• A Game Changer for Personal Jurisdiction
  • July 20, 2016 | Authors: J. Bruce McKissock; Nicolai A. Schurko
  • Law Firm: Marshall Dennehey Warner Coleman & Goggin, P.C. - Philadelphia Office
  • Key Points:
    • The United States Supreme Court has clarified that, for a court to exercise general personal jurisdiction over a corporate defendant, the defendant must be considered “at home” in the forum state.
    • Under Daimler, only in an “exceptional” case will a corporate entity’s operations in a forum other than its formal place of incorporation or principal place of business be so substantial and of such nature as to render the corporate defendant “at home” in that forum.
    • The Daimler reasoning has been adopted by several courts across the country and drastically restricted the ability for courts to exercise general jurisdiction over foreign corporate defendants. One major defense victory on this issue came in a case handled by Marshall Dennehey, Leeds v. S.K. Travel, LLC et al., July Term 2014, No. 01735, App. for King’s Bench Power or Extraordinary Jurisdiction denied, Leeds v. Gulfstream Aero. Corp. (Del.), 125 A.3d 774 (Pa. 2015), in which a high-end aircraft manufacturer doing business nationally was dismissed from a lawsuit brought in the Philadelphia Court of Common Pleas following jurisdictional preliminary objections.
    The landscape of where large national companies can be sued in the United States has dramatically changed over the past few years. Imagine the following scenario: a younger husband and wife, residents of Ohio, have left their children with a babysitter and are driving a rented SUV on a remote road through West Virginia on a camping trip. The SUV was rented from an agency in Ohio, and the couple drove the vehicle straight from Ohio and over the border into West Virginia. After rounding a blind turn in the West Virginia mountains, the wife unexpectedly encounters a line of stopped traffic. She slams on the brakes to avoid a collision, but the brakes suddenly and without warning do not work. The SUV slams into the line of stopped traffic, and, tragically, the husband and wife are killed.

    The estates of the deceased couple obtain representation from a nationally-renowned plaintiffs’ attorney based in Philadelphia. Upon advice of this attorney, the estates of the deceased couple file a wrongful death and survival lawsuit sounding in product liability in the Philadelphia Court of Common Pleas against various defendants, including the rental car company, the SUV manufacturer and the brake manufacturer. Your firm is retained to defend the brake manufacturer. As you receive and evaluate the file, you know that this is an extremely high-value case. You realize that getting the case out of what is commonly perceived to be a “plaintiff-friendly” venue would be a preliminary victory, which could ultimately set the stage for obtaining the best possible outcome for your client.

    One of the first things that sticks out to you is that nothing about the accident, itself, relates to Pennsylvania. This is a vehicle that was rented in Ohio by Ohio residents. The accident occurred in West Virginia. The vehicle was manufactured in Michigan, and the brakes were made in North Carolina and delivered to the manufacturer in Michigan, where they were installed. The plaintiffs, the vehicle and the accident have no relation to Pennsylvania. However, via conversations with your client, you learn that this particular brake manufacturer is a “national” company. Though headquartered in North Carolina and organized under the laws of Delaware, your client: sells its brakes to distributors in all 50 states; has authorized installers/repair shops in most states, including three such shops Pennsylvania; enters into contracts and vendor agreements with several entities that are based in Pennsylvania; and in the past 10 years has, on average, derived 7% of its revenue from sales made to entities or persons based in Pennsylvania. While specific jurisdiction over your client in Pennsylvania is almost certainly lacking, general jurisdiction over your client in the Commonwealth is all but a sure thing, right? Not necessarily.

    In Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014), the United States Supreme Court clarified the requirements for a court to exercise general personal jurisdiction over a foreign or out-of-state defendant. In that case, the plaintiffs sued Daimler AG, a German company, in California for alleged human rights violations committed outside the United States. The plaintiffs argued in favor of the California court’s exercise of personal jurisdiction over the defendant based on its U.S. subsidiary’s contacts with California. Specifically, the plaintiffs argued that Mercedes Benz USA, Daimler AG’s subsidiary, made Daimler susceptible to general jurisdiction in the courts of California because Mercedes Benz USA sold/distributed a significant amount of automobiles to California dealerships and residents and derived substantial revenue from those sales/distributions. The question presented was whether general jurisdiction over the German parent company was proper based on these contacts. The Supreme Court held that general jurisdiction was not proper. In so holding, the Court explained that a corporation must be “essentially at home” in a forum in order for a court in that state to comply with the due process requirements in asserting general jurisdiction:

    [T]he inquiry . . . is not whether a foreign corporation’s in-forum contacts can be said to be in some sense “continuous or systematic,” it is whether that corporation’s “affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum state.”

