Second Circuit Rejects Consent-Based Jurisdiction over PLO

Last Friday, the Second Circuit issued much-anticipated decisions in Fuld v. Palestine Liberation Organization and Waldman v. Palestine Liberation Organization, cases brought by U.S. nationals against the Palestine Liberation Organization (“PLO”) and Palestinian Authority (“PA”) for injuries sustained during terrorist attacks in Israel. After the Second Circuit held in an earlier decision in Waldman that personal jurisdiction over the PLO was lacking, Congress tried to alter that outcome through statute. In last week’s decisions, the Second Circuit held that the Promoting Security and Justice for Victims of Terrorism Act (“PSJVTA”) is unconstitutional because it asserts personal jurisdiction based on activity that cannot be understood as consent to jurisdiction. It therefore affirmed dismissal of Fuld and declined to recall its prior mandate requiring dismissal of Waldman.

In reaching this conclusion, the Second Circuit applied the Supreme Court’s new personal jurisdiction decision, Mallory v. Norfolk Southern Railway Co. (2023). The appellate court’s reasoning shows how Mallory can be integrated into the existing personal jurisdiction framework and identifies a defensible limit on Mallory’s broad approval of consent-based jurisdiction.

Waldman and Congressional Intervention

The road to last Friday’s decisions stretches back almost twenty years. The Waldman plaintiffs initially sued the PLO and PA in 2004 in the SDNY under the Anti-Terrorism Act (“ATA”), alleging that they provided material support to the perpetrators of terrorist attacks in Israel. After a seven-week trial in early 2015, a jury found the defendants liable and awarded damages of $218.5 million, which was trebled under the ATA to $655.5 million.

In Waldman I (2016), the Second Circuit vacated the verdict and directed the district court to dismiss the case for lack of personal jurisdiction. First, although the Second Circuit recognized that sovereign states may not have due process rights under the U.S. Constitution (an issue unresolved by the Supreme Court), it held that the PLO and PA do because the United States has not recognized either as a sovereign state. Thus, personal jurisdiction must be established over the PLO and PA just as it would need to be for a private citizen or business. Second, the court of appeals held that the difference between the Fifth and Fourteenth Amendment does not materially affect the personal jurisdiction analysis. Thus, even though the Waldman plaintiffs were suing under a federal statute, making personal jurisdiction turn on the Fifth Amendment’s Due Process Clause, the structure of that analysis mirrored that of the Fourteenth Amendment’s Due Process Clause. Third, applying that Fourteenth Amendment analysis, it held that personal jurisdiction was lacking. There was no specific jurisdiction because there was no link between the wrongful conduct (which occurred outside the United States) and the U.S. forum. And in light of the Supreme Court’s then-recent decision in Daimler AG v. Bauman (2014), there was also no general jurisdiction because the PLO is not “at home” in the United States.

Congress responded with the Anti-Terrorism Clarification Act (“ATCA”), which declared that a defendant consents to personal jurisdiction in an ATA action if it accepts certain forms of assistance from the United States or operates an office in the United States pursuant to a waiver of a different statute that otherwise prohibited the PLO from doing so. The Waldman plaintiffs then asked the Second Circuit to recall its mandate in Waldman I in light of the ATCA. In Waldman II (2016), the Second Circuit refused to do so because the defendants had stopped receiving the relevant assistance from the United States and did not operate a U.S. office pursuant to a waiver.

The plaintiffs tried to appeal Waldman II to the Supreme Court, but before the Court could consider the cert petition, Congress passed the PSJVTA. The PSJVTA identified two types of conduct that would constitute consent to personal jurisdiction in an ATA action: (1) making payments to an individual who has been imprisoned for an act of terrorism that injured or killed a U.S. national or to the family of an individual who died while committing an act of terrorism that injured or killed a U.S. national; or (2) maintaining an office or conducting any activity while in the United States on behalf of the PLO or the PA (other than that covered by the UN Headquarters Agreement). In light of the new statute, the Supreme Court granted the cert petition, vacated Waldman II, and remanded the case for further consideration. The Second Circuit in turn remanded the case to the district court, holding in abeyance in the meantime the plaintiffs’ motion to recall the Waldman I mandate. In 2022, Judge George Daniels (SDNY) held that the PSJVTA does not establish constitutionally valid personal jurisdiction over the defendants.

Fuld’s More Direct Path

Shortly after Congress adopted PSJVTA, the family members of an American citizen who was killed on the West Bank filed Fuld against the PLO and the PA. The defendants moved to dismiss for lack of personal jurisdiction, and in January 2022, Judge Jesse Furman of the SDNY held that the PSJVTA’s assertion of consent-based jurisdiction violates constitutional due process. The plaintiffs appealed.

The Second Circuit’s Reasoning

The Second Circuit affirmed in both cases, agreeing with the district court that the PSJVTA’s consent provisions violate the Due Process Clause. Fuld (authored by SDNY Judge John Koetl) contains the panel’s rationale, with Waldman (issued per curiam) incorporating Fuld’s reasoning.

The impact of Mallory is apparent from the outset. Fuld starts by declaring that “[t]he Supreme Court has recognized three distinct bases for exercising personal jurisdiction over an out-of-forum defendant…: general jurisdiction, specific jurisdiction, and consent.” (This is not a sentence I suspect the lower courts would have written a year ago.) Because the parties did not really contest general or specific jurisdiction, the decision focuses on consent—in particular, whether PSJVTA’s implied consent provisions accord with due process. Fuld describes at length different ways that consent to suit can be established, drawing heavily from Insurance Corp. of Ireland v. Compagnie des Bauxites (1982), an until-recently sidelined decision that Justice Jackson’s concurrence in Mallory has recentered.

