(Not) Home Sweet Home: Fighting Assertions of General Jurisdiction over Product Liability Claims in Oregon and Washington
By Seann Colgan | March 29, 2017
For corporate defendants doing business in multiple states, the U.S. Supreme Court’s 2014 decision in Daimler AG v. Baumann, 134 S. Ct. 746 (2014) was a godsend. Daimler significantly limited the permissible scope of general personal jurisdiction – i.e., the circumstances under which a corporate defendant may be hauled into court in a forum completely unrelated to the underlying claims. It has been a boon particularly for corporate defendants who manufacture consumer products, and who therefore regularly face products liability claims.
Recently, the Oregon Supreme Court issued a decision applying Daimler in a manner very favorable to corporate defendants. The appellate courts of Washington have yet to weigh in, however a Washington trial court has issued a decision that is similarly helpful. The bottom line is that corporate defendants facing suit in Oregon or Washington by plaintiffs asserting general jurisdiction are likely to find a judiciary receptive to their arguments under Daimler.
General Jurisdiction (Or, I think I remember that from law school)
First, a quick refresher. Personal, as opposed to subject matter, jurisdiction comes in two varieties: specific and general. (Defendants may also, of course, consent to personal jurisdiction as in a contractual forum selection clause.) Specific jurisdiction arises when the defendant’s business activities in the forum state bear some relationship to the claim itself. The paradigmatic example is a personal injury plaintiff suing based upon an accident that occurred in the forum.
But what if there is no relationship between the underlying claim, the forum, and the defendant’s business activities? In that case, a plaintiff may try to assert general jurisdiction: the concept that a particular forum has jurisdiction over a defendant regardless of the claim asserted.
The exercise of jurisdiction by courts, federal and state, must however comport with the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution. The seminal case is International Shoe Co. v. Washington, 326 U.S. 310 (1945), wherein the Supreme Court held that due process permits the exercise of general jurisdiction over an out-of-state corporate defendant if the defendant’s business activities are so “continuous” and “substantial” as to justify suit against it in the forum state “on causes of action arising from dealings entirely distinct from those activities.” 326 U.S. at 318.
Recent Jurisprudence: Goodyear and Daimler limit general jurisdiction
In 2011, the Supreme Court clarified the standard set forth in International Shoe, holding that a court may assert general jurisdiction only when business activities in the forum state are so continuous and systematic as to render the defendant “essentially at home” there. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). The Court did not explain in Goodyear, however, what activities were sufficient to meet this test.
In Daimler, the Court picked up the ball, and did exactly that. Essentially, the Court held that a corporation is “at home” for purposes of general jurisdiction only in its state of incorporation, and in the state where its principal place of business is located. 134 S.Ct at 761. Although the Court noted that additional “exceptional” circumstances may give rise to general jurisdiction in other states, it made clear that mere business activity in a forum states – regardless of the amount of activity – is not of itself sufficient to give rise to general jurisdiction there. As the Court commented: “A corporation that operates in many places can scarcely be deemed at home in all of them.” Id. at 762, n. 20.
Daimler in Oregon and Washington
The Oregon Supreme Court recently issued a decision applying Baumann in exactly the way multi-state corporate defendants would like to see it applied. The plaintiff in Barrett v. Union Pacific Railroad Co., 361 Or. 115 (March 2, 2017) was injured while working for the defendant railroad in Idaho. The defendant, Union Pacific, is a Delaware corporation, with its principal place of business in Nebraska. The court noted that Union Pacific has 1,700 employees in Oregon, owns and operates almost 1,100 miles of track in the state, and generates over $645 million in annual revenue from its Oregon operations. Id. at 124.
