United States: Updating Our Post-Bauman 50-State Survey On General Jurisdiction By Consent

Not quite a year ago, we prepared a 50-state survey on the status of claims that a foreign corporation's compliance with a state's corporate domestication statutes can be "consent" to general personal jurisdiction. This post went along with one of the DDL Blog's cheat sheets called the " Post-BMS Personal Jurisdiction Cheat Sheet."

Because Bexis recently filed an amicus brief on this subject in Pennsylvania, in connection with which he had occasion to update the law in this field, particularly as to Pennsylvania's vexed situation.  Unlike almost every other state in the union, since Daimler AG v. Bauman, 571 U.S. 117 (2014) ("Bauman"), Pennsylvania seems to be doubling down on general jurisdiction by consent.  Since everybody else is marching in the other direction, we've decided to incorporate a detailed critique of Pennsylvania developments into an updated version of our 50-state survey.  We also wish to recognize, again, Reed Smith attorney Kevin Hara, without whose efforts the original 50-state survey could not have been created.

We start with the century-old Supreme Court case, Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917) ("Pa. Fire").  Although it has yet to address Pa. Fire directly, the Supreme Court requires that "all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny." Shaffer v. Heitner, 433 U.S. 186, 212 (1977).  In Bauman, the Supreme Court cautioned that "cases decided in the era dominated by Pennoyer's territorial thinking should not attract heavy reliance today." 134 S. Ct. at 761 n.18 (citation omitted). Thus:

Brown v. Lockheed-Martin Corp., 814 F.3d 619, 639 (2d Cir. 2016).  Pa. Fire "represent[s] a disfavored approach to general jurisdiction." Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 898 N.W.2d 70, 82 (Wis. 2017).  "Pennsylvania Fire has yielded to the two-prong analysis for long-arm jurisdiction set forth in recent decades by the Supreme Court." Magwitch, LLC v. Pusser's West Indies, Ltd., 200 So.3d 216, 218 (Fla. App. 2016).

The basic problem with general jurisdiction by consent is that, under the International Shoe approach to personal jurisdiction, the United States Supreme Court has repeatedly held that corporate defendants must be "at home" in order to support a state's general jurisdiction – not just that they conduct "continuous and substantial" business – far less that they merely register to do business.

Our precedent . . . explains that the Fourteenth Amendment's Due Process Clause does not permit a State to hale an out-of-state corporation before its courts when the corporation is not "at home" in the State and the episode-in-suit occurred elsewhere.

BNSF Railway. v. Tyrrell, 137 S. Ct. 1549, 1554 (2017); see Bauman, 571 U.S. at 127 (foreign corporate "affiliations with the State [must be] so 'continuous and systematic' as to render them essentially at home in the forum State") (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011)).

The unconstitutionality of a general personal jurisdiction by consent theory, which ignores the Supreme Court's rigorous "at home" standard for general jurisdiction, is a fortiori from Bauman:

[T]he same global reach would presumably be available in every other State. . . . Such exorbitant exercises of all-purpose jurisdiction would scarcely permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.

571 U.S. at 139 (citation and quotation marks omitted).  "A corporation that operates in many places can scarcely be deemed at home in all of them."  Id. at 139 n.20.  "[I]n-state business . . . does not suffice to permit the assertion of general jurisdiction."  BNSF, 137 S. Ct. at 1559.

All 50 states and the District of Columbia have corporate registration laws.  E.g., T. Monestier, "Registration Statutes, General Jurisdiction, & the Fallacy of Consent," 36 Cardozo L. Rev. 1343, 1363-64 n.109 (2015) (collecting all 50 states' registration statutes).  Thus, if a registration statute could create general jurisdiction – based on "consent" or anything else – in derogation of constitutional standards, interstate corporations could be subjected to general jurisdiction everywhere they conducted business, even if that business is not "continuous and substantial," and even if they actually conducted no business at all.  No dice.  In Bauman, the Supreme Court specifically rejected, as "unacceptably grasping," legal theories that "approve the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business."  571 U.S. at 138 (quotation marks omitted).

