A court’s assertion of personal jurisdiction over a party to a lawsuit exposes it to “the [s]tate’s coercive power”; thus, a court must first determine whether the exercise of personal jurisdiction comports with the limitations imposed by the Fourteenth Amendment’s Due Process Clause. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 918-19 (2011) (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). It is well-settled precedent that a non-resident defendant may be subject to a court’s jurisdiction only when the defendant has “certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe Co., 326 U.S. at 316 (internal quotations omitted); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92 (1980). Nevertheless, lower courts have continually struggled with the perimeters of personal jurisdiction, both general and specific, resulting in conflicting decisions across the United States.
The Supreme Court of the United States clarified the boundaries of general personal jurisdiction with its opinions in Goodyear and Daimler AG v. Bauman, 134 S. Ct. 746 (2014). The Court held in Goodyear that a corporation may submit to a state’s general authority by explicit consent, when the corporation’s “affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State,” or by making that state its place of incorporation or principal place of business. Goodyear, 564 U.S. at 918-19. And, in Daimler, the Court explained that a non-resident corporation is subject to general jurisdiction in the fora of its place of incorporation and principal place of business because those “are paradigm bases for general jurisdiction.” Daimler, 134 S. Ct. at 760 (internal quotations omitted). These decisions have since guided lower courts in assessing the boundaries of the state court’s power over non-resident defendants.
Most recently, the high Court confirmed the scope of specific personal jurisdiction of state courts over out-of-state defendants who do business throughout the United States. In an 8-1 opinion, the Court reversed the California Supreme Court’s decision in favor of non-resident plaintiffs who filed suit in California alleging injuries from Bristol-Myers Squibb’s (BMS) drug Plavix, holding that California’s state courts do not have jurisdiction to hear these claims because there was no “connection between the forum and the specific claims at issue.” Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., No. 16-466, 2017 WL 2621322, at *8 (U.S. June 19, 2017). Similar to Goodyear and Daimler, the BMS decision closes the divide among lower courts over the scope of personal jurisdiction and will presumably dampen forum shopping for the time being.
Shaping of General Jurisdiction Jurisprudence
Under International Shoe, which continues to be the canonical case in this area of law, an out-of-state corporation may be subject to a state court’s exercise of general jurisdiction when its activities within the forum are so “continuous . . . substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Int’l Shoe Co., 326 U.S. at 318. Prior to the high Court’s decisions in Goodyear and Daimler, corporations engaged in nationwide business activities found themselves subject to a state court’s general jurisdiction in multiple and often unforeseeable forums. In Goodyear and Daimler, the Court defined what constituted sufficient contacts with the forum so as to subject a non-resident defendant to personal jurisdiction, which significantly narrowed the availability of general jurisdiction over foreign and out-of-state defendants.
Goodyear Dunlop Tires Operations, S.A. v. Brown
The plaintiffs in Goodyear were North Carolina residents whose teenage sons died in a bus accident in France. Goodyear, 564 U.S. at 920. They brought suit for wrongful-death damages in North Carolina state court against Goodyear USA, an Ohio corporation, and three Goodyear foreign subsidiaries, which operated in Turkey, France and Luxembourg, alleging that the accident was caused by tire failure. Id. at 921. The foreign subsidiaries moved to dismiss for lack of personal jurisdiction on the basis that they were not registered to do business in North Carolina; had no place of business, employees or bank accounts in the State; did not design, manufacture or advertise their products in North Carolina; and did not solicit business in the State or sell or ship tires to North Carolina customers. Id. The North Carolina state courts refused to dismiss the case against the foreign subsidiaries on the grounds that a small percentage of their tires “had reached North Carolina through ‘the stream of commerce’” when distributed by other Goodyear USA affiliates. Id. at 921-22. They reasoned that this connection was sufficient to assert general jurisdiction over the foreign corporations. Id. at 922.
