William H. Rehnquist: We'll hear argument next in No. 91-779, Burlington Northern Railroad Company v. William D. Ford and Thomas L. Johnson. Ms. Christian, you may proceed.
Betty Jo Christian: Mr. Chief Justice, may it please the Court: The issue in this case is whether Montana's venue law violates the equal protection clause. That venue law provides that a domestic corporation can be sued only in the county in which it has its principle place of business or in a case where a tort occurred within the State in the county where the tort occurred. The same venue law provides that suit can be filed against any foreign corporation in any of the 56 counties in the State. This rule applies even to a foreign corporation that has been licensed to do business, has named a registered agent, and has established a place of business in the State. Burlington Northern is this latter type of corporation, and the reason that we're before this Court today is that application of the Montana venue law has led to these suits and a number of others being filed in two particular counties in Montana in which suit would not be proper if the suit were against a domestic corporation. Now, I want to emphasize at the outset that petitioners are not asking this Court to determine what kind of venue law any State should prescribe. That is strictly a matter for the State, and they are entitled to make it as narrow or as broad as they choose. Our position is simply this: that a foreign corporation that has been admitted to do business in the State and has named its registered agent and established a place of business there is entitled to the protection of the same venue laws that the State chooses to adopt for its domestic incorporations.
William H. Rehnquist: And this is why, Mrs. Christian, because of the equal protection clause of the 14th Amendment?
Betty Jo Christian: This is the equal protection clause of the 14th Amendment, Justice Rehnquist.
William H. Rehnquist: You would say, then, that there is no rational basis for distinguishing between a foreign corporation with a place of business in Montana and a corporation... Montana corporation that has a principal place of business?
Betty Jo Christian: That is our position, Justice Rehnquist. We believe that that basic issue was decided by this Court 60 years ago in the case of Power Manufacturing Company v. Saunders, and there are two points that I want to particularly emphasize in the argument today. First, that the Saunders law was squarely based upon the reality of the substantial similarities between a domestic corporation and a corporation that, although incorporated in another State, has been what this Court called domesticated in Wheeling v. Lander.
William H. Rehnquist: Saunders was substantially criticized and limited very shortly after it was decided, wasn't it?
Betty Jo Christian: The only criticism of Saunders that I'm aware of, Justice Rehnquist, occurred in the Starnes decision in a footnote. Starnes had decided, in the context of a Texas venue law in which geographic discrimination was not at issue that in that particular case there was in fact no discrimination at all in practice between the foreign and domestic corporation, and in a footnote in Justice Brennan's opinion he simply stated, citing three decisions of this Court, that it is not clear whether Saunders is still good law. But when those three decisions are analyzed, one of them... Metropolitan Life Insurance Company against Brownell... actually cited Saunders and quoted from it as establishing the standard that should be applied, and simply went on to find that in that case, because of the different statutory schemes that the State had enacted related to foreign and domestic insurance companies, there was a rational basis for the difference. The second case was the Bain Peanut Company case authored by Justice Holmes. In that case, the Court held that a venue law which established venue for a corporation of any type, domestic or foreign, in any county in which a cause of action arose, was constitutional although a suit could be brought against an individual only in the county of Donethal, and the point there was simply that there's sufficient difference between a corporation and an individual to justify the different treatment. We have no quarrel with that. The third case cited was the Allied Stores case in which the Court was concerned with a State statute that provided a more favorable treatment for a foreign corporation than a domestic corporation and thus did not involve the issues of disparate treatment for one who is essentially an outsider to the State. So we do not think that those cases in any way undermine Saunders. In fact, to the contrary, Saunders was actually the first in a line of cases that has established a broad principle regarding the equality of treatment to which a domestic corporation and foreign corporations in this domesticated class are entitled. Now--
David H. Souter: Ms. Christian, if you win this case, is it sufficient for us to decree that Montana must... in effect the Montana courts must allow domestic corporations to be tried in any county?
Betty Jo Christian: --I think that the equal protection simply demands that foreign corporations that have been admitted to do business and in fact have a place of business in the State be treated equally with domestic corporations. Now, the State legislature could choose to equalize this in any way that they see fit. We think as a practical matter that a State legislature is unlikely to ever adopt an any-county rule if it has to be applied to domestic corporations.
David H. Souter: If I may interrupt you, what do we do right now?
Betty Jo Christian: I think the answer would be to determine that the equal protection clause requires that foreign corporations of this class be given equal treatment with domestic corporations and remand to the Montana supreme court. Under the existing law, the Montana supreme court has decreed that a domestic corporation resides wherever it has its principal place of business in the State, and so the equality would appear to be one of permitting the foreign corporation that is also operating a place of business in the State to have venue only at its principal place of business in the State, but I would reiterate that ultimately the decision is for the State legislature and for the State courts, and that the equalization that is required is simply equal treatment for the foreign corporation and the domestic corporation.
David H. Souter: But you think it would be open to the Montana supreme court to provide the, as it were, the more favorable alternative relief that in effect would get you out of this county.
Betty Jo Christian: We think that it would, and we think in fact that if... to do anything else would require that they overrule their own prior decisions, holding that the residence of a domestic corporation is its principal place of business. It might be illuminating, Justice Souter, if we look briefly at how this disparity arose, because it doesn't arise directly from the statute itself.
