On December 22, 2017 President Trump signed into law the Tax Cuts and Jobs Act (officially Public Law no. 115-97, named “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”). Recognized generally for changes to the individual income tax brackets, the corporate tax cuts, and the estate tax modification, a separate section, 13307, likely will have a significant impact on sexual harassment settlements.

 

Senator Bob Menendez (D- NJ) proposed the Weinstein tax exclusion (above) in direct response to the #MeToo movement after the sexual harassment revelations about Harvey Weinstein. The provision was added to the Tax Cuts and Jobs Act to restrict tax deductibility of sexual harassment settlements associated with nondisclosure agreements. Such agreements were reported in connection with Harvey Weinstein, Fox News, and other high profile cases.

Section 13307 modified the IRS Tax Code section 162 to eliminate the ability of businesses and defendants (and possibly plaintiffs) to deduct the costs associated with settlements of sexual harassment claims that are subject to nondisclosure agreements, including legal fees related to the settlements. Because most settlements related to sexual harassment have included confidentiality or nondisclosure language, the impact of this legislation will be significant for all parties involved, and will be reflected in advice from legal counsel. The provision applies to any payments made on or after December 22, 2017 and is not retroactive, except to the extent it affects payments left to be paid after December 22, 2017 on any prior settlement agreement.

The statutory language does not provide definitions for the terms “sexual harassment” or “sexual abuse.” The statutory language also does not clarify the meaning of “related to” for the purposes of settlement or legal fees. This ambiguity leaves several important open questions:

• An employment dispute that does not involve claims of sexual harassment but results in a nondisclosure agreement that includes broad releases may be problematic. If the scope of the releases includes sexual harassment claims, can that settlement be deducted by the business?

• What if a plaintiff has multiple claims, including but not limited to retaliation, gender discrimination, and a sexual harassment claim; what portions of a settlement payment will be deductible? Could effective contract drafting allocate most of the settlement consideration to the non-sexual harassment claims and thereby affect deductibility?

• In settling multiple claims, should counsel draft two separate agreements, one dealing only with the sexual harassment claim and the other agreement with all remaining claims, and allocating the larger portion of the settlement consideration to the nonsexual harassment claim, which is deductible?

• Does the statute exclude all legal fees associated with the claim from deduction, or just the portion of fees associated with the negotiation of the settlement and the drafting and execution of a settlement agreement?

Until more clarity is provided by administrative rules, legislative changes, or court opinions, lawyers will have an important role advising clients how to modify previous boilerplate nondisclosure settlement agreements Counsel also will be instrumental in structuring the negotiation of sexual harassment claims, as businesses and defendants weigh the potential benefit of keeping a sexual harassment claim confidential against the financial implication of losing the ability to deduct the settlement and legal fees.

The #MeToo movement has given a voice and a platform for sexual harassment victims. Because the number of sexual harassment claims, including class actions, is likely to increase, businesses will be motivated to increase their preventive efforts through education and training of their employees about sexual harassment. After the enactment of the Tax Cuts and Jobs Act, businesses and defendants also must be prepared to balance the cost of claims that can no longer be deducted against the value of confidentiality and settlement certainty.

The new tax provision is important, but also vague and subject to interpretation. In future issues, the Defense Litigation Insider will examine the effect of this legislation on the negotiation and drafting of settlement and nondisclosure agreements.

 

 

Oxford Global Resources, LLC v. Hernandez
Superior Court of Massachusetts
(Suffolk, Business Litigation Session)
Docket No. 1684-CV-03911-BLS-2


 

The Business Litigation Session of the Suffolk Superior Court in Massachusetts invalidated a contractual forum selection clause and dismissed an employer’s action to enforce a noncompetition agreement signed by a former employee, because the employer forced a Massachusetts forum upon a California employee in order to circumvent California public policy against the enforcement of noncompetition agreements.

