Home Is Where You Make It: SCOTUS Explains The Jurisdictional Rule Covering Corporate Defendants

June 1, 2021 / Writing and Speaking

By Paul V. Esposito

We all have a place we call home. Over a lifetime, the average person will own three houses. Some people may simultaneously own more than one. But that’s nothing compared to corporations, some of which operate in all 50 states.

A corporation may have two home states where it may be sued: the state of its incorporation and of its principal place of business. But what about the other 48 states where it actively does business. May it be sued there? The U.S. Supreme Court has unanimously answered “yes.”  Its message to the corporate world: home is not just where you’d like it; home is where you make it.  Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S.Ct. 1017, 2021 U.S. LEXIS 1610 (2021).

Facts

Ford designed its 1996 Explorer in Michigan and manufactured it in Kentucky. It sold a new Explorer in Washington. The owner resold it to Markkaya Gullett, who moved to Montana. While she drove it there, the tread on a rear tire separated. The car spun, then flipped. Markkaya died at the scene. Her estate sued Ford in Montana.

Ford designed its 1994 Crown Victoria in Michigan and manufactured it in Canada. It sold one in North Dakota. The car’s owner resold it, and the new buyer moved to Minnesota. Adam Bandemer was a passenger in the car heading to a Minnesota ice-fishing hole when his driver rear-ended a snow plow. The airbag did not deploy; the car landed in a ditch. Bandemer sustained serious brain injuries. He sued Ford in Minnesota.

Ford is incorporated in Delaware, headquartered in Michigan. It moved to dismiss each suit, arguing that personal jurisdiction over Ford existed only if Ford’s conduct in the state gave rise to the claim. In Ford’s mind, a vehicle needed to be designed, manufactured, or originally sold in a state asserting personal jurisdiction over Ford. The state courts in Montana and Minnesota found the ties between Ford’s marketing and the victims’ injuries sufficient to make Ford defend itself in those states.

Analysis

SCOTUS unanimously sided with the state courts. Personal jurisdiction exists where a defendant’s contacts with a forum state are enough to make a suit there reasonableunder “traditional notions of fair play and substantial justice.” There are two forms of personal jurisdiction: general and specific. General jurisdiction exists where a defendant is incorporated or has its principal place of business. Where general jurisdiction exists, a lawsuit need not be factually related to the forum state.

By contrast, specific jurisdiction is narrowly focused. It looks for evidence that a defendant has purposely availed itself of the privilege of conducting activities in a forum state. The claim against it must arise out of or relate to defendant’s contacts within the state. The specific-jurisdiction rule gives a defendant fair warning that the extent of its conduct within a state may impact future litigation.

The Supreme Court rejected as too narrow Ford’s argument that to invoke specific jurisdiction, an injury needed to be caused by Ford’s conduct in a forum state. So long as a claim “relates” to a defendant’s activity there, it is enough. And Ford’s activities in Montana and Minnesota were enough to relate the claims to the forum states. In each state Ford mounted a large advertising campaign about its vehicles, including the models involved in the accidents. Ford had 36 dealerships in Montana and 84 in Minnesota where it sold new and used cars, again including the involved models. The dealers performed repair work and Ford sold replacement parts in the states. In short, Ford systematically served the states where the allegedly defective vehicles caused injuries. In doing so, Ford benefitted from states laws covering the enforcement of contracts, defense of property, and creation of markets.

The considerations of interstate federalism also supported jurisdiction in Montana and Minnesota. Those states had an interest in providing residents with a convenient forum and in enforcing their own safety rules. Ford’s choice of forums—the states of original sale—means that states would preside over suits by non-residents involving out-of-state accidents and injuries. The inconvenience resulting from Ford’s approach would undermine the law’s purpose of properly allocating jurisdiction.

Learning Point:  The Ford Motor decision should go far in resolving jurisdiction disputes involving multi-state businesses involved in traditional sales-and-service operations. If a corporation systematically—as opposed to sporadically—transacts business within a state, it should expect that it will need to defend suits there.

But Ford Motor does not cover what SCOTUS must eventually address: whether a mere “virtual” presence in a state translates into a specific-jurisdictional contact with it. With internet transactions having become a fact of business life (think Amazon), that question needs an answer.  The “when” an answer will come is anyone’s guess.

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