A More Personal Touch: Challenge to Madison County Jurisdiction Ordered Forward

By on June 7, 2016

6-7On May 25, 2016, the Illinois Supreme Court ordered the Fifth District Appellate Court of Illinois to hear Ford Motor Company’s appeal on a motion to dismiss for lack of personal jurisdiction, which had been denied by Honorable Judge Stephen A. Stobbs, the presiding asbestos judge in Madison County. Because Madison County has long been a magnet for out-of-state plaintiffs, this appeal could have widespread ramifications for out-of-state corporations, particularly those involved in mass-tort litigation. A ruling in favor of Ford would significantly impede plaintiffs’ ability to forum shop in plaintiff-friendly jurisdictions such as Madison County.

In Jeffs v. Anco Insulations, Inc., plaintiff alleges that the decedent was exposed to asbestos-containing products through his work as a union insulator at various sites. Decedent worked at the Ford plant in Michigan for six weeks in the 1970’s, but was not exposed to any Ford product or facility in Illinois.

In June 2015, Ford moved to dismiss for lack of personal jurisdiction. Ford relied primarily on the United States Supreme Court’s ruling in Daimler AG v. Bauman, which established that a court may assert jurisdiction over a foreign corporation “only when the corporation’s affiliations with the State in which suit is brought are so constant and pervasive as to render [it] essentially ‘at home’ in that forum State.” (This is an issue that we have blogged about before – California Court rules no jurisdiction over foreign parent corporations; No in state dealings for years – no jurisdiction; Out of state defendant? Out of state exposure? File suit somewhere else; and Registered in Delaware Is Not At “Home” There.) Under the Daimler analysis, a corporation is generally “at home” only at its place of incorporation or principal place of business. Because Ford’s state of incorporation is Delaware and its principal place of business is in Michigan, Ford argued that the court could not impose jurisdiction.

In November 2015, Judge Stobbs denied Ford’s motion. Despite the standard articulated in Daimler, Judge Stobbs ruled that Ford is subject to jurisdiction in Illinois due to its substantial contacts with the state. Judge Stobbs noted that Ford conducts business in Illinois, owns real property in Illinois, has employees in Illinois, and has acquiesced to jurisdiction in Illinois in previous suits. Judge Stobbs further found that Ford provided “unequivocal consent to jurisdiction in Illinois” by virtue of its Illinois business license and appointment of a registered agent to accept process. To further bolster his decision, Stobbs relied on Ford’s recently filed brief in a separate case, Folta v. Ferro Engineering, in which Ford explicitly acknowledged its significant operations and monetary investments in Illinois.

After Judge Stobbs issued his ruling, Ford sought leave to appeal the decision. On February 10, 2016, a three member panel of the Fifth District denied Ford’s petition. Undeterred, Ford filed a motion for a supervisory order with the Illinois Supreme Court, which the court granted. A supervisory order is granted only in limited circumstances when the lower court acted in excess of its authority or abused its discretionary authority. As such, the granting of this supervisory order suggests that the Illinois Supreme Court finds Ford’s position meritorious.

A ruling in favor of Ford would undoubtedly be followed by an onslaught of personal jurisdiction motions, particularly for those out-of-state defendants caught in the web of Madison County asbestos litigation. Most of the active defendants have little or no connection with Illinois, and many cases involve non-Illinois exposures. In the interim, it remains to be seen whether Judge Stobbs will entertain any additional personal jurisdiction motions or simply stay them pending a ruling from the Fifth District Appellate Court.

Filed under Asbestos, Illinois, Jurisdiction, Madison County, Illinois

Registered in Delaware Is Not At “Home” There: Not Enough For General Jurisdiction

By on April 20, 2016

4-21Earlier this week, the Supreme Court for the State of Delaware ruled that a corporation registered in Delaware was nevertheless not subject to general jurisdiction in Delaware. Genuine Auto Parts v. Cepec. This was a decision of some substance, generating a written opinion of some 44 pages responding to the arguments and briefs of not only the plaintiff and defendant, but also several amicus curiae briefs. This is an issue that we have blogged about before (California Court rules no jurisdiction over foreign parent corporations; No in state dealings for years – no jurisdiction; and Out of state defendant? Out of state exposure? File suit somewhere else).

