Quasi Guest Post – 50 State Survey On General Jurisdiction Through Consent By Registration To Do Business: Putting Bauman And Baseball Back Together

Author:Mr James Beck and Kevin M. Hara
Profession:Reed Smith
 
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What follows is a collaborative effort between Bexis and Reed Smith's Kevin Hara, who helped research and write this post. It's not really a guest post, but Kevin had such a large hand in it that his contribution deserves to be separately acknowledged.

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As attorneys, we are fond of rules: they give us structure, define boundaries sometimes both literally in a physical sense and figuratively in a nonphysical – but no less fundamental – way. Nearly four years have elapsed since the Supreme Court crystallized the limitations on general personal jurisdiction in the landmark case Daimler AG v. Bauman, 134 S. Ct. 746 (2014) ("Bauman"), whose praises we have lauded, here, here, and here. We followed Bauman, a case near and dear to the hearts of litigators on the right side of the "v.", because it dealt a significant blow to the litigation tourism that has multiplied over recent years by confining general jurisdiction to the places in which a nonresident defendant is "at home." Nonetheless, plaintiffs' attorneys have attempted to stretch that definition in a number of ways, including arguing for general jurisdiction based on judicial estoppel, waiver, and alter ego, as we explained here and here.

Those arguments are largely fact- and case-specific. Another argument plaintiffs have asserted post-Bauman, however, is not, and is therefore of greater concern. That is the issue of consent-based jurisdiction through a corporation's registration to do business – which is mandatory in all 50 states. Thus, general jurisdiction by "consent" based simply on registration to do business/appointment of an agent for service of process has the potential to be every bit as "grasping" and "exorbitant" as the general jurisdiction theories rejected in Bauman itself. Because of this, under Bauman's due process principles, such registration requirements should not subject nonresident defendants to all-purpose jurisdiction. Thankfully, in most states, it does not. As discussed in much greater detail below, we believe the following states gave rejected general jurisdiction by consent based on state registration statutes:

Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Idaho, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, the Virgin Islands, Washington, West Virginia, and Wisconsin.

In a few jurisdictions, precedent exists that (at least so far) allows foreign corporations that have registered to do business to be haled into court even for claims unrelated to any in-state activity. While this precedent was not directly addressed by Bauman, it contravenes the principles underlying Bauman, not to mention opening the door wide for forum shopping, improper litigation tourism, and other forms of gamesmanship that strain what we consider the bounds of fair play.

Sports, much like the practice of law, has its own rules designed to ensure fair play and impose important limits on the particular game at issue. One prime example is discussed in "The Common Law Origins of the Infield Fly Rule," 123 U. Pa. L. Rev. 1474 (1975). For attorneys who lament some of the tactics that still stretch the bounds of legal rules and regulations and are baseball aficionados, consider the Official Rules of Major League Baseball ("MLB") Rule 7.08 "Retiring a Runner," and its inherent flexibility and vulnerability. Our focus on the territorial limits to jurisdiction recognized and applied by Bauman's holding and due process reminds us about a recent article that discussed a trick play in a high school championship game known as "The Play That Broke Baseball," dubbed "Skunk in the Outfield." The play, like consent to jurisdiction through registration, exceeded the bounds of sportsmanship, but did not at the time technically break the rules.

As always, we start with the applicable rule, in this case Official MLB Rule 7.08, which proscribes the baseline for a runner. According to Rule 7.08, any runner is out when:

(a)(1) He runs more than three feet away from his base path to avoid being tagged unless his action is to avoid interference with a fielder fielding a batted ball. A runner's base path is established when the tag attempt occurs and is a straight line from the runner to the base he is attempting to reach safely; or

(2) after touching first base, he leaves the base path, obviously abandoning his effort to touch the next base.

