an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home." Goodyear, 131 S. Ct. at 2853–54.

Parties and courts spent the next three years trying to figure out exactly where a corporation would be deemed at home for jurisdictional purposes. The Court, in Daimler, provided an answer. It explained that merely having continuous and systematic contacts with the forum was no longer sufficient to render a corporate defendant susceptible to general jurisdiction there. Daimler, 134 S. Ct. at 761. The corporation's contacts must instead be so continuous and systematic to justify saying that it is basically at home in the forum. Only a limited set of affiliations to the forum satisfy this standard. Those affiliations generally are the corporation's place of incorporation and principal place of business. Daimler, 134 S. Ct. at 760–61. General jurisdiction, in other words, is normally constitutionally proper only in the corporation's domicile. There nevertheless may be an "exceptional" case where general jurisdiction will be appropriate in a forum other than the corporation's place of incorporation and principal place of business. Daimler, 134 S. Ct. at 761 n.19.

Life after Daimler
Although the Daimler Court greatly restricted the reach of general jurisdiction, it did not explicitly define the exceptional case that would merit finding a corporation at home in a forum outside of its domicile. But it did state that the "at home" analysis requires consideration of the corporation's entire set of activities, nationwide and worldwide. Yet, the Court at the same time cautioned, "A corporation that operates in many places can scarcely be deemed at home in all of them." Daimler, 134 S. Ct. at 762 n.20. Some trial courts have taken this warning to heart by holding contacts that are typical of a corporation doing business in any state "are far from exceptional" and will not subject the corporation to general jurisdiction in the forum. See, e.g., In re Plavix Related Cases, No. 2012 L 5688, 2014 WL 3928240, at *7 (Ill. Cir. Ct. Aug. 11, 2014) (emphasis omitted).

Given the uncertainty regarding the contours of the exceptional case, trial courts have followed different approaches to dealing with jurisdictional challenges presented early in the litigation. Certain courts have granted motions to dismiss because the defendant was not incorporated, nor did it have its principal place of business, in the forum and because the exceptional case is a highly limited concept. See, e.g., Chatwal Hotels & Resorts LLC v. Dollywood Co., 90 F. Supp. 3d 97, 104 (S.D.N.Y. 2015) (finding that general jurisdiction could not be exercised because the defendants were not incorporated in New York, did not have their principal place of business in New York, and their contacts with New York clearly did not present an exceptional case); Robinson v. Johnson & Johnson, No. BC531848, 2015 WL 3923292, at *4 (Cal. Super. Ct. June 22, 2015) (refusing to find that the facts presented an exceptional case and noting that the exceptional case is intended to be "highly limited" in light of Supreme Court precedent). Other courts have utilized a less absolute approach and allowed jurisdictional discovery before ruling on motions to dismiss. See, e.g., Bazor v. Abex Corp., No. PC20123965, 2015 WL 4487188, at *6–7 (R.I. Super. Ct. July 16, 2015) (granting motion to compel jurisdictional discovery as to one defendant, but denying motion to compel as to other defendants). Justice Sotomayor predicted this may happen in her Daimler concurrence, but the majority rebuffed her concern stating that "it is hard to see why much in the way of discovery would be needed to determine where a corporation is at home." Daimler, 134 S. Ct. at 762 n.20; Daimler, 134 S. Ct. at 770–71 (Sotomayor, J., concurring).

Still other courts have attempted to avoid Daimler altogether. These courts have said that corporate defendants may consent to personal jurisdiction by registering to do business in the forum and maintaining a registered agent to accept service in the forum thereby alleviating the need to undertake the general jurisdiction analysis. See Beach v. Citigroup Alternative Invs. LLC, No. 12 Civ. 7717(PKC), 2014 WL 904650, at *6 (S.D.N.Y. Mar. 7, 2014); Sagers v. AGCO Corp., No. 1422-CC10026, slip op. at 4 (Mo. Cir. Ct. Aug. 6, 2015). As might be expected, courts have reached the opposite conclusion too, finding that service on a registered agent does not automatically lead to general jurisdiction. See, e.g., Smith v. Union Carbide Corp., No. 1422-CC00457, 2015 WL 191118, at *2 (Mo. Cir. Ct. Jan. 12, 2015). Rather, there must be a showing that exercising general jurisdiction over the corporate defendant does not offend its due process rights even if the defendant has a registered agent in the state. Smith, 2015 WL 191118, at *2.

The Supreme Court's Reassessment of Specific Jurisdiction
During the same October 2010 and October 2013 terms when the general jurisdiction landscape was evolving, the Court was also trying to clarify certain features of specific jurisdiction. To that end, the Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), again tackled the controversial stream of commerce doctrine. A majority of the justices ultimately agreed the forum could not constitutionally exercise jurisdiction over the defendant under the facts of the case. A majority, though, could not agree on whether the stream of commerce doctrine was a viable basis for establishing jurisdiction over a nonresident defendant, leaving the question for another day and lower courts without any clear guidance on the topic. See J. McIntyre, 131 S. Ct. at 2785, 2791.

While not directly addressing the stream of commerce issue, the Court announced its unanimous opinion in Walden v. Fiore regarding the standard for specific jurisdiction one month after Daimler was decided. The Walden Court's decision, despite receiving less fanfare than Daimler, may play an important role in what has been termed "the centerpiece of modern jurisdiction theory." See Goodyear, 131 S. Ct. at 2854. The Court, to be sure, did not purport to drastically alter the framework for specific jurisdiction. It just put a finer point on the rules.

The Court began its discussion by reaffirming that specific jurisdiction is about the relationship among the defendant, forum, and litigation. Walden, 134 S. Ct. at 1121. It then stated that specific jurisdiction can only be constitutionally exercised if the defendant's conduct at issue in the litigation creates a substantial connection with the forum. Under this rubric, the contacts the defendant itself creates with the forum and not its contacts with the plaintiff are what matters. The defendant's physical presence in the forum state, including through goods, therefore is a relevant contact. Consistent with this defendant-centric approach, the Court explained that the plaintiff's contacts with the forum, no matter how significant, simply cannot be the justification for exercising jurisdiction over a defendant. Nor may the defendant's relationship with the plaintiff be the sole link to the forum regardless of whether the defendant directs its conduct toward the plaintiff and knows of the plaintiff's forum connections. Walden, 134 S. Ct. at 1122–23, 1125.

The decisions in Daimler and Walden answered significant questions on both general and specific jurisdiction, but they have opened the door to new questions as well. Only time will tell if a consensus is reached on these new subjects in trial and intermediate appellate courts or if they will have to make their way back to the Supreme Court.

Keywords: litigation, products liability, personal jurisdiction, general jurisdiction, specific jurisdiction, Supreme Court

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