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The Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, Inc.

Supreme Court of Wisconsin

June 30, 2017

The Segregated Account of Ambac Assurance Corporation (the "Segregated Account") and Ambac Assurance Corporation ("Ambac"), Plaintiffs-Appellants,
Countrywide Home Loans, Inc. ("Countrywide"), Defendant-Respondent-Petitioner.

          Oral Argument: February 28, 2017

         REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at 370 Wis.2d 788, 882 N.W.2d 871 (2016 - Unpublished)

         Circuit Court Dane County (L.C. No. 2014CV3511) Peter Anderson Judge.

          For the defendant-respondent-petitioner, there were briefs filed by Thomas M. Pyper, Lisa M. Lawless, and Husch Blackwell LLP, . Madison, with whom on the briefs were Joseph M. McLaughlin and Simpson Thacher & Bartlett LLP, New York. Oral argument by Joseph M. McLaughlin.

          For the plaintiffs-appellants, there was a brief filed by Erik H. Monson, Karen M. Gallagher, and Coyne, Schultz, Becker & Bauer, S.C., Madison, with whom on the brief were Barbara A. Neider, Jeffrey A. Mandell, and Stafford Rosenbaum LLP, Madison. Oral argument by Barbara A. Neider.

          An amicus curiae brief was filed on behalf of Civil Procedure Law Professors by John Franke and Gass Weber Mullins LLC. Oral argument by John Franke.

          An amicus curiae brief was filed on behalf of Wisconsin Manufacturers and Commerce Association and The Chamber of Commerce of the United States of America by Kevin M. St. John and Bell Giftos St. John LLC, Madison, with whom on the brief were Daniel Domenico and Kittredge LLC, Denver.

          An amicus curiae brief was filed on behalf of The Coalition for Litigation Justice by Kathryn A. Keppel and Gimbel, Reilly, Guerin & Brown LLP, Milwaukee.


         ¶1 This case implicates the authority of Wisconsin courts to exercise general jurisdiction over a foreign corporation. Countrywide Home Loans, Inc. petitioned this court for review of an unpublished decision of the court of appeals, [1] which held that Countrywide consented to general personal jurisdiction in Wisconsin when it appointed a registered agent pursuant to Wis.Stat. § 180.1507 (2015-16).[2]Because the text of § 180.1507 does not even mention jurisdiction, much less consent, Countrywide's compliance with the statute does not, on its own, confer jurisdiction. We therefore hold that compliance with § 180.1507 does not subject Countrywide to general jurisdiction in Wisconsin; accordingly, we reverse the decision of the court of appeals and remand the matter to the court of appeals for further proceedings consistent with this opinion.[3]

         I. BACKGROUND

         ¶2 Countrywide is a New York corporation with its principal place of business in California. Prior to the Great Recession, Countrywide was a leading home mortgage loan insurer, but its home mortgage activity ended after the housing market collapsed. Authorized to do business in Wisconsin since 1986, Countrywide appointed CT Corporation System, a Wisconsin corporation, as its registered agent for service of process in 2014. Prior to commencement of this action, Countrywide did not maintain any offices, employees, or business presence within the state.

         ¶3 Ambac Assurance Corporation is a Wisconsin corporation with its principal place of business in New York. As an insurer of financial instruments, Ambac issued polices in 2005 insuring against losses stemming from residential mortgage-backed securities containing Countrywide mortgage loans. Neither the policies nor the contracts were negotiated in Wisconsin, but the underlying securities did include mortgage loans made to Wisconsin residents and secured by property here. When many of the mortgage loans underlying the securities defaulted during the Great Recession, the policies obligated Ambac to pay claims worth hundreds of millions of dollars. Because of Ambac's significant liabilities under the policies, the Wisconsin Commissioner of Insurance approved a plan in March 2010 establishing the Segregated Account of Ambac Assurance Corporation. Ambac transferred its policies into the Segregated Account, which now owns the policies. The Segregated Account entered statutory rehabilitation pursuant to Wis.Stat. §§ 645.31-32, [4] and rehabilitation proceedings remain ongoing.[5]

         ¶4 Ambac and the Segregated Account[6] filed this suit against Countrywide in December 2014 and served CT Corporation System with the summons and complaint in January 2015. The complaint alleged that Ambac incurred substantial liability under the insurance policies only because Countrywide fraudulently misrepresented the quality of the mortgages underlying the securities.[7] Countrywide moved to dismiss the complaint for lack of personal jurisdiction. Ambac opposed the motion, arguing that Countrywide consented to general jurisdiction in Wisconsin when it appointed a registered agent under Wis.Stat. §§ 180.1507 and 180.1510.

