Until recently, many large companies have resigned themselves to the assertion of personal jurisdiction by courts in any state in which they do business—so long as the plaintiff has named the right corporate entity as defendant. That’s because the conventional wisdom has been that large companies are subject to personal jurisdiction nationwide because they do a lot of business in every state.
The Supreme Court recently has provided reason to revisit that assumption, however. Two recent decisions by the Court place significantly tighter limitations on the assertion of personal jurisdiction, equipping businesses with new defenses against forum-shopping by plaintiffs’ class-action lawyers.
Putting the brakes on general personal jurisdiction
The first decision, from January, is Daimler AG v. Bauman. Most of the media coverage of the case focused on the decision’s implications for the future of Alien Tort Statute (ATS) litigation. But Bauman wasn’t just about the ATS; the heart of the Court’s opinion was a clarification of the test for general personal jurisdiction, the type of jurisdiction that permits a defendant to be sued over claims that have no connection to the forum.
In Bauman, the Court held that, barring “exceptional circumstances,” the only states that can exercise general personal jurisdiction over a corporation are its state of incorporation and the state of its principal place of business (which is almost always its headquarters).
Richard Samp, who is chief counsel at the Washington Legal Foundation, has an interesting article in Forbes on how Bauman will make it harder for the plaintiffs’ bar to cherry-pick favorable jurisdictions in which to file class actions. As Rich explains, this decision may be a game-changer:
If a consumer claims that he has been injured by a prescription drug, for example, his choice of forum will likely be limited to no more than three states: his home state, and the state(s) in which the pharmaceutical manufacturer is incorporated and maintains its principal place of business. After Daimler, it makes no difference that the manufacturer’s sales within the plaintiff’s favored forum are in the billions of dollars annually, so long as that state is not the manufacturer’s principal place of business; it would take “exceptional circumstances” to convince the Court that the manufacturer is “at home” in that State.
Check out the rest of Rich’s article; it’s worth reading. (My colleagues Alex Lakatos, Marc Cohen, Andy Pincus, Mark Hanchet, Chris Houpt, Paul Hughes, and Gretchen Helfrich have also reported on the significance of Bauman.)
Restoring rigor to specific personal jurisdiction
A second Supreme Court decision arguably does for specific personal jurisdiction what Bauman does for general personal jurisdiction. Specific jurisdiction is the type of jurisdiction that allows a defendant to be sued for specific claims that are sufficiently connected to the forum, even if that forum couldn’t exercise general personal jurisdiction over the defendant.
In Walden v. Fiore, a Georgia law enforcement officer seized cash from two gamblers while they were changing planes in the Atlanta airport. When the gamblers returned home to Nevada, they sued the Georgia officer in Nevada court. The Supreme Court held that Nevada couldn’t exercise specific jurisdiction over the Georgia officer.
The Court’s decision laid out two important limits on the scope of specific personal jurisdiction:
a defendant’s relationship with the forum must “arise out of contacts that the defendant himself”—not the plaintiff—creates, and
courts are to look to “the defendant’s contacts with the forum State itself, not the defendant’s contacts with persons who reside there.”
In a footnote, however, the Court announced that it was not deciding “whether and how a defendant’s virtual ‘presence’ and conduct” online might “translate into ‘contacts’ with a particular state.”
Despite its caveats, the Court’s articulation in Walden of basic principles of specific personal jurisdiction may be very helpful to class-action defendants, particularly in the products-liability area. Under Walden, loose allegations by plaintiffs of a purportedly foreseeable “effect” on persons in the forum state arguably aren’t sufficient to establish personal jurisdiction; plaintiffs must instead show that the defendant itself has established contacts with the forum.