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12/11/2020

Stephen Sachs on Originalism, Personal Jurisdiction and the Ford Case
Michael Ramsey

At Volokh Conspiracy, Stephen Sachs (Duke): Originalism and Personal Jurisdiction: Some Hard Questions. From the introduction:

I promised quite a while ago to say more about Ford Motor Co. v. Montana Eighth Judicial District Court, the personal jurisdiction case heard this term. (Transcript here; Howard Wasserman's SCOTUSBlog summary here.) The Justices seemed to find the case difficult, which it is—both under modern doctrine and under the original rules.

At oral argument, the parties declined (alas!) to argue for abandoning International Shoe and returning to first principles. Under the prior rules of personal jurisdiction, the plaintiffs might have had a way to win. But it would have involved very different arguments than the ones they put before the Court, which under the traditional rules ought to lose. That makes it hard to say which party's victory is more compatible with first principles. And it reminds us that fixing personal jurisdiction is going to be a task for Congress, not only for the courts.

And from the core of the originalist analysis:

As I've argued before, the relevant source of law here isn't the Fifth or Fourteenth Amendments, but general and international law. (For more on why, see the sources in my previous post.) In the nineteenth century, for jurisdiction over an individual, those rules usually required in-state service of process. Except for weird cases like diplomats or invading armies, people within a state's borders owed that state's government a temporary allegiance. [Ed.: Yes, meaning that they were "subject to the jurisdiction thereof"!] They had to listen to what that government said, which included what its courts said—and other governments would usually hold them to it, even after they left town. By contrast, most people outside a state's borders didn't have to listen to what its government said. If you were a citizen or resident who happened to be abroad, you might owe your home jurisdiction a permanent allegiance; if its statutes allowed for something other than in-state service, you might be bound by those statutes too. But an absent nonresident (like Marcus Neff) wasn't bound to come when called, and in the meantime he wasn't obliged to submit to the courts' decisions.

For corporations, the rules were more complicated, because corporations were creatures of law. If six Montanans wanted to form a single entity to own Montana property, enter Montana contracts, or sue or be sued in Montana courts, it was up to Montana corporate law whether to let them. (And often the answer was "no": corporate franchises were hard to come by.) ...

By default, then, a State A corporation could only sue or be sued in State A, because that's the only place where it really existed as a legal entity with corporate privileges. Everywhere else, it was just a group of individuals. But other states could choose to recognize the corporation and to extend it privileges by comity—and they generally would, absent some local rule to the contrary. If an out-of-state citizen like Henry Ford wanted to buy a plot of land in Montana and sell cars there, or to send agents into Montana to enter contracts on his behalf, he could; a law forbidding him on the basis of his out-of-state citizenship would have violated Art. IV's Privileges and Immunities Clause. But corporations weren't guaranteed any privileges and immunities, so they had to get the state's permission, express or implied. And this permission could be conditioned on various things, including a consent to be sued in its courts.

The "implied" part was what made things confusing. What if an out-of-state corporation tried to exercise corporate privileges in Montana, for which Montana required corporate registration? One response might be to hold the acts ultra vires and invalid, or perhaps to treat them as the acts of the individual shareholders, unsheltered by limited liability. But another was to recognize the corporation by comity, serve process on their in-state agent, and to apply what the Court in Old Wayne Mutual Life called a kind of estoppel. If a corporation claimed to exercise corporate privileges in another state, "it will be deemed to have assented to any valid terms prescribed by that commonwealth as a condition of its right to do business there, and it will be estopped to say that it had not done what it should have done in order that it might lawfully enter that commonwealth and there exert its corporate powers." In other words, Ford can't claim to be a real corporation in Montana when it comes to forming contracts, but turn around and claim that they're not a real corporation in Montana when it comes to getting sued on those contracts.

The interesting next section is: "How did we get from there to here?"

I think this is probably right.  It seems like it might lead to unfortunate results (though that shouldn't deter an originalist).  But maybe it wouldn't: couldn't corporations (that were worried about expansive state jurisdiction) operate through locally-incorporated subsidiaries, so that the parent itself never did business in the state and so never had to consent to the state's jurisdiction?