Those facts, however, were not sufficient to give rise to general jurisdiction under Daimler. The court reasoned as follows: “There is no dispute that Union Pacific has engaged in a substantial, continuous, and systematic course of business in Oregon. However, Union Pacific’s activities in Oregon, while substantial, are only a small part of its larger business activities in 23 states. To paraphrase the Court’s reasoning in Daimler, if Oregon can exercise general jurisdiction over Union Pacific … then every state in which Union Pacific has engaged in similar activities can assert general jurisdiction, and the Court was clear that a rule of decision that results in multiple jurisdictions simultaneously asserting general jurisdiction over an out-of-state defendant is at odds with the Due Process Clause.” Id. at 123-34. If you’re a corporate defendant in Oregon in need of a handy quote to insert into your motion to dismiss on grounds of lack of general personal jurisdiction: there it is.
Washington’s appellate courts have yet to issue a decision applying Daimler. King County Superior Court, however, which is the trial court of general subject matter jurisdiction in Seattle, issued a decision applying Daimler in line with Barrett. The plaintiff in Cox v. Alco Indus., Inc., et al., King Co. Case No. 15-2-09603-6 SEA, alleged asbestos exposure occurring in Idaho. The defendant, CertainTeed Corporation was a Delaware corporation with its primary headquarters in Pennsylvania. The court noted that CertainTeed sold products in Washington through at least 82 distributors and retailers, and employed 35 sales representative in Washington. Order (September 10, 2015), p. 1.
As in Barrett, those facts alone did not subject CertainTeed to the exercise of general jurisdiction. The court concluded, following Daimler, “that the due process clause of the Fourteenth Amendment now prohibits a state court from exercising general jurisdiction over a foreign (i.e., out-of-state) corporation unless that corporation’s activities are so significant and continuous as to make the forum state one of its principal places of businesses.” Id.
The bottom line is that, if you represent an out-of-state corporate defendant facing suit in Oregon or Washington, Daimler may provide a solid basis for a successful motion to dismiss on grounds of lack of general personal jurisdiction. To determine whether Daimler is applicable to your case, consider the following two questions:
- Is your company incorporated in the forum state or is your corporate headquarters located there?
- Do the factual allegations for the lawsuit relate to the forum state (example: did the accident giving rise to a products liability claim happen there)?
If the answer to both of those questions is NO, you very likely have a strong argument for dismissal under Daimler. Recall, however, that a motion to dismiss on grounds of lack of jurisdiction must be made in a defendant’s first responsive pleading, or else it is deemed waived. Make sure, therefore, that your counsel in Oregon or Washington do not file an answer without first considering the jurisdictional question.
Daimler would seem to have done away with the notion that a corporation’s mere business activities may subject it to suit nationwide. Plaintiff’s attorneys are nothing if not resourceful, however, and two potential exceptions to what we might call the Daimler doctrine have been raised in various courts around the county. First, as noted above, jurisdiction may also be obtained through the consent of a corporate defendant. Since Daimler, Plaintiffs have accordingly argued that a corporation that complies with a state’s business registration statute has thus consented to general jurisdiction in the state. No appellate decision in Oregon or Washington has yet taken up this issue. It is at least questionable after Daimler, however, whether a state may require a corporation to consent to general jurisdiction as a condition of doing business in the state.
In a more creative end-around, the California Supreme Court recently issued a decision that undermines Daimler in mass tort cases. The issue in Bristol-Myers Squibb Co. v. Superior Court, 1 Cal. 5th 783 (2016), was whether a California trial court had jurisdiction over claims asserted against a drug manufacturer by nonresident plaintiffs that were part of a class action. None of the plaintiffs had purchased or ingested the drug in California, and the defendant was not incorporated or headquartered there.
The California Supreme Court, accordingly, held that there was no general personal jurisdiction under Daimler. The court went on to find, however, that the defendant marketed and distributed the drug in California, employed salespeople there, and had significant R&D facilities in California, and that such activities were part of nationwide marketing and distribution of the drug – on which basis it found that the trial court had specific personal jurisdiction over the nonresident claims. Id. at 804-806.
Needless to say, the holding that general business activity can give rise to specific jurisdiction is an unexpected twist in the law. The story is not yet finished, however: the U.S. Supreme Court has granted certiorari, and argument is scheduled for April 25, 2017. Stay tuned. We will update these questions as further decisions are issued.