Second Circuit Rejects General Jurisdiction Based on Consent by Registration

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Since the inception of product liability litigation, particularly asbestos and other mass tort litigation, defendants have been subjected to forum shopping. Forum shopping is the practice of filing lawsuits within plaintiff – favorable jurisdictions in the hope of securing increased jury verdicts. Often, these lawsuits are filed in jurisdictions where there is minimal or almost no meaningful connection between the jurisdiction and the claim. Besides the obvious fundamental bias of this type of practice, forum shopping results in severely overcrowded dockets, as well as an overwhelmed defense bar in the forum of the plaintiff ’s choice. Over the past two years, a succession of federal court decisions, including one Supreme Court decision, has offered some relief to the defense bar. Most recently, the Second Circuit issued a landmark ruling in Brown v. Lockheed Martin Corporation, 814 F.3d 619 (2d Cir. 2016) giving those defendants dragged into unfavorable and far-away courts a powerful new argument when challenging general personal jurisdiction.

Courts can exercise two forms of personal jurisdiction over a defendant-corporation – specific and general. A court may exercise specific jurisdiction when the cause of action arises out of the defendant’s activities within the state. General jurisdiction permits a court to assert personal jurisdiction over a corporate defendant no matter where the cause of action arose, so long as the corporation’s contacts within the forum state are so “continuous and systematic” that the corporation is essentially “at home” in the forum state. See Int’l Shoe Co. v. State of Wash., Off . Unemployment Comp. & Placement, 326 U.S. 310, 317 (1945). Over the course of years, courts and lawyers alike began leaving off the “at home” portion of the test, asserting general jurisdiction in cases where a defendant corporation had only minimal contacts within the forum state. Th en, in 2014, the Supreme Court’s revolutionary decision in Daimler AG v. Bauman, 134 S. Ct. 746, 757 (2014) reemphasized the importance of the “at home” portion of the test, clarifying that only in exceptional cases will a corporate defendant be subject to general personal jurisdiction beyond the places where it is either: (1) incorporated, or (2) has its principal place of business.

In the two years following Daimler, courts rapidly took to the new standard becoming increasingly reluctant to assert general personal jurisdiction over foreign corporations. Plaintiff lawyers, in turn, began formulating new strategies to circumvent the ruling. Th eir most popular argument was that companies implicitly consented to general jurisdiction when they registered for business and appointed service of process within the state. Th en, in February 2016, the Second Circuit in Brown v. Lockheed Martin Corporation explicitly shut down the Daimler workaround. In Brown, a woman brought suit in Connecticut district court accusing Lockheed Martin, a defense contractor, of causing her father’s asbestos-related death. As a former mechanic in the U.S. Air Force, her father was alleged to have developed mesothelioma from working amongst asbestos containing products and equipment made by Lockheed Martin. Because her father had been exposed to asbestos in Maryland, not Connecticut, the plaintiff was only able to assert general personal jurisdiction.

In a nod to the Daimler logic, the Brown court ruled that despite the fact Lockheed Martin had a major facility in Connecticut, derived significant revenue ($160 million) from its operations in Connecticut, leased office spaces in Connecticut and employed between 30-70 individuals in Connecticut, the corporation could not be considered sufficiently “at home” within the state for purposes of general personal jurisdiction. Most importantly, the court addressed the growing interest in the “general jurisdiction by consent” argument. The court stressed that a state business registration statute, which is facially neutral as to jurisdiction, can only be plausibly interpreted as conferring specific jurisdiction, not general jurisdiction. Interestingly, the Second Circuit disregarded a state appellate court decision that previously interpreted the registration statute as conferring general jurisdiction upon foreign corporations.

Being the first post-Daimler appellate court to explicitly address and then reject the general personal jurisdiction by consent argument, the Brown decision has already had rippling effects within the products liability landscape. For example, only two months after the decision in Brown, on April 18, 2016, the Delaware Supreme Court in Genuine Parts Company v. Cepec, No. 528, 2015, 2016 WL 1569077, at *9 (Del. Apr. 18, 2016) ruled that a worker who was exposed to asbestos in Florida could not bring a cause of action for his asbestos-related injuries against a brake manufacturer in Delaware. Citing Daimler and Brown, the Delaware Supreme Court ruled that their business registration statute could best be interpreted as not conferring general jurisdiction by consent over a foreign corporation that had fewer than 1 percent of its stores and generated less than 1 percent of its revenue from its activities within the state. Similarly, both New York and New Jersey federal courts have subsequently employed Brown in support of their rulings that completion of state registration and appointment procedures is insufficient, by itself, to establish that a corporation had consented to general jurisdiction within its state. See Display Works, LLC v. Bartley, No. CV 16-583, 2016 WL 1644451, at *7 (D.N.J. Apr. 25, 2016); In re: LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262 (NRB), 2016 WL 1558504, at *7 (S.D.N.Y. Apr. 15, 2016).

A few jurisdictions, however, have been more reluctant to part with their powers of general personal jurisdiction by consent over foreign corporations. For example, in March 2016, a Kansas federal court in In re: Syngenta AG MIR 162 Corn Litigation, No. 14-MD-2591-JWL, 2016 WL 1047996, at *3 n.2 (D. Kan. Mar. 11, 2016) distinguished the holding in Brown, stating that Brown “declined to decide whether jurisdiction by consent through registration was permissible … [and] instead interpreted the particular registration statute not to require consent to general jurisdiction.” Other jurisdictions have ignored the Brown decision outright. For example, on Feb. 23, 2016, in Jacob Chalkey v. Smithkline Beecham Corporation, No. 4:15 CV 1838 DDN, 2016 WL 705134, at *1 (E.D. Mo. Feb. 23, 2016) a Missouri federal court construed a Missouri business registration as a direct conferral of general personal jurisdiction over foreign corporations. Disregarding the Brown opinion penned only four days earlier, the Missouri court declared that Daimler’s holding was limited to general jurisdiction and could not be extended to cases involving the consent to personal jurisdiction effected by compliance with a state registration statute.

Despite some of the judicial hesitation in states, such as Kansas and Missouri, Brown is likely to have tremendous impact on courts that are still navigating the post-Daimler landscape. While specific, general and “true” consent to jurisdiction remain viable avenues of obtaining personal jurisdiction, appellate decisions, such as Brown, make it increasingly difficult to argue that general jurisdiction based on consent by registration squares with the logic laid out in Daimler. Most importantly, the Brown decision gives defense lawyers an additional tool in their arsenal to challenge the basis for personal jurisdiction in cases that do not relate to a corporate defendant’s in-state or staterelated operations.   Eric Lindenfeld

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