On March 25, 2020, the Supreme Court issued a unanimous and expansive ruling on personal jurisdiction, in Ford Motor Co. vs. Montana Eighth Judicial District Court, 2021 WL 1132515 (U.S. March 25, 2020) (Deepak Gupta of Gupta/Wessler successfully argued the case before the Court). This article summarizes the holding and then discusses its practical significance, listing nine consumer law contexts for which the decision should either be binding or persuasive precedent in allowing consumers to bring actions in their own states against out-of-state defendants.
The Holding in Ford Motor
A unanimous Supreme Court in Ford Motor (with two concurrences) holds that due process may permit personal jurisdiction over Ford Motor in the consumer’s home state, where the consumer suffered the injury from a defective vehicle, even though the vehicle was originally sold outside the consumer’s home state. Personal jurisdiction can be found as long as the company conducted business in the consumer’s home state that relates in some way to the consumer’s injuries, such as engaging in other transactions for similar products there. This is the case even though the company’s design, manufacture, and sale of the particular vehicle at issue did not occur in the consumer’s home state.
In one of two consolidated cases, the vehicle was purchased new by a different buyer in one state and later resold to the consumer as a used vehicle in the state where the injury occurred. In the other case, the consumer moved from the state where the consumer had purchased the vehicle, and the injury occurred in the consumer’s new state of residence. In both cases, the Court found personal jurisdiction over Ford in the consumer’s current home state. Ford’s sale of the vehicle through its dealerships in a different state did not prevent personal jurisdiction, because Ford had extensive business connections in the consumer’s current state of residence—even though those connections involved vehicles other than the car at issue.
The Court specifically rejected the proposition that personal jurisdiction in the consumer’s home state must be based on the company’s business connections in that state involving the exact car at issue in the litigation. There need not be a causal link between Ford’s activities in the state and the injury in the state.
The Court stated: “Ford had systematically served a market in Montana and Minnesota for the very vehicles that the plaintiffs allege malfunctioned and injured them in those States. So there is a strong ‘relationship among the defendant, the forum, and the litigation.’” The Court further found that “In conducting so much business in Montana and Minnesota, Ford ‘enjoys the benefits and protection of [their] laws’— the enforcement of contracts, the defense of property, the resulting formation of effective markets.”
Nine Practice Implications of Court’s Ruling
A frequent concern in any consumer litigation, whether in state or federal court, is obtaining personal jurisdiction over an out-of-state defendant in the courts where the consumer resides. There are often practical and compelling considerations for filing the case in the same state where the consumer and often the consumer’s attorney are located. Moreover, if the consumer is sued in the consumer’s home state, the consumer may wish to join out-of-state third parties in that case.
Ford Motor is important precedent in these situations—either as precedent directly on point or as indicative of an expansive view of personal jurisdiction. Here are nine examples:
1. Suing used car wholesalers, even where an out-of-state wholesaler did not sell the vehicle to a dealer located in the forum state, as long as the wholesaler sells other vehicles to dealers there. Used cars, particularly those with wreck or flood damage, lemon buyback histories, or odometer tampering, are often sold from a dealer to an auction to a wholesaler to a dealer to other dealers and eventually to the consumer. Some of these transfers may involve attempts to wash a salvage or other suspect title brand, by titling the vehicle in another state. Ford Motor is precedent that, even though the upstream defendant did not sell the vehicle at issue in the forum state, there is personal jurisdiction where that entity sells other vehicles to dealers in the forum state.
This result has important practical significance. Rather than just suing the consumer’s immediate seller, a consumer injured by used car fraud may want to sue an upstream entity, such as the wholesaler or even a used car auction establishment. The dealer directly selling the used car to the consumer may disavow all knowledge of a hidden problem. Bringing in upstream dealers and wholesalers may be critical to prove the fraud, to affix responsibility, and to recover from a deep pocket.
Investigating fraud involving upstream dealers, wholesalers, and auctions is examined at NCLC’s Automobile Fraud Chapter 2, particularly at § 2.6.3. Case law as to personal jurisdiction of these upstream sellers in the automobile fraud context is discussed at § 10.3.4 of that treatise.
2. Bringing warranty claims concerning a car purchased as used, but still within the car’s warranty period, where the car was sold as new in another state. Many used vehicle sales are still covered by the original manufacturer warranty, and any resulting warranty litigation will typically be brought in the consumer’s home state against an out-of-state manufacturer that (like Ford Motor) has extensive dealings in the consumer’s home state. Nevertheless, where the vehicle was originally sold as new in another state, personal jurisdiction issues can arise as to the manufacturer. Ford Motor is precedent that such personal jurisdiction is available.
More on warranty litigation against vehicle manufacturers is found in NCLC’s Consumer Warranty Law, particularly Chapter 13. Note also that § 13.3.10 discusses jurisdiction over and service of process upon foreign defendants and witnesses, such as German or Japanese manufacturers or distributors.
