Suing Out-of-State (Foreign) Corporations.

A curious as-pect of American law is that a corporation has no legal existence outside the boundaries of the state chartering it.923 Thus, the basis for state court jurisdiction over an out-of-state (“foreign”) corporation has been even more uncertain than that with respect to individuals. Before International Shoe Co. v. Washington,924 it was asserted that, because a corporation could not carry on business in a state without the state’s permission, the state could condition its permission upon the corporation’s consent to submit to the jurisdiction of the state’s courts, either by appointment of someone to receive process or in the absence of such designation, by accepting service upon corporate agents authorized to operate within the state.925 Further, by doing business in a state, the corporation was deemed to be present there and thus subject to service of process and suit.926 This theoretical corporate presence conflicted with the idea of corporations having no existence outside their state of incorporation, but it was nonetheless accepted that a corporation “doing business” in a state to a sufficient degree was “present” for service of process upon its agents in the state who carried out that business.927

Presence alone, however, does not expose a corporation to all manner of suits through the exercise of general jurisdiction. Only corporations, whose “continuous and systematic” affiliations with a forum make them “essentially at home” there, are broadly amenable to suit.928 While the paradigmatic examples of where a corporate defendant is “at home” are the corporation’s place of incorporation and principal place of business,929 the Court has recognized that in “exceptional cases” general jurisdiction can be exercised by a court located where the corporate defendant’s operations are “so substantial” as to “render the corporation at home in that state.”930 Nonetheless, insubstantial in-state business, in and of itself, does not suffice to permit an assertion of jurisdiction over claims that are unrelated to any activity occurring in a state.931 Without the protection of such a rule, foreign corporations would be exposed to the manifest hardship and inconvenience of defending, in any state in which they happened to be carrying on business, suits for torts wherever committed and claims on contracts wherever made.932 And if the corporation stopped doing business in the forum state before suit against it was commenced, it might well escape jurisdiction altogether.933 In early cases, the issue of the degree of activity and, in particular, the degree of solicitation that was necessary to constitute doing business by a foreign corporation, was much disputed and led to very particularistic holdings.934 In the absence of enough activity to constitute doing business, the mere presence of an agent, officer, or stockholder, who could be served, within a state’s territorial limits was not sufficient to enable the state to exercise jurisdiction over the foreign corporation.935

The touchstone in jurisdiction cases was recast by International Shoe Co. v. Washington and its “minimum contacts” analysis.936 International Shoe, an out-of-state corporation, had not been issued a license to do business in the State of Washington, but it systematically and continuously employed a sales force of Washington residents to solicit therein and thus was held amenable to suit in Washington for unpaid unemployment compensation contributions for such salesmen. The Court deemed a notice of assessment served personally upon one of the local sales solicitors, and a copy of the assessment sent by registered mail to the corporation’s principal office in Missouri, sufficient to apprise the corporation of the proceeding.

To reach this conclusion, the Court not only overturned prior holdings that mere solicitation of business does not constitute a sufficient contact to subject a foreign corporation to a state’s jurisdiction,937 but also rejected the “presence” test as begging the question to be decided. “The terms ‘present’ or ‘presence,’ ” according to Chief Justice Stone, “are used merely to symbolize those activities of the corporation’s agent within the State which courts will deem to be sufficient to satisfy the demands of due process. . . . Those demands may be met by such contacts of the corporation with the State of the forum as make it reasonable, in the context of our federal system . . . , to require the corporation to defend the particular suit which is brought there; [and] . . . that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice’. . . . An ‘estimate of the inconveniences’ which would result to the corporation from a trial away from its ‘home’ or principal place of business is relevant in this connection.”938 As to the scope of application to be accorded this “fair play and substantial justice” doctrine, the Court concluded that “so far as . . . [corporate] obligations arise out of or are connected with activities within the State, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.”939

