A Railroad Company Gets Sued. You Won’t Believe What Happens Next!

The Supreme Court issued its decision this morning in BNSF v. Tyrrell, an interesting case raising the question, how much activity must a corporation engage in within a state before that corporation may be subject to general personal jurisdiction in the courts of that state, when that state is neither a corporation’s state of incorporation nor its principal place of business? While not necessarily the sort of blockbuster case likely to be reported in wall-to-wall coverage, this case reiterated some critical constitutional principles related to civil procedure and clarified some ambiguities left in previous cases, and practitioners will invariably read this decision closely for guidance as the Court continues to feel its way slowly into the twenty-first century with respect to its personal jurisdiction jurisprudence.

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Before diving into the opinion, there are three important matters, two constitutional and one statutory, to bear in mind related to the question before the Court.

First, the Due Process Clause of the Fourteenth Amendment, prohibiting states from depriving “any person of life, liberty, or property, without due process of law . . . .” This Clause “protects an individual’s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.'” Burger King Corp. v. Rudzewicz, 471 U.S. 461, 471-72 (1985) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). The Clause essentially “requir[es] that individuals have ‘fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign.'” Id. at 472 (quoting Shaffer v. Heitner, 433 U.S. 86, 218 (1977) (Stevens, J., concurring in the judgment)).

Second, the Court’s decision in Daimler AG v. Bauman, 571 U.S. ___, 134 S. Ct. 746 (2014), reiterating that, in light of constitutional limitations on courts’ exercise of jurisdiction, courts may only assert general personal jurisdiction — that is, jurisdiction over any claim against an entity, regardless of whether or not the events giving rise to that claim occurred in the forum state — over corporations “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 the forum State.'” Daimler AG, 134 S. Ct. at 751 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___, 131 S. Ct. 2846, 2851 (2011)). “[O]nly a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.” Daimler AG, 134 S. Ct. at 760. Typically, those affiliations will be in the form of the corporation either maintaining its principal place of business or being incorporated in the state. The Court in Daimler AG explicitly rejected the idea that general jurisdiction may be exercised over an entity as long as that entity simply “engages in a substantial, continuous, and systematic course of business” in that forum. Id. at 761. However, the Court did indicate that “in an exceptional case . . . a corporation’s operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State.” Id. at 761 n.19. The Court did not elaborate upon what that might look like.

Third, the Federal Employers’ Liability Act (FELA), stating that a lawsuit against an employer “may be brought in a district court of the United States, in the district of the residence of the defendant, or in which the cause of action arose, or in which the defendant shall be doing business at the time of commencing such action.” 45 U.S.C. § 56. The plaintiffs’ argument in BNSF relied on reading this provision as an affirmative grant of jurisdictional authority that, coupled with the grant of concurrent jurisdiction to state courts in the second half of the provision, ostensibly meant that a corporate defendant could be sued in state court in a state in which that defendant was “doing business” at the time the lawsuit was filed.

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With that background in place, we turn to the substance of the opinion written by Justice Ginsburg, who has played a major role in shaping the Court’s contemporary jurisprudence on the topic.

The case before the Court combined two lawsuits brought separately by two individuals who sought monetary damages against BNSF Railway Company for injuries allegedly sustained on-the-job. FELA subjects railroad-employers “engaging in commerce between any of the Several States” to liability “in damages to any person suffering injury while he is employed by such carrier in such commerce, or, in case of the death of such employee, to his or her personal representative . . . .” 45 U.S.C. § 51. Plaintiffs — one former BNSF employee and the wife of a deceased former BNSF employee — brought suit for a knee injury and for kidney cancer, respectively, which plaintiffs asserted were sustained while the employees were working for the company. BNSF Ry. Co. v. Tyrrell, 581 U.S. ___ (2017), slip op. at 2-3.

The plaintiffs brought their lawsuits under FELA in Montana state court, even though they neither resided there nor sustained their alleged injuries there. Id., slip op. at 1. Making matters more complicated, BNSF was not incorporated in Montana nor did it maintain its principal place of business there, id., which are typically the bases upon which a court may assert general personal jurisdiction over a corporation in suits involving events occurring outside of the forum. BNSF is incorporated in Delaware and has its principal place of business in Texas, and it was merely “doing business” in Montana. Id. slip op. at 3. The case thus raised the question as to the scope and applicability of the Court’s footnote in Daimler AG about the permissible exercise of general personal jurisdiction against corporations in a forum even when that corporation neither is incorporated nor has its principal place of business in that forum. See Daimler AG, 134 S. Ct. at 761 n.19.

The Montana Supreme Court concluded that BNSF’s “doing business” in the state was sufficient to allow for Montana state courts to take jurisdiction over the case in light of the provision in FELA allowing these types of claims to be brought in a forum “in which the defendant shall be doing business at the time” such action is commenced. 45 U.S.C. § 56. BNSF Ry. Co. v. Tyrrell, 581 U.S. ___ (2017), slip op. at 1. The Montana Supreme Court also held in the alternative that jurisdiction was permissibly exercised by Montana state courts in light of state law subjecting “persons found within . . . Montana” to suit therein, which was certainly true of BNSF given their thousands of miles of railroad tracks and thousands of employees in the state. Id. slip op. at 2. The Montana Supreme Court distinguished Daimler AG, reasoning that that case was different because it did not involve a FELA claim or a railroad defendant. BNSF Ry. Co. v. Tyrrell, 581 U.S. ___ (2017), slip op. at 4.

