Many of us recall a time when communications were in person, by landline telephone or by postal letter. Today our lives cross many communication platforms, often circling the globe without a thought. We text, email, blog, facsimile, post, file share, and at times even communicate in person. We wake up in Austin, Texas, spend that afternoon at a client’s office in New York, and awaken the next morning at a meeting in Yuma, Arizona. As opposed to shopping with the neighborhood butcher or baker, we now purchase most anything our minds can conjure by clicking our “smart devices,” expecting the purchases to be delivered hours later. Businesses have restructured into large, multi-national entities with many wholly owned subsidiaries and divisions meet the needs of a lightning-fast global market Subsidiaries are often stratified to match geographic needs, local regulatory requirements and product lines, so good can be easily transported across state and national borders.
When we click our smart phone and order a product while sitting on our couch in El Paso, which then travels from Hong Kong to Long Beach by sea, then from Long Beach to El Paso by truck, have we subjected ourselves to the jurisdiction and potential litigation in each venue along the way? On May 30, 2017, In BNSF Railway Co. v. Tyrrell, the United States Supreme Court issued a decision that reassures us that the due process protection of the Fourteenth Amendment remains steadfast in our shrinking global world.
In BNSF Railway Co. v. Tyrrell, two employees of BNSF sued BNSF in Montana state court under the FELA, the statute which makes railroads liable to their employees for on-the-job injuries. Neither of the employees lived or was injured in Montana. Although BNSF had over 2000 miles of railroad track and employed over 2000 people in Montana, BNSF was not incorporated in Montana and did not maintain its principal place of business in Montana. The plaintiffs argued BNSF’s contact with Montana was sufficient to convey general jurisdiction over the railroad. The Montana Supreme Court, relying primarily on cases decided before International Shoe Co. v. Washington, 326 U.S. 310 (1945), its statute allowing exercise of personal jurisdiction over “persons found” in Montana, coupled with the fact that this was an FELA claim against a railroad, found sufficient contacts to hold Montana courts could exercise general jurisdiction over BNSF.
In an 8-1 decision authored by Justice Ginsberg, the United States Supreme Court reversed the Montana Supreme Court, holding that a general jurisdiction inquiry calls for an appraisal of the corporation’s entire scope of activities, not just the magnitude of in-state contacts.
While the business BNSF does in Montana would be sufficient to subject the railroad to specific personal jurisdiction in Montana for claims arising from its operations, the physical presence of tracks and employees was insufficient to create general jurisdiction.
For a state court to exercise general jurisdiction over a non-resident, the “paradigm forums in which a corporate defendant is ‘at home’ are the corporation’s place of incorporation and its principal place of business,s” with only limitied exceptions.
Justice Sonia Sotomayor dissented, suggesting a remand to Montana for a fact-intensive analysis. The correct inquiry, she argued, I s whether a defendant has attained benefits in a forum state which warrant the burdens associated with general personal jurisdiction.
The approach of the majority’s opinion, Sotomayor said, “grants a jurisdictional windfall to large multistate or multinational corporations that operate across many jurisdictions. Under its reasoning, it is virtually inconceivable that such corporations will ever be subject to general jurisdiction in any location other than their principal places of business or of incorporation. Foreign business with principal places of business outside the United States may never be subject to general jurisdiction in this country even though they have continuous and systematic contacts within the United States.”
While this case may prove helpful to defeat jurisdiction over lawsuits unrelated to a defendant’s contacts with that jurisdiction, it has little bearing on litigation based on a defendant’s specific contacts with a venue. The test for cases where specific, rather than general, jurisdiction is urged, is still based on systematic activities within a state, and contacts with the State that are the basis of the suit. See, Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 US 915 (2011).
Although I am a fan of buying local (“Keep Austin Weird”), for those of you who like the anonymity of your couch, click away.