David H. Souter: I think maybe if I may interrupt you again, maybe that's in part what was provoking my question, and I may simply be wrong about the statute. I thought the Montana statute... well, Montana had a statute in which the domestic corporation simply had the power to designate its principle place of business and that that was binding for venue purposes. Am I wrong on that?
Betty Jo Christian: It does not appear to be that, Justice Souter. The statute talks about residence and nonresidence, and the Montana supreme court decreed that a domestic corporation resides wherever it has its principal place of business. Now, at the time this case arose and historically, there had been no requirement that a domestic corporation designate a principal place of business. That came--
David H. Souter: So, in effect it's a question of fact, it's not something that is, as it were, within the control of the domestic corporation simply by putting the name of one town down when it files its annual return.
Betty Jo Christian: --I think that's correct, Justice Souter.
David H. Souter: Okay.
Betty Jo Christian: Now, the requirement of designating a principal place of business in the State was added to the statute just last year, after this case was litigated, and at the time that it was adopted the State also added a definition. I believe the definition for the domestic corporation is that the principal place of business is where its executive offices are located, and so the State itself has provided a definition which would certainly be appropriate for them to also do in the context of a foreign corporation.
Antonin Scalia: Well, what about a foreign corporation, as would be the case for most of them, I suppose, whose executive offices are not in the State?
Betty Jo Christian: Justice Scalia, we think that the concept of a principal place of business in the State is one that has received widespread recognition both in Montana and elsewhere. In Montana, for example--
Antonin Scalia: But Montana has given it an artificial meaning for domestic corporations. A domestic corporation can have its major plant at one place and do almost all its business there but have its executive offices somewhere else, and it's where the executive offices would be that would be the principal place of business.
Betty Jo Christian: --It has given it an artificial meaning. Our contention is that consistent with the equal protection clause the State cannot refuse to give similar and appropriate meaning to the situation of a foreign corporation that, even though it has its national headquarters elsewhere, in fact has a principal place of business in the State.
Antonin Scalia: Well, why can't it say, you know, just as with the... we'll treat it just the same as domestic corporations. We will treat your principal place of business in the State to be where your executive offices are, and if they are not in the State, tough luck, but we're treating you equally.
Betty Jo Christian: I think the equality would have to reflect equal treatment related to the purposes of the venue laws, and in the context of the considerations that go into venue, a foreign corporation such as Burlington Northern that in fact has a major executive office presence in the State, even though its national headquarters is elsewhere, cannot be treated differently. The uncontroverted affidavit in this case, Justice Scalia, shows that Burlington Northern has its division headquarters in Hill County, Montana. That's headed by its general manager of the division. Over half of its employees in the State are there. So our position is that, consistent with equal protection, a State has the obligation to recognize that the same factors that justify treating a domestic corporation's principal place of business in Montana as its residence have equal application to a foreign corporation that in fact has a principal place of business in the State.
William H. Rehnquist: Well, are you defining principal place of business in the State for yourself, Ms. Christian? Is Burlington Northern defining it for itself?
Betty Jo Christian: Certainly, Justice Rehnquist, the State would have full power to adopt any bona fide definition.
William H. Rehnquist: Well, I mean, when you're talking now about Burlington Northern having a principal place of business, you're simply using your own language, so to speak.
Betty Jo Christian: This has historical precedent in Montana, Justice Rehnquist.
William H. Rehnquist: I'm the Chief Justice.
Betty Jo Christian: I apologize, Mr. Chief Justice. Historically, from 1893 up until the late 1960's the State of Montana required every foreign corporation that sought to be admitted to do business in the State to file with the Secretary of State at the time of its admission a certificate that stated both its principal place of business outside the State and its principal place of business in the State, so this is something that historically was recognized by the State of Montana. In addition, numerous other States in the aftermath of this Court's Saunders decision brought their statutes into compliance with Saunders by adopting the concept of a principal place of business in the State as the residence for a foreign corporation. Some of them at the same time adopted a definition that would control what that principal place of business was. Others did not. Others pleaded it as a fact matter.
Anthony M. Kennedy: You're asking us, it seems to me, to say that it is rational, almost necessary, for every State to enact a scheme whereby foreign corporations have a single, principal place of business in that State. Now, that may apply to your client, but that isn't the test under the equal protection clause rational basis. This is not narrow tailoring, where your client is entitled to the narrowest possible statute to bring it into conformance with domestic corporations. The State need legislate only on a rational basis with respect to all out-of-State corporations, and many of those corporations may have no principal place of business, or no office that can be equated to that.
Betty Jo Christian: Justice Kennedy, certainly the State, as I indicated before, would have the power to set definitions for what it considers to be a principal place of business, what it considers to be enough to qualify as a principal place of business in the State, and if a particular foreign corporation's contacts with the State are not sufficient to meet that definition, then it would not fall within, but we cannot conceive of any bona fide definition that would not include Burlington Northern. Our position is simply this, and I think this is the basic principle established by the Saunders case, that with respect to matters pertinent to venue... and that is, we're talking about trials in State district courts... that there is no substantial difference between a domestic corporation and between those foreign corporations that have been admitted to do business in the State and have actually established a place of business there, and that if the court chooses to extend to its domestic corporations the very great benefits that are attached to limiting venue to the single county where it has its residence, then there is no rational basis not to extend that same benefit to those foreign corporations that have been domesticated, are also doing business in the State, and also have what is reasonably considered a residence in the State.
