Denver Journal of International Law & Policy Volume 14 Number 1 Article 5 May 2020 In Personam Jurisdiction in Federal Courts over Foreign Corporations: The Need for a Federal Long-Arm Statute Barry E. Cohen Follow this and additional works at: https://digitalcommons.du.edu/djilp Recommended Citation Barry E. Cohen, In Personam Jurisdiction in Federal Courts over Foreign Corporations: The Need for a Federal Long-Arm Statute, 14 Denv. J. Int'l L. & Pol'y 59 (1985). This Article is brought to you for free and open access by the University of Denver Sturm College of Law at Digital Commons @ DU. It has been accepted for inclusion in Denver Journal of International Law & Policy by an authorized editor of Digital Commons @ DU. For more information, please contact [email protected],dig- [email protected]. In Personam Jurisdiction in Federal Courts Over Foreign Corporations: The Need for a Federal Long-Arm Statute BARRY E. COHEN* I. INTRODUCTION Since the United States Supreme Court's approval of "minimum con- tacts" as a basis for state court jurisdiction over persons not present in a forum state, general purpose long-arm statutes have become part of the jurisprudence of almost every state. These statutes typically subject a party who is not present in a state to suit there, so long as the cause of action arises from certain contacts of the party in the state. An example of this type of long-arm jurisdiction is an action in one state to recover for personal injuries incurred within its borders, but resulting from the use of a defective product manufactured by a company with no physical presence in the forum. The distribution of the defective product in the forum state would generally be a sufficient state "contact" on which to assert personal jurisdiction over the distant manufacturer.' There is, however, no general federal law akin to a state long-arm statute which authorizes in personam jurisdiction in a federal district court. Such a void restricts the court's authority over persons who cannot be served with process within the geographic boundaries of the state in which the district court sits. Although some statutes that establish federal rights and remedies do authorize extraterritorial service of process in cases arising under them,2 most do not. Thus, for many federal causes of action in which extraterritorial service of process is needed it is necessary to rely on Rule 4(e) of the Federal Rules of Civil Procedure.3 Rule 4(e) permits a federal plaintiff to utilize the long-arm jurisdiction provided by the law of the state in which the district court sits.' An approach to long-arm jurisdiction which invests a federal court with the same degree of long-arm jurisdiction as a state court has little to command for itself. As it concerns alien corporations, current law on ex- traterritorial in personam jurisdiction in federal courts creates a signifi- cant loophole through which these corporations can avoid personal juris- * B.S. 1967, University of Illinois; J.D. 1970, Northwestern University; LL.M. 1971, University of London. Partner, Davis, Graham, & Stubbs; Lecturer, University of Denver College of Law. 1. Cf. World-wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98 (1980). 2. See infra note 7. 3. Rule 4(e) permits extraterritorial service of process pursuant to federal law (where it is authorized) and, alternatively, under applicable law of the forum state. 4. See infra at 62. DEN. J. INT'L L. & POL'Y VOL. 14:1 diction in any federal court. This situation arises from the fact that Rule 4(e) looks to state law principles of extraterritorial personal jurisdiction, which (in both a statutory and constitutional sense), depend upon the alien corporation's activities or contacts with the forum state. If these contacts are insufficient to satisfy state statutory or fourteenth amend- ment due process criteria, the state long-arm statute cannot be invoked, and long-arm jurisdiction in that forum is unavailable. Moreover, if the alien corporation has no state contacts sufficient to permit the use of a state long-arm statute, but there are sufficient contacts with the United States as a whole to satisfy a fifth amendment due process test of juris- diction, current law would permit such a defendant to escape federal ju- risdiction under most circumstances. With regard to a foreign corporation,5 current reliance on state long- arm jurisdiction may be interfering with policies embodied in the general and specific federal venue statutes of Title 28 of the U.S. Code. For exam- ple, section 1391(b), allows federal question cases to be brought, inter alia, in the district in which the claim arose. That district may