One year ago, the U.S. Supreme Court issued two decisions making it tougher for plaintiffs to establish personal jurisdiction over nonresident defendants in the forum of their choice.
Since that time, courts across the country have followed suit. Going forward, plaintiffs will need to either file suit in defendants’ home jurisdictions or in a jurisdiction where plaintiffs can establish that a defendant had litigation-related contacts. And defendants must consider whether seeking dismissal of a case for lack of personal jurisdiction could result in litigating the case in a worse forum.
Personal Jurisdiction Basics: General vs. Specific
Since the Supreme Court’s 1945 landmark decision in International Shoe Co. v. Washington, courts recognize two types of personal jurisdiction: general and specific. “A court with general jurisdiction may hear any claim against that defendant, even if all the incidents underlying the claim occurred in a different State.” Bristol-Myers Squibb Co. v. Superior Court of California. On the other hand, “[i]n order for a state court to exercise specific jurisdiction, ‘the suit’ must ‘aris[e] out of or relat[e] to the defendant’s contacts with the forum.’” Bristol-Myers Squibb.
Last summer, the Supreme Court refined the analysis for both.
May 2017: General Jurisdiction
First, in BNSF Railway Co. v. Tyrrell, the Supreme Court held that general jurisdiction was lacking over the defendant because the company was not “at home” in Montana. In reaching this holding, the Court relied on its 2014 decision in Daimler AG v. Bauman, where it held that a corporation must be “at home” in the forum state to be subject to general personal jurisdiction. A corporation is only “at home” in its state of incorporation and where it maintains its principal place of business.
June 2017: Specific Jurisdiction
One month after BNSF, the Supreme Court addressed specific personal jurisdiction in Bristol-Myers Squibb. There, a group of plaintiffs—mostly nonresidents of California—sued the defendant company in California state court, alleging personal injury claims based on their use of the company’s drug. The defendant filed a motion to quash service of summons, which the trial court denied.
On appeal, the Supreme Court of California majority found there was jurisdiction over the company, applying a “sliding scale approach to specific jurisdiction.” Specifically, the court observed that the defendant had five research facilities in California, it sold almost 187 million pills of the drug in California, it earned more than $900 million in revenue from those sales, and it employed around 160 people in the state. Based on these “wide ranging” contacts with California, the court found specific jurisdiction, which it held was further supported because the nonresidents’ claims were similar to the California residents’ claims.
The U.S. Supreme Court reversed, holding that the “sliding scale approach” was “difficult to square with our precedents.” “For specific jurisdiction, a defendant’s general connections with the forum are not enough.” “Even regularly occurring sales of a product in a State do not justify the exercise of jurisdiction over a claim unrelated to those sales.” Rather, specific jurisdiction requires a “connection between the forum and the specific claims at issue.”
Ultimately, the Court held that in order to have specific personal jurisdiction, there must be “an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” The Court held that personal jurisdiction was lacking, and so it reversed the judgment of the California Supreme Court.
Plaintiffs have learned that when they sue a defendant in a state other than the “at home” state, courts are less willing to find specific personal jurisdiction.
Putting the Brakes on Expanding Personal Jurisdiction
Since the Supreme Court’s back-to-back decisions last summer, lower courts across the country have taken notice. And plaintiffs have learned that when they sue a defendant in a state other than the “at home” state, courts are less willing to find specific personal jurisdiction.
“The Supreme Court started putting the brakes on this sort of expanded notion of what personal jurisdiction is” years ago, says Robert J. Will, St. Louis, MO, cochair of the ABA Section of Litigation’s Pretrial Practice & Discovery Committee. “Bristol-Myers Squibb put a finer point on that when it came to this notion of piggyback jurisdiction where you anchor local plaintiffs and then bring in all these other folks from all over the country when there is really no connection whatsoever to the forum.”
Will says courts will no longer “allow these kind of piggyback claims because it is not fair to the [nonresident] corporations when they have to deal with claims of plaintiffs who have nothing to do with the jurisdiction in which the claim is sitting.” Based on the decisions since Bristol-Myers Squibb was decided, his prediction may be right.
