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Supreme Court Reaffirms Limits on General Personal Jurisdiction For Foreign Corporate Defendants

Posted in Litigation Trends

supreme-court-building-1209701_1280With the United States Supreme Court hearing less than 100 cases every year, it is exceedingly rare for the Court to address a particular issue more than once.  However, with state courts throughout the country failing to properly apply its 2014 decision in Daimler AG v. Bauman, 134 S.Ct. 746 (“Daimler”), the Supreme Court recently found it necessary to reaffirm that absent “exceptional” circumstances a foreign corporate defendant is subject to general personal jurisdiction only in its state of incorporation or principal place of business.  Specifically, in BNSF Railway Co. v. Tyrrell, 581 U.S. __ (May 30, 2017) (“Tyrrell”), the Supreme Court held that Montana state courts could not exercise general personal jurisdiction over defendant BNSF, despite the fact that BNSF had fairly significant business ties to the state, because BNSF was neither incorporated in Montana nor had its principal place of business within the state.  While Daimler and Tyrrell will not eliminate the practice of forum shopping by plaintiffs, they do place material limitations on a plaintiff’s ability to file litigation in any forum where the injury did not occur and plaintiff must therefore rely on general personal jurisdiction alone in establishing personal jurisdiction over a foreign corporate defendant.

Background

Tyrrell involves two initially independent cases brought in Montana state courts by plaintiffs (Tyrrell and Nelson) under the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. §51 et seq., which allows railroad employees to sue their employers for injuries sustained on the job.  Both plaintiffs brought suit in Montana state courts, but neither case involved an injury that occurred in the state, and neither plaintiff resided in the state.  While defendant BNSF is incorporated in Delaware with its headquarters in Texas, it does have significant business ties to Montana, where 5% of its work force is located and roughly 6% of its railroad track is contained.  BNSF filed a motion to dismiss in each lawsuit, asserting that pursuant to Daimler it was not “at home” in Montana, and therefore not subject to general personal jurisdiction.  Because the injuries giving rise to the causes of action did not occur in Montana, specific personal jurisdiction was not at issue.  In Nelson’s case the motion was granted, but in Tyrrell’s case the motion was denied.  The rulings were appealed, and on appeal the Montana Supreme Court consolidated the two matters.

The Montana Supreme Court found that the state courts had general personal jurisdiction over BNSF under FELA because BNSF was doing business in Montana at the time of the suit.  In finding personal jurisdiction over BNSF, the Montana Supreme Court distinguished the Supreme Court’s holding in Daimler based on the application of FELA, concluding that because of the federal statute general personal jurisdiction could be conferred to the state courts even if the Daimler test was not satisfied.  The Montana Supreme Court also found that Montana state law allows for the state courts to exercise personal jurisdiction over BNSF because BNSF conducts business in the state.  Mont. Rule Civ. Proc. 4(b)(1)(2015).

The United States Supreme Court granted certiorari to resolve two questions: (1) whether FELA allows state courts to exercise general personal jurisdiction over railroad defendants conducting business in the state, but that are neither incorporated in nor have their principal place of business in the state, and (2) whether the Montana courts’ exercise of personal jurisdiction in the two cases is consistent with the due process clause of the Fourteenth Amendment.

Supreme Court Orders Reversal and Remand

In deciding the first question, the Supreme Court looked primarily at the FELA provision stating that a claim may be brought in a district “in which the defendant shall be doing business at the time of commencing such action.”  The Court determined that this provision deals with venue and subject matter jurisdiction only, and not personal jurisdiction.

More significantly, in deciding the second question, the Supreme Court found that BNSF was not “at home” in Montana, and therefore not subject to general personal jurisdiction there.  In making this finding, the Court echoed its reasoning from Daimler, noting that “a court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations . . . when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State . . . [t]he ‘paradigm’ forums in which a corporate defendant is ‘at home,’ . . . are the corporation’s place of incorporation and its principal place of business.”  The Supreme Court went on to clarify that “Daimler . . . applies to all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.”  (Emphasis added.)  Although the Supreme Court noted that an “exceptional case” could occur to allow general personal jurisdiction over a foreign defendant outside of its state of incorporation or principal place of business, the Court found that BNSF’s contacts with Montana were not “so substantial” to qualify as such since its contacts represented less than 10% of BNSF’s overall contacts nationwide.

In sum, because FELA did not address personal jurisdiction over railroads, and because Montana state law allowing for the exercise of personal jurisdiction over BNSF did not comport with due process pursuant to the test set forth in Daimler, the Supreme Court reversed and remanded “for further proceedings not inconsistent with [its] opinion.”

Justice Sotomayor, the lone dissenter, concurred in part and dissented in part with the majority’s opinion.  She concurred with the majority’s decision that FELA does not confer personal jurisdiction to state courts over railroad defendants.  Where she dissented with the majority was in their strong reaffirmation of Daimler and their decision not to remand the case back to the Montana Supreme Court to conduct an independent review of BNSF’s ties to Montana, and whether those ties constituted an exception to the Daimler “at home” test.  Ultimately, Justice Sotomayor was concerned that in practice the ”exceptional case” identified by the majority would never be found to exist, creating an imbalance of the equities in defendants’ favor.

Future Impact

Prior to Daimler and Tyrrell, corporate defendants were essentially subject to general personal jurisdiction in any forum in which their business contacts were deemed to be sufficient enough by the state courts, resulting in forum shopping by plaintiffs.  Tyrrell makes it clear (again), that absent exceptional circumstances, corporations that do business on a national scale will not be subject to general personal jurisdiction in every state, thereby reigning in plaintiffs’ ability to forum shop.  As a result of Tyrrell, it is anticipated that plaintiffs will place greater emphasis on establishing specific personal jurisdiction.  Notably, Bristol-Myers v. Sup. Ct., No. 16-466, argued on the same day as Tyrrell, will likely address the issue of specific personal jurisdiction.  It is anticipated that the Supreme Court will render its opinion any day now, so stay tuned.