The New Untouchables: Subjecting Foreign Corporations to Federal Question Jurisdiction


Linda S Mullenix

1 Preview of United States Supreme Court Cases 18


This article previews the issues and arguments in Omni Capital International v. Wolff, on the Supreme Court’s 1987-88 appellate docket. The issue in this case is whether, in suing foreign nationals in a purely private action arising under a federal statute (the Commodities Exchange Act), resort must be made to local state personal jurisdiction requirements, or whether federal court jurisdiction is determined by a national "aggregation of contacts" test.

For the last forty years, the Supreme Court has thoroughly examined and re-examined almost every conceivable nuance of the propriety of hailing reluctant parties into state and federal court. The focus of this analysis has been the fairness and reasonableness of subjecting United States citizens to the jurisdiction of a court not of their choosing. With some consistency, the Supreme Court has stated that due process is not offended by requiring defendants to appear in a distant court to answer for the consequences of their actions, provided there are certain affiliating circumstances and the assertion of the court's jurisdiction would not offend traditional notions of justice and fair play.

The Supreme Court has continued to refine its conception of minimum contacts and affiliating circumstances for the purpose of state court jurisdiction in domestic litigation. Last term, however, the Court issued a landmark decision concerning the ability of United States citizens to sue foreign corporations in state courts for personal injuries resulting from alleged defective product manufacture. The Court analyzed the fairness and reasonableness of subjecting a Japanese corporation to litigation in California and concluded that the unique burdens on the Japanese corporation to defend itself in a far-off court outweighed California's interests in providing a forum for the litigation. The Court sent the message that state courts should exercise great caution in asserting American notions of personal jurisdiction over foreign corporations.

The Court begins this term with a case that requires it to again examine the extent of limitations on the ability of American litigants to sue foreign nationals or corporations in American courts. This time, however, the Court will have to address the ability of a complainant to sue aliens in federal court tinder a federal regulatory scheme, or "federal question jurisdiction."Omni Capital presents a case of first impression to the Supreme Court concerning personal jurisdiction requirements where a lawsuit is brought in federal court pursuant to a federal statute (the Commodities Exchange Act) that is silent on the subject of service of process. Although the Supreme Court has not yet spoken on this question, the majority of lower court decisions have uniformly held that in federal question cases where the federal statute does not provide for nationwide service of process, then the federal court is bound by the literal language of Federal Rule of Civil Procedure 4(e) and must apply state jurisdictional law.

Notwithstanding this prevailing view, a few lower federal courts have held that in such federal question cases, the appropriate jurisdictional standards look toward the defendant's contacts with the entire United States and cannot be bound by the more limited state territorial approach to jurisdiction suggested by Rule 4(e). The Supreme Court, then, will have the opportunity in Omni to decide whether, in non-diversity federal cases arising under federal statutes that are silent on service of process, it is appropriate to apply a national aggregation of contacts theory of jurisdiction. The opponents of this position argue that the jurisdictional issue in these cases is a purely narrow one of statutory interpretation, and where Congress has not provided for nationwide service of process, the Federal Rules of Civil Procedure are clear in requiring that state law govern jurisdiction.

A corollary to this argument is that Congress knows how to provide for service of process when it so desires and that lack of a provision indicates that Congress rejected a national scope to process and amenability to jurisdiction. The proponents of a national aggregation of contacts theory argue that amenability to suit in federal cases should be governed by the Fifth Amendment to the Constitution, which implicitly and by interpretation requires only that national jurisdiction prerequisites be satisfied in order not to offend traditional notions of substantial justice and fair play. They further argue that imposing state jurisdictional requirements in purely federal question cases serves to defeat the national regulatory reach of federal legislation.

Lurking behind the purely procedural questions raised by Omni Capital are more subtle policy questions involving international relations and comity between the United States and foreign nations when aliens are sued in United States courts. The Supreme Court is most likely to avoid this issue entirely by deciding the case on extremely narrow statutory grounds. The Omni case seems an unlikely vehicle for the Court to forge new grounds in endorsing a national aggregation of contacts theory. On the other hand, the Court may take notice that strict adherence to the Rule 4(e) mandate to utilize state long arm jurisdiction requirements will make many foreign corporations litigation-proof in the United States. Coupled with its decision in the Asahi Metals case last term, the Supreme Court may be well on the path to creating a new class of procedural untouchables: alien corporations causing injury to American citizens in the United States.

Full Citation

Linda S. Mullenix, The New Untouchables: Subjecting Foreign Corporations to Federal Question Jurisdiction, 1987-88 Preview of U.S. Supreme Court Cases 18.