In Re: MTBE Products Liability Litigation (New York U.S.D.C.)

Filed: March 30, 2015

Opinion by: Shira A. Scheindlin

Summary:  In a case involving multiple jurisdictions, a federal court held that in the absence of a federal question, the laws of the forum state should control, in this case Pennsylvania. The court then applied Pennsylvania’s choice-of-law rules to hold that the laws of the jurisdiction where the “targeted entity” is incorporated should determine whether to piece the corporate veil. The defendant’s parent company was incorporated in Delaware, but its Maryland subsidiary—the target of the lawsuit—was formed in Maryland. Thus, under the court’s ruling, Maryland’s veil-piercing laws should govern.

The full opinion is available in PDF.

Oliver v. Crump (Maryland U.S.D.C.)

Filed: September 15, 2011

Opinion by: Judge Ellen Lipton Hollander

Held: In a suit alleging breach of fiduciary obligations of directors of a corporation, a Maryland court may exercise personal jurisdiction over out-of-state directors of a Maryland corporation that conducts its business operations in Maryland.

Facts: Defendants were directors, officers and employees of a Maryland corporation. Plaintiff alleged defendants acted in a course of misconduct. All of the defendants reside in Delaware.

Analysis: A court exercising personal jurisdiction over non-resident defendants does not violate the due process clause of the U.S. Constitution when the defendants have "minimum contacts" in the state and "the exercise of jurisdiction based on those contacts is constitutionally reasonable." The Court applied the logic of Pittsburgh Terminal Corp. v. Mid Allegheny Corp., 831 F.2d 522 (4th Cir. 1987), which involved a West Virginia corporation and directors who lived in the State of Virginia.

In Pittsburgh Terminal, the Fourth Circuit held "the acceptance of a directorship constitutes minimum contacts in a derivative suit." The Court also found minimum contacts because, among other reasons, (a) Maryland law, like West Virginia law, provides the business and affairs of the corporation shall be managed under the direction of a board of directors, (b) directors participate in business decisions that have a primary effect in the forum state and (c) by becoming directors, the defendants purposefully availed themselves of the privilege of doing business in that state.

Turning to the constitutional reasonableness portion of the due process test, the Court cited Pittsburgh Terminal, which noted the factors of the case made the "assertion of jurisdiction more reasonable." The Court agreed. As in Pittsburgh Terminal, the defendants live in a neighboring state. Maryland has a strong interest in providing a forum to hear a claim alleging wrongful acts by the directors of one of its domestic corporations. And, according to the Court, while defendants receive many benefits of the legal fiction of a corporation, requiring "them in turn to shoulder one of the few burdens of such fiction" did not seem unfair.

The opinion is available in pdf.

Pro-Football, Inc. v. Tupa (Ct. of Special Appeals)

Filed: February 28, 2011
Opinion by Judge Robert A. Zarnoch.

Held: Maryland courts will not enforce a forum selection clause that avoids application of Maryland’s workers’ compensation law.

Facts: Thomas Tupa, a former punter for the Washington Redskins, injured his lower back while warming up for a preseason game. Tupa filed a claim with the Maryland Workers’ Compensation Commission. After a hearing, the commissioner found that Maryland had jurisdiction over Tupa’s claim despite a forum selection clause to the contrary. The Maryland Circuit Court found, on appeal, that Maryland had jurisdiction as a matter of law. The issue was appealed to the Court of Special Appeals.

Analysis: The Court of Special Appeals affirmed the Circuit Court’s decision. Maryland’s Worker’s Compensation Act (the “Act”) provides that rights of employees under the Act cannot be waived. The court found that Maryland has a strong public policy in compensating employees for their injuries. Because the effect of the forum selection clause would be to avoid application of the Act, the court held that the forum selection clause contravened public policy.

The full opinion is available in pdf.

Cappel v. Riaso (Ct. of Special Appeals)

Filed: February 7, 2011
Opinion by Judge Timothy E. Meredith

Held: Defendants' ownership of unimproved land in Maryland, unrelated to the cause of action, did not support the exercise of personal jurisdiction over the defendant in an action to enforce a confession of judgment clause in a guaranty.

