In the January 2, 2020 edition of The Legal Intelligencer Edward T. Kang and Kandis L. Kovalsky co-authored “Five Years After ‘Daimler’: It’s All in the Specifics.”
Major cases such as 2014’s Daimler AG v. Bauman have refined the requirements for, and in many senses restricted, the establishment of personal jurisdiction over parties. This goes for both the exercise of general and specific jurisdiction.
The exercise of personal jurisdiction is fundamentally connected with the constitutional right to due process. The question of whether it is fair and procedurally proper to subject a person to a forum state’s jurisdiction has been refined by the U.S. Supreme Court multiple times in the past decades, and especially in recent years. Major cases such as 2014’s Daimler AG v. Bauman have refined the requirements for, and in many senses restricted, the establishment of personal jurisdiction over parties. This goes for both the exercise of general and specific jurisdiction.
The basic notion behind general jurisdiction is that the defendant has to have, to quote directly from the well-known International Shoe v. State of Washington opinion, “continuous and systematic” affiliations with the forum state to reasonably expect that state’s jurisdiction over her, no matter the issue at stake (as opposed to specific jurisdiction, where the issue in question is the only reason one could expect to land up in another state’s court). But, what does “continuous and systematic” mean?
For many large businesses, whose contacts and transactions in various states are indeed very “continuous and systematic,” a more specific set of qualifications has to be put in place. The Supreme Court’s opinion in Daimler elaborated on the idea of being “at home” and held that except in truly exceptional cases (which remain to be seen), a company is only “at home” in its state of incorporation and the state in which it maintains a principal place of business. The Court explained that “a corporation that operates in many places can scarcely be deemed at home in all of them.” Although Daimler left open the possibility that there could be general jurisdiction over a company other than in the states in which it is incorporated or headquartered, we have not come across such an “exceptional” case in our review.
In some instances, for those of us representing corporate clients, it seems the Daimler decision was too simple to be true. For example, there is currently a war between 42 Pa.C.S. Section 5301 and Daimler, which is leading to uncertainty for both Pennsylvania practitioners and institutional clients. Pennsylvania uniquely provides for “jurisdiction-by-consent” in this statute that predates Daimler by more than 35 years: “incorporation or qualification as a foreign corporation under the laws of this commonwealth” or “consent” “shall constitute a sufficient basis of jurisdiction to enable the tribunals of this commonwealth to exercise general personal jurisdiction…”
Pennsylvania’s jurisdiction-by-consent statute’s existence is in serious question. On June 6, in Sullivan v. A.W. Chesterton, U.S. District Court Judge Eduardo Robreno for the Eastern District of Pennsylvania held that this statutory scheme is unconstitutional and dismissed the case under Rule 12(b)(2). In doing so, Robreno expressly disregarded the longstanding U.S. Court of Appeals for the Third Circuit decision of Bane v. Netlink, which endorsed Pennsylvania’s consent jurisdiction of registered nonresident businesses as inconsistent with the Supreme Court’s directives in Daimler. Just a few months later on Nov. 15, however, Judge Jan E. DuBois, also of the U.S. District Court for the Eastern District of Pennsylvania, in the matter of Healthcare Services Group v. Moreta, reached the opposite conclusion from Robreno on the same issue. DuBois held that the Third Circuit decision of Bane v. Netlink was still good law, even under Daimler, and that registration remains a sufficient basis for general personal jurisdiction.
Pennsylvania courts, on the other hand, have not outlawed this longstanding Pennsylvania statute … yet.
In 2018, two separate three-judge panels of the Pennsylvania Superior Court (one in Webb Benjamin v. International Rug Group and the other in Murray v. American LaFrance) held that the statute was constitutional under Daimler. And, in yet another reported opinion out of the Eastern District of Pennsylvania on this issue, Judge Joel Slomsky relied on the Pennsylvania Superior Court’s decision in LaFrance in holding that if a foreign corporation registers to do business in the commonwealth of Pennsylvania, there is personal jurisdiction over the corporation “regardless of whether the personal jurisdiction is general or specific.” See Sciortino v. Jarden, 395 F.Supp.3d 429 (E.D. Pa. 2019). On Oct. 31, however, an en banc panel of the Superior Court heard reargument on whether under Daimler, registration to do business in Pennsylvania can constitute consent to general personal jurisdiction, as in Murray v. American LaFrance. The intermediate appellate court was asked to consider its earlier 2-1 decision. This forthcoming decision is certainly one to watch for, as the Superior Court has the ability to create binding precedent on the issue that so far is lacking. For now, Pennsylvania’s consent-by-jurisdiction remains in flux.
