As a result of massive economic disruptions from the spread of SARS-CoV-2, there is going to be a surge in litigation. Merits litigation involving force majeure clauses, frustration of purpose, and impossibility will be myriad. For some corporate defendants, there will also be procedural wrangling over where such litigation occurs. Personal jurisdiction offers a potential defense for domestic firms to avoid being hauled into court across the country and both personal jurisdiction and forum non conveniens offer defenses for foreign firms to potentially avoid having to litigate in American courts.
Personal Jurisdiction over Corporate Defendants
Personal jurisdiction as a concept is the idea that a particular court has the authority to adjudicate claims brought against a particular defendant. The principle is rooted in constitutional due process under the 5th and 14th amendments and is also a creature of statute with each state defining the outer limit of its courts’ jurisdiction (most but not all extend to the maximum allowed under the federal constitution so that will be assumed for purposes of this article). There are two types of personal jurisdiction—general and specific. For general personal jurisdiction to exist, a defendant corporation must be at home in the jurisdiction, which means state of incorporation or principal place of business. This article will not focus on general personal jurisdiction. Specific personal jurisdiction means that the court has jurisdiction to hear the specific claims brought by the plaintiff. To determine if specific personal jurisdiction exists, the jurisdictional contacts between the defendant and the plaintiff’s claims must be analyzed to determine if personal jurisdiction is proper.
The most recent Supreme Court case addressing specific personal jurisdiction over corporate defendants is Bristol-Myers Squibb v. Superior Court of California, 137 S. Ct. 1773 (2017). There, the Supreme Court held that California could not exercise personal jurisdiction over Bristol-Myers Squibb for claims brought by plaintiffs who did not reside in California, were not prescribed the drug in California, and did not ingest the drug in California—California courts could only exercise jurisdiction over claims brought by plaintiffs whose relationship with the pharmaceutical company directly involved California.
Bristol-Myers Squibb built upon the foundation laid by Walden v. Fiore, 571 U.S. 277 (2014), a case where the Supreme Court also limited the permissible exercise of personal jurisdiction. There, suit was brought in Nevada federal court against a law enforcement officer for an allegedly unlawful search conducted before the plaintiff boarded a plane. All the law enforcement officer’s conduct occurred in Georgia and nothing the law enforcement officer was directed at Nevada. Since all conduct underlying the claims occurred in Georgia, personal jurisdiction over the law enforcement officer in Nevada was not proper.
The key takeaway from these cases is that when a court considers specific personal jurisdiction, only contacts relevant to the claims underpinning the litigation are to be considered—and only the defendant’s contacts with the jurisdiction. This is helpful to defendant corporations, as it means the existence of independent lines of business or commercial interactions with a jurisdiction are immaterial in assessing personal jurisdiction in a particular case (such as a distribution contract with a third-party who has a presence in the jurisdiction). It also means a plaintiff cannot manufacture jurisdiction by creating jurisdictional contacts in a more plaintiff-friendly state. Any time a foreign corporation (or even an American corporation with its headquarters in another state) faces a lawsuit in an American court, there should be a careful analysis of whether the court has jurisdiction over the defendant corporation, an analysis that should only include the defendant’s contacts with the jurisdiction underlying the facts and causes of action alleged in the complaint.
The effect of having a personal jurisdiction defense prevail is most often a dismissal without prejudice. This will allow the plaintiff to file the complaint again, but the plaintiff will be required to bring the litigation in a proper place where the defendant has sufficient minimum contacts with the forum in relation to the claims raised in the complaint. It may be the case that such an alternate forum exists elsewhere in the United States, but for foreign corporations it may be the case that the only appropriate forum is in a foreign jurisdiction. That analysis would depend on the specific facts of an individual case.
Forum Non Conveniens and Foreign Corporate Defendants
Forum non conveniens (literally translated as an inconvenient forum) is a mechanism that could allow multinational corporations to transfer litigation to their home jurisdictions. The exact contours of forum non conveniens vary state-by-state, but a North Carolina court offered a catalog of the factors courts consider: (1) the nature of the case; (2) the convenience of the witnesses; (3) the availability of compulsory process to produce witnesses; (4) the relative ease of access to sources of proof; (5) the applicable law; (6) the burden of litigating matters not of local concern; (7) the desirability of litigating matters of local concern in local courts; (8) convenience and access to another forum; (9) choice of forum by plaintiff; and (10) all other practical considerations. Cardiorentis Ag v. IQVIA, Ltd., 2018 NCBC LEXIS 243, at *7 (aff’d. 2020 N.C. LEXIS 96*, 2020 WL 977957 (N.C. Feb. 28, 2020) (per curium)). Some states give more weight to the plaintiff’s choice of forum, some on the location of witnesses and evidence, and others on which law will govern the litigation, but all these factors could bear on a court’s decision. The ultimate inquiry is whether “(1) a substantial injustice would result in the absence of a stay, (2) the stay is warranted by the factors that are relevant and material, and (3) the alternative forum is convenient, reasonable, and fair.” Id. at *7–8.
The most plausible scenario under which a forum non conveniens motion will be granted by a court is some variation of the one in Cardiorentis. There, the plaintiff was a Swiss biopharma company and the defendants were an American parent company and its English subsidiary. The plaintiff and the English subsidiary had a contractual relationship, and the plaintiff’s claims were for breach of that agreement. Since the plaintiff brought suit outside its home jurisdiction, its choice was given less weight in the analysis (with the idea being to minimize forum shopping). The court next analyzed the location of witnesses and evidence and concluded that most were in Europe and very few/little were in North Carolina. The court also pointed out that the tort claims included in the complaint were likely to be governed by English law so that English courts had a greater interest in adjudicating them than did the courts of North Carolina. Based on these facts, the court granted a stay in favor of allowing proceedings to occur in England.
The key facts underlying this decision were as follows: plaintiff sued away from its home; claims had only tangential relationship to the chosen forum; existence of personal jurisdiction over all defendants was questionable and premised in no small part on a corporate parent-subsidiary relationship where one of the defendant entities is at home in the jurisdiction where suit is brought. It may not be necessary for all these factors to be present, but if a multinational corporation and its American parent/subsidiary faces a lawsuit from a plaintiff that appears to be forum shopping then a motion to stay under forum non conveniens is worth consideration as a means to stave off expansive and expensive litigation in an American court.