The court framed the issue succinctly:

This interlocutory appeal raises the singular issue of whether Delaware may exercise general jurisdiction over a foreign corporation for claims having nothing to do with Delaware, as price for the corporation agreeing simply to be able to do business in Delaware.

Cepek reversed the decision of the court below, finding that Daimler AG v. Bauman, 134 S. Ct. 746 (2014) “fundamentally undermined” earlier jurisprudence regarding jurisdiction.

Daimler 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.

This was so despite the existence of a Delaware long-arm statute and a Delaware registration statute that had previously been interpreted as effectuating a “consent” to general jurisdiction by foreign corporations registering in Delaware. This is a recurring argument for the plaintiffs’ bar in its efforts to evade or limit Daimler. Cepek explicitly addressed this issue and found that the weight of authority is that registration or similar activity is not enough to evade Daimler.

The plaintiffs’ selection of Delaware as the location of filing may have been driven by the fact that 5 of 7 defendants present in the case were incorporated in Delaware. But Genuine Auto Parts is a Georgia corporation and the alleged exposures occurred in Georgia. Genuine Auto Parts had registered in Delaware and appointed an agent for service of process in Delaware. Plaintiffs argued that by registering in Delaware, Genuine Auto Parts had “consented” to general jurisdiction and prior cases in Delaware supported this contention. Plaintiffs argued that this “consent” rendered this case immune to an application of the logic of Daimler.

This decision is important for at least three reasons. First, the Supreme Court for the State of Delaware acknowledged that Daimler “made a major shift in our nation’s personal jurisdiction jurisprudence” that superseded the numerous prior decisions upon which the plaintiffs relied.

Second, the court supports its decision with strikingly pro-business language, stating:

Every state in the union, and the District of Columbia, has enacted a registration statute that requires foreign corporations to register to do business and appoint an in-state agent for service of process. As the home of a majority of the United States’ largest corporations, Delaware has a strong interest in avoiding overreaching in this sensitive area. If all our sister states were to exercise general jurisdiction over our many corporate citizens, who often as a practical matter must operate in all fifty states and worldwide to compete, that would be inefficient and reduce legal certainty for businesses. Human experience shows that “grasping” behavior by one can lead to grasping behavior by everyone, to the collective detriment of the common good. (emphasis added)

Third, where does this leave the plaintiffs’ bar in multi-defendant cases? For some reason, plaintiffs did not want to file this case in Georgia where the exposure occurred and the plaintiffs were located. It would seem logical that they would then pick a jurisdiction that was “home” to a majority of the defendants. This decision says that if they do so select, they may jeopardize their ability to pursue at least some defendants. What is the answer for the plaintiffs who want to pursue multiple defendants? One response is “file where the exposure occurred.” But what if the exposure occurred in several different states? This is just one of several issues that are yet to be worked out. In the meantime, the lack of clarity seems to inure to the benefit of at least some defendants.

Filed under Delaware, Foreign Corporations, Jurisdiction

Out-of-State Defendant? Out-of-State Exposure? File Suit Somewhere Else: Defendants Escape Jurisdiction in California Asbestos Case

By on August 12, 2015

On August 11, 2015, Judge Emilie Elias of the Superior Court for the County of Los Angeles granted 5 separate motions to quash on grounds that may be available to many non-California defendants. The case, Malek v. Blackmer Pump Co., involved a plaintiff who now resides in California, but for whom all the alleged exposures occurred while plaintiff resided in Iran. The moving parties relied on Daimler AG v. Bauman (2014) 134 S. Ct. 746, which, as this blog has previously reported (here and here), holds that jurisdiction rests only (1) where the tort occurred or (2) where the defendant is “at home,” such as where it has its principal place of business. Daimler held that a California court may not exercise general jurisdiction over a foreign company solely due to the in-state activities of its subsidiaries, but the principle is not limited to cases involving parent and subsidiary corporations.