    Id. at 761 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011) (emphasis added). The Court continued that the “paradigm” bases for assertion of general jurisdiction over a corporation are: (1) its state of incorporation, or (2) principal place of business, both of which “have the virtue of being unique . . . as well as easily ascertainable.” Moreover, the Court explicitly rejected the plaintiff’s request to approve the exercise of general jurisdiction in every state in which a corporation “engages in a substantial, continuous, and systematic course of business” because that approach would be “unacceptably grasping.” Though the Daimler court did not “foreclose the possibility that in an exceptional case, a corporation’s operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such nature as to render the corporation at home in that State.”

    Other courts throughout the United States have acknowledged and/or adopted the reasoning of Daimler. For instance, in Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 800 (7th Cir. 2014), the Seventh Circuit referenced the “paradigm” test for jurisdiction:

    In Daimler, the Court confirmed its adherence to the distinction between ‘general jurisdiction’ and ‘specific jurisdiction.’ The former is proper only in the limited number of fora in which the defendant can be said to be ‘at home.’ For a corporation, such places include the state of incorporation and the state of the principal place of business.

    In Shovah v. Roman Catholic Diocese of Albany, 745 F.3d 30, 34 (2d Cir. 2014), the court concluded that the Diocese of Albany was not “at home” in Vermont. The diocese was not “not home” there, despite that its parishes employed, served, accepted advertising and collected charitable contributions from, and maintained a weekly newspaper with a partial circulation to people and companies in Vermont.

    Recently, our Aviation Practice Group at Marshall Dennehey prevailed on preliminary objections to personal jurisdiction over our client, Gulfstream Aerospace Corporation (a national manufacturer of high-end jet aircraft) in a catastrophic aviation case filed in the Philadelphia Court of Common Pleas. See Leeds v. S.K. Travel, LLC et al., July Term 2014, No. 01735, App. for King’s Bench Power or Extraordinary Jurisdiction denied, Leeds v. Gulfstream Aero. Corp. (Del.), 125 A.3d 774 (Pa. 2015). While both specific and general jurisdiction were at issue in this case, the primary focus of the jurisdictional arguments was whether the Philadelphia Court of Common Pleas could exercise general jurisdiction over our client. The two named Gulfstream entities were incorporated under the laws of Delaware and Georgia, respectively, with their principal place of business in Georgia. Though Gulfstream, as a national aircraft manufacturer, undoubtedly did what the plaintiffs described as significant and continuous business in Pennsylvania, we were able to successfully argue that the Gulfstream entities’ contacts with Pennsylvania were not so systematic and continuous as to render Gulfstream “at home” in Pennsylvania pursuant to the reasoning of Daimler.

    So, going back to the hypothetical posed at the beginning of this article; is the exercise of general personal jurisdiction in that fact scenario a sure thing? The answer is a resounding “no.” A large national company that does business across the country is not necessarily susceptible to the exercise of general personal jurisdiction by courts in every state across the country. As it is now interpreted, Daimler stands for the proposition that general personal jurisdiction can only be exercised in a state where a defendant is deemed “at home,” with “at home” being either its state of incorporation or principal place of business. And, more importantly, only in an “exceptional case” can a corporation’s operations in a forum other than its formal place of incorporation or principal place of business be so substantial and of such nature as to render the corporation “at home” in that state.

    The game has changed, and the issue of general jurisdiction has swung in favor of defendants who may be faced with forum shopping. As this is clearly an issue of due process, it is something courts should resolve at the outset of the proceedings. While some jurisdictional discovery may be permitted, in the Leeds case described above, we were successful in limiting that discovery to the essential “at home” criteria. All of this means that plaintiffs who are faced with pursuing multiple actions in different fora may be more amenable to an early compromise settlement, especially where they find that they cannot proceed in a “plaintiff-friendly” forum of their choice