Consent-by-Registration Theory of General Jurisdiction Rejected in New York Post-Daimler
As every attorney is sure to remember, one of the first things law students are taught is the concept of personal jurisdiction. This makes good sense, since the power of the court to bind the parties before it is a threshold issue present in all litigation.1 Personal jurisdiction is more than a minor technical hurdle, however. Verdict trends and substantive laws can, and often do, vary greatly from jurisdiction to jurisdiction.2 At times, the exposure faced by a litigant in a particular jurisdiction is so significant that obtaining a dismissal on jurisdictional grounds is nearly as good as winning the case outright — even if the action is ultimately re-filed in a different jurisdiction.
For corporate defendants, the question of where they may be subject to personal jurisdiction is of constant concern. In American jurisprudence, personal jurisdiction is split into two sub-categories: specific jurisdiction and general jurisdiction.3 Specific jurisdiction is the jurisdiction of a court to adjudicate a dispute that is related to the forum itself.4 General jurisdiction, by contrast, is the jurisdiction of a court to adjudicate a dispute regardless of where it took place, or whether it bears any relationship to a defendant’s contacts with the forum.5 In Daimler AG v. Bauman, the United States Supreme Court famously clarified where a corporate defendant may be subject to general jurisdiction.6 There, the Court held that a corporation is subject to general jurisdiction in both the forum where it is incorporated, as well as the forum where it maintains its principal place of business.7 The Daimler court also held “that in an exceptional case . . . a corporation’s operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home” in such a forum, thus subjecting it to general jurisdiction there as well.8
Aybar v. Aybar
Although Daimler was decided over five years ago, its effects continue to percolate throughout the country. One issue faced by many courts in light of Daimler is whether or not a foreign corporation’s compliance with a particular state’s business registration statute constitutes consent to general jurisdiction within the state. This is commonly referred to as the “consent-by-registration” theory of general jurisdiction.9 Courts have come to differing conclusions, particularly since registration statutes vary across jurisdictions.10 In New York, this issue was first addressed at the appellate level in the recent case of Aybar v. Aybar.11
Aybar involved a motor vehicle accident in Virginia that resulted in multiple deaths and other serious injuries.12 The accident was precipitated by a tire failure that, in turn, caused the subject vehicle to roll over while it was being driven on the Virginia interstate.13 The decedents’ estates and surviving passengers then commenced suit in New York against Goodyear Tire & Rubber Co. (“Goodyear”) and Ford Motor Company (“Ford”), among other defendants.14 As against Goodyear, plaintiffs alleged that the tire involved in the accident was negligently manufactured and designed.15 Plaintiffs made the same allegations against Ford with respect to the vehicle at issue.16
Neither Goodyear nor Ford were incorporated in New York, nor did they maintain their principal place of business in New York.17 Thus, relying upon Daimler, Goodyear and Ford both moved to dismiss for lack of personal jurisdiction.18 The motions were opposed by U.S. Tires and Wheels of Queens, LLC (“U.S. Tires”), a New York corporation that was defending a parallel action stemming from the same accident.19 U.S. Tires argued that, although the accident occurred in Virginia, both Goodyear and Ford “had consented to general jurisdiction in New York by registering to do business” as foreign corporations in New York, and by “designating an agent for service of process in New York.”20 Plaintiffs also opposed the motions, arguing that Goodyear and Ford were both “essentially ‘at home’” in New York and thus subject to general jurisdiction.21 In support of their argument, plaintiffs submitted evidence that both defendants had large physical presences in New York and employed many New York residents.22 The parties effectively conceded that neither Goodyear nor Ford were subject to specific jurisdiction in New York.23
Both motions were denied.24 The motion court accepted U.S. Tires’ consent-by-registration argument and held that both Goodyear and Ford were subject to general jurisdiction in New York.25 The motion court also held that Goodyear and Ford were both “essentially at home” in New York based upon their New York activities, which constituted an independent basis for exercising general jurisdiction over them.26 Goodyear and Ford appealed.27
