United States: At Least Listen To Us Now – Waiver & Personal Jurisdiction

Last Updated: April 25 2018
Article by James Beck

As soon as Daimler AG v. Bauman, 571 U.S. 117 (2014), we made a point of warning defendants that personal jurisdiction was waivable. Waiver was in the second paragraph of our Bauman Personal Jurisdiction In-House Counsel Checklist – before the checklist itself:

Personal jurisdiction defenses, however, are waivable. They have to be pleaded and asserted at the outset of the litigation, or else the other side will argue – more persuasively, the more time that has passed – that a defendant has slept on its rights while other parties and the judicial system itself have expended valuable time and effort litigating in the plaintiffs' forum of choice. Thus, corporate defendants have to act quickly to evaluate and raise Bauman-based jurisdictional defenses at the outset of the case.

But just suppose that somebody didn't listen to us. Perhaps not recognizing the significant changes in personal jurisdiction practice (if not necessarily in constitutional Due Process doctrine itself) wrought by Bauman and Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), a defendant might not plead a personal jurisdiction defense, thinking it futile – as indeed it likely was under prior practice in most places. Or even if personal jurisdiction was one of those 28 boilerplate defenses included at the end of every answer to a complaint, perhaps the defendant didn't file a motion to dismiss under Fed. R. Civ. P. 12(b)(1) at the outset of the litigation....

Now the defendant has seen the light and wants to raise personal jurisdiction as a potentially dispositive defense (in the current forum, anyway). Plaintiff raises waiver. Is the defendant out of luck?

It's not a good situation to be in, but it's not hopeless, at least not in all jurisdictions. Today we're discussing arguments against waiver that have succeeded in Bauman/BMS personal jurisdiction decisions.

In Gucci America, Inc. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014), decided not long after Bauman, the plaintiffs' waiver argument failed even though the defendant "appeared in the district court and did not argue there that the court lacked personal jurisdiction." Id. at 135. In between Bauman was decided. "While arguments not made in the district court are generally waived, a party cannot be deemed to have waived objections or defenses which were not known to be available at the time they could first have been made." Id. (citations and quotation marks omitted). Bauman's enforcement of the "at home" test for general jurisdiction meant that the world had changed:

[A] defendant does not waive a personal jurisdiction argument − even if he does not make it in the district court − if the "argument that the court lacked jurisdiction over the defendant would have been directly contrary to controlling precedent in this Circuit. Prior to Daimler [which we call Bauman because there are a lot more Mercedes-Benz cases], controlling precedent in this Circuit made it clear that a [defendant] with a branch in New York was properly subject to general personal jurisdiction here. Under prior controlling precedent . . . through the activity of its New York branch, [defendant] engaged in a "continuous and systematic course of doing business". . . . Therefore, we conclude that [defendant] did not waive its personal jurisdiction objection.

Id. at 135-36 (citations and quotation marks omitted). We believe that the same thing can be said about BMS and case-linked personal jurisdiction – both as to disapproving California's sliding scale and as to the insufficiency of relationships with in-state distributors. Accord Strauss v. Credit Lyonnais, S.A., 175 F. Supp.3d 3, 14 (E.D.N.Y. 2016); In re LIBOR-Based Financial Instruments Antitrust Litigation, 2015 WL 4634541, at *31 (S.D.N.Y. Aug. 4, 2015); 7 West 57th Street Realty Co., LLC v. Citigroup, Inc., 2015 WL 1514539, at *5-7 (S.D.N.Y. March 31, 2015) (all following Gucci). "It was only after the Supreme Court issued its decision in [Bauman] that the scope of [the] 'at home' test was appreciated." Klieman v. Palestinian Authority, 82 F. Supp.3d 237, 243 (D.D.C. 2015). Thus, the worse any given jurisdiction's personal jurisdiction law was before Bauman and/or BMS, the more likely it is that futility precludes waiver.

As similar defense to waiver – based on BMS as the intervening decision − prevailed recently in Practice Management Support Services, Inc. v. Cirque du Soleil, Inc., ___ F. Supp.3d ___, 2018 WL 1255021 (N.D. Ill. March 12, 2018) (which we discussed for other reasons, here), where the defendant had not initially raised personal jurisdiction against "unnamed, nonresident class members," either in "their answer" or while "litigating this case for many years." Id. at 17. Citing precedent from around the country, Practice Management held that the defendants nonetheless "raise[d] their personal jurisdiction defense in a motion that timely followed [BMS]." Id.

[A] party cannot be deemed to have waived objections or defenses which were not known to be available at the time they could first have been made, especially when it does raise the objections as soon as their cognizability is made apparent. . . . [A] party can be excused for failing to raise a defense where the defense, if timely asserted, would have been futile under binding precedent. Like [other] cases, the Court finds that raising a personal jurisdiction defense as to unnamed, nonresident class members would have been "futile" prior to [BMS]. The Court therefore finds that the defense was not then available" to defendants and declines to find it forfeited.

Id. (citing, and in some cases quoting: Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 92 (2d Cir. 2009); Bennett v. City of Holyoke, 362 F.3d 1, 7 (1st Cir. 2004); Glater v. Eli Lilly & Co., 712 F.2d 735, 738 (1st Cir. 1983); Holzsager v. Valley Hospital, 646 F.2d 792, 795-96 (2d Cir. 1981)). See Feller v. Transamerica Life Insurance Co., 2017 WL 6453262, at *4 (C.D. Cal. Dec. 11, 2017) (no waiver because "it is not clear that [defendant] would have had a viable basis for challenging personal jurisdiction with respect to their claims" before BMS).

