Are You Defending Your Clients Where They Don't Belong? Corporate Defendants' New Potent Defense Is Personal (Jurisdiction, That Is)

Abstract

PENNOYER v. Neff (1) may be just a vague memory from Civil Procedure class in law school, but no doubt every lawyer remembers learning same fundamentals of personal jurisdiction. To sue a defendant in a particular forum, a plaintiff must show personal jurisdiction over defendant in compliance with that forum's long-arm statute and Constitution's Due Process Clause. Personal jurisdiction comes in two forms--specific jurisdiction and general jurisdiction. While specific jurisdiction likely got ample airtime on intricacies of minimum contacts and stream-of-commerce, general jurisdiction typically was reduced to a single sound bite: and systematic activities by a corporation in a particular state were sufficient to subject that corporate defendant to general jurisdiction in that forum. Civil Procedure professors were not only ones, however, to give short shrift to general jurisdiction. In a nearly 70 year period, Supreme Court issued scores of opinions featuring specific jurisdiction to a mere three opinions on general jurisdiction. Thus, general jurisdiction played little or no role in defense strategy of large companies conducting business on a national scale. Unless plaintiff named wrong corporate entity as a defendant, most companies conceded personal jurisdiction in every state because they were doing business in every state; companies (and courts) usually accepted prevailing general jurisdiction mantra of and systematic to be sufficient. In January 2014, however, United States Supreme Court catapulted general jurisdiction into spotlight and turned conventional wisdom on its head about reach of general personal jurisdiction with its eight-Justice majority decision in Daimler AG v. Bauman. (2) The Supreme Court eliminated and systematic test and gave Civil Procedure professors, district courts, and most importantly, corporate defense counsel a new sound bite with powerful teeth: a corporation may be subject to general jurisdiction only where it is at home. (3) The two paradigm places a corporation is at home are its state of incorporation and its principal place of business. Consequently, general jurisdiction now should be an essential element of corporate defense strategy in any case in which specific jurisdiction is lacking as to one or more plaintiffs. I. The Beginning: International Shoe and Its (Sparse) Progeny The Supreme Court's 1945 decision in International Shoe Co. v. Washington (4) laid foundation for general personal jurisdiction over corporate defendants. The Supreme Court adopted a broad interpretation of personal jurisdiction and limits placed on it by Due Process Clause. The Supreme Court issued often-quoted rule of specific jurisdiction that defendant need only have certain minimum contacts with forum state that maintenance of suit does not offend 'traditional notions of fair play and substantial justice.' (5) But for a corporate defendant, Court explained that the continuous operations in forum state could be so substantial and of such a nature as to justify suit against it in causes of action arising from dealings entirely distinct from those activities. (6) The parameters of this early formulation of general jurisdiction, however, remained unclear. And in nearly 70 years that followed International Shoe, Supreme Court decided only two general jurisdiction cases. A. Perkins v. Benguet Consolidated Mining In first case, Perkins v. Benguet Consolidated Mining, (7) Supreme Court formalized International Shoe's and systematic activities test. (8) Plaintiff Perkins, a nonresident, sued a foreign mining company in Ohio for dividends she claimed as a stockholder and for damages resulting from company's alleged failure to issue stock certificates to her. (9) The mining company was organized under laws of Philippine Islands, where it operated profitable gold and silver mines. …