The PSJVTA is unlike any of these other examples of consent, the Second Circuit reasoned, because there is no government benefit provided in exchange for or conditioned on the defendants’ consent to jurisdiction. The defendants thus cannot be said to have agreed to be subject to U.S. jurisdiction. Congress simply labeled the defendants’ ongoing conduct, which was insufficient to establish either specific or general jurisdiction, as consent. Jurisdiction-by-legislative-fiat does not pass constitutional muster.

Take the second prong of the PSJVTA’s “consent” provision: maintaining an office or conducting any activity in the United States (separate from activity covered by the UN Headquarters Agreement). “[F]ederal law has long prohibited the defendants from engaging in any activities or maintaining any offices in the United States, absent specific executive or statutory waivers,” Fuld points out, and “[t]he PSJVTA does not purport to relax or override these prohibitions.” Thus, there can be no benefit conferred by the defendants’ implied consent to jurisdiction—the predicate activities remain unlawful. Similarly, making payments to people outside of the United States involves no benefit conferred by the U.S. government: no access to domestic markets as in Mallory, no use of state roadways as in Hess v. Pawloski (1927), no preliminary use of the U.S. court system as in Insurance Co. of Ireland. In short, “[t]he defendants in this case cannot be said to have accepted some in-forum benefit in return for an agreement to be amenable to suit in the United States.”

A useful contrast (though not one explicitly invoked in Fuld) are the consent provisions in the ATCA: the acceptance of aid from the U.S. Government or the operation of sanctioned offices. Notably, the PLO and PA stopped accepting those benefits after the ATCA was passed. The PSJVTA was an effort to identify any remaining connection with the United States and transmogrify it into consent. Somewhat ironically, the more estranged the United States is from a foreign entity, the less likely there will be any grace extended by the United States (and accepted by the foreign entity) on which consent to jurisdiction can be premised.  

Mallory and Consent

The Second Circuit in Fuld has identified a defensible limit to Mallory’s potentially far-reaching approval of jurisdiction-by-statute. Simply putting potential defendants on notice that their conduct could subject them to personal jurisdiction is not enough—as Ingrid wrote when reviewing the district court’s decision in Fuld, “Could a California statute deem Daimler’s continued production of automobiles in Germany as ‘consent’ to suit in California?” One place to draw the line is to require some exchange of benefit from which a court can imply consent. In effect, it is an implied contract approach to jurisdiction: there must be consideration for the defendant’s jurisdictional consent.

I agree with the Second Circuit that there must be some limit on a legislature’s ability to simply declare jurisdiction over absent defendants. But more questions remain to be answered about the limit that the Second Circuit has identified.

First is the question left open by Mallory: can the government legitimately withhold the “benefit” on which jurisdictional consent is premised? Justice Alito wrote separately in Mallory to emphasize the potential Dormant Commerce Clause problem of states threatening to exclude out-of-state businesses even from purely domestic markets. (Congress, however, has more leeway that the states in terms of extrinsic limits on the withholding of benefits.)

Another question is the distinction between waiver of a constitutional right and consent. Justice Jackson’s Mallory concurrence very purposefully spoke of waiver, as did Insurance Co. of Ireland. Waiver would seem to encompass more than reciprocal benefits; it includes other conduct by which a defendant can clearly relinquish a constitutional right. The Second Circuit in Fuld could have been more careful to distinguish these terms, which it used interchangeably. Is waiver ultimately a fourth bucket of personal jurisdiction, or simply a separate, ex post occurrence not relevant to the due process analysis?

A third question is how courts’ discussion of consent in the personal jurisdiction context will interact with consent (or waiver) in other constitutional contexts. The Second Circuit invoked the Eleventh Amendment sovereign immunity context to bolster its understanding of consent—but state sovereign immunity is much harder to waive than is an individual right like freedom from jurisdiction (even assuming that waiver and consent are interchangeable). The Second Circuit also took pains to distinguish Fourth Amendment consent-to-search precedent—but to what degree should consent (or waiver) be treated as transsubstantive?

Broader Questions

In addition to these questions about how to operationalize Mallory, Fuld raises broader questions about personal jurisdiction and transnational litigation. Waldman I made two important moves that could be debated. First, it equated the personal jurisdiction analysis under the Fourteenth Amendment with that of the Fifth Amendment. As Fuld notes, the circuits continue to be largely in agreement with that conclusion. But it remains an open question before the Supreme Court, and as the divided Fifth Circuit en banc decision last year in Douglass v. Nippon Yusen Kabushiki Kaisha illustrates, there is an originalist argument for distinguishing between the two.

Second, Waldman I concluded that the PLO and PA have due process rights because they are not recognized sovereign states. As Ingrid previously noted, it feels odd to suggest that non-recognized governing bodies have greater constitutional rights than recognized ones (though recognized ones may benefit from sovereign immunity as a matter of both domestic and international law).

It seems assured that the plaintiffs in Fuld and Waldman will petition the Supreme Court for certiorari. And the Supreme Court is often receptive to such petitions when a lower court has held an act of Congress to be unconstitutional. Whether the Court has any appetite for yet another personal jurisdiction case, however, remains to be seen.