Not At Home: Reining In General Personal Jurisdiction After BNSF Railway Co. v. Tyrrell

CIVIL PROCEDURE

Jurisdiction

BNSF Railway Co. v. Tyrell redefined the contours of a court's jurisdictional reach by effectively subjecting corporations to general personal jurisdiction only in those states where they are incorporated or have their principal place of business, attorneys from WilmerHale say. Moreover, dozens of courts across the country have relied on BNSF Railway to dismiss lawsuits under factual circumstances that, in the past, would almost certainly have sufficed for the exercise of general jurisdiction, they say.

Introduction

Although it has been less than a year since the U.S. Supreme Court decided BNSF Railway Co. v. Tyrrell, 2017 BL 179673, 136 S. Ct. 1549 (2017), the decision has been repeatedly and successfully invoked to dismiss lawsuits against corporate defendants that, under previous jurisprudence, would likely have been haled into court.

BNSF Railway redefined the contours of a court's jurisdictional reach by effectively subjecting corporations to general personal jurisdiction only in those states where they are incorporated or have their principal place of business.

In BNSF Railway, the Court denied the exercise of personal jurisdiction by a Montana court over a corporation that had active operations, thousands of workers, thousand miles of railroad track, and hundreds of millions of dollars of property in the state. See id. at 1554. The corporation, however, was neither incorporated in nor had its principal place of business in Montana. The Supreme Court held that courts must assess ''a corporation's activities in their entirety'' and that a corporation that operates in many jurisdictions, like BNSF, cannot be at home in all of them. The mere fact that a corporation has contacts with a foreign state will ''not suffice to permit the assertion of general jurisdiction'' over claims ''unrelated to any activity occurring'' there. Id. at 1559 (internal citation omitted). In other words, general ''all purpose'' jurisdiction over an out-of-state corporate defendant will no longer obtain simply because that corporation maintains a presence—even a significant presence—in the forum.

Lower courts have taken notice of the Supreme Court's narrowed view of general jurisdiction. For example, in one of the first cases implementing BNSF Railway, the U.S. District Court for the District of Maryland dismissed a lawsuit against Northrop Grumman Systems Corporation for lack of general personal jurisdiction, even though the defendant headquartered one of its three business sectors in Maryland and employed over 11,000 people there. See Grabowski v. Northrop Grumman Sys. Corp., No. CV GLR-16-3492, 2017 BL 266252, at *5 (D. Md. June 30, 2017).

As Grabowski and the other cases discussed below illustrate, corporate defendants now have an effective shield against forum-shopping plaintiffs who seek to enmesh corporate defendants in jurisdictions with no connection to the subject matter of the litigation.

Exercising General Jurisdiction Before BNSF Railway

The due-process provisions of the Fifth and 14th Amendments to the U.S. Constitution prohibit a plaintiff from haling into court a defendant who lacks sufficient contacts with the forum. See, e.g., Waldman v. Palestine Liberation Org., 835 F.3d 317, 331 (2d Cir. 2016).

The Supreme Court established a two-part due process test for personal jurisdiction in International Shoe v. Washington: the ''minimum contacts'' inquiry and the ''reasonableness'' inquiry. 326 U.S. 310, 316-317 (1945). The minimum contacts inquiry requires that the court determine whether a defendant has sufficient minimum contacts with the forum to justify the court's exercise of personal jurisdiction over the defendant.

The reasonableness inquiry asks whether the assertion of personal jurisdiction comports with ''traditional notions of fair play and substantial justice'' under the circumstances of the particular case. Id. at 316.

There are two kinds of personal jurisdiction: general jurisdiction and specific jurisdiction.

General personal jurisdiction empowers a court to hear any and all claims against the defendant before it. The exercise of specific jurisdiction arises from the corporation's in-state activity that ''gave rise to the episode-in-suit.'' Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011) (citing Int'l Shoe, 326 U.S. at 317) (emphasis in original).

For decades following International Shoe, courts routinely asserted general jurisdiction over corporate defendants on claims not arising from their activities in the forum. If a corporation had facilities or employees within the state, or did business within the state, these were often deemed ''continuous and systematic contacts'' sufficient to satisfy the minimum contacts and reasonableness inquiries for general personal jurisdiction.