Plaintiff-employer Oxford Global Resources, LLC (“Oxford”), a recruiting and staffing company specializing in placement of information technology contractors to businesses, hired defendant-employee Hernandez to an entry-level position as an account manager. When hired, Hernandez had to sign an offer letter and a separate “protective covenants agreement” which contained confidentiality, noncompetition, and non-solicitation provisions. The agreement also contained a forum selection clause requiring that any lawsuit arising from the agreement be brought in Massachusetts, and a choice-of-law provision providing for the application of Massachusetts law to the agreement.

Oxford hired Hernandez to work in its Campbell, California, office. Hernandez interviewed for the position in California; signed the offer letter and agreement in California; was trained by Oxford in California; conducted all of his work for Oxford in California; and reported to Oxford supervisors who were located in California. Indeed, the Court found that all relevant events and all of Oxford’s alleged injuries occurred in California. The only connection to Massachusetts, the Court noted, was Oxford’s allegation that its principle place of business was there.

Oxford sued Hernandez in Massachusetts alleging that Hernandez used information regarding the identity of Oxford’s customers to solicit those customers on behalf of a competitor in California. Hernandez moved to dismiss the action under the doctrine of forum non conveniens, which permits dismissal when “the court finds that in the interest of substantial justice the action should be heard in another forum.” Mass. Gen. Laws, ch. 223A, § 5. Despite the forum selection clause, Hernandez prevailed and the Court dismissed the action in order for it to be heard in a California court.

The Court engaged in a three-step analysis leading to dismissal. First, it determined that California law governed the agreement despite the choice-of-law provision favoring Massachusetts law because the agreement was an improper contract of adhesion since Hernandez did not have a meaningful opportunity to negotiate it. Oxford’s offer to Hernandez was a take-it-or-leave-it offer, no negotiation of the agreement’s terms took place, and Hernandez had no bargaining power as an entry-level employee with no previous experience in the industry. The Court discounted the agreement’s boilerplate language that Hernandez had the opportunity to consult a lawyer and that he was not under duress as insufficient to overcome the disparity in bargaining power between the parties.

Significantly, the Court found the choice-of-law provision to be an apparent attempt by Oxford to circumvent California’s public policy against the enforcement of noncompetition agreements. Without the provision, California law would have governed the agreement because California had the most significant relationship to the transaction and the parties, as all relevant events occurred there, and because Oxford “alleged no facts and presented no evidence suggesting that Hernandez’s contract and work for Oxford implicated Massachusetts in any way.” The Court therefore concluded that enforcement of the agreement’s choice-of-law provision “would result in substantial injustice to Hernandez by depriving him of the freedom to compete against Oxford in California that is guaranteed under California law, and it would do so based solely on a contract clause that Hernandez had no meaningful opportunity to negotiate when he was hired.”

In the second step of its analysis, the Court determined that the agreement’s forum selection clause was unenforceable under California law. Although generally enforceable, forum selection clauses in combination with choice-of-law provisions that violate public policy are themselves unenforceable as against public policy.

The final step of the Court’s analysis was to determine the proper venue for Oxford’s action in the absence of an enforceable forum selection clause. The Court exercised its broad discretion in concluding that it would be unfair to compel Hernandez to defend himself in Massachusetts, where all relevant events and witnesses were located in California, and the private and public interests weighed heavily in favor of California as the proper venue. Accordingly, the Court dismissed the action in Massachusetts and determined that California was the appropriate forum for Oxford to litigate its claims against Hernandez.

This case presents several key takeaways for Massachusetts practitioners and businesses dealing with employment agreements. For one, boilerplate language in an employment agreement is not free from scrutiny over the true bargaining power in the employer-employee relationship. Moreover, “remembered information” concerning the identity of customers—the employee’s “own memory of customers’ names, needs, and habits”—is too broad to be protected by the employer as confidential information, although an employer’s compilation of such information in a list or database will likely be protected. Finally, the mere location of a company’s principle place of business may not be enough to ensure that selection of that forum for litigation is adequate; some additional aspect of the work performed or the contract entered into must implicate the forum state.

