Out of Reach?

Missouri poses an interesting challenge when litigating multi-party construction-defect claims. With its two largest metropolitan areas adjacent to (and essentially overlapping) neighboring states, a project often involves subcontractors from those states.

This all well and good, until it is not. For example: A dispute arises over defects in the project, and then it becomes clear that it is impossible to bring all the parties into the litigation because the court lacks jurisdiction over some of them.

The ability to exercise jurisdiction over non-resident defendants, including corporations not incorporated or primarily located in Missouri, has been narrowed in the last decade. This is vexing to the owners and general contractors that strategically prefer Missouri law to that of a sister state, or who anticipate more favorable jury pools on the Missouri side of the state line.

Personal Jurisdiction

Personal jurisdiction is a prerequisite for any lawsuit to proceed in Missouri courts, as it establishes a court’s authority to compel litigants to respond to a legal proceeding that may affect their rights or interests [see State ex rel. Cedar Crest Apartments, LLC v. Grate, 577 S.W.3d 490, 493 (Mo. banc 2019), quoting State ex rel. Bayer Corp. v. Moriarty, 536 S.W.3d 227, 230 (Mo. banc 2017)]. Under Missouri law, personal jurisdiction over a non-resident corporation must be authorized by Missouri’s long-arm statute (RSMo § 506.500) and must not offend due process.

The Missouri long-arm statute enumerates the circumstances in which a person, firm, or corporation, “whether or not a citizen or resident” of Missouri, can “submit…to the jurisdiction” of Missouri courts “as to any cause of action arising from the doing of any of such acts.” Those circumstances include transacting business in Missouri; making any contract within Missouri; committing a tortious act within Missouri; owning, using, or possessing any real estate situated in Missouri; and contracting to insure any person, property, or risk located in Missouri at the time of contracting. The long-arm statute further provides that if a cause of action does not arise from the acts it enumerates, it may not be asserted against a non-resident defendant in Missouri court.

With respect to due process considerations in establishing personal jurisdiction over a non-resident corporate defendant, the Missouri Supreme Court has held that a court must possess either specific (conduct-linked) jurisdiction or general (all-purpose) jurisdiction over a non-resident corporation [see Cedar Crest, 577 S.W.3d at 493, citing State ex rel. Norfolk S. Ry. Co. v. Dolan, 512 S.W.3d 41, 45 (Mo. banc 2017)].

Specific Jurisdiction 

Specific jurisdiction “requires consideration of the ‘relationship among the defendant, the forum, and the litigation.’” [see Norfolk, 512 S.W.3d at 48, citing Andra v. Left Gate Prop. Holding, Inc., 453 S.W.3d 216, 226 (Mo. banc 2015)]. Specific jurisdiction “encompasses cases in which the suit arises out of or relates to the defendant’s contacts with the forum.”  [Id., quoting Daimler AG v. Bauman, 134 S.Ct. 746, 748-49 (2014)]. In other words, where a non-resident corporation has “availed itself of the opportunity to do business in Missouri, it would be subject to specific jurisdiction in Missouri…[but] only over claims that are related to those contacts.” (Id., citing Andra, 453 S.W.3d at 226).

General Jurisdiction

While specific jurisdiction is predicated, in part, on conduct that connects the claims at issue to the forum state, general jurisdiction can be used to establish personal jurisdiction in Missouri courts over a non-resident corporation when the claims at issue do not arise out of or relate to such corporation’s contacts with Missouri. General jurisdiction in Missouri is normally established when the corporation is either incorporated in Missouri or its principal place of business is in Missouri

The Missouri Supreme Court has reasoned that if a corporation is incorporated or principally based in Missouri, personal jurisdiction can be established without any connection between the claims at issue due and the corporation’s connections to Missouri, as the Missouri long-arm statute is satisfied by such connections, and due process is not thereby offended (see Cedar Crest, 577 S.W.3d at 493-94; and Norfolk, 512 S.W.3d at 46-47).

Furthermore, the United States Supreme Court has recognized a third, “exceptional” basis for establishing general jurisdiction over a non-resident corporation that is neither incorporated nor principally based in Missouri. In these rare circumstances, general jurisdiction can be established when a non-resident corporation’s Missouri activities are so substantial and of such a nature as to render the corporation at home in Missouri [see Norfolk, 512 S.W.3d at 46, quoting Daimler AG v. Bauman, 571 U.S. 117, 138 (2014)].

What is “exceptional” is literally the million-dollar question in many cases. The Supreme Court’s 2014 ruling in Daimler significantly narrowed the scope of general jurisdiction based upon a corporation’s activities in a state in which it is neither incorporated nor principally based. Prior to Daimler, a subcontractor that routinely performed work in the neighboring state would be subject to the general jurisdiction of Missouri courts, even for claims that did not arise from the corporation’s activities in Missouri [see Norfolk, 512 S.W.3d at 46, citing State ex rel. K-Mart Corp. v. Hollinger, 986 S.W.2d 165, 168-69 (Mo. banc 1999)]. 

In Daimler, the Supreme Court found that the pertinent question “is whether that corporation’s ‘affiliations with the State are ‘so continuous and systematic’ as to render [it] essentially at home in the forum State.’” In reaching this conclusion, the Supreme Court reasoned that “[a] corporation that operates in many places can scarcely be deemed at home in all of them. Otherwise, ‘at home’ would be synonymous with ‘doing business’ tests framed before specific jurisdiction evolved in the United States.”

Applying the principles set forth in Daimler, the Missouri Supreme Court in Norfolk found no general jurisdiction in Missouri courts over the non-resident defendant, notwithstanding the fact that the railroad “owns and operates some 400 miles of track, generates approximately $232 million in revenue, and employs some 590 people in Missouri,” because the record reflected that the railroad also conducted business in 21 other states, and only 2% of the railroad’s business and employees are located in Missouri.”

Two years later, the Missouri Supreme Court in Cedar Crest declined to recognize general jurisdiction in Missouri court over a non-resident subcontractor for bodily injury that purportedly occurred in Kansas. In that case, a worker filed suit in Jackson County, Missouri for personal injuries allegedly sustained while working at an apartment complex in Overland Park, Kansas. Two Kansas business entities named as defendants in the Missouri action, on the grounds that they “owned and/or controlled and/or maintained” the property at issue, moved to dismiss the claims against them for lack of personal jurisdiction. In response, the claimant argued that general jurisdiction over the Kansas defendants was appropriate because they were registered to do business in Missouri, had solicited business in Missouri, had filed unrelated lawsuits in Missouri, and owned unrelated rental property in Missouri. 

On appeal of the trial court’s denial of the non-resident corporations’ motion to dismiss, the Missouri Supreme Court held that these purported connections to Missouri “are typical contacts of a non-resident corporation. As such, they fall far, far short of establishing the ‘exceptional case’ for general jurisdiction over a non-resident corporation that is ‘at home’ in Missouri.”

Following the precedent established in Daimler, the Missouri Supreme Court has made clear in Norfolk and Cedar Crest that general jurisdiction is not a catch-all basis for jurisdiction over a non-resident subcontractors that are not otherwise connected to Missouri. To avoid this trap, contract documents should include both venue and jurisdiction clauses that can ensure that all necessary parties will be present when the time comes.

The authors extend special credit to Patrick Allegri, Knight Nicastro Mackay, Kansas City.