         ¶5 Dismissing the complaint for lack of personal jurisdiction, the Dane County Circuit Court[8] concluded that Wisconsin courts cannot exercise general jurisdiction over Countrywide.[9] The circuit court reasoned that "merely having a registered agent and merely having . . . one or two foreclosure actions [does] not make you a resident of this state in the same sense that [anyone] . . . from Wisconsin could be sued in Wisconsin and could not be heard to complain." Absent explicit contractual consent, the court determined that "the registered agent and the very modest participation in foreclosure proceedings at the time of the filing . . . would not sustain jurisdiction under [Daimler AG v. Bauman, 134 S.Ct. 746 (2 014) ] ."

         ¶6 Ambac appealed, and the court of appeals reversed. Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, Inc., No. 2015AP1493, unpublished slip op. (Wis. Ct. App. June 23, 2016) (per curiam). Quoting language from this court's decisions in Punke v. Brody, 17 Wis.2d 9, 115 N.W.2d 601 (1962), and Hasley v. Black, Sivalls & Bryson, Inc., 70 Wis.2d 562, 235 N.W.2d 446 (1975), the court of appeals held that appointing a registered agent for service of process constituted consent to general jurisdiction in Wisconsin. Segregated Account, unpublished slip op., ¶¶11-13. It therefore agreed with Ambac that, "by maintaining a Wisconsin agent to receive service of process . . ., Countrywide 'subjected' itself to the 'general jurisdiction' of Wisconsin courts, and actually consented to personal jurisdiction." Id., ¶9. The court of appeals rejected Countrywide's argument that the Supreme Court's Daimler decision either directly or indirectly undermined Punke and Hasley. Id., ¶¶18-20. Countrywide filed a petition for review, which we granted.


         ¶7 Whether Wisconsin courts have personal jurisdiction over a foreign corporation is a question of law we review de novo, although we benefit from the analyses of the circuit court and court of appeals. Rasmussen v. Gen. Motors Corp., 2011 WI 52, ¶14, 335 Wis.2d 1, 803 N.W.2d 623 (first citing Kopke v. A. Hartrodt S.R.L., 2001 WI 99, ¶10, 245 Wis.2d 396, 629 N.W.2d 662; then citing State v. Aufderhaar, 2005 WI 108, ¶10, 283 Wis.2d 336, 700 N.W.2d 4).


         A. Personal Jurisdiction over Corporations

         ¶8 A brief review of personal jurisdiction doctrine places our statutory interpretation question in the appropriate context. Shortly after the adoption of the Fourteenth Amendment to the United States Constitution, the Supreme Court decided Pennoyer v. Neff, 95 U.S. 714 (1878), which tied personal jurisdiction to a defendant's presence within the forum state. At the time, service of process on a defendant within the forum cemented personal jurisdiction. Id. at 722-24. This territorial approach, however, limited jurisdiction over corporations; because corporations were not people, their "presence" within a forum state was statutorily defined by the legislature. In most forums, corporations were subject to suit only if incorporated in that state. Cf. State ex rel. Drake v. Doyle, 40 Wis. 175, 197 (1876) ("The corporation, being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created." (quoting Paul v. Virginia, 75 U.S. (8 Wall.) 168, (1869))); see also Bank of Augusta v. Earle, 38 U.S. (13 Pet.) 519, 588 (1839) ("[A] corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. It exists only in contemplation of law, and by force of the law; and where that law ceases to operate, and is no longer obligatory, the corporation can have no existence.").

         ¶9 Consequently, foreign corporations could be immune from suit, even if they carried out significant operations within a state. Registration statutes thus arose in part to permit the exercise of jurisdiction over foreign corporations. See Morris & Co. v. Skandinavia Ins. Co., 279 U.S. 405, 408-09 (1929) ("The purpose of state statutes requiring the appointment by foreign corporations of agents upon whom process may be served is primarily to subject them to the jurisdiction of local courts in controversies growing out of transactions within the State."). The corporation's in-state agent satisfied Pennoyer's local presence requirement, and some courts discovered an implicit "consent" to personal jurisdiction within the appointment of the agent. See Burnham v. Super. Ct. of Cal., 495 U.S. 604, 617-18 (1990) (plurality).