3. Suing manufacturers for defective new cars or other products, even though the consumer purchased the new product in another state, such as where the consumer has since moved or the consumer purchased the product across state lines. Ford Motor is precedent that there is personal jurisdiction over the out-of-state manufacturer, as long as the manufacturer has a presence in the forum state, even if that presence did not include the sale of the product at issue. As long as the manufacturer or retailer sells related products in the consumer’s present home state, there can be personal jurisdiction even though the product at issue in the litigation was not designed, manufactured, or sold in the consumer’s home state.
Further complications may arise with new car lemon laws that only apply to vehicles purchased in that state or only where the consumer was a resident of that state at the time the vehicle was purchased. But, as far as personal jurisdiction goes, the consumer should be able to bring a lemon law case in the consumer’s current state of residence even if the vehicle was purchased in another state. For more on the state lemon law litigation, see NCLC’s Consumer Warranty Law Chapter 14.
4. Suing national lenders where a consumer obtained the credit in another state, and either has since moved or the credit was extended across state lines. Just as in warranty litigation, Ford Motor is precedent that there is personal jurisdiction over a creditor even when the credit was not extended in the consumer’s current home state, as long as the creditor extends credit or otherwise is involved with credit accounts involving other consumers in that forum state. This applies not just to situations where the consumer has since moved or went physically across state lines to obtain the credit. Today increasingly credit is extended over the internet, mail, or telephone, and state law may sometimes find that the place of credit extension is the creditor’s home state and not the consumer’s state of residence.
Questions of personal jurisdiction involving unsecured credit are examined in more detail in NCLC’s Consumer Credit Regulation § 7.9.2. That discussion includes personal jurisdiction over internet lenders and securitization trusts, in bankruptcy courts, and over parent and holding companies.
5. Suing mortgage holders or servicers where the real property is located in another state. Surprisingly, personal jurisdiction issues arise even involving real property. While most cases find there is personal jurisdiction over an out-of-state securitization trust in the state where the property is located, this is not always the case. See NCLC’s Mortgage Lending § 10.5.2. This issue becomes acute where the consumer wants to sue an out-of-state entity in the consumer’s current state of residence, even though the property is not located in that state. This may happen, for example, where the consumer has since moved to another state or took out a mortgage on property located in another state. Ford Motor is precedent that there is personal jurisdiction in the consumer’s current state of residence, as long as the defendant is involved with other home mortgages in the forum state.
6. Internet extensions of credit or sales. Most courts find that there is personal jurisdiction over an internet lender or seller in the consumer’s home state because the loan or sale is “made” in the consumer’s home state. If a court though were to balk at finding personal jurisdiction in the consumer’s home state, such as finding that the sale or credit extension was “made” elsewhere, Ford Motor suggests that there is personal jurisdiction in the consumer’s home state if the creditor or seller has sufficient transactions involving other residents of the consumer’s state.
Footnote 4 in Ford Motor states “we do not here consider internet transactions, which may raise doctrinal questions of their own.” The footnote goes on to discuss isolated internet sales where the seller has little connection of any kind to the consumer’s home state. Nevertheless, Ford Motor is still suggestive that there is personal jurisdiction over an internet seller or creditor when it has extensive connections to the consumer’s state, even if a sufficient connection is not proven by the particular internet sale to the consumer. For a discussion of personal jurisdiction over internet creditors, see NCLC’s Consumer Credit Regulation § 18.104.22.168.
7. Fair Credit Reporting Act claims against consumer reporting agencies, furnishers, and users of consumer reports. Often a consumer reporting agency, a creditor furnishing information to that agency on the consumer, and/or a business using that information will reside elsewhere than the consumer’s home state. Moreover, the actual transfer of information from furnisher to reporting agency or reporting agency to user will take place outside the consumer’s home state. Ford Motor again is precedent that there is personal jurisdiction over such out-of-state reporting agencies, furnishers, and users of consumer reports, as long as that person has extensive dealings in the consumer’s home state. This is the case even if those dealings do not directly involve the matter being litigated. See NCLC’s Fair Credit Reporting § 11.4.3 for a discussion of personal jurisdiction as to out-of-state furnishers, reporting agencies, and users.
8. Where the consumer applies for a residential rental, home mortgage, or job in another state, where the defendant also does business in the consumer’s state of residence. Consumers may take actions in an attempt to move to another state, such as applying for a residential rental, a home mortgage, or employment. When that application is denied, the consumer may have discrimination or other claims against the entity receiving the application or against a related entity. Ford Motor is precedent that there is personal jurisdiction in the consumer’s original home state, as long as the defendant has extensive connections in the consumer’s home state, such as may be the case with a national bank, a large landlord, or a multi-state employer.
9. Suing corporate parents, holding companies, aiders and abettors. Where a defendant is thinly capitalized, consumer litigants may prefer to join in a suit the defendant’s out-of-state parent or holding company or some other out-of-state joint venturers or abettors. Whether there is personal jurisdiction over such third parties may be unclear where the third party did not take any actions in the consumer’s home state relating to the particular consumer. Ford Motor again is suggestive that there is personal jurisdiction where these other parties have extensive connections to the consumer’s home state, particularly connections in some way similar or related to the consumer’s transaction, even if not involving the consumer’s transaction. For a discussion of personal jurisdiction over parents and holding companies, see NCLC’s Consumer Credit Regulation § 22.214.171.124.