Page 8 - Commercial Litigation

S8 | MONDAY, AUGUST 10, 2015 | Commercial Litigation | NYLJ.COM
CREDIT_BIGSTOCK
BY TIMOTHY P. HARKNESS, DAVID Y. LIVSHIZ
AND SHANNON M. LEITNER
O ver the past five years, the U.S. Supreme Court has issued a series of decisions scaling back the ability of U.S. courts
to exercise personal jurisdiction over foreign defendants in suits concerning conduct occur- ring outside of the United States. Of these, two decisions issued by the Supreme Court con- cerning general jurisdiction, Goodyear Dunlop Tires Operations, S.A. v. Brown1 and Daimler AG v. Bauman,2 have received the majority of
TIMOTHY P. HARKNESS is a partner, DAVID Y. LIVSHIZ is a senior associate and SHANNON M. LEITNER is an associate, at Freshfields Bruckhaus Deringer in New York.
attention, but it is a third decision, Walden v. Fiore,3 which sharply limits the ability of U.S. courts to exercise specific jurisdiction, that may prove to have the most impact.
In Walden, decided in late 2014, the Supreme Court significantly cut back on the ability of lower courts to employ the so-called “effects” test to sustain jurisdic- tion over foreign defendants. Previously, relying on an earlier Supreme Court prec- edent, Calder v. Jones,4 courts had frequently exercised specific personal jurisdiction over a foreign defendant on the basis of the effect that the defendant’s conduct had on the plaintiff in the forum rather than the defendant’s connections with that forum. In Walden, the Supreme Court held that to sustain jurisdiction over a defendant, the court must find that the defendant purpose- fully directed his conduct at a forum itself, not simply that the defendant’s conduct had
a foreseeable adverse effect on the plaintiff in the forum.
While Walden’s full reach is yet to be determined, the Supreme Court’s focus on the need for the defendant to have contacts with the forum, separate and apart from the effects the defendant’s conduct has on the plaintiff in the forum, calls into question the continued constitutional viability of CPLR §302(a)(3)—at least in so far as it extends to “economic,” as opposed to “physical,” torts. In the past, courts frequently exercised jurisdiction over foreign institutions alleged to have committed economic torts, such as conversion or breach of fiduciary duty, out- side of New York but which allegedly injured a New York resident, pursuant to §302(a)(3) of the CPLR. The court’s decision in Walden, however, raises the prospect that such use of §302(a)(3), would no longer pass consti- tutional muster. By contrast, the ability of
New York courts to exercise personal jurisdic- tion over a person standing on the New York border who throws a grenade into New York state and physically injures someone, is not in dispute. In sum, for foreign institutions seek- ing to avoid being dragged into U.S. courts, with U.S. discovery burdens, Walden offers not only new arguments to assert in support of their jurisdictional dismissal motions, but also suggests ways in which these institu- tions should organize themselves and plan their conduct to avoid being hauled into a U.S. courtroom.
The Legacy of ‘Calder v. Jones’
The effects test rejected by Walden had its roots in the Supreme Court’s decision in Calder v. Jones. Calder concerned a libel claim brought in California against the edi- tor of the National Enquirer and one of the
Limiting the ‘Effects’ Test
For Personal Jurisdiction: ‘Walden’