How Corporate Law Invented the Doctrine of Specific Jurisdiction, or Why Sovereignty Plays No Role in Specific Jurisdiction

This week, the Supreme Court issued its decision in Daimler AG v. Bauman, holding that a U.S. District Court in California does not have personal jurisdiction over a German corporation to hear a foreign tort claim brought by Argentinian plaintiffs, even when that corporation has U.S. subsidiaries that do frequent business in California and can be said to be “at home” in California. Actually, the Court went much further than that: not only does the U.S. District Court in the Northern District of California not have jurisdiction to hear the claim against Daimler, the Court’s decision leaves the strong implication that neither would any other court in the U.S., whether state or federal. In Bauman, the Court was forced to assume that Daimler’s U.S. subsidiaries – who are incorporated in or have a principal place of business in New Jersey and Delaware –  were “at home” in California. Even then, the Court concluded that no jurisdiction over Daimler existed. Since bringing suit in a state where Daimler’s subsidiaries were “at home” was not sufficient to confer jurisdiction, the Bauman plaintiffs’ claims would apparently fail no matter where in the U.S. it had been brought.

What is also of particular interest in Bauman, though, is the majority opinion’s relatively detailed recap of the history of general jurisdiction and specific jurisdiction. In doing so, the Court takes pains to portray Bauman as the natural and predictable progeny of the Court’s 1945 decision in International Shoe Co. v. Washington, as well as an extension of its more recent decisions in J. McIntyre Machinery, Ltd. v. Nicastro (2011) and Goodyear Dunlop Tires Operations, S.A. v. Brown (2011). The Court’s decision reaffirms that, post-International Shoe, general jurisdiction has become the red-headed stepchild of the Supreme Court’s personal jurisdiction jurisprudence: yes, it does exist, but it’s not particularly significant, and whenever possible we’re going to try to focus on specific jurisdiction instead.

But Bauman’s history of personal jurisdiction neglects one very significant part of the story: the origins of specific jurisdiction. Although Bauman claims that, post-International Shoe, “specific jurisdiction has been cut loose from Pennoyer’s sway,” this metaphor mistakenly assumes that the two were ever pinned together in the first place. Specific jurisdiction was not derived from Pennoyer, nor from common law conceptions of general jurisdiction. Specific jurisdiction is instead the bastard child of corporate law and the Full Faith and Credit Clause, first born out of state legislatures’ needs to regulate the interstate activities of corporate entities, and later transformed by federal courts into a constitutional due process doctrine which imposed federal limits on state regulation of commerce. See, e.g., International Harvester Co. of America v. Kentucky, 234 US 579 (1914); and Whitaker v. Macfadden Publications, Inc., 70 App.D.C. 165 (1939).

Today’s judicial doctrine of specific jurisdiction was created as a statutory scheme to ensure that corporations could be sued even when they were acted outside of the state in which they were incorporated. Well over a century later, International Shoe adopted the doctrine, jettisoned its statutory origins, and announced that it was now a constitutional basis for regulating the reach of state courts via the Due Process clause of the Fourteenth Amendment. Unsurprisingly, the resulting legal concept is neither seamless nor entirely internally coherent. Although International Shoe attempted to shoehorn specific jurisdiction into the Court’s pre-existing framework of personal jurisdiction, but personal jurisdiction’s doctrinal lineage is very different from that of specific jurisdiction. Personal jurisdiction, as an expression of a state’s inherent sovereign authority, is a creature of international law. As result of this mismatch between jurisdictional concepts, nearly 70 years after International Shoe, the Supreme Court is still grappling today with how to resolve this basic conflict between the competing sovereignty-based and due process-based regimes of personal jurisdiction.