Extending this logic, a majority of the Court ruled that an out-of-state association selling mail order insurance had developed sufficient contacts and ties with Virginia residents so that the state could institute enforcement proceedings under its Blue Sky Law by forwarding notice to the company by registered mail, notwithstanding that the Association solicited business in Virginia solely through recommendations of existing members and was represented therein by no agents whatsoever.940 The Due Process Clause was declared not to “forbid a State to protect its citizens from such injustice” of having to file suits on their claims at a far distant home office of such company, especially in view of the fact that such suits could be more conveniently tried in Virginia where claims of loss could be investigated.941

Likewise, the Court reviewed a California statute which subjected foreign mail order insurance companies engaged in contracts with California residents to suit in California courts, and which had authorized the petitioner to serve a Texas insurer by registered mail only.942 The contract between the company and the insured specified that Austin, Texas, was the place of “making” and the place where liability should be deemed to arise. The company mailed premium notices to the insured in California, and he mailed his premium payments to the company in Texas. Acknowledging that the connection of the company with California was tenuous—it had no office or agents in the state and no evidence had been presented that it had solicited anyone other than the insured for business— the Court sustained jurisdiction on the basis that the suit was on a contract which had a substantial connection with California. “The contract was delivered in California, the premiums were mailed there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims.”943

In making this decision, the Court noted that “[l]ooking back over the long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents.”944 However, in Hanson v. Denckla, decided during the same Term, the Court found in personam jurisdiction lacking for the first time since International Shoe Co. v. Washington, pronouncing firm due process limitations. In Hanson,945 the issue was whether a Florida court considering a contested will obtained jurisdiction over corporate trustees of disputed property through use of ordinary mail and publication. The will had been entered into and probated in Florida, the claimants were resident in Florida and had been personally served, but the trustees, who were indispensable parties, were resident in Delaware. Noting the trend in enlarging the ability of the states to obtain in personam jurisdiction over absent defendants, the Court denied the exercise of nationwide in personam jurisdiction by states, saying that “it would be a mistake to assume that th[e] trend [to expand the reach of state courts] heralds the eventual demise of all restrictions on the personal jurisdiction of state courts.”946

The Court recognized in Hanson that Florida law was the most appropriate law to be applied in determining the validity of the will and that the corporate defendants might be little inconvenienced by having to appear in Florida courts, but it denied that either circumstance satisfied the Due Process Clause. The Court noted that due process restrictions do more than guarantee immunity from inconvenient or distant litigation, in that “[these restrictions] are consequences of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has the ‘minimum contacts’ with that State that are a prerequisite to its exercise of power over him.” The only contacts the corporate defendants had in Florida consisted of a relationship with the individual defendants. “The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant’s activity, but it is essential in each case that there be some act by which the defendant purposefully avails himself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. . . . The settlor’s execution in Florida of her power of appointment cannot remedy the absence of such an act in this case.”947

The Court continued to apply International Shoe principles in diverse situations. Thus, circulation of a magazine in a state was an adequate basis for that state to exercise jurisdiction over an out-of-state corporate magazine publisher in a libel action. The fact that the plaintiff did not have “minimum contacts” with the forum state was not dispositive since the relevant inquiry is the relations among the defendant, the forum, and the litigation.948 Or, damage done to the plaintiff ’s reputation in his home state caused by circulation of a defamatory magazine article there may justify assertion of jurisdiction over the out-of-state authors of such article, despite the lack of minimum contact between the authors (as opposed to the publishers) and the state.949 Further, though there is no per se rule that a contract with an out-of-state party automatically establishes jurisdiction to enforce the contract in the other party’s forum, a franchisee who has entered into a franchise contract with an out-of-state corporation may be subject to suit in the corporation’s home state where the overall circumstances (contract terms themselves, course of dealings) demonstrate a deliberate reaching out to establish contacts with the franchisor in the franchisor’s home state.950