But be careful – this "dramatic new development" exception to waiver comes with a limited shelf life, and BMS is rapidly approaching its first anniversary.

Practice Management also found it proper to excuse any waiver on an alternative ground, that it would be contrary to "proper construction of governing law" to allow a questionable waiver to preserve litigation that – after BMS – was now clearly barred by Due Process limits on personal jurisdiction.

[E]ven if defendants had waived this defense, the Court finds that it would be appropriate to excuse the forfeiture. . . . [T]he court retains the independent power to identify and apply the proper construction of governing law, even where the parties fail to advert to the applicable rule in their own briefing. Given the Supreme Court's clear holding in [BMS] concerning the proper framework for analyzing personal jurisdiction in cases like this one . . ., exercising the court's discretion to excuse the forfeiture [is] warranted.

Id. (quoting and following Greene v. Mizuho Bank, Ltd., ___ F. Supp.3d ___, 2017 WL 7410565, at *6 (N.D. Ill. Dec. 11, 2017)). See Levine Hat Co. v. Innate Intelligence, LLC, 2017 WL 3021526, at *3 (E.D. Mo. July 17, 2017) (excusing technical waiver; "federal courts will generally deem a Rule 12(b)(2) motion timely if the defendant's previously-filed answer expressly includes the lack of personal jurisdiction as an affirmative defense"). So if your jurisdictional argument is good enough, and the plaintiff's jurisdictional argument is the opposite, a sympathetic court can find grounds to avoid a claimed waiver.

Another useful case for defeating waiver arguments is Hinrichs v. General Motors of Canada, Ltd., 222 So.3d 1114 (Ala. 2016). First, Hinrichs turns the waiver argument around, holding that the plaintiff had himself waived the waiver argument by not asserting it clearly or timely. Id. at 1120. See In re Plavix Related Cases, 2014 WL 3928240, at *6 (Ill. Cir. Aug. 11, 2014) ("Plaintiffs also fail to specifically identify what Defendants did that resulted in waiver. Plaintiffs have thus waived their waiver argument"). So even if the defendant wasn't on its toes, if the plaintiff wasn't either, the plaintiff may waive a waiver argument.

Second, Hinrichs excused the defendant's three-year (until after the U.S. target defendant declared bankruptcy) delay because of the plaintiffs' procrastination in actually pursuing his supposed claim.

[Plaintiff] repeatedly sought extensions of the trial court's scheduling order and took no action to pursue his claims against [defendant] during this period. When it appeared that the trial court would not further amend its scheduling order, [defendant] filed its motion reasserting its defense to personal jurisdiction. . . . [Plaintiff] cannot point to [defendant's] having at any time caused the trial court to address a potentially dispositive issue that would have been moot had its defense of lack of personal jurisdiction been later sustained.

Id. Thus, due to the plaintiff's own dilatory conduct in pursuing any claim against what had been a secondary defendant, that defendant "did not waive its defense of lack of personal jurisdiction." Id. See Statek Corp. v. Coudert Bros. LLP, 2018 WL 834227, at *12 (D. Conn. Feb. 12, 2018) (no waiver of personal jurisdiction while action was stayed by bankruptcy).

The dilatory plaintiff scenario occurs with startling frequency, especially in MDL situations where weak plaintiffs seek to lie low and do nothing while hoping for a settlement. Another frequent source of plaintiff-side dilatory conduct of not pursuing pleaded claims is asbestos, where many defendants languish until something (usually a settlement; sometimes a bankruptcy) causes the plaintiff finally to pay attention to a low level defendant with an inchoate personal jurisdiction defense.

Finally, as we already mentioned, a number of decisions (all authored by the same judge) considered the BMS decision an "other paper" that restarted the 30-day period for removal under 28 U.S.C. §1446(b)(3). Douthit v. Janssen Research & Development, LLC, 2017 WL 4224031, at *6 (S.D. Ill. Sept. 22, 2017):

Correctly, defendants attest BMS conclusively established the Due Process Clause prohibits non-[resident] plaintiffs from filing claims against defendants in [this] state['s] courts. The Court agrees with defendants and finds plaintiffs' argument unfounded. When a different case resolves a legal uncertainty concerning the existence of original federal jurisdiction, removal is allowed on that basis.

Id. (citation and quotation marks omitted). Accord Braun v. Janssen Research & Development, LLC, 2017 WL 4224034, at *6 (S.D. Ill. Sept. 22, 2017); Bandy v. Janssen Research & Development, LLC, 2017 WL 4224035, at *6 (S.D. Ill. Sept. 22, 2017); Pirtle v. Janssen Research & Development, LLC, 2017 WL 4224036, at *6 (S.D. Ill. Sept. 22, 2017); Roland v. Janssen Research & Development, LLC, 2017 WL 4224037, at *5 (S.D. Ill. Sept. 22, 2017); Woodall v. Janssen Research & Development, LLC, 2017 WL 4237924, at *6 (S.D. Ill. Sept. 22, 2017) (all by Herndon, C.J.). While that ruling was favorable to those defendants which acted in time after BMS, it is not going to help anyone now, since the thirty days have long since run.

While there are ways around a possible waiver of personal jurisdiction, defendants really don't want to have to go there. First of all, there are plenty of cases going the other way – we're just not going to do the plaintiffs' research for them. Second, defense counsel never wants to be in a position of having to explain an adverse ruling on waiver to their client. Third, after Bauman and BMS, it's really a lot more fun for our side to be challenging personal jurisdiction on the merits.

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

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