From our prior personal jurisdiction posts concerning Daimler AG v. Bauman, 134 S. Ct. 746 (2014), and the plaintiff-side dodge of “general jurisdiction by consent,” regular blog readers were aware that one of the few jurisdictions where the consent theory appeared to have some traction was Delaware. Those adverse decisions were based on pre-Bauman Delaware state law,Sternberg v. O’Neil, 550 A.2d 1105 (Del. 1988), which had allowed general jurisdiction by consent.
In an asbestos mass tort case, the Delaware Supreme Court has just overruled Sternberg – on the basis that general jurisdiction by consent merely by means of registration to do business is incompatible with Bauman:
We conclude that after [Bauman], it is not tenable to read Delaware‘s registration statutes asSternberg did. Sternberg . . . rested on a view of federal jurisprudence that has now been fundamentally undermined by [Bauman] and its predecessor Goodyear Dunlop Tires Operations, S.A. v. Brown. . . . Sternberg represented just one plausible way to read a statute that on its face does not refer explicitly to personal jurisdiction, much less to consent to personal jurisdiction.
Genuine Parts Co. v. Cepec, No. 528, 2015, slip op. at 2 (Del. April 18, 2016) (footnote omitted). Thus, “Delaware‘s registration statutes must be read as a requirement that a foreign corporation must appoint a registered agent to accept service of process, but not as a broad consent to personal jurisdiction in any cause of action, however unrelated to the foreign corporation‘s activities in Delaware.” Id. at 3. That means, “[i]n most situations where the foreign corporation does not have its principal place of business in Delaware, that will mean that Delaware cannot exercise general jurisdiction over the foreign corporation.” Id. (footnote omitted).
Genuine Parts recognized that corporate registration statutes cannot violate the due process principles laid down, first in Brownand then emphatically in Bauman:
An incentive scheme where every state can claim general jurisdiction over every business that does any business within its borders for any claim would reduce the certainty of the law and subject businesses to capricious litigation treatment as a cost of operating on a national scale or entering any state‘s market. [Bauman] makes plain that it is inconsistent with principles of due process to exercise general jurisdiction over a foreign corporation that is not “essentially at home” in a state for claims having no rational connection to the state. The foreign corporation in this case does not have its principal place of business in Delaware; nor is there any other plausible basis on which Delaware is essentially its home. Hence, Delaware cannot exercise general jurisdiction over it consistent with principles of due process.
Slip op. at 5 (footnotes omitted).
Thus it’s curtains for litigation tourist plaintiffs suing out-of-state corporations in mass tort actions in Delaware (and, we believe, everywhere else).
Human experience shows that “grasping” behavior by one, can lead to grasping behavior by everyone, to the collective detriment of the common good. It is one thing for every state to be able to exercise personal jurisdiction in situations when corporations face causes of action arising out of specific contacts in those states; it is another for every major corporation to be subject to the general jurisdiction of all fifty states. Theoretically, under the [plaintiffs’] position, major Delaware public corporations with national markets could be sued . . . in any state in the nation because the corporations have had to register to do business in every state. And in fact, many post-[Bauman] decisions involved situations where plaintiffs sought to subject a Delaware corporation to the general jurisdiction of a state that had no relation to the cause of action and was not the corporation‘s principal place of business. [Bauman] rejected the notion that a corporation that does business in many states can be subject to general jurisdiction in all of them. Under a sensible goose-and-gander approach, Delaware should be prudent and proportionate in exercising jurisdiction over foreign corporations.
Slip op. at 34-36. (footnotes omitted).
Genuine Parts thus aligned Delaware with the post-Baumanmajority of courts that recognize how general jurisdiction based on mere registration to do business/appointment of an agent for service of process is just as constitutionally overbroad as the jurisdictional theory rejected in Bauman itself. “[T]he majority of federal courts that have considered the issue of whether consent by registration remains a constitutional basis for general jurisdiction after Daimler have taken the position that we adopt.” Id. at 38 (footnote collecting cases omitted – you can find them in our post-Bauman cheat sheet). The Pennoyer-era Supreme Court decision Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), is no longer good law post-Bauman:
[T]hat [Bauman] did not reach out and explicitly overrule older precedent . . . does nothing to relieve that [“stark tension with its reasoning”], or to obscure another reality, which is that the older case law was rooted in an era where foreign corporations could not be sued in other states unless there was some fictional basis to find them present there. And to give some credit to our predecessor generations, plaintiffs typically did not sue defendants in fora that had no rational relation to causes of action; the increasing embrace of that practice among segments of the plaintiffs‘ bar has instead built over recent decades.
Slip op. at 39-40 (footnotes omitted) (emphasis added). “Mass tort claims have gravitated toward certain jurisdictions that plaintiffs believe are more favorable. As a result, the bulk of the litigation has occurred in a handful of jurisdictions. Extensive and widespread forum shopping continues.” Id. at 40 n.22 (citation and quotation marks omitted). “[W]ith the increased frequency of mass tort litigation, forum shopping abuse has become both more prevalent and has taken on new importance.” Id. at 41 n.22 (citation and quotation marks omitted). But now, doing business in a state cannot be conditioned on consent to general jurisdiction. “[T]he argument is that a business somehow must agree to being subject to general jurisdiction in every state in our nation, as a condition to doing business nationally . . . is inconsistent with principles of due process.” Id. at 41. To “coerce” consent in that fashion would be an “unconstitutional condition.” Id. at 41 & n.125.
In short – litigation tourist mass tort plaintiffs go away! The time of litigation hellholes, where anybody from anywhere can sue anybody from anywhere, is over.