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Personal Jurisdiction Does Restrict Where a Corporation Can Be Sued

By Michael W. Mitchell and Edward Roche
Published by LAW.COM
04.20.2020

A South Carolina resident sued Marriott in a federal court in his home state after suffering an injury in a Marriott-affiliated hotel overseas. The Fourth Circuit’s decision provides helpful guidance on the scope of personal jurisdiction over corporations, and offers some food for thought for litigants.

A plaintiff bringing a lawsuit will often want to file close to home, for various strategic and logistical reasons. The appeal of filing at home has perhaps never been stronger, as COVID-19 casts uncertainty on travel plans and litigation calendars well into the future.

A recent decision by the U.S. Court of Appeals for the Fourth Circuit gives plaintiffs reasons to be cautious, however, before defaulting to filing in their home states. The court’s decision in Fidrych v. Marriott International, 952 F.3d 124 (4th Cir. 2020), demonstrates that personal jurisdiction imposes a very real restriction on where corporate defendants—even large multinational corporations—may be sued. It shows that plaintiffs must give careful consideration to personal jurisdiction before filing, and defendants should assess personal jurisdiction as soon as the litigation begins.

Background to Fidrych v. Marriott International

The plaintiff, a South Carolina resident, traveled to Milan, Italy, for work. He stayed at the Boscolo Milano, a “Marriott-affiliated” property. The Boscolo is not owned or managed by Marriott, but is branded as a part of Marriott’s “Autograph Collection” and can be booked through Marriott.

While the plaintiff was staying at the Boscolo, the glass shower door shattered in his hand. It caused serious injuries to his thumb, which required multiple surgeries to repair.

The plaintiff sued Marriott in federal court in South Carolina. He claimed that Marriott was negligent in failing to regularly inspect the property. He also claimed that Marriott had breached a contract to maintain a safe hotel, and that Marriott was responsible for the negligent actions of the Boscolo. Marriott argued that the case should be dismissed because the court lacked personal jurisdiction over Marriott. The district court agreed and dismissed the case, and the plaintiff appealed to the Fourth Circuit.

Background on Personal Jurisdiction

A court in the United States—whether state or federal—may enter a valid judgment against a corporate defendant only if the court has personal jurisdiction over the corporation. Unless a corporate defendant consents to jurisdiction, the U.S. Constitution allows a court to exercise personal jurisdiction only if there are sufficient “minimum contacts” between the corporation and the “forum state”—the state in which the court is located. In Fidrych, the plaintiff brought suit in federal court in South Carolina, so the relevant question was whether Marriott had the requisite minimum contacts with South Carolina for the court to exercise personal jurisdiction over Marriott in this lawsuit.

U.S. Supreme Court jurisprudence has long held that the minimum contacts test can be satisfied in two distinct ways. First, a court has “general jurisdiction” over a corporate defendant where the corporation’s contacts with the state are so extensive that it is “essentially at home” in the state. More recent U.S. Supreme Court case law has established that this category of personal jurisdiction over a corporation exists, except in rare situations, only in the state in which the corporation has its headquarters or its principal place of business. Daimler AG v. Bauman, 571 U.S. 117, 134 S. Ct. 746 (2014). When a corporation has its headquarters or principal place of business in a state, the corporation may be sued there regardless of whether its contacts with the state have given rise to the plaintiff’s claims.

In the second distinct category of personal jurisdiction, the U.S. Supreme Court has recently explained that a court may exercise “specific jurisdiction” where the corporation’s contacts with the forum state are continuous, systematic, and purposeful, and the specific claims in the lawsuit arise from those particular contacts. Bristol-Myers Squibb Co. v. Superior Court of Cal., __ U.S. __, 137 S. Ct. 1773 (2017).

The Fourth Circuit’s Decision

The Fourth Circuit upheld the dismissal of the case, agreeing that Marriott did not have sufficient contacts with South Carolina to satisfy the Constitution’s test for personal jurisdiction. The court explained the three strands of its analysis.

First, the court ruled that Marriott had not consented to jurisdiction in South Carolina merely by obtaining a certificate to do business in the state. The Fourth Circuit acknowledged some disagreement in the federal courts on this question, and ultimately came down on the side of those courts that reject it as a basis for personal jurisdiction. The court went further, however, and explained that even in those courts where a business certificate can serve as a form of consent to personal jurisdiction in the state, Marriott would not have consented here. Under that permissive approach, a certificate to conduct business signals consent to jurisdiction if the state’s law equates the certificate with consent. South Carolina law does not do so. A corporation can obtain a certificate there, and can appoint an agent to receive service of process, without consenting to jurisdiction. (The same is true, incidentally, under North Carolina law.)

Second—moving on to the first part of the “minimum contacts” analysis—the Fourth Circuit determined that Marriott was not subject to general jurisdiction in South Carolina. Despite the 90 Marriott hotels in South Carolina, Marriott’s certificate to do business there, and the ability of South Carolina residents to use Marriott’s website, Marriott was not “essentially at home” in the state. Marriott had similar contacts in states across the country, and “a corporation that operates in many places can scarcely be deemed at home in all of them.”

Third, the Fourth Circuit determined that Marriott was not subject to specific jurisdiction in South Carolina because “Marriott’s case-related contacts with South Carolina are too tenuous and too insubstantial.” The plaintiff’s injuries occurred far from South Carolina. He happened to be a South Carolina resident, so the effects of his injuries would be felt in that state. But the plaintiff’s connections alone are not sufficient, as the focus is on the connections that the corporate defendant has voluntarily made with the state that give rise to the cause of action.

The plaintiff argued that the operation of Marriott’s website in South Carolina was enough of a connection to confer specific jurisdiction. The plaintiff accessed the website from South Carolina to review the Boscolo before booking, and a travel agent used the website to make the reservation on behalf of the plaintiff’s employer. But the Fourth Circuit rejected this argument. The website functioned only as the equivalent of a toll-free telephone number: giving consumers an easy way to contact Marriott and make reservations. Marriott was not using the website to target South Carolina residents in particular. It was designed to accept reservations from any state in the country and from any country in the world.

Takeaways from the Fidrych Decision

Businesses involved in any litigation—whether as a plaintiff or a defendant—should carefully assess personal jurisdiction as part of the initial case strategy. Prospective plaintiffs should consider where each defendant will be subject to personal jurisdiction. There may be only one possible forum, or there may be several. If several, the plaintiff should consider where other case requirements (such as venue) are satisfied, and then which forums would be convenient or otherwise favorable.

Plaintiffs will sometimes need to resist the temptation to sue in their home forums. Bringing suit close to home is convenient, and plaintiffs often perceive a strategic advantage to litigating on their “home turf.” But, as Fidrych shows, the fact that the plaintiff resides in the state and the corporate defendant can be found there may not be sufficient to confer personal jurisdiction. The temptation can result in an expensive delay of the litigation. In Fidrych, to ensure personal jurisdiction over Marriott in a U.S. court, the plaintiff needed to sue in Delaware (where Marriott is incorporated), Maryland (where it has its principal place of business), or in a state where the law explicitly equates Marriott’s business certificate with consent to personal jurisdiction.


This article was first published on LAW.COM on April 20, 2020, and is republished here with permission. ©2020 ALM Media Properties, LLC. All rights reserved.

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Jamie Greene
jgreene@smithlaw.com
T: 919.838.2045

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