Since International Shoe, the Supreme Court has not viewed "consent" the way it did in Pa. Fire.  Instead, it dispensed with "the fiction of implied consent to service on the part of a foreign corporation" in favor of "ascertain[ing] what dealings make it just to subject a foreign corporation to local suit."  Shaffer, 433 U.S. at 202-03.  Broad notions of "implied" consent are now considered "purely fictional":

We initially upheld these [corporate registration] laws under the Due Process Clause on grounds that they complied with Pennoyer's rigid requirement of either "consent," or "presence."  As many observed, however, the consent and presence were purely fictional.  Our opinion in International Shoe cast those fictions aside.

Burnham v. Superior Court, 495 U.S. 604, 617-18 (1990) (citations omitted).

The Court's most extensive discussion of personal jurisdiction and consent during the International Shoe era is in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinée, 456 U.S. 694 (1982) ("ICI"), and that discussion entirely omits corporate registration as a recognized form of "consent."  Rather, the "variety of legal arrangements have been taken to represent express or implied consent" recognized in ICI consisted of:

• "[S]ubmi[ssion] to the jurisdiction of the court by appearance"
• "[P]arties to a contract may agree in advance"
• "[A] stipulation entered into by the defendant"
• "[C]onsent [is] implicit in agreements to arbitrate"
• "[C]onstructive consent to the personal jurisdiction of the state court [inheres] in the voluntary use of certain state procedures"
• "[W]aive[r] if not timely raised"
• "[F]ail[ure] to comply with a pretrial discovery order."

456 U.S. at 704-06 (citations and quotation marks omitted).  Likewise, the Court discussed consent in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873, 880-81 (2011), and again did not include corporate registration.  Id. at 880-81.

Corporate registration statutes are thus conspicuously absent from all recent Supreme Court consideration of personal jurisdiction by consent, and for good reason.  States may not "requir[e] the corporation, as a condition precedent to obtaining a permit to do business within the State, to surrender a right and privilege secured to it by the Constitution."  Koontz v. St. Johns River Water Management District, 570 U.S. 595, 607 (2013) (citations and quotation marks omitted).  That would impose an "unconstitutional condition" on the ability of foreign corporations to conduct interstate commerce.  Id. Rather, as the Supreme Court observed in Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952), for a corporation "to secure a license and to designate a statutory agent upon whom process may be served" at most "provide[s] a helpful but not a conclusive test" for jurisdiction.  Id. at 445.

Under the current framework for personal jurisdiction, "consent" by registering to do business as a foreign corporation no longer supports general jurisdiction.  "'Extorted actual consent' and 'equally unwilling implied consent' are not the stuff of due process."  Leonard v. USA Petroleum Corp., 829 F. Supp. 882, 889 (S.D. Tex. 1993) (citation omitted).  At most, corporate registration is one factor in considering specific "case-linked" personal jurisdiction under the framework discussed in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).

A large and growing body of law exists on the concept of jurisdiction by consent.  We have a constantly updated cheat sheet collecting the favorable cases here.  Even before Bauman was decided, 28 states already had precedent holding that general personal jurisdiction could not be predicated solely on compliance with the state's corporate domestication statute.  The highest courts in California, Colorado, Delaware, Illinois, Maryland, Michigan, Missouri, Montana, Nevada, North Carolina, Ohio, Oregon, South Carolina, and Wisconsin have rejected such arguments, with eight of those occurring post-Bauman.  Thus, in the four years since the Supreme Court decided Bauman, all eight state high courts to address the issue have unanimously concluded that compliance with corporate registration statutes cannot, without (much) more, satisfy the strict standard for general personal jurisdiction, whether or not called "consent."

We count only four states (Iowa, Minnesota, Nebraska, and Pennsylvania – with Pennsylvania being the most notorious), along with Puerto Rico, that currently still subscribe to the "fiction" of corporate registration as a form of "consent."  All four of these states are in circuits that issued wayward general jurisdiction by consent decisions over two decades before Bauman.  See Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991) (applying Pennsylvania law); Knowlton v. Allied Van Lines, 900 F.2d 1196 (8th Cir. 1990) (applying Minnesota law).  The outcome is unclear in four other states (Kansas, Kentucky, New Mexico, and Wyoming).  Overall, the vast majority of states – 42 (plus DC and VI) – have precedent rejecting the proposition that a nonresident defendant may be subject to general jurisdiction simply by registering to conduct business.

Download >> Updating Our Post-Bauman 50-State Survey on General Jurisdiction by Consent

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