Missouri Supreme Court Says No “Piggybacking”
For instance, in State ex rel. Bayer Corporation v. Moriarty, 92 users of the defendant company’s contraceptive device sued for alleged personal injuries. Only seven plaintiffs were Missouri residents, and the remaining 85 were nonresidents. When the lower court denied the defendant company’s motion to dismiss the nonresidents’ claim, the company filed a writ of prohibition in the Supreme Court of Missouri.
In response to the motion, the nonresident plaintiffs asserted that the company registered to do business in Missouri, engaged in substantial business activities there, and generated substantial revenue with the device in Missouri. They also argued that the company was subject to “piggyback” specific jurisdiction because they were implanted with the same device that the company marketed and sold in Missouri to the other seven resident plaintiffs.
Last December, the court rejected the nonresidents’ argument on specific personal jurisdiction, observing that the suit must arise out of or relate to the corporation’s contacts with the forum. Relying on Bristol-Myers Squibb, the court found no “affiliation between the forum and the underlying controversy” or “activity or an occurrence that takes place in the forum state.” The court issued a writ of prohibition directing the trial court to vacate its order without prejudice.
Tenth Circuit Says Long-Term Business Relationships Are Not Enough
Four days before the decision in Bayer Corporation, in Old Republic Insurance Co. v. Continental Motors, the U.S. Court of Appeals for the Tenth Circuit addressed whether the U.S. District Court for the District of Colorado could exercise specific personal jurisdiction over an out-of-state defendant, whose website allows airplane repair businesses known as fixed-base operators to have access to its online service manuals in exchange for a fee. One such Colorado fixed-base operator accessed these manuals on an airplane with engine components manufactured by the defendant. The airplane crashed in Idaho on a flight from Colorado.
The airplane’s insurer paid the owner for the property loss and filed a subrogation action against the defendant in Colorado federal district court. The district court dismissed, holding that the defendant did not have enough of a presence in Colorado to establish specific personal jurisdiction.
On appeal, the Tenth Circuit acknowledged that the defendant and the Colorado fixed-base operator had a 20-year relationship, which contemplated continued contact. Before Bristol-Myers Squibb, perhaps this would have been enough to establish specific personal jurisdiction.
But the court further observed that there were no alleged prior negotiations between the defendant and the fixed-base operator, the one-year agreements created minimal obligations for either side, the defendant never sought the fixed-base operator’s business, and there were no allegations that the defendant had any direct communications with the fixed-base operator. As a result, the court agreed that the plaintiff failed to establish specific personal jurisdiction.
The courts and the law are finally catching up to the realities of a global economy and e-commerce.
The “Amazon Effect”
“I call this the ‘Amazon Effect,’” says Dale M. Weppner, St. Louis, MO, cochair of the Section of Litigation’s Products Liability Committee. “The courts and the law are finally catching up to the realities of a global economy and e-commerce. I can literally pull up Amazon or similar websites and have products delivered to my door with no real intention on the part of the manufacturer of targeting the forum state. Courts have now recognized that it takes more than simply distributing or delivering a product to a state to confer general jurisdiction.”
Weppner is hesitant to call this a “trend.” “I think this represents more than a mere trend,” he says. “I think what we are seeing is a wholesale change in how we will litigate cases going forward. The concept of ‘stream of commerce’ jurisdiction appears to be dead. We also may see a significant reduction in the proliferation of the so-called ‘Judicial Hellholes’ as non-resident plaintiffs find it harder and harder to maintain actions against non-resident defendants in these forums.”
Will agrees: “I think litigants who are trying to defend against that type of expansive jurisdiction have some pretty potent weapons in recent Supreme Court precedents that more or less sort of started with Goodyear [Dunlop Tires Operations, S. A. v. Brown] and Daimler.”