Anthony M. Kennedy: Yes, but you're saying that it's irrational for the State not to treat foreign corporations differently on a basis of several subclasses, and it seems to me quite plausible, quite rational, for the State to treat all foreign corporations similarly, and the only way you can make your argument is by saying that some foreign corporations have a principal place of business, but I don't know why we are required to say that the State is entitled, or is required to legislate on that narrow assumption.
Betty Jo Christian: I think the principal established by Saunders which was carried forward in cases such as Searle v. Cohn is that in the modern world the concept of a foreign corporation includes two very distinct and very different types of corporations with respect to their relationship with the State. One of them is those that can be treated as... can be considered to be truly foreign. That is, those that have only transitory relationships, if any, with the State, and they're entitled to be treated quite differently from domestic corporations. But in the modern world of multi-State businesses there is another very large category of corporations which happen to be incorporated in another State, many of them like Burlington Northern and Delaware, which may even have their national headquarters elsewhere, but which in fact for all purposes related to venue are no different from a domestic corporation, and let me try to illuminate that by explaining what we're really talking about in terms of factors related to venue. Now, the respondent has emphasized that a--
Harry A. Blackmun: Ms. Christian, let me look at the other side of the coin. Your client, the Burlington Northern, has its principal place of business in Dallas, doesn't it?
Betty Jo Christian: --It's nationwide principal place of business is in Forth Worth, Texas.
Harry A. Blackmun: Is Fort Worth... what's it doing down there? You know, originally it was the old CB&Q... Chicago, Burlington, and Quincy. Those are not Texas names, and the... its original basic place of business was in Minnesota. How come Dallas and Fort Worth?
Betty Jo Christian: This occurred after a merger. There were two mergers, actually, as you will recall, in which the Burlington... which formed the present Burlington Northern. The first was the merger of the old Great Northern, Northern Pacific, and the CB&Q back in 1970. Then around--
Harry A. Blackmun: None of which had anything to do with Texas.
Betty Jo Christian: --That had nothing at all to do with Texas, and Burlington Northern remained in St. Paul with its headquarters there. Subsequently, in I believe 1980, Burlington Northern merged with the Frisco, which had lines extending to the South and going down into the Southwest and Texas, and it was after that that Burlington Northern chose to move its headquarters down to Fort Worth, Texas, because at that--
Harry A. Blackmun: These things can really be maneuvered rather easily.
Betty Jo Christian: --I think as a practical matter corporations select their national headquarters and their in-State headquarters based on business realities of where it makes sense to run a business from, and in this case, for example, Hill County was chosen as Burlington Northern's principal place of business in Montana because that is in the middle of its only main line running across the State.
William H. Rehnquist: Well, what is the county seat of Hill County?
Betty Jo Christian: That is Havre, Mr. Chief Justice.
William H. Rehnquist: That's the eastern part of the State?
Betty Jo Christian: It's approximately the center part of the State. It's the largest town on the Burlington Northern main line, and it's located just about the middle of Montana, I believe, or possibly a little bit to the--
Harry A. Blackmun: Well, that's an old part of Montana that everybody's known about for years and years. What's wrong with it?
Betty Jo Christian: --I beg your pardon?
Harry A. Blackmun: I say, that's an old-established town on the main line that everyone has known for years in Montana. What's wrong with it?
Betty Jo Christian: There's nothing wrong with it. That is Burlington Northern's principal place of business in Montana. That's where it has its division headquarters.
William H. Rehnquist: Is Montana just one... is Montana itself a separate division on the Burlington Northern?
Betty Jo Christian: There is a Montana Division which includes most of the lines in Montana. The actual boundaries, Mr. Chief Justice, are drawn based on railroad operations rather than strict State boundaries, so there are some lines that are in the Montana Division that spill over into Idaho on the west and into North Dakota on the east.
William H. Rehnquist: Are there some lines which are not in the Montana Division which are geographically in Montana?
Betty Jo Christian: At the time that this case arose, there were. At the present time, most of those lines have now been incorporated into the Montana Division. There are still a few lines down close to Wyoming that are in the Denver Division.
William H. Rehnquist: More than one division, then, has geographical operations in Montana.
Betty Jo Christian: There are a very few lines that are still in the Denver Division at the time that this case... that is a very short trackage, down near the border, the southern border of Montana, but at the time this--
Sandra Day O'Connor: Why do you--
Betty Jo Christian: --I beg your--
Sandra Day O'Connor: --Why do you suppose all the lawsuits are filed in Yellowstone County?
Betty Jo Christian: --I think the practical answer to that, Justice O'Connor, is that plaintiffs are going into Yellowstone and Cascade Counties because they perceive, and Burlington Northern agrees with them, that the verdict that they received in those two counties is likely to be far more favorable than they would receive if they sued in Hill County--
Sandra Day O'Connor: In that juries are more responsive to plaintiffs in those counties?
