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Courts Clarify Rules for Personal Jurisdiction to Limit Forum-Shopping Plaintiffs

Posted by Robert A. Bernheim | Jun 15, 2017 | 0 Comments

If your company is sued, you should immediately ask if the court has personal jurisdiction over your company. Personal jurisdiction, that is, jurisdiction over the individual parties in a case, rather than over the subject matter of the claims, is a legal concept intended to keep cases before courts that have a particular interest in the proceedings or parties. In the United States, personal jurisdiction against a defendant may arise either on the basis of general jurisdiction over the defendant or specific jurisdiction over the facts of the case. Either way, the bedrock principle courts follow is that a company must have “minimum contacts” sufficient to show the company's purposeful availment of contact with the state where the court is located. From a business perspective, personal jurisdiction prevents a company from being “home towned” by an unfriendly out-of-state court that has no connection with the dispute. The parties instead would have to litigate in the defendant company's home state or at least a state with a specific connection to the case at issue. Personal jurisdiction also protects a company by ensuring that litigation is filed near the defending business or the witnesses involved in the case, hopefully reducing travel time and expenses for attorneys to travel out-of-state to question witnesses or prepare company employees.

Determining whether a court has either general or specific personal jurisdiction usually involves a detailed review of the parties' background and case circumstances. Attorneys and their clients continually struggle with understanding this hard-to-define and evolving area of law. Some cases may involve clearly appropriate exercise of personal jurisdiction, such as a lawsuit arising from a toxic waste spill within the same state where the lawsuit was filed. But in an increasingly interconnected world with multi-national corporations, franchisees, worldwide internet marketing, and interstate business deals, the limits of personal jurisdiction are more complex than ever.

On May 11, 2017, the Arizona Court of Appeals issued its opinion in Wal-Mart Stores, Inc. v. LeMaire, 764 Ariz. Adv. Rep. 29, which aligns Arizona more closely with recent clarifying decisions of the U.S. Supreme Court. In LeMaire, a plaintiff sued Walmart, a Delaware corporation with principal place of business in Arkasas, in an Arizona court for a slip-and-fall accident that had occurred in an Oregon Walmart store. There was no specific jurisdiction because the accident occurred in Oregon, but the plaintiff argued that Walmart's extensive business operations in Arizona combined with its appointment of an agent to receive service of process in Arizona subjected it to the general jurisdiction of Arizona courts. The Court of Appeals, however, found neither factor sufficient to confer general jurisdiction over Walmart. This decision is especially notable given Walmart's employment of 34,000 workers at 131 stores and distribution centers, which makes it either Arizona's largest or second-largest employer year after year. 

On May 30, 2017, the U.S. Supreme Court issued its opinion in BNSF Railway Co. v. Tyrrell, 137 S. Ct. 1549, which reinforces the same opinions the LeMaire Court relied upon. In BNSF Railway, the widow of a former railroad worker sued over the worker's exposure to chemicals on the job. The worker and his widow were from North Dakota, he was exposed to chemicals in South Dakota, Iowa, and Minnesota, and BNSF was incorporated in Delaware and had its principal place of business in Texas. Yet the widow sued in Montana to take advantage of plaintiff-friendly rules and standards existing in that state. The U.S. Supreme Court said Montana courts did not have personal jurisdiction because BNSF was not incorporated there and did not have such concentrated operations in Montana to make it essentially “at home” there.

These cases underscore the need to evaluate early on whether the Court has jurisdiction over the dispute. While these opinions relieve companies of some worries about forum-shopping plaintiffs, the best way for a business to guard against being dragged before an unfamiliar, out-of-state court is to manage its place of incorporation and to employ well-crafted forum selection and arbitration clauses in its contracts. While not a surefire solution in all situations, these contractual provisions can force parties to use a predetermined forum, such as a court near the company's main headquarters or an arbitration using specialized rules. An arbitration clause, in particular, can help reduce litigation costs, assure someone with experience in the subject matter will decide the outcome, and ensure confidentiality. Both types of clauses can be inserted into commercial contracts, bills of sale, employment agreements, and a wide assortment of other business transactions and relationships. A F&M attorney can help advise you which provisions are most appropriate for your company's needs and draft language you can use in your standard contracts.

About the Author

Robert A. Bernheim

Robert Bernheim's practice is concentrated in commercial litigation, product liability litigation, and appeals, with substantial experience in cases involving commercial contract disputes, insurance, financial services litigation, class actions, and personal injury tort defense. Robert's product liability litigation experience includes defending against defective design, manufacturing, and marketing claims in cases involving automobiles, household and commercial appliances, and pharmaceuticals. His insurance experience is primarily with property and casualty, automobile, CGL, and errors and omissions policies and includes work involving claims investigation, coverage analysis, coverage litigation, claims litigation, and class action defense.

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