The Court has continued to wrestle over when a state may adjudicate a products liability claim for an injury occurring within it, at times finding the defendant’s contacts with the place of injury to be too attenuated to support its having to mount a defense there. In World-Wide Volkswagen Corp. v. Woodson,951 the Court applied its “minimum contacts” test to preclude the assertion of jurisdiction over two foreign corporations that did no business in the forum state. Plaintiffs had sustained personal injuries in Oklahoma in an accident involving an alleged defect in their automobile. The car had been purchased the previous year in New York, the plaintiffs were New York residents at time of purchase, and the accident had occurred while they were driving through Oklahoma on their way to a new residence in Arizona. Defendants were the automobile retailer and its wholesaler, both New York corporations that did no business in Oklahoma. The Court found no circumstances justifying assertion by Oklahoma courts of jurisdiction over defendants. The Court found that the defendants (1) carried on no activity in Oklahoma, (2) closed no sales and performed no services there, (3) availed themselves of none of the benefits of the state’s laws, (4) solicited no business there either through salespersons or through advertising reasonably calculated to reach the state, and (5) sold no cars to Oklahoma residents or indirectly served or sought to serve the Oklahoma market. Although it might have been foreseeable that the automobile would travel to Oklahoma, foreseeability was held to be relevant only insofar as “the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.”952 The Court in World-Wide Volkswagen Corp. contrasted the facts of the case with the instance of a corporation “deliver[ing] its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.”953

In Asahi Metal Industry Co. v. Superior Court,954 the Court addressed more closely how jurisdiction flows with products downstream. The Court identified two standards for limiting jurisdiction even as products proceed to foreseeable destinations. The more general standard harked back to the fair play and substantial justice doctrine of International Shoe and requires balancing the respective interests of the parties, the prospective forum state, and alternative fora. All the Justices agreed with the legitimacy of this test in assessing due process limits on jurisdiction.955 However, four Justices would also apply a more exacting test: A defendant who placed a product in the stream of commerce knowing that the product might eventually be sold in a state will be subject to jurisdiction there only if the defendant also had purposefully acted to avail itself of the state’s market. According to Justice O’Connor, who wrote the opinion espousing this test, a defendant subjected itself to jurisdiction by targeting or serving customers in a state through, for example, direct advertising, marketing through a local sales agent, or establishing channels for providing regular advice to local customers. Action, not expectation, is key.956 In Asahi, the state was found to lack jurisdiction under both tests cited.

Doctrinal differences on the due process touchstones in stream-of-commerce cases became more critical to the outcome in J. McIntyre Machinery, Ltd. v. Nicastro.957 Justice Kennedy, writing for a four-Justice plurality, asserted that it is a defendant’s purposeful availment of the forum state that makes jurisdiction consistent with traditional notions of fair play and substantial justice. The question is not so much the fairness of a state reaching out to bring a foreign defendant before its courts as it is a matter of a foreign defendant having acted within a state so as to bring itself within the state’s limited authority. Thus, a British machinery manufacturer who targeted the U.S. market generally through engaging a nationwide distributor and attending trade shows, among other means, could not be sued in New Jersey for an industrial accident that occurred in the state. Even though at least one of its machines (and perhaps as many as four) were sold to New Jersey concerns, the defendant had not purposefully targeted the New Jersey market through, for example, establishing an office, advertising, or sending employees.958 Concurring with the plurality, Justice Breyer emphasized the outcome lay in stream-of-commerce precedents that held isolated or infrequent sales could not support jurisdiction. At the same time, Justice Breyer cautioned against adoption of the plurality’s strict active availment of the forum rule, especially because the Court had yet to consider due process requirements in the context of evolving business models, modern e-commerce in particular.959

Nonetheless, in order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant’s contacts with the forum,960 and when there is “no such connection, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.”961 As a result, the Court, in Bristol-Myers Squibb Co. v. Superior Court, concluded that the California Supreme Court erred in employing a “relaxed” approach to personal jurisdiction by holding that a state court could exercise specific jurisdiction over a corporate defendant who was being sued by non-state residents for out-of-state activities solely because the defendant had “extensive forum contacts” unrelated to the claims in question.962 Concluding that California’s approach was a “loose and spurious form of general jurisdiction,”963 the Court held that without a “connection between the forum and the specific claims at issue,” California courts lacked jurisdiction over the corporate defendant.964