Betty Jo Christian: --Precisely, Justice O'Connor, and this is a reality of modern litigation. This is why venue is so important in modern civil litigation, and it's why the protection afforded by a State venue law that limits, as this one does, venue to a single county for its own domestic corporations is of such great importance. The difference to a corporation in being subject to suit only in one county, where it has its principal place of business, and to one that is subject to suit anywhere in the State, in the county that the plaintiff selects as the one that it believes is the most favorable to its particular lawsuit, is an enormous advantage.
William H. Rehnquist: Under your theory, could Burlington Northern move its principal place of business to a very small town in Montana, the county seat which had a reputation for very small plaintiffs' verdicts?
Betty Jo Christian: I think that that would be largely precluded, and certainly limited by the simple business reality that you have to have your principal place of business in a place where it makes sense to run your business. You can't have 900 people located in some inaccessible spot that is remote from the business they're operating, and that's true of domestic or foreign corporations. The selection of a principal place of business is dictated by the business realities.
Byron R. White: Ms. Christian, what... if you counted up all the foreign corporations that are doing business in Montana, how many of them... what percentage of them do you think would have what you would call a principal place of business in Montana?
Betty Jo Christian: I can't really answer that, Justice White. Certainly--
Byron R. White: I would suppose there would be a lot of them that didn't have a principal place of business in Montana.
Betty Jo Christian: --I think you would find some in both categories, and this is why we emphasize--
Byron R. White: And you wouldn't... if you were representing one of those companies that didn't have a principal place of business in Montana, you wouldn't be making this argument about them--
Betty Jo Christian: --Justice White--
Byron R. White: --They could be sued in any county in the State--
Betty Jo Christian: --Justice White--
Byron R. White: --Is that right?
Betty Jo Christian: --I think the--
Byron R. White: Is that right?
Betty Jo Christian: --It depends on how you define principal place of business, and that's rightly for the State--
Byron R. White: Well, let's just assume, then, that there are corporations doing business in Montana that do not have a principal place of business in Montana, such as your client does. Let's just assume that. Now, those companies could be sued in any county in Montana without violating the equal protection clause.
Betty Jo Christian: --If, under a bona fide definition of principal place of business they did not in fact have a principal place of business in Montana--
Byron R. White: Yes.
Betty Jo Christian: --Then we think that they could appropriately be sued in any county, but I would reiterate that this is where, Justice White, I think we get into what Bain Peanut referred to as allowing a little play in the joints. Now, with respect to domestic corporations, the State of Montana grants every domestic corporation a principal place of business regardless of how small that may be. Now, with respect to foreign corporations, we think it would be entirely appropriate that every foreign corporation also be assumed to have a principal place of business. This is in fact what Montana for 70 years apparently assumed in requiring that designation to be made, but we're getting now into an area in which we think that the States do have some discretion to adjust at the margin. The point is that for those foreign corporations that do have a principal place of business in the State, according to every standard the State may choose to adopt, you cannot, consistent with the equal protection clause, treat them differently from the domestic corporations in the same category. Mr. Chief Justice, I would like to reserve my remaining time for rebuttal.
William H. Rehnquist: Very well, Ms. Christian. Mr. Klein, we'll hear from you.
Joel I. Klein: Thank you, Mr. Chief Justice, and may it please the Court: Montana's venue laws, like those of virtually every other jurisdiction in this country, treat residents and nonresidents differently. Petitioner acknowledges legitimacy of that basic distinction, but objects to one aspect of its application... Montana's decision to treat its domestic corporations as residents while denying that status to foreign corporations who simply have an office in the State.
Sandra Day O'Connor: How many States have laws like Montana's, Mr. Klein?
Joel I. Klein: Justice O'Connor, the answer is that there are probably a dozen or so States that draw distinctions similar. The problem is, each State has a different venue law, so for example, some States say... and these are cited in petitioner's petition on pages 21 to 23, but some States will say that if you're a nonresident you can be sued in the county of a plaintiff's residence, so they're not identical, but I think there are something like a dozen States that draw these kinds of distinctions.
Anthony M. Kennedy: Except for those dozen States, do the other States generally require the foreign corporation to designate a principal place of business within the State?
Joel I. Klein: I don't think that's right, I think there are a handful or so that do that. Other States don't use single place of business. In other words... and that's a key distinction between Saunders. A lot of States provide that any corporation can be sued wherever it has an office. Montana hasn't gone that way. That was the statute in Saunders, and it seems to me, Justice Kennedy, that's a very different statute. If it says, look, wherever you have an office, you're amenable to suit, now you're a foreign corporation, and wherever you have an office it's not going to be a limitation, that does seem to me to be an arbitrary distinction. But Montana has its own scheme, and I think it rests on this rational justification, and that is, the Montana legislature could rationally have concluded that domestic corporations tend to have an important attribute that foreign corporations like petitioners lack, and that attribute is a single, easily identifiable headquarters in the State of Montana. That attribute, that single identifiable headquarters, is rationally related to Montana's distinction for two reasons: first, having that headquarters relates to the kind of convenience considerations that affect venue, and second of all, having such a headquarters means there won't be litigation over where the venue is located.