         ¶10 In 1945, however, the Supreme Court decided International Shoe Co. v. Washington, 326 U.S. 310 (1945), dispensed with the "purely fictional" notions of implied consent and presence-by-agent, and redirected personal jurisdiction doctrine away from the territorial approach that prevailed under Pennoyer. Burnham, 495 U.S. at 618 (plurality). Two categories of personal jurisdiction have emerged since then. A corporation may be subject to personal jurisdiction in a forum state under a theory of "specific jurisdiction" if it has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'1 Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Exercise of specific jurisdiction requires a nexus between the defendant's activities in the state and the suit against it. Availability of specific jurisdiction obviates the need for states to use registration statutes to secure personal jurisdiction over foreign corporations' activities.

         ¶11 By contrast, a state may exercise "general jurisdiction" over a corporation if its "continuous corporate operations within [the] state [are] ... so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities." Id. at 318; see also Helicopteros Nacionales de Colum., S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984). If a defendant is subject to general jurisdiction in a forum, it may be sued there even in the absence of any relationship between the litigation and the defendant's contacts with the state. In recent years, the Supreme Court clarified the limits the Fourteenth Amendment's Due Process Clause places on the scope of general jurisdiction: "A court may assert general jurisdiction over foreign . . . corporations to hear any and all claims against them when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Daimler, 134 S.Ct. at 754 (alteration omitted; emphasis added) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). Critically, a corporation's "in-state business" sufficient to support a forum state's exercise of specific personal jurisdiction "does not suffice to permit the assertion of general jurisdiction over claims . . . that are unrelated to any activity occurring in" the forum state. BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1559 (2017) .

         ¶12 "With respect to a corporation, the place of incorporation and principal place of business are 'paradig[m] . . . bases for general jurisdiction'" because they are "unique" and "easily ascertainable." Daimler, 134 S.Ct. at 760 (alterations in original) (quoting Goodyear, 564 U.S. at 924) . In corralling "exorbitant exercises of all-purpose jurisdiction, " the Supreme Court recognized the value in having a "clear and certain forum in which a corporate defendant may be sued on any and all claims." Id. at 760-61. Identifying "at least one" definite forum where corporate defendants are subject to general jurisdiction benefits plaintiffs but also enables defendants "to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." Id. at 760-62 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).

         B. Appointment of a Registered Agent in Wisconsin

         ¶13 The question before this court is whether compliance with Wis.Stat. § 180.1507, without more, constitutes consent to general jurisdiction in Wisconsin. Interpretation of this statute is a matter of first impression. As always, "statutory interpretation begins with the language of the statute." State ex rel. Kalal v. Cir. Ct. for Dane Cty., 2004 WI 58, ¶45, 271 Wis.2d 633, 663, 681 N.W.2d 110, 124 (internal quotation mark omitted) (quoting Seider v. O'Connell, 2000 WI 76, ¶43, 236 Wis.2d 211, 612 N.W.2d 659). We give statutory text its "common, ordinary, and accepted meaning." Id. Because both context and structure are "important to meaning, " we interpret statutory text "in the context in which it is used; not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes; and reasonably, to avoid absurd or unreasonable results." Id., ¶46.

         ¶14 To conduct business in Wisconsin, foreign corporations must comply with certain registration and appointment requirements. Among other conditions found in Chapter 180, Wis.Stat. § 180.1507 requires that "[e]ach foreign corporation authorized to transact business in this state shall continuously maintain in this state a registered office and registered agent."[10] Ambac now argues that appointment of a registered agent under § 180.1507 amounts to consent to general jurisdiction. In support of its position, Ambac points out that Wis.Stat. § 180.1510(1) designates a foreign corporation's registered agent as the corporation's agent for service of process.[11]

         ¶15 We disagree with Ambac's interpretation. Consent to general jurisdiction cannot be read into Wis.Stat. §§ 180.1507 and 180.1510 without "expand[ing] the meaning of the statute[s] to the point that we engage in rewriting the statute[s], not merely interpreting [them] ." State v. Briggs, 214 Wis.2d 281, 288, 571 N.W.2d 881 (Ct. App. 1997) . We will not rewrite the statute to create jurisdiction where the legislature has not. The text of Wis.Stat. § 180.1507 is devoid of any language regarding either consent or jurisdiction. Section 180.1507 merely requires that every foreign corporation authorized to do business in Wisconsin maintain a registered office and registered agent in the state. Subsections (1) through (3) then describe the persons and entities eligible to serve as registered agents. The language is straightforward, and none of the words-independently or taken together-suggest consent to jurisdiction.[12] Because Chapter 180 in no way telegraphs that registration equals consent to general jurisdiction, a foreign corporation would be understandably surprised to learn, perhaps before it even conducts any business here, that registration automatically subjects it to being hauled into a Wisconsin court in a case having no connection whatsoever to Wisconsin.