First, as a background point, it is important to note that Bauman does not actually address whether U.S. district courts could themselves constitutionally exercise personal jurisdiction over either Daimler or Daimler’s subsidiaries. Under the current set-up of the federal court system, a district court (with some infrequent exceptions) does not determine whether it inherently possesses personal jurisdiction over a party. Instead, the court follows a choice of law provision which instructs it to examine whether or not a state court in the state where it sits could possess jurisdiction over the party. FRCP 4(k)(1)(a) (“[s]erving a summons or filing a waiver of service establishes personal jurisdiction over a defendant who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.”). Daimler’s jurisdictional challenge is not directed at the inherent jurisdictional reach of the district court in which the suit was brought. Instead, Daimler’s challenge concerns the limits imposed on California state courts by the federal Constitution. These constitutional limits on the power of state courts were initially imposed by the Full Faith and Credit clause, and, later, by the Fourteenth Amendment’s Due Process clause. Although Constitutional limits on federal adjudicatory jurisdiction do exist, they are not implicated by the line of case law leading up to Bauman.

Second, as it is applied in state courts in the United States today, the modern concept of personal jurisdiction is a hybrid creature of both international and constitutional law. As applied today, personal jurisdiction is largely a due process doctrine, but the Court (with the exception of Justice Ginsberg) has been unwilling to sever personal jurisdiction’s last remaining ties to sovereignty-based conceptions of adjudicatory jurisdiction that were inherited from international law. Ginsburg’s majority opinion in Bauman, just like her majority opinion in Goodyear, meticulously avoids any references to sovereignty, and Ginsburg’s dissent in McIntyre was explicit in denying that sovereignty plays any role in state personal jurisdiction limitations. (Although Sotomayor signed on to Ginsburg’s dissent in McIntyre, she apparently has had second thoughts about it since, as her concurrence in Bauman cites the majority opinion’s “undu[e] curtail[ment of] the States’ sovereign authority” as the first of four “deep injustices” she predicts will result from Bauman). Still, no other justice has affirmatively endorsed Ginsburg’s anti-sovereignty approach, and, in Bauman, even Ginsburg was forced to make vague references to the “risks to international comity” posed by general jurisdiction, as a justification for her sovereignty-free approach to jurisdiction. For now, it is safe to assume that the Court still considers international law to be a part of our law of personal jurisdiction, and will continue to maintain that specific jurisdiction is both a question of sovereignty and a question of due process.

I. Personal Jurisdiction Under International Law

Personal jurisdiction, as understood by public law at the time of the Constitution, was entirely a matter of public international law, based on sovereign authority and a government’s physical reach. A state’s courts were nevertheless free to exercise any sort of personal jurisdiction that they wished, regardless of whether it complied with public law concerning personal jurisdiction. The fact that a given judgment may have breached international would not have been much consolation for a judgment debtor who was later found in that state, as the state was entitled to enforce a judgment entered in violation of international law if it wanted to. But if the debtor remained in a foreign state, he could rest easy, as traditional rules of comity held that the judgment of a foreign state issued in violation of international law was not entitled to any weight in the courts of other states.

Under this “old way” of doing personal jurisdiction, personal jurisdiction was always general jurisdiction; international law provided that if a sovereign had jurisdiction to issue any kind of judgment against an individual, it had jurisdiction to issue all kinds of judgments. “Personal jurisdiction” was in most respects synonymous with “served with process.” As such, in the United States, courts could hear any case against a defendant so long as one of two conditions was met: either the defendant was physically served with court papers while in the territory of the court’s state, or else the defendant consented to jurisdiction.

This model had the benefit of being easy to administer when dealing with natural persons. It was binary, as a person was either served with process in a state or they were not, or else they had either consented to jurisdiction or they had not. The rapid expansion of corporations in American economic life quickly made this system untenable, however, as courts struggled with applying the act of physically serving process on the legal fiction of a corporation. The question of whether a corporation has been served with process was nuanced and ambiguous – because what counts a physically serving and incorporeal entity?

Since obtaining jurisdiction on corporations through service of process was no longer a workable system, courts and legislatures initially responded by forgoing the jurisdiction-by-process method all together, and focusing on jurisdiction-by-consent instead. Even though a Virginia corporation could not be physically served in Maryland, Maryland could enact a statute mandating that corporations consent to personal jurisdiction in Maryland if they operate in its territory.

This “implied consent” scheme was never intended to supplant the role of sovereignty. As discussed below, however, the “implied consent” scheme’s eventual evolution into specific jurisdiction was done in a way that unmoored personal jurisdiction from its roots in international law.

