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At issue in this case is whether the United States Supreme Court should grant certiorari to decide whether the due process clause of the Fourteenth Amendment permits a court to exercise personal jurisdiction over an out-of-state company with no contacts of its own in the forum state, but based instead on the forum contacts of another party who has allegedly engaged in a civil conspiracy with the non-resident defendant.
The out-of-state defendant here is Fitch Ratings, Inc., a financial-products ratings agency headquartered in New York. Fitch has no contacts of its own with the forum state, Tennessee. Instead, the plaintiff, First Community Bank, which does business in Tennessee, alleges that Fitch should be imputed with the Tennessee contacts of its alleged co-conspirators, various co-defendant issuers and placement agents for certain asset-backed securities rated by Fitch and purchased by the bank. The bank alleges that the defendants engaged in a conspiracy to over-value the worth of those securities in order to secure their sale to the bank, which purchased the securities in reliance on the allegedly false ratings and then suffered a substantial loss. For jurisdictional purposes, the bank alleges that certain of those co-defendant issuers and placement agents engaged in sales transactions with the bank directly in Tennessee sufficient to establish personal jurisdiction over them in Tennessee. (The parties do not appear to dispute this jurisdictional fact.) And the Tennessee Supreme Court has permitted the bank to attribute the Tennessee contacts of those co-defendants to Fitch, the out-of-state defendant, if the bank can substantiate its claim that the defendants all engaged in a conspiracy to defraud the bank.
Under the Tennessee law of civil conspiracy, as with the law of most states, each co-conspirator is vicariously liable for the conduct committed by co-conspirators in furtherance of the conspiracy. That is, each co-conspirator is an “agent” of the other co-conspirators for liability purposes, to assist the plaintiff by allowing her to recover damages jointly and severally from each co-conspirator. Due process, by contrast, serves the altogether different purpose of protecting the non-resident defendant’s liberty interest in not having to litigate in a remote and unanticipated forum and have to submit to that court’s coercive judgment. “The purpose of this [minimum-contacts] test, of course, is to protect a defendant from the travail of defending in a distant forum, unless the defendant's contacts with the forum make it just to force him to defend there.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 807 (1985). In short, vicarious liability under civil conspiracy law is broad and serves to protect the plaintiff’s interests. By contrast, vicarious personal jurisdiction is a narrow and uncertain concept that serves to protect the defendant’s liberty interests.
In its amicus brief supporting the Petitioner, NELF argued that due process should not permit a court to impute the forum contacts of one party to another, if at all, unless the out-of-state defendant has purposefully availed itself of the forum, such as by substantially directing and controlling the alleged co-conspirator’s in-state conduct. Nowhere does the Tennessee test for “civil conspiracy jurisdiction” require such purposeful availment, and nowhere does the bank allege any such facts. Moreover, the Supreme Court has long rejected as constitutionally inadequate the notion that the exercise of personal jurisdiction can be based on the mere foreseeability of Fitch’s ratings for various financial products winding up in the Tennessee financial market, or in the market of any of the other 50 states, for that matter. “[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (emphasis added). And even if the Tennessee test for “civil conspiracy jurisdiction” did contain a purposeful availment requirement, it would not warrant the separate label of “civil conspiracy jurisdiction.” Instead, the so-called test would merely be a particular application of the unitary minimum-contacts test for personal jurisdiction, established long ago under International Shoe and its progeny, to the context of a civil conspiracy. In sum, NELF argues that the notion of a separate category of “civil conspiracy jurisdiction” is an unnecessarily confusing and conclusory doctrine that should be summarily rejected by the Supreme Court.
Despite NELF’s arguments and the importance of the jurisdictional issue, the Supreme Court denied certiorari on June 27, 2016.
At issue in this case is whether the United States Supreme Court should grant certiorari to decide whether the due process clause of the Fourteenth Amendment permits a court to exercise personal jurisdiction over an out-of-state company with no contacts of its own in the forum state, but based instead on the forum contacts of another party who has allegedly engaged in a civil conspiracy with the non-resident defendant.
The out-of-state defendant here is Fitch Ratings, Inc., a financial-products ratings agency headquartered in New York. Fitch has no contacts of its own with the forum state, Tennessee. Instead, the plaintiff, First Community Bank, which does business in Tennessee, alleges that Fitch should be imputed with the Tennessee contacts of its alleged co-conspirators, various co-defendant issuers and placement agents for certain asset-backed securities rated by Fitch and purchased by the bank. The bank alleges that the defendants engaged in a conspiracy to over-value the worth of those securities in order to secure their sale to the bank, which purchased the securities in reliance on the allegedly false ratings and then suffered a substantial loss. For jurisdictional purposes, the bank alleges that certain of those co-defendant issuers and placement agents engaged in sales transactions with the bank directly in Tennessee sufficient to establish personal jurisdiction over them in Tennessee. (The parties do not appear to dispute this jurisdictional fact.) And the Tennessee Supreme Court has permitted the bank to attribute the Tennessee contacts of those co-defendants to Fitch, the out-of-state defendant, if the bank can substantiate its claim that the defendants all engaged in a conspiracy to defraud the bank.
Under the Tennessee law of civil conspiracy, as with the law of most states, each co-conspirator is vicariously liable for the conduct committed by co-conspirators in furtherance of the conspiracy. That is, each co-conspirator is an “agent” of the other co-conspirators for liability purposes, to assist the plaintiff by allowing her to recover damages jointly and severally from each co-conspirator. Due process, by contrast, serves the altogether different purpose of protecting the non-resident defendant’s liberty interest in not having to litigate in a remote and unanticipated forum and have to submit to that court’s coercive judgment. “The purpose of this [minimum-contacts] test, of course, is to protect a defendant from the travail of defending in a distant forum, unless the defendant's contacts with the forum make it just to force him to defend there.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 807 (1985). In short, vicarious liability under civil conspiracy law is broad and serves to protect the plaintiff’s interests. By contrast, vicarious personal jurisdiction is a narrow and uncertain concept that serves to protect the defendant’s liberty interests.
In its amicus brief supporting the Petitioner, NELF argued that due process should not permit a court to impute the forum contacts of one party to another, if at all, unless the out-of-state defendant has purposefully availed itself of the forum, such as by substantially directing and controlling the alleged co-conspirator’s in-state conduct. Nowhere does the Tennessee test for “civil conspiracy jurisdiction” require such purposeful availment, and nowhere does the bank allege any such facts. Moreover, the Supreme Court has long rejected as constitutionally inadequate the notion that the exercise of personal jurisdiction can be based on the mere foreseeability of Fitch’s ratings for various financial products winding up in the Tennessee financial market, or in the market of any of the other 50 states, for that matter. “[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (emphasis added). And even if the Tennessee test for “civil conspiracy jurisdiction” did contain a purposeful availment requirement, it would not warrant the separate label of “civil conspiracy jurisdiction.” Instead, the so-called test would merely be a particular application of the unitary minimum-contacts test for personal jurisdiction, established long ago under International Shoe and its progeny, to the context of a civil conspiracy. In sum, NELF argues that the notion of a separate category of “civil conspiracy jurisdiction” is an unnecessarily confusing and conclusory doctrine that should be summarily rejected by the Supreme Court.
Despite NELF’s arguments and the importance of the jurisdictional issue, the Supreme Court denied certiorari on June 27, 2016.
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