The U.S. Supreme Court, however, rejected the North Carolina courts’ stream-of-commerce analysis and found that it was a blending of specific and general jurisdiction. Id. at 926-27. The Court re-emphasized that while the “[f]low of a manufacturer’s products into the forum” “may bolster an affiliation germane to specific jurisdiction,” it does not support a finding of “general jurisdiction over a defendant.” Id. at 927. The Court reversed the state courts and held that such a limited connection between the forum and the foreign subsidiaries “[was] an inadequate basis for the exercise of general jurisdiction” because it did not “establish the ‘continuous and systematic’ affiliation necessary to empower” the state courts to hear claims unrelated to the foreign subsidiaries’ contacts with North Carolina. Id. at 920. The foreign corporations’ affiliations with the state did not render them “at home” in North Carolina. Id. at 929.
Daimler AG v. Bauman
While the 2011 high Court’s decision in Goodyear certainly reshaped the law of personal jurisdiction as applied to foreign corporations, it was Daimler that markedly narrowed the state courts’ power to assert general jurisdiction over out-of-state and foreign defendants selling products in the United States. Daimler involved a German corporation, Daimler AG, that was sued in federal court in California by Argentinian plaintiffs for human rights violations perpetrated by Daimler’s Argentinian subsidiary in Argentina. Daimler, 134 S. Ct. at 751-52. Jurisdiction over the lawsuit was predicated over the contacts that Mercedes Benz USA (MBUSA) had with California. Id. at 751-52. MBUSA is a subsidiary of Daimler incorporated in Delaware with its principal place of business in New Jersey that distributed Daimler-manufactured cars to dealerships throughout the United States. Id. MBUSA also had multiple facilities based in California and a regional office. Id. The plaintiffs invoked the court’s general jurisdiction, and the Ninth Circuit upheld it, reasoning that MBUSA did extensive business in California, and its conduct could be attributed upward to Daimler AG. Id. at 753.
Building on its precedent, the U.S. Supreme Court rejected the California court’s reasoning and reemphasized that general jurisdiction exists over a non-resident corporation only when its “affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.” Daimler, 134 S. Ct. at 751. In determining whether a corporation can be considered to be “at home” in a particular State, the Court ruled that the “paradigm” considerations are the corporation’s place of incorporation and principal place of business. Id. at 760. The Court explained that “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction.” Id. Importantly, the general jurisdiction test is not satisfied in every State in which a corporation “engages in a substantial, continuous, and systematic course of business” because such a standard is “unacceptably grasping” and violates due process. Id. at 760-62.
The Daimler ruling basically limited the forums where a corporation is subject to general jurisdiction to that company’s state of incorporation and principal place of business. The decision effectively abrogated the long-arm statutes passed in many states that allowed their courts to submit a foreign corporation found “doing business” in the state to general jurisdiction based solely on the presence of corporate branches, subsidiaries or affiliates. See e.g. Dietrich v. Bauer, No. 95 CIV. 7051 (RWS), 2000 WL 1171132, at *4 (S.D.N.Y. Aug. 16, 2000), on reconsideration in part, 198 F.R.D. 397 (S.D.N.Y. 2001). Daimler also restricted the plaintiffs’ ability to latch on to a subsidiary’s contacts with the state to allege jurisdiction over the foreign parent company.
Goodyear and then Daimler added clarification and perimeters to the constitutional bedrock of International Shoe in the area of personal jurisdiction. The impact was a further narrowing in the application of general jurisdiction that led litigants to increasingly rely on specific jurisdiction.
Shaping of Specific Jurisdiction Jurisprudence
Soon after Daimler, the high Court decided Walden v. Fiore, 134 S. Ct. 1115 (2014), which addressed the “‘minimum contacts’ necessary to create specific jurisdiction,” over a non-resident defendant. While Walden did not involve a corporate defendant, it reemphasized precedent on specific jurisdiction established by International Shoe, Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), Helicopteros Nacionales de Colombia, S.A. v. Hall, 471 U.S. 462 (1985), and others, and further paved the way for the Court’s decision in BMS. In Walden, the Court reasserted that the relationship between the defendant, the forum and the litigation “must arise out of contacts that the ‘defendant himself’ creates with the forum State.” Id. at 1122. The Court further emphasized that the “defendant-focused ‘minimum contacts’ inquiry” cannot be satisfied through “contacts between the plaintiff (or third parties) and the forum State.” Id. A non-resident “defendant’s relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.” Id. at 1123.
