Out-of-State Corporations Approval of Georgia Lawsuit

In a recent decision, the Georgia Supreme Court reiterated that under Georgian law, if a foreign company registers with the Georgia Secretary of State to conduct business in Georgia, it consents to general personal jurisdiction — which means it can sue Georgia’s courts for all claims, including claims unrelated to its activities in Georgia. Cooper Tire & Rubber Co. v. McCall, 312 Ga. 422, 422 (2021). However, the legal basis for general personal jurisdiction has changed, and the Georgia Supreme Court’s view has been amended since the US Supreme Court decisions Goodyear Dunlop Tires Operations, SA v. Brown, 564 US 915 (2011) and Daimler AG by others rejected by courts v. Bauman, 571 US 117 (2014). Now an appeal of the Georgia Supreme Court decision in Cooper Tire is pending in the US Supreme Court. See Cooper Tire, #21-926 (filed December 20, 2021).

To provide some background, courts in a particular state may exercise personal jurisdiction over a company in two ways: first, specific jurisdiction under which a company may be sued for claims arising out of the company’s conduct in that state; and second, general jurisdiction, referred to as “all-purpose jurisdiction,” under which a company may be sued in any state for claims arising out of any conduct, whether connected to the company’s conduct in that regard Condition. As is clear from the description, general jurisdiction allows plaintiffs to sue for a much broader range of activities than specific jurisdiction. In the interest of fairness, according to the US Supreme Court decisions in the Goodyear and Daimler cases, general personal jurisdiction was limited to states where a corporation “may be fairly considered to have its home” – generally 1) its state of incorporation and 2) the state of its principal place of business (usually its principal place of business), if different.

In Cooper Tire & Rubber Co. v. McCall, plaintiffs sued Cooper Tire and co-defendants in Georgia, alleging that a tire manufactured by Cooper Tire developed a malfunction that resulted in a car accident in Florida. Defendants sought to dismiss the case because Cooper Tire is incorporated in Delaware and has a principal place of business in Ohio. However, plaintiffs argued that since Cooper Tire was registered to conduct business in Georgia, it was therefore subject to general personal jurisdiction under Georgian law.

On appeal, the Georgia Supreme Court agreed with the plaintiffs, upholding its earlier judgment in Allstate Insurance Co. v. Klein, in which it found that “under the statutes of Georgia, Georgian courts may exercise general personal jurisdiction over any non-state corporation which ‘is authorized to do business in that state or to do business when a claim arises.’” Cooper Tire, 312 Ga. at 422, citing Klein, 262 Ga. 599 (1992). Klein relied on a 1917 US Supreme Court decision, Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 US 93.

In the Pennsylvania Fire case, the U.S. Supreme Court upheld a Missouri statute that required foreign corporations registering to do business in Missouri to file a power of attorney with the state Insurance Superintendent stating that the service to the inspector the company should be regarded as a personal service. 243 US at 94.

This law did not violate due process, the court said, because the defendant voluntarily consented by issuing the required power of attorney. 243US at 95-96. The Pennsylvania Fire has never been specifically waived, despite significant changes in the landscape of common personal jurisdiction since its ruling in 1917. Based on this precedent, the Georgia Supreme Court found consent by registration to be an allowable ground for assertion general personal jurisdiction remains over an accused.

And despite the fact that Georgia’s corporate registration process does not inform foreign corporations that registering to conduct business in the state subjects them to general personal jurisdiction, the Georgia Supreme Court ruled that corporations, on that basis, on this fact be pointed out preliminary decision in small. However, the Georgia Supreme Court acknowledged that the US Supreme Court’s view of general personal jurisdiction has changed in the time since the Klein decision and that there are “tensions” between his decision and recent US Supreme Court rulings in Goodyear and Daimler. Cooper Tire, 312 Ga. at 422.

Part of the Georgia Supreme Court’s reluctance to overrule Georgia’s existing legal system may be due to the language of the Georgian Code, which implicitly classifies registered foreign corporations as “residents.” OCGA § 9-10-90 defines a nonresident as “a corporation which is not organized or existing under the laws of that state and, at the time of a claim or cause of action, is not authorized to do business or to conduct business in that state. …arising.” Only non-residents are subject to the state’s long-arm statute, which provides for special jurisdiction. As the Georgia Supreme Court argued in Klein and reiterated in Cooper Tire, a non-governmental entity authorized to conduct business in Georgia is a “resident” for personal jurisdiction purposes, subjecting it to general personal jurisdiction. but in particular not subject to the specific personal jurisdiction under the Long Arm Statute.

As the Georgia Supreme Court described in Cooper Tire, if the court overruled Klein’s general jurisdiction, it would lead to the absurd result that registered foreign corporations would not be subject to either specific or general jurisdiction in Georgia: “This result would allow foreign corporations to isolate themselves from personal jurisdiction in Georgia simply by obtaining the required certificate of power of attorney and registering to conduct business here, effectively immunizing themselves from lawsuits for any reason. Cooper Tire, 312 Ga. at 436. Judge Bethel specifically concurred with Cooper Tire’s decision to bring lawmakers’ attention to this legislative issue, noting that there is a “significant chance that current Georgia law will at some point , be found inconsistent with the requirements of federal due process,” which would open the door to a situation where registered foreign corporations in Georgia would not be sued at all. 312 ga. at 437.

One reason the U.S. Supreme Court is more likely to grant Cooper Tire Certiori is that the Pennsylvania Supreme Court recently ruled that consent by registration is constitutional with respect to Pennsylvania law (which uses similar, but not identical, language to that of Georgia) and reviewed came to the opposite conclusion – concluding that the Pennsylvania statute violated due process and was therefore unconstitutional. Mallory vs Norfolk S Ry. Co., 266 A.3d 542 (Pa. 2021). The Mallory decision was also appealed to the US Supreme Court. See Mallory, #21-1168 (filed February 18, 2022).

The parties in both Cooper Tire and Mallory have now completed their briefing on their respective writ applications and each application will be submitted to the judges for consideration. If four judges vote to grant the petition in both cases, that case will be placed on the US Supreme Court list to try this fall.

Copyright © 2022 Womble Bond Dickinson (US) LLP All rights reserved.National Law Review, Volume XII, Number 83