Reconciling Transnational Jurisdiction: A Comparative Approach to Personal Jurisdiction over Foreign Corporate Defendants in US Courts.

• Author: Berger-Walliser, Gerlinde

TABLE OF CONTENTS I. INTRODUCTION 1245 II. PERSONAL JURISDICTION: TERMINOLOGY, FUNCTION, AND 1251 INTERNATIONAL LAW A. Terminology and Function 1252 B. International Sources 1254 1. Supreme Court Precedent on International Law 1255 2. The Role of General International Law for Personal 1258 Jurisdiction III. PERSONAL JURISDICTION IN THE UNITED STATES 1260 A. US Sources 1260 B. Characteristics 1261 1. Procedural Due Process and Minimum Contacts 1261 2. Purposeful Availment, Fairness to the Defendant, and 1263 Predictability 3. Territoriality, Federalism, and Authority 1268 C. Recent Developments 1271 1. BNSF Railway Co. v. Tyrrell and Bristol-Myers Squibb 1271 Co. v. Superior Court 2. Parent-Subsidiary Corporate Structures 1274 3. Public Policy Concerns 1275 IV. PERSONAL JURISDICTION IN THE EUROPEAN UNION 1278 A. European Sources 1278 1. The Brussels Regime 1279 2. Domestic Jurisdictional Rules 1281 B. Characteristics 1285 1. Harmonization and Right to a Fair Trial 1285 2. Predictability, Legal Certainty, and Judicial 1288 Discretion 3. Efficiency, Access to Justice, and Balancing Competing 1294 Interests V. CONCLUSION 1302 I. INTRODUCTION

After decades of inactivity, the issue of personal jurisdiction over foreign corporate defendants with little to no physical presence in the forum state has resurfaced on the agenda of the U.S. Supreme Court (1) and is attracting attention from the legal community both domestically and internationally. (2) Until recently, American courts have treated personal jurisdiction generously, to say the least. Since International Shoe Co. v. Washington (International Shoe), (3) most lower federal and state supreme courts have asserted personal jurisdiction over foreign or domestic out-of-state corporate defendants (4) whenever the corporation has engaged in sufficiently "continuous, systematic and substantial" activity in the forum state. (5) This broad criterion, while difficult enough to comprehend in domestic cases, proves particularly daunting in the international setting.

Foreign corporations have faced lawsuits before US courts in cases with--in their eyes--little connection to the forum state in situations where their own domestic courts would typically deny jurisdiction. (6) Combined with special features of US procedural and substantive law such as class actions, contingent fees, discovery, and punitive damages, the U.S. Supreme Court's "minimum contacts rule" (7) exasperates alien companies (8) and has spurred protest from foreign governments. (9) Though consternation over the US legal system may sometimes be exaggerated or emanate from false or incomplete information, (10) studies indicate foreign companies doing business in the United States rank "fear of legal liability" as among their top concerns. (11) They view "the legal system as a drawback regarding investment in the United States" and are concerned with the high legal costs and a perceived lack of predictability and litigation fairness, (12) which puts the United States at a competitive disadvantage in attracting foreign investment despite its otherwise business-friendly regulatory environment. (13)

The United States is not alone, however, in providing "exorbitant jurisdiction." (14) European countries allow plaintiffs access to their courts based on rules that are deeply concerning from an American perspective. (15) Legal commentators have called the difference in opinions and concepts a "justice conflict" between the United States and predominantly civil law European jurisdictions. (16) This disharmony has impeded international treaty negotiations, (17) and prevents mutual recognition of judgments (18) while also placing economic burdens on plaintiffs and defendants. (19) Recent Supreme Court decisions suggest that this may be about to change. (20)

In a series of cases decided between 2011 and 2017, the Supreme Court appeared to take steps toward gradually restricting personal jurisdiction over corporate defendants in general--and foreign corporations specifically. In J. McIntyre Machinery, Ltd. v. Robert Nicastro (McIntyre), the Court limited specific jurisdiction in a product liability case requiring the plaintiff to show that the corporate defendant intended to "conduct [] activities within the forum State" where the injury had happened, (21) thereby denying personal jurisdiction--where, ironically, European courts would have granted it. (22)

In both Goodyear Dunlop Tires Operations, S.A. v. Brown (Goodyear) (23) and Daimler A. G. v. Bauman (Daimler), the Court limited general personal jurisdiction over alien corporations--except for "exceptional case[s]" (24)--to their "place of incorporation and principal place of business," (25) in an attempt to bring US rules more in line with international approaches. (26)

