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April 16, 2018 Articles

Stream-of-Commerce Personal Jurisdiction Dries Up Following Bristol-Myers Squibb

James M. Beck

Since 2018 began, several decisions have held that Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (BMS), precludes theories of “stream of commerce” (SoC) personal jurisdiction that do not require that a defendant have intentionally availed itself of access to a forum state’s markets.

Under BMS, “case-linked” personal jurisdiction (also called “specific” personal jurisdiction) must “arise out of or relate to the defendant’s contacts with the forum.” Id. at 1780 (internal quotes omitted) (emphasis original). Where the “relevant conduct occurred entirely” out of state, “the mere fact that this conduct affected plaintiffs with connections to the forum state did not suffice to authorize jurisdiction.” Id. (internal quotes omitted) (emphasis original). Without a plaintiff/case-specific factual link, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.” Id. BMS repeatedly cited and followed World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), the holding of which BMS described as an “isolated occurrence” cannot be capable of supporting jurisdiction where “the defendant carried on no activity” in the state “whatsoever” and one of its products, in a “fortuitous circumstance,” caused injury when it “happened to suffer an accident while passing through” the state. BMS, 137 S. Ct. at 1782.

The BMS decision also reiterated that a defendant’s distribution of its products through independent third parties cannot create case-linked jurisdiction.

A defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction. In this case, it is not alleged that [the defendant] engaged in relevant acts together with [its distributor] in [the forum]. . . . The bare fact that [the defendant] contracted with a [forum] distributor is not enough to establish personal jurisdiction in the State.

Id. at 1783 (citations and quotation marks omitted).

In addition, BMS had a federalism component:

[T]he primary concern is the burden on the defendant. . . . [E]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

Id. at 1780–81 (internal quotation marks from World-Wide Volkswagen omitted).

The discussion in BMS—particularly as the author was Justice Alito—suggests that so-called SoC jurisdiction is also imperiled. SoC jurisdiction, unlike BMS, involves plaintiffs who are residents of their chosen fora. However, standard of care jurisdiction also does not involve any forum-directed conduct by the defendant being sued. Rather, it is a theory that the presence of a defendant’s product in the forum, without more, permits case-linked jurisdiction over that defendant with respect to any injuries its product might cause—even though the product’s presence was due to the independent actions of others. SoC jurisdiction can exist absent evidence that the defendant intended for its products to be present in the forum state or was even aware that they were.

SoC jurisdiction has never commanded a majority on the Supreme Court. Its high point was a concurrence in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987). In Asahi, Justice Brennan, speaking for four justices, stated:

As long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise. Nor will the litigation present a burden for which there is no corresponding benefit. A defendant who has placed goods in the stream of commerce benefits economically from the retail sale of the final product in the forum State, and indirectly benefits from the State’s laws that regulate and facilitate commercial activity. These benefits accrue regardless of whether that participant directly conducts business in the forum State, or engages in additional conduct directed toward that State.

480 U.S. at 117.

This passage was dictum (Justice Brennan agreed that no jurisdiction existed on the facts of Asahi) in a concurring opinion, but the concept of SoC jurisdiction in the absence of any forum-directed conduct by the defendant has persisted for decades.

In 2011, the Supreme Court held that SoC jurisdiction could not be asserted as a form of general jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 929 (2011). However, a concurring opinion by Justice Alito prevented a majority of the Court from administering the coup de grâce to SoC jurisdiction in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011). Four justices “conclu[ded] that the authority to subject a defendant to judgment depends on purposeful availment,” thus rejecting “the undesirable consequences of Justice Brennan’s approach” in Asahi. Id. at 885. This Nicastro plurality held that (1) “jurisdiction is in the first instance a question of authority rather than fairness”; (2) “personal jurisdiction requires a forum-by-forum, or sovereign-by-sovereign, analysis”; and (3) “a defendant may in principle be subject to the jurisdiction of the courts of the United States but not of any particular State.” Id. at 883–84.

Justice Alito, joined by Justice Breyer, refused “to announce a rule of broad applicability” that would have eliminated SoC jurisdiction. Id. at 887. Instead, they agreed only that “a single sale of a product in a State does not constitute an adequate basis for asserting jurisdiction over an out-of-state defendant, even if that defendant places his goods in the stream of commerce, fully aware (and hoping) that such a sale will take place.” Id. at 888–89.