Nonetheless, the application of specific jurisdiction precedent has been murky at times—lower courts have differed in how they evaluated whether a plaintiff’s claims “arise out of or relate to” a non-resident defendant’s contacts with the forum. Some courts have required a causal relationship (“but for” or proximate) between the defendant’s forum contacts and plaintiff’s claims while others adopted a much more nebulous “substantial connection” or “discernable relationship” test that could be satisfied in the absence of any causal relationship between the defendant’s forum contacts and plaintiff’s claims. Unsurprisingly, this conflict has resulted in blatant forum shopping, turning the plaintiff-friendly, “substantial connection” jurisdictions into magnets for mass litigation, particularly product liability litigation. In these cases, hundreds of non-resident plaintiffs from all over the country have filed suits against out-of-state corporations, bringing claims over alleged injuries that arose entirely outside of the forum and that have no causal nexus with the corporation’s contacts with the forum.
Bristol-Myers Squibb Co. v. Superior Court of California
The U.S. Supreme Court reaffirmed the settled principles of personal jurisdiction in their most recent decision on the subject. In Bristol-Myers Squibb Co., 661 plaintiffs were joined in a single, California state court action against BMS, claiming they had been injured by ingesting Plavix, a pharmaceutical drug. BMS, 2017 WL 2621322 at*3. Only 86 of the 661 plaintiffs lived in California, and the remaining 575 plaintiffs neither lived in California nor sustained any injury there. Id. at *4. BMS, the manufacturer of Plavix, is a global biopharmaceutical company incorporated in Delaware and headquartered in New York. Id. BMS had five laboratory facilities in California, employed sales representatives in the state and maintained a small state-government advocacy office. Id. at *3. BMS also sold Plavix in California, as it did in the rest of the country. However, Plavix was not developed, manufactured, labeled or packaged in California; nor did BMS create a marketing strategy for Plavix in California. Id. at *4. None of the non-California plaintiffs alleged that they obtained Plavix in or through California, that they were injured in California or that they were treated for the alleged injuries in California. Id.
The Supreme Court of California denied BMS’s motion to dismiss for lack of personal jurisdiction, holding that it had specific personal jurisdiction over BMS as to all of the plaintiffs’ claims. Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874, 884 (Cal. 2016), cert. granted sub nom. Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S. Ct. 827, 196 L. Ed. 2d 610 (2017), and rev’d sub nom. Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., No. 16-466, 2017 WL 2621322 (U.S. June 19, 2017). The court applied a “sliding scale approach to specific jurisdiction,” under which a defendant’s contacts with the state and their connection to the claim at-issue were “inversely related;” that is, “[t]he more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Id. at 887, 889. Under this test, the California high court concluded that “BMS’s extensive contacts with California establish minimum contacts based on a less direct connection between BMS’s forum activities and plaintiffs’ claims than might otherwise be required.” Id. at 889. Further, under this loose test, “the nonresident plaintiffs’ claims bear a substantial connection to BMS’s contacts in California” because of their similarity to the claims asserted by the California plaintiffs. Id. at 888. This satisfied, according to the California Supreme Court, the “substantial nexus” requirement. Id. at 890. The dissent called the decision an “aggressive assertion of personal jurisdiction,” which “is inconsistent with the limits set by due process,” id. at 910, and “expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction.” Id. at 896.
