Fourteenth Amendment, Section 1:
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
A curious aspect of American law is that a corporation has no legal existence outside the boundaries of the state chartering it. 1 Thus, the basis for state court jurisdiction over an out-of-state (
foreign) corporation has been even more uncertain than that with respect to individuals. Before International Shoe Co. v. Washington, 2 it was asserted that, because a corporation could not carry on business in a state without the state’s permission, the state could condition its permission upon the corporation’s consent to submit to the jurisdiction of the state’s courts, either by appointment of someone to receive process or in the absence of such designation, by accepting service upon corporate agents authorized to operate within the state. 3 Further, by doing business in a state, the corporation was deemed to be present there and thus subject to service of process and suit. 4 This theoretical corporate presence conflicted with the idea of corporations having no existence outside their state of incorporation, but it was nonetheless accepted that a corporation
doing business in a state to a sufficient degree was
present for service of process upon its agents in the state who carried out that business. 5
Presence alone, however, does not expose a corporation to all manner of suits through the exercise of general jurisdiction. Only corporations, whose
continuous and systematic affiliations with a forum make them
essentially at home there, are broadly amenable to suit. 6 While the paradigmatic examples of where a corporate defendant is
at home are the corporation's place of incorporation and principal place of business, 7 the Court has recognized that in
exceptional cases general jurisdiction can be exercised by a court located where the corporate defendant's operations are
so substantial as to
render the corporation at home in that state. 8 Nonetheless, insubstantial in-state business, in and of itself, does not suffice to permit an assertion of jurisdiction over claims that are unrelated to any activity occurring in a state. 9 Without the protection of such a rule, foreign corporations would be exposed to the manifest hardship and inconvenience of defending, in any state in which they happened to be carrying on business, suits for torts wherever committed and claims on contracts wherever made. 10 And if the corporation stopped doing business in the forum state before suit against it was commenced, it might well escape jurisdiction altogether. 11
In early cases, the issue of the degree of activity and, in particular, the degree of solicitation that was necessary to constitute doing business by a foreign corporation, was much disputed and led to very particularistic holdings. 12 In the absence of enough activity to constitute doing business, the mere presence of an agent, officer, or stockholder, who could be served, within a state's territorial limits was not sufficient to enable the state to exercise jurisdiction over the foreign corporation. 13 The touchstone in jurisdiction cases was recast by International Shoe Co. v. Washington and its
minimum contacts analysis. 14 International Shoe, an out-of-state corporation, had not been issued a license to do business in the State of Washington, but it systematically and continuously employed a sales force of Washington residents to solicit therein and thus was held amenable to suit in Washington for unpaid unemployment compensation contributions for such salesmen. The Court deemed a notice of assessment served personally upon one of the local sales solicitors, and a copy of the assessment sent by registered mail to the corporation's principal office in Missouri, sufficient to apprise the corporation of the proceeding.
To reach this conclusion, the Court not only overturned prior holdings that mere solicitation of business does not constitute a sufficient contact to subject a foreign corporation to a state’s jurisdiction, 15 but also rejected the
presence test as begging the question to be decided.
