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1.4 Billion Not Enough to Establish General Jurisdiction

Wednesday, May 13, 2015
In Daimler AG v. Bauman (2014) 134 S. Ct. 746, the United States Supreme Court rewrote civil procedure textbooks around the country. In last year’s momentous decision, the Supreme Court held that “the place of incorporation and principal place of business are paradig[m]…bases for general jurisdiction,” and that only in “exceptional cases” should a court exercise general jurisdiction over a corporation domiciled in another state.

Just weeks ago, a California appellate court was asked to review a trial court decision finding the existence of general jurisdiction over BNSF Railway Company in a wrongful death action. Specifically, the family of a former BNSF employee filed suit in a Los Angeles Superior Court last year, alleging that the decedent’s death from mesothelioma was the result of his having worked with asbestos at a facility located in Wichita, Kansas. BNSF, incorporated in Delaware with its principal place of business in Texas, filed a motion to quash arguing that the California court lacked jurisdiction because the lawsuit did not arise from any of BNSF’s California activities (i.e., no specific jurisdiction) and because its activities within the State of California were a “minor” component of its overall operation. BNSF claimed that only six percent of its sales revenue came from California, and a similarly small percentage of its infrastructure and workforce are located in California, whereas the largest share of its workforce, sales, and infrastructure came from BNSF’s home state of Texas.

A Los Angeles County Superior Court judge denied BNSF‘s motion to quash. Citing Daimler, the court said that general jurisdiction was present because BNSF has a “continuous and systematic” relationship with California that made the company “essentially at home” here.

The Court of Appeal, however, reversed the trial court decision, reiterating that while a defendant may be sued in a state where it is neither incorporated nor headquartered, it requires an “exceptional case.” Also relying on Daimler, the Court asserted that although California was an important market for BNSF’s products, its activities in California were comparatively small compared to its national business. The uniqueness of asbestos litigation “does not make every asbestos suit ‘exceptional,’" said the Court. Although sympathetic to the plight of the plaintiff, the Court opined that allowing the plaintiff to sue BNSF either where it was incorporated or where its principal place of business was located, preserves the constitutional rights of of both parties. To permit BNSF to be sued in a multitude of states would violate the due process rights of BNSF for the reasons set forth in Daimler:

[T]he due process rights of defendants cannot vary with the types of injury alleged by plaintiffs. Our analysis must focus on ‘the relationship among the defendant, the forum, and the litigation’…and that relationship here is simply not enough to render petitioner ‘at home’ in California such that the exercise of general jurisdiction over actions unrelated to petitioner’s forum activities is warranted.”

Despite the fact that $1.4 billion in revenue generated in California seems to be an "exceptional" drop in the bucket, it is clear Daimler and appellate cases like BNSF are establishing a high threshold for the “exceptional case.” National and global companies like BNSF have reason to celebrate. To read the appellate opinion, click here.

 
For more information contact:
Christopher E. Ng, Esq.
Gibbs Giden Locher Turner Senet & Wittbrodt LLP
1880 Century Park East, 12th Floor
Los Angeles, California 90067
Phone: (310) 552-3400
email: cng@gibbsgiden.com
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