Antonin Scalia: Yes, but I mean if it were discovered that corporations... just statistically it happens to be true that corporations whose names begin in Z, many more of those have such headquarters than corporations that begin with other letters, you wouldn't allow a law that said only those corporations whose names begin in Z can be sued solely where their chief headquarters are.
Joel I. Klein: That's because the preliminary criteria is absolutely arbitrary.
Antonin Scalia: Well, that's right, but why isn't it... if... why isn't it just as arbitrary to say well, just because it happens that domestic corporations are more likely to have a headquarters, why do you have to write off those that aren't domestic but do have a headquarters?
Joel I. Klein: Because it seems me, Justice Scalia, we don't write them off. We're saying is there a rational basis to distinguish the two categories.
Antonin Scalia: I suggest not, any more than with corporations whose names begin in Z.
Joel I. Klein: Well, let me see if I can develop the distinction. That is, the Montana legislature says we're conferring venue based on residence because that is convenient in the sense that the reason we have a residence law is people want to be close to their litigation. Now, if you have your corporate headquarters in Montana, that's where your chief executive officials are going to be, that's where your chief legal counsel if you have one is going to be, that's where your books and records are going to be. That is your litigation hub as a rule, and that's all the equal protection clause asks, is let's look across the spectrum of these corporations. As a rule, if we have a Montana corporation, people incorporate in Montana, unlike Delaware, to do their business in Montana. Their executive offices, we rationally believe, are a litigation hub. Now, for a foreign corporation like--
Antonin Scalia: Excuse me, I... is that all it takes to be rational, is to pick some factor that puts the majority of people in that classification so that you could pick, you know, males with blue eyes, and if that happens to correspond to a majority of situations, that's a rational classification, even though you could just as readily identify the particular individuals with the characteristic you're concerned about, such as residence?
Joel I. Klein: --I think you put your finger on the distinction. It's not simply that there's a correlation. There's a reason to expect the correlation, Justice Scalia, and that reason is, if you incorporate in Montana, you're going to have your executive offices, as a rule, there. That's what the Montana legislature has decided.
Antonin Scalia: That is likely to be true. So what?
Joel I. Klein: But that seems to be--
Antonin Scalia: If there are other companies that just as well have their principal place of business in the State, why do you have to write them off?
Joel I. Klein: --Well, it's not a question of writing it off. When you administer a rule like this, Justice Scalia, there are some people who are going to fall on the outside. Let's take a simple rule. If you're 18 years old, you can drive in Montana. If you're 17 you can't. There are some people who are 17 who are very good drivers, but the State doesn't have to make an individual determination. The State has to look across a category. Now, I suggest to you, if you take the following two groups that petitioner is talking about, one is those corporations that incorporate in the State. Are they likely to have their headquarters, their executive officials, and litigation hub in the State? The answer to that is yes. If you take foreign corporations, they may or may not. Burlington Northern's litigation may be handled out of Forth Worth. It may be handled any place within the State out of a division. Second of all, if you have a headquarters... and this is important to venue law... it's easy to know where to sue. There's no dispute. You know, in the history of Montana there's never been a single lawsuit about where is the residence of a domestic corporation, and I think that's important because that issue is subject to interlocutory appeal. So what it means is, plaintiffs know where the domestic headquarters of a Montana corporation is going to be. It's an easy place to find, and indeed, as counsel points out, it's now expressly designated, but it was always designated in that we knew where the chief executive official was. Now, if you're a foreign corporation... excuse me. If you're a foreign corporation, and let's just say you have five different drugstores in Montana and your executive offices are in Chicago, there's no readily identifiable place to call residency. The fact that you may have a few more employees or a few fewer employees in a particular place doesn't answer that question.
Sandra Day O'Connor: Well, does Montana, though, require a foreign corporation to designate some place in Montana as a principal place of residence?
Joel I. Klein: That is not the case. There was an earlier statute going back to 1895, in which the option of designating a chief office was available. I believe if you look at the statutes that suggests a place where you could file suit, serve papers, but the notion that there is a kind of principal place of business within the State is not what Montana requires.
Sandra Day O'Connor: There... does Montana law provide for the designation of someone in the State on whom suit can be served?
Joel I. Klein: Yes, Your Honor.
Sandra Day O'Connor: And that's a matter of public notice, and anyone can easily find that, I suppose.
Joel I. Klein: That's correct, and in this instance... that's an interesting point, Justice O'Connor, because in this instance Burlington Northern, for example, has its registered agent in Helena, Montana. It's basically a shop that serves as registered agent for virtually everyone. They don't claim that that's where they should be sued, and again I don't think the State has to accommodate... the mere fact of certainty that you have an agent some place doesn't give you a residence. You could put an agent in the most far-away corner of the State for service of process, but that would not give you a residence, in the same way that a domestic corporation is entitled to say we reside in this State. And I would just follow that with a historical point, Justice Scalia, is that this is an area where we're talking about a tradition that goes back 100-some-odd years in that as a logical matter if a State creates a domestic corporation the logical inference is that it's going to treat it as a residence. That inference is still the rule, by the way, under Federal venue statute 1400(b), that your residence under 1400(b), as this Court made clear in Brunette, is where you're incorporated, so I think this rule has both the virtue of historical tradition and the virtue of practical significance.