II. Personal Jurisdiction Under the Full Faith and Credit Clause

Our current jurisprudence of personal jurisdiction grew out of a line of cases that were not concerned with the limitations imposed on personal jurisdiction by international law, but rather the limitations imposed by international law on the effect of a foreign state’s judgments in another state’s courts. This is in part because the limits of personal jurisdiction were rarely litigated in the 18th and early 19th centuries, as at that time a court’s issuance of a judgment that was beyond its jurisdiction was, as a practical matter, often not a particularly compelling concern. A defendant would not be likely to suffer significant harm as a result of such an improper judgment, since, by definition, that defendant would be outside of the sphere in which that court had any power to take action against him.

There were of course exceptions to this general situation. Prize cases, for instance, regularly raised questions of jurisdictional overreach, owing to the specialized character of admiralty courts and their application of the law of nations, as well as the frequent international travel of the subject property. This travel was, in the case of prizes, often unanticipated and unintended by the prizes’ previous owners – increasing the possibility that the prize could be transferred to a jurisdiction where previous adverse judgments had been rendered concerning the vessels. As a result, a court’s issuance of a judgment in a case that it had no jurisdiction over posed a more significant concern in prize cases than it did in other civil matters, where a judgment issued without jurisdiction would simply not be encountered again by the people or property it affected.

With the enactment of the Constitution, however, a court’s personal jurisdiction over the parties before it took on an important new significance, owing to the Full Faith and Credit Clause. Under the Full Faith and Credit Clause, a court’s personal jurisdiction to issue a verdict was very much of practical significance, as that judgment could now be enforced not only in the forum where it was rendered, but in any forum in the Union. The significance of a court’s judgment was thus no longer wholly dependent upon that court’s power over the person or property that the judgment concerned. The essential question became instead the court’s power to issue the render the judgment in the first place.

This was a novel situation. As attested by Edmund Randolph, at the time of the Constitutional Convention, the Founders were aware of “no instance of one nation executing judgments of the Courts of another nation.” (Although the Articles of Confederation had its own version of the ‘full faith and credit’ clause, courts considering it had held that the clause couldn’t possibly mean that “executions might issue in one state upon the judgments given in another.”) But the Constitution’s Full Faith and Credit clause did mean just that. Previously, if a court in South Carolina were to issue a judgment against a defendant whose only assets were located in New York, the fact the judgment had been rendered improperly might not be of significant concern to the defendant if he had no intention of ever possessing property in South Carolina. Under the Full Faith and Credit clause, however, the plaintiff in that case could follow the defendant to where his assets were and enforce the South Carolina judgment in New York courts.

In Mills v. Duryee, 11 US 481 (1813), the Supreme Court, in an opinion issued Judge Story, upheld the enforcement of a federal law enacting the Full Faith and Credit clause, finding that where “full notice” of a suit has been given, and a judgment was reached in the court’s of that state, that judgment was conclusive not only in that state but in every other. The dissent in Mills, however, expressed concern at this understanding of the Full Faith and Credit statute, fearing that it would violate natural law principles requiring jurisdiction to be inherently territorial-based:

There are certain eternal principles of justice which never ought to be dispensed with, and which Courts of justice never can dispense with but when compelled by positive statute. One of those is, that jurisdiction cannot be justly exercised by a state over property not within the reach of its process, or over persons not owing them allegiance or not subjected to their jurisdiction by being found within their limits.