On January 19, 2017, the U.S. Supreme Court granted certiorari, No. 16-466, 2017 WL 215687, to resolve the personal jurisdiction issue and answer the following question: “Whether a plaintiff’s claims arise out of or relate to a defendant’s forum activities when there is no causal link between the defendant’s forum contacts and the plaintiff’s claims—that is, where the plaintiff’s claims would be exactly the same even if the defendant had no forum contacts.” In an 8-1 decision, the Supreme Court held that there were no adequate links between California and the nonresidents’ claims to support a finding of specific jurisdiction and reversed the state court decision.
In coming to its decision, the high Court reviewed its jurisprudence on personal jurisdiction and reemphasized its holdings in Goodyear and Daimler that general jurisdiction exists over a non-resident corporation only where “the corporation is fairly regarded as at home.” 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.” BMS, 2017 WL 2621322, at *6. The Court reiterated its prior holdings that “[f]or specific jurisdiction, a defendant’s general connections with the forum are not enough.” Id. at *8. “In other words,” the Court explained, “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.’” Id. (quoting Goodyear). Thus, “specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Id.
The Supreme Court squarely rejected the “sliding scale approach” adopted by the California state court as a “loose and spurious form of general jurisdiction” not supported by precedent. Id. at 8. The California court had failed to identify any adequate link between the State and the nonresidents’ claims to support a finding of specific jurisdiction. Id. The Court held that where the nonresident plaintiffs were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California, “[t]he mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in Californi—and allegedly sustained the same injuries as did the nonresidents—does not allow the State to assert specific jurisdiction over the nonresidents’ claims.” Id. at *8. In addition, the Court noted that the fact that BMS contracted with McKesson, a California distributor, to distribute Plavix nationally, without more, “is not enough to establish personal jurisdiction in the State.” Id. at 10.
With its holding in BMS, the Court ended any divide among the lower courts over the scope of specific jurisdiction and the nexus requirement. The case confirms the limits of the state courts’ exercise of specific jurisdiction over out-of-state corporations and continues the trend toward a narrower application of personal jurisdiction over out-of-state corporations that started with Goodyear and Daimler.
Impact of Personal Jurisdiction Jurisprudence
The Supreme Court noted that “straightforward application in this case of settled principles of personal jurisdiction will not result in the parade of horribles” that the plaintiffs claim it would. BMS at *11. On one hand, as Justice Sotomayor points out in her dissent, the decision could “make it impossible” to bring a nationwide mass action in state court against two or more defendants headquartered and incorporated in different States because at least one of the two would not be subject to jurisdiction in any given state. Id. at *11. But on the other hand, BMS does not erect an insuperable barrier to joint actions by residents from different states in the jurisdictions that have general jurisdiction over a corporation.
The BMS decision is of importance to all companies that market and sell their products in the U.S. In fact, the jurisdictional facts of BMS are similar to the jurisdictional facts of many cases pending throughout the country: numerous non-resident plaintiffs joined to a comparatively few resident plaintiffs. See, e.g., the so-called “talcum powder lawsuits,” such as Swann v. Johnson & Johnson, Case No. 1422-CC09326-01 (Mo. Cir. Ct. St. Louis). The decision will most likely bring those cases to a halt, at least for the meantime, curbing the rampant forum shopping in mass litigation. For example, in St. Louis, on the same day the BMS decision was issued, Johnson & Johnson filed a motion for mistrial and motion to stay in one of its talcum powder cases in light of the BMS decision, which was granted by the court. Id.
Goodyear, Daimler and BMS obviously curtail the state courts’ ability to assert general or specific jurisdiction over non-resident defendants—they each outline and confirm the limitations on the state court’s reach and power. As such, the decisions afford corporations some predictability as to where they can be hauled into court, and thus, the corporations can adjust their business strategies accordingly. As the high Court has recognized, even corporations with nationwide business activities are entitled to some “minimum assurance as to where [their] conduct will and will not render them liable to suit.” Daimler, 134 S. Ct. at 762; see also Burger King Corp, 471 U.S. at 472; World-Wide Volkswagen Corp., 444 U.S. at 297.