Lawrence W. Newman and David Zaslowsky ()
The final months of the most recent U.S. Supreme Court term saw two decisions in the area of international litigation and a personal jurisdiction decision that re-enforced earlier decisions that make it more difficult to assert jurisdiction over foreign parties. We look at them in this article.
The most significant decision was in Water Splash v. Menon, No. 16-254 (May 22, 2017), which resolved a lower court split that had existed for many years. The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (the Convention) seeks to simplify, standardize, and generally improve the process of serving documents abroad. It specifies certain approved methods of service and preempts inconsistent methods of service wherever the Convention applies.
The primary method of service under the Convention is through the “central authority” that is designated by each signatory. When a central authority receives an appropriate request, it must serve the documents or arrange for their service, and then provide a certificate of service. Submitting a request to a central authority is not, however, the only method of service approved by the Convention. Another method of service is contained in Article 10 of the Convention, which provides, in relevant part:
Provided the State of destination does not object, the present Convention shall not interfere with—
(a) the freedom to send judicial documents, by postal channels, directly to persons abroad,
(b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents … directly through the judicial officers, officials or other competent persons of the State of destination
(c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents … . (emphasis added)
Articles 10(b) and 10(c), by their plain terms, address additional methods of service that are permitted by the Convention. By contrast, Article 10(a) does not expressly refer to “service.” The use of the word “send” instead of “serve” in Article 10(a) led to a split among the lower courts over whether documents used to initiate a lawsuit could be served by mail under Article 10(a).
The Supreme Court granted certiorari in order to resolve that split and held that the Convention does not bar service by mail to initiate a lawsuit. The court explained that, first, based on the plain text, “send” is a broad term, and there is no apparent reason why it would exclude the transmission of documents for a particular purpose (namely, service). Second, is context. The scope of the Convention is limited to service of documents. In light of that, it would be quite strange if Article 10(a)—apparently alone among the Convention’s provisions—concerned something other than service of documents.
In response to the argument that “send” must mean something other than “serve,” or else the latter word would have been used, the Supreme Court explained that, even if true, that would not mean that use of the word “send” excludes service. The court said also that the French version of the Convention is equally authentic to the English version, and that version has consistently been interpreted to permit service by mail. Furthermore, even if the argument were correct, the most that could be said would be that there is an ambiguity. But, as the Supreme Court explained, to resolve an ambiguity, a court may look at extratextual sources. Here, three extratextual sources—the Convention’s drafting history, the views of the Executive, and the views of other signatories—all support the conclusion that Article 10(a) encompasses service through mail.
The Supreme Court went on to explain that its decision did not mean that the Convention authorized service by mail. Rather, in cases governed by the Convention, service by mail is permissible if two conditions are met: first, the receiving state has not objected to service by mail; and, second, service by mail is authorized under otherwise-applicable law. Here, the case was remanded for determination of the issue of whether Texas law authorized the methods used by the plaintiff.
Foreign Sovereign Immunities Act
Bolivarian Republic of Venezuela v. Helmerich & Payne International Drilling Co., No. 15-423 (May 1, 2017), was a case in which a Venezuelan company, wholly owned by an American parent company, supplied oil rigs to various agencies of the Venezuelan government. According to stipulated facts, by early 2010, the Venezuelan government had failed to pay more than $10 million that it owed the subsidiary. At that point, the government sent troops to the equipment yard where the rigs were stored, prevented the subsidiary from removing the rigs, and issued a “Decree of Expropriation” nationalizing the rigs. The parent and subsidiary sued Venezuela for expropriation.
The Foreign Sovereign Immunities Act (FSIA) provides that a “foreign state shall be immune from the jurisdiction of the courts of the United States and of the States … .” 28 U. S.C. §1604, unless the case falls under one of the enumerated exceptions in the statute. The expropriation exception provides there is no immunity in any case
in which rights in property taken in violation of international law are in issue and that property … is owned or operated by an agency or instrumentality of the foreign state … engaged in a commercial activity in the United States. §1605(a)(3).
Venezuela moved to dismiss the case on the ground that its sovereign immunity deprived the district court of jurisdiction, arguing that there could be no expropriation in violation of international law because the subsidiary was a Venezuelan entity. The Court of Appeals denied the motion to dismiss. It did so by deciding only that the plaintiffs might have a nonfrivolous expropriation claim, which it held was sufficient to defeat a motion to dismiss.
