A guest post from three of the many smart lawyers at Maron Marvel Bradley Anderson & Tardy LLC. Unlike me, they can keep up, and the knowledge and posts are very much appreciated.
March 3, 2017
Not One, but Two, State Supreme Courts Uphold Strict Application of Daimler This Week
Two decisions issued this week by state supreme courts show the upheaval that is taking place in personal jurisdiction, and are representative of the legal questions being pondered by attorneys and within many federal and state courts across this nation since January 2014. Does Daimler apply to my case? Will its application benefit the final outcome of my litigation? In the now-seminal Daimler AG v. Bauman , 134 S. Ct. 746 (2014) opinion, the Supreme Court revisited the issue of personal jurisdiction in a way not seen since Int’l Shoe Co. v. Washington , 326 U.S. 310 (1945) and Pennoyer v. Neff , 95 U.S. 714 (1878) and confirmed unequivocally that a court cannot assert general jurisdiction over a corporation unless that corporation (1) is either incorporated or principally based in that forum; or (2) has affiliations with the forum that are “so continuous and systematic as to render it essentially at home” there. Id. (quotation marks and brackets omitted) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 US 915 (2011). If nothing else, Daimler was an attempt to maintain restrictions on the exercise of general jurisdiction, not to expand it, and to provide corporations some predictability on where they may be sued. Since Daimler, many courts have been presented with motions by defendants seeking dismissal based upon lack of general personal jurisdiction. Some state courts have vigorously supported the application of Daimler, while others have found factual differences to deny such personal jurisdiction challenges. Numerous opinions have been issued in the past two (2) years, but what remains uncertain is the long- term application going forward. That may become clearer when the Court decides the two cases being argued next month: BNSF Railway Co. v. Tyrrell , No. 16-405, and Bristol-Myers Squibb Co. v. Superior Court of Californi a, No. 16-466. Oral arguments for both are scheduled for April 25, 2017.
This week, however, non-resident defendants sued in Missouri and Oregon were given more clarity on Daimler‘s impact, at least for the immediate future. On February 28, 2017, the Missouri Supreme Court issued its ruling in State ex rel. Norfolk So. Ry. Co. v. Hon. Colleen Dolan, No. SC95514, applying a strict reading of Daimler. The Court held that Missouri courts do not have personal jurisdiction (specific or general) over Norfolk Southern Railway Company. Russell Parker, an Indiana resident, brought a Federal Employer’s Liability Act (FELA) suit in St. Louis County, alleging injury as a result of his years of employment by Norfolk Southern in Indiana. Norfolk Southern Railway is a Virginia corporation with its principal place of business in Virginia. Norfolk moved for lack of personal jurisdiction, which was overruled (without opinion) by the trial court. A petition for writ of prohibition or, in the alternative, a writ of mandamus, was subsequently denied by the Missouri Court of Appeals. Further appeal was made by Norfolk to the Missouri Supreme Court.
Parker argued that Missouri courts had both general and specific jurisdiction over Norfolk, and, alternatively, that Norfolk consented to personal jurisdiction by registering to do business in Missouri and appointing a Missouri agent for service of process, or that FELA conferred specific personal jurisdiction over a railroad in any state where the railroad owned or operated tracks. The Missouri Supreme Court rejected all of Parker’s arguments, holding that, while prior to Daimler, Norfolk’s “continuous and systemic” business in Missouri would have supported general jurisdiction, post Daimler that, “…is no longer the law.” Slip op. at 6. Instead, the Court found Norfolk’s contacts insufficient to establish general jurisdiction. Applying Daimler, the Court held that courts can only exercise general jurisdiction over a corporation if that corporation’s place of incorporation or its principal place of business is in the forum state, or in exceptional cases, where the corporation’s activities are so substantial and of such a nature as to render the corporation essentially at home in that forum state. Applying the analysis of both Daimler and Brown v Lockheed Martin Corp., 814 F.3d 619 (2d Cir. 2016), the Missouri Supreme Court found Norfolk’s activities in Missouri insufficient to confer general jurisdiction in that they represent only a tiny portion of Norfolk’s entire nationwide business. (Norfolk’s business in Missouri is only 2% of its nationwide business. Norfolk owns or operates some 400 miles of track, generates $232 million in revenue, and employs 590 people in Missouri. It generates greater revenue in 11 other states, and has track in 22 others, and more employees in 13 other states.) Norfolk’s activities in Missouri are quite distinct from the nerve center of activities the U.S. Supreme Court posited might be sufficient to make it, essentially, Norfolk’s home state.
Parker further argued that Norfolk is subject to specific jurisdiction since Norfolk purposely availed itself of the opportunity to do business in Missouri – the injuries in Indiana were injuries “arising from or related to” the same “type” of activities as Norfolk’s Missouri activities – and that FELA itself provides specific jurisdiction any place a railroad corporation has tracks. Accepting such an analysis, according to the court, would go beyond the pre-Daimler approach to general jurisdiction. It would turn specific jurisdiction on its head as every state would then have specific jurisdiction over every national business. As to FELA, the court recognized that Parker’s relied-upon provision in FELA only references “venue” and does not address personal jurisdiction.