         ¶16 Wisconsin Stat. § 180.1510(1) does mention "service of process"-a term generally associated with the initiation of a lawsuit-but service of process is an act distinct from the grounds necessary to confer general jurisdiction.[13] A registered agent's role is to receive service of process, notice, or demand on behalf of a foreign corporation, and the agent's mere receipt of process does not empower Wisconsin courts to exercise either specific or general personal jurisdiction without compromising the due process rights of the foreign corporation. The fact that Wis.Stat. § 180.1510(1) assigns the registered agent responsibility to receive process therefore cannot transform appointment of an agent under Wis.Stat. § 180.1507 into consent to general jurisdiction. To conclude differently would resurrect the "purely fictional" notions of "implied consent" and "presence" associated with designated agents during a bygone era when foreign corporations would otherwise elude justice in proper forums. That period of time has passed, and those defunct concepts were appropriately discarded, having been superseded by long-arm statutes.

         ¶17 Adopting Ambac's interpretation of Wis.Stat. §§ 180.1507 and 180.1510(1) as effecting consent to general jurisdiction would render Wisconsin's long-arm statute superfluous with respect to all foreign corporations authorized to transact business in this state-the very entities the long-arm statute was designed to reach:

[T]he objective of the statute was to give citizens of Wisconsin the right to make use of the courts of this state in instituting causes of action against any foreign corporation, which actually is carrying on business activities within the state, subject only to such limitations as are imposed by the United States constitution.

Vt. Yogurt Co. v. Blanke Baer Fruit & Flavor Co., 107 Wis.2d 603, 609-10, 321 N.W.2d 315');">321 N.W.2d 315 (Ct. App. 1982) (emphasis added; original emphasis omitted) (quoting Huck v. Chi., St. Paul, Minneapolis & Omaha Ry., 4 Wis.2d 132, 137, 90 N.W.2d 154 (1958)). In interpreting the scope of the long-arm statute, Wisconsin courts have long recognized that "[t]his state does not have the same interest in providing a forum for nonresidents whose injuries by nonresidents have no connection to this state as it does in protecting its residents from nonresidents doing business here." Id. at 612 (emphasis added). The long-arm statute reaches foreign corporations doing business in Wisconsin, which are required to register an agent for service of process. If such registration were sufficient to expose foreign corporations to general, all-purpose jurisdiction of Wisconsin courts, the long-arm statute would effectively serve no purpose. "Statutory interpretations that render provisions meaningless should be avoided." Belding v. Demoulin, 2014 WI 8, ¶17, 352 Wis.2d 359, 843 N.W.2d 373; accord Kalal, 271 Wis.2d 633, ¶46; State ex rel. Smith v. City of Oak Creek, 139 Wis.2d 788, 796, 407 N.W.2d 901 (1987); Harrington v. Smith, 28 Wis. 43, 67 (1871); see also Antonin Scalia & Bryan A. Garner, Reading Law 174-79 (2012) ("[A statute] should [not] needlessly be given an interpretation that causes it to duplicate another provision or to have no consequence.").

         ¶18 Wisconsin Stat. § 801.05(1)(d) gives Wisconsin courts personal jurisdiction over a defendant "engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise." But if we equate appointment of a registered agent under Wis.Stat. § 180.1507 with consent to general jurisdiction, Wisconsin courts would not need to establish grounds for specific jurisdiction under Wis.Stat. § 801.05(1) (d), except with respect to foreign corporations prohibited from transacting business in this state under Wis.Stat. § 180.1501-entities the long-arm statute is unlikely to reach.[14] A foreign corporation's contacts with Wisconsin would be irrelevant so long as it registered an agent for service of process-which all foreign corporations authorized to transact business in this state must do.[15] We will not interpret Wis.Stat. §§ 180.1507 and 180.1510(1) in a manner that makes the long-arm statute "idle and nugatory." Scalia & Garner, supra, at 174 (internal quotation mark omitted) (quoting Thomas M. Cooley, A Treatise on the Constitutional Limitations Which Rest upon the Legislative Power of the States of the American Union 58 (1868)).[16]

         ¶19 Ambac also relies on Wis.Stat. § 180.1505(2), under which a corporation certified to do business in Wisconsin "has the same but no greater rights and has the same but no greater privileges as, and ... is subject to the same duties, restrictions, penalties and liabilities . . . imposed on, a domestic corporation of like character." Ambac argues that because foreign corporations "enjoy[] the privilege of using the Wisconsin courts and [are] placed on equal footing with domestic companies, " § 180.1505(2) operates with Wis.Stat. §§ 180.1507 and 180.1510(1) to imply that certified foreign corporations consent to personal jurisdiction in Wisconsin for any claim, regardless of the claim's relationship to the state.

