SCOTUS Personal Jurisdiction Decision Has Far-Reaching Implications

On March 25, 2021, in the case of Ford Motor Co. v. Montana Eighth Judicial District Court et al. the Supreme Court of the United States rejected arguments by Ford Motor Company (Ford) that they should not be subject to personal jurisdiction in two product liability cases (one in Montana and one in Minnesota) because they are not headquartered nor incorporated in either state. This decision has far-reaching implications for manufacturers across the board, but in particular, has the potential to cripple many small to midsize businesses already stretched by thinning margins in the wake of the pandemic.

About the SCOTUS Ruling

In the March 2021 decision,  SCOTUS reviewed two cases from Montana and Minnesota, where Ford was sued for allegedly selling defective auto parts, which resulted in injury to one plaintiff and the death of another plaintiff. Ford argued that it should not be subject to personal jurisdiction in either Montana or Minnesota unless its conduct in those states gave rise to the plaintiffs’ claims. Specifically, Ford argued that it should not be subject to personal jurisdiction in these two states unless the plaintiffs could show that Ford had designed, manufactured, or sold in these states the particular vehicles involved in the accidents. In a rare 8-0 unanimous decision, SCOTUS rejected this argument and held that Ford’s activities in these states was sufficient to support a finding of personal jurisdiction in both cases.

Potential Impact on Small-to-Midsize Manufacturers

The decision in this case could prove extremely problematic for small to midsize businesses, not just because the risk of liability is significantly heightened, but the economic impact should a small business be subject to this ruling could prove devastating. Imagine the owners of a Virginia mom-and-pop store having to fly across the country to litigate in Nevada because a Nevada citizen was injured by one of their products. The costs associated with travel, lodging, and litigation can add up quickly, especially if it is a contentious suit. This may not be a huge issue for a bigger company, but for a smaller business, this could really cut into profit margins, which itself could put the entire business at risk.

Litigation is also often time-consuming. When dealing with a small business that may only have a few employees, or even just one or two owners working together. Asking one or both to be away from the business to litigate in another state could cause permanent damage the business. Let’s face it, if the pandemic taught us nothing else, it proved that time spent away from the business is money lost, which is an obvious issue for small and medium sized businesses.

Broader Litigation Impact

Advances in technology have led many businesses to adopt ecommerce platforms to help them capture sales from a growing cohort of online buyers. This can be a lucrative move for small businesses that are trying to gain more exposure and sell their products in other states. However, an issue of recent contention is determining which states can exert personal jurisdiction over businesses that sell their products online. This is an area many expected might be addressed by SCOTUS in the Ford case, but the Justices were mostly silent, leaving it up to the states to make a determination on specific personal jurisdiction for ecommerce-related litigation.  That kind of uncertainty could be very unsettling for small business owners who sell products online to buyers, for instance, across five states. The implications of the Ford decision could mean that business owners can be sued and taken to court in any of those five states, which could be disastrous for the small business owner.

Another area to watch is climate litigation.  There have been a number of climate cases around the country that have essentially been “on pause” while waiting for SCOTUS to rule on the Ford case.  In King County, Washington, for example, the County filed suit against Exxon Mobil and four other energy companies to hold them responsible for knowingly contributing to climate disruptions and putting the residents of King County at greater risk of natural disasters as a result.  Exxon Mobil filed a motion to dismiss, arguing the mere existence of fuel tanks, gas stations, or other equipment in the County was not sufficient to establish personal jurisdiction. A federal court judge froze those proceedings last year in response to the motion, citing the Ford case and a similar climate-related petition before SCOTUS. With the Ford decision now decided, it is unlikely Exxon Mobil will prevail on their motion and this case, along with several others around the country, may advance beyond the question of personal jurisdiction.

An interesting twist to this decision is its potential applicability in financial services litigation.  Currently, banks and lending companies have asserted principles of general jurisdiction to swat down claims in jurisdictions where they are neither headquartered nor incorporated.  It’s possible plaintiffs may now argue that the Ford decision makes it easier for courts to assert personal jurisdiction over foreign or out-of-state financial institutions, which would be a reversal of precedent set in the 2014 SCOTUS decision of Daimler AG v. Bauman.

Another interesting wrinkle raised by this Ford decision may affect the proliferation of privacy litigation, which has been trending up for years, as corporate entities have grappled with the fallout from data breaches. Privacy, in the context of data collection, is an area of law that often resembles the undeveloped and untamed “wild wild west,” in which plaintiffs often raise new and untested arguments.  In the context of the Ford decision, it is conceivable that a plaintiff could sue in a friendlier forum and argue the applicability of personal jurisdiction in that forum simply because a company’s privacy policy applies to consumers in any state.  It’s also conceivable this argument could be easily defeated because, as mentioned previously, the Ford decision does not directly address issues of ecommerce, which shares many overlaps with privacy litigation.

Lastly, this decision may give rise to forum shopping, as Plaintiffs look to sue in jurisdictions that have a history of Plaintiff friendly verdicts.

Key Takeaways and Next Steps

In all likelihood, the Ford decision by SCOTUS has set up a high degree of probability that the issue of personal jurisdiction will be before them again, sooner rather than later.  Despite that, and the fact that there are more questions left unanswered than are answered, businesses must begin to carefully way their commercial interactions across state lines.  A particularly important consideration for small-to-midsize businesses and manufacturers is the evaluation of liability risk in the event of a cross-border dispute, as the question of personal jurisdiction gains applicability across many types of litigation.

Rob Glickman is the Managing Principal at the Cleveland, OH-based law firm McCarthy, Lebit, Crystal & Liffman. 

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Contributing Advisors