When Terrorists Default, Should Courts Consider Personal Jurisdiction?

A case from last week, Kaplan v. Hezbollah, illustrates the intricacies of consent-based personal jurisdiction in the context of default judgments and raises questions about the due process rights of terrorist organizations (and other unpopular defendants).

U.S. citizens injured by Hezbollah missile attacks in Israel sued under the Antiterrorism Act (ATA). Hezbollah did not enter an appearance. The district court dismissed the ATA claims as within the “act of war” exception, but the Court of Appeals for the District of Columbia found that the district court lacked personal jurisdiction.  The district court had not addressed personal jurisdiction, and it was the plaintiffs who had asked the Court of Appeals to rule on personal jurisdiction so that the judgment would be enforceable. The case was transferred to the Eastern District of New York – where venue was permissible under the ATA and where the defendant had more significant contacts with the forum state – and the plaintiffs (after more procedural wrangling) moved for default judgment against Hezbollah.

Magistrate Judge Tiscione Dismissed for Lack of Personal Jurisdiction

Although the plaintiffs met the first two ATA requirements—proper service and a statutory basis for personal jurisdiction—the exercise of personal jurisdiction did not comport with Fifth Amendment due process under a “minimum contacts” approach, Judge Tiscione reasoned. The defendant did have minimum contacts with the United States as a whole because it allegedly engaged in a conspiracy with Alexei Saab—a member of the organization who has conducted various trainings and reconnaissance missions for Hezbollah across the world—to survey potential attack sites in the United States. But the plaintiffs did not establish that the attacks that injured them arose out of Saab’s activities in the United States because there was no evidence of any relationship between Hezbollah’s contact with Saab and its attacks in Israel.

District Judge Cogan Disagreed

Judge Cogan did not adopt the magistrate judge’s recommendation, however, reasoning instead that personal jurisdiction is not a necessary condition for entering a default judgment. Though most circuits require an examination of personal jurisdiction, in the Second Circuit under Sinoying Logistics PTE Ltd. v. Yi Da Xin Trading Corp., apparently a court “may first assure itself that it has personal jurisdiction” when a defendant declines to appear. Judge Cogan concluded that for default judgments, personal jurisdiction should be considered when jurisdiction is clearly absent or highly unlikely, but that courts should “hesitate” before examining personal jurisdiction over the defaulting defendant if the question is “close or unsettled.”  He gave two reasons that courts should hesitate to examine personal jurisdiction before entering a default judgment.  First, personal jurisdiction is waivable.  It is clear, the judge pointed out, that had Hezbollah appeared would have waived the defense.  Why should the defendants be better off not appearing at all?  Second – and relatedly – when a defendant actually appears, the court is better able to make an informed decision about personal jurisdiction because it can order discovery. In this case, for example, had Hezbollah appeared, the plaintiffs may have been able to obtain discovery that connected Saab’s activities to the attacks at issue.

Should Judges Consider Personal Jurisdiction If the Defendant Does Not Appear?

Judge Cogan and Magistrate Judge Tiscione are both wrong.  Judge Tiscione erred in dismissing the case (although he did so consistent with the approach taken in many circuits, as discussed below).  Defendants can waive their personal jurisdiction defense – at least they waive the opportunity to raise it in the forum entering the initial judgment – by not entering an appearance (or not otherwise contesting personal jurisdiction through a special appearance or the like).  In my view, if they choose this route, the judge should enter a default judgment against the defendant without making a finding on personal jurisdiction, which can be contested at the enforcement stage.  Magistrate Judge Tiscone would have dismissed the case for lack of personal jurisdiction rather than entering a judgment in favor of the plaintiffs.

Judge Cogan was correct that this case should not be dismissed, but erred by reasoning that district courts should consider personal jurisdiction in default judgment cases that are “clear” or in which personal jurisdiction is “highly unlikely.”  In my view, they should not, even if plaintiffs want them to. Instead, the defendant may contest the personal jurisdiction of the court that issued the judgment when (and if) enforcement is sought. Judge Cogan reasoned that refusing to enter a default judgment when personal jurisdiction is clearly lacking saves judicial resources because doing so obviates the need for an enforcement action at all.  But a system in which district court judges sometimes consider personal jurisdiction and sometimes do not based upon their sense of whether personal jurisdiction is “highly unlikely,” introduces uncertainty that itself consumes judicial resources, especially because without the participation of the defendant, the finding on personal jurisdiction cannot have preclusive effect.

Better to have a bright line rule.  And the better bright line rule is that if the defendant does not appear, the court should issue default judgment without evaluating personal jurisdiction and potentially dismissing the case instead.  Yes, several other Circuits (including the Ninth and Tenth) have held to the contrary by requiring that courts consider personal jurisdiction before entering a default judgment. The D.C. Circuit has reached the same conclusion, leading to confusion about what courts must actually do in order to ascertain personal jurisdiction in the absence of the defendant, including whether they should hold evidentiary hearings or instead rely upon the pleadings. Courts reason that a personal jurisdiction inquiry is necessary before entering a default judgment because if there is no personal jurisdiction, the court has no power to enter judgment.  That reasoning is not convincing.  No matter what conclusion the court reaches about personal jurisdiction, the defaulting party may contest it at the enforcement stage.

The magistrate judge in the Kaplan case may have considered personal jurisdiction because he thought he was required to do so – in other words, he might have read Sinoying differently to require a personal jurisdiction inquiry (and potential dismissal) in every case (as other circuits do). But at least that approach is better than Judge Cogan’s discretionary one.

Due Process for Unpopular Defendants

Finally, although Judge Cogan acknowledges that terrorist organizations must be afforded due process rights, he asserts that courts may consider the “defendant’s identity” when they exercise their discretion on whether to evaluate personal jurisdiction (or not) over defaulting defendants.  There is no reason, the opinion says, that an organization widely known to be responsible for the deaths of innocent people should benefit from the court’s discretion.  This part of the opinion demonstrates why district courts should not have more discretion and why a bright line rule is preferable. Although Judge Cogan says that unpopular defendants deserve the same due process rights as other defendants, he then goes on in the same paragraph to deny Hezbollah the due process rights he would afford to other organizations and other defendants.  Doing so violates the very clause of the Constitution he purports to apply – the Fifth Amendment Due Process Clause.