         ¶20 Once again, Ambac disengages from the plain language of Chapter 180. Like Wis.Stat. §§ 180.1507 and 180.1510(1), Wis.Stat. § 180.1505(2) mentions neither consent nor jurisdiction; thus, its plain language undermines Ambac's argument.[17] It is too great a leap to characterize consent to general jurisdiction as a "duty" imposed on every foreign corporation that registers to do business in Wisconsin, particularly where the actual statutory language offers no warning that exposure to suits in Wisconsin for claims arising elsewhere is a consequence of registration.

         ¶21 Treating general jurisdiction as a "duty" of domestic corporations that extends to all registered foreign corporations by default would extend Wisconsin's exercise of general jurisdiction beyond the tapered limits recently described by the Supreme Court. Because the Due Process Clause of the Fourteenth Amendment controls the circumstances under which a state may exercise personal jurisdiction, we must consider the due process implications of exercising jurisdiction over a foreign corporation. This court generally avoids interpreting statutes in a way that places their constitutionality in question. Blake v. Jossart, 2016 WI 57, ¶27, 370 Wis.2d 1, 884 N.W.2d 484 ("[I]f any doubt exists about the statute's constitutionality, the court must resolve that doubt in favor of upholding the statute." (citations omitted)), cert, denied, 137 S.Ct. 669 (2 017); accord State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis.2d 32, 46, 205 N.W.2d 784 (1973); see also Scalia & Garner, supra, at 247-51 ("A statute should be interpreted in a way that avoids placing its constitutionality in doubt.")

         ¶22 In Goodyear Dunlop Tires Operations, S.A. v Brown, 564 U.S. 915 (2011), the Supreme Court addressed the proper scope of general jurisdiction within the bounds of due process, holding that a corporation may be subject to general jurisdiction only in a forum where it "is fairly regarded as at home" Id. at 924 In Daimler, the Court later clarified the circumstances under which a corporation has sufficiently continuous and systematic contacts to be "at home" in a forum state Rather than focusing "solely on the magnitude of the defendant's in-state contacts, " a court must conduct "an appraisal of a corporation's activities in their entirety, nationwide and worldwide, " because " [a] corporation that operates in many places can scarcely be deemed at home in all of them" 134 S.Ct. at 762 n20 (quoting Id. at 767 (Sotomayor, J, concurring)). A forum state denies defendants due process of law if it "subject[s] foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate." Id. at 759-60. Within this framework, the Daimler Court explained that "Goodyear did not hold that a corporation may be subject to general jurisdiction only in a forum where it is incorporated or has its principal place of business; it simply typed those places paradigm all-purpose forums." Id. at 760.

         ¶23 Courts in other jurisdictions have recognized that Goodyear and Daimler strictly confine the exercise of general jurisdiction over foreign corporations within the bounds of due process. In a comprehensive opinion reversing its own precedent, which previously held that appointment of an agent for service of process conferred general jurisdiction over a foreign corporation, [18] the Delaware Supreme Court reconsidered Delaware's registration statute in light of the altered due process framework:

Our duty is to construe a statute of our state in a manner consistent with the U.S. Constitution, when it is possible to do so with no violence to its plain meaning. Nothing in the registration statutes explicitly says that a foreign corporation registering thereby consents to the personal jurisdiction of this state. Nothing in the statutes explicitly says that by having to register in order to "do any business in this State, through or by branch offices, agents or representatives located in this State, " and to appoint a registered agent in the state to receive service of process, that meant a foreign corporation was waiving any objection to personal jurisdiction for causes of action not arising out of the conduct in Delaware that gave rise to the registration requirement.
In light of Daimler, [Delaware's registration statute] can be given a sensible reading by construing it as requiring a foreign corporation to allow service of process to be made upon it in a convenient way in proper cases, but not as a consent to general jurisdiction.

Genuine Parts Co. v. Cepec, 137 A.3d 123, 142 (Del. 2016) (footnotes omitted) (quoting Del. Code Ann. tit. 8, § 371(b)). In construing a Connecticut statute with language mirroring Wis.Stat. § 180.1510's, the Second Circuit similarly observed that

[i]f mere registration and the accompanying appointment of an in-state agent-without an express consent to general jurisdiction-nonetheless sufficed to confer general jurisdiction by implicit consent, every corporation would be subject to general jurisdiction in every state in which it registered, ...

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