Case preview: Defining “relatedness” in personal jurisdiction

From 1990 until 2010, the Supreme Court decided no cases about personal jurisdiction, the legal doctrine controlling when a defendant can be made to litigate within a state. For perspective, Justice David Souter joined the court in fall 1990 and retired in summer 2009 without hearing one personal-jurisdiction case. Since 2010, however, personal jurisdiction has become a hot issue on the court’s docket. The latest case, Ford Motor Co. v. Montana Eighth Judicial District (consolidated with Ford Motor Co. v. Bandemer), considers whether state courts in Montana and Minnesota have personal jurisdiction over two lawsuits against Ford, which sells cars in both states but manufactured and sold the specific cars at issue out-of-state. The court rescheduled this case from last term and will hold telephonic argument on Wednesday.

Background

Ford Motor Co. is headquartered in Michigan and incorporated in Delaware. It designs and manufactures automobiles, which it sells to independently owned-and-operated dealers throughout the country.

Montana Eighth Judicial District arose from a 2015 accident in Montana involving a 1996 Ford Explorer that killed driver Markkaya Jean Gullet. Her estate sued Ford in state court in Montana, alleging design defect, failure to warn and negligence. Gullett’s car was assembled in Kentucky, sold to a dealership in Washington and originally sold to a consumer in Oregon. It went through numerous sales before reaching Gullett in Montana.

Bandemer arose from a 2015 accident in Minnesota involving a 1994 Ford Crown Victoria that injured passenger Adam Bandemer. Bandemer sued Ford in state court in Minnesota, asserting claims for products liability, negligence and breach of warranty. The car involved in the accident was designed in Michigan, assembled in Ontario, Canada, and sold to a dealership in North Dakota. The vehicle was with its fifth owner when registered in Minnesota in 2013.

Personal jurisdiction

The basic analytical framework for personal jurisdiction is well known and not in dispute.

A state court’s exercise of personal jurisdiction must be consistent with the 14th Amendment’s requirements that a person not be deprived of life, liberty or property without due process of law. To be subject to jurisdiction in a state consistent with due process, a defendant must have “certain minimum contacts with it such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” The court distinguishes general personal jurisdiction from specific personal jurisdiction; general jurisdiction means a defendant is subject to suit in a state for all claims, while specific jurisdiction means a defendant is subject to suits that bear some connection to the defendant’s contacts with the state.

The touchstone for general jurisdiction is where the defendant is “at home,” which for a corporation is its principal place of business and state of incorporation. Ford is “at home” in neither Montana nor Minnesota.

The plaintiffs thus must establish specific jurisdiction over Ford, which involves a three-step inquiry. Ford must have contacts with the forum state, such as by selling, marketing, advertising or otherwise providing services to that state or by placing its products into the “stream of commerce” in the state. Those contacts with the state must “give rise or relate to” the claim (or, stated differently, the claim must “arise out of or relate to” to the contacts). And it must not be unreasonable to require Ford to litigate there. There is no dispute that Ford has minimum contacts with both states, given its selling, marketing and shipping of cars there. Nor can Ford make the necessary “compelling case” that it would be unduly burdensome to litigate in either state.

The dispute in this case is about the second prong of the specific-jurisdiction inquiry: When do a defendant’s contacts give rise or relate to the claim?

Ford’s arguments

Ford focuses on the fact that it did not do anything in either state with respect to the cars involved in the accidents. Ford played no role in either car entering the forum state. Gullett’s car was assembled in Kentucky, sold by Ford to a dealership in Washington and made its way to Montana through several sales, none of which was connected to Ford. The car in which Bandemer was riding was designed in Michigan, assembled in Canada, sold to a dealership in North Dakota and went through several owners, none connected to Ford, before reaching a Minnesota owner in 2013.

Ford argues that “give rise” and “relate to” are synonyms defining a single concept. Although collapsed into a single standard — contacts must “give rise or relate to” the claim — the terms are not different, the company says. In fact, some recent cases omit the latter term in favor of the former. And two phrases need not connote two concepts; law often repeats companion terms to express one idea and one standard — for example, “fair play and substantial justice,” also in the personal-jurisdiction framework.

Although stated two ways, Ford argues, the singular concept demands a causal connection between the contacts and the litigation. The defendant’s in-state contact must be “suit-related”; it cannot be conduct with respect to third parties that is “similar” to the conduct at issue in the lawsuit. Ford’s contacts with the states must have proximately caused Gullett’s and Bandemer’s claims — Ford must have taken or aimed some act at the states, and that action must be what the plaintiffs seek to remedy by bringing their claims in state court. This approach, Ford argues, ensures that defendants have fair warning of where particular activity might subject them to the jurisdiction of a state’s court system. Because Ford knows what it did and where, it can structure its conduct to avoid suit in a given forum, if it wishes.