The dissent’s fears remained unrealized. In Picquet v. Swan, 19 Fed. Cas. 609, no. 11,134 C.C.D.Mass. 1828, Justice Story further elaborated on the extent of the Full Faith and Credit Clause, holding that ‘full notice’ is required in order for a judgment in one state to be conclusive in another. Notice alone was not sufficient to grant a court jurisdiction over a person not within that court’s physical territory, however, because that notice must be coupled with either the person’s consent to appear in that state, or by the existence of property owned by that person within that state:

Nor would it in such a case vary the legal result, that the party had actual notice of the suit; for he is not bound to appear to it. No sovereign has a just right to issue such a notice, and thereby to acquire a jurisdiction to draw the party from his own proper forum ad alium examen. Where a party is within a territory, he may justly be subjected to its process, and bound personally by the judgment pronounced, on such process, against him. Where he is not within such territory, and is not personally subject to its laws, if on account of his supposed or actual property being within the territory, process by the local laws may by attachment go to compel his appearance, and for his default to appear, judgment may be pronounced against him, such a judgment must, upon general principles, be deemed only to bind him to the extent of such property, and cannot have the effect of a conclusive judgment in personam, for the plain reason, that except so far as the property is concerned, it is a judgment coram non judice. If the party chooses to appear and take upon himself the defence of the suit, that might vary the case, for he may submit to the local jurisdiction, and waive his personal immunity.

In D’Arcy v. Ketchum, 52 US 165 (1851), the Supreme Court confirmed that the Full Faith and Credit Clause did not overthrow the principle of international law, as it existed before the Constitution, that a foreign judgment is void unless the defendant it was issued against had been provided with notice and an opportunity to be heard:

That countries foreign to our own disregard a judgment merely against the person, where he has not been served with process nor had a day in court, is the familiar rule; national comity is never thus extend. The proceeding is deemed an illegitimate assumption of power, and resisted as mere abuse. Nor has any faith and credit, or force and effect, been given to such judgments by any State of this Union, so far as we know; the State courts have uniformly, and in many instances, held them to be void, and resisted their execution by a second judgment thereon; and in so holding they have altogether disregarded, as inapplicable, the Constitution and laws of the United States. We deem it to be free from controversy that these adjudications are in conformity to the well-established rules of international law, regulating governments foreign to each other[…]

The international law as it existed among the States in 1790 was, that a judgment rendered in one State, assuming to bind the person of a citizen of another, was void within the foreign State, when the defendant had not been served with process or voluntarily made defence, because neither the legislative jurisdiction, nor that of courts of justice, had binding force.

It is important to remember that these cases were not concerned with “personal jurisdiction,” per se, but instead with the enforcement of a judgment from one state in the courts of another state. A failure serve a defendant with process meant that another state would not be constitutionally required to enforce the resulting judgment in its own courts, but that did not affect the validity of that judgment in the state where the verdict was issued: “a judgment of a court of another State does not bind the person of the defendant, in another jurisdiction, though it might do so under the laws of the State in which the action was brought.” Grover & Baker Sewing Machine Co. v. Radcliffe, 137 US 287 (1890) (citing Steel v. Smith, 7 W. & S. 447 (1844)).

In short, prior to the Fourteenth Amendment, a state, as its own sovereign, was permitted to violate international law, by having its courts render and enforce judgments which were beyond its sovereign authority. However, if a state chose to do so, the state lost its right to have that judgment enforced in the courts of its sister states. It could violate international law if it wanted to, and its own citizens and subjects couldn’t complain about a lack of personal jurisdiction, but the citizens and subjects of other states could object when those judgments were brought for enforcement elsewhere:

Of its own jurisdiction, so far as it depends on municipal rules, the court of a foreign nation must judge, and its decision must be respected. But if it exercises a jurisdiction which, according to the law of nations, its sovereign could not confer, however available its sentences may be within the dominions of the prince from whom the authority is derived, they are not regarded by foreign nations.

Rose v. Himeley, 8 U.S. 241 (1808).

