NMSC: Registering as a Foreign Corporation Is Not Consent to Be Sued in New Mexico

In Chavez v. Bridgestone Americas Tire Operations, LLC, the New Mexico Supreme Court examined an interesting question about civil procedure: does registration as a foreign corporation in New Mexico, without more, operate as consent to be sued in New Mexico? Nearly 30 years ago, the court of appeals had answered that question in the affirmative. In this case, the Court changed course, holding that the mere act of registration does not operate as consent to be sued in New Mexico.

Background

In this case, the Court consolidated four district court cases with similar fact patterns. Each was a deadly automobile accident alleged to have been caused by defective tires. None of the specific products involved in these lawsuits was designed or manufactured in New Mexico. The manufacturers also did not directly sell the products to Plaintiffs in New Mexico. It does appear, however, that the manufacturers have actively marketed and distributed identical or nearly identical products in our state.

Each of the manufacturers filed motions to dismiss in the district court, asserting that general personal jurisdiction was improper because the Manufacturers were not at home in New Mexico and specific personal jurisdiction was improper because Plaintiffs’ claims were not caused by the manufacturers’ New Mexico contacts. Each of the district judges denied these motions and certified the issues for interlocutory appeal. The court of appeals accepted three of the petitions for interlocutory review and denied the fourth.

In one of the three cases it accepted, the court of appeals issued a formal opinion. Using a “right-for-any-reason” analysis, the court concluded that the manufacturer had consented to general personal jurisdiction by registering to transact business under New Mexico’s Business Corporations Act (the “BCA”). In doing so, the court followed its own precedent from the 1993 case of Werner v. Wal-Mart Stores, Inc., which had held that registration operates as consent to general jurisdiction. The court then issued memorandum opinions in the other two cases, following the approach used in the published case.

The Court’s Analysis

To decide this case, the Court needed to determine whether the BCA requires a registering foreign corporation to consent to general personal jurisdiction. Although the parties had briefed constitutional due process issues, the Court decided the case based on the meaning of the BCA itself. Nevertheless, the opinion contains an excellent background of the relevant due process issues.

The Due Process Clause of the Fourteenth Amendment guarantees a defendant the right to due process. Among other things, it requires that personal jurisdiction must exist over a defendant before a judgment may be rendered against that defendant. Long ago, this requirement could be satisfied if the defendant company had a registered agent in the state. But for many decades now the analysis had had more to do with the nature and extent of the defendant’s contacts with the state.

Modern cases on jurisdiction focus on into two theories: general jurisdiction and specific jurisdiction. Specific jurisdiction, which is not at issue in this case, extends to claims that arise out of or relate to the defendants contacts with the state. General jurisdiction, on the other hand, extends to all claims against a defendant, regardless of their connection to the forum. But it only exists in jurisdictions where the defendant’s ties to the forum state are so continuous and systematic as to render it essentially at home in the state. Practically speaking, this means the state where the defendant was formed and the state where it maintains its principal place of business.

One way to approach this case might have been to argue, as the defendants apparently did, that modern jurisdiction cases are not compatible with the theory of consent by registration. The argument is relatively strong, and only a small minority of jurisdictions still adhere to the consent by registration theory. Ultimately, however, the question is not settled, and the Court chose to avoid it.

Instead, the Court employed a more direct analysis. In addition to general and specific jurisdiction, personal jurisdiction of either type exists if the defendant consents to jurisdiction. Consent can be express or implied. Looking at the statutory text of the BCA, the Court determined that foreign registration was not enough to show that a foreign company consented to general jurisdiction in New Mexico.

Unlike some other states, New Mexico’s laws do not contain an express consent to jurisdiction. In the 1993 Werner case, however, the court of appeals had concluded that under the BCA, consent was implied. In Werner, the court of appeals determined that the BCA expressed a legislative intent to equalize domestic and foreign corporations under New Mexico law, a conclusion that the Supreme Court agreed with. Based on this intent, the court held that consent to general jurisdiction was implied, because doing so made domestic and foreign companies on equal footing (both were subject to general jurisdiction). It is this conclusion that the Supreme Court disagreed with.

Under the Court’s analysis, consent by registration did not “equalize” domestic and foreign companies. Instead, it required foreign companies to waive their constitutional rights–something domestic companies were not required to do. Moreover, doing so was not necessary, since New Mexico’s long-arm statute already subjected foreign companies to jurisdiction in New Mexico for their New Mexico-related activities. Looking at the BCA itself, the Court found no evidence of consent to general jurisdiction; instead, what consent language that existed related to service on a company that revoked the authority of its registered agent in New Mexico.

Against the backdrop of the Fourteenth Amendment, the Court was unwilling to stretch the statutory language to the extent it had been by the Werner court. The Court therefore concluded that any legislative intent to require a foreign corporation to consent to general personal jurisdiction should be “clearly, unequivocally[,] and unambiguously express[ed]” in the statutory text. Because it was not in the BCA, the Court overruled Werner and held that the BCA did not support a consent-by-registration theory.

As a result, the Court ruled that there was no general jurisdiction to sue the manufacturers in this case in New Mexico. Because the court of appeals had not analyzed whether there was specific jurisdiction in any of the four cases, the Court remanded for the court of appeals to make that decision in the first instance.

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