The moving parties in this case, including John Crane, Inc., Fisher Controls, RJ Reynolds and Exxon Mobil, all are readily acknowledged to be “doing business” in California, but are not “at home” in California, so under the guidelines of Daimler California lacks special jurisdiction over them. Plaintiffs’ counsel, Weitz & Luxenberg, filed oppositions and argued the motions.

Judge Elias discussed with counsel the potential challenges that her ruling may present. Plaintiff’s counsel commented that they may be obliged to sue the dismissed defendants in other jurisdictions where they are “at home.” This presents the potential for multiple cases for the same plaintiff against different defendants in different jurisdictions. Nevertheless, Judge Elias felt she was bound by Daimler and subsequent California decisions, both federal and state.

For example, in Senne v. Kansas City Royals Baseball Corp., the Northern District of California made clear that the concept of “at home” in the context of general jurisdiction should be construed very narrowly – observing Daimler’s emphasis that merely [even] engaging in a “substantial, continuous and systematic course of business” is not enough to establish general jurisdiction.

Similarly, in BNSF Ry. Co. v. Superior Court, the California Court of Appeal applied Daimler in a directly analogous asbestos personal injury case to reverse the trial court’s exercise of general jurisdiction over a defendant with admittedly substantial and continuous business in California. Although the California Supreme Court has granted review and thereby depublished this decision, its rationale is likely to be followed, as it was in Malek.

For those cases in which asbestos plaintiffs seek to file suit in a jurisdiction in which they cannot establish special jurisdiction (i.e. where the tort occurred), and in which the target defendants are not “at home,” these authorities and the recent order of Judge Elias present significant challenges. At least in Los Angeles going forward, one can expect defendants to seriously consider motions to quash for their corporate defendants incorporated elsewhere and with corporate offices elsewhere.

Filed under Jurisdiction, Motions to Quash

No In-State Dealings For Years? No Jurisdiction

By on January 9, 2015

We previously analyzed the U.S. Supreme Court’s decision in Daimler A.G. v. Bauman and its effects on California personal jurisdiction law. We have been following the progress of courts applying this significant decision. Federal courts have now begun applying Bauman in the context of asbestos personal injury lawsuits, many hundreds of which are filed in state and federal courts each year in California alone.

The potentially far reaching impact of Bauman is demonstrated by the recent order of Judge Barry Ted Moskowitz of the United States District Court, Southern District of California.  The moving papers argued that there was a lack of personal jurisdiction over the defendant, a pump manufacturer defendant in a mesothelioma case, and the court agreed.  The defendant pump manufacturer had apparently sold pumps to a contractor for installation on Navy ships at shipyards in CA.  Admittedly the order of Judge Moskowitz relies upon the specific facts of the case, but the court’s analysis suggests that similar results may be found in favor of other defendants.

The court explained that there are two types of personal jurisdiction: general and specific.  Specific jurisdiction arises when the defendant’s contacts with the forum state gave rise to the suit.  Here, the plaintiffs did not claim that specific jurisdiction existed.   One could postulate specific jurisdiction, for example, in a case in which the pump was worked upon in the forum state, but apparently such facts did not exist in this case.

The court then moved to an assessment of general jurisdiction.  The court found that the evidence presented did not demonstrate that the defendant was “essentially at home” in California so as to establish general jurisdiction.  The court considered “all of the defendant’s contacts with the forum state over a period of years prior to the filing of the complaint,” commenting that typically courts have examined “a defendant’s contacts with the forum state over a period of three to seven years prior to the filing of the complaint.”

As in all asbestos cases, the exposure in question occurred decades ago, and in later years the contacts which the defendant in question had with California dwindled to nothing.  Indeed the evidence showed that the defendant had only one transaction in the state of California after 1986.

Not every defendant will be able to demonstrate such minimal contacts with the forum state as applicable in the instant case.  But how much contact will be necessary to show that a defendant is “essentially at home” in the forum state?  It would seem that many defendants may be in a position to argue that they are not.  No doubt other defendants will be testing the limits of this new standard for general personal jurisdiction whenever they sued in a forum other than the place where the alleged tortious conduct occurred.  We look forward to following the progress of such cases.

