Fuld: Right for the Wrong Reason
September 13, 2023
In a major decision interpreting Mallory v. Norfolk Southern Railway Co. (2023), the Second Circuit in Fuld v. Palestine Liberation Organization held that personal jurisdiction may not be established by relying on the “deemed consent” provision of the Promoting Security and Justice for Victims of Terrorism Act (“PSJVTA”). A thorough review of the decision can be found here.
In this post, I suggest that the Second Circuit was right in Fuld because the court remained true to precedent going back to at least the 1950s, but that its emphasis on an exchange for a benefit is misleading at best. On this blog and elsewhere, I keep finding myself in the position of defending the Mallory decision, not because I think it is right, but (I think) because I see it as more consistent with prior law than many of its critics.
How Fuld Was Right: No Consent-Based Jurisdiction
To begin with, I think the Fuld decision was right—by which I mean consistent with precedent—when it held that a statute cannot simply convert in-state acts into “deemed consent,” as Congress did here. But this insight is not new. In the early days when courts were trying to break out of the shackles of Pennoyer v. Neff (1878), courts frequently used legal fictions to show that the in-state acts of a defendant were sufficient for personal jurisdiction. Courts might say that a corporation’s in-state acts made it “present” in the jurisdiction—with presence being one of Pennoyer’s well-established bases of jurisdiction. In other cases, often relying on state statutes, courts concluded that certain in-state acts constituted “implied consent” to jurisdiction—with consent also going back to well before Pennoyer as a basis for jurisdiction.
But then came International Shoe (1945). The central insight of International Shoe was that in-state acts, on their own, should be a sufficient basis for personal jurisdiction to satisfy the Due Process Clause. International Shoe, therefore, made the “fictional” uses of presence and consent irrelevant. A court did not need to pretend that in-state acts amounted to presence or consent, because presence and consent were no longer the only bases on which jurisdiction could be constitutionally asserted.
An illustration is the nonresident motorist statute. The prototypical nonresident motorist statute provided that driving a car in a state was implied consent to personal jurisdiction for motor vehicle accidents in the state. In Hess v. Pawloski (1927), the Supreme Court held that jurisdiction based on Massachusetts’ nonresident motorist statute was constitutional because the out-of-state driver impliedly consented to jurisdiction by driving in the state. The Court also observed that this type of jurisdiction was an exchange, with the driver getting the benefits of using the state’s roads.
But Hess was almost two decades before International Shoe. After International Shoe, it was not necessary to say that a nonresident driver who had an accident in Massachusetts impliedly consented to jurisdiction in Massachusetts because, under International Shoe, the court could simply find that there had been minimum contacts with the forum (specific jurisdiction). Indeed, in Olberding v. Illinois Central Railroad Co. (1953), Justice Frankfurter rejected the implied-consent theory of jurisdiction as applied to a nonresident motorist statute, memorably referring to that fiction as a “horse soon curried.” There was no need in 1953 to resort to implied consent because the law allowed in-state acts to support jurisdiction.
Notably, the Fuld decision approvingly cited Hess—but did not mention Olberding—as an example of proper consent-based jurisdiction, explaining that Hess approved of the Massachusetts law because it extracted consent in exchange for a benefit. But this is the wrong way to think about Hess today. The result in Hess is right because everyone agrees that you can get specific jurisdiction over a defendant who gets in a car accident in the forum state. Hess is not, or at least should not be, a “consent” case today.
How Fuld Was Wrong: Exchange for a Benefit
Did I write this post to correct the record on a 1927 decision or to use the phrase a “horse soon curried”? Yes, but not only for those reasons. The Fuld decision’s emphasis on an exchange for a benefit risks distorting the law in ways that are too narrow, too broad, and too misleading about other types of jurisdiction.
First, Fuld is too narrow because its emphasis on the exchange, I fear, distracts from the core type of consent-based jurisdiction: express consent. Here’s a law-professorly hypothetical. Imagine that Pennsylvania adopts a statute that requires the Pennsylvania Department of State to make available a form called the General Jurisdiction Consent Form. The top of the form states: “Any person who would like to consent to general jurisdiction in the courts of Pennsylvania shall sign this form, acknowledging that there is no/none/zero benefit exchanged.” If a party signed this form, then I do not see any Due Process problem with finding general jurisdiction independent of any exchange for a benefit. The reason is that express consent, unlike the implied consent of Hess, has never been removed from our law.
(By the way, one thing that made Mallory a difficult case—though the Court did not grapple with this issue specifically—is whether the Pennsylvania registration form was express consent. Had Pennsylvania included a General Jurisdiction Consent Clause on the form, then I would say that its statute was consistent with longstanding precedent.)
Second, Fuld’s emphasis on the exchange is also too broad. The unresolved issue in Mallory is whether an express consent statute that satisfies the Due Process Clause is unconstitutional for some other reason, for example as an unconstitutional condition or a violation of the Dormant Commerce Clause. But recall my hypothetical statute with no benefit. Such a statute shouldn’t create a problem under these clauses because the consenting party is doing so without pressure from the state. It is only when there is an exchange of benefit that a state might transgress constitutional limits, putting an unconstitutional condition on the exercise of a right or burdening interstate commerce. Of course, the Second Circuit did not say that an exchange of benefits immunized a state law from challenges under these other provisions. But I worry that emphasizing an exchange for a benefit only muddies the waters of the law.
Third and finally, at a more theoretical level, I worry that the court’s emphasis on an exchange of benefits for consent obscures the “exchange of benefits” that undergirds general and specific jurisdiction law. At least part of the reason that courts can exercise general and specific jurisdiction is because defendants over whom there is personal jurisdiction receive some of the benefits of state law. In Worldwide Volkswagen (1980), for example, the court found that there were not minimum contacts supporting specific jurisdiction, remarking that defendants “carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law.” Shaffer v. Heitner (1977) approved of in rem jurisdiction on a social contract theory because “the defendant’s claim to property located in the State would normally indicate that he expected to benefit from the State’s protection of his interest.” And in an older general jurisdiction case, the Supreme Court in Milliken v. Meyer (1940) held that domicile provided general jurisdiction because of a reciprocal exchange: “The state which accords him privileges and affords protection to him and his property by virtue of his domicile may also exact reciprocal duties.” These cases suggest a social-contract theory of personal jurisdiction that goes well beyond the mere reciprocal exchange of consideration that defines the law of contract. And I think it would be a problem if personal jurisdiction law forgets the social contract in favor of the ordinary contract.
The Second Circuit got it right in Fuld—the PSJVTA is not some magic elixir that can turn unrelated conduct into consent to jurisdiction. But the court’s reasoning, which links consent-based jurisdiction to an exchange for a benefit, might lead to mischief in future cases trying to define the limits of personal jurisdiction.