January 21, 2021 – Daily Journal
Raymond Hua’s article, “The (not so) long arm of the law” was published in the Daily Journal Civil Litigation section on January 21, 2021.
The (not so) long arm of the law
Personal jurisdiction can be a powerful tool against forum shopping by the filing plaintiff. It is imperative to spot the issue early in the litigation to avoid potential waiver.
At the outset of a case, personal jurisdiction establishes a court’s authority over the defendant. Without such authority, the case may be dismissed without consideration of the merits. Although the case may be refiled in another jurisdiction, there is a possibility the case would not be refiled at all, or it may be refiled in a jurisdiction that has more favorable law or jury pool.
Now, you may think that defendant’s contacts give rise to personal jurisdiction: general personal jurisdiction and specific personal jurisdiction.
Under specific personal jurisdiction, jurisdiction is appropriate where the claim arises out of or relates to the defendant’s contacts with the forum and where the defendant has purposefully availed itself “of the privilege of conducting activities within the forum state thus invoking the benefits and protections of its laws.” J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).
Where claims are unrelated to the forum state, courts may exercise general personal jurisdiction so long as the defendant’s connections with the forum state are “continuous and systematic” and of such a nature as to justify the suit. This is how courts routinely asserted general jurisdiction for decades — courts would look to factors such as a corporation’s conduct within a forum state, the number of employees, and its financial stake in the state. See, e.g., Walden v. Fiore, 134 S. Ct. 1115 (2014). By doing so, courts would justify a defendant having to defend itself in a jurisdiction where it was not incorporated, and was not headquartered. In other words, by virtue of engaging in substantial business within the state, a company could potentially subject itself to having to defend itself in that state.
In 2014, the Supreme Court’s decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), notably narrowed the threshold to meet general jurisdiction. In Bauman, the Supreme Court held that Daimler AG (a German public stock company) was not “at home” in California for purposes of litigation brought by Argentinian residents. This despite the fact that Daimler obviously did substantial business in the state of California. Moreover, the California contacts or activities of a foreign corporation’s subsidiaries, affiliates, or branded entities cannot be “attributed” to the parent company for general jurisdiction purposes. 134 S. Ct. at 761-62.
Three years later in 2017, in BNSF Railway Co. v. Tyrrell, 137 S. Ct. 1549 (2017), the Supreme Court held that Montana could not exercise personal jurisdiction over BNSF because it was incorporated in Delaware and had its principal place of business in Texas, even though the railroad had more than 2,000 miles of track and 2,000 employees in Montana. This decision further cements the court’s restrictions as to the application of general jurisdiction.
In summary, if the company defendant is based outside the state or country, questions that should be considered at the outset are as follows:
Personal jurisdiction can be a powerful tool against forum shopping by the filing plaintiff. It is imperative to spot the issue early in the litigation to avoid potential waiver.
Click here to read the article on the Daily Journal.
Authors:
Raymond H. Hua, Partner
Email: rhua@yukelaw.com
Phone: (213) 362-7777 Ext. 250