In a detailed opinion examining the history of personal jurisdiction jurisprudence, the Second Department reversed the motion court and dismissed plaintiffs’ complaint against Goodyear and Ford.28 The Second Department initially noted that New York’s business registration statutes “did not expressly require consent to general jurisdiction as a cost of doing business in New York . . . .”29 Rather, the so-called “consent-by-registration” theory of general jurisdiction had been a creature of New York common law dating back to a 1916 Court of Appeals decision in the case of Bagdon v. Philadelphia & Reading Coal & Iron Co.30 The rationale of Bagdon was that compliance with the registration statutes and the appointment of an in-state agent constituted a “presence” in New York sufficient to confer all-purpose jurisdiction over the foreign corporation.31 The Second Department observed, however, that Bagdon was decided long before the concepts of specific jurisdiction and general jurisdiction had been fully developed, and in any event, had not been relied upon by the Court of Appeals for at least seventy years.32 The Second Department accordingly held that:
[I]n view of the evolution of [personal] jurisdiction jurisprudence, and, particularly the way in which Daimler has altered that jurisprudential landscape, it cannot be said that a corporation’s compliance with the existing business registration statutes constitutes consent to the general jurisdiction of New York courts, to be sued upon causes of action that have no relation to New York.33
The Second Department further explained that, under Daimler, a foreign corporation’s mere presence in a forum was no longer sufficient to confer general jurisdiction over the corporation.34 As a result, the holding of Bagdon and the cases that followed it no longer applied.35 And given that New York’s registration statutes contained no express consent to general jurisdiction, the Second Department concluded that to hold otherwise would be “‘unacceptably grasping’ under Daimler.”36
Finally, the Second Department rejected plaintiffs’ contention that Goodyear and Ford were “essentially ‘at home’” in New York as contemplated by Daimler.37 The Second Department reiterated that such an exceptional finding required “an appraisal of a corporation’s activities in their entirety, nationwide and worldwide.”38 While both Goodyear and Ford had extensive New York contacts, they represented only a small fraction of their worldwide activities.39 Thus, neither Goodyear nor Ford could be subject to general jurisdiction in New York.40
Clearly, the Second Department’s rejection of consent-by-registration jurisdiction in Aybar is a breath of fresh air for corporate litigants. It promotes predictability and reinforces Daimler’s constrainment of forum-shopping plaintiffs. The decision is especially significant for a jurisdiction like New York, where sky-high verdicts are the norm and seemingly ever-rising.41 In addition, unless a contrary rule is pronounced by another department or the Court of Appeals, the Second Department’s holding will remain binding upon all trial courts state-wide and should be cited by practitioners accordingly.42
Aybar is also significant for its refusal to find Goodyear or Ford “essentially ‘at home’” in New York. Had the Second Department ruled otherwise, Daimler’s holding would have been rendered meaningless for a huge swath of foreign corporations with significant New York activities.43 That the court sided with Goodyear and Ford is hopefully a sign that Daimler’s “exceptional case” will continue to remain an outlier in New York.44
Aybar is a welcome decision for out-of-state corporate defendants – both for its substantive holding, as well as for the clarity it brings to New York’s jurisdictional landscape. Practitioners would do well to be mindful of Aybar and extricate such clients from New York courts when exposure looms large.
ABOUT THE AUTHOR
Michael Tripicco is an associate in Hawkins Parnell & Young, LLP’s New York City office. He is a multi-jurisdictional litigator who focuses his practice on toxic tort, professional liability and commercial litigation matters.
1 “It is fundamental that a court must acquire personal jurisdiction over a defendant before it can render a judgment against that defendant.” Aybar v. Aybar, ___A.D.3d___, 2019 N.Y. Slip. Op. 00412, *3 (2019) citing Burnham v. Superior Court of Cal., County of Marin, 495 U.S. 604, 608 (1990) and Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).
2 See, e.g., W. McDonald Plosser, United States: Sky’s The Limit? A 50-State Survey of Damages Caps and the Collateral Source Rule, Mondaq Business Briefing, Dec. 11, 2018; Neil Vidmar & Mirya Holman, The Frequency, Predictability, and Proportionality of Jury Awards of Punitive Damages in State Courts in 2005: A New Audit, 43 Suffolk U. L. Rev. 857 (2010).
3 See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919-220 (2011).
5 See Bristol-Myers Squibb Co. v Superior Ct., 137 S. Ct. 1773, 1779-1780 (2017); Goodyear Dunlop Tires Operations, S.A., 64 U.S. at 919-920.
