What court you are in can make or break a lawsuit, and therefore your company. Who is the judge? What law applies? How hard is it for you and witnesses to get to court and other case events? Those are just some of the questions that make what lawyers call “venue” or “forum” so important.
Business people are somewhat surprised by where they can properly be sued. Last month, the U.S. Supreme Court’s ruling in Ford Motor Company v. Montana Eighth Judicial District Court unanimously broadened its interpretation of “personal jurisdiction”—or where a plaintiff may sue a business outside the business’ “home state” (i.e. where it is incorporated or its principal place of business).
The Ford case involved two personal-injury lawsuits related to two car accidents—one in Minnesota and another in Montana. In each case, Minnesota and Montana were where the respective plaintiff lived, purchased the used car, and where the accidents occurred. Ford, however, designed, manufactured, and originally sold the cars involved in the accidents in different states and Canada. Ford argued that these plaintiffs were required, but failed, to demonstrate a “causal link” between Ford’s conduct in Minnesota and Montana and the car accidents since Ford had not designed, manufactured, or sold the plaintiffs’ cars involved in the accidents in either of those states.
The Supreme Court determined that the plaintiffs could bring their respective lawsuits in Minnesota and Montana because the plaintiffs’ claims “related to” Ford’s connections with Minnesota and Montana even if the claims didn’t arise from Ford’s actions in either state.
But what does “related to” mean for companies faced with the prospect of defending a lawsuit outside of their home state? The Court identified several factors to consider when deciding whether a plaintiff may bring a lawsuit in a particular state, which are listed in the following questions:
1. Do the company’s products enter into commerce within the state?
First, companies must evaluate where they operate and sell their products and the extent of those activities (e.g. sales volume, market share, etc.). While the Court left open whether the products involved with the alleged harm in a lawsuit must be the same type of product sold in the state where the lawsuit was brought, the Court emphasized that the types of cars involved in the accidents and subject to the lawsuit were sold to consumers in Minnesota and Montana.
2. Does the company advertise within the state?
In addition, companies must consider the extent of their advertising in a particular state and whether or not the advertising relates to the products relevant to the lawsuit. While the Court noted that Ford specifically advertised for the model of cars involved in the accidents within Minnesota and Montana, the Court left open whether the outcome would have changed had Ford not advertised those particular car models in those states.
3. Does the company provide post-sale services or facilitate activity in secondary markets within the state?
Finally, companies should consider their involvement with consumers beyond an initial sale. Ford, for example, provides original parts to auto supply stores and repair shops across the country, including Minnesota and Montana. Moreover, Ford encourages a resale market for its products in those states: Almost all of its 36 dealerships in Montana and four dealerships in Minnesota buy and sell used Fords.
The Bottom Line
No single one of these factors is by itself decisive. But by understanding these factors, companies can better assess where they may be required to defend a lawsuit in the future. While companies likely will not change where they sell, advertise, and service their products because of the above, companies can better prepare for such lawsuits.
With these factors in mind, a company may more accurately evaluate the litigation risks associated with operating in far-flung states. Companies should evaluate with their attorney where operations may expose them to lawsuits, and what measures might better prepare them for such suits.
This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Barnes & Thornburg LLP is a large, full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business. Read more Metropreneurial Legal Insights.