Specific jurisdiction has also experienced recent clarifications from the nation’s highest court. And, after Daimler, specific jurisdiction, at least outside of Pennsylvania, as described above, is where the arguments “are at.”
As any practitioner knows, specific jurisdiction arises from a defendant’s actions being directly connected to the forum state and is exercised through a state’s long-arm statute. A simple example is litigation arising from a car crash that occurred outside of the defendant’s home state. As many have pointed out, the existence of specific jurisdiction is important because it discourages illegal or otherwise undesirable behavior outside of one’s home state, and thus helps promote the public good in a more universal sense. Lea Brilmayer, “A General Look at Specific Jurisdiction,” The Yale Journal of International Law 2017, 42:1, 3.
But again, knowing when exactly the “minimal contacts” threshold (as we learned in International Shoe) has been met can be difficult. Walden v. Fiore, another watershed Supreme Court case from 2014, helped clarify a major point—the defendant’s contacts with the forum state (which give rise to the cause of action) have to come from the defendant himself. In the Walden case, the Supreme Court reversed the Ninth Circuit’s decision to allow Nevada’s jurisdiction over Anthony Walden. Walden was a Georgia officer who seized money from Gina Fiore and Keith Gipson in the Atlanta airport. Fiore and Gipson sued Walden once they returned home to Nevada—Walden otherwise had no connections to the state.
The court held that merely having contacts with other parties in the forum state in question is not enough. The defendant’s actions must somehow be directed to the state itself, and not towards some persons affiliated with it. Even more recent seminal Supreme Court decisions have reiterated this point. The most recent is the 2017 Bristol-Myers Squibb v. Superior Court of California, San Francisco decision, where the Supreme Court clarified that California courts could not assert jurisdiction over the nonresident plaintiffs who had joined their claims against Bristol Myers Squibb with in-state plaintiffs. As the defendant was out-of-state, these nonresident plaintiffs would have to show how defendant injured them in their own home states and take their claims to court there—and not in the consumer-friendly California forum.
As one can see, personal jurisdiction is a complicated subject. It is clearly one that can divide the country’s leading judges and legal experts. Even Justice Sonia Sotomayor, in her Daimler concurrence opinion, where she concurred in judgment only, described the court’s majority opinion, penned by Justice Ruth Bader Ginsburg, as Daimler AG being “too big for general jurisdiction.” In her eyes, the decision was much simpler—the case had “foreign plaintiffs,” a “foreign defendant,” and the case was “based on foreign conduct.” She believed knowing that the forum was inappropriate in California did not involve the level of analysis used in the majority’s opinion. Sotomayor was also concerned that the majority’s rule would shift the risk of loss from multinational corporations to the individual plaintiffs harmed by their actions. She is not alone in believing that multinational corporations, who may enjoy the benefits of U.S. commerce, are able to avoid many of the burdens of U.S. law.
Recently, opinions that have considered the properness of jurisdiction have imposed restrictions on the requirements needed for a forum to be proper. It would not be surprising to see future opinions imposing additional restrictions on jurisdictional requirements. But, it could also be possible, at times, to see the pendulum swing in the opposite direction. Sotomayor’s opinion in Bristol Myers Squibb questioned the fairness of the court’s opinion, as it concerned a mass action against a large pharmaceutical company. The court’s limitations on the exercise of jurisdiction would, in her view, severely limit the ability of plaintiffs to join together in an effective nationwide suit—thus resulting in variously effective “piecemeal litigation.” Considering the resources of large companies like Bristol Myers Squibb compared to the limited resources of individuals who may want to take action against them, many believe it is fair to ask who would actually benefit (or, who would suffer) from limiting jurisdiction in this manner. If we also consider the above-mentioned Pennsylvania registration statute, the court may have to rule on whether these types of statutes are fair and allowable (thus loosening the belt) or if they are not.
Jurisdictional issues are complicated. While Daimler, Walden and Bristol-Myers Squibb are all helpful, there remain many uncertainties as demonstrated recently in LaFrance. Practitioners from Pennsylvania should closely monitor how the Superior Court will come down in LaFrance and consider its potential impact to their cases.
Edward T. Kang is the managing member of Kang Haggerty LLC. He devotes the majority of his practice to business litigation and other litigation involving business entities.
Kandis L. Kovalsky, a member of the firm, focuses her practice on representing both corporate and individual clients in a broad range of complex commercial litigation matters in Pennsylvania and New Jersey state, federal and bankruptcy courts.
Reprinted with permission from the January 2, 2020 edition of “The Legal Intelligencer” © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.