III. Personal Jurisdiction Under the Fourteenth Amendment

Throughout the mid-19th Century, the Full Faith and Credit clause’s requirement of notice and an opportunity to be heard became increasingly associated with the requirements of ‘due process.’ See, e.g., Galpin v. Page, 85 U.S. 350 (1873); and Rees v. City of Watertown, 86 U.S. 107 (1873). At that same time, a separate line of cases began to develop in state courts, in which they began to limit their own jurisdictional reach on the basis of Due Process clauses in state constitutions. These state courts’ conception of “personal jurisdiction” were coextensive with “service of process”; they concluded that, without service of process on a defendant who was physically within the territorial bounds of that court’s sovereign, or without the consent of that defendant, the proceeding would amount to a divestiture of title without due process of law. See Campbell v. Campbell, 63 Ill. 462 (1874). In other words: without service of process, there necessarily cannot be “due” process. Brewster v. Ludekins (Supreme Court of California, 1861) (“By the same Constitution [of California], ‘no person shall be deprived of life, liberty or property without due process of law.’ (Art. XI, sec. 8.) The notice in this case summoning the creditors to appear must be regarded as a process. It is equivalent to a summons and performs the same office. ‘Process is the means of compelling the defendant to appear in Court.’ (2 Chitty’s Blackstone, 13, title Process.) This is the only means by which the creditors are brought into Court, and unless it is a process it is nothing at all, and the Court cannot acquire jurisdiction over the creditors.”).

Following the ratification of the Fourteenth Amendment, these two lines of cases were conjoined in Pennoyer v. Neff, 95 US 714 (1878). In Neff, the Supreme Court found that the same due process requirements that were necessary for a judgment of one state to be enforceable in the courts of a different state, under the Full Faith and Credit Clause, were now also requirements under due process for a state that wishes to render a judgment in its own courts:

Since the adoption of the Fourteenth Amendment to the Federal Constitution, the validity of such judgments may be directly questioned, and their enforcement in the State resisted, on the ground that proceedings in a court of justice to determine the personal rights and obligations of parties over whom that court has no jurisdiction do not constitute due process of law.

The Fourteenth Amendment did not alter the existing requirements of service of process, or alter the generally understood concept of personal jurisdiction. The Fourteenth Amendment instead curtailed the sovereignty of the individual states by removing their ability to enact, even for themselves, judgments that the states had previously been free to issue and enforce in within their own borders, even though other states would not be constitutionally compelled to execute those judgments in their courts.

The particular requirements of personal jurisdiction that Neff found to be mandated by the Fourteenth Amendment no longer exist as requirements today. For Neff, service of process was the start and the end of the Court’s personal jurisdictional analysis; as long as a plaintiff could show personal service of process, due process was satisfied. But in today’s courts, service of process is a necessary, but not sufficient, condition. The Neff Court, in contrast to today’s Court, would not have had the slightest hesitation in ruling that the plaintiffs in Daimler AG v. Bauman could proceed against Daimler – just so long as the judgment did not extend beyond the (quite sizable) value of the property that Daimler possesses in California:

Every State owes protection to its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold and appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State’s jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire into that non-resident’s obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control the disposition of the property. If the non-resident have no property in the State, there is nothing upon which the tribunals can adjudicate.

Although Neff’s conflation of personal jurisdiction with the court’s physical reach would not survive, Neff’s invocation of the Fourteenth Amendment as a means by which improper personal service could be challenged has become a permanent fixture of the United States’ personal jurisdiction jurisprudence.

IV. Personal Jurisdiction in the Corporate Era

For the substantive requirements of personal jurisdiction, the new law of the land comes from International Shoe, which handed down (even if it did not name) the doctrine of specific jurisdiction. As the Court stated in Daimler AG v. Bauman,

Since International Shoe, “specific jurisdiction has become the centerpiece of modern jurisdiction theory, while general jurisdiction [has played] a reduced role.”  Goodyear, 564 U. S., at ___ (slip op., at 8) (quoting Twitchell, The Myth of General Jurisdiction, 101 Harv. L. Rev. 610, 628 (1988)).  International Shoe’s momentous departure from Pennoyer’s rigidly territorial focus, we have noted, unleashed a rapid expansion of tribunals’ ability to hear claims against out-of-state defendants when the episode in-suit occurred in the forum or the defendant purposefully availed itself of the forum.

What was the cause of this ‘momentous departure’ that the Court speaks of? The answer, in short, is that corporations did. By the late 19th century, the jurisdictional quagmires that were caused by corporate participation in interstate commerce resulted in almost every state enacting its own statutory scheme of corporate service of process. These statutes were not based upon traditional notions of personal jurisdiction, but instead upon theories of implied consent. This implied consent model negated any difficulties posed by a state court’s lack of physical or territorial sovereignty over a foreign corporation personal — and the resulting lack of personal jurisdiction — as a defendant’s consent to jurisdiction was an independently sufficient basis under which the case could be brought.