The Supreme Court disagreed, holding that the nonfrivolous-argument standard is not consistent with the FSIA. Were it otherwise, there would be a standard “limited only by the bounds of a lawyer’s (nonfrivolous) imagination. It would create increased complexity in respect to a jurisdictional matter where clarity is particularly important.” The court further concluded that FSIA suits can no longer proceed simply because jurisdictional facts are intertwined with the merits of a claim. A court should decide the foreign sovereign’s immunity defense at the threshold of the action, resolving any factual disputes as near to the outset of the case as is reasonably possible. By stressing the importance of plaintiffs’ actually pleading facts and law sufficient to establish jurisdiction under an applicable FSIA exception, and of the courts’ deciding the jurisdiction issue early in the process, the Supreme Court has made it easier for foreign sovereigns to challenge claims brought under the FSIA.
The third Supreme Court decision of note, BNSF Railway Co. v. Tyrell, No. 16-405 (May 30, 2017), concerned the issue of personal jurisdiction. In recent years, in Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U. S. 915 (2011) and Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Supreme Court narrowed the application of the concept of general jurisdiction so that it applied only in states in which a defendant could be considered “at home.” In BNSF, the Supreme Court reinforced the limited scope of general jurisdiction.
BNSF involved two separate actions that were consolidated on appeal to the Montana Supreme Court. In each suit, the plaintiff asserted claims under the Federal Employers’ Liability Act (FELA) for injuries arising from their employment with BNSF. Arguing that it was not “at home” in Montana, BNSF moved to dismiss each action for lack of personal jurisdiction. In support of its motions, BNSF noted that neither employee was injured in Montana, that BNSF was not headquartered in Montana and did not have its principal place of business there, and that BNSF had only a small percentage of its total workforce (5 percent) and total track mileage (6 percent) there.
The trial court in one of the cases granted BNSF’s motion, while the trial court in the other denied the motion. The Montana Supreme Court, relying on two sentences of a section of FELA as well as the state’s own procedural statutes, ruled that BNSF was subject to the general jurisdiction of the Montana courts.
On appeal, the U.S. Supreme Court held that neither provision of the FELA relied upon by the Montana Supreme Court addressed personal jurisdiction. Having concluded that the FELA provides no basis for establishing personal jurisdiction, the court turned its attention to Montana’s long-arm statute, which permits Montana courts to exercise personal jurisdiction over “persons found within … Montana.” Despite the plain language of the Montana law, the outcome-determinative issue, the court stressed, was not whether BNSF could be found in Montana. Indeed, BNSF did not contest that it could be found in Montana, as the Montana courts construed the statute. The critical issue was whether application of the Montana statute allowing the Montana courts to exercise jurisdiction over BNSF comports with the Due Process Clause of the Fourteenth Amendment—that is, were the defendant corporation’s affiliations with the state so “continuous and systematic” as to render them essentially at home in the forum state? The “paradigm” forums in which a corporation is at home, according to Goodyear and Daimler, are the state of incorporation and the state in which the corporation has its principal place of business—for BNSF, Delaware and Texas, respectively.
The Supreme Court reiterated comments from Daimler that, even when suit is not brought in a “paradigm” forum, a court can exercise general jurisdiction over a corporate defendant in an “exceptional case” in which the corporation’s contacts with the forum state are “so substantial and of such a nature as to render the corporation at home in that State.” In this regard, the Montana Supreme Court found BNSF’s in-state track mileage and number of Montana employees compelling. The U.S. Supreme Court determined that these contacts, though arguably significant in an absolute sense, failed to comport with due process, again drawing from its Daimler decision:
[T]he general jurisdiction inquiry does not focus solely on the magnitude of the defendant’s in-state contacts … . Rather, the inquiry calls for an appraisal of a corporation’s activities in their entirety; [a] corporation that operates in many places can scarcely be deemed at home in all of them.
The U.S. Supreme Court reversed the Montana Supreme Court’s decision that there was personal jurisdiction.
This decision was followed by another jurisdiction decision of the Supreme Court. In Bristol-Myers Squibb v. Superior Court of California, No. 16-466 (June 19, 2017), the court reversed a decision by the California courts that asserted specific personal jurisdiction, explaining that there can only be specific jurisdiction if there is activity or an occurrence that takes place in the forum state that relates to the underlying controversy and not to extensive unrelated business activity in the state that is not sufficient to satisfy the requirements for general jurisdiction. This was yet another confirmation by the court of tightening jurisdictional rules that will undoubtedly be used by foreign companies to argue against jurisdiction of U.S. courts.