Will the Supreme Court Further Restrict Jurisdiction of US Courts Over Foreign Entities?

By Howard L. Simon, Windels Marx Lane & Mittendorf LLP

At stake in a pair of cases pending before the Supreme Court is the reshaping of the constitutional due process standard for whether a US court can adjudicate a claim against a non-resident entity. It has long been the rule that depending on the nature of a defendant’s contacts with a forum, the court may exercise either general or specific personal jurisdiction over the defendant. Based on the Supreme Court’s 2014 Daimler decision, general jurisdiction – whereby a court may hear any and all claims against a defendant – is now limited, except in “exceptional” cases, to a corporation’s place of incorporation or its principal place of business.

In order for a court to exercise specific jurisdiction, due process requires that (i) the defendant has “minimum contacts” with the forum, (ii) the plaintiff’s claims “arise out of or relate to” those contacts, and (iii) jurisdiction would be “reasonable” under the circumstances. The basic tests for minimum contacts and reasonableness are well-established. Minimum contacts exist where a defendant’s activities indicate its “purposeful availment” of the privilege of doing business in the forum such that it could foresee being hauled into court there. Reasonableness is assessed based on a multifactor analysis, and is only rarely a bar to jurisdiction.

The cases before the Supreme Court concern the second requirement. The Ford Motor Company is seeking to have the Court rule that a defendant’s contacts only “arise out of or relate to” the plaintiff’s claim if the contacts are the proximate cause of the claim. Ford argues that this rule has the benefit of providing predictability as to where corporate defendants may face suit. Ford’s opponents argue that the Court should not further restrict jurisdiction in a way that benefits corporate entities at the expense of US citizens seeking relief against them. Which way the Court rules will have significant consequences both for US plaintiffs and foreign defendants.

Published: Litigation & Dispute Resolution Newsletter, No. 14, Spring 2021 l Photo: MISHELLA - stock.adobe.com