not, how- ever, be the one in which the defendant has sufficient contacts under state law to support in personam jurisdiction. Since a federal court is con- stitutionally permitted to exercise jurisdiction over any domestic corpora- tion regardless of where located, Rule 4(e)'s dependence on state contacts effectively increases locational requirements of federal venue law (e.g., contacts with the forum state). When so viewed, Rule 4(e) may be unin- tentionally derrogating from policies expressed in federal venue statutes and may be an unnecessary circumscription on a plaintiff's choice of fora. The discussion which follows examines the current status of federal long-arm jurisdiction, the practical problems associated with its use, and the constitutional limits on federal in personamn jurisdiction. The conclu- sion drawn is that a generally applicable federal standard for long-arm jurisdiction presents the possibility of a more rational assertion of in per- sonam jurisdiction by federal courts over distant parties - especially alien corporations. Such a standard should be authorized either by stat- ute or as an amendment to Rule 4 of the Federal Rules of Civil Procedure for use in federal question cases. II. THE PROBLEM: THE USE OF STATE LONG-ARM STATUTES IN FEDERAL QUESTION CASES CREATES A GAP BETWEEN A FEDERAL COURT'S ACTUAL AND CONSTITUTIONAL REACH OVER DISTANT PARTIES Several federal remedial statutes contain provisions for extraterrito- rial service of process in cases arising under them. Section 12 of the Clay- ton Antitrust Act, for example, provides: Any suit, action or proceeding under the anti-trust law against a cor- 5. In this article, "foreign corporation" refers to a United States domestic corporation not registered to do business in a particular state. An "alien corporation" is one incorpo- rated in a foreign country. 1985 IN PERSONAM JURISDICTION IN FEDERAL COURTS poration may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business, and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found. (emphasis added.)6 Section 27 of the Securities Exchange Act of 1934 is similar, authorizing extraterritorial jurisdiction wherever a defendant is an inhabitant, trans- 7 acts business, or in any district in which an unlawful act has occurred. Under the Clayton Act, the "transacts business" test of anti-trust venue has permitted long-arm jurisdiction to be exercised over corporate defendants with no physical presence in the forum state.6 Long-arm juris- diction under the Securities Exchange Act has extended to defendants with virtually no contacts with the forum state, when venue was based on the occurrence of an unlawful act in that state.9 Many federally-created causes of action, however, contain no provi- sions for extraterritorial service of process.10 In proceedings under such statutes, in personam jurisdiction over a corporation which cannot be physically served in the forum state depends upon state long-arm law, 6. Clayton Antitrust Act §12, 15 U.S.C. §22 (1982). 7. The Securities Exchange Act of 1934 §27, 15 U.S.C. §78aa (1982) provides in perti- nent part: Any suit or action to enforce any liability or duty created by this title or rules and regulations thereunder, or to enjoin any violation of such title or rules and regulations, may be brought in any such district [wherein any act or transac- tion constituting the violation occurred] or in the district wherein the defen- dant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabi- tant or wherever the defendant may be found. Other federal long-arm provisions are found in the Foreign Sovereign Immunities Act of 1976 §4 & 5, 28 U.S.C. §1391(0, §1608 (1982) (service of a summons on a foreign state or agency or instrumentality thereof may be made by mail wherever the party is located, if other specified methods not available); federal interpleader, 28 U.S.C. §2361 (1982) (service may be made in any district in which a party resides or is found) and the Miller Act §2, 40 U.S.C. §270b (1982) (where venue is proper,extraterritorial service of process is authorized in suits by subcontractors on federal construction projects against sureties on payment bonds). 8. See, e.g., B.J. Semel Associates, Inc. v. United Fireworks Mfg. Co., 355 F.2d 827 (D.C. Cir. 1965); Lippa's Inc. v. Lenox Inc., 305 F. Supp. 175 (D. Vt. 1969). For a review of personal jurisdiction under Section 12 of the Clayton Act, see Hovenkamp, PersonalJuris- diction and Venue in Private Antitrust Actions in the Federal Courts: A Policy Analysis, 67 IOWA L. REV. 485 (1982); Note, Personal Jurisdiction Over Alien Corporationsin Anti- trust Actions: Toward a More Uniform Approach, 54 ST.