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.

CSR, Ltd. v. Taylor (Ct. of Appeals)

Filed: November 16, 2009
Opinion by Judge Clayton Greene, Jr.

Held: An Australian distributor of asbestos, who used the port of Baltimore as a conduit in shipping raw asbestos from Australia to U.S. customers located outside of Maryland, did not attain sufficient minimum contacts with the State of Maryland to be subject to the Court’s exercise of personal jurisdiction.

Facts: The personal representatives of two dockworkers who died from mesothelioma sued CSR based on the theory that the dockworkers became sick from the offloading of CSR’s raw asbestos from ships docked at the Port of Baltimore.

CSR acted as the exclusive distributor for a wholly owned subsidiary to sell asbestos to customers in the United States and regularly shipped distributions of asbestos through the Port of Baltimore. CSR regularly advertised its asbestos in a trade magazine that was published and circulated in the United States.

CSR also acted as the exclusive distributor of Australian sugar to customers in the United States and regularly used the Port of Baltimore to make such distributions.

The Circuit Court granted CSR’s motion to dismiss for lack of personal jurisdiction noting that CSR did not have any meaningful contacts with the State of Maryland. The Court of Special Appeals reversed finding that CSR’s packaging and shipping of asbestos to the Port of Baltimore was sufficient to establish such minimum contacts with Maryland as to render lawful the Circuit Court’s exercise of jurisdiction.

Analysis: A Maryland court may exercise jurisdiction over an out-of-state defendant if: (i) the requirements of Maryland’s long-arm-statute are satisfied, and (ii) the exercise of personal jurisdiction comports with the requirements imposed by the Due Process Clause of the Fourteenth Amendment.

Here, the court determined that it did not need to extensively consider the requirements of Maryland’s long-arm-statue because the Circuit Court’s exercise of jurisdiction would have offended the Due Process Clause

The Due Process Clause requires that an out-of-state defendant “have established minimum contacts with the forum state and that to hale him or her into court in the forum state would not comport with traditional notions of fair play and substantial justice.” The out-of-state defendant must “purposefully avail itself of the privilege of conducting activities within the forum state,” thus creating a substantial connection with the forum state. A substantial connection is forged when the out-of-state defendant either engages in significant activities in Maryland or creates continuing obligations with the State's residents.

CSR did not personally avail itself of the privilege of conducting activities within Maryland by shipping asbestos or sugar through the Port of Baltimore. CSR neither engaged in significant activities in Maryland nor created continuing obligations with residents of the State. CSR did not maintain a place of business in Maryland, nor was it licensed to do business in Maryland. CSR did not have a relationship with any customers in Maryland, nor with the Port of Baltimore dockworkers. In fact, CSR’s act of shipping asbestos and sugar through the Port of Baltimore was required by the unilateral activity of third parties.

CSR’s advertising of asbestos in a trade magazine published and distributed in the United States also did not satisfy the “purposeful availment” requirement because the advertisements did not target Maryland consumers.

The full opinion is available in PDF.