Facts: The Defendants signed a guaranty containing a confession of judgment clause. In the guaranty, the defendants agreed to appear "in any court of competent jurisdiction in the State of Virginia or any other State or Territory of the United States" to confess judgment.

Upon a default, the plaintiff filed a complaint and affidavit for confessed judgment in the Circuit Court for Montgomery County. The clerk entered judgment against the defendants. The defendants filed a motion to vacate on grounds that the court lacked personal jurisdiction because of their minimal contacts with Maryland. The plaintiff opposed the motion on grounds that the defendants owned land in Maryland, thus availing themselves of the benefits and protections of the forum state. The trial court held that owning the property was a sufficient contact to justify the exercise of personal jurisdiction under International Shoe, and it denied the motion.

Analysis: First, the Court held that lack of personal jurisdiction is an appropriate basis under Rule 2-611(d) upon which to move to vacate a confessed judgment, though it is not specified in the rule.

Regarding the merits, the Court held that an out-of-state resident's ownership of real property unrelated to the cause of action, absent other ties, is insufficient to establish jurisdiction under either the long-arm statute or the Due Process Clause. Accordingly, the Court vacated the judgment.

The full opinion is available in pdf.

Micro Focus (US), Inc. v. Bell Canada (Maryland U.S.D.C.)

Filed: February 23, 2010
Opinion by Judge Roger W. Titus

Held: The forum selection clause in the license agreement between the parties did not allow courts in Maryland to exercise personal jurisdiction over Bell Canada, a Canadian corporation with its principal place of business in Toronto. Other than this provision, the plaintiffs did not assert any other basis for the exercise of personal jurisdiction over Bell Canada.

Facts and Analysis: Prior to December 31, 2008, Bell Canada entered into a license agreement with Micro Focus for certain software. The license agreement had the following provision:

If Licensee acquires the Software in North America, the laws of the state of Maryland govern this License Agreement. If Licensee acquires the Software in France, Germany or Japan, this License Agreement is governed by the laws of the country in which Licensee acquired the Software. In the rest of the world the laws of England govern this License Agreement. The aforesaid applicable law shall apply without regard to conflicts of laws provisions thereof, and without regard to the United Nations Convention on the International Sale of Goods. This License Agreement shall be subject to the exclusive jurisdiction of the courts of the country determining the applicable law as aforesaid.

(Emphasis by the Court.)

Applying Maryland law, the Court found that Micro Focus' interpretation was unreasonable:

Micro Focus’ interpretation requires two questionable inferences. The first inference is that the “country” governing licenses executed by North Americans must be the United States because Maryland is part of the United States. The second inference is that “courts of the country” means all federal courts in the United States. Both inferences are tenuous. Accordingly, the Court rejects Micro Focus’ contention that the forum selection clause unambiguously refers to the federal courts of the United States.

(Footnote omitted.)

Further, the Court found that the "clause at issue is . . . nonsensical in that it vests courts with exclusive jurisdiction over a 'License Agreement' rather than over parties or over actions arising out of the License Agreement."

Perhaps as an admonition to drafters of contracts, the Court warned that "the best of intentions, if not clear and unequivocally communicated, simply will not suffice when it comes to a waiver of objections to personal jurisdiction."

The full opinion is available in PDF. The opinion has been approved for publication.

Blue Bird, LLC v. Nolan (Cir. Ct. Mont. Cnty)

Filed April 28, 2009
Opinion by Judge Ronald B. Rubin

Held: Deciding an issue of first impression in the State, the Circuit Court for Montgomery County held that an internet "click-wrap" agreement governing terms of use of a website is valid and enforceable under Maryland law.

Facts: The issue arose in connection with the defendants' motion to dismiss for lack of personal jurisdiction. The defendants' sole contacts with the State were over the internet. Among the relevant contacts, the defendants agreed to terms of use on the plaintiff's website by clicking "I accept." The terms included a forum selection clause whereby the defendants purported to consent to jurisdiction in the State. The court applied an objective standard to evaluate the formation of a contract and concluded that the defendants manifested their assent to the terms of use by clicking.

The full opinion is available in PDF.