DelawareUnder Delaware law, when a derivative plaintiff loses its stockholder status as the result of a merger, the plaintiff usually also loses its standing to pursue a derivative suit on behalf of the corporation.  This rule is subject to only two limited exceptions: (1) when “the merger itself is the subject of a claim of fraud, being perpetrated merely to deprive shareholders of the standing to bring a derivative action,” and (2) when “the merger is in reality merely a reorganization which does not affect plaintiff’s ownership in the business enterprise.”  Lewis v. Ward, 852 A.2d 896, 902 (Del. 2004) (clarifying exceptions identified in Lewis v. Anderson, 477 A.2d 1040 (Del. 1984)).  In a decision revisiting a 2010 mining tragedy in which dozens of miners were killed, the Delaware Court of Chancery recently concluded that neither exception applied to preserve the standing of stockholders of Massey Energy Company (“Massey”) to bring derivative claims, and that plaintiffs had not brought direct claims for an “inseparable fraud.”  In re Massey Energy Co. Derivative & Class Action Litig., Consol. C.A. No. 5430-CB (May 4, 2017).

Backstory: The Court of Chancery Refuses To Enjoin The Massey-Alpha Merger

In 2011, stockholder plaintiffs attempting to enjoin a merger between Massey and Alpha Natural Resources, Inc. (“Alpha”) argued that Massey should be forced to assume and transfer derivative claims against certain Massey fiduciaries to a trust for the benefit of Massey stockholders, rather than allowing the claims to pass to Alpha.  While finding “little doubt” that plaintiffs’ derivative claims could survive a motion to dismiss, the Court also concluded that plaintiffs were likely to lose standing to pursue those claims if the merger was consummated.

The Court of Chancery noted that a corporation reasonably may conclude that the risks arising from a lawsuit outweigh the potential risk-weighted recovery, even when the corporation clearly has been harmed.  As a practical matter, a corporation with strong claims against former executives may choose not to pursue those claims for valid reasons, including a wish to avoid pleading formal admissions that potentially could be used against the corporation by third parties, such as insurance carriers, government agencies, and employees and other individuals with personal injury and other claims.  Delaware courts have declined to hold that these kinds of dilemmas – which arise because the corporation itself is conflicted, and not because the directors suffer a personally disabling conflict of interest – justify excusing a would-be plaintiff from the requirement of a pre-suit demand.  In its injunction opinion, the Court in Massey similarly refused to create another exception to the general rule that a merger extinguishes the ability of a former stockholder plaintiff to pursue claims derivatively on behalf of the corporation.  In addition, the Court noted that if a potential buyer cannot rely on the fact that a merger will eliminate derivative claims, bids for troubled assets will be reduced, if not deterred completely, because the buyer must discount the value of the assets to reflect the uncertainty.  As a result, the Court could not conclude that the Massey-Alpha merger was unfairly priced.  “That Massey might be selling to Alpha at a price lower than it would have had the company been better managed is an idea one can embrace without also then concluding that there is a basis to conclude that the Merger with Alpha ought to be enjoined.”

