Wednesday, August 17, 2011
Personal Jurisdiction, McIntyre v. Nicastro, and Horizontal Federalism
The Supreme Court's recent plurality opinion in McIntyre Machinery, Ltd. v. Nicastro contains a fascinating, potentially significant, and largely overlooked discussion about how horizontal federalism frames constitutional limits on adjudicative jurisdiction in state courts. The opinion provides some hope that a more coherent approach to jurisdictional analysis might be on the horizon, although that hope may be dim due to the plurality's failure to consider the implications of its reasoning. Indeed, the opinion's brief discussion of abstract constitutional theory is oddly disconnected from its application of narrower doctrinal rules.
In Nicastro, the Court held that a New Jersey court could not exercise personal jurisdiction over the British manufacturer of an allegedly defective product that caused an injury in New Jersey to an employee of the New Jersey business that had purchased the product. The manufacturer had not directly marketed or sold the product in New Jersey. But the manufacturer had actively encouraged its distributor to market the product throughout the United States, and the manufacturer's officers had attended sales conventions in the U.S. alongside buyers from New Jersey. Nevertheless, the plurality opinion concluded that jurisdiction was unconstitutional because the manufacturer had not "purposefully directed" or "targeted" conduct at New Jersey, at least to an extent sufficient to confer jurisdiction in light of the "economic realities" of the relevant market. The fact that the product entered the "stream of commerce" and forseeably flowed into New Jersey was immaterial absent a more direct nexus between the manufacturer's extraterritorial activities and the product's eventual destination. This holding is debatable for several reasons, including: (1) the defendant's well-documented desire and efforts to extract payments from U.S. buyers regardless of their precise location; (2) New Jersey's interest in providing a convenient and effective remedy to a local plaintiff injured in a local accident; and (3) the unfortunate incentives and risks that doctrine creates when it allows defendants to evade jurisdiction through the use of intermediaries (indeed, the intermediary in Nicastro had filed for bankruptcy prior to the litigation). Whether or not the holding is correct, for present purposes we can focus on the more abstract theoretical questions that the case addressed. (For insightful commentary on the holding elsewhere on this blog, see the posts by Howard Wasserman and Robin Effron.)
An interesting aspect of the plurality opinion is its attempt to explain why the Constitution limits the states' authority to exercise adjudicative jurisdiction. This "why" question has generated disagreement among commentators, who often find common ground only in their shared skepticism of the Court's evolving explanations. For example, scholars have characterized modern personal jurisdiction doctrine as "unacceptably confused and irrational," "convoluted and arcane," "in chaos," "half-baked," "precarious," and "plagued" by "ambiguity and incoherence." (My recent article entitled Impersonal Jurisdiction provides citations for these quotations and a more detailed account and critique of the doctrine's theoretical foundation.) Given the widespread perception that the Court has yet to offer a coherent account of why the Constitution limits the jurisdictional reach of state courts, any new discussion—even if only from a plurality—is grist for a well-primed mill.
We can more easily follow the plurality's densely written argument by fragmenting it into components. The plurality essentially contended (on page 9 of the slip opinion) that: (1) limits on personal jurisdiction exist to protect "individual liberty" rather than as "a matter of state sovereignty"; (2) liberty is important because of the Due Process Clause; (3) the Due Process Clause "protects the individual's right to be subject only to lawful power"; and (4) power is lawful only if it is within the "sovereign" "authority" of the forum state. So the plurality appears to have concluded that the scope of a state's adjudicative jurisdiction is at least partially a function of the scope of its sovereign authority, assessed through the prism of liberty. But how do we know how far the state's sovereign authority extends? It is here that the opinion takes an interesting turn. The plurality observed (again on page 9) that "if another State [other than the defendant's "home State"] were to assert jurisdiction in an inappropriate case, it would upset the federal balance, which posits that each State has a sovereignty that is not subject to unlawful intrusion by other States." This language suggests that each state's sovereignty is a function of its role in a federal system that includes other equally sovereign states. The plurality's complete chain of reasoning therefore runs as follows: limits on jurisdiction implicate liberty, liberty implicates due process, due process requires focusing on state authority, and state authority is a function of the forum state's position among other coequal actors in a federal system. The opinion thus suggests that one cannot understand the scope of states' adjudicative jurisdiction without thinking about horizontal federalism. (Justice Ginsburg's dissent denied that "sovereignty" was directly relevant to jurisdictional analysis, although the dissent did engage the plurality by noting that the lower court's exercise of jurisdiction did not "diminish the sovereignty" of other states or undermine the "fair and reasonable allocation of adjudicatory authority among States." Justice Breyer's concurrence did not address the plurality's discussion of sovereignty and federalism.)