6 Daimler AG v. Bauman, 571 U.S. 117 (2014).
7 Id. at 137-138.
8 Id. at 139, n. 19 (emphasis added).
9 See, e.g., Aybar, 2019 N.Y. Slip. Op. 00412 at *5-6.
10 See, e.g., Allstate Ins. Co. v. Electrolux Home Prods., 2018 U.S. Dist. LEXIS 130241, at *11 (E.D. Pa. 2018) (“[T]here is no reason to believe that Daimler overruled the Third Circuit’s holding . . . that, under Pennsylvania’s long-arm statute, ‘registration by a foreign corporation carries with it consent to be sued in Pennsylvania courts’”); Consol. Infrastructure Group, Inc. v. USIC, LLC, 2017 U.S. Dist LEXIS 76576, at *12-17 (D. Neb. 2017) (“One of the most solidly established ways of giving such consent [to personal jurisdiction] is to designate an agent for service of process within the State”); Genuine Parts Co. v. Cepec, 137 A.3.d 123, 125-127 (Del. 2016) (holding that, in light of Daimler, compliance with Delaware’s registration statutes does not confer general jurisdiction over a foreign corporation); Spanier v. Am. Pop Corn Co., 2016 U.S. Dist LEXIS 50071, at *11-14 (N.D. Iowa 2016) (holding that consent-by-registration does not run afoul of Daimler).
11 Aybar, 2019 N.Y. Slip. Op. 00412 at *1-2, *5-7.
12 Id. at *2.
18 Id. at *2-3.
19 Id. at *3.
21 Id. at *2-3. In other words, plaintiffs argued that this was an “exceptional case” under the framework of Daimler, whereby both Goodyear and Ford would be subject to general jurisdiction in New York, despite the fact that neither was incorporated in New York, nor had their principal place of business in New York. Id.
23 Id. at *4, n. 2, *4.
24 Id. at *3
28 Id. at *7-8
29 Id. at *5-6.
30 Id. at *6
31 Id. at *6-7
33 Id. at *6.
34 Id. at *7
36 Id. Notably, the Second Department refused to consider whether or not a hypothetical statute that required an express consent to general jurisdiction would pass muster under Daimler. Id. at n. 3, *6.
37 Id. at *4.
39 Id. at *1-2, *4.
40 Id. at *4.
41 See, e.g., Julia Marsh, $60M Verdict vs. Asbestos Death Award Spurs Reform Cry, The New York Post, Apr. 17, 2018, at 8; Greg G. Smith, A $57M ‘Lie’ — NYCHA Hit With Whopping Lead Case Verdict, Jan. 28, 2018, at 4; Douglass Dowty, F-M Bus Driver’s Family Wins $7.7M in Largest Local Asbestos Verdict, The Post Standard, Dec. 25, 2014, at A13; Phil Fairbanks, Record $66 Million Awarded in Injury Case; Woman Left Paralyzed by Falling Equipment, Buffalo News, Dec. 9, 2010, at A1.
42 As the First Department explained in Striver 140 LLC v. Cruz: “[t]he Appellate Division is a single State-wide court divided into departments for administrative convenience . . . and, therefore, the doctrine of stare decisis requires trial courts . . . to follow precedents set by the Appellate Division of another department until the Court of Appeals or [the Appellate Division within the trial court’s own department] pronounces a contrary rule.” 770 N.Y.S.2d 814, 815 (1st Dep’t 2003) quoting Mountain View Coach Lines v Storms, 476 N.Y.S.2d 918, 919-20 (2d Dep’t 1984).
43 Such a result would have also run contrary to the post-Daimler case of BNSF Ry. Co. v. Tyrell. 137 S. Ct. 1549, 1554 (2017). In BNSF Ry. Co., the United States Supreme Court held that Montana could not exercise general jurisdiction over BNSF Railway even though it had 2,061 miles of railroad track in Montana, employed some 2,100 workers in Montana, maintained an automotive facility in Montana, and generated revenue in the Montana. 137 S. Ct. 1549, 1554 (2017). The Court reasoned that to find a corporation “at home” in a forum beyond its principal place of business or place of incorporation (i.e., the paradigmatic forum(s) for general jurisdiction purposes) would truly be “an exceptional case.” Id. at 1558 quoting Daimler 571 U.S. 117, 139, n. 19 (2014). In Aybar, the alleged New York activities of Goodyear and Ford were far less substantial than those of BNSF Railway in BNSF Ry. Co. See Aybar, 2019 N.Y. Slip. Op. 00412 at *1-2, *4.
44 Indeed, as of the date of this writing, it appears that only a single New York state appellate decision has held that a foreign corporation was “essentially at home” in New York. See Peters v. Peters, 127 A.D.3d 656, 657 (1st Dep’t 2015). However, that decision warrants little attention in that it was based entirely upon the failure of the party contesting jurisdiction to preserve the issue for appeal. Id.