Flash Forward:  The Court of Chancery Confirms Its Preliminary Analysis

On May 4, 2017, the Court of Chancery issued an opinion granting a post-bankruptcy motion to dismiss fiduciary duty claims in the Massey case.  Plaintiffs alleged that fourteen former directors and officers of Massey breached their fiduciary duties by “causing Massey to employ a deliberate and systematic business plan of willfully disregarding both internal and external safety regulations.”  Plaintiffs conceded that the merger deprived them of standing to pursue derivative claims, but argued they should be allowed to pursue claims directly, relying on dicta in Arkansas Teacher Retirement System v. Caiafa, 996 A.2d 321 (Del. 2010).  In Caiafa, the Delaware Supreme Court approved a settlement of claims against Countrywide directors and officers, which did not carve out derivative claims into a separate litigation trust.  The Court noted that the derivative claims – which were dismissed after a merger – were “functionally worthless.”  However, the Court also commented that “Delaware law recognizes a single, inseparable fraud when directors cover massive wrongdoing with an otherwise permissible merger,” and that “[a]n otherwise pristine merger cannot absolve fiduciaries from accountability for fraudulent conduct that necessitated the merger.”  The Supreme Court later clarified in another Countrywide opinion that this language did not create a new exception to the rule of Lewis v. Anderson, and concerned only direct claims, not derivative claims.

The Court in Massey found that plaintiffs had failed to state a direct claim under the dicta in Caiafa.  The Court read this language as requiring a plaintiff to plead facts showing that (1) a defendant engaged in serious pre-merger misconduct that would support a direct claim, and (2) the merger was “necessitated” or made “inevitable” by that misconduct.  The Court viewed plaintiffs’ claims as focusing on “prototypical examples of corporate harm that can be pursued only derivatively,” i.e., mismanagement, not direct harm to individual stockholders.  Defendants allegedly violated laws intended to protect third parties, but were not alleged to have acted to enrich themselves at the expense of other stockholders.  Moreover, defendants were alleged to have acted with open hostility to regulators and were not alleged to have attempted to conceal their actions.  As for the second prong of this standard, the Court referred to the 2001 finding that the Massey-Alpha merger was not “necessitated” by the alleged misconduct, but also concluded it did not need to reach this issue because the claims were clearly derivative.

The Court also stated that although plaintiffs would not be able to pursue viable derivative claims, the result was equitable because Alpha had in 2011 paid “a substantial sum” to acquire all of Massey’s assets, including the derivative claims at issue.

Finally, the Court in Massey remarked in dicta that it did not believe that stockholder ratification was at all relevant to the motion to dismiss:

The policy underlying Corwin, to my mind, was never intended to serve as a massive eraser, exonerating corporate fiduciaries for any and all of their actions or inactions preceding their decision to undertake a transaction for which stockholder approval is obtained.  Here, in voting on the Merger, the Massey stockholders were asked simply whether or not they wished to accept a specified amount of Alpha shares and cash in exchange for their Massey shares or, alternatively, to stay the course as stockholders of Massey as a standalone enterprise, which would have allowed plaintiffs to press derivative claims.  Massey’s stockholders were not asked in any direct or straightforward way to approve releasing defendants from any liability they may have to the Company for the years of alleged mismanagement that preceded the sale process.  Indeed, the proxy statement for the Merger implied just the opposite in stating that control over the derivative claims likely would pass to Alpha as a result of the Merger.  To top it off, if defendants’ view of Corwin were correct, it would have the disconcerting and perverse effect of negating the value of the derivative claims that Alpha paid to acquire along with Massey’s other assets.

 

Practice Point: Which Mergers Fail to Eliminate Claims?

The exceptions to the Lewis v. Anderson rule all concern mergers which are “otherwise permissible,” which generally means that they are mergers that comply with the statutory requirements of Delaware law.  Although every case is subject to its own analysis, and specific facts may lead to a different result in a particular case, certain generalizations are possible, and the following types of mergers should be viewed as more risky than others.

The “laundering” merger

Under the first exception to the rule of Lewis v. Anderson, a merger that is undertaken merely to deprive stockholders of standing will not, in fact, deprive stockholders of standing.  Importantly, none of the parties in Massey argued that the merger between Massey and Alpha was such a merger.  To the contrary, the Court referred to record evidence that Massey’s board of directors had considered several strategic alternatives, including a “standalone” plan in which Massey would continue to operate its business without a merger or other business combination.  The board concluded that the standalone plan was less preferable for reasons including Massey’s “tarnished reputation and history of missing management projections,” but still considered it to be “viable.”  Moreover, even if Massey had undertaken the merger because it had been weakened by the alleged misconduct of defendants, that is not the same as a merger undertaken for the purpose of limiting the liability of the directors approving it.

