Morris Manning & Martin, LLP

Georgia Court Holds Corporations Registered to do Business in Georgia are Subject to General Jurisdiction of Georgia Courts

09.24.2021

On Tuesday, September 21, 2021, the Supreme Court of Georgia issued its decision in Cooper Tire & Rubber Company v. McCall. The Court reaffirmed one of its prior decisions and held that a corporation that is registered to do business in the State of Georgia is a “resident” for jurisdictional purposes and may sue or be sued to the same extent as a domestic corporation.

The plaintiff brought suit against Cooper Tire & Rubber Company (Cooper Tire), as well as two other defendants, in the State Court of Gwinnett County. The plaintiff was injured when a tire that was designed, manufactured, and sold by Cooper Tire allegedly malfunctioned and resulted in a car accident.

In response to the complaint, Cooper Tire filed a motion to dismiss in which it argued that “as a nonresident corporate defendant with only minimal contacts in Georgia, it is not subject to personal jurisdiction in this state.” Cooper Tire is incorporated in Delaware and has a principal place of business in Ohio. The plaintiff responded by arguing that Cooper Tire is a resident of Georgia because it is authorized to transact business in the state, and thus is subject to personal jurisdiction.

The trial court granted Cooper Tire’s motion to dismiss, and the Georgia Court of Appeals reversed the trial court’s ruling. The Court of Appeals found that “Cooper Tire is a resident corporation subject to personal jurisdiction in this state.” The Georgia Supreme Court affirmed the Court of Appeals’ ruling. In support of its holding, the Court looked to its prior holding in Allstate Insurance Co. v. Klein, in which it held that “Georgia courts may exercise personal jurisdiction over any out of-state-corporation that is ‘authorized to do or transact business in this state at the time a claim arises.’”

In Klein, the Court looked to the definition of “nonresident” under Georgia’s Long-Arm Statute, which includes, in part, “a corporation which is not organized or existing under the laws of this state and is not authorized to do or transact business in this state at the time a claim or cause of action under Code Section 9-10-91 arises.” Thus, based on this definition, the Court concluded that a corporation that is authorized to do or transact business in Georgia at the time a claim arises is a resident and subject to personal jurisdiction. Therefore, under Klein, a foreign corporation that is registered to do business in Georgia is treated the same as a domestic corporation for personal jurisdiction purposes.

The Court found that its holding in Klein does not violate federal due process and the stare decisis factors favor following the prior ruling. The Court also noted that if it had reached the opposite conclusion, a ‘gap’ would exist because a nonresident corporation that registered to do business in Georgia could never be sued for acts or omissions that occurred in the state because it would not be subject to any personal jurisdiction in Georgia whether specific or general.

The Court also notes the tension that exists between its holding in Klein and recent United States Supreme Court decisions. Thus, Klein’s holding could be undermined by future United States Supreme Court decisions. Further, the Court points to the General Assembly’s ability to modify Georgia’s Long-Arm Statute to eliminate this risk of Georgia courts’ jurisdiction being undermined. Specifically, in his concurrence, Justice Bethel notes the disincentive that currently exists for foreign corporations to register in Georgia, since non-registered corporations “have significantly less exposure.”

The Court’s ruling in Cooper Tire reaffirms Georgia’s stance that foreign corporations that are authorized to do business in the state are subject to the general jurisdiction of Georgia courts. This means that these corporations can be hailed into Georgia courts even if the underlying claim does not relate to Georgia or the corporation’s contacts with the state. Therefore, corporations need to be aware that by registering to do business in Georgia, they are ultimately consenting to the jurisdiction of Georgia courts.

If you have any questions concerning this legal update, please contact Seslee Smith or a member of the Litigation Practice.