For example, in FLS Transportation Services (USA) Inc. v. National Bankers Trustee Corp., the plaintiff, a Delaware corporation with its principal place of business in Illinois, sued NBT, a Tennessee corporation, in Missouri. See Order Denying Mot. to Dismiss, No. 12- 00936-CV-W-GAF, (W.D. Mo. Jul. 16, 2012), Dkt. No. 20 (Nov. 26, 2012). NBT's only contacts with Missouri consisted of contracts with thirteen Missouri freight carriers (all of which placed venue for any dispute in Tennessee and none of which was related to the plaintiff's claims), 800 mailers sent into Missouri (out of a total of 25,000 mailers distributed nationwide), and a website available to any internet user in Missouri. NBT did not have any salespeople, an agent for service of process, property, or a secured interest in any real property in Missouri. Nonetheless, the court found that NBT's contacts sufficed to establish general jurisdiction, observing, among other things, that the ''percentage of a company's advertising dollars spent on the forum state are generally irrelevant; the focus is instead on the company's contacts with the forum state.'' Id.

Similarly, in Haubner v. Abercrombie & Kent International, Inc., 812 N.E.2d 704, 710-711 (Ill. App. Ct. 2004), a Ugandan tour operator was subjected to personal jurisdiction in a wrongful death suit, even though it did not have a corporate office in Illinois or conduct direct advertising in Illinois. The court premised jurisdiction on the fact that the defendant had communicated with employees of an Illinois tour operator regarding various tours offered by both companies in Africa, that it derived 30 percent of its revenue from business it conducted in Illinois, and that it had an Illinois tour operator issue a refund to a customer on its behalf.

Starting with Goodyear Dunlop Tires Operations, S.A. v. Brown, the U.S. Supreme Court began to sharpen the type of ''continuous and systematic contacts'' needed to subject a corporate defendant to general jurisdiction within a forum, explaining that the paradigmatic forum was one in which the corporation was ''at home,'' i.e., its place of incorporation or principal place of business. As indicated by the subsequently decided FLS Transportation case noted above, however, Goodyear's exegesis was not accepted as a hardand- fast rule.

In Daimler AG v. Bauman, 2014 BL 9151, 134 S. Ct. 746, 754 (2014), the Supreme Court clarified that general jurisdiction should usually be limited to the paradigm forums identified in Goodyear. Daimler stated that only in ''exceptional cases'' should a corporation be subjected to general jurisdiction in any other forum. The Court pointed to Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952), as an exemplar of such an ''exceptional'' case. Daimler, 134 S. Ct. at 761 n.19.

In Perkins, the Second World War compelled the defendant corporation's owner to relocate the business temporarily from the Philippines to Ohio, whereupon Ohio became ''the center of the corporation's wartime activities,'' rendering suit proper there. Id. at 756 n.8; Perkins, 342 U.S. at 447-448. The Daimler court rejected as ''unacceptably grasping'' the formulation previously adopted by many courts, namely, that general jurisdiction exists ''in every State in which a corporation engages in a substantial, continuous, and systematic course of business.'' Daimler, 134 S. Ct. at 761 (internal citation omitted). Nevertheless, the Daimler Court stated that ''Goodyear did not hold that a corporation may be subject to general jurisdiction only in a forum where it is incorporated or has its principal place of business.'' Id. at 760 (emphasis in original).

BNSF Railway and Its Progeny

Issued on May 30, 2017, BNSF Railway erased any doubt: absent truly rare circumstances, general jurisdiction may be found only in the forum in which a corporation is incorporated or has its principal place of business.

In BNSF Railway, the plaintiffs brought suit in Montana against BNSF under the Federal Employers' Liability Act, 45 U.S.C. § 51 et seq., (''FELA'')—a federal law that allows railroad workers to sue their employers for injuries that occur on the job—alleging work-related related injuries. The plaintiffs were not residents of Montana, and their injuries did not occur there. See BNSF Railway, 137 S....