Footnotes

923
Cf. Bank of Augusta v. Earle, 38 U.S. (13 Pet.) 519, 588 (1839). [Back to text]
924
326 U.S. 310 (1945). [Back to text]
925
Lafayette Ins. Co. v. French, 59 U.S. (18 How.) 404 (1855); St. Clair v. Cox, 196 U.S. 350 (1882); Commercial Mutual Accident Co. v. Davis, 213 U.S. 245 (1909); Simon v. Southern Ry., 236 U.S. 115 (1915); Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U.S. 93 (1917). [Back to text]
926
Presence was first independently used to sustain jurisdiction in International Harvester Co. v. Kentucky, 234 U.S. 579 (1914), although the possibility was suggested as early as St. Clair v. Cox, 106 U.S. 350 (1882). See also Philadelphia & Reading Ry. v. McKibbin, 243 U.S. 264, 265 (1917) (Justice Brandeis for Court). [Back to text]
927
E.g., Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917); St. Louis S.W. Ry. v. Alexander, 227 U.S. 218 (1913). [Back to text]
928
Daimler AG v. Bauman, 571 U.S. ___, No. 11–965, slip op. at 8 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 920 (2011)) (holding Daimler Chrysler, a German public stock company, could not be subject to suit in California with respect to acts taken in Argentina by Argentinian subsidiary of Daimler, notwithstanding the fact that Daimler Chrysler had a U.S. subsidiary that did business in California). [Back to text]
929
Id. at 18–19. [Back to text]
930
Id. at 20 n. 19. For example, the Court held that an Ohio court could exercise general jurisdiction over a defendant corporation that was forced to relocate temporarily from the Philippines to Ohio, making Ohio the “center” of the corporation’s activities. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 447–48 (1952). [Back to text]
931
See BNSF R.R. Co. v. Tyrrell, 581 U.S. ___, No. 16–405, slip op. at 11–12 (2017) (holding that Montana courts could not exercise general jurisdiction over a railroad company that had over 2,000 miles of track and more than 2,000 employees in the state because the company was not incorporated or headquarted in Montana and the overall activity of the company in Montana was not “so substantial” as to render the corporation “at home” in the state). [Back to text]
932
E.g., Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408 (1984); Davis v. Farmers Co-operative Co., 262 U.S. 312 (1923); Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516 (1923); Simon v. S. Ry., 236 U.S. 115, 129–30 (1915); Green v. Chicago, B. & Q. Ry., 205 U.S. 530 (1907); Old Wayne Life Ass’n v. McDonough, 204 U.S. 8 (1907). Continuous operations were sometimes sufficiently substantial and of a nature to warrant assertions of jurisdiction. St. Louis S.W. Ry. Co. v. Alexander, 227 U.S. 218 (1913); see also Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 922 (2011) (distinguishing application of stream-of-commerce analysis in specific cases of in-state injury from the degree of presence a corporation must maintain in a state to be amenable to general jurisdiction there). [Back to text]
933
Robert Mitchell Furn. Co. v. Selden Breck Constr. Co., 257 U.S. 213 (1921); Chipman, Ltd. v. Thomas B. Jeffery Co., 251 U.S. 373, 379 (1920). Jurisdiction would continue, however, if a state had conditioned doing business on a firm’s agreeing to accept service through state officers should it and its agent withdraw. Washington ex rel. Bond & Goodwin & Tucker v. Superior Court, 289 U.S. 361, 364 (1933). [Back to text]
934
Solicitation of business alone was inadequate to constitute “doing business,” Green, 205 U.S. at 534, but when connected with other activities could suffice to confer jurisdiction. Int’l Harvester Co. v. Kentucky, 234 U.S. 579 (1914). Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141–42 (2d Cir. 1930) (Hand, J., providing survey of cases). [Back to text]
935
E.g., Riverside Mills v. Menefee, 237 U.S. 189, 195 (1915); Conley v. Mathieson Alkali Works, 190 U.S. 406 (1903); Goldey v. Morning News, 156 U.S. 518 (1895); but see Conn. Mut. Life Ins. Co. v. Spratley, 172 U.S. 602 (1899). [Back to text]