Antonin Scalia: I don't understand Burlington Northern to be saying that you have to pick a certain criterion, nor do I understand that to have been what Saunders said, but why isn't it reasonable to say look, corporations are artificial entities... they don't really exist anywhere. I mean, they don't have a residence, they're not people, but if you're going to allow your domestic corporation artificially to acquire a residence, and thereby to be suable only in one place, you have to let out-of-State corporations artificially acquire a residence. We don't care where it is. It could be where they file with CT, if it's in Helena, or it could be where their principal drugstore is, or it could be... make up whatever you want, but you have to allow them to acquire a residence if you let your domestic corporations do that. Why isn't that a rational rule?
Joel I. Klein: That may be a rational rule. I don't think it's constitutionally compelled. Don't get me wrong, I think a State could perfectly well have that rule. The reason why it's not--
Antonin Scalia: You're quite right. Let me put it the other way. Why isn't it irrational to say we are only going to let our domestic corporations acquire a residence?
Joel I. Klein: --I think the two reasons, Justice Scalia, are 1) that domestic corporations, because they have their executive offices, literally do have a functional residence. You know, when it comes to a trial, if I am the chief executive official or the general counsel of a Montana corporation, my presence at the trial may be important. That's... especially in a big case. My direct access to trial counsel has practical convenience concerns that relate to every venue kind of consideration. Those are real. If you need the books and records of the corporation, they're right there. They're accessible. Now, it may be that an individual foreign corporation has the same kind of practical necessities. I don't believe Burlington Northern does, but as a rule, foreign corporations don't claim to have the same kind of practical necessity in terms of venue considerations and accessibility, and I do want to emphasize, I think Saunders is a very different case. The statute in Saunders says wherever you have an office you're suable. Now, that statute, it seems to me once you say that it's impossible to say that just because you have your certificate from another State you shouldn't be suable wherever you have an office, but there's nothing wrong with Montana's single residence notion. Once you buy that notion, then you have the rule I gave you, and second of all you have the question of administrative convenience. If I have my executive offices in Montana, that's going to be where my business is. Now, Burlington Northern, when it has a regional system of railroads, is not making Statewide decisions about where to locate its office.
John Paul Stevens: Mr. Klein, can I interrupt you right on that point about, isn't it not possible that a corporation in Montana could designate Helena as its principal place when it incorporates and have its corporate office there for that purpose, but in fact have its major commercial offices located at the other end of the State?
Joel I. Klein: I think that's possible, but I think--
John Paul Stevens: If that were true, which would be the principal place of business?
Joel I. Klein: --Helena would be the principal place, where it has its executive offices.
John Paul Stevens: Where it designated in its charter, even though the president in fact worked in the--
Joel I. Klein: Oh, I think... I don't know--
Antonin Scalia: --It's just, you can set up a Delaware corporation and have the necessary papers filed down there to have that your headquarters for corporate purposes but yet you really run your business out of Detroit or some place.
Joel I. Klein: --No, I misunderstood your question. Let me change my answer, Justice Stevens. I think the question is where, in fact, are your executive offices?
John Paul Stevens: Right, so it's even true within Montana that you could have the same kind of... for a domestic corporation you have the same situation you could have for a foreign corporation, where it designates a registered agent in Helena but it actually has all its corporate business run out of another city.
Joel I. Klein: But in fact the way that works is that you get sued at that other city. You get sued where your executive offices are located. There's never been a case... in other words, everybody in Montana whose--
John Paul Stevens: Then I don't understand the difference as you explained it to Justice Scalia when you posited each, the domestic and the foreign, could have the same situation with a designated registered agent in town A but have most of their business in town B.
Joel I. Klein: --No, my point is not... is where the difference that I'm relying on, I'd like to make it clear, is where are the executive officers of the corporation. That is critical to venue, because those are the people that are most responsible for the litigation. That's where the books and records are most likely to be.
John Paul Stevens: Then why isn't that true of a division in Montana also?
Joel I. Klein: It may or may not be, but you have to understand we're talking about two classes of corporations.
John Paul Stevens: I understand, and we're also talking about Montana, but the same rule presumably could apply to Michigan or New York as well, where you have, you know, the same kind of problems.
Joel I. Klein: I think it could and I think it does, but the difference is, as a class of corporations, if we know the following thing, that they have an office in the State, is there reason to think that that office is a litigation hub in the same way that there is to think that an executive office where the people who ultimately must answer for the corporation are located, and I think it's not, and I think Montana simply says it's rational for us to conclude we've got two categories. You always have to factor in venue, and I think this may also address some of... I hope address some of Justice Scalia's concerns. You always have to factor in venue. Every venue decision balances convenience. There's somebody else out there called the plaintiff who is essentially arguing I have convenience considerations too, here, and while Montana--
John Paul Stevens: We're primarily concerned with out-of-State plaintiffs and out-of-State torts for the most part, I take it. That's where this becomes significant.
