“Whatever you do, take care of your shoes.”
. . .
Welcome back! I really appreciate everyone who read the first part of this series. I was genuinely surprised with how many people read it. If you’re back again, thank you. Now, let’s set pleasantries aside and get back on the (personal jurisdiction) train.
What is personal jurisdiction?
At its core, personal jurisdiction describes the power a court has to make decisions that are binding upon a specific person or entity. Reams of complex legal doctrine originated with a simple question: how far away do I have to be before I can ignore what a judge says? Michigan’s 13th Circuit Court unquestionably has the authority to tell me what to do and the means to enforce its decisions. I drive past both the court and sheriff’s department on my way to work each day. But what if a court on the Aleutian Islands tells me I have to present myself to defend a lawsuit filed by Capital One for non-payment of a credit card bill? A massive financial company choosing to file a collections lawsuit in a location I have never been, nor have convenient access to, just isn’t fair, right? Courts have issued opinions over the decades that slowly developed an analytical framework to answer that question, “Is it fair to sue someone in this court?”
One of several cases that confront nearly all new students of law (there a handful) is the impenetrable Pennoyer v. Neff . The case was decided in 1878. If you are not familiar with the way people wrote at that point in time, particularly about scientific, medical, and legal topics, it’s like trying to spot a fish in your aquarium after a 3-year decided to feed them an entire container of food. Although that analogy might not hit home with everyone, it conveys the message, and it’s certain there’s a couple of you that know exactly what I’m talking about.
The origin of the dispute is simple. A lawyer sued a client for an unpaid attorney bill (yes, law school started off with a case about how to sue clients), but we don’t need to spend much time on the lawsuit itself. More important is the legacy of the Pennoyer Court’s rulings. It conceived of a territorial approach to evaluating a court’s jurisdiction which continues to this day. Generally speaking, a trial court’s jurisdiction extends throughout the borders of the state in which it is situated. In Pennoyer, the court ruled that the California man was not subject to the jurisdiction of an Oregon court. The ruling was rooted in a sense of fairness. The man suing the Californian never informed the man of the lawsuit. He only posted a legal notice in the local newspaper. However, the Californian was not immune from suit. The Court approved of “tag” jurisdiction, meaning that if the Californian was travelling through Oregon, and the man trying to sue him served him while within the state of Oregon, the Californian would be subject to the Court’s jurisdiction.
Although much of the “law” from Pennoyer has been subsumed into more recent cases, the territorial nature of jurisdiction remains. Generally speaking, a court has personal jurisdiction over individuals residing within the same state. This system would be fine if everyone would just stay in their own state—I’m looking at you, Ohio—but today’s economy just doesn’t work that way.
A New Hampshire man builds a bear trap, but not any bear trap, a particularly dangerous bear trap. It’s dangerous because his friend and colleague in bear trap building, Mr. Vermont, produced a defective part at his Vermont bear trap parts facility. Mr. New Hampshire takes his extra-dangerous bear trap to a bear trap convention in Illinois, where it catches the eye of a woman from the City of Los Angeles. Ms. California buys the extra-dangerous bear trap and takes it to a shipping company so it can be delivered to her bear trapping camp in Montana. At the shipping company, the packing clerk forget to fill the bear trap box with federally mandated and regulated bear trap packing peanuts. The improperly packed, extra-dangerous bear trap makes its way to Mr. Wheelie, a truck driver from Arkansas. Mr. Wheelie neatly stacks the extra-dangerous bear trap package on top of several other parcels in the back of his truck but forgets to strap the box down. In fact, he doesn’t secure the cargo door either. He is dangerously exhausted from working 100-hour weeks. His employer, Mr. Bigg runs one of the largest shipping companies in North America. Mr. Bigg has no idea that his company is shipping an extra-dangerous bear trap from Illinois to Montana, but he is very aware of the “tired-or-fired” policy he recently put into place. Mr. Bigg needs to pay for “Biggs Riggs” brand-new corporate headquarters in Harrisburg, Pennsylvania. Meanwhile, somewhere West of Sioux Falls, South Dakota, Mr. Wheelie is cruising down Interstate 90—whistling poorly. Right behind his rig, a brown 1985 Dodge Aries is so close to the truck it looks like the station wagon is attempting a Knight Rider style docking procedure. Mr. Pinchpenny, alongside his door-to-door sales-partner Mr. Backslappy, are on a journey from Nebraska to the western coast to find their fortune in encyclopedia sales. In order to save a few bucks, Mr. Pinchpenny is drafting the truck’s windbreak to conserve gas. Strung tight and frazzled, he grips the wheel tightly with sweaty palms, when suddenly, the rear door opens and a box flies from the cargo area right towards Mr. Backslappy’s head . . . .
The above, which in retrospect reads like a law school examination question, illustrates factual patterns that make personal jurisdiction analysis complex. Mr. Backslappy is in some serious trouble. If the extra-dangerous bear trap ends up taking his head clear off, poor old Mrs. Backslappy won’t have any more of that good encyclopedia money. She will have no choice but to seek compensation from every person responsible. She’s living in Nebraska, but only Mr. Pinchpenny lives anywhere close to her home. The others are scattered around the country. Does Mrs. Pinchpenny have to file lawsuits in each state?