If the plurality meant to invoke horizontal federalism, the opinion is novel. In my Impersonal Jurisdiction article, I contended that personal jurisdiction jurisprudence should focus on horizontal federalism concerns, but currently does not. The plurality's apparent invocation of horizontal federalism could be a welcome development, depending on how the Court expands on its analysis. Of course, the opinion's analysis is fleeting and undeveloped, and so one should not read too much into it about how the plurality (and the rest of the Court) might approach future cases.
Unfortunately, any hope that the plurality may have introduced a useful innovation into analysis of adjudicative jurisdiction is tempered by several gaps in the plurality's analysis. These gaps suggest either that the plurality did not take its own observation about horizontal federalism seriously, or that it did not fully consider the implications of its reasoning. I will explore a few quirks in the plurality's analysis here; my Impersonal Jurisdiction article (which predates Nicastro) provides a more complete account of the kinds of questions and complexities that arise from thinking about personal jurisdiction within the broader context of horizontal federalism.
First, the plurality did not explain how the theory that it articulated led to the test that it announced. The opinion concludes (consistent with precedent) that purposeful targeting of the forum is generally a necessary prerequisite for jurisdiction. Yet the opinion does not consider why a doctrine ostensibly focused on state authority in a federal system should prioritize the defendant's subjective intent over, for example, the forum state's interest in providing a remedy, objective facts about the defendant's profit from activities in the forum, and the defendant's ability to bear the cost of litigating in the forum. The opinion thus departs from prior accounts of why jurisdictional limits exist without reconsidering prior accounts of how jurisdictional limits operate.
Second, the opinion did not consider that situating personal jurisdiction within a broader context of constitutional law governing horizontal federalism invites analogies to other federalism doctrines that might require reorienting jurisdiction doctrine. The plurality inadvertently illustrated this phenomenon when it discussed choice of law. Two portions of the opinion are relevant. On page 4, the plurality stated that "[t]he Due Process Clause protects an individual's right to be deprived of life, liberty, or property only by the exercise of lawful power. This is no less true with respect to the power of a sovereign to resolve disputes through the judicial process than with respect to the power of a sovereign to prescribe rules of conduct for those within its sphere. As a general rule, neither statute nor judicial decree may bind strangers to the State." The plurality thus noted that the choice of law and jurisdiction inquiries can be similar: states may not exercise "lawful power" over "strangers," and so doctrine exists to distinguish strangers from non-strangers. Yet on page 11, the plurality observed that "[a] sovereign's legislative authority to regulate conduct may present considerations different from those presented by its authority to subject a defendant to judgment in its courts." In other words, even though the jurisdiction and choice of law inquiries sometimes aspire to distinguish strangers from non-strangers, different factors might be relevant in the two inquiries, so a person might be a stranger for jurisdictional purposes but not for choice of law purposes. The obvious follow-up question that the plurality never addressed is: why? What aspect of asserting jurisdiction over a person, as compared to applying a statute to that same person, requires considering different variables in the constitutional calculus? Instead of addressing this question, the plurality merely repeated various doctrinal tests (such as "purposeful availment") announced in prior jurisdiction cases, without explaining why those tests did not also apply in the choice of law context, and why current choice of law tests do not apply in the jurisdiction context. The failure to compare the two contexts is important because modern choice of law doctrine almost certainly would allow application of New Jersey law to the plaintiff's claim (which stems from an accident and injury in New Jersey to an employee of a business in New Jersey), even though the defendant did not "purposefully direct" its conduct to New Jersey. So apparently the lawful exercise of sovereign authority over a reluctant defendant does not always require the sort of purposefully targeted conduct that the plurality extols in its blunt rhetoric about due process. This observation does not mean that the plurality was wrong—jurisdiction and choice of law might be meaningfully different—but those differences require a subtler analysis of federalism than the plurality provided.
