First Community Bank, N.A. v. First Tennessee Bank, N.A.
489 S.W.3d 369
| Tenn. | 2015Background
- First Community Bank (VA) bought roughly $135M in CDOs/RMBS (2003–2007) that were rated investment-grade by S&P, Moody’s, and Fitch (the Ratings Agencies) and later suffered large losses after downgrades.
- The bank sued Ratings Agencies, placement agents, and issuing special-purpose entities in Tennessee state court for fraud, negligent misrepresentation, conspiracy, unjust enrichment, and violations of the Tennessee Securities Act.
- Ratings Agencies (nonresident) moved to dismiss for lack of personal jurisdiction; trial court granted dismissal and denied jurisdictional discovery; Court of Appeals affirmed as to jurisdiction but remanded some non‑jurisdictional issues for Rule 56 proceedings.
- The Tennessee Supreme Court reviewed whether Tennessee courts have general, specific, or conspiracy-based jurisdiction over the Ratings Agencies and whether the bank should get jurisdictional discovery.
- The Court held the bank failed to make a prima facie showing of general or specific jurisdiction, rejected the bank’s conspiracy-jurisdiction showing at the prima facie level, but found the conspiracy theory was colorable enough to remand for the trial court to consider limited jurisdictional discovery under a clarified framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| General personal jurisdiction | Ratings Agencies do substantial business in TN (offices, revenues, publications) making them "at home." | Agencies are incorporated/PPB elsewhere; TN contacts are tiny relative to global operations and not an "exceptional case." | Dismissal affirmed — no general jurisdiction (not "essentially at home" in TN). |
| Specific personal jurisdiction | Ratings and ratings-related conduct foreseeably caused harm in TN; some underlying collateral included TN assets; agencies worked with placement agents who had TN contacts. | Foreseeability/stream‑of‑commerce alone insufficient; contacts not purposefully directed to TN; plaintiff is the only link. | Dismissal affirmed — no prima facie specific jurisdiction (no purposeful availment). |
| Conspiracy theory of jurisdiction | Co-conspirators (placement agents, issuers) had TN contacts and overt acts in TN; thus nonresident agencies’ conduct is attributable and supports jurisdiction. | Allegations are conclusory; business relationships alone do not show an agreement or meeting of the minds required for conspiracy jurisdiction. | Plaintiff failed to plead an agreement with reasonable particularity (no prima facie showing of conspiracy jurisdiction). Court nevertheless found conspiracy theory colorable and remanded for discretionary limited jurisdictional discovery. |
| Jurisdictional discovery | Plaintiff sought limited discovery to develop proof of jurisdiction (esp. conspiracy). | Agencies opposed as burdensome and premature absent a sufficient jurisdictional showing. | Trial court did not abuse discretion in denying discovery at that time for general/specific claims; but Supreme Court set a framework and remanded to allow trial court to reconsider limited discovery on conspiracy theory under specified factors. |
Key Cases Cited
- International Shoe Co. v. Washington, 326 U.S. 310 (U.S. 1945) (established minimum-contacts due-process standard for personal jurisdiction)
- Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (U.S. 2011) (distinguishes general vs. specific jurisdiction; continuous and systematic contacts insufficient alone for general jurisdiction)
- Daimler AG v. Bauman, 571 U.S. 117 (U.S. 2014) (general jurisdiction normally limited to place of incorporation or principal place of business; exceptional-case standard)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (purposeful availment and fairness framework for specific jurisdiction)
- Walden v. Fiore, 134 S. Ct. 1115 (U.S. 2014) (minimum-contacts analysis focuses on defendant’s contacts with the forum, not on plaintiff’s location)
- Chenault v. Walker, 36 S.W.3d 45 (Tenn. 2001) (adopts and explains conspiracy theory of personal jurisdiction in Tennessee)
- State v. NV Sumatra Tobacco Trading Co., 403 S.W.3d 726 (Tenn. 2013) (personal-jurisdiction standards and prima facie showing in Tennessee)