Case Notes

MA Federal Court Holds Defendants Not Subject to General Personal Jurisdiction

In Federal Home Loan Bank of Boston v. Ally Financial, Inc., 2014 U.S. Dist. LEXIS 140975 (D. Mass. Sep. 30, 2014), a plaintiff bank sued, among others, certain credit rating agencies in the United States District Court for the District of Massachusetts, alleging they understated the risk of private label mortgage-backed securities sold to the plaintiff. The agencies moved to dismiss for lack of personal jurisdiction, arguing their contacts with Massachusetts were not such as to render them “essentially at home” in the state, as is required for the exercise of general or “all-purpose” jurisdiction. The court denied the motion, but shortly thereafter the United States Supreme Court held in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), that “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there,” the paradigmatic examples being the defendant's place of incorporation or principal place of business. The defendants then moved for reconsideration of their motion to dismiss. The plaintiff opposed, and also argued that even if the court lacked personal jurisdiction, it should sever and transfer the claims against the rating agencies to the Southern District of New York, where personal jurisdiction existed.

Regarding general jurisdiction, the court first noted that the Supreme Court's opinion in Daimler made clear that whether a defendant is “essentially at home” in the forum state is not determined by the quantity of the defendant's contacts there, as “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” Under this “tighter assessment of the standard,” the rating agencies could not be subject to general jurisdiction. Although they had activities in Massachusetts that generated significant revenue, they had similarly substantial contacts with dozens of other states. Moreover, the agencies were neither incorporated nor had their principal places of business in the state, and there was no indication this was an “exceptional case” under Daimler such that general jurisdiction should be extended beyond those paradigmatic forums.

Regarding the plaintiff's request for severance and transfer, there were two statutes that potentially authorized such a transfer, but there were unsettled questions regarding the applicability of each. The plaintiff principally relied on 28 U.S.C. ' 1631, which permits a “court” that finds “there is a want of jurisdiction” to transfer a suit to another “court” in which the suit “could have been brought.” There is substantial disagreement among courts, however, as to whether the statute applies when either subject matter or personal jurisdiction is lacking, or only when subject matter jurisdiction is lacking. Although the United States Court of Appeals for the First Circuit has acknowledged this controversy, it has declined to weigh in. The district court held that the statute applies only when subject matter jurisdiction is lacking, noting the legislative history indicates the statutory objective was to ameliorate that kind of defect, and there is some textual support for that position because the statute's definition of “court” includes appellate and administrative tribunals where subject matter jurisdiction is often an issue.

The plaintiff also argued that the case could be transferred under 28 U.S.C. ' 1406(a), which authorizes transfer of a case “laying venue in the wrong district ' to any district or division in which it could have been brought.” Notwithstanding the statute's textual limitation to venue-related issues, it has commonly been cited by courts as authorizing a transfer to cure a lack of personal jurisdiction. The court noted, however, that although it is clear that where venue is improper, the statute authorizes transfer to a district with proper venue even if the defendant was not subject to jurisdiction in the original district, it remains uncertain whether the statute “may be a vehicle for transfer when venue is proper in the original district, as here ' that is, where there is no venue defect calling for correction.” Accordingly, the court also declined to transfer the case under ' 1406(a), and dismissed all claims against the rating agencies to permit an immediate appeal to the First Circuit to clarify the interpretation of both transfer statutes. ' David Geiger , Foley Hoag

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MA Federal Court Holds Defendants Not Subject to General Personal Jurisdiction

In Federal Home Loan Bank of Boston v. Ally Financial, Inc., 2014 U.S. Dist. LEXIS 140975 (D. Mass. Sep. 30, 2014), a plaintiff bank sued, among others, certain credit rating agencies in the United States District Court for the District of Massachusetts, alleging they understated the risk of private label mortgage-backed securities sold to the plaintiff. The agencies moved to dismiss for lack of personal jurisdiction, arguing their contacts with Massachusetts were not such as to render them “essentially at home” in the state, as is required for the exercise of general or “all-purpose” jurisdiction. The court denied the motion, but shortly thereafter the United States Supreme Court held in Daimler AG v. Bauman , 134 S. Ct. 746 (2014), that “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there,” the paradigmatic examples being the defendant's place of incorporation or principal place of business. The defendants then moved for reconsideration of their motion to dismiss. The plaintiff opposed, and also argued that even if the court lacked personal jurisdiction, it should sever and transfer the claims against the rating agencies to the Southern District of New York, where personal jurisdiction existed.

Regarding general jurisdiction, the court first noted that the Supreme Court's opinion in Daimler made clear that whether a defendant is “essentially at home” in the forum state is not determined by the quantity of the defendant's contacts there, as “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” Under this “tighter assessment of the standard,” the rating agencies could not be subject to general jurisdiction. Although they had activities in Massachusetts that generated significant revenue, they had similarly substantial contacts with dozens of other states. Moreover, the agencies were neither incorporated nor had their principal places of business in the state, and there was no indication this was an “exceptional case” under Daimler such that general jurisdiction should be extended beyond those paradigmatic forums.

Regarding the plaintiff's request for severance and transfer, there were two statutes that potentially authorized such a transfer, but there were unsettled questions regarding the applicability of each. The plaintiff principally relied on 28 U.S.C. ' 1631, which permits a “court” that finds “there is a want of jurisdiction” to transfer a suit to another “court” in which the suit “could have been brought.” There is substantial disagreement among courts, however, as to whether the statute applies when either subject matter or personal jurisdiction is lacking, or only when subject matter jurisdiction is lacking. Although the United States Court of Appeals for the First Circuit has acknowledged this controversy, it has declined to weigh in. The district court held that the statute applies only when subject matter jurisdiction is lacking, noting the legislative history indicates the statutory objective was to ameliorate that kind of defect, and there is some textual support for that position because the statute's definition of “court” includes appellate and administrative tribunals where subject matter jurisdiction is often an issue.

The plaintiff also argued that the case could be transferred under 28 U.S.C. ' 1406(a), which authorizes transfer of a case “laying venue in the wrong district ' to any district or division in which it could have been brought.” Notwithstanding the statute's textual limitation to venue-related issues, it has commonly been cited by courts as authorizing a transfer to cure a lack of personal jurisdiction. The court noted, however, that although it is clear that where venue is improper, the statute authorizes transfer to a district with proper venue even if the defendant was not subject to jurisdiction in the original district, it remains uncertain whether the statute “may be a vehicle for transfer when venue is proper in the original district, as here ' that is, where there is no venue defect calling for correction.” Accordingly, the court also declined to transfer the case under ' 1406(a), and dismissed all claims against the rating agencies to permit an immediate appeal to the First Circuit to clarify the interpretation of both transfer statutes. ' David Geiger , Foley Hoag

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