Pace v. Cirrus Design Corp.: The Fifth Circuit Provides Insight Into Application of Recent SCOTUS Opinions

The Fifth Circuit recently clarified the applicability of the pleading standard in assessing fraudulent joinder and applied two major Supreme Court personal jurisdiction decisions in new contexts. Glen Pace, a Mississippi resident, crashed an airplane in Texas. Pace had taken off from Mississippi, made multiple stops in Texas, and was on his way back to Mississippi when the crash occurred. Alleging that “several components” of the aircraft malfunctioned, Pace filed suit in Mississippi state court, naming four out-of-state defendants—three component manufacturers and a company involved in the aircraft’s maintenance, overhaul and repair. In a bid to destroy diversity jurisdiction, Pace amended his complaint to assert claims against two in-state defendants that had previously owned the aircraft.

The case was removed to federal court by the out-of-state defendants, who contended that diversity jurisdiction existed because the in-state defendants were improperly joined. These defendants also filed motions to dismiss for lack of personal jurisdiction, asserting that the court lacked both general and specific jurisdiction. The trial court agreed with these arguments, and the Fifth Circuit affirmed. See Pace v. Cirrus Design Corp., No. 22-60603, 2024 WL 739343 (5th Cir. Feb. 23, 2024). The decision in Pace provides guidance on three major jurisdictional issues:

• First, the court applied Rule 9(b)’s heightened pleading standard to assess whether the plaintiff stated a claim for purposes of a fraudulent joinder analysis, thereby protecting the right of defendants to remove cases to federal court.
• Second, the court rejected the plaintiff’s attempt to extend the United States Supreme Court’s decision in Mallory v. Norfolk Southern Railway Co., 600 U.S. 122 (2023), in a manner that would have effectively rendered all corporations that register to do business in Mississippi subject to the general jurisdiction of courts within the state.
• And third, the court refused to read Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. 351 (2021), to allow out-of-state defendants’ general forum contacts to provide a basis for the exercise of specific jurisdiction.

Fraudulent Joinder

Pace asserted breach of contract, misrepresentation and negligence claims against two in-state defendants that had previously owned the aircraft at issue. These defendants did not sell the aircraft to its current owner, but Pace sued them nonetheless based on their conduct as owners.

Defendants can establish fraudulent joinder by showing the plaintiff’s inability “to establish a cause of action against the non-diverse party in state court.” Pace, 2024 WL 739343, at *2 (quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). And “[o]ne method courts utilize to determine fraudulent joinder is to review the allegations within the complaint under ‘a Rule 12(b)(6)-type analysis.’” Id. (quoting Smallwood, 385 F.3d at 573). On appeal, Pace attempted to defend only his misrepresentation and negligence claims, but the Fifth Circuit rejected both arguments.

Pace’s negligence claim was premised on a theory specific to the aviation context—that Federal Aviation Administration regulations imposed a duty on the aircraft’s prior owners to maintain and inspect it. But the Fifth Circuit held that any duty to maintain and inspect applied only to current owners, thus negating the essential duty element of the negligence claim.

More broadly applicable is the court’s analysis of Pace’s misrepresentation claim, which centered on the representations surrounding the sale of the aircraft. The Fifth Circuit reasoned that because Pace’s claim was based on alleged false statements, Rule 9(b)’s heightened pleading standard applied and provided the standard for the fraudulent-joinder analysis. It then conducted a traditional assessment of the sufficiency of Pace’s allegations, found that the misrepresentation claim was “not sufficiently pled,” and upheld the trial court’s determination that the in-state defendants had been fraudulently joined.

The ruling is significant. While the Fifth Circuit has previously applied a true Rule 12(b)(6)-type analysis when assessing fraudulent joinder, and specifically indicated that Rule 9(b) makes up a component of the applicable pleading standard, see Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 203 (5th Cir. 2016), it had also stated in an unpublished opinion “that a district court should not find fraudulent joinder and dismiss a fraud claim for failure to satisfy the pleading requirements of Rule 9(b) without first granting leave to amend.” Murray v. Gen. Motors, L.L.C., 478 F. App’x 175, 181 n.10 (5th Cir. 2012) (citing Hart v. Bayer Corp., 199 F.3d 239, 247 n. 6 (5th Cir. 2000)). The Supreme Court long ago stated that “Federal courts should not sanction devices intended to prevent a removal to a Federal court where one has that right, and should be equally vigilant to protect the right to proceed in the Federal court as to permit the state courts, in proper cases, to retain their own jurisdiction.” Wecker v. Nat’l Enameling & Stamping Co., 204 U.S. 176, 186 (1907). With Pace, the Fifth Circuit has shown a continuing willingness to do just that.

