Raymond Hua & Kathy Fox published in Daily Journal

January 21, 2021 – Daily Journal

Raymond Hua and Kathy Fox'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 your company conducts business in the state, so there likely is personal jurisdiction. However, the case law has changed over the years that warrants a closer look. 

Traditionally, the long arm of the law confers personal jurisdiction upon a nonresident defendant where there has been "minimum contacts" with the forum state "such that the suit does not offend traditional notions of fair play and substantial justice." Most lawyers may recall from law school that the U.S. Supreme Court in International Shoe v. Washington, 66 S. Ct. 154 (1945), requires minimum contacts and reasonableness in order to convey personal jurisdiction. "Minimum contacts" evaluates the defendant's presence in the forum such as ties or contacts with the forum state or activities engaged in the state. With respect to the minimum contacts analysis, the Supreme Court has recognized two theories for assessing whether a 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 contacts must be so "continuous and systematic" as to render it "essentially at home in the forum state." The "at home" aspect of the court's determination ultimately restricted general jurisdiction to a corporation's state of incorporation and state of principal place of business. What this meant for the German parent company of Mercedes was that the court deemed Daimler AG 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:

  1. Does the claim or injury causing event arise from or relate to the defendant's contact in the state where the matter is filed?
  2. If the claim does not arise from the forum state, is the company defendant incorporated or have its principal place of business in the state where the action is filed?
  3. If the answer is "no" to both questions, then a personal jurisdiction challenge may be worth considering. 
  4. If contemplating a personal jurisdiction challenge, be careful not to engage in conduct that would potentially waive the personal jurisdiction challenge. For example, making an appearance could be interpreted as a waiver of a personal jurisdiction challenge.

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

 

 

Kathy Fox

Email: kfox@yukelaw.com

Phone: (213) 362-7777 Ext. 244