Personal jurisdiction is the power of a court to adjudicate and enforce its orders over a person (or entity). Under both federal and state common law, when a lawsuit is commenced, a defendant must raise its objection to personal jurisdiction, if there is one, either in its answer or in a pre-answer motion to dismiss the complaint. If the defense is
raised in an answer, the defendant must ultimately move to dismiss at some point in the proceeding. If not timely raised, the defendant waives or forfeits the defense.
Most people want no part of the technicalities of raising a jurisdictional defense, and leave it to their attorney’s to handle these details. But clients should be aware of certain fundamental principles and the consequences of not abiding by them. A recent decision handed down by the U.S. Court of Appeals for the Second Circuit (New York, Connecticut and Vermont) underscores the importance of when and how to assert a jurisdictional defense. As the case shows, a jurisdiction defense should be raised with the court by way of a motion to dismiss early in the process.
Hamilton v. Atlas Turner Inc., 197 F.3d 58, (2d Cir. 1999), cert. denied, 53 U.S. 1244 (2000), was an asbestos-related product liability lawsuit. Hamilton was diagnosed with pleural effusion in 1993 and mesothelioma in 1994. That same year, he commenced an action in federal court in the Southern District of New York against a number of defendants, including Atlas Turner Inc., a Canadian corporation. In the complaint, Hamilton alleged that Atlas was one of the manufacturers of asbestos products that he was exposed to between 1959 and 1961, when he worked as a boilerman in the U.S. Navy.
Atlas filed an answer in June 1994 that included an affirmative defense that, being a Canadian corporation, the federal court in New York lacked personal jurisdiction over Atlas.
Hamilton died in November 1994 and the lawsuit was continued by his estate. Shortly thereafter, the case was referred to the Multidistrict Litigation Panel (MDL),1 The MDL transferred the Hamilton case, along with a number of asbestos claims, to the Eastern District of Pennsylvania for discovery and other pretrial proceedings. In 1997, more than three years later, the case was transferred back to the Southern District of New York for trial.
In August, 1998, more than eight months after the case was returned to New York, Atlas moved to dismiss the lawsuit for lack of personal jurisdiction. The New York federal district court denied the motion as premature, noting that discovery was incomplete in this area, and that the motion could be renewed upon a fuller record. In October, 1998, after a full trial on the merits, the jury awarded more than $4 Million to the executrix of Hamilton’s estate.
After the verdict, Atlas again moved to dismiss for want of personal jurisdiction. This time, the district court granted the motion and dismissed the action, holding that Atlas had not implicitly waived its right to object to jurisdiction. Hamilton appealed.
On appeal, a unanimous Second Circuit reversed the lower court’s ruling, holding that its decision to dismiss the action was an abuse of its discretion. The Second Circuit held that Atlas had forfeited its right to object to the court’s personal jurisdiction, pointing to four distinct opportunities that Atlas had to move to dismiss. During the approximately four years that passed between the filing of its answer and jurisdiction defense in 1994 and when Atlas finally moved to dismiss in 1998, Atlas could have made a motion:
- In the five months between the filing of the answer and the MDL transfer;
- At the time of the MDL transfer, when it affirmatively asked for the transfer instead;
- During the three years that the matter was pending before the MDL; and
- Promptly after the case was remanded to the Southern District of New York in December, 1997, instead of waiting eight months.
Precisely why Atlas waited so long is not discussed in the decision, nor is it apparent from the facts. Defendants often assert the defense of lack of personal jurisdiction in their answers, rather than making a pre-answer motion. There are a number of significant reasons why:
- In seeking to defeat a motion to dismiss for lack of personal jurisdiction, a plaintiff is generally held to a lower standard of proof in a motion that is made prior to discovery;2 if the motion is pre-discovery, a plaintiff need only make a prima facie case, whereas, if the motion is post-discovery, the plaintiff must show jurisdiction by a preponderance of the evidence;
- Motions practice increases the cost of litigation, particularly when an evidentiary hearing is required, as is often the case with jurisdiction motions made prior to discovery – the cost can often be reduced by waiting for discovery and/or combining a jurisdiction motion with other requests for relief, such as a motion for summary judgment;
- Courts are hesitant to dismiss lawsuits without any discovery, and evidence obtained during discovery may in fact bolster the argument that jurisdiction does not exist;
- If discovery is going to take place, a defendant involved in multi-district litigation may well benefit from the centralization of discovery and other pre-trial proceedings;
- The lower court judge may indicate a leaning towards a finding of jurisdiction, and discovery may provide more evidence to convince the court otherwise;
- Where, as with the Hamilton case, the case is being transferred to another jurisdiction for pretrial proceedings, the transferee court may be more sympathetic to the jurisdiction argument, and the party may therefore wish to wait until after transfer; Similarly, if the case has already been transferred, the transferee court may be less sympathetic, and therefore, the party may wish to wait for transfer back to the original court;
A curious aspect of this decision is that, when Atlas did finally move to dismiss, the lower court actually denied Atlas’ motion as premature. Atlas similarly urged the Court of Appeals that it did not move to dismiss earlier, because if it had, the plaintiff would have simply argued that discovery was not yet complete, as the lower court had concluded. An unpersuaded Court of Appeals stated that Atlas never gave the lower court the chance to consider or respond to that objection. Instead, by withholding the motion, Atlas gambled that it could raise the jurisdiction issue on the eve of trial, in case a trial occurred. This is an odd statement, considering the lower court’s conclusion in August, 1998 that the motion was premature.
Notwithstanding the Court’s discussion of the many opportunities to move to dismiss during the lawsuit, the delay which probably broke the back of Atlas’ argument was one between December, 1997 and August, 1998. If Atlas had moved in December, 1997, when discovery was essentially completed and the case had just been remanded to the Southern District, it is highly questionable whether the Court of Appeals still would have found the lower court’s dismissal to have been an abuse of discretion. Atlas could have argued that the discovery was necessary to impose a higher burden of proof on Hamilton, and that it moved immediately upon completion of the bulk of discovery.
Hamilton clearly instructs federal court litigants that they should not wait until the eve of trial to move to dismiss on personal jurisdiction grounds.3 The point at which the right to move to dismiss for lack of personal jurisdiction is forfeited if not made is not a bright line rule, but is determined on a case by case basis. The lesson of Hamilton is that, if the motion to dismiss is not made before the answer, once discovery is complete, it had better be imminent.
- The MDL is a federal court panel designed to consolidate and organize pretrial proceedings, such as discovery, in situations where there are numerous lawsuits in multiple states of the same nature or involving common parties (such as in the much-litigated area of asbestos exposure). ↩
- Moore’s Federal Practice, Section 12.31 (Matthew Bender 3d Ed.) ↩
- It should be noted that some New York State case law applies a more lenient standard than do the federal courts. ↩