High Court’s BNSF Ruling A Roadblock For Forum-Shopping

Law360, New York (May 30, 2017, [spp-timestamp time="8:37"] PM EDT) — The U.S. Supreme Court ruled Tuesday that BNSF Railway Co. can’t be sued in Montana by two out-of-state employees who weren’t injured there, a decision experts say gives large corporations more control over the jurisdictions in which they might face injury lawsuits.

By an 8-1 vote, the justices reversed a ruling by the Montana Supreme Court that individuals have the right to sue in the state even though they have no connection to it under both the Federal Employers Liability Act, a 1908 law that protects railroad workers injured on the job, and Montana state law.

The justices concluded that Section 56 of FELA does not address personal jurisdiction over railroads. The majority also held that state courts must follow the Supreme Court’s 2014 decision in Daimler AG v. Bauman, which held that the due process clause forbids a state court from exercising general personal jurisdiction over a defendant that is not at home in the forum state.

John Alan Doran of Sherman & Howard LLC said the ruling has a much broader reach than simply the issue of where a railroad can be sued under FELA as it continues a line of cases by the high court that have restricted general jurisdiction.

“The [Supreme] Court has doubled down on its evolutionary narrowing of general jurisdiction under the 14th Amendment,” Doran said. “The court once again affirmed the principle that a corporation is subject to general jurisdiction in the state where it is incorporated or it has its principal place of business, or in exceptional circumstances a state where it can otherwise be determined to be ‘at home’ for due process purposes.”

Those constraints on personal jurisdiction make it “much more difficult” for companies to be sued outside of their traditional “home states,” Locke Lord LLP partner Rusty Perdew said, noting that businesses can choose the states where they are incorporated or have their headquarters and may select places they feel comfortable litigating in.

Plaintiffs, on the other hand, can avoid those jurisdictions only if they file suits in the state where an alleged injury occurs “even if they don’t like the laws there,” according to Perdew.

“The [high court] overwhelmingly reaffirmed a new and very restrictive test for personal jurisdiction announced in its 2014 Daimler decision, and made clear that Daimler’s test applies in all civil cases and not just cases involving non-U.S. companies,” Perdew said. “Even companies that have significant presence in states outside their home state can’t be sued there for out-of-state injuries.”

The high court case stems from two separate lawsuits filed in Montana: the first by Robert Nelson, a North Dakota resident and a BNSF fuel truck driver, over knee injuries he allegedly suffered on the job, and the second by the widow of Brent Tyrrell, who was allegedly exposed to chemical carcinogens while working at the company that ultimately led to his kidney cancer and death.

Neither worker claimed to have worked in Montana or suffered injuries there. But Montana’s high court ultimately ruled that because the company has “substantial, continuous and systematic” business operations in the state, it can be sued under both the FELA and Montana law by residents and nonresidents alike.

While the high court’s opinion authored by Justice Ruth Bader Ginsburg acknowledged that BNSF had more than 2,000 miles of railroad track in Montana as well as over 2,000 employees in the state, the court said that still wasn’t enough for the Texas-based BNSF to be hauled into court in Montana by an out-of-state plaintiff whose alleged injuries didn’t occur there, and that no exceptional circumstance existed to rule otherwise.

The justices noted that BNSF maintains less than 5 percent of its workforce and about 6 percent of its total track mileage in Montana, which accounts for less than 10 percent of the company’s total revenue, a level of activity that “is not so substantial and of such a nature as to render the corporation at home” in Montana.

Jason Drori of Foley & Lardner LLP said the BNSF ruling benefits out-of-state corporate defendants in at least two ways, the first of which is that it “ensures that no one industry or business type can be singled out as being more susceptible to general personal jurisdiction.”

Drori highlighted in particular the justices’ conclusion that the 14th Amendment due process constraints that were outlined in the Daimler ruling apply to all state-court assertions of general jurisdiction over nonresident defendants and that those constraints don’t vary with the type of claim asserted or business enterprise sued.

“Second, the facts of [BNSF] and its holding will make it difficult for future litigants to support general jurisdiction outside of a nonresident corporation’s principal place of business or state of incorporation,” Drori added.

But for the plaintiffs’ side of the bar, Josh Van Kampen said the decision simply re-established the high court’s status quo in terms of how courts apply rules surrounding general jurisdiction for corporate defendants.

Had the decision gone the other way, Van Kampen said it could have “opened up a can of worms” for corporate defendants if plaintiffs were given the ability to forum-shop, but the court ultimately “went in the other direction.”

“The day before the ruling, the way we would have analyzed where to file a suit is exactly the same as it will be the day after the ruling,” Van Kampen said.

While the high court majority chose to limit plaintiffs’ ability to sue for out-of-state injuries, Justice Sonia Sotomayor issued a partial dissent in which she sharply criticized the Daimler precedent and said the ruling “grants a jurisdictional windfall” to large multistate or multinational corporations.

Under the majority’s rationale, Justice Sotomayor called it “virtually inconceivable” that those companies will ever be subject to general jurisdiction in any location other than the states where they are incorporated or headquartered — a standard that will act to the detriment of potential plaintiffs.

Moreover, Justice Sotomayor said that foreign businesses headquartered overseas may never be subject to general jurisdiction in the U.S. even though they have continuous and systematic contacts within America.

“What was once a holistic, nuanced contacts analysis backed by considerations of fairness and reasonableness has now effectively been replaced by the rote identification of a corporation’s principal place of business or place of incorporation,” Justice Sotomayor said. “The result? It is individual plaintiffs, harmed by the actions of a far-flung foreign corporation, who will bear the brunt of the majority’s approach and be forced to sue in distant jurisdictions with which they have no contacts or connection.”

Van Kampen said Justice Sotomayor’s hypothetical example of foreign companies is a situation that is “more concerning” to plaintiffs since, in those situations, they would be “relegated to where an alleged injury occurred” to file suit.

“The court didn’t create an exception for multinationals,” Van Kampen said.

The case is BNSF Railway Co. v. Tyrrell et al., case number 16-405, in the U.S. Supreme Court.

By Vin Gurrieri