The Journal Record - March 19, 2015

“Can we be sued there?”

Our firm’s business clients ask this question frequently. Lawyers and courts have debated the answer for decades. Jurisdiction over a corporation can be complicated, especially for companies that distribute products to customers nationwide. Recently, the U.S. Supreme Court decided two important cases that arguably narrow where a corporation can be sued.

In 2011, in Goodyear Dunlop Tires Operations S.A. v. Brown, the Supreme Court found a corporation could only be subject to general jurisdiction if it is at home in the state where the lawsuit is filed. Three years later, the court in Daimler AG v. Bauman found that a corporation is at home in a state only if its contacts with the state are so systematic and continuous that it is comparable to a domestic enterprise in that state. Importantly, the Daimler court rejected as unacceptably grasping the argument that a corporation should be subject to general jurisdiction in every state in which it engages in a substantial, continuous and systematic course of business. The court made it clear that only a limited set of affiliations with a state would subject a corporation to all-purpose jurisdiction.

Under the Daimler decision, a corporation does not necessarily become subject to general jurisdiction merely because it conducts business in a state. Although these cases do not say corporations are only at home in states where they are incorporated or have their principal place of business, they appear to reject any sprawling view that a corporation can be sued anywhere. For example, a manufacturer’s distribution of its products nationwide should not subject it to general jurisdiction in every single state under these rulings. Continuous business activities within a state are likely not enough either. Depending on the circumstances, a corporation may also have an argument that being subject to general jurisdiction in every state violates due process.

The Daimler decision has caught the attention of lawyers and generated significant discussion. Only time will tell how courts nationwide further define the at-home test for where a corporation is subject to jurisdiction.