With respect to the Montana Supreme Court’s view that FELA explicitly grants authority to state courts to exercise general personal jurisdiction in suits involving FELA claims, the Court reversed and held that the provision was simply a venue provision, not an affirmative grant of jurisdictional authority. See id. slip op. at 5-7. The Court compared this provision to the general federal venue provision in 28 U.S.C. § 1391, which “govern[s] the venue of all civil actions brought in district courts of the United States” and which allows civil actions to “be brought in” fora delineated therein. See 28 U.S.C. § 1391(b). That “be brought in” formulation also appears in the FELA provision at issue, which the Court has read simply as a venue provision for some time. Baltimore & Ohio R. Co. v. Kepner, 314 U.S. 44, 52 (1941); Green v. Chicago B. & Q. R. Co., 205 U.S. 530 (1907). The Court has never read 45 U.S.C. § 56 so as to “affect personal jurisdiction” one way or another. BNSF Ry. Co. v. Tyrrell, 581 U.S. ___ (2017), slip op. at 5. Typically, the Court has understood Congress to provide for the exercise of personal jurisdiction in statutes authorizing and setting terms for service of process. See, e.g., 15 U.S.C. § 22. The Court has not read statutes to provide for this where Congress simply indicated what the proper venue for a lawsuit may be. As such, the Montana Supreme Court over-read FELA, and jurisdiction could not be founded upon this statutory provision.

That left the Montana Supreme Court’s alternative ground for its decision, which was that state law allowed for state courts to exercise general personal jurisdiction over a corporation “found within . . . Montana.” The question before the Court here was the fundamental constitutional question of whether this exercise of general personal jurisdiction comported with the Due Process Clause’s requirement that “maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe, 326 U.S. at 316.

The Court concluded that the suit could not be maintained without so offending the principles underlying due process, reversing and remanding accordingly. Justice Ginsburg, engaging in what has come to be known as the “comparative contacts” test derived from Daimler AG, observed that BNSF had only about 6% of its total track mileage in Montana, employed less than 5% of its total work force in Montana, generated less than 10% of its total revenue in Montana, and maintained only one of its twenty-four automotive facilities in Montana. BNSF Ry. Co. v. Tyrrell, 581 U.S. ___ (2017), slip op. at 3. These contacts were insufficient to meet the “essentially at home” standard of Daimler AG and Goodyear required by the Due Process Clause before a state court can exercise general personal jurisdiction over an entity. The Montana Supreme Court’s effort to distinguish Daimler was unavailing given that the principles articulated in that case “appl[y] to all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.” Id. slip op. at 11.

The Court thus reversed both bases upon which the Montana Supreme Court relied to sustain the exercise of general personal jurisdiction, ostensibly leaving consent-to-jurisdiction as the only basis left upon which Montana state courts might exercise jurisdiction permissibly in this case. Id. slip op. at 12.

Justice Sotomayor concurred in part and dissented in part, reiterating her views from her concurrence in Daimler AG that the Court’s personal jurisdiction jurisprudence should simply turn on whether a corporation’s “continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Id. slip op. at 2 (Sotomayor, J., concurring in part and dissenting in part) (quoting Int’l Shoe, 326 U.S. at 318). Justice Sotomayor rejected the “essentially at home” rule distinguishing the exercise of general personal jurisdiction from specific personal jurisdiction. She asserted that this rule creates “serious inequities” by giving “a jurisdictional windfall to large multistate or multinational corporations that operate across many jurisdictions.” Id. Justice Sotomayor would prefer what she views as a return to “a holistic, nuanced contacts analysis backed by considerations of fairness and reasonableness.” Id. She took issue with the Court’s holding, which she argued forces plaintiffs “harmed by the actions of a farflung corporation” to “bear the brunt of the majority’s approach” by being “forced to sue in distant jurisdictions with which they have no contacts or connection.” Id. slip op. at 3. Most relevant for the critical sub-issue here, Justice Sotomayor observed that the Court’s reasoning could be understood to limit Daimler AG‘s footnote nineteen “exceptional case” to the facts of an odd, one-off case arising during World War II. Id. slip op. at 4 (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952)). She viewed the majority’s reading of the footnote as “so narrow as to read the exception out of existence entirely . . . .” Id.

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I see two main takeaways from this short, somewhat under-the-radar opinion, sure to have lasting ripple effects. First, all but one of the current justices on the Court appear intent on taking a slow-moving, “small-c” conservative approach concerning the exercise and expansion of the Court’s general personal jurisdiction jurisprudence. Though in this case the corporation in question was a railroad (surprise, surprise), amenability to general personal jurisdiction is a salient issue for every type of interstate or multinational corporation, particularly internet businesses like Amazon or Google who have significant contacts in every fora in the country. The Court appears sensitive to the legal environment in which these businesses operate and does not want to shift its jurisprudence too far or too fast in any direction, especially given the ambiguities latent in this area of law. Second, the uncertainty introduced by the terse Daimler AG footnote has been somewhat mitigated by this decision, which makes clear that the Court meant it when it said it would be only in “an exceptional case” that general personal jurisdiction could be exercised over a corporation who lacks either incorporation status or its principal place of business in the forum state.

I wouldn’t be surprised if we see a case before the Court in the next few years where the plaintiff relies on the Daimler AG footnote and the defendant cites Justice Sotomayor’s dissent for the proposition that the BNSF Ry. Co. majority “read the exception out of existence entirely.” While the Court has (still) not yet set hard-and-fast guideposts for ascertaining how many contacts suffice to justify the exercise of general personal jurisdiction, allowing some uncertainty to remain concerning this perennially-thorny civil procedure issue, the Court has moved the ball along and likely teed up (a) future case(s) that might more squarely address the question. And, depending on the composition of the Court at that time, this case may foreshadow a shift to the adoption of clearer, more readily-defined standards in the Court’s personal jurisdiction jurisprudence.

One comment

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