By Pamela C. Maloney, J.D.
A prior Georgia Supreme Court opinion holding that foreign corporations authorized to do business in the state were Georgia residents for jurisdictional purposes has survived a jurisdictional challenge by a nonresident tire manufacturer.
A tire manufacturer’s motion to dismiss products liability claims brought against it by a Georgia resident, who was injured in a tire failure accident that occurred in Florida, on the ground that the Georgia courts lacked jurisdiction over it because it was a nonresident corporation with only minimal contacts in the state of Georgia was denied by the Georgia Supreme Court. In so ruling, the state high court upheld the constitutionality of its prior decision explicitly holding that a foreign corporation authorized to do business in the state under Georgia’s Business Code was a Georgia resident for jurisdictional purposes (Cooper Tire & Rubber Co. v. McCall, September 21, 2021, LaGrua, S.).
A passenger, who was traveling on a Florida roadway in a vehicle equipped with a rear tire designed, manufactured, and sold by Cooper Tire & Rubber Company, was injured seriously when the tread on one of the rear tires suddenly failed and separated from the remainder of the tire, causing the driver to lose control over the vehicle. The passenger filed a lawsuit against Cooper Tire, setting forth claims for negligence, strict products liability, and punitive damages. Cooper Tire moved to dismiss the action, arguing that as a nonresident corporate defendant with only minimal contacts in Georgia, it was not subject to personal jurisdiction in the state. The trial court agreed, dismissing the case. On appeal, the Georgia Court of Appeals reversed the trial court’s ruling, concluding that under the Georgia Supreme Court’s decision in Allstate Insurance Co. v. Klein, 262 Ga. 599 (422 SE2d 863) (1992), which explicitly held that foreign corporations authorized to do business in the state were Georgia residents for jurisdictional purposes, Cooper Tire was a resident corporation subject to personal jurisdiction.
The state supreme court granted certiorari to reconsider Klein’s general-jurisdiction holding, which the court described as not aligning with a recent line of U.S. Supreme Court cases addressing state courts’ authority to exercise general personal jurisdiction over out-of-state corporations in a manner that accords with the due process requirements of the U.S. Constitution.
General v. specific jurisdiction. Since 1878, when the U.S. Supreme Court established the parameters governing a state court’s authority to assert personal jurisdiction over an out-of-state defendant in accordance with the Fourteenth Amendment’s Due Process Clause in Pennoyer v. Neff, 95 U.S. 714 (24 LE 565) (1878), the High Court has refined the concept of personal jurisdiction over out-of-state corporations, setting up two subsets of jurisdictional authority-general personal jurisdiction and specific personal jurisdiction. State courts could assert general jurisdiction over foreign corporations whose affiliations with the state were so continuous and systematic as to render them essentially at home in the forum state. This is often referred to as the “minimum contacts” requirement.
The exercise of specific jurisdiction rested on an affiliation between the forum and the underlying controversy and required that the out-of-state defendant must have purposefully availed itself of the privilege of conducting business activities within the form. The state supreme court explained that for purposes of establishing specific jurisdiction, many states had enacted long-arm statutes authorizing courts to exercise specific jurisdiction over out-of-state manufacturers. Georgia’s long-arm statute specifies that an out-of-state defendant must do certain acts within the state before he can be subject to specific personal jurisdiction.
Klein holding. The definition of “nonresident” found in Georgia’s long-arm statute formed the basis for the state high court’s opinion in Klein. In that decision, the high court clarified that the definition of “nonresident” in the long-arm statute made it clear that the statute applied solely to the exercise of personal jurisdiction over persons who were nonresidents of the state at the time the act or omission complained of occurred, including a corporation that was not organized or existing under the laws of Georgia and was not authorized to do or transact business in the state at the time a claim or cause of action arose. In contrast, under the Georgia Business Code, a foreign corporation could sue or be sued to the same extent as a domestic corporation.
