Over the past two years, Hunton & Williams has been carefully monitoring the application of Daimler AG v. Bauman in trial and appellate courts throughout the country. The U.S. Supreme Court’s landmark Daimler decision articulated a standard that significantly limits the types of contacts sufficient to subject a defendant to general jurisdiction in a particular forum. Under that standard, a plaintiff must demonstrate that the defendant’s contacts with the forum are so continuous and systematic as to render it “essentially at home” there. In most instances, a company is “essentially at home” only in the state where it is incorporated and the state where it operates its principal place of business. Since the opinion was issued, the risk of a company becoming subject to general jurisdiction outside its home states has substantially decreased—a largely positive outcome for companies in the retail products industry that have traditionally been subject to “all purpose” general jurisdiction in each state where they conduct business.
Despite recognizing the limits outlined in Daimler, a minority of trial courts have nonetheless applied a consent-based theory to find that a corporation is subject to general jurisdiction in forums outside its home states. These courts generally reason that if a defendant has registered to do business and appointed an agent for service of process in a state, the corporation has impliedly consented to general jurisdiction there. To date, very few of these post-Daimler decisions have been analyzed at the appellate court level. However, in the recent Brown v. Lockheed Martin Corp. opinion, the Second Circuit addressed it head on.
In the case, the plaintiff sought to recover from Lockheed Martin in Connecticut for injuries her father suffered outside of the state. Lockheed moved to dismiss the complaint for lack of personal jurisdiction. Because the plaintiff’s claims did not arise in Connecticut, there was no dispute that the court lacked specific jurisdiction. Instead, the plaintiff sought to establish that Lockheed was subject to general jurisdiction in the state by pointing to its substantial contacts there (e.g., Lockheed leased space in four in-state locations, employed between approximately 30 and 70 workers in the state and derived about $160 million in revenue there during the relevant time period). In the alternative, the plaintiff argued that Lockheed had consented to general jurisdiction in the state by registering to do business and appointing an agent for service there.
The Second Circuit affirmed the District Court’s dismissal of the case.
- First, the Court “comfortably” concluded that Lockheed’s contacts with Connecticut “[fell] well below the high level needed to place the corporation ‘essentially at home’ in the state” under Daimler.
- Second, the Court analyzed the Connecticut long-arm statute and business registration statutes at issue and concluded that none provided express authority for the consent-based theory of general jurisdiction. Instead, these statutes were enacted to ensure that state citizens could pursue claims against foreign corporations related to business conducted in the state—in other words, they provided for specific jurisdiction. The Court concluded that to give the statutes the sweeping interpretation the plaintiff sought—without explicit statutory authority—would raise serious constitutional concerns and “would risk unraveling the jurisdictional structure envisioned in Daimler and Goodyear based only on a slender inference of consent pulled from routine bureaucratic measures that were largely designed for another purpose entirely.”
In its analysis, the Second Circuit distinguished the Connecticut business registration statute at issue from those in other states that expressly contemplate that foreign corporations will become subject to general jurisdiction upon registration (e.g., Pennsylvania and New York). The Court raised the possibility that such statutes may not be constitutionally valid after Daimler, but did not decide the question, given that the Connecticut statute at issue contained no such language.
This decision is important for companies in the retail products industry for several reasons:
- The decision constitutes a strong affirmation of Daimler’s breadth. Despite Lockheed’s meaningful in-state contacts, it could not be subject to general jurisdiction in Connecticut.
- The decision casts doubt on the constitutional validity of the consent-based theory of general jurisdiction in any state where the business registration statute does not expressly contemplate such consent—and maybe even in those that do.
- It illustrates the importance for any company considering the possibility of extending their business to a new forum to first conduct a litigation risk analysis that would assess the likelihood that registering to do business there might subject them to new, and potentially higher risk, litigation. Until the Supreme Court decides the constitutionality of a business registration statute that requires consent to general jurisdiction, entering such a forum could do precisely that.