First Community Bank, N. A. v. First Tennessee Bank, N. A.
489 S.W.3d 369
Tenn.2015Background
- First Community Bank (Virginia) purchased ~$135 million in CDOs and RMBSs (2003–2007) that required minimum credit ratings from S&P, Moody’s, and Fitch to be issued and sold.
- Ratings Agencies (S&P, Moody’s, Fitch) assigned investment-grade ratings; later downgraded the products (2008–2009), and First Community sold at heavy losses, suing for fraud, negligent misrepresentation, conspiracy, unjust enrichment, and Tennessee Securities Act violations.
- Plaintiff sued multiple defendants including the three nonresident Ratings Agencies; Ratings Agencies moved to dismiss for lack of personal jurisdiction and other grounds. Trial court dismissed for lack of jurisdiction and on other grounds; Court of Appeals affirmed jurisdictional dismissal but remanded some non-jurisdictional issues for Rule 56 treatment.
- Tennessee Supreme Court granted review on personal jurisdiction and whether jurisdictional discovery should have been allowed. The Court reviewed general, specific, and conspiracy theories of jurisdiction and the procedural posture (12.02(2) motion decided on affidavits/pleadings).
- Court held plaintiff failed to make a prima facie showing of general or specific jurisdiction over the Ratings Agencies but found a colorable claim for conspiracy jurisdiction only — remanding to allow the trial court to consider limited jurisdictional discovery on the conspiracy theory under a newly articulated multi-factor test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| General jurisdiction | Ratings Agencies do substantial business in TN (offices, revenues, state activity) so they are "essentially at home" here | TN not S&P/Moody’s/Fitch place of incorporation or principal place of business; in-state contacts are minimal relative to global operations | No general jurisdiction: contacts worldwide show TN not an exceptional forum under Daimler; prima facie not met |
| Specific jurisdiction | Ratings directed at nationwide investors; some underlying collateral/placement activity connected to TN; Agencies worked with TN placement agents | Ratings and monitoring were national acts not purposefully directed to TN; foreseeability of sales into TN insufficient | No specific jurisdiction: plaintiff failed to show Agencies purposefully availed themselves of TN or that suit-related conduct created substantial TN contacts |
| Conspiracy-based jurisdiction | Alleged concerted scheme between Ratings Agencies, issuing entities, and TN placement agents to issue inflated ratings; overt acts occurred in TN | No plausible agreement; allegations amount to business relationships and conjecture, not a meeting of minds | Prima facie conspiracy agreement insufficient; but plaintiff made a colorable claim warranting remand for possible limited jurisdictional discovery on conspiracy theory |
| Jurisdictional discovery | Plaintiff sought limited discovery to develop jurisdictional facts | Agencies opposed as burdensome and fishing expedition; trial court denied | Trial court did not abuse discretion in denying discovery based on record; Supreme Court provides framework and remands to allow trial court to reevaluate conspiracy-discovery request under new factors |
Key Cases Cited
- International Shoe Co. v. Washington, 326 U.S. 310 (established minimum contacts due process framework)
- Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (clarified general vs. specific jurisdiction; "at home" standard)
- Daimler AG v. Bauman, 571 U.S. 117 (emphasized principal place of business/incorporation as paradigmatic bases for general jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (purposeful availment and foreseeability in specific jurisdiction analysis)
- Walden v. Fiore, 571 U.S. 277 (minimum-contacts must be defendant-focused; plaintiff’s forum connections insufficient)
- Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (stream-of-commerce principles; placement into stream of commerce alone insufficient)
- World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (foreseeability alone does not establish jurisdiction)
- State v. NV Sumatra Tobacco Trading Co., 403 S.W.3d 726 (Tenn.) (procedural standards for 12.02(2) jurisdictional rulings)
- Gordon v. Greenview Hosp., Inc., 300 S.W.3d 635 (Tenn.) (prima facie standard and trial court discretion on jurisdictional motions)
- Chenault v. Walker, 36 S.W.3d 45 (Tenn.) (adopted conspiracy theory for asserting jurisdiction and set its elements)