The terms ‘present’ or ‘presence,’ according to Chief Justice Stone,
are used merely to symbolize those activities of the corporation’s agent within the State which courts will deem to be sufficient to satisfy the demands of due process. . . . Those demands may be met by such contacts of the corporation with the State of the forum as make it reasonable, in the context of our federal system . . . , to require the corporation to defend the particular suit which is brought there; [and] . . . that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice'. . . . An ‘estimate of the inconveniences’ which would result to the corporation from a trial away from its ‘home’ or principal place of business is relevant in this connection. 16 As to the scope of application to be accorded this
fair play and substantial justice doctrine, the Court concluded that
so far as . . . [corporate] obligations arise out of or are connected with activities within the State, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue. 17
Extending this logic, a majority of the Court ruled that an out-of-state association selling mail order insurance had developed sufficient contacts and ties with Virginia residents so that the state could institute enforcement proceedings under its Blue Sky Law by forwarding notice to the company by registered mail, notwithstanding that the Association solicited business in Virginia solely through recommendations of existing members and was represented therein by no agents whatsoever. 18 The Due Process Clause was declared not to
forbid a State to protect its citizens from such injustice of having to file suits on their claims at a far distant home office of such company, especially in view of the fact that such suits could be more conveniently tried in Virginia where claims of loss could be investigated. 19
Likewise, the Court reviewed a California statute which subjected foreign mail order insurance companies engaged in contracts with California residents to suit in California courts, and which had authorized the petitioner to serve a Texas insurer by registered mail only. 20 The contract between the company and the insured specified that Austin, Texas, was the place of
making and the place where liability should be deemed to arise. The company mailed premium notices to the insured in California, and he mailed his premium payments to the company in Texas. Acknowledging that the connection of the company with California was tenuous – it had no office or agents in the state and no evidence had been presented that it had solicited anyone other than the insured for business – the Court sustained jurisdiction on the basis that the suit was on a contract which had a substantial connection with California.
The contract was delivered in California, the premiums were mailed there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. 21
In making this decision, the Court noted that
[l]ooking back over the long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents. 22 However, in Hanson v. Denckla, decided during the same Term, the Court found in personam jurisdiction lacking for the first time since International Shoe Co. v. Washington, pronouncing firm due process limitations. In Hanson, 23 the issue was whether a Florida court considering a contested will obtained jurisdiction over corporate trustees of disputed property through use of ordinary mail and publication. The will had been entered into and probated in Florida, the claimants were resident in Florida and had been personally served, but the trustees, who were indispensable parties, were resident in Delaware. Noting the trend in enlarging the ability of the states to obtain in personam jurisdiction over absent defendants, the Court denied the exercise of nationwide in personam jurisdiction by states, saying that
it would be a mistake to assume that th[e] trend [to expand the reach of state courts] heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. 24
The Court recognized in Hanson that Florida law was the most appropriate law to be applied in determining the validity of the will and that the corporate defendants might be little inconvenienced by having to appear in Florida courts, but it denied that either circumstance satisfied the Due Process Clause. The Court noted that due process restrictions do more than guarantee immunity from inconvenient or distant litigation, in that
[these restrictions] are consequences of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has the ‘minimum contacts’ with that State that are a prerequisite to its exercise of power over him. The only contacts the corporate defendants had in Florida consisted of a relationship with the individual defendants.
The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant’s activity, but it is essential in each case that there be some act by which the defendant purposefully avails himself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. . . . The settlor’s execution in Florida of her power of appointment cannot remedy the absence of such an act in this case. 25
The Court continued to apply International Shoe principles in diverse situations. Thus, circulation of a magazine in a state was an adequate basis for that state to exercise jurisdiction over an out-of-state corporate magazine publisher in a libel action. The fact that the plaintiff did not have
minimum contacts with the forum state was not dispositive since the relevant inquiry is the relations among the defendant, the forum, and the litigation. 26 Or, damage done to the plaintiff’s reputation in his home state caused by circulation of a defamatory magazine article there may justify assertion of jurisdiction over the out-of-state authors of such article, despite the lack of minimum contact between the authors (as opposed to the publishers) and the state. 27 Further, though there is no per se rule that a contract with an out-of-state party automatically establishes jurisdiction to enforce the contract in the other party’s forum, a franchisee who has entered into a franchise contract with an out-of-state corporation may be subject to suit in the corporation’s home state where the overall circumstances (contract terms themselves, course of dealings) demonstrate a deliberate reaching out to establish contacts with the franchisor in the franchisor’s home state. 28