Joel I. Klein: --I don't think that's correct. I think first of all this rule applies, that Burlington Northern's talking about, this is a facial challenge. It would apply to every in-State or out-of-State plaintiff, every in-State or out-of-State tort.
John Paul Stevens: I understand.
Joel I. Klein: And I think that their suggestion that there's somehow... there's some floodgate of out-of-State litigation is, as I think we--
John Paul Stevens: Well, certainly the plaintiff didn't pick this forum because it was most convenient to the plaintiff. I mean, neither the accident occurred there, nor the plaintiff has any connection with this forum.
Joel I. Klein: --That's not... as a matter of fact, that happens not to be correct, Justice Stevens. First of all, the plaintiff lives in Sheraton. That's about 110 miles from Billings. That's the... the nearest big city is in Billings. Second of all, the plaintiff went there for medical treatment on his knee. Both plaintiffs did, so their doctors were actually in Billings. So in this particular instance, although I don't think that should decide the constitutional issue, there was actually a nexus.
Byron R. White: Mr. Klein, do you think the equal protection standard was properly stated in Saunders? It said that the classification should not be arbitrary, but it should be based on a real and substantial difference having a reasonable relation to the subject of the particular legislation. Is that the--
Joel I. Klein: That's not the current standard, Justice White.
Byron R. White: --So do you think that Montana's law could pass the standard stated in Saunders?
Joel I. Klein: I do, but I don't think it has to. I think it has to pass a much lower threshold, and I think that's the point of Justice Holmes' unanimous opinion in Bain Peanut. First of all, all venue laws are going to be somewhat arbitrary. There's no way around it. It's a rule of general application that can't be tailored to each individual situation. Second of all, venue laws necessarily are going to inconvenience one party in part at the expense of the other, and I suggest to you the reason why, since Bain Peanut, this Court has not had a single one of these cases, even though there's lots of venue laws where you could mount a similar type argument... you could say, I'm an out-of-State resident. I live in Wyoming, but the truth is, I've got a fixed home in Montana where I vacation three, four, five, six, eight months, and even though I'm a resident in Wyoming, treat me as a resident of Montana. These kind of arguments, the books are rife with these kinds of distinctions in venue law, and it just seems to me all a State needs to say is look, there's a plausible difference. Corporate law was built on the notion that a principal place of business of a corporation is different from just a place of business. That's a plausible, rational distinction, and I don't think Montana or any of these other laws can be subject to a whole lot more rigorous scrutiny, otherwise in a sense venue laws are always challengeable, anybody can show. It's no different, I submit, from my hypothetical that says look, to get social security... in Califano v. Jobst, if you're 18 years old, you no longer get it whether you need it or not, and somebody could say but I'm just like somebody who's under 18, and I need it. That's exactly the kind of situation we have here.
Antonin Scalia: Mr. Klein, what if you have a Delaware corporation that has its principal... it's headquarters in Montana? They can still be sued anywhere in Montana.
Joel I. Klein: The answer to that question, frankly, is not directly posed by this case. In other words, Burlington Northern is not such a corporation. I think the answer is yes. I think the equal protection clause in this area doesn't require the States to cut precise corners. However, if one were to think that that is a constitutionally decisive case, I would suggest that the right common law thing to do is to give Montana a chance to face that question. I admit, that's a harder question than the one we face, but I would think before you strike a statute down on its face, Justice Scalia, you'd let the State supreme court take a look at it. These venue rules sort of evolved just the way you'd think they evolve. We started out with a statute as a territory that said if you had a residence you got sued there. Then we created a corporation, where we said now, is that like a residence, and we said yes. Then we took another person and said he's not like... another corporation and said he's not like a resident because his home's in Forth Worth. Now you're saying, which is possible, that if somebody said look, I'm a Delaware corporation but my executive offices are in Montana, I'd say before we strike down the statute we give Montana a chance to make that argument. That's not petitioner's argument. It wouldn't benefit petitioner in this case.
Byron R. White: Well, Mr. Klein, I take it that a Montana corporation with its principal place of business in a particular county can only be sued there, is that it?
Joel I. Klein: That's exactly right.
Byron R. White: Why should a corporation, just because it's foreign, be capable of being sued in just any county?
Joel I. Klein: Because I think the justifications for limiting venues--
Byron R. White: Well, I know, it may be that it's very convenient to sue a domestic corporation at their principal place of business, but does it necessary follow that a foreign corporation that doesn't have a principal place of business in Montana can be sued anywhere?
Joel I. Klein: --It doesn't necessarily follow, Justice White, I'm... what I think--
Byron R. White: Well, that's... I take it it has to follow--
Joel I. Klein: --I think it follows this way--
Byron R. White: --According to your argument.
Joel I. Klein: --Well, I think it follows in part. I think it follows that Montana can say if you don't have a chief executive office, then the plaintiff's convenience is paramount and it should pick the forum. But let me just say this, Justice White: Burlington Northern is not--
Byron R. White: Why shouldn't the equal protection clause say that if you only allow a domestic corporation to be sued in one county a foreign corporation may only be sued in one county, and a foreign corporation is entitled to state where it can pick out a county that it can be sued in.
