Client Advisory

Janelle N. Winters, Rachel S. Rubenstein, Randolph Portugal

In E.T. v. Boys and Girls Club of Hudson County, the New Jersey Supreme Court issued a significant ruling limiting the circumstances under which national umbrella organizations may be sued in New Jersey for torts committed by employees of local affiliates.

The case arose after New Jersey expanded the statute of limitations for child sex abuse claims in 2019, prompting nine plaintiffs to file suit against the Boys & Girls Club of Hudson County (BGCHC) and the Boys & Girls Club of America (BGCA), among others, alleging sexual abuse by a part-time counselor at BGCHC between 1976 and 1984. BGCHC is a New Jersey nonprofit headquartered and incorporated in the state, and its amenability to suit was undisputed. Boys & Girls Clubs of America (BGCA), however, is a federally chartered corporation domiciled in the District of Columbia and headquartered in Georgia. BGCA moved to dismiss for lack of personal jurisdiction.

The trial court relied on Daimler AG v. Bauman to find that BCGA was not subject to general jurisdiction in New Jersey but permitted jurisdictional discovery to resolve factual disputes regarding BGCA’s involvement in BGCHC’s operations. Discovery revealed that though BGCA received membership dues and provided BGCHC with template programing, resource development assistance, budgeting support, training opportunities, and its name and logo, BGCHC retained exclusive authority over hiring, firing, supervising, and training staff—including the alleged abuser—and BCGA’s authority was limited to enforcing membership requirements passed by the National Council, a body composed of delegates from local clubs.

The Appellate Division concluded that these contacts did not relate to the alleged abuse and reversed the decision of the trial court. The Supreme Court granted certification.

The Supreme Court’s Ruling

The six-justice majority held that New Jersey could not exercise specific jurisdiction over BGCA after applying a two-part test, explaining that a court can exercise specific jurisdiction over a nonresident corporate if: (1) the defendant takes some act to purposefully avail itself of the privilege of conducting activities within the forum state; and (2) the claim arises out of or relates to the purposeful availment of the forum state.

The Court explained that to satisfy (1), there must be a “substantial connection” between the defendant and New Jersey, which “must come about by an action of the defendant purposefully directed toward” New Jersey. This requires “purposeful availment,” and “cannot normally include what a nonresident defendant has failed to do.” To satisfy (2), there must be a “strong connection between the defendant’s affirmative acts directed toward the forum State and the plaintiff’s lawsuit.”

The Court therefore held that New Jersey courts could not exercise specific personal jurisdiction over BCGA because the plaintiffs’ claims did not “arise out of or relate to” any affirmative act that BCGA took in or directed toward New Jersey. Though BCGA “maintained contacts with New Jersey,” a plaintiff’s claims must “arise out of or relate to” those contacts, and the plaintiffs’ claims did not. The Court further observed that it has “never held that a failure to promulgate policies or procedures can constitute purposeful availment,” as purposeful availment requires that the defendant take “some act,” and a failure to act is not sufficient for specific personal jurisdiction “unless that action was contractually or statutorily required in the forum state.”

Key takeaway: The majority’s ruling makes clear that New Jersey courts may exercise personal jurisdiction only when a claim arises out of or relates to an affirmative act a defendant took in or directed toward New Jersey—a failure to act, unless required by statute or contract, is insufficient. Before answering, parent organizations sued in New Jersey should carefully evaluate the complaint to determine whether the complaint adequately alleges an affirmative act and whether such act is sufficiently connected to the claims.