The two most recent cases confirm the trend toward an increasingly narrow and more formalistic approach to personal jurisdiction over out-of-state corporate defendants. (27) Though mainly dealing with issues of venue, in BNSF Railway Co. v. Tyrrell (BNSF), (28) the Supreme Court, applying its holding from Daimler, found BNSF's contacts to the forum were in no way substantial enough to form an "exceptional case," nor "of such a nature as to render the corporation at home in that State." (29) In Bristol-Myers Squibb Co. v. Superior Court (Bristol-Myers), (30) the Court held that a state court has jurisdiction over a nationally operating corporation only if all plaintiffs were injured in the forum state, de facto limiting nationwide class actions and mass joinders to the corporation's place of incorporation or principal place of business, notwithstanding the judicial remedy of federal multidistrict litigation. (31)

While Goodyear and Daimler have already produced considerable commentary, (32) the most recent cases have less so. (33) It is yet unclear whether the decisions indeed revolutionize personal jurisdiction rules, (34) clarify precedent previously applied inconsistently by lower courts, (35) or raise more new questions in the place of those questions answered. (36) Policy considerations, as expressed by Justice Sotomayor in her dissenting opinions for Daimler, BNSF, and Bristol-Myers, could serve as a future point of contention for the Court. Additionally, the role of international law in formulating these jurisdictional rules has barely been addressed in either case law or scholarly commentary.

Based on a comparative analysis of jurisdictional rules in the United States and Europe, this Article discusses whether the renovated US paradigm of personal jurisdiction is apt to govern personal jurisdiction of global market realities in an equitable and effective manner. The Article analyzes how the two most recent decisions contribute to further defining jurisdiction in relation to foreign corporate defendants and the degree to which they help--or hurt--to reconcile opposing views both in and outside the United States. It argues that the Supreme Court's decisions since 2011, though importing certain elements of EU law into US jurisprudence, remain deeply grounded in the traditional US paradigm of jurisdiction, leading to inconsistent results and a lack of a theoretically sound personal jurisdiction doctrine, (37) despite the Supreme Court's concern for other nations' divergent jurisdiction rules as expressed in Daimler. (38) This Article suggests that, in order to improve predictability and trust in the fairness of the US judicial system internally and internationally, an entirely different approach, which breaks with traditional notions, may be needed. One way to achieve this goal could be to adopt the formalistic model of the EU Brussels Regulation (39) and limit general personal jurisdiction while expanding specific jurisdiction in a way that is predictable, equitable, and in line with constitutional due process requirements.

To this effect, Part II discusses the meaning and function of personal jurisdiction in the United States and the European Union and analyzes the role of international law as a source for jurisdictional rules. Part III reviews the development of Supreme Court precedent and identifies the main sources and characteristics of US personal jurisdictional rules. It summarizes the recent decisions in BNSF and Bristol-Myers and places them within the earlier Supreme Court precedent. It also examines policy concerns raised by the minority opinions in Daimler, BNSF Railways, and Bristol-Myers. Part IV compares the US approach to that of the European Union and selected individual EU countries, particularly Germany, where much of the academic literature on the alleged US-EU justice conflict originates. It identifies fundamental differences and analyzes the degree of and prospects for convergence between the two jurisdictional regimes. Part V concludes.

2. PERSONAL JURISDICTION: TERMINOLOGY, FUNCTION, AND INTERNATIONAL LAW

   Rules of personal jurisdiction in the United States allow the adjudicating authority to determine whether it is competent to render a judgment against a particular defendant. (40) Various interests are at stake when developing rules that govern jurisdiction of domestic courts over foreign corporate defendants. Accordingly, jurisdictional rules can fulfill different functions in different jurisdictions. (41) Before examining the content and underlying rationale of the existing US and EU rules, it is necessary to first gain a basic understanding of what personal jurisdiction actually means. The following subpart compares the meaning and function of the terms used to describe personal jurisdiction in the United States and foreign legal systems.

   1. Terminology and Function

      Under US law, personal jurisdiction is a court's power to hear a case depending on the identity of the parties in the suit. (42) An out-of-state party who believes it is unfair to stand trial before the courts of that foreign state can object based on lack of personal jurisdiction. (43) Personal...