The “deja vu” merger

In the “mere reorganization” merger, a stockholder continues to have the same ownership interest as before, only in a newly reorganized corporation.  This issue did not arise in Massey.

The “fruits of fraud” merger

Under Caiafa as interpreted in Massey, a plaintiff may continue to pursue direct claims based on serious pre-merger misconduct, where that misconduct makes a merger “inevitable.”  (With the subsequent limitation to direct claims in Countrywide II, this observation has become somewhat obvious, as mergers generally do not extinguish standing to bring any claims directly.)  The merger between Massey and Alpha was not deemed to be an “inevitable” merger, despite the fact that, as noted above, Massey was seriously weakened by the alleged misconduct.  The Court was persuaded by the record that Massey’s board viewed the standalone plan as “a viable option,” even though it was “not the best choice available.”

california-160550_960_720California’s Unfair Competition Law

The Legislature enacted California’s Unfair Competition Law (the “UCL”) to deter unfair business practices and protect consumers from exploitations in the marketplace. Allen v. Hyland’s Inc. (C.D. Cal. 2014) 300 F.R.D. 643, 667. Under the UCL “unfair competition” means “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act.” Bus. & Prof. Code, §§ 17200; 17500. The Legislature initially imposed no standing requirements for private litigants to bring suit and, “[a]s a result, a private individual or entity with no relationship to the alleged wrongful practice could use the statute to force a business to repay substantial sums arguably acquired through a UCL violation.” In re Tobacco II Cases (2009) 46 Cal.4th 298, 329 (dissenting opinion).

In November 2004, California voters passed Proposition 64, a ballot proposition designed to prevent “shakedown suits” brought under the UCL. In re Tobacco II Cases, 46 Cal.4th at 316. Lawmakers aimed Proposition 64 at “unscrupulous lawyers” who exploited the UCL’s generous standing requirement to extort money from small businesses by bringing frivolous lawsuits. Id.[1]  

Proposition 64 required that for private litigants to bring an action under the UCL the litigant must suffer an actual economic injury as a result of the unfair business practice at issue. Bus. & Prof. Code, § 17204. Critically, under Proposition 64, local public prosecutors can still bring UCL lawsuits without meeting the more stringent standing requirements applicable to private litigants. Bus. & Prof. Code, § 17204. Thus, while Proposition 64 limited private litigants’ standing to sue under the UCL, government prosecutors’ standing was in no way affected by this law. Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232.

The Aftermath of Proposition 64

Ever since the Legislature amended the UCL pursuant to Proposition 64, California courts have been faced with the issue of interpreting the “as a result of” language under the UCL. The California Supreme Court has opined the “as a result of” language requires that a putative plaintiff actually relies on the conduct at issue in order to have standing to sue under the UCL. In re Tobacco II Cases (2009) 46 Cal.4th 298, 326. The actual reliance need not be the only cause of the plaintiff’s harm; so long as the reliance is a substantial factor in actually influencing the plaintiff’s decision, standing will lie. Id., at 326-27.

In 2016 the Court of Appeal for the Second District recognized that the “as a result of” language required “reliance on a statement for its truth and accuracy.” Goonewardene v. ADP, LLC (2016) 5 Cal.App.5th 154, 185 (citing Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 327).

Veera v. Banana Republic, LLC

The California Supreme Court will have another opportunity to further define “as a result of” under the UCL in a case which appellant Banana Republic recently filed for review. In Veera v. Banana Republic, LLC the plaintiffs alleged that they were “lured” into a Banana Republic store by a 40% off sign only to be told at the register that some of the items they chose to purchase were not subject to the sale and were full priced. (2016) 6 Cal.App.5th 907, 910. According to the plaintiffs, they ultimately purchased some of the items at full price, despite the fact that they were informed that the clothing they chose was not subject to the sale, because they felt “embarrassed” because lines were forming behind them. Id.