Finally, the plurality did not consider how thinking about jurisdiction in the context of federalism lowers some of the stakes that rhetoric about due process tends to inflate. For example, the plurality observed that Congress may be able to authorize jurisdiction over the defendant in a federal court in New Jersey (for example, by using the Commerce Clause to create a federal question action, or by permitting nationwide service of process in a diversity action). Presumably, Congress could also authorize the application of New Jersey law (which would apply of its own force in a diversity action and could be borrowed in a federal question action). Moreover, there is no reason why federal and state courts cannot lease space in the same building. Accordingly, the following hypothetical scenario is possible under the plurality's analysis: two plaintiffs could sue the British manufacturer on identical claims; one would file in state court, and one in federal court, but both courts would be on the same floor of the same building in New Jersey. In the federal action, the manufacturer would not have any defense to personal jurisdiction. But twenty feet away, in the state action, the manufacturer could bristle at the outrage of being sued in a New Jersey court in violation of its right to liberty and due process. The defendant's argument in state court might have technical merit, but the fact that simply removing the action to an adjacent federal courtroom and re-serving the summons would cure the problem takes some of the sting out of the defendant's invocation of liberty interests. Indeed, one can argue (as I have in the Impersonal Jurisdiction article) that Congress's ability to cure most jurisdictional defects in state courts by authorizing removal to federal court should obviate or narrow the due process remedies that the Court has created without much attention to the Constitution's text or to the relevant horizontal federalism concerns.
In sum, the plurality opinion's reference to horizontal federalism in a context where such references had been missing is an interesting shift in emphasis that offers a tantalizing possibility of future evolution in personal jurisdiction doctrine. But the opinion does not consider, let alone embrace, the implications of its observation about why the Constitution limits the states' judicial reach.
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I agree with your analysis here. The court has rarely focused on horizontal federalism. A key question is why is it harder for a state to apply personal jurisdiction than its choice of law? Isn't the law applied more important than the place of the trial? Or, as the old saying goes is the defendant more interested in where he is hanged than if he is hanged? See The Renquist Court and Horizontal Federalism: An Evaluation and a Proposal for Moderate Constitutional Constraints on Horizontal Federalism at http://ssrn.com/abstract=597103 .
Posted by: Scott Fruehwald | Aug 17, 2011 2:08:56 PM
Rather than being something new, isn't the articulation of horizontal federalism in Kennedy's opinion in Nicastro simply harkening back to Pennoyer v. Neff?
Posted by: David Levine | Aug 19, 2011 1:15:55 PM
Scott, I agree that the due process inquiry should not categorically provide stricter scrutiny to state action invoking adjudicative jurisdiction than to state action invoking legislative jurisdiction. But I am not sure that choice of law is always more important than choice of forum. Here is one scenario where choice of forum might be more important than choice of law: suppose that a plaintiff from state X sues a defendant from state Y in a court in state X, and that X’s law is only slightly different than Y’s law. If litigating in the forum would impose burdens on the defendant that preclude mounting an effective defense, then arguably the choice of forum inquiry is more important to the defendant than the choice of law inquiry.
Posted by: Allan Erbsen | Aug 19, 2011 4:59:28 PM
David, I agree that the plurality’s approach more closely tracks Pennoyer’s emphasis on sovereignty than does the dissent’s approach. However, I think that the plurality’s treatment of federalism in Nicastro differs from the majority’s treatment of federalism in Pennoyer. The opinion in Pennoyer envisioned a federal system in which lines on a map neatly divided regulatory authority into distinct spheres. Under Pennoyer, New Jersey’s power ends at New Jersey’s borders: it cannot summon noncitizens into the state. In contrast, the plurality in Nicastro acknowledges that borders are permeable. New Jersey can in theory reach outside its borders to grab a British defendant, but only under certain circumstances. Defining those circumstances requires a more nuanced assessment of horizontal federalism than Justice Field provided in Pennoyer.
Posted by: Allan Erbsen | Aug 19, 2011 5:01:18 PM