Filed under Jurisdiction

California Court Rules: No Jurisdiction Over Foreign Parent Corporations

By on August 8, 2014
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This week in Young v. Daimler AG, the California Court of Appeal held that there is no general personal jurisdiction over foreign companies in California whose only “connections” to the state are the activities of its legally separate but wholly owned subsidiaries. This is the first appellate case in California applying the U.S. Supreme Court’s January 2014 decision on this issue, Daimler AG v. Bauman (2014) 134 S.Ct. 746.

Young is particularly significant because it abrogates an entire theory of general jurisdiction law in California — the “representative services doctrine” — and gives out-of-state and foreign defendants welcome protection from lawsuits in California, even if they have in-state subsidiaries doing substantial business. It is important to note that this case did not involve any other theory of jurisdiction, such as an “alter ego”-type of theory holding a foreign parent subject to jurisdiction in California, where its corporate formality-ignoring subsidiary operates.

The representative services doctrine, set forth in Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, held that general personal jurisdiction could be asserted over a foreign defendant if its in-state subsidiary performed “a function that is compatible with, and assists the parent in pursuit of, the parent’s own business.” In other words: “[I]f a parent uses a subsidiary to do what it otherwise would have done itself, it has purposely availed itself of the privilege of doing business in the forum. Jurisdiction over the parent is therefore proper.” This may describe many foreign parent-domestic subsidiary relationships, but the U.S. Supreme Court held in Bauman that it does not confer personal jurisdiction, and Young agrees.

This is not the only such case before the Court of Appeal on this very issue — Daimler AG v. Superior Court (Pierson) is scheduled for oral argument on August 18, 2014. Young and Pierson involve the same question, arising out of the same fact pattern: May a California state court exercise general personal jurisdiction over a foreign company, solely due to the in-state activities of its subsidiaries? Young, applying the U.S. Supreme Court’s Bauman decision, answered “no.” The California Supreme Court unanimously ordered in March 2014 that the Pierson plaintiffs show cause why service of summons on Daimler should not be quashed in light of Bauman. Pierson is before a different Court of Appeal district (the Third, in Sacramento) than was Young (the First, in San Francisco), but Pierson is likely to be decided the same way.

Young and Pierson are product liability cases involving Jeep vehicles manufactured by DaimlerChrysler before Chrysler’s split from Daimler AG and bankruptcy. Both plaintiffs pursued their claims against Daimler AG as the ultimate parent of DaimlerChrysler at the time the vehicles in question were manufactured.

In Young, the plaintiffsasked the court to apply the Ninth Circuit’s then-current decision in Bauman v. DaimlerChrysler Corp. (2011) 644 F.3d 909, which held that general jurisdiction over Daimler AG was appropriate in California because of the extensive activities of its indirect subsidiary Mercedes-Benz USA. This case cited the representative services doctrine as the source of its holding, that is, Mercedes-Benz USA’s activities in California were so important to Daimler AG that general jurisdiction over Daimler AG was appropriate.

In reversing the Ninth Circuit, the U.S. Supreme Court held in Bauman that the representative services doctrine “rested primarily on [the] observation that [American subsidiary] MBUSA’s services were ‘important’ to Daimler, as gauged by Daimler’s hypothetical readiness to perform those services itself if MBUSA did not exist. Formulated this way, the inquiry into importance stacks the deck, for it will always yield a pro-jurisdiction answer[.] . . . The Ninth Circuit’s agency theory thus appears to subject foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate, an outcome that would sweep beyond even the ‘sprawling view of general jurisdiction’ we rejected in” other cases.

Applying Bauman, Young affirmed the trial court’s grant of Daimler AG’s motion to quash service of summons and agreed that because Daimler AG itself did not do business in California, there was no general personal jurisdiction: “In our view, appellant’s argument impermissibly ‘elide[s] the essential difference between case-specific and all-purpose (general) jurisdiction. . . . Indeed, the test endorsed in Bauman . . . whether a foreign defendant is ‘essentially at home in the forum state’—focuses on the defendant’s significant corporate presence in the forum.”

