SCOTUS Limits Jurisdictions Where Corporations Can Be Sued

SCOTUS Limits Jurisdictions Where Corporations Can Be Sued

With its recent opinion in BNSF Railway Co. v. Tyrrell, the United States Supreme Court reaffirmed the strong position that it took in Daimler AG v. Bauman with respect to general jurisdiction, leaving no doubt that a corporation is subject to a state’s general jurisdiction in only very limited and specific circumstances.

In Daimler, the plaintiffs, who were Argentinian residents, filed a lawsuit in the United States District Court for the Northern District of California against Daimler, a German company, alleging that its subsidiary, Mercedes-Benz Argentina (“MBA”), was involved in a plan to kidnap, detain, torture, and kill MBA workers in Argentina. The plaintiffs argued that the District Court had jurisdiction because another Daimler subsidiary, Mercedez-Benz USA, LLC (“MBUSA”), distributed cars in California, and had facilities and offices in California. None of the acts allegedly performed by MBA took place in California or the United States. The District Court dismissed the plaintiffs’ suit for lack of personal jurisdiction and the United States Court of Appeals for the Ninth Circuit subsequently reversed the district court, finding that the exercise of personal jurisdiction over Daimler was reasonable under the circumstances of the case.

In a unanimous reversal of the Ninth Circuit’s holding, with Justice Ruth Bader Ginsburg writing for the Court, the Supreme Court held that a foreign corporation can only be subject to general jurisdiction in states where it is “at home.” The definition of where a corporation is “at home” is very narrow and includes only the corporation’s place of incorporation, its principal place of business, and where the corporation is “essentially at home” because its “affiliations with the State are so ‘continuous and systematic.’” These affiliations must be far more than conducting regular business activities in a state because a “corporation that operates in many places can scarcely be deemed at home in all of them.” Under the facts of the case, the Supreme Court held that both general and specific jurisdiction did not exist.

Despite Daimler’s restrictive test for general jurisdiction, some courts continued to try to find ways around Daimler and as a result, approximately three years after Daimler, the Supreme Court issued its opinion in BNSF Railway, again reminding lower courts of the stringent test for general jurisdiction. In BNSF Railway, the plaintiffs attempted to bring claims against BNSF under the Federal Employers’ Liability Act (“FELA”) in Montana state court. Notably, the plaintiffs’ injuries did not occur in Montana and neither BNSF’s place of incorporation nor its principal place of business is in Montana. In holding that Montana had general jurisdiction over BNSF, the Montana Supreme Court noted that BNSF employed approximately 2,100 workers in Montana and had 2,061 miles of railroad rack in Montana. The Montana Supreme Court concluded that this showed BNSF was both “doing business” and “found within” Montana such that personal jurisdiction existed under FELA and Montana law.

In another opinion written by Justice Ginsburg, the Supreme Court reversed the decision of the Montana Supreme Court and reiterated the position it articulated in Daimler – in order for there to be general jurisdiction over a foreign corporation, the corporation must be at home in the state. After again pointing out that the “‘paradigm’ forums in which a corporate defendant is ‘at home’” are the corporation’s place of incorporation and principal place of business, the Supreme Court elaborated on circumstances where a corporation’s affiliations render them “essentially at home” in a state. The Court explained that in “an ‘exceptional case,’” a corporate defendant’s operations in another forum “may be so substantial and of such a nature as to render the corporation at home in that State.” That BNSF had thousands of employees and miles of railroad was not enough as the “general jurisdiction inquiry does not focus solely on the magnitude of the defendant’s in-state contacts” but instead “calls for an appraisal of a corporation’s activities in their entirety.”

Perkins v. Benguet Consol. Mining Co. was referenced as an example of an exceptional case where general jurisdiction existed in a state other than the place of incorporation or the principal place of business. In Perkins, general jurisdiction was found to exist in Ohio because the corporation was temporarily forced by war to relocate from the Philippines to Ohio, and Ohio then became “the center of the corporation’s wartime activities.” That the Supreme Court pointed to Perkins – a case where general jurisdiction was found only because a war effectively displaced the company as an example of an “exceptional case” justifying a finding of general jurisdiction demonstrates how limited general jurisdiction is and that the circumstances giving rise to a finding that a corporation’s affiliations with a state render the corporation essentially at home in that state must be truly unusual and far beyond merely engaging in regular business activities in a state.

If Daimler left any doubt, BNSF Railway confirmed that the Supreme Court has effectively shut the door on arguments that a corporation’s activities in a state can subject it to general jurisdiction absent the most unusual and extraordinary circumstances.