United States: What You Will See On Personal Jurisdiction Following BMS

Last Updated: July 19 2017
Article by Steven Boranian

The Supreme Court's opinion on personal jurisdiction in BMS v. Superior Court has already made a substantial impact, despite being on the books for a mere three weeks. That's probably because it's the Supreme Court and also because personal jurisdiction is an issue in every lawsuit filed, whether in state or federal court. Another reason could be that the California Supreme Court's opinion reaching for personal jurisdiction in BMS was so clearly swimming against the Supreme Court's recent current that its reversal was widely anticipated and thus gained notoriety even faster than usual. That last part is speculation, but still, we have not heard so much about personal jurisdiction since poor Mr. Burnham traveled from New Jersey to California to visit his kids. See Burnham v. Superior Court, 495 U.S. 604 (1990).

So what will we see following BMS? We saw last week that some plaintiffs will try to stretch even the most tenuous forum contacts into specific jurisdiction, and some courts may go along with that. We expect that most will not. Take for example a recent opinion from the New Jersey Appellate Division, Dutch Run-Mays Draft, LCC v. Wolf Block, LLP, __ A.3d __, 2017 WL 2854420 (N.J. App. Div. July 5, 2017). In Dutch Run, a Florida real estate developer sued a dissolved Pennsylvania law firm in New Jersey state court, and it argued that the law firm's compliance with New Jersey's business registration statute created personal jurisdiction "by consent." The New Jersey courts rejected that position. Sure, the plaintiff was able to identify New Jersey contacts—business registration, a New Jersey registered agent, two New Jersey offices, the residency of some partners on the law firm's dissolution committee, and three lawsuits that the law firm filed in New Jersey's courts.

The problem for the plaintiff was that its claims had nothing to do with these New Jersey contacts. As the court put it, "[T]he negligence forming plaintiff's cause of action did not arise from defendant's contacts with New Jersey. Plaintiff cannot show any relationship between the underlying matter and the business or attorneys in New Jersey." Id. at *5. Thus, no specific personal jurisdiction. This is a faithful application of BMS, which requires a causal link between the defendant's forum contacts and the plaintiff's alleged injury.

Equally as important, the court held that the law firm's registration in New Jersey did not imply "consent" to general personal jurisdiction under Daimler AG v. Bauman:

Plaintiff suggests Daimler's holding is narrowed by its facts, specifically that Daimler was not registered as a foreign entity and had no registered agent or offices in California.

This limited view ignores Daimler's definitive due process analysis. . . . We now join the many courts that have circumscribed the view of general jurisdiction post-Daimler. . . . In light of Daimler, we reject the application of [Allied-Signal, Inc. v. Purex Indus., Inc. 242 N.J. Super. 362 (App. Div. 1990)] as allowing general jurisdiction solely based on the fiction of implied consent by a foreign corporation's compliance with New Jersey's business registration statute. . . . Importantly, the exercise of general jurisdiction requires satisfaction of the "continuous and systematic contacts" to comply with due process. Mere registration to conduct some business is insufficient.

Dutch Run, at *7 (emphasis added, citations omitted). The court also rejected the plaintiff's request for "jurisdictional discovery" because "[w]e remain unconvinced that permitting further discovery would have altered our conclusion." Id. at *8.

Speaking of discovery, we also commend to you the order rejecting "jurisdictional discovery" in In re Baltimore City Asbestos Litigation (Smith v. Automotive Prods. Co.), Memorandum Opinion & Order, No. 24X13000333 (Baltimore City Circuit Ct. June 7, 2017). In Smith, a Pennsylvania plaintiff sued multiple Pennsylvania defendants in Pennsylvania. But after some defendants won summary judgment, the plaintiff tried to re-file his lawsuit in Maryland, which has a longer statute of limitations. Slip op. at 2.

The Maryland court initially reserved ruling on personal jurisdiction and allowed limited "jurisdictional discovery." This made neither side happy, resulting in dueling motions for reconsideration: The defendants asked again for dismissal, and the plaintiffs wanted broader discovery.

The defendants won. Citing BMS, the court ruled that it lacked specific personal jurisdiction over the defendants because

this suit is unrelated to any alleged contact the Defendants may have had with the State of Maryland. Further the Defendants in this suit have conducted virtually no business in the State of Maryland and, therefore, have not purposefully availed themselves of the privilege of conducting activities in the State. Therefore, this Court lacks specific jurisdiction over the Defendants in this suit.

Slip op. at 5. The court similarly lacked general personal jurisdiction over the defendants because they were not "at home" in Maryland, where "the only relevant inquiry is whether the defendant is either incorporated or has its principle place of business in the forum state." Slip op. at 6 (citing Daimler AG v. Bauman). Like the New Jersey court in Dutch Run, the Maryland court rejected "jurisdictional discovery" because "[i]t is clear that further discovery will not uncover facts demonstrating the existence of general jurisdiction over any of the moving Defendants. All of the Defendants are incorporated outside of Maryland. The Defendants' principal places of business are all in Europe." Slip op. at 6.

We bring you these two cases not only because they are timely, but because they confront tactics that we expect to see post-BMS—assertions of jurisdiction "by consent" and requests for "jurisdictional discovery." Our view on jurisdiction by consent is clear: We don't think it holds up; and as the New Jersey court found, a majority of courts have ruled that business registration alone does not form consent to jurisdiction.

As for discovery, these courts were correct to reject discovery where the facts already showed that jurisdiction was lacking. To this, we can add only that courts contemplating "jurisdictional discovery" should be reticent, very reticent. As is commonly true with phased discovery, defining the phases can be challenging, leading to substantial overlap between discovery on jurisdictional facts versus discovery on all other facts. It is a slippery slope toward full-blown discovery, in a case where the plaintiff has not yet established the court's jurisdiction. Look at what the plaintiff did in Smith v. Automotive Products, discussed above—the court gave them jurisdictional discovery, and their response was to ask for more. We are not surprised. Of course, this all assumes that a court has the power to allow discovery against a defendant contesting jurisdiction in the first place. We don't know the answer to that question, but the yet-to-be established nature of the court's prerogative is another reason to tread lightly.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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