936
326 U.S. 310 (1945). [Back to text]
937
This departure was recognized by Justice Rutledge subsequently in Nippert v. City of Richmond, 327 U.S. 416, 422 (1946). Because International Shoe, in addition to having its agents solicit orders, also permitted them to rent quarters for the display of merchandise, the Court could have used International Harvester Co. v. Kentucky, 234 U.S. 579 (1914), to find it was “present” in the state. [Back to text]
938
International Shoe Co. v. Washington, 326 U.S. 310, 316–17 (1945). [Back to text]
939
326 U.S. at 319. [Back to text]
940
Travelers Health Ass’n v. Virginia ex rel. State Corp. Comm’n, 339 U.S. 643 (1950). The decision was 5-to-4 with one of the majority Justices also contributing a concurring opinion. Id. at 651 (Justice Douglas). The possible significance of the concurrence is that it appears to disagree with the implication of the majority opinion, id. at 647–48, that a state’s legislative jurisdiction and its judicial jurisdiction are coextensive. Id. at 652–53 (distinguishing between the use of the state’s judicial power to enforce its legislative powers and the judicial jurisdiction when a private party is suing). See id. at 659 (dissent). [Back to text]
941
339 U.S. at 647–49. The holding in Minnesota Commercial Men’s Ass’n v. Benn, 261 U.S. 140 (1923), that a similar mail order insurance company could not be viewed as doing business in the forum state and that the circumstances under which its contracts with forum state citizens, executed and to be performed in its state of incorporation, were consummated could not support an implication that the foreign company had consented to be sued in the forum state, was distinguished rather than formally overruled. 339 U.S. at 647. In any event, Benn could not have survived McGee v. International Life Ins. Co., 355 U.S. 220 (1957), below. [Back to text]
942
McGee v. International Life Ins. Co., 355 U.S. 220 (1957). [Back to text]
943
355 U.S. at 223. The Court also noticed the proposition that the insured could not bear the cost of litigation away from home as well as the insurer. See also Perkins v. Benguet Consolidating Mining Co., 342 U.S. 437 (1952), a case too atypical on its facts to permit much generalization but which does appear to verify the implication of International Shoe that in personam jurisdiction may attach to a corporation even where the cause of action does not arise out of the business done by defendant in the forum state, as well as to state, in dictum, that the mere presence of a corporate official within the state on business of the corporation would suffice to create jurisdiction if the claim arose out of that business and service were made on him within the state. 342 U.S. at 444–45. The Court held that the state could, but was not required to, assert jurisdiction over a corporation owning gold and silver mines in the Philippines but temporarily (because of the Japanese occupation) carrying on a part of its general business in the forum state, including directors’ meetings, business correspondence, banking, and the like, although it owned no mining properties in the state. [Back to text]
944
McGee v. International Life Ins. Co., 355 U.S. 220, 222 (1957). An exception exists with respect to in personam jurisdiction in domestic relations cases, at least in some instances. E.g., Vanderbilt v. Vanderbilt, 354 U.S. 416 (1957) (holding that sufficient contacts afforded Nevada in personam jurisdiction over a New York resident wife for purposes of dissolving the marriage but Nevada did not have jurisdiction to terminate the wife’s claims for support). [Back to text]
945
357 U.S. 235 (1958). The decision was 5-to-4. See 357 U.S. at 256 (Justice Black dissenting), 262 (Justice Douglas dissenting). [Back to text]
946
357 U.S. at 251. In dissent, Justice Black observed that “of course we have not reached the point where state boundaries are without significance and I do not mean to suggest such a view here.” 357 U.S. at 260. [Back to text]
947