Based on the foregoing, the plaintiffs brought claims pursuant to the UCL.[2] Banana Republic moved for summary judgment arguing that the plaintiffs did not have standing to sue because they did not suffer from a legally cognizable injury under the UCL as amended under Proposition 64, which the trial court granted. Veera, 6 Cal.App.5th at 911-12. In reversing the trial court’s order of summary judgment in a 2:1 decision, the Court of Appeals found a triable issue of material fact as to whether the plaintiffs actually relied on the 40% off sign to make their purchase. Id., at 919. The Court reasoned that plaintiffs’ reliance on the advertising “informed their decision to buy, which culminated in the embarrassment and frustration they felt when, as items were being rung up, they learned the discount did not apply,” thus concluding that the alleged misleading advertising was a substantial factor in causing their ultimate decision to buy. Id., at 920.

The dissenting justice, the Honorable Patricia A. Bigelow, honed in on the fact that the plaintiffs learned of the full price prior to buying the items, and that accordingly, the plaintiffs themselves were ultimately responsible for their “induced” purchases: “The only legally cognizable economic injury the plaintiffs in this case allege they suffered was the money they spent on full-priced clothes. Whether or not the store window signs were ambiguous or misleading, it is undisputed that before the plaintiffs incurred any economic injury, they learned the clothes they had selected were not 40 percent off. They then changed their purchase decisions, choosing to buy only some of the items they had selected, fully aware they were not discounted.” Veera, 6 Cal.App.5th at 924 (emphasis added). Ultimately, the dissenting justice reasoned that where a putative plaintiff “knows the true facts before consummating the transaction that causes the injury” this is, in effect, a superseding cause to any economic harm experienced by the plaintiff. Id., at 926 (emphasis added).

The Court of Appeals Diminished the Standing Requirement of the UCL

Given the purpose of Proposition 64, it seems the Court of Appeal’s interpretation and application of the UCL in Veera is a departure from the voter-chosen amendment and the Supreme Court’s interpretations of that amendment. Although protecting California’s citizens from unfair competition is a noble and necessary mission, “protecting” consumers from an action which they ultimately enter into with their eyes wide open is not consistent with the spirit of the UCL. Plaintiffs themselves broke the causal chain when they, with the knowledge that the price of the clothing was not discounted 40%, chose to proceed with the purchase anyway. Thus, the 40% off advertisement was no factor, let alone a substantial factor, in the plaintiffs’ ultimate purchasing decision.

Such a ruling, which allows plaintiffs to bring suit, despite the fact that the purchaser knew the items were full priced prior to making the purchase (i.e., prior to incurring any actual damages), is not what the Legislature, nor the voters, intended. Ultimately the Court of Appeals’ interpretation of the UCL renders Proposition 64 at 60% of its intended strength, that is, 40% off its voted-for value.

We expect this case will be subject to further scrutiny by the California Supreme Court.  Hopefully, it will hear this case and, consistent with the state of the law, affirm the trial court’s ruling which granted Banana Republic’s motion for summary judgment.

[1] See also http://blogs.wsj.com/law/2011/01/28/calif-high-court-to-corporate-america-labels-matter/?mg=id-wsj; http://vigarchive.sos.ca.gov/2004/general/propositions/prop64-title.htm

[2] Plaintiffs also brought causes of action under the False Advertising Law (Bus. & Prof. Code, § 17500 et seq.) and the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.).