Young recognized that this means the representative services doctrine is essentially dead: “While the Bauman II Court questioned the formulation and application of the Ninth Circuit’s agency test [the representative services doctrine], in the end it assumed agency and still concluded that MBUSA’s California contacts were insufficient to confer general jurisdiction in California.” This is hugely important to multistate and international businesses. Such defendants cannot be sued in California, even if their subsidiaries do substantial business in California. Young is a clear rejection of the representative services doctrine and the opinion did not limit the application of its decision to the particular facts of the case before it.

Out-of-state and foreign businesses participating in California’s economy through subsidiaries are common. Such businesses must remain careful to ensure that their subsidiaries observe corporate formalities and remain legally separate. Overall, however, Young brings California general jurisdiction law in line with U.S. Supreme Court precedent and will make establishing jurisdiction over out-of-state and foreign defendants significantly more difficult in the future.

Filed under California, Foreign Corporations, Jurisdiction

The End of Litigation Tourism in St. Louis?

By on February 28, 2012

St. Louis, Missouri is a beautiful city with many attractions, but few want to be dragged there involuntarily, besides the attractions it also have great places to visit like hotels and luxury pools, since fiberglass pool prices have gotten low in the last years. Yet that has been the case for a number of corporate defendants in recent years, who have been sued in St. Louis City courts in mass tort litigation by thousands of plaintiffs from all over the country, despite their having no connection at all with St. Louis or even Missouri.

Why St. Louis? The City is a small urban geographical area in the middle of the greater St. Louis area (including St. Louis County), with a reputation for overly plaintiff-friendly juries. It holds a prominent place on the American Tort Reform’s list of “Judicial Hellholes,” which cites litigation “infused with junk science,” massive verdicts, excessive lawsuit advertising poisoning the jury pools, abusive actions, and blatant forum shopping.

So it’s no surprise that plaintiffs’ attorneys in the talc ovarian cancer body powder litigation picked St. Louis city courts for one of their favored venues. Beginning in 2014, Johnson & Johnson and its talc supplier, Gordon & Rees client Imerys Talc America, were sued in numerous multi-plaintiff cases, with hundreds of out of state and non-St. Louis plaintiffs. Trial after trial occurred over the next four years, with verdicts in the tens of millions, and even in the billions, against Johnson & Johnson. The trial court repeatedly denied motions challenging jurisdiction, venue, and joinder. The court also denied motions to exclude what the defendants deemed (and other courts had found to be) unreliable scientific evidence that talc-based powders even can cause ovarian cancer.

How did this all happen in St. Louis? It happened because when one St. Louis plaintiff filed suit there, dozens of out-of-state and non-St. Louis plaintiffs joined in her suit. The St. Louis judge ruled that if one plaintiff had proper venue in St. Louis, all the others could piggy-back on her suit no matter where they were from or where they were allegedly injured, thus establishing venue for everyone. The defendants argued that joinder could not create venue under Missouri law, but were shot down time after time. Motions, briefs, arguments, and pre-trial writs, all to no avail; trial after trial, with the court trying claims of non-Missouri plaintiffs for the most part.

Then the defendants got the attention of the Missouri Supreme Court. In response to writs of prohibition filed by Imerys and Johnson & Johnson, the Court stayed a 2017 trial set to begin with a plaintiff who the defendants argued had proper venue in the county, not the city, to review the venue issue that had created a litigation hub in the city courtroom. On February 13, 2019, the Missouri Supreme Court appears to have ended litigation tourism in St. Louis, in a significant ruling that should stop non-St. Louis plaintiffs from bringing their claims there, and halt the pervasive forum shopping. In two companion suits the Missouri Supreme Court held that a tort plaintiff must establish proper venue for her own claims—she cannot merely join in a suit filed by a St. Louis city plaintiff and obtain proper venue by piggy-backing. In other words, joinder cannot create venue. Period. “It cannot and does not,” as evidenced by Missouri rules and “40 years of Supreme Court precedent.” Click here for a prior post on cases rejecting “jurisdiction by joinder.”

The 4-3 opinion reads strongly, as do the dissents.  But there is no mistaking that the forum shopping that brought hundreds, even thousands, of plaintiffs into St. Louis city courts even though they had no relation to the forum should be at an end.  And that is good news for those who don’t want to be dragged into St. Louis.

Filed under Jurisdiction, Talc

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