According to Ford, the lower courts erred in treating “relate to” as a distinct standard not requiring causation. This erroneous approach, writes Ford, impermissibly allows jurisdiction based on the defendant’s contacts with third parties in the forum states if enough of those third-party contacts “resemble” or are similar to the subject of the lawsuit.

Ford concedes that it does business in both states; it engages in marketing and advertising in both state, provides services in both states and ships cars to dealers in both states. But it is not subject to jurisdiction in these cases because those in-state business activities did not cause either injury. Ford did not sell or ship the cars at issue into the forum states; Ford’s actions that did cause the injuries occurred out-of-state. The claims by Gullett’s estate and Bandemer would be “precisely the same if Ford had never done anything in Montana and Minnesota.”

United States as amicus curiae

The United States appears as a “friend of the court” supporting Ford, although the court denied the solicitor general argument time.

The United States argues that a state court cannot exercise specific jurisdiction over a claim arising from the sale of a product outside the state; it is mere “fortuity” that the manufacturer sells the same type of product within the state or has extensive general connections to the state. This is the essential distinction between general and specific jurisdiction — the former is a state’s power over its citizens and corporations, while the latter is a state’s power over out-of-state corporations in lawsuits connected to that corporation’s in-state business activities.

But the United States rejects as “unsound” Ford’s demand for a causal connection between contacts and claim. That approach ignores Ford’s conduct toward the state as a whole. It would create different personal-jurisdiction standards for different types of cases, whereas the court demands that the same general rules apply to all. It also would complicate the analysis by introducing complex factual questions.

The government closes by emphasizing that these cases involve jurisdictional limits on state courts under the 14th Amendment, not jurisdictional limits on federal courts under the Fifth Amendment. While federal law generally makes personal jurisdiction in federal court coextensive with personal jurisdiction in a state court in that state, Congress has given federal courts broader jurisdiction in some situations. The government urges the Supreme Court to continue to reserve the question of whether restrictions on state-court jurisdiction apply to federal courts.

Plaintiffs’ arguments

Gullett and Bandemer offer a “simple” test: “If a defendant deliberately cultivates a given state as a market for a product, it may be sued in that state for injuries caused in that state by that product.” That test would establish a sufficient relationship between their injuries and Ford’s conduct — the automobile manufacturer sells the same product in the state, even if not the specific units involved in the lawsuit. This test would provide fair notice — Ford would know it can be sued in a state for injuries caused by a product that it sells in the state. And it would further the states’ interests in protecting their citizens from companies that have established a continuing relationship with the people of the state and thus have assumed an obligation not to injure those people.

The plaintiffs identify a number of defects in Ford’s proximate-cause test, which would “radically reshape the jurisdictional landscape.” Ford, they allege, misreads the “arise out of or relate to” language. This is not, as Ford argues, an example of legalese repeating two synonymous phrases to capture one concept. Rather, the terms are disjunctive — “arise out of” and “relate to” are alternative concepts with distinct meanings — rather than a conjunctive repetition of the same idea. While “arise out of” connotes causation, “relate to” suggests something broader.

Automobile accidents constitute a common basis for litigation, with injured persons seeking compensation from manufacturers of cars, tires and parts. The effect of Ford’s causation test would be to shuffle claims from the state where plaintiffs were injured (and often reside) to another forum, such as the state in which the manufacturer made the first sale (North Dakota in Bandemer, Washington or Oregon in Montana Eighth Judicial District). But those states would be no more convenient for Ford, while far more burdensome for the plaintiffs. Alternatively, it would shuffle cases to Ford’s home in Michigan. Either way, they conclude, the “only advantage for Ford is an illegitimate one: the possibility that the litigation burdens will be so substantial that many plaintiffs will give up their claims.”

Amicus briefs

In addition to the federal government’s involvement, the case has drawn interest from a broad range of amici, many asserting unexpected positions. A cross-section of states, some Republican-controlled and some Democratic-controlled, filed a brief in support of Gullett and Bandemer, urging the justices to accept a broad conception of state sovereignty allowing their courts to reach defendants who cause harm within their borders. The National Association of Home Builders also supports the plaintiffs, arguing that preventing jurisdiction over the out-of-state manufacturer would focus liability on a possibly innocent in-state intermediary, forcing that intermediary to pursue duplicative litigation out of state. It offers the example of an in-state home builder who must pursue third-party claims, likely out of state, against a liable out-of-state supplier (such as a Chinese drywall manufacturer) because the supplier would not be subject to jurisdiction where the plaintiff was injured.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is counsel on an amicus brief in support of the respondents in this case. The author of this post is unaffiliated with the firm.]