Written By Michael P. Theroux, Laura M. Gill and Jennifer Power
On September 14th, 2018, the United States (U.S.) Court of Appeals for the Ninth Circuit in the Eastern District of Washington (the "Court"), upheld the District Court decision to hold Canadian mining company, Teck Cominco Metals ("Teck"), liable for disposing waste in the Columbia River. The plaintiffs were awarded US$8.25 million in damages.1
This appeal decision highlights the unwillingness of U.S. courts to lay the Calder "effects-test", (a test used to exercise personal jurisdiction over a foreign defendant) to rest despite recent criticism. The United States District Court in the Eastern District of Washington asserted that it had jurisdiction over Teck in a 2004 decision.2 On appeal, the Court found no issues with the analysis and reasoning applied by the District Court judge.
These decisions highlight circumstances in which U.S. courts will permit Canadian companies to be sued in the U.S. for tort claims notwithstanding that the company's operations are entirely within Canada. This decision remains of particular significance to energy and mining companies whose operations are in Canada but whose operational impacts may extend to the U.S.
Teck is a subsidiary of Vancouver-based Teck Minerals. The claim is based on historical operations: the company allegedly discharged 10 million tons of slag in to the Columbia River from its smelter site in Trail, BC between 1930 and 1995.3 Teck officially ceased discharging slag in to the Columbia River in 1995; however, the residual effects are still present and a thorough cleanup of the river is still required.
To assert jurisdiction, the District Court applied the "Calder effects-test," a test developed by the U.S. Supreme Court to determine specific jurisdiction in torts claims.4 The test determines whether a court has personal jurisdiction over non-resident defendants who allegedly committed an intentional tort outside of the forum but whose effects were felt within the state. The Calder test requires that the defendant must have 1) committed an intentional act, 2) expressly aimed at the forum state, and 3) caused harm that the defendant knows is likely to be suffered in the forum state.5
On appeal, Teck argued that the Calder effects-test was improperly applied, and that its waste disposal activities were not "expressly aimed" at Washington.6 The court rejected Teck's defence that its wastewater discharges were aimed only at the Columbia River as opposed to Washington and noted that rivers are "nature's conveyor belts" and that Teck made use of the river to flush waste away from its site.
The decision leaves much to be desired with regard to delineating what actions will be deemed "expressly aimed at the forum state". The Court noted that express aiming is an ill-defined concept but that the phrase means "something more" than a "foreign act with foreseeable effects in the forum state".7 Judge Gould ruled that: "It is inconceivable that Teck did not know that its waste was aimed at the State of Washington when Teck deposited it into the powerful Columbia River just miles upstream of the border".8
The Court noted that the District Court found sufficient evidence that Teck knew the Columbia River carried waste away from the smelter toward Washington and continued to discharge waste until the company modernized its furnace in the mid-1990s. The entire Calder analysis at the Federal Appeal Court level spanned a mere seven paragraphs out of a 55-page judgment.
Criticisms of the Calder Effects-Test
Legal scholars have argued that the Calder effects-test has been applied "haphazardly" and poses a risk to appropriate assertions of jurisdiction. The speculation is that the merits of effects-test cases are "inextricably intertwined" with jurisdictional issues such that merit-based assumptions about liability will play an influential role in whether or not a court finds jurisdiction.9 In other words, courts will find jurisdiction when they believe the defendant will be held liable and are less likely to find jurisdiction where the pre-trial liability of the defendant is harder to identify.
Further, the test has faced attack for being wholly inappropriate in the internet age. If the Calder effects-test can assist a court in subjecting a foreign defendant to jurisdiction wherever the harm is felt, the internet can plausibly be felt everywhere. This unreasonable result is yet another argument in favour of restricting the application of the Calder effects-test.
Some scholars suggest that courts "...should require a higher burden of jurisdictional proof in effects-test cases…" to ensure that undue influence from merit-based assumptions do not rule the analysis.10 If the Teck decision does make its way to the U.S. Supreme Court, it will be interesting to watch whether the court endorses a more narrow interpretation of the test in light of these complaints.
Until the U.S. Supreme Court refines, narrows or limits the Calder effects-test, Canadian companies should be aware of the law in neighbouring U.S. jurisdictions wherein effects of its business operations might be felt and which may subject them to tort claims in the U.S.