MLB Rule 7.08. The key portion of the rule is the second sentence of subsection (a)(1), which sets the base path, which is "established when the tag attempt occurs and is a straight line from the runner to the base he is attempting to reach safely." Thus, there is no base path if no player is attempting to tag the runner, who can go anywhere – even into the outfield – which is precisely what happened in Skunk In The Outfield ("Skunk"). The above referenced article provides a fascinating depiction of the entire play, which took 2 minutes and 32 seconds, an eternity for a baseball play. For instance, a very fast runner can traverse the 90 feet from home plate to first base in under 4 seconds, and circle the bases on a home run in fewer than in 14. Even the longest plays, such as a rundown (when a runner becomes trapped between two bases) typically lasts less than 20 seconds. Of course, the games themselves may take upwards of four hours, especially in the American League, which includes the unfortunate Designated Hitter rule.

But back to the play. The team that unleashed Skunk did so in order to entice the defense into a rundown with base runners at the first and third, in order to steal a run, by allowing the runner on third to score during the confusion. The problem with Skunk is that the rules allow it, and while Skunk would never happen in MLB, the exploitation of the rule in a state championship game denigrated the game, caused both teams to spend an extremely long, frustrating amount of time on the maneuver, raised the ire of players, officials and spectators, and ultimately, failed to work. This begs the question whether, even if such a ploy is not against the rules, should it be prohibited by something else, such as fundamental fairness?

The same can be said about general jurisdiction by consent through registration, many large corporations conducting business throughout the country register in all 50 states. A century-old Supreme Court case, Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), allowed general jurisdiction by consent under the old in rem-based jurisdictional standards that were overturned beginning with International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (overruling Pennoyer v. Neff, 95 U.S. 714 (1878)). Since large corporations have to be registered to do business in every state, allowing jurisdiction by consent under Pennsylvania Fire would result in their being subject to suit everywhere for anything – a jurisdictional skunk theory that would permit, under a different name, precisely what Bauman rejected. As Bauman itself cautioned, cases "decided in the era dominated by Pennoyer's territorial thinking . . . should not attract heavy reliance today." 134 S. Ct. at 761 n.18.

As we discussed at length, the Second Circuit succinctly explained why the general jurisdiction by consent theory is a skunk in Brown v. Lockheed-Martin Corp., in holding that Bauman precluded a nonresident corporation's business registration from ipso facto equating to general jurisdiction:

If mere registration and the accompanying appointment of an in state agent − without an express consent to general jurisdiction − nonetheless sufficed to confer general jurisdiction by implicit consent, every corporation would be subject to general jurisdiction in every state in which it registered, and [Bauman's] ruling would be robbed of meaning by a back‐door thief.

814 F.3d 619, 640 (2d Cir. 2016) (applying Connecticut law) (emphasis added). Brown crystallized one of the problems with both consent by registration and Skunk In The Outfield – each represents an attempt to gain an advantage on the other side by exploiting the system. However, even the team that utilized Skunk became embarrassed over the play, as the crowd became derisive, the play ultimately accomplished nothing, and even the coach who called the play never used it again. In other words, sometimes, the ability to take a particular action may not explicitly break the rules, but nonetheless should be prohibited. That is the reason most states have declined to allow general jurisdiction are merely by a defendant's registration to do business in a given forum.

Attorneys on the other side of the "v.," however, haven't been as easily embarrassedas baseball players.

Thus, a lot of law exists on the concept of jurisdiction by consent. We have a cheat sheet collecting the favorable cases here. Overall, the vast majority of states – 38 (plus DC and VI) – have rejected the theory that a nonresident defendant may be subject to general jurisdiction simply by registering to conduct business through judicial decision or by statute, while in only 4 (Iowa, Minnesota, Nebraska, Pennsylvania) does current precedent continue to support that suspect argument, with the outcome being unclear in the other 8 (Alabama, Georgia, Hawaii, Kansas, Kentucky, New Hampshire, Tennessee, Virginia, and Wyoming). Notably, the highest courts in California, Colorado, Delaware, Illinois, Maryland, Michigan, Missouri, New Mexico, Nevada, North Carolina, Ohio, Oregon, and Wisconsin have rejected such arguments, with seven of those occurring post-Bauman.

The overwhelming number of state and federal decisions issued after Bauman, which...

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