Context and out-of-state conduct

A few years ago, plaintiffs could sue almost anywhere they wanted. Corporations and other businesses were subject to general jurisdiction wherever they did business. But the U.S. Supreme Court's decisions in Goodyear Dunlop Tires Operations v. Brown and Daimler AG v. Bauman changed all that, limiting general jurisdiction over a corporation to the places where it is "at home" -- generally the place of incorporation and the principal place of business. In Walden v. Fiore, meanwhile, the Supreme Court held that a state court could not assert specific jurisdiction over out-of-state defendants to adjudicate out-of-state conduct merely because the plaintiff happened to live in the forum state.

The California Supreme Court briefly blew a big hole in those limits by holding that specific jurisdiction could be asserted by a state that had no connection to a specific dispute at issue so long as the state was entertaining similar actions by in-state plaintiffs against the same out-of-state defendant. The Supreme Court reversed that decision earlier this year, however, in Bristol-Myers Squibb Co. v. Superior Court. The Bristol-Myers court held that specific jurisdiction could be asserted only based on an "affiliation between the forum and the underlying controversy, principally, "[an] activity or an occurrence that takes place in the forum State." Jurisdiction could not rest on a defendant's in-state activities that were unconnected to a particular plaintiff's claim.

Against this background, a divided panel of the 9th U.S. Circuit Court of Appeals recently held in Morrill v. Scott Financial Corp., 2017 DJDAR 10150 (Oct. 24, 2017), that even allegedly tortious activities in the forum state might not confer specific jurisdiction.

Morrill arose from a Nevada lawsuit in which Morrill's Arizona law firm represented a debtor. Seeking to depose Morrill and one of his partners, the creditor's lawyers initiated a special proceeding in Arizona court in order to serve a deposition subpoena. One of those lawyers appeared at the Arizona hearing on Morrill's motion to quash. After the deposition issue returned to Nevada court, the Nevada Supreme Court required the creditor's lawyers to satisfy a three-part test in order to proceed -- whereupon they withdrew the subpoena. The creditor's lawyers then sued Morrill for defamation in Nevada. That case was dismissed, but Morrill's clients ultimately fired him.

That's when Morrill and his firm sued the creditor's lawyers in federal district court in Arizona. That case was dismissed for lack personal jurisdiction, and a divided 9th Circuit panel affirmed. The majority held that filing an Arizona lawsuit and entering Arizona to pursue it did not confer specific jurisdiction because the Arizona activities were ancillary to the out-of-state Nevada lawsuit. Because the in-state litigation activity occurred only because the plaintiffs had inserted themselves into the Nevada proceeding, the in-state activity was not "directed" at Arizona. Rather, the out-of-state activity provided a "framework" for the in-state litigation activity, which the court characterized as "component parts" of the Nevada litigation. Even the defendants' "physical entry" to pursue their allegedly abusive scheme was "merely incidental to an out-of-state transaction." The "forum state was only implicated by the happenstance of Plaintiffs' residence."

Judge Andrew Kleinfeld dissented. He viewed instituting a lawsuit in Arizona and traveling there to pursue it as activity directly aimed at Arizona. Judge Kleinfeld believed that the majority was wrong to focus on the "driving force behind" the defendants' forum conduct and the "framework" for it, rather than simply assessing the defendants' contacts with the forum and their relationship to the cause of action.

The key issue in Morrill is how much context matters in the specific jurisdiction inquiry. The majority held that in-state conduct undertaken as an ancillary part of an out-of-state activity should be treated as if it were out-of-state activity. The out-of-state conduct provides an analytical "framework" that neutralizes the effect of in-state conduct that, were it independent, undoubtedly would support specific jurisdiction. It is unclear whether this analysis would apply outside the litigation context, where state procedures may require certain types of contacts in order to accomplish specific litigation goals like discovery.

Another essential part of the majority's analysis is its extension of the principle from Walden that out-of-state actors cannot be hauled into the forum state's courts to adjudicate out-of-state conduct merely because the plaintiff happens to live in the forum state. The 9th Circuit majority viewed Morrill's Arizona residence as the same type of coincidental fact unrelated to the substance of the offending conduct as the Nevada residence of the Walden plaintiffs. But Walden did not involve allegedly tortious conduct in the forum state. Morrill does. But Morrill suggests that a plaintiff's residence is coincidental, and thus irrelevant to the jurisdictional analysis, not only when the plaintiff has been injured while traveling out of state (as in Walden), but also when the defendant comes into the plaintiff's home state to cause harm, so long as the reason for the defendant's actions related to an out-of-state transaction where the plaintiff's state of residence was immaterial. Further developments will clarify how much the federal courts will restrict personal jurisdiction for claims based on both in-state and out-of-state conduct.