In 1945, the Supreme Court started building a framework for answering similar questions in International Shoe v State of Washington. In Shoe, a shoe company operating out of St. Louis, Missouri had a number of employees living and selling shoes in Washington State. During the relevant time period, the company had 11 to 13 employees within Washington, making sales in hotels, or occasionally a temporarily rented facility, but never opened a brick and mortar store. This business plan was duplicated through a number of states. International Shoe Company only owned fixed assets in the state of Missouri.
The State of Washington was aware of the company’s presence and decided International Shoe Company needed to contribute the state’s unemployment fund, just as it required from any other business operating within the state. The company fought against the fee, not only because it wanted to avoid the Washington liability but because the practice was central to its business model. The same structure was used to avoid similar taxes in every state where it operated.
After the company repeatedly refuse to pay the fee, the state filed an action against the company in its own court. International Shoe Company didn’t argue it was not responsible for unemployment contributions. Rather, it only argued the Missouri court did not have jurisdiction and could not render a judgement against it. Its theory was that a company, like the defendant in Pennoyer, could only be sued in the state where it resided. It was telling Washington, if you want me, come get me in Missouri. Washington, on the other hand, wasn’t trying to chase anyone, so the parties fought over the narrow issue of personal jurisdiction in Washington courts. The trial court, appellate court, and supreme court of Washington all found in its own favor (surprise), so International Shoe Company took it to the Supremes (that’s a tenacious shoe company…).
The company brought its argument to the big stage, insisting that its home was St. Louis, Missouri—or maybe Delaware, the state where it was incorporated (Delaware gets all the corporations…), but definitely not Washington. Its argument focused on the territorial boundaries. The Supreme Court, while honoring the territorial underpinnings of jurisdiction, gave significant weight to the fairness of forcing the company to litigate a case in Washington state courts.
The Court’s opinion resolving the matter instructed courts to consider whether a defendant has “sufficient minimum contacts” with the forum state, such that allowing a lawsuit to proceed would “not offend traditional notions of fair play and substantial justice.” In this case, that rubric considered whether the International Shoe Company had conducted enough activities within the state of Washington that holding it to account in a Washington court was fair.
The phrase “traditional notions of fair play and substantial justice” was coined in Milliken v Meyer, a case considering how much notice a defendant is entitled to before being bound by the decisions in a lawsuit. The concepts of notice and personal jurisdiction are intertwined, as both are fundamentally fairness questions. What the Shoe Court added to the quoted “fairness” language was the inquiry into the sufficiency of contact between the defendant and the forum state.
The Court considered Pennoyer when rendering its opinion. The case held that a person was subject to suit where he lived (home state) or where he could be found (tag jurisdiction). By analogy, the home of International Shoe Company was Missouri, where it was physically located (or Delaware, where it is incorporated), but how can one determine where a corporation can be found? Can serving one of the corporations’ employees or agents in a forum state sufficient? Although applying tag jurisdiction to corporate employees would be simple and neat, the Court acknowledged the nature of the corporate fiction—a company is not real and only a part of our societies’ intersubjective reality—and identifying its presence is complex. Rightfully so, as forcing a company to respond to a lawsuit in a state only because one of its employees happened to be tagged while passing through doesn’t seem fair at all. This is where the Court’s reliance upon “sufficient minimum contacts” comes into play.
The opinion broaches the subject of specific versus general jurisdiction, but not using those terms. I’m reserving the discussion about this particular topic for the next installment, but for the purposes of this discussion, the Shoe Court found that because the company’s contact with the state involved the hiring, firing, and management of employees within its boundaries, holding it to account in a Washington court was fair. The opinion implied that its ruling may have been different if the nature of the lawsuit was unrelated to the contact, such as a claim for negligence occurring outside of the state.
The Court’s decision was rooted in the due process clauses of the United States Constitution. The Constitution guarantees a person’s life, liberty, and property shall be secure and any abridgment of property rights must be proceeded by due process of law. The Shoe Court held that a court can’t order around someone that has no connection to the forum state, but if that person does have a connection to the state, simply claiming domicile in another state is insufficient to avoid jurisdiction, particularly when the claim arises out of the defendant’s actions within the state’s boundaries.
And that’s the saga of International Shoe Co. v State of Washington. Although the facts of the case aren’t the most exciting, the Court’s holding regarding minimum sufficient contacts and fair play reverberate through personal jurisdiction cases to this day. The next installment will dive into the World-Wide Volkswagen Co. v. Woodson, a case based upon tragic circumstances. Until then, I wish you all the very best. Stay safe and healthy.
Benjamin W. Bryant, JD
Neumann Law Group
I want to thank the two professors that taught me everything I know about this topic. Professor Kathleen Payne of Michigan State University College of Law and Richard Friedman of the University of Michigan Law School. I had an amazing educational experience at both institutions and am grateful for the way these brilliant individuals (and a host of others) have changed my life.