The doctrine that would eventually become specific jurisdiction first came into being as a response to an early line of cases which effectively granted corporations immunity in every state other than the one in which they were incorporated. In the early 19th century, state and federal courts had found that, under the common law, a corporation only existed within the state of its incorporation, and that serving process on a corporation’s officers outside of the corporation’s home state could not provide jurisdiction over the corporation. See, e.g., McQueen v. Middleton Manufacturing Co. (NY, 1818). But this “cause[d] much inconvenience, and often of manifest injustice. The great increase in the number of corporations of late years, and the immense extent of their business, only made this inconvenience and injustice more frequent and marked.” St. Clair v. Cox, 106 US 350 (1882).

Although the “home state only” rule provided a binary, bright-line test for determining whether process had been served on a corporation, it quickly became apparent that a new, less absolute test would be needed, under which service could be made on corporations in states other than where they were incorporated. This introduced a great deal of ambiguity into the question of  jurisdiction, because the only existing model for serving process on a foreign defendant was by physically tagging the defendant with process while the defendant was physically in the territory of the issuing court.

It turned out that applying tag jurisdiction to corporations was just as unreasonable and unworkable as was the alternative “home state only” rule. Corporations are people that act through other people – oftentimes, lots and lots of other people – and corporations can be found wherever their people can be found. Corporations can even be found in places where they don’t even have people, if, for example, their articles of incorporation can be found there. So how were the courts to figure out which people needed to be tagged for personal jurisdiction to attach to a corporation? And what does it even mean to serve a defendant with process, when that defendant is only a legal fiction? As the Court said in St. Clair v. Cox, 106 US 350 (1882),

In the State where a corporation is formed it is not difficult to ascertain who are authorized to represent and act for it. Its charter or the statutes of the State will indicate in whose hands the control and management of its affairs are placed. Directors are readily found, as also the officers appointed by them to manage its business. But the moment the boundary of the State is passed difficulties arise; it is not so easy to determine who represent the corporation there, and under what circumstances service on them will bind it.

The courts initially solved the dilemma posed by the legal fiction of corporations with a legal fiction of their own. Even though personal service could not be had on a foreign corporation, a foreign corporation can be constructively held to have consented to a foreign state’s jurisdiction, simply by declaring such consent was mandatory for any foreign corporation doing business in that state. And if there has been consent to a dispute being heard by particular forum (even if that consent is a legal fiction, rather than an actual expression of consent), then the question of jurisdiction never arises in the first place.

In The Lafayette Ins. Co. v. French, et al., 59 US 404 (1855), the Supreme Court affirmed that service of process was effective on a corporation outside of its home state, so long as the process was served upon an agent of the corporation, who was in the territory of the issuing court while doing business on behalf of the corporation, if that state had enacted a statute requiring corporations to give constructive consent to process in that state:

This corporation, existing only by virtue of a law of Indiana, cannot be deemed to pass personally beyond the limits of that State. Bank of Augusta v. Earle, 13 Pet. 519. But it does not necessarily follow that a valid judgment could be recovered against it only in that State. A corporation may sue in a foreign state, by its attorney there; and if it fails in the suit, be subject to a judgment for costs. And so if a corporation, though in Indiana, should appoint an attorney to appear, in an action brought in Ohio, and the attorney should appear, the court would have jurisdiction to render a judgment, in all respects as obligatory as if the defendant were within the State. The inquiry is, not whether the defendant was personally within the State, but whether he, or someone authorized to act for him in reference to the suit, had notice and appeared; or, if he did not appear, whether he was bound to appear or suffer a judgment by default.