 

supreme-court-building-1209701_1280 On February 28, 2017, the Missouri Supreme Court joined a growing list of tribunals to apply a strict reading of the United States Supreme Court’s seminal ruling in Daimler AG v. Bauman, 134 S. Ct. 746 (2014). In State ex rel. Norfolk So. Ry. Co. v. Hon. Colleen Dolan, No. SC95514, the Missouri Supreme Court held that Missouri courts lack the requisite personal jurisdiction, either specific or general, over a non-resident defendant, Norfolk Southern Railway Company, in a claim brought by a non-resident plaintiff who asserted a Federal Employer’s Liability Act (FELA) violation arising from his employment by Norfolk Southern in the State of Indiana. The ruling marks a significant victory for corporate defendants seeking to combat forum shopping by plaintiffs, the practice of bringing cases in jurisdictions which are more likely to provide a favorable judgment or a more lucrative verdict.

The plaintiff, Indiana resident Russell Parker, argued that Missouri courts had both general and specific jurisdiction over Norfolk based on the company’s contacts with the state. Specifically, the plaintiff cited Norfolk’s ownership of approximately 400 miles of railroad track in the state, 590 employees in the state, and approximately $232,000,000 in annual revenue from the company’s operations in Missouri. As grounds for its decision, the court found that the plaintiff’s allegations did not arise from or relate to Norfolk’s activities in Missouri so as to give rise to specific jurisdiction, nor were Norfolk’s operations in the State sufficient to give rise to a Missouri court’s exercise of general jurisdiction over a defendant such as Norfolk; a company incorporated in and with principal place of business in Virginia.

Citing the Second Circuit’s decision in Brown v. Lockheed Martin Corp., 814 F.3d 619, 627-30 (2d Cir. 2016), wherein .05 percent of the defendant’s employees and no more than .107 percent of total revenue were derived from the defendant’s activities in the state of Connecticut, the Missouri Supreme Court concluded that Norfolk’s activity in Missouri represents “a tiny portion” of the company’s business activities nationwide. Specifically, the court noted that the revenue derived from Missouri is approximately 2 percent of Norfolk’s total revenues; the tracks owned and operated in Missouri constitute approximately 2 percent of the tracks Norfolk owns and operates nationally; and the company’s Missouri-based employees account for only about 2 percent of its total employees.

The Missouri Supreme Court’s decision is particularly newsworthy for its refusal to find general personal jurisdiction based on a non-resident company’s appointment of a registered agent in the state. In its ruling, the court rejected the plaintiff’s argument that Norfolk’s compliance with Missouri’s mandatory business registration requirements for foreign corporations amounted to consent to the exercise of general personal jurisdiction by Missouri courts. To the contrary, the court held that as the relevant section of law provided only that registration is consent to service of process against non-resident corporations, “the registration statute does not provide an independent basis for broadening Missouri’s personal jurisdiction to include suits unrelated to the corporation’s forum activities when the usual bases for general jurisdiction are not present.” This finding echoes the recent ruling of the Delaware Supreme Court in Genuine Parts Company v. Cepec, 137 A.3d 123, 147 n.125 (Del. 2016), which held that a broad inference of consent based on a non-resident corporation’s registration to do business in a state would allow national corporations to be sued in every state, rendering Daimler pointless.

Further, the Missouri Supreme Court declined to go along with the plaintiff’s argument that FELA itself provides an independent basis for specific jurisdiction any place that a railroad corporation has tracks. Here too, the court rejected the contention that FELA confers specific jurisdiction on the grounds that such an interpretation would turn specific jurisdiction on its head, subjecting corporations to personal jurisdiction in every state regardless of the facts of the case or the defendant corporation’s contacts with the state.

The Missouri Supreme Court’s decision adds a significant brick in the Daimler wall, bolstering the protection it provides corporations against forum shopping and excessive litigation in magnet jurisdictions. The true measure of Daimler’s longevity will, however, come next month, as the United States Supreme Court hears oral arguments on two challenges involving the application of Daimler in BNSF Railway Co. v. Tyrrell, and Bristol-Myers Squibb Co. v. The Superior Court of San Francisco County. Stay tuned!