South Carolina's Mysterious Sometimes-disappearing Long-arm Statute
| Jurisdiction | South Carolina,United States |
| Citation | Vol. 27 No. 4 Pg. 38 |
| Pages | 38 |
| Publication year | 2016 |
The Confounding "Conflation" Conundrum
William M. Janssen, J.
Rider Advisory: This is a high-speed personal jurisdiction roller coaster ride in the dark. It is not recommended for young children, those suffering from high blood pressure or motion sickness, or anyone who panics reflexively at the mere mention of Pennoyer v. Neff. Keep your hands and feet inside the vehicle at all times.
The mystery
South Carolina has a long-arm statute. It authorizes South Carolina courts to exercise personal jurisdiction over nonresidents in eight, precisely-worded circumstances, namely when those nonresidents: (1) transact any business in the state; (2) contract to supply in the state; (3) commit a tort in the state; (4) commit a tort out of state that causes injury in the state, provided they regularly do/solicit business in state, engage in a persistent course of in-state conduct, or derive substantial revenue from in-state use/consumption; (5) have an interest, use or possess real property in the state; (6) contract to insure an in-state person, property or risk; (7) enter into a contract to be performed in the state; or (8) produce, manufacture or distribute goods, reasonably expecting that the goods are used/consumed in the state, and they are so used or consumed.[1] Narrower still, our long-arm statute makes clear that this jurisdiction is only possible if one or more of these eight circumstances was the actual cause of the dispute that now prompts a lawsuit.[2] It all seems to pose a formidable statutory gauntlet for anyone attempting to sue a nonresident in a South Carolina court.
Unless the long-arm statute just disappears.
Over the years, South Carolina case law has repeated that this long-arm statute is to be understood as "coextensive" with (and extending to the outer reaches of) the U.S. Constitution's due process clause, and, consequently, that the "sole question" in South Carolina is whether a proposed exercise of personal jurisdiction would offend due process.[3] This is the "conflation" view of personal jurisdiction -that the statutory, long-arm inquiry folds into (or compresses down to) the constitutional inquiry, on the assumption that the General Assembly's enacting intent was to approve a jurisdictional reach over nonresidents as far as the Constitution would tolerate. Under such an interpretation, the long-arm statute functionally disappears as a separate, independent constraint on judicial power.
But in other, also recently decided cases, this "conflation" approach to our long-arm statute is described simply a "trend," and that the more "traditional" two-step inquiry would test, first, for comportment with the long-arm statute, and then only if the statute is satisfied, second, whether that reach conforms with the Constitution.[4]
Still other recent case law has ignored the "conflation" approach altogether. Those cases hold that personal jurisdiction imposes a compulsory two-step inspection: long-arm statute first, and due process second.[5] More curious still, in some of those opinions, the South Carolina courts found that a proposed exercise of personal jurisdiction is disallowed under the long-arm statute, without ever reaching the secondary question of constitutionality[6] Clearly, at least in those cases, the long-arm statute has most certainly not disappeared.
Finally, still other cases embrace "conflation" as the proper approach, but then continue on to discuss whether the long-arm statute is satisfied.[7]
All in all, a perfectly fascinating academic puzzle. But it does not leave practitioners with a reliable gauge for assessing for their in-state and out-of-state clients the jurisdictional consequences of a nonresident's behavior. Has South Carolina's long-arm statute truly been "conflated" into just a due process inquiry alone? Is the only limit on the extraterritorial reach of South Carolina judicial authority the constitutional one, or is there still a statutory constraint as well? To solve this puzzle, a bit of history is useful.
History
The U.S. Supreme Court's 1878 opinion in Pennoyer v. Neff continues to torture (or, perhaps more accurately, continues to be an instrument for torturing) law students almost 140 years after the fact. That decision, interpreting the then newly ratified Fourteenth Amendment, famously ruled that every court's reach ordinarily ends at its state's boundary-line.[8] The sovereignty due to sister states, the Pennoyer Court announced, forbade an extraterritorial exercise of personal jurisdiction unless, inside that state's boundary-line, the nonresident could be found with property, served with process or persuaded to voluntarily appear.[9]
In the years that followed, the rigidity of this due process limit eroded a little bit, but it was not until 1945 with International Shoe Co. v. Washington that the tight-fisted Pennoyer rule finally got its "minimum contacts" breathing space.[10] Legislatures and courts then adapted to the constitutional evolution. Many states, beginning with Illinois in 1955, enacted "long-arm" laws designed to take advantage of International Shoe's due process relaxation.[11] A draft uniform law, for possible adoption by all the states, was published just a few years later.[12]
South Carolina's legislature joined the parade in 1966 when it enacted our eight-category long-arm statute as part of the state's U.C.C. omnibus legislation.[13] In crafting the statute, the General Assembly borrowed language from both the uniform law and North Carolina's statute; its text has remained largely unchanged ever since.[14] The legislation also included a general jurisdiction statute (premised on a nonresident's enduring relationship with the state).[15] In 1973, the S.C. Supreme Court volunteered that the 1966 long-arm statute "clearly shows a legislative intent to broaden the concept of what constitutes transacting business in the State of South Carolina and to extend South Carolina's jurisdiction accordingly"[16] None could fairly quibble with this modest assessment.
Now, here's where the story turns curious.
In the early 1960s, a Tennessee company that made folding stairways for attics had been sued in Rock Hill federal court for tort injuries, and personal jurisdiction became an important issue on appeal. In resolving that appeal, Shealy v. Challenger Manufacturing Co., the Fourth Circuit first ruled easily that the Constitution's International Shoe test was not offended, then turned to the Tennessee company's argument that South Carolina's statute governing service on foreign corporations (a precursor to the later 1966 long-arm statute) demanded "considerably more activity within the state" than just minimum contacts.[17] This argument the Fourth Circuit rejected. Its reasoning has continued to haunt South Carolina long-arm jurisprudence ever...
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