In BMS, however, Justice Alito adhered to the very federalist model of jurisdiction that he had been unwilling to join in Nicastro. That development does not bode well for the kind of SoC jurisdiction without purposeful availment that has bedeviled product liability defendants for decades. Of late, courts have been coming to that conclusion. Most recently, the Oklahoma Supreme Court decided Montgomery v. Airbus Helicopters, Inc., 2018 WL 1164671 (Okla. Mar. 6, 2018), and held that BMS eliminated the remaining jurisdictional underpinnings of SoC jurisdiction. “[S]ubsequent, to [BMS], we must conclude that any ‘stream of commerce’ test applied to [defendants’] products . . . cannot establish Oklahoma jurisdiction”:

[BMS] requires an affiliation between the forum and the underlying controversy, an activity or an occurrence that takes place in the forum State, which subjects the cause to the State’s regulation. The adjudication of issues must derive from, or be connected with, the very controversy that establishes jurisdiction. Accordingly, a “sliding scale” approach, or “totality of the contacts” or “stream of commerce” approach is insufficient to establish specific personal jurisdiction.

Montgomery, 2018 WL 1164671, at *9.

While Oklahoma had “an interest in adjudicating this case” because “most of the harm” occurred there, “these facts alone, without [the defendants] having further direct and specific conduct with this State directly related to the incident giving rise to the injuries, is insufficient for asserting specific personal jurisdiction over them” after BMS. Id. at *10.

The week before Montgomery, the Third Circuit disposed of an SoC-based jurisdiction claim against the target defendant’s parent in Shuker v. Smith & Nephew, PLC, 2018 WL 1096185 (3d Cir. Mar. 1, 2018). For decades, the Third Circuit had avoided taking a position on Asahi-style SoC jurisdiction, neither adopting nor definitively rejecting it. See, e.g., D’Jamoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 105–6 (3d Cir. 2009) (avoiding SoC issue by holding that airplane crashing in state did not “enter” the stream of commerce “as that term is generally understood”). But, following BMS, a Third Circuit panel unanimously rejected SoC jurisdiction in Shuker. “We perceive no merit in [the plaintiffs’] stream-of-commerce theory of personal jurisdiction.” Shuker, 2018 WL 1096185, at *14. Observing that “[a] plurality of Supreme Court Justices has twice rejected the stream-of-commerce theory,” Shuker took notice of relevant language in BMS:

Indeed, the Supreme Court has recently held that “[t]he bare fact that [a nonresident defendant] contracted with a [resident] distributor is not enough to establish personal jurisdiction in the State.” [citing BMS] We thus have no cause to revisit our Court’s precedent on this issue, and we decline to adopt [the plaintiffs’] stream-of-commerce theory of specific personal jurisdiction.

Id. at *14 (affirming rejection of SoC jurisdiction without any discovery).

Earlier in 2018, Venuti v. Continental Motors, Inc., 2018 WL 312532 (Utah Ct. App. Jan. 5, 2018), similarly rejected SoC jurisdiction in another plane crash case. Beyond nationwide sales of its product, “there [wa]s no evidence that [the defendant] took any additional steps to target [the forum state] for the sale of the product.” Id. at *4. “[A] series of third-party sales” rather than “any deliberate action on the part of” the defendant brought the product into the state. Id. at *5. “[M]erely placing a product into the stream of commerce knowing that it could be swept into the forum state does not subject a manufacturer to personal jurisdiction.” Id. Without some “target[ing]” of the forum, that the defendant sold a lot of products generally doesn’t create jurisdiction, particularly after BMS:

When there is no connection between the forum and the underlying controversy, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.”

Id. at *6 (quoting BMS, 137 S. Ct. at 1781).

Finally, Moseley v. Suzuki Motor, Inc., 2018 WL 539330 (D. Idaho Jan. 24, 2018), reached the same conclusion. The Moseley plaintiff asserted SoC jurisdiction over a foreign product manufacturer without even bothering to allege how the product, which had been sold by a now-defunct independent distributor in another state in 2008, made its way to Idaho by 2015, where it was involved in a fatal accident. Id. at *1; see id. at *2 (“Plaintiffs have failed to explain how the motorcycle even ended up in Idaho”).

In the absence of any evidence that the defendant manufacturer ever “specifically targeted” the forum state, id. at *2, the Moseley court rejected SoC jurisdiction. Where “only the distributor, but not the manufacturer, purposefully availed itself of the benefits of doing business” in a state, personal jurisdiction over the manufacturer does not exist, even if the distributor, in this particular case, was a corporate subsidiary of the defendant. Id. at *3.

Courts are thus starting to realize that, while BMS was not an SoC jurisdiction case, it did authoritatively delineate the standards for case-linked personal jurisdiction, which under Goodyear is the only possible basis for SoC jurisdiction. The holding in BMS—that merely having in-state distributors cannot support case-linked jurisdiction—should therefore be fatal to SoC jurisdiction, which rests on “contacts” (if any exist at all) that are less significant even than having forum distributors. These courts recognize that BMS cannot be ignored simply because it involved nonresident plaintiffs. If, and only if, “purposeful availment,” rather than the “fortuitous” conduct of third persons, brought a product into the jurisdiction, can there be personal jurisdiction under any sort of case-linked theory after BMS.

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