Ongoing evolution of the concept of general personal jurisdiction
A court must have personal jurisdiction to exercise power over an individual or company, for instance, to allow legal claims to be brought against that person or entity, order that person or entity to comply with discovery demands, or order that person or entity to turn over assets of a judgment debtor. Personal jurisdiction is generally derived from a defendant’s contacts or presence in the forum.
The Supreme Court’s decision in Daimler AG v Bauman, 134 S Ct 746 (2014) sharply limited the circumstances in which a court can exercise one of two types of personal jurisdiction, known as general personal jurisdiction, over a corporation. General jurisdiction allows a court to hear a case even when the defendant’s contacts or presence in the jurisdiction are unrelated to the claim pursued.
In Daimler, the Supreme Court held that general personal jurisdiction is permissible only where ‘that corporation’s affiliations with the State are so continuous and systematic as to render it essentially at home in the forum state’ (Daimler, 134 S Ct at 761 (citation omitted) (emphasis added)). Although the previous test for general jurisdiction was relatively flexible and generous, the Daimler court cabined future cases to two bases of general jurisdiction:
- the corporation’s place of incorporation; or
- the corporation’s principal place of business.
It all but eliminated general personal jurisdiction over a corporation short of either of those conditions being met.
Following Daimler, courts have reached different conclusions on the reach of an important exception to the rule - jurisdiction by consent. Initially, a number of state and federal courts in New York found that consent to jurisdiction - for instance, by a company’s registration to do business in a particular state - survives Daimler as a basis for general jurisdiction (eg, Fallman v Hotel Insider, Ltd, 2016 WL 316378, at *2 (SDNY 15 January 2016) (‘It is well-settled that registering one’s corporation with the New York Department of State and designating an agent to receive process in New York constitutes consent to general jurisdiction in New York courts’) and Serov v Kerzner International Resorts, Inc, 52 Misc 3d 1214(A) (S Ct 26 July 2016) (similar). The Court of Appeals for the Second Circuit offered mixed guidance in Brown v Lockheed Martin Corp, 814 F.3d 619 (Second Circuit 2016), in which it held that defendant Lockheed Martin did not consent to jurisdiction in Connecticut solely by registering to conduct business and appointing an agent for service of process in the state. Although Brown was specific to Connecticut’s business registration statute and expressly left open the possibility that registration statutes in other states (including New York) might very well confer jurisdiction over companies registered to do business in those states, several decisions by New York state and federal courts have held that corporations do not consent to general jurisdiction when they register to do business in New York and appoint an agent for service of process (eg, Sae Han Sheet Co v Eastman Chemical Corp, 2017 WL 4769394, at *6 (SDNY 19 October 2017) (collecting cases and declining to find general personal jurisdiction by consent where the ‘registration statutes are not carefully drawn to expressly require consent to general jurisdiction’). Courts in dozens of other states have drawn similar conclusions. For example, the Delaware Supreme Court, another important jurisdiction for judgment enforcement purposes, came out firmly against registration as a form of consent to general jurisdiction. In Genuine Parts Co v Cepec, 137 A.3d 123 (Del 2016), the Delaware Supreme Court held that corporations not incorporated in Delaware that register to do business in that state are not subject to the general jurisdiction of Delaware courts.
Despite this trend, the law in the United States is not currently uniform, nor fully settled, on whether a foreign company’s registration to do business in a particular US state constitutes consent to general personal jurisdiction in that state. Compare Sae Han Sheet Co v Eastman Chemical Corp, 2017 WL 4769394, at *6 (SDNY 19 October 2017) (‘In light of Daimler and . . . Brown, the more recent authority in this district has held that corporations do not consent to general jurisdiction when they register under the various New York registration statute’) with Wheeler v CBL & Associates Properties, Inc, 2017 WL 3611295, at *2-3 (NY S Ct 2017) (finding ‘registration . . . sufficient to establish consent-based general in personam jurisdiction’).
Absent a binding ruling that is directly to the contrary, judgment creditors can still attempt to rely on decisions such as Fallman, for example, when seeking to compel a foreign company to comply with asset discovery requests or to turnover assets of a judgment debtor. Further, where the foreign company’s presence or activity in the United States is at issue in the proceeding, the company may also be subject to a court’s specific personal jurisdiction - which is the other type of personal jurisdiction that was not addressed in the Daimler decision.
Discovery requests from the US: overcoming blocking statutes
The discovery process in the United States may be used to request information or documents located abroad. Provided the court has personal jurisdiction over the discovery target, the target can be compelled to produce material that is within its possession, custody or control, even if it is located outside the United States. Some foreign jurisdictions, however, have data privacy laws, bank secrecy laws or ‘blocking statutes’ - laws that prohibit litigants from providing information for use in a US judicial proceeding - that might ostensibly thwart such discovery efforts. But courts in the United States have shown a willingness to ignore or discount such foreign laws in certain circumstances, such that a litigant based in the United States might succeed in having a court compel production of information or documents from foreign jurisdictions where those laws apply.
Blocking statutes increasingly come up in US litigation when, for example, a private party or the Internal Revenue Service seeks to enforce a subpoena requesting bank records or other documents from entities accused of tax malfeasance in the United States or abroad. Those entities may have relevant bank accounts in jurisdictions such as the British Virgin Islands, China, France, Israel, Singapore and Switzerland where there are strong national banking laws that prevent disclosure of certain information sought by the United States or private parties.
The Supreme Court has stated that ‘American courts are not required to adhere blindly to the directions’ of blocking statutes (Societe Nationale Industrielle Aerospatiale v US District Court for Southern District of Iowa, 482 US 522 (1987)). Consequently, lower courts have sometimes refused to give any deference to such laws (eg, Chevron Corp v Donziger, 296 FRD 168, 198 (SDNY 2013) (‘[T]he [trial] court may impose discovery under the Federal Rules of Civil Procedure when it has personal jurisdiction over the foreign party, notwithstanding provisions of foreign law that would prohibit production’) and In re Activision Blizzard, Inc, 86 A.3d 531, 549 (Del Ch 2014) (‘[T]he Blocking Statute is expansively broad . . . It does not focus on a specific kind of material, nor does it identify a specific French sovereign interest’). Other courts have considered the stated purpose of the blocking statute and how expansive it is in deciding whether it should be heeded, and will excuse production of the information requested. Applying that analysis, a New York court has held that deference was owed to the Swiss blocking statute but not the French equivalent (see Motorola Credit Corp v Uzan, 73 F Sup. 3d 397 (SDNY 2014)).
Thus, based on current case law, the existence of data privacy laws, bank secrecy laws and blocking statutes in a foreign jurisdiction where relevant information or documents are located will not necessary prevent a litigant from obtaining production of that material through the US discovery process. Parties conducting discovery in the European Union (EU), however, should also be mindful of the EU’s new data privacy law, the General Data Protection Regulation (GDPR). Although many believe the GDPR will make it easier for US litigants to seek discovery in the EU, several commentators have expressed concern that the record-keeping, data-security and enforcement provisions of the new regulation represent compliance risks that a party should consider when seeking discovery for use in US legal proceedings.
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