We are pleased to report on a recent decision from the United States Court of Appeals for the Fifth Circuit in the Danny Patterson v. Aker Solutions, Inc. et al. matter, in which we served as counsel for Aker Subsea AS (“Aker Subsea”). In a matter of first impression, the Fifth Circuit conclusively held that the limited use of secondment agreements by a foreign entity, Aker Subsea, was insufficient contacts to subject that foreign entity to the jurisdiction of the United States courts.
Aker Subsea filed a FRCP 12(b)(2) Motion to Dismiss for lack of personal jurisdiction in the District Court. The District Court granted that motion and dismissed Aker Subsea. Patterson appealed, arguing that he use of eleven (11) secondment agreements to temporarily assign Aker Subsea employees to its domestic affiliate, Aker Solutions, Inc., were sufficient contacts with the United States as a whole to subject Aker Subsea to personal jurisdiction pursuant to FRCP 4(k)(2). The Fifth Circuit affirmed the District Court, holding that “Aker Subsea’s limited contracts with the United States – eleven secondment agreements – are insufficient to satisfy due process concerns. Thus, exercising general personal jurisdiction over Aker Subsea would be inappropriate.”
Patterson, a U.S. citizen, allegedly sustained a knee injury while working aboard the M/V SIMON STEVIN, a Luxembourg-flagged vessel that was located off the coast of Russia. Patterson was working for Blue Offshore Projects BV (“Blue Offshore”) on a project to install subsea production equipment in a gas and condensate field. While aboard the M/V SIMON STEVIN, Patterson claims that he was struck by a cable and was injured. Patterson originally sued Blue Offshore and two other companies he alleged were involved in the project, Aker Solutions, Inc. (“Aker Solutions”) and FMC Technologies, Inc., in the Eastern District of Louisiana. Patterson alleged that the defendants’ negligence caused his injuries. Patterson later amended his complaint and added more defendants including Aker Subsea, FMC Kongsberg Subsea AS (“FMC Kongsberg”), and FMC Eurasia, LLC. Aker Subsea and FMC Kongsberg separately moved to dismiss for lack of personal jurisdiction. The district court allowed Patterson additional time to conduct jurisdictional discovery. After completion of the jurisdictional discovery, the district court found that neither specific nor general personal jurisdiction existed over Aker Subsea or FMC Kongsberg. Thus, it granted their motions and dismissed them from the suit. FMC Kongsberg ultimately settled leaving only Aker Subsea’s appeal pending.
Patterson argued that that the district court erred by dismissing Aker Subsea because, in his view, it has sufficient contacts with the United States to establish general personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2). Patterson contended that over a three-year period, Aker Subsea entered into eleven secondment agreements whereby it would assign its employees to an American affiliate in Houston, Texas. Under the secondment agreements, the employees sent to the United States remained employees of Aker Subsea. Patterson argued that this showed continuous and systematic contacts in the United States sufficient to assert general jurisdiction over Aker Subsea. Aker Subsea argued that these sporadic contacts were insufficient.
The Fifth Circuit had to determine whether Aker Subsea had sufficient contacts with the United States to satisfy due process and authorize the exercise of personal jurisdiction over it. The Fifth Circuit determined that Aker Subsea’s lack of business contacts with the United States except for eleven secondment agreements, sending eleven employees to the United States over a brief period of time, did not rise to the level of making Aker Subsea essentially at home in the United States. The Fifth Circuit recognized that the Supreme Court has found a sufficient basis for the exercise of general jurisdiction over a non-resident defendant in only one modern case—Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952)—and determined that Aker Subsea’s contacts with the United States do not rise to the level of contacts in that instance.
The Fifth Circuit further determined that the mere sending of employees to the United States by Aker Subsea did not rise to the level of business presence required by other Fifth Circuit jurisprudence to exercise personal jurisdiction. It determined that Aker Subsea’s use of secondment agreements was distinguishable from other cases where the Fifth Circuit exercised general personal jurisdiction, such as companies continually calling on United States’ ports, advertising, and seeking out United States based business (System Pipe & Supply, Inc. v. M/V Viktor Kurnatovskiy, 242 F.3d 322, 325 (5th Cir. 2001) or foreign insurers insuring United States based companies and shipments to the United States and paying claims to such companies (Adams v. Unione Mediterranea Di Sicurta, 364 F.3d 646, 650 (5th Cir. 2004)).
The Fifth Circuit ultimately held that exercising personal jurisdiction over Aker Subsea under Rule 4(k)(2) would be appropriate only if Aker Subsea’s contacts with the United States as a whole are sufficient to satisfy due process concerns. Aker Subsea’s limited contacts with the United States—eleven secondment agreements—are insufficient to satisfy due process concerns. Thus, exercising general personal jurisdiction over Aker Subsea would be inappropriate.
Many foreign businesses maintain United States-based domestic entities for the purpose of conducting business in the United States. It is common among foreign businesses to utilize secondment agreements as a method of providing a domestic affiliate with personnel having a particular expertise or experience on a temporary basis to take advantage of the experience or expertise of a business’ foreign affiliates. At the same time, secondment agreements typically allow a temporarily assigned employee to maintain the benefits accrued by the employee in his country of permanent residence.
The Fifth Circuit’s ruling makes clear that the utilization of secondment agreements by foreign entities to temporarily assign employees to a domestic affiliate will not alone subject a foreign entity to the jurisdiction of the United States’ courts. Thus, multi-national businesses should be secure in continuing the practice of seconding employees to domestic affiliates without fear of unknowingly being subject to lawsuits in the United States.
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