357 U.S. at 251, 253–54. Upon an analogy of choice of law and forum non conveniens, Justice Black argued that the relationship of the nonresident defendants and the subject of the litigation to the Florida made Florida the natural and constitutional basis for asserting jurisdiction. 357 U.S. at 251, 258–59. The Court has numerous times asserted that contacts sufficient for the purpose of designating a particular state’s law as appropriate may be insufficient for the purpose of asserting jurisdiction. See Shaffer v. Heitner, 433 U.S. 186, 215 (1977); Kulko v. Superior Court, 436 U.S. 84, 98 (1978); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 294–95 (1980). On the due process limits on choice of law decisions, see Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981). [Back to text]
948
Keeton v. Hustler Magazine, 465 U.S. 770 (1984) (holding as well that the forum state may apply “single publication rule” making defendant liable for nation-wide damages). [Back to text]
949
Calder v. Jones, 465 U.S. 783 (1984) (jurisdiction over reporter and editor responsible for defamatory article which they knew would be circulated in subject’s home state). [Back to text]
950
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). But cf. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408 (1984) (purchases and training within state, both unrelated to cause of action, are insufficient to justify general in personam jurisdiction). [Back to text]
951
444 U.S. 286 (1980). [Back to text]
952
444 U.S. at 297. [Back to text]
953
444 U.S. at 298. [Back to text]
954
480 U.S. 102 (1987). In Asahi, a California resident sued, inter alia, a Taiwanese tire tube manufacturer for injuries caused by a blown-out motorcycle tire. After plaintiff and the tube manufacturer settled the case, which had been filed in California, the tube manufacturer sought indemnity in the California courts against Asahi Metal, the Japanese supplier of the tube’s valve assembly. [Back to text]
955
All the Justices also agreed that due process considerations foreclosed jurisdiction in Asahi, even though Asahi Metal could have foreseen that some of its valve assemblies would end up incorporated into tire tubes sold in the United States. Three of the Asahi Justices had been dissenters in World-Wide Volkswagen Corp. v. Woodson. Of the three dissenters, Justice Brennan had argued that the “minimum contacts” test was obsolete and that jurisdiction should be predicated upon the balancing of the interests of the forum state and plaintiffs against the actual burden imposed on defendant, 444 U.S. at 299, while Justices Marshall and Blackmun had applied the test and found jurisdiction because of the foreseeability of defendants that a defective product of theirs might cause injury in a distant state and because the defendants had entered into an interstate economic network. 444 U.S. at 313. [Back to text]
956
480 U.S. at 109–113 (1987). Agreeing with Justice O’Connor on this test were Chief Justice Rehnquist and Justices Powell and Scalia. [Back to text]
957
564 U.S. ___, No. 09–1343, slip op. (2011). [Back to text]
958
564 U.S. ___, No. 09–1343, slip op. (2011) (Kennedy, Roberts, Scalia and Thomas). [Back to text]
959
564 U.S. ___, No. 09–1343, slip op. (2011) (Breyer and Alito concurring). [Back to text]
960
Daimler AG v. Bauman, 571 U.S. ___, No. 11–965, slip op. at 8 (2014). [Back to text]
961
Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty., 582 U.S. ___, No. 16–466, slip op. at 7 (2017). [Back to text]
962
Id. at 7. [Back to text]
963
Id. A court may exercise “general” jurisdiction for any claim—even if all the incidents underlying the claim occurred in a different state—against an individual in that person’s domicile or against a corporation where the corporation is fairly regarded as “at home,” such as the company’s place of incorporation or headquarters. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919–24 (2011). [Back to text]
964
See Bristol-Myers Squibb Co., slip op. at 8. [Back to text]