12 September 2016

Colorado Supreme Court Rules On General Jurisdiction And Tag Jurisdiction

In the case of Magill v. Ford Motor Co., 2016CO57, decided today, the Colorado Supreme Court has enshrined in Colorado precedent two major new rulings on jurisdiction over corporations, both of which make it harder to sue corporations.

The case involves the Magills were injured in a car accident with an El Paso County man in Douglas County, where they resided.  They sued the other driver for negligence and also Ford Motor Company on a product liability theory.  By including a Colorado defendant in addition to Ford Motor Company, and by suing on state law tort claims, they escaped federal court jurisdiction. Under the traditional law of "general jurisdiction", Ford Motor Company could be sued on any subject in any state where it had a permanent office or permanent agent, and resided in the state at the location of each of its permanent offices including that of its registered agent in Denver.  So, the Magills sought to sue in Denver, which had a favorable jury pool and was convenient for many lawyers since the Ford Motor Company defendant could be considered to reside in Denver.  But, while this approach would have worked in 2006, it failed in 2016.

First, the Colorado Supreme Court rejected the doctrine (called "tag jurisdiction"), applicable in cases where individuals are served with process, that serving a defendant with process in a state gives a court in the state where the service of process took place, jurisdiction over the defendant even if the defendant has no other connections to the state.  This mirrors a 9th Circuit case reaching the same conclusion in 2014 (the same post notes that the 9th Circuit also reached the same conclusion regarding the jurisdictional effect of having a registered agent in the state).

An important subset of this ruling, partially related to its second holding, is that registration of an agent for service of process in a state, which had originally been required by states of corporations doing business in the state so as to give the state's jurisdiction over the corporation, is no longer sufficient to confer general jurisdiction over the corporation.

Second, following the lead of the U.S. Supreme Court in the case of Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014) (covered in this post when it was decided), the Colorado Supreme Court has applied the doctrine that "general jurisdiction" over a corporation, which previously allowed suit on any subject to be brought against a business in any state in which it had a regular office or agent for the conduct of business, is now limited to jurisdictions where the corporate defendant is "at home" which basically means the state where it is incorporated or where its headquarters is located.  Thus, Ford which is incorporated in Delaware and has its headquarters in Michigan is not "at home" in Colorado.

It also made rulings on venue under the Colorado Rules of Civil Procedure, holding that the City and County of Denver was not a proper venue, despite the fact that Ford had an agent for service of process in the county, when the underlying car accident took place in Douglas County (a Denver suburb) where the Plaintiffs also resided, and the other driver was an El Paso County resident.  Thus, the neither the address of the agent for service of process for Ford nor the location at which the service of process was secured, was sufficient to establish venue, in addition to being insufficient grounds to establish general personal jurisdiction.

The Colorado Supreme Court remanded to allow the Denver Court to transfer the case to a new venue (presumably Douglas County where the accident occurred, although El Paso County would also be proper because a defendant resided there), and then to determine if Colorado has "specific" personal jurisdiction over Ford Motor Company due to the connections of the facts of the particular case to Ford Motor Company (which is almost surely will, because the accident took place in Colorado).

In this particular case, the only practical effect will be a new judge in a different county not terribly far from the one where the suit was brought originally (which will actually probably be less convenient for Ford Motor Company's out of state legal team than the original venue, but critically, will have a more defendant friendly jury pool in either Douglas County or El Paso County).  But, the precedent will come up in almost every lawsuit against an out of state corporation brought in Colorado.

The decision was unanimous, because its central holding was largely foreordained by the U.S. Supreme Court and the collateral rulings made which were not dictated by that ruling, will make the related doctrines much simpler than if they had gone the other way (possibly also tempting the U.S. Supreme Court to take up the case to review it).

No comments: