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What You Know About Personal Jurisdiction is Now (Probably) Wrong

Mon, 09/25/2017 - 10:11 -- admin25

by Robert Velevis and David Sillers

What almost all of us learned in law school about personal jurisdiction has been significantly narrowed by the Supreme Court in a series of recent cases culminating this term. These decisions have wide-ranging effects for corporate defendants and mass action plaintiffs alike.

Significant Limiting of General Jurisdiction

This term, the Supreme Court further narrowed the scope of reach of “general” jurisdiction in BNSF Railroad Company v. Tyrrell, 581 U.S. ____, 137 S.Ct. 1549 (2017). In brief:

·        A court has general jurisdiction over a corporate defendant only where the defendant’s contacts are so “continuous and systematic” that the defendant is “at home” in the forum state, “comparable to a domestic enterprise” in the forum state. Daimler AG v. Bauman, 134 S.Ct. 746, 758 n.11 (2014). The “paradigm” (and perhaps only) such places are the corporation’s principal place of business and its place of incorporation.

·        Tyrrell further narrowed the doctrine because it was insufficient that the defendant had 2,000 employees and 2,000 miles of railroad track in the forum state.

·        Previously, it was an open question of whether a large, sustained presence in the forum state could be sufficient for general jurisdiction. In Tyrrell, the Court appeared to practically limit general jurisdiction to only the principal place of business and state of incorporation. The Court held open the possibility for an “exceptional case.”

·        State courts are not free to expand past the Supreme Court’s rule, nor does it matter what type of claim is brought.

            Tyrrell suggests changes in best practices:

·        When analyzing a motion to dismiss for lack of personal jurisdiction, counsel are used to creating a “laundry list” of contacts (or lack of contacts) to the forum such as physical presence, sales agents, or the like in the forum state.

·        Such lists are increasingly irrelevant in light of Tyrrell and the Daimler and Goodyear cases that preceded it.

·        The Supreme Court’s rule has greatly increased predictability and consistency in where lawsuits may be brought.

·        Corporate defendants have a powerful new tool to dismiss suits based on general jurisdiction outside their principal place of business and state of incorporation.

Potential Pitfalls and Open Issues

·        Individuals. While the Supreme Court has strongly suggested that individuals may be subject to general jurisdiction only in their state of domicile, it has not been directly decided by the Supreme Court.

·        Unincorporated Entities. General jurisdiction regarding unincorporated entities are much trickier than corporations.

o   LLCs, for example, are citizens of every state of residence of each of their members. If there are multiple layers of LLCs, they may be citizens of dozens of states.

o   It is also not settled how general jurisdiction will work for LLCs and partnerships because they are not “incorporated” anywhere.

o   The logical extension of Tyrrell is that the “at home” test will be applied to them, but it is unclear exactly how it will be applied.

Specific Jurisdiction

            The Court also substantially limited specific jurisdiction in the “mass action” arena by Bristol-Meyers v. Superior Court of California, No. 16-466, 582 U.S. ___ (2017):

·        600 plaintiffs, most of whom were out-of-state residents injured out-of-state, filed against Bristol Meyers in California.

·        The Supreme Court held that the California court lacked specific jurisdiction over the defendants for the out-of-state claims; there must be an “affiliation between the forum and the underlying controversy . . . [an] activity or an occurrence that takes place in the forum State[.]” Id. at 6.

·        It rejected that the factual similarity between the in-state and out-of-state claims could give jurisdiction over the entire “mass action,” in a seeming blow to what some describe as litigation tourism.

The Big Future Issue: Class Actions

The critical question is whether the holding will be extended to class actions; the rationale seems applicable and could lead to specific jurisdiction only extending to in-state plaintiffs even in the class arena. Stay tuned.

Rob Velevis is a partner at Sidley. David Sillers is an associate at the firm. They can be reached at rvelevis@sidley.com and dsillers@sidley.com, respectively.

This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.

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