Joel I. Klein: --Because I think that would say to the State--
Byron R. White: Or the State may designate a county to be sued in.
Joel I. Klein: --Well, there are two things: one is, can the State designate it, the other is, can the foreign corporation designate it. It seems to me the point that was raised before is the foreign corporation can simply say yes, we'll pick a place. Then they can--
Byron R. White: Well, that's what... you've let the domestic corporation pick a place.
Joel I. Klein: --We let them pick a place, Justice White, because that's where they had their executive offices. I don't think--
Anthony M. Kennedy: Well, is that true... you say there's never been any litigation on this. Is there anything to prevent us from making the assumption that it's a conclusive presumption of correctness that that is the principal place of business simply because the corporation so designates it?
Joel I. Klein: --The only thing to prevent you from saying that is the language in the Montana supreme court opinion that says it's the principal place of business and that term has not been designated in the code. In other words, until this year the term principal place of business meant in Montana would it customarily meant in corporate law, and in the case I cite, what the court in Montana said in the Mapston case is it said a school district is just like a corporation. We know where its principal place of business is in this State. So I think it's not an arbitrary designation.
Anthony M. Kennedy: But there's no designation made in the corporate papers or in any other filing by the corporation.
Joel I. Klein: Until this year, you designated exactly where your president, vice president and secretary and treasurer were, so that would be, in fact, where your place of business was. This year you also designate your executive offices as an office, but up until this year what you would see on the form in Montana are the four chief officials, which I think is in fact what the executive offices are, and I think that's the point about venue. Those are the people ultimately responsible for corporate litigation. If there are no further questions, Mr. Chief Justice--
William H. Rehnquist: Thank you, Mr. Klein. Ms. Christian, you have four minutes remaining.
Betty Jo Christian: Thank you, Mr. Chief Justice. I have just two points. First of all, respondent has argued that the matter of convenience in venue is entirely different for a foreign corporation and for a domestic corporation on the theory that the significant factor with respect to convenience in terms of venue is where the chief executive officers and the corporate records are, but I'd like to step back for a moment and just look at what convenience in terms of venue really means. We're talking about convenience in the logistics of a trial in a State district court, and what that really means is the convenience of having an office in which your witnesses can remain and continue to get their work done until shortly before they're called on the stand to testify instead of having to leave town at least one day ahead of time, go to another city, and stay in a hotel waiting to be called. It means having physical facilities, your secretaries and word processors available, in order to put together exhibits, in order to prepare witnesses for trial. This is the sort of thing, the sort of convenience and economy, related to venue, not where the chief executive officer is, who is highly unlikely to be involved, and not the place where the corporate books and records are kept.
William H. Rehnquist: Well, if--
Betty Jo Christian: If you need the records--
William H. Rehnquist: --Ms. Christian, it depends on the kind of case, really. If it were a merger case or, you know, fighting off a hostile takeover or something of that... certainly the chief executive could be involved, whereas I suspect the chief executive would not be involved in a personal injury action.
Betty Jo Christian: --That's correct, Mr. Chief Justice, and our point is simply this that in terms of selecting... of identifying convenience generally, the convenience in terms of State district court litigation needs to focus primarily on the convenience of logistics in running the trial, not upon in particular... where particular individuals would be. It's the logistics.
William H. Rehnquist: You say it has to. You mean Montana has no choice, it must focus on what you say it must focus on.
Betty Jo Christian: Mr. Chief Justice, Montana has complete discretion as to whether even to consider convenience or not. Respondents have suggested that convenience is the key consideration, and I was simply responding to their argument in terms of, if that is the justification, then it applies just as much to a foreign corporation that also has a place, one place from which it would be more convenient to centralize its litigation, and the mere fact it's incorporated elsewhere, or even has its national headquarters elsewhere, does not mean it does not have a single point that would be more convenient. My final point is simply this: the suggestion has been made that the Saunders case was different from this because in Saunders the venue for domestic corporations was at any place where the corporation had a fixed place of business... pardon me, any place of business, whereas for a foreign corporation it was any county. What this would mean in practice is that if you have a relatively broad venue statute for a domestic corporation so that the disparity with foreign is relatively narrow, then it's a violation of the equal protection clause, but if you have a vast disparity, the difference between one county venue for the domestic corporation and any county venue for the foreign corporation, then that passes constitutional muster, and that simply does not square with any realistic notion of equal protection. If there are no further questions, thank you very much.
Clarence Thomas: One question.
Betty Jo Christian: Yes.
Clarence Thomas: Did you consider arguing that this venue statute violated the commerce clause?
Betty Jo Christian: Traditionally, Justice Thomas, this Court has considered venue laws, challenges to venue laws, under the equal protection clause rather than the commerce clause. We think that there may be commerce clause implications here, but from a policy standpoint, this is the way this Court has treated it, and since it avoids a case-by-case determination of whether there is a burden on interstate commerce in any particular venue law perhaps as applied to any particular case, we suggest that from a policy standpoint equal protection is really what venue laws is all about.
William H. Rehnquist: Thank you, Ms. Christian. The case is submitted.
Betty Jo Christian: Thank you.