Other Recent Cases
Whether or not we are seeing a trend, other courts have taken notice. For instance, last March in Shuker v. Smith & Nephew, the U.S. Court of Appeals for the Third Circuit rejected a plaintiff’s “stream-of-commerce” theory of specific personal jurisdiction. The stream-of-commerce theory contends that specific personal jurisdiction exists over a nonresident defendant when that defendant’s goods find their way into the forum state indirectly via the “stream of commerce,” making it foreseeable that the goods could cause injury in the state. The Third Circuit declined to adopt the theory, however, observing that the Supreme Court in Bristol-Myers Squibb held that “[t]he bare fact that [a non-resident defendant] contracted with a [resident] distributor is not enough to establish personal jurisdiction in the State.”
And in In re Xarelto Caseslast February, a California trial court refused to permit jurisdictional interrogatories where nonresident plaintiffs were allegedly injured in their home states. The court found it insufficient that clinical trials were performed in California and that the manufacturers hired a resident distributor—this had nothing to do with whether plaintiffs’ claims “arose out of” the defendants’ contacts with California. Therefore, the proposed discovery “seeks information on, at best, merely tenuous contact between the Defendants and California.”
District Court Split
Since the Supreme Court’s 2017 decisions, however, not all courts agree on everything. In Bristol-Myers Squibb,Justice Sotomayor recognized in a dissenting opinion that the majority did not address whether the opinion “would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there.” And indeed, a split has emerged among district courts on this point.
In DeBernardis v. NBTY, Inc., for example, the U.S. District Court for the Northern District of Illinois, while calling it a “close question,” predicted that “courts will apply Bristol-Myers Squibb to outlaw nationwide class actions in a form, such as in this case, where there is no general jurisdiction over the Defendants.” But in In re Chinese-Manufactured DryWall Products, the U.S. District Court for the Eastern District of Louisiana held that Bristol-Myers Squibb did not preclude specific jurisdiction over a class and denied a motion to dismiss on those grounds.
Other questions remain as well. For instance, since the Bristol-Myers Squibb decision only concerned specific jurisdiction by a state, “we leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.”
And in SPV OSUS, Ltd. v. UBS AG, the U.S. Court of Appeals for the Second Circuit observed that the Supreme Court has not specified exactly how “a defendant’s activities must be tied to the forum for a court to properly exercise specific personal jurisdiction over a defendant.” In other words, should the in-forum conduct be the “proximate cause of plaintiff’s injuries,” or the “but for” cause?
Since the BNSF and Bristol-Myers Squibb cases, plaintiffs may need to narrow their focus. Of course, plaintiffs always have the option of filing their suits in the defendant’s “home” jurisdiction where general jurisdiction exists. To establish specific jurisdiction, however, plaintiffs will need to either file suit in the defendant’s home jurisdiction, or in a jurisdiction where plaintiffs can establish that the defendant had litigation-related contacts.
“Plaintiff’s counsel are very good and creative in finding ways to get where they want to be,” says Will. “If there is a benefit to plaintiffs from these decisions, it is making some things more clear as to what will and what will not be sufficient to establish jurisdiction.” “Plaintiffs’ counsel don’t want to spend a lot of time and money on fruitless efforts, so to the extent there is clarity and some guidance that they can take from these cases, it makes it easier for them,” so they can better “craft their jurisdictional allegations and factual allegations to fit to establish jurisdiction where they want it.”
With these new limitations, these courts “are not saying never,” says Will. “The Supreme Court is [only] saying that it is a tougher bar.”
As for defense counsel, Weppner has a warning. “I would caution people to be careful what they wish for,” he says. “Simply because a case gets dismissed on jurisdictional grounds in one forum doesn’t necessarily mean the case will go away. There will be a proper jurisdiction and venue for every claim,” which means that a successful motion to dismiss could mean the case ends up in a worse forum.
“Before you rush off and get the case dismissed,” says Weppner, “you’d better do your homework as to where the claim might properly end up, including an evaluation of such issues as damages caps, joint and several liability, standards for admissibility of expert testimony, treatment of settling parties, and even the recoverability and insurability of punitive damages.”
Anthony R. McClure is an associate editor for Litigation News.
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