… We consider this foreign corporation, entering into contracts made and to be performed in Ohio, was under an obligation to attend, by its duly authorized attorney, on the courts of that State, in suits founded on such contracts, whereof notice should be given by due process of law, served on the agent of the corporation resident in Ohio, and qualified by the law of Ohio and the presumed assent of the corporation to receive and act on such notice; that this obligation is well founded in policy and morals, and not inconsistent with any principle of public law; and that when so sued on such contracts in Ohio, the corporation was personally amenable to that jurisdiction; and we hold such a judgment, recovered after such notice, to be as valid as if the corporation had had its habitat within the State; that is, entitled to the same faith and credit in Indiana as in Ohio, under the constitution and laws of the United States.

For the next few decades, the test for determining whether a court had personal jurisdiction over an out-of-state corporation was as follows:

First, it must appear that the corporation was carrying on its business in the State where process was served on its agent; second, that the business was transacted or managed by some agent or officer appointed by or representing the corporation in such State; third, the existence of some local law making such corporation amenable to suit there as a condition, express or implied, of doing business in the State. United States v. American Bell Telephone Co., 29 F. 17 (1886).

This change would make service on a corporation in a foreign state technically possible, but the actual requirements for perfecting such service were still left murky. Much of the relevant litigation focused on when a corporation could be said to be “doing business” in a state, so as to trigger that state’s implied consent to process statute. The requirement that a corporation be “doing business” was a statutory requirement in order for a court to find implied consent to process, and, prior to International Shoe, it had nothing at all to do with a court’s actual jurisdictional reach.

This statutory requirement was responsible, however, for the creation of the nascent “minimum contacts” test, as well as the concern with “fair play” and “substantial justice” which features so prominently in our modern scheme of personal jurisdiction. In interpreting the corporate implied consent statutes, courts concluded that in order to be “doing business,” so as to imply consent to service of process, a corporation had to have sufficient involvement and activity in a state so that the legal fiction of implied consent was not unreasonable or unwarranted, or else the court would risk letting “fiction deny the fair play that can be secured only by a pretty close adhesion to fact.” McDonald v. Mabee, 243 US 90 (1917). That is to say, if a ‘legal fiction’ became so much of a fiction as to lack a reasonable relationship with reality, due process violations could be implicated.

The first real glimmers of our modern concept of “specific jurisdiction” arose in 1907. In Old Wayne Mut. Life Assn. of Indianapolis v. McDonough, 204 US 8 (1907), the Court found that where state law implies corporate consent to service of process, that implied consent need not be universal, but could be attached with contingencies regarding the type of process that service had been accepted for:

But even if it be assumed that the insurance company was engaged in some business in Pennsylvania at the time the contract in question was made, it cannot be held that the company agreed that service of process upon the Insurance Commissioner of that Commonwealth would alone be sufficient to bring it into court in respect of all business transacted by it, no matter where, with or for the benefit of citizens of Pennsylvania.

A foreign corporation’s implied consent to service of process no longer had to be all or nothing. In some circumstances, and under some state statutes, the courts would find that implied consent would not be an across-the-board grant of jurisdiction, but would only be implied consent for certain specific causes of action arising in that state:

But these possible inconveniences serve to emphasize the importance of the principle laid down in Old Wayne Life Association v. McDonough, 204 U.S. 22, that the statutory consent of a foreign corporation to be sued does not extend to causes of action arising in other States.

International Harvester Co. of America v. Kentucky, 234 US 579 (1914). See also People’s Tobacco Co. v. American Tobacco Co., 246 US 79 (1918).

This system of implied corporate consent survived for well over half a century. ‘General jurisdiction’ remained the only type of personal jurisdiction that existed, and it operated alongside the varying state statutes which mandated that foreign corporations give consent to process as a condition of their operation in that state. And then, in 1945, the Supreme Court issued its decision in International Shoe, and in doing so the Court took the the long line of case law addressing the statutory construction of corporate implied consent laws, and transformed it into a new constitutional doctrine of jurisdiction. The Court did so by simply obliterating the “implied consent” theory of corporate amenability to suit, and then announcing that ‘implied consent’ had never truly existed in the first place. In reality, the Court said, the basis of a court’s authority to hear a suit against a foreign corporation had never been ‘consent,’ but rather that the courts had possessed personal jurisdiction over these foreign corporations all along:

True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized agents. But more realistically it may be said that those authorized acts were of such a nature as to justify the fiction.

