New Mexico is called the Land of Enchantment, and with good reason. The Carlsbad Caverns, White Sands National Monument, Albuquerque Balloon Festival, Taos Ski Slopes, and Chaco Culture National Historic Park are all splendid visual treasures. A green chili burger is a beautiful work of art. And there’s a reason all this background scenery in breaking Bad and You better call Saul is so gripping.
But New Mexico’s place in the law hasn’t always been enchanting. The McDonald’s hot coffee case was decided in New Mexico. (We may be asked to return our Defense Hack card for saying this, but we’re not sure this case was badly decided. Of course, everyone knows the coffee is hot. And have you seen any. photos of this complainant’s burns?)
Too bad for history. Shortly before Thanksgiving, the New Mexico Supreme Court made the corporate defendants grateful by rejecting the theory that business registration in the state constitutes consent to personal jurisdiction. The case, Chavez v Bridgestone Ams. Tire Operations, LLC et al., 2021 NM LEXIS 74 (New Mexico November 15, 2021), was a global appeal involving four car accidents. The defendants were automobile and tire manufacturers, therefore Chavez is not about drugs or devices. Nevertheless, his detention has implications for our field of law. In addition, the Chavez holding offers a stark contrast to some darker jurisdictions.
The defendants were foreign companies (that is, companies that were neither incorporated nor had a principal place of business in New Mexico) that had challenged their personal jurisdiction in the tort cases brought against them. The products involved were not designed or manufactured in New Mexico, although they were marketed and distributed there. Lower courts have based their personal jurisdiction on registrations of companies doing business in New Mexico, citing both the New Mexico precedent as well as the old SCOTUS (1917) decision in Pennsylvania Fire, who confirmed the consent by recording.
The defendants argued that the exercise of personal jurisdiction violated the 14th Amendment, the dormant trade clause and the unconstitutional conditions doctrine. More specifically, the defendants argued that “contemporary case law in matters of personal jurisdiction” (Bauman and offspring) “canceled, in silence, ” Pennsylvania Fire.
In unanimous opinion, the New Mexico Supreme Court overturned the Court of Appeals and ruled that registrations of companies to do business did not amount to consent to personal jurisdiction. In an exercise of modesty and judicial restraint, the New Mexico Supreme Court failed to address constitutional issues at all, including the viability of Pennsylvania Fire. Rather, the court ruled that the New Mexico Business Corporation Act (BCA) “does not require a foreign corporation to consent to general personal jurisdiction in New Mexico.”
The best thing the plaintiffs had going for them was a 1993 New Mexico Court of Appeals ruling interpreting the BCA to require foreign companies to consent to personal jurisdiction. This interpretation was not based on the plain language of the BCA. Instead, the Court of Appeals discerned legislative intent behind BCA to “equalize domestic and foreign corporations under New Mexico law.” Eh? We don’t even know what it means to equalize domestic and foreign companies. They are clearly not equal; they are not equally located. Moreover, what is the policy served by such equalization?
Justice Kagan said we are all textualists now. Scalia had won. The triumph of textualism has now reached Santa Fe. Chavez, the New Mexico Supreme Court concluded that “the plain language of BCAs does not require a foreign company to consent to jurisdiction.” The court declined to graft a consent requirement onto the registration and saw no clear legislative intent to require foreign companies to consent to jurisdiction.
The old theory of equalization made no sense. In fact, this created inequalities, as foreign companies lost all rights to challenge due process violations associated with personal jurisdiction, while domestic companies retained this right. In any event, equalization has been adequately secured by the New Mexico Long Guns Act, which extends specific personal jurisdiction to all duties, restrictions, penalties, and liabilities arising out of or relating to the activities of any corporation in the State, “thus ensuring that our State courts can enforce the obligations related to the forum of a foreign company.”
The Chavez court recognized that the BCA’s earlier interpretation to require consent was read against an older personal jurisdiction (e.g., the Act of 1877 Pennoyer case, which tormented us in civil procedure class). We’ve come a long way since Pennoyer, through International shoe To Bauman To Bristol Myers Squibb. Now the focus is on the company’s relationship with the forum. Certainly since Bauman general personal jurisdiction has focused on defendants ‘due process rights, not on plaintiffs’ convenience. The Chavez court would not presume that the legislature “intended to embrace Pennoyer-The fictions of the era were abandoned long before the enactment of the BCA. As a result, the Chavez case overturned the Court of Appeal and ruled that registration of a company did not constitute consent to personal jurisdiction.
We saw a press report from Chavez case in which one of the plaintiff’s attorneys predicted that there would still be personal jurisdiction over at least some of the companies because three of the four car crashes were in New Mexico. May be. Maybe there will be a specific personal jurisdiction via SCOTUS this year Ford engine cases, which we discussed here. But there may be no doubt that the New Mexico Supreme Court made the right decision in rejecting consent via recording fiction. New Mexico is a beautiful place far, far from where we live and practice. It would be nice if some courts in our area followed New Mexico’s lead.
Speaking of which, in the past few weeks, no less than three high state courts have ruled on this issue. We have articles on the other two – AG (bad) and NY (good). Most appeal decisions, both state and federal, are favorable. The Pennsylvania Supreme Court is currently reviewing the matter and is so favorable to the plaintiff that we tremble that it will only become the second court of appeal since. Bauman go wrong on the matter.
By the way, one of the defense lawyers appealing to Chavez was Sean Marotta (Hogan Lovells), who runs one of the top lawyer Twitter accounts. He comes across as funny, generous and wise.