The Court has continued to wrestle over when a state may adjudicate a products liability claim for an injury occurring within it, at times finding the defendant's contacts with the place of injury to be too attenuated to support its having to mount a defense there. In World-Wide Volkswagen Corp. v. Woodson, 29 the Court applied its
minimum contacts test to preclude the assertion of jurisdiction over two foreign corporations that did no business in the forum state. Plaintiffs had sustained personal injuries in Oklahoma in an accident involving an alleged defect in their automobile. The car had been purchased the previous year in New York, the plaintiffs were New York residents at time of purchase, and the accident had occurred while they were driving through Oklahoma on their way to a new residence in Arizona. Defendants were the automobile retailer and its wholesaler, both New York corporations that did no business in Oklahoma. The Court found no circumstances justifying assertion by Oklahoma courts of jurisdiction over defendants. The Court found that the defendants (1) carried on no activity in Oklahoma, (2) closed no sales and performed no services there, (3) availed themselves of none of the benefits of the state’s laws, (4) solicited no business there either through salespersons or through advertising reasonably calculated to reach the state, and (5) sold no cars to Oklahoma residents or indirectly served or sought to serve the Oklahoma market. Although it might have been foreseeable that the automobile would travel to Oklahoma, foreseeability was held to be relevant only insofar as
the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. 30 The Court in World-Wide Volkswagen Corp. contrasted the facts of the case with the instance of a corporation
deliver[ing] its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. 31
In Asahi Metal Industry Co. v. Superior Court, 32 the Court addressed more closely how jurisdiction flows with products downstream. The Court identified two standards for limiting jurisdiction even as products proceed to foreseeable destinations. The more general standard harked back to the fair play and substantial justice doctrine of International Shoe and requires balancing the respective interests of the parties, the prospective forum state, and alternative fora. All the Justices agreed with the legitimacy of this test in assessing due process limits on jurisdiction. 33 However, four Justices would also apply a more exacting test: A defendant who placed a product in the stream of commerce knowing that the product might eventually be sold in a state will be subject to jurisdiction there only if the defendant also had purposefully acted to avail itself of the state's market. According to Justice O’Connor, who wrote the opinion espousing this test, a defendant subjected itself to jurisdiction by targeting or serving customers in a state through, for example, direct advertising, marketing through a local sales agent, or establishing channels for providing regular advice to local customers. Action, not expectation, is key. 34 In Asahi, the state was found to lack jurisdiction under both tests cited.
Doctrinal differences on the due process touchstones in stream-of-commerce cases became more critical to the outcome in J. McIntyre Machinery, Ltd. v. Nicastro. 35 Justice Kennedy, writing for a four-Justice plurality, asserted that it is a defendant's purposeful availment of the forum state that makes jurisdiction consistent with traditional notions of fair play and substantial justice. The question is not so much the fairness of a state reaching out to bring a foreign defendant before its courts as it is a matter of a foreign defendant having acted within a state so as to bring itself within the state's limited authority. Thus, a British machinery manufacturer who targeted the U.S. market generally through engaging a nationwide distributor and attending trade shows, among other means, could not be sued in New Jersey for an industrial accident that occurred in the state. Even though at least one of its machines (and perhaps as many as four) were sold to New Jersey concerns, the defendant had not purposefully targeted the New Jersey market through, for example, establishing an office, advertising, or sending employees. 36 Concurring with the plurality, Justice Breyer emphasized the outcome lay in stream-of-commerce precedents that held isolated or infrequent sales could not support jurisdiction. At the same time, Justice Breyer cautioned against adoption of the plurality's strict active availment of the forum rule, especially because the Court had yet to consider due process requirements in the context of evolving business models, modern e-commerce in particular. 37
Nonetheless, in order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant's contacts with the forum, 38 and when there is
no such connection, specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the State. 39 As a result, the Court, in Bristol-Myers Squibb Co. v. Superior Court, concluded that the California Supreme Court erred in employing a
relaxed approach to personal jurisdiction by holding that a state court could exercise specific jurisdiction over a corporate defendant who was being sued by non-state residents for out-of-state activities solely because the defendant had
extensive forum contacts unrelated to the claims in question. 40 Concluding that California's approach was a
loose and spurious form of general jurisdiction, 41 the Court held that without a
connection between the forum and the specific claims at issue, California courts lacked jurisdiction over the corporate defendant. 42