The Court also took the previous doctrine of mandatory consent to process, as described in Old Wayne, and turned it into a rule of partial personal jurisdiction, in which personal jurisdiction is contingent upon the subject matter of the suit:

Conversely it has been generally recognized that the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation’s behalf are not enough to subject it to suit on causes of action unconnected with the activities there.

In the cases relied upon by International Shoe in making this assertion, courts had found that a corporation’s sporadic presence in a state could only imply consent to process in that state for actions arising from that sporadic presence. Those cases had not accepted (or even directly contemplated) that a corporation’s activities in a foreign state could actually have the effect of conferring the foreign state with personal jurisdiction over the corporation. These cases were, however based on the theory that due process limited how far the legal fiction of consent could be stretched — a doctrine which International Shoe kept, but altered so that it now held that due process places limitations on how far the legal fiction of presence can be stretched to maintain the fiction of personal jurisdiction.

This new doctrine, which eventually would be dubbed ‘specific jurisdiction’, is not personal jurisdiction as it was traditionally understood. Personal jurisdiction was originally a type of adjudicative jurisdiction under which the scope of a court’s power was determined by reference to its sovereign authority over a specific person or thing. Specific jurisdiction is instead a due process doctrine, created to address the unique problems posed by the rapid expansion of the corporate form in American economic life, under which the scope of a court’s power is determined by whether it would be reasonable for a court to hear a given case, with reasonableness determined by reference to the relationships among the defendant, the forum, and the litigation.

Justice Ginsberg has lobbied hard for sovereignty-based jurisdiction to be extinguished all together from our jurisprudence, and she has repeatedly called for the rest of the Court to finally acknowledge that sovereignty is not now, and has never been, a component of specific jurisdiction. So far, however, the rest of the Court has resisted this conclusion, and the other justices continue to labor under the fiction that specific jurisdiction can simultaneously be a matter of sovereignty and a matter of due process. In order to maintain this jurisdictional Frankenstein, the Court has set forth the proposition that specific jurisdiction is based upon “whether a defendant has followed a course of conduct directed at the society or economy existing within the jurisdiction of a given sovereign, so that the sovereign has the power to be subject the defendant to judgment concerning that conduct.” McIntyre. This construction purports to reconcile the inherent contradictions of jurisdiction based on both sovereignty and reasonableness, but its application has proven in practice to be unclear and inconsistent. Without a more internally consistent theory of jurisdiction, we can expect that the question of personal jurisdiction over foreign corporate structures will continue to make regular appearances on the Court’s docket.

-Susan

2 thoughts on “How Corporate Law Invented the Doctrine of Specific Jurisdiction, or Why Sovereignty Plays No Role in Specific Jurisdiction

  1. Stupid question time.

    Why wouldn’t the Argentinians sue in either Argentina or Germany?

    Were they just venue shopping, or is there some specific reason the US has to get involved, like they were in the US driving a Mercedes made in South Carolina and it up and caught fire all of a sudden out of the blue?

    • I don’t know the specifics of the Bauman situation, but as with most the corporate Alien Tort Statute cases, it usually has something to do with the fact (1) in the country where the killings and bad stuff happened, the courts either don’t permit legal actions based on the past atrocities or don’t recognize the cause of action (or in some cases, the corporation sometimes no longer has a presence in the state where it occurred — not an issue here, though), (2) in the home country of the corporation, the courts are either perceived as being unfriendly to a foreign human rights claim against their own national, or don’t believe the parent is liable for the actions of its subsidiary, and (3) they found a U.S. plaintiff’s lawyer who is keen to take a dramatic human rights case on.

      When the Court decided Kiobel last year (abuses in Nigeria by British/Dutch corporations), it pretty much put an end to these “foreign cubed” claims (foreign plaintiff suing foreign defendant for foreign acts). Bauman was a question of whether the ND of California had jurisdiction just to hear this case, but even if the plaintiffs had won on that, they’d likely still have lost for the same reason the Kiobel plaintiffs did.

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