Finally, Parker argued that Norfolk consented to personal jurisdiction by complying with Missouri’s foreign corporation registration statutes and appointing an agent. The court specifically rejected this argument and stated that, to the extent the holdings or dicta of its prior cases may suggest otherwise, they should not be followed. The court specifically held that the Missouri registration statute does not provide an independent basis for broadening Missouri’s personal jurisdiction to include the corporation’s forum activities when the usual bases for general jurisdiction are not present.
In the second state high court decision this week applying a strict reading of Daimler, the Oregon Supreme Court issued its ruling in Barrett v. Union Pacific Railroad Co., CC 15CV27317; SC S 063914 (March 2, 2017). The Court held that Oregon courts do not have personal jurisdiction over Union Pacific Railroad Company for claims unrelated to the railroad’s activities in the state. Christopher Barrett, an Oregon resident, brought an action in Oregon to recover for injuries he sustained while working for Union Pacific as a spiker machine operator near Minidoka, Idaho. Union Pacific is a Delaware corporation with its principal place of business in Omaha, Nebraska. It operates railroads in 23 states, including Oregon and has been engaged in business in Oregon on an ongoing basis for a substantial period of time. Indeed, one of its now-merged subsidiaries first began operating in Oregon in 1863. Oregon forms a significant part of Union Pacific’s business (the company owns approximately 32,000 miles of track in 23 states, with approximately 3.4% of those tracks in Oregon, and Oregon is ninth in terms of number of employees and fourteenth among the states in revenues generated for the railroad company). Barrett argued that Oregon has general jurisdiction over Union Pacific under FELA and, because of Union Pacific’s actions in Oregon were “so substantial and of such a nature as to justify suit against [Union Pacific] on causes of actions arising from dealings entirely distinct from those activities.” (quoting Goodyear). The trial court ruled that it could exercise general jurisdiction over Union Pacific. Union Pacific sought a writ of mandamus to the trial court, which adhered to its initial ruling after an alternative writ was issued by the Supreme Court to the trial court. On review, Barrett also argued that Oregon has specific jurisdiction over Union Pacific.
The Oregon Supreme Court recognized that there was no dispute that “Union Pacific has engaged in a ‘substantial, continuous, and systematic course of business’ in Oregon.” However, while substantial, the activities are only a small part of its larger business activities in 23 states. The court applied the same reasoning as applied in Daimler, that if the state exercised general jurisdiction over Union Pacific because that company’s activities in Oregon are substantial and continuous, then every state in which Union Pacific has engaged in similar activities could simultaneously assert general jurisdiction over the company – thus placing it at odds with the Due Process Clause. Barrett advanced three interrelated reasons why Daimler does not foreclose Oregon from exercising general jurisdiction; contending that (1) there is no unfairness to subjecting Union Pacific to general jurisdiction in light of its substantial and continuous business presence; (2) Union Pacific employs 1,700 persons in Oregon, has annual payroll in Oregon in excess of $144.6 million, owns and operates almost 1,100 miles of track in the state and generates over $645 million annual revenue; and (3) the case is factually distinguishable from Daimler since it does not require attributing the activities of an in-state agent to a foreign corporation. The court appreciated the distinctions raised by Barrett, but was not persuaded that Daimler can be so easily distinguished.
Barrett also relied upon section 56 of FELA for the proposition that general jurisdiction is proper. The 1910 codification by Congress added what is now section 56 of FELA which provides that “Under this chapter an action may be brought in a [District Court of the United States], in the district of the residence of the defendant, or in which the cause of action arose, or in which the defendant shall be doing business at the time of commencing such an action. The jurisdiction of the courts of the United States under this chapter shall be concurrent with that of the courts of the several States, and no case arising under this Act and brought in any state court of competent jurisdiction shall be removed to any court of the United States.” 36 Stat 291; see 45 USC § 56. Barrett relied upon Baltimore & Ohio R. Co. v. Kepner, 314 US 44 (1941) and Miles v. Illinois Central R. Co., 315 US 698 (1942), both of which predated Daimler. Like the Missouri court in State ex rel. Norfolk So. Ry. Co., the Oregon court was not persuaded by this argument, stating simply that section 56 of FELA addresses venue and subject matter jurisdiction; not personal jurisdiction.
Finally, Barrett argued that the relationship among Union Pacific, the forum, and this litigation were sufficient to give Oregon specific jurisdiction over Union Pacific. This was not raised in the court below and the factual record with regard to specific jurisdiction was not fully developed. The Oregon court noted that the only Oregon-specific fact before the trial court was that Barrett was a resident of Oregon. The Oregon Supreme Court indicated that, without more, it could not say that the trial court had specific jurisdiction over Union Pacific.
Justice Walters dissented, suggesting that Oregon should have authority to adjudicate a FELA claim brought by one of its residents against a railroad that has laid tracks and conducted its unique interstate railway business in the state for over 100 years. Justice Walters concluded that this would be one of the “exceptional” cases referred to in Daimler, and undertook a detailed analysis of the history of FELA. Justice Brewer joined in the dissenting opinion.
These decisions certainly serve as a fitting backdrop for the upcoming decisions by the U.S. Supreme Court coming later this year.
Maron Marvel Bradley Anderson & Tardy LLC