Reading these statutes together, the Klein court ruled that any corporation that was authorized to do business in Georgia was subject to the general jurisdiction of Georgia’s courts.
Constitutionality of Klein holding. Based on the line of cases following the U.S. Supreme Court’s ruling in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (131 SCt 2846, 180 LE2d 796 (2011) in which the High Court consistently has held that general jurisdiction was proper only when a corporation’s operations were so substantial, continuous, and systematic as to render the corporation essentially “at home” in a state, a determination that would necessarily be made on a case-by-case basis, the tire manufacturer challenged the constitutionality of the consent by registration theory of general personal jurisdiction enunciated in Klein. The tire manufacturer also argued that this theory, which was recognized by the U.S. Supreme Court in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (37 SCt 341, 61 LEd 610 (1917), conflicted with modern due process jurisprudence.
However, Pennsylvania Fire had not been overruled nor was it even addressed by the majority opinions rendered by the U.S. Supreme Court in subsequent rulings on the issue of personal jurisdiction over foreign corporations, the Georgia high court explained. Instead, the U.S. High Court has continued to recognized consent as a proper means of exercising personal jurisdiction over out-of-state corporations. In addition, a number of federal and state courts have concluded that the designation of an in-state agent for service of process in accordance with a state registration statute can constitute consent to personal jurisdiction if supported by the breadth of the statute’s text or interpretation.
The Georgia Supreme Court acknowledge that the state’s Business Corporation Code did not expressly notify out-of-state corporations that obtaining authorization to transact business in the state and maintaining a registered office or registered agent in the state would subject the corporation to general jurisdiction in the state’s courts. However, the general-jurisdiction holding in Klein did notify out-of-state corporations that their corporate registration would be treated as consent to general personal jurisdiction in the state, which was enough to distinguish Georgia from other states in which the registration statute did not create a basis for personal jurisdiction. There was nothing in the statute or the state’s jurisprudence that would put a foreign corporation on notice that by registering with the state it was consenting to personal jurisdiction. Thus, until the U.S. Supreme Court overrules Pennsylvania Fire, federal due process precedent remains binding on the Georgia courts and on the lower federal courts and dictated the conclusion that the general-jurisdiction holding in Klein did not violate federal due process.
Stare decisis. Having decided that Klein’s general-jurisdiction holding met the requirements of federal due process, the state supreme court recognized that there remained a question as to whether that decision should still be followed as a matter of statutory stare decisis. After weighing the stare decisis factors, the Georgia high court found no compelling reason to overrule Klein. First, the reasoning underlying the decision remained sound and was sensible in the context of the case at bar. Second, Klein was almost 30 years old and had been relied on or cited by the state’s courts of appeals in nine cases and by federal district courts applying Georgia law in 12 cases. Third, neither the tire manufacturer nor the court had found any “reliance interests” that would be impaired significantly if the holding in Klein were to be overruled.
Furthermore, the workability factor weighed strongly against overruling Klein’s general-jurisdiction holding. The supreme court stated that overruling Klein would create a jurisdictional gap that would allow out-of-state corporations to insulate themselves from personal jurisdiction in Georgia simply by obtaining the requisite certificate of authority and registering to do business in the state, thereby effectively immunizing themselves from suit for any cause whatsoever. Potentially, a large number of out-of-state corporations like the tire manufacture could fall into a class exempt from a personal jurisdiction-specific and general-in the state simply because they were authorized and registered to do business in the state, which was the outcome proposed by the tire manufacturer. The Georgia high court refused to overrule Klein, thus avoiding this “perverse consequence.”
The case is No. S20G1368.
Attorneys: Christopher Scott Anulewicz (Balch & Bingham, LLP) and Eric D. Ruben (Clyde & Co. US, LLP) for Cooper Tire & Rubber Co. Cale Howard Conley (Conley Griggs Partin LLP) for Tyrance McCall.
Companies: Cooper Tire & Rubber Co.
MainStory: TopStory JurisdictionNews MotorEquipmentNews GeorgiaNews
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