Fifth in a series discussing the jurisdiction of courts of the United States
The United States Supreme Court has continued to rein in a court's ability to exercise general personal jurisdiction. In its most recent decision, BNSF Railway Co. v. Tyrell (decided 30 May 2017), the Court reversed a decision of the Montana Supreme Court that upheld the jurisdiction of the Montana courts under both Federal and state law.
BNSF involved two separate actions that were consolidated on appeal to the Montana Supreme Court. In each suit, the plaintiff asserted claims under the Federal Employers' Liability Act (FELA) for injuries arising from their employment with BNSF. Arguing that it was not "at home" in Montana, BNSF moved to dismiss each action for lack of personal jurisdiction. In support of its motions, BNSF noted that neither employee was injured in Montana, that BNSF was not headquartered in Montana and did not have its principal place of business there, and that BNSF had only a small percentage of its total workforce (5%) and total track mileage (6%) there.
The trial court in one of the cases granted BNSF's motion, while the trial court in the other denied the motion, setting the stage for the appeal to the Montana Supreme Court and ultimately the US Supreme Court.
BNSF in the Montana Supreme Court
The Montana Supreme Court, relying on two sentences of a section of FELA as well as the state's own procedural statutes, ruled that BNSF was subject to the general jurisdiction of the Montana courts.
The first provision of FELA that swayed the Montana Supreme Court permits an action to be brought in a US district court in a district “in which the defendant shall be doing business at the time of commencing such action.” 45 U.S.C. Sec. 56. The second sentence of Sec. 56 of FELA that the Montana Supreme Court deemed persuasive makes the jurisdiction of the US district courts concurrent with that of the state courts.
Alternatively, the Montana Supreme Court ruled that jurisdiction could be predicated on Montana's long-arm statute (Mont. Rule Civ. Proc. 4(b)(1) (2015)), which allows Montana courts to assert personal jurisdiction over “persons found within . . . Montana.” The Montana high court determined that BNSF could be "found within Montana" because it maintained more than 2,000 miles of tracks and employed more than 2,000 workers in Montana.
The combination of track mileage and BNSF employees in Montana led the Montana Supreme Court to conclude that BNSF was "doing business" in Montana for purposes of FELA and that it could be "found in Montana" under the state's procedural laws.
BNSF in the US Supreme Court
The US Supreme Court granted certiorari to decide "whether §56 [of FELA] authorizes state courts to exercise personal jurisdiction over railroads doing business in their States but not incorporated or headquartered there, and whether the Montana courts’ exercise of personal jurisdiction in these cases comports with due process." The Court emphasized that these issues were addressed to the exercise of general jurisdiction, and not specific jurisdiction, because the plaintiffs' injuries did not arise from, and were otherwise unrelated to, any work performed by either plaintiff in Montana.
The US Supreme Court held that neither provision of FELA relied upon by the Montana Supreme Court addresses personal jurisdiction. First, the Court noted the Montana Supreme Court's misplaced reliance on the provision of Sec. 56 that allows an action to be brought in a district in which the defendant is doing business. That provision, the Court observed, addresses venue, not personal jurisdiction, and, thus provides no basis for haling a defendant into the courts of Montana.
Next the Court held that Sec. 56's grant of concurrent jurisdiction refers to subject matter jurisdiction, not personal jurisdiction, and simply allows both federal and state courts to decide FELA cases. In support of this ruling, the Court noted that "Congress added this clarification after the Connecticut Supreme Court held that Congress intended to confine FELA litigation to federal courts, and that state courts had no obligation to entertain FELA claims."
Having concluded that Sec. 56 of FELA provides no basis for establishing personal jurisdiction, the Court turned its attention to Montana's long-arm statute, which permits Montana courts to exercise personal jurisdiction over "persons found within…Montana." Despite the plain language of the Montana law, the outcome determinative issue, the Court stressed, was not whether BNSF could be found in Montana (indeed, BNSF did not contest that it could be found in Montana, as the Montana courts construed the statute). Rather the critical issue was whether application of the Montana statute allowing the Montana courts to exercise jurisdiction over BNSF "comports with the Due Process Clause of the Fourteenth Amendment." The Court ruled that it did not, drawing heavily on its decisions in Goodyear and Daimler. Those decisions clarified that before a court can exercise general jurisdiction, due process requires a corporation's affiliations with the State to be "so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Quoting Daimler, 571 U. S., at ___ (slip op., at 8) (quoting Goodyear, 564 U. S., at 919). The "paradigm" forums in which a corporation is at home, according to Goodyear and Daimler, are the state of incorporation and the state in which the corporation has its principal place of business - for BNSF, Delaware and Texas, respectively.
The Court reiterated comments from Daimler that even when suit is not brought in a "paradigm" forum, a court can exercise general jurisdiction over a corporate defendant in an "exceptional case" in which the corporation's contacts with the forum state are "so substantial and of such a nature as to render the corporation at home in that State.” In this regard, the Montana Supreme Court found BNSF's in-state track mileage and number of Montana employees compelling. The US Supreme Court determined that these contacts, though arguably significant in an absolute sense, failed to comport with due process, again drawing from its Daimler decision:
[T]he general jurisdiction inquiry does not focus solely on the magnitude of the defendant’s in-state contacts….Rather, the inquiry calls for an appraisal of a corporation’s activities in their entirety; [a] corporation that operates in many places can scarcely be deemed at home in all of them.
While BNSF's contacts with Montana may have been sufficient to subject it to the specific jurisdiction of Montana courts, those same contacts could not support the exercise of general jurisdiction because the asserted claims were unrelated to any BNSF activity in Montana.
The BNSF decision is entirely consistent with the Supreme Court's decisions in Goodyear and Daimler and confirms the high bar that must be met to establish general jurisdiction when a corporate defendant is sued in a forum other than its state of incorporation or the state in which it has its principal place of business. This decision continues the trend of reining in the exercise of general personal jurisdiction and will greatly limit a plaintiff's ability to forum-shop.
In addition to their arguments based on FELA Sec. 56 and Montana's long arm statute, the plaintiffs in the Montana cases also argued that BNSF consented to the jurisdiction of the Montana courts by obtaining a certificate to conduct business in Montana and appointing an in-state registered agent for service of process. Because the Montana Supreme Court found jurisdictional predicates in Sec. 56, Montana's law arm statute, and BNSF's contacts with Montana, it elected not to address the consent argument. And in the absence of review by the Montana Supreme Court, the US Supreme Court also declined to address the issue.
As noted in a previous Alert, in the aftermath of Goodyear and Daimler, the issue of consent jurisdiction has generated considerable debate in US courts, with inconsistent results, often within courts of the same judicial district. This debate will continue until resolved by the US Supreme Court. Given the deep divisions that have arisen on this issue, it is reasonable to expect that the issue will soon come before the high court for review.