General Jurisdiction

Having found that the trial court properly exercised subject matter jurisdiction over Pace’s case, the court next examined whether it properly dismissed the action for lack of personal jurisdiction. There are two types of personal jurisdiction—general and specific—and Pace argued that both types existed here. The Fifth Circuit’s analysis began with general jurisdiction.

Because none of the defendants were incorporated or based in Mississippi, Pace had to rely on a consent-based form of general jurisdiction recently recognized in Mallory. In Pennsylvania, companies that register to do business in the state must consent to general jurisdiction, a statutory scheme the Supreme Court found compatible with constitutional due process. See Mallory, 600 U.S. at 134–36. Pace argued that Mississippi law operates the same way. The Fifth Circuit disagreed.

While “Mallory analyzes what a state may require,” courts must still “examine the state law to find what it does require.” Pace, 2024 WL 739343, at *10. While Mississippi law requires foreign corporations that register to do business within the state to appoint a registered agent, Miss. Code Ann. § 79–4–15.03(5), and provides that a registered corporation becomes “subject to the same duties, restrictions, penalties and liabilities now or later imposed on, a domestic corporation of like character,” id., § 79–4–15.05(b), it also states that the appointment of a registered agent “does not by itself create the basis for personal jurisdiction over the represented entity,” id., § 79–35–15. Thus, “Mississippi law does not follow the consent-by-registration doctrine.” Pace, 2024 WL 739343, at *11. Because states are not constitutionally bound to follow Pennsylvania’s statutory scheme, Mississippi’s alternative approach is valid.

The difference between what a state can do and what it does do should have been clear from Mallory itself. Nonetheless, lower courts’ application of the decision has created major uncertainty, particularly for companies registered to do business in multiple states. Pace properly cabins Mallory, provides a direct ruling on Mississippi’s statutory scheme, and establishes a roadmap for addressing this issue as it arises with respect to other states.

Specific Jurisdiction

The Fifth Circuit’s ruling on specific jurisdiction establishes the limits of another recent Supreme Court case, Ford Motor Company. In that products liability case, the Supreme Court found that car crash plaintiffs’ claims arose from or related to the forum state because “Ford had systematically served a market in [the forum states] for the very vehicles that the plaintiffs allege malfunctioned and injured them in those States.” Ford Motor Co., 592 U.S. at 365. Given these case-specific forum connections, the defendants could not negate jurisdiction by establishing that they did not distribute the precise vehicles in question into the forum states where they eventually crashed.

Citing Ford Motor Company, Pace attempted to establish specific jurisdiction through the various defendants’ forum contacts. But the case was fundamentally different from Ford Motor Company because the defendants’ various connections to the state could only tangentially be connected to the case and, more starkly, the plaintiff was not injured in the forum state. These distinctions proved dispositive: “Yes, the corporate defendants serve the forum, but all their relevant alleged conduct occurred in other states, Pace’s injury occurred in Texas, and the only connections to Mississippi related to this litigation are Pace’s residency and the aircraft’s hangering there.” Pace, 2024 WL 739343, at *13.

While Ford Motor Company arguably expanded the scope of specific jurisdiction, it does not invite plaintiffs to rely on general forum contacts when establishing personal jurisdiction, and as the Fifth Circuit demonstrated in Pace, even a resident plaintiff injured outside the forum state will find very little support in the ruling.

In sum, Pace addresses major, recurring jurisdictional issues and provides strong authority for defendants looking to establish fraudulent joinder or obtain dismissal based on the absence of personal jurisdiction. Product manufacturers, sellers, and their attorneys should fully understand the decision and its implication.