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State Sovereignty and Federalism: Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee
The Court further clarified the role of state sovereignty and federalism concerns in the personal jurisdiction analysis in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982).
In that case, lack of personal jurisdiction was raised as a defense by a number of foreign defendant insurance companies. The plaintiff contested the defendants’ alleged lack of sufficient minimum contacts, but the defendants refused to produce the evidence required by the court to make a determination on the sufficiency of such contacts with the forum. After numerous discovery orders and warnings went unheeded, the court accepted the jurisdictional facts as alleged by the plaintiffs as established per FRCP 37(b)(2)(A) and found that it had jurisdiction. The defendants subsequently appealed.
Rule 37(b)(2)(A) grants a district court the power to impose sanctions for failure to comply with discovery requirements including “[a]n order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order.”
While the defendants contended that “[i]f a court does not have jurisdiction over a party, … it may not create that jurisdiction by judicial fiat,” Justice White, writing for the Court, found that this mischaracterized the issue at hand. He reiterated that, while no action of the parties can create subject matter jurisdiction for a court if it is lacking, certain actions of a party can serve to vest a court with personal jurisdiction over that party (for example, a waiver by appearance or, as here, a failure to comply with discovery requirements regarding the establishment of jurisdictional facts) even if personal jurisdiction would otherwise have been lacking.
In explaining the possibility for a defendant to waive personal jurisdictional defenses, the Court focused on the personal nature of the right protected by the Due Process Clause rather than on the sovereignty and federalism concerns that had been highlighted in Word-Wide Volkswagen: “The requirement that a court have personal jurisdiction flows not from Art. III, but from the Due Process Clause. The personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty. [FN10] Thus, the test for personal jurisdiction requires that “the maintenance of the suit ... not offend ‘traditional notions of fair play and substantial justice.’ … Because the requirement of personal jurisdiction represents first of all an individual right, it can, like other such rights, be waived.”
In the accompanying footnote, Justice White explained further:
“It is true that we have stated that the requirement of personal jurisdiction, as applied to state courts, reflects an element of federalism and the character of state sovereignty vis-à-vis other States. For example, in World-Wide Volkswagen Corp. … we stated: “[A] state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist ‘minimum contacts' between the defendant and the forum State. The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.” (Citation omitted.) Contrary to the suggestion of Justice POWELL, … our holding today does not alter the requirement that there be “minimum contacts” between the nonresident defendant and the forum State. Rather, our holding deals with how the facts needed to show those “minimum contacts” can be established when a defendant fails to comply with court-ordered discovery. The restriction on state sovereign power described in World-Wide Volkswagen Corp., however, must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause. That Clause is the only source of the personal jurisdiction requirement and the Clause itself makes no mention of federalism concerns. Furthermore, if the federalism concept operated as an independent restriction on the sovereign power of the court, it would not be possible to waive the personal jurisdiction requirement: Individual actions cannot change the powers of sovereignty, although the individual can subject himself to powers from which he may otherwise be protected.”
Justice Powell, while concurring in the outcome, wrote separately to note his concern with the majority’s interpretation of the requirements of personal jurisdiction: “By eschewing reliance on the concept of minimum contacts as a “sovereign” limitation on the power of States—for, again, it is the State's long-arm statute that is invoked to obtain personal jurisdiction in the District Court—the Court today effects a potentially substantial change of law. For the first time it defines personal jurisdiction solely by reference to abstract notions of fair play.”
Plaintiff’s “Minimum Contacts”?: Keeton v. Hustler Magazine, Inc.
Must a plaintiff have certain “minimum contacts” with the forum in which a suit is brought for the exercise of personal jurisdiction to be proper? The Court unanimously answered that question in the negative in Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984).
In Keeton, New York resident Kathy Keeton brought a suit against Hustler Magazine in New Hampshire alleging libel. Although Keeton had minimal personal links to New Hampshire, it was the only state in which her libel claims were not time-barred. The District Court for the District of New Hampshire dismissed the case for lack of personal jurisdiction and the Court of Appeals for the First Circuit affirmed, explaining “the New Hampshire tail is too small to way so large an out-of-state dog.” The Supreme Court unanimously reversed finding no Due Process requirement that plaintiffs have “minimum contacts” with the forum state and further finding that the fact that the statute of limitations had run in all other jurisdictions was irrelevant to the personal jurisdiction analysis.
The Court summarized the parties’ links to New Hampshire as follows: “Petitioner Keeton is a resident of New York. Her only connection with New Hampshire is the circulation there of copies of a magazine that she assists in producing. The magazine bears petitioner's name in several places crediting her with editorial and other work. Respondent Hustler Magazine, Inc., is an Ohio corporation, with its principal place of business in California. Respondent's contacts with New Hampshire consist of the sale of some 10 to 15,000 copies of Hustler magazine in that State each month.”
The Court found these actions by Hustler unquestionably sufficient to subject it to personal jurisdiction in New Hampshire on the facts alleged: “Such regular monthly sales of thousands of magazines cannot by any stretch of the imagination be characterized as random, isolated, or fortuitous. It is, therefore, unquestionable that New Hampshire jurisdiction over a complaint based on those contacts would ordinarily satisfy the requirement of the Due Process Clause that a State's assertion of personal jurisdiction over a nonresident defendant be predicated on “minimum contacts” between the defendant and the State.” Because New Hampshire’s long-arm statute was co-extensive with the Due Process Clause, the Court found “all the prerequisites for personal jurisdiction over Hustler Magazine, Inc., in New Hampshire are present.”
As for the concern about the plaintiff’s minimum contacts, the Court explained that the proper inquiry is, per Shaffer, on “the relationship among the defendant, the forum, and the litigation,” later elaborating: “[W]e have not to date required a plaintiff to have “minimum contacts” with the forum State before permitting that State to assert personal jurisdiction over a nonresident defendant. On the contrary, we have upheld the assertion of jurisdiction where such contacts were entirely lacking.”
Hustler’s protests that Keeton’s forum-shopping was unfair given New Hampshire’s especially long statute of limitations on libel were equally unavailing – at least as to the issue of personal jurisdiction. The Court was clear that “any potential unfairness in applying New Hampshire's statute of limitations to all aspects of this nationwide suit has nothing to do with the jurisdiction of the Court to adjudicate the claims.”
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