The Supreme Court Puts Personal Jurisdiction On Trial

Leslie Brueckner of Public Justice and I just wrote an article for Law360 about a pair of cases before the U.S. Supreme Court concerning personal jurisdiction. You can find the article on Law360 and also below.

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Remember personal jurisdiction, the topic that everyone slept through during law school? Guess what? Personal jurisdiction is no longer boring: in fact, it’s become the hottest new corporate defense strategy, particularly in the area of mass torts.

And it’s now before the U.S. Supreme Court, in two cases argued on April 25, 2017: Bristol Myers Squibb Company v. County of San Francisco (BMS) and BNSF Railway Co. v. Tyrrell (BNSF). Unfortunately, judging from the way things went during oral argument, the outlook for plaintiffs seems bleak.

Ever since 2014, when the U.S. Supreme Court decided Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014), corporations have been raising personal jurisdiction as a threshold defense to stop injury victims from getting a hearing on the merits of their claims. And, in many cases, the courts are agreeing with them, and throwing the victims’ claims out of court.[1]

BMS and BNSF will decide the viability of that strategy — with major implication for injury victims’ ability to seek justice in a forum of their choosing.

The specific question in BMS is whether California courts have personal jurisdiction over a pharmaceutical company that was sued by both California and non-California plaintiffs, together, for injuries suffered as a result of BMS’s uniform, national marketing practices that caused harm (from a prescription drug known as Plavix) both in California and elsewhere.

The California Supreme Court rejected BMS’s personal jurisdiction defense, holding that it would not offend due process for BMS to defend itself against the non-residents’ claims in California.

BMS has appealed to the U.S. Supreme Court, saying that it would be “fundamentally unfair” to allow it to be sued by non-resident plaintiffs in California, even though it is already defending itself on identical claims by California residents in the same proceeding and even though BMS sold nearly $1 billion of its dangerous drug to California residents during the relevant time period.

On these facts, BMS’s “fairness” arguments seems difficult to swallow. And because due process boils down to whether jurisdiction would offend “fundamental fairness,” common sense would suggest that BMS’s odds in the U.S. Supreme Court are less than favorable.

If that’s true, then why is the personal jurisdiction defense meeting with so much success these days, and how did BMS wind up in the U.S. Supreme Court? This brings us to Daimler AG v. Bauman, the Supreme Court’s pesky 2014 decision that has caused all sorts of trouble in the area of personal jurisdiction.

Before 2014, personal jurisdiction was almost never raised as defense by big companies that do business all over the country. That’s because the touchstone of personal jurisdiction has always been “fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). And when it comes to a large company that aggressively markets its products all over the country, there’s nothing unfair about allowing a plaintiff to file suit in any state where the company does a lot of business.

But then the U.S. Supreme Court decided Daimler, an unusual case involving international parties that had nothing to do with American companies injuring American consumers on American soil. Nonetheless, Daimler had a huge impact on domestic litigation by holding that, subject to rare exceptions, “general jurisdiction” only exists where a corporation is “at home” in the forum — and, as a corollary, general jurisdiction does not exist simply because a corporation has engaged in “substantial, continuous, and systematic” business in a given state.

That holding made it much more difficult for plaintiffs to sue a corporation outside of its “home” state, where it is either incorporated or has its principle place of business. To do so, a plaintiff has to meet the more stringent test of “specific jurisdiction,” which requires a showing (among other things) that the cause of action “arises out of or relates to” the corporation’s specific activities in the forum state — a test that can be difficult to meet, particularly in a mass tort case involving plaintiffs from all over the country.

In the wake of Daimler, corporations seized on lack of personal jurisdiction as a threshold defense to being sued, arguing that they couldn’t be sued in states where they were not “at home” unless the plaintiff’s claims were legally caused by the defendant’s activities in the forum state — a rigid interpretation of the “specific jurisdiction” test that has sharply split the lower federal courts.

Despite that, a number of courts have agreed with this draconian approach to specific jurisdiction, resulting in cases being thrown out before the plaintiffs even had an opportunity to take any discovery on the merits of their claims.[2]

But in July 2016, the California Supreme Court issued its decision in BMS, holding that, although California could not exercise general jurisdiction over BMS as to the non-resident plaintiffs’ claims because the company was not “at home in the State” (per Daimler), California could exercise specific jurisdiction over BMS as to the non-resident plaintiffs’ claims because of the company’s substantial business activities in California (including the sale of more than $1 billion worth of Plavix to Californians) and the existence of similar claims by California residents.

Predictably, BMS is asking the U.S. Supreme Court to overturn the California Supreme Court’s ruling, arguing that it would be fundamentally unfair to allow it to be sued in California.

It’s hard to see how that argument could possibly be correct. At its core, personal jurisdiction boils down to one question: is it fundamentally fair to force a company to defend itself in a particular jurisdiction on the claim in question? Given the extent of BMS’s contacts with California, and the fact that it is already being sued on identical claims by in-state residents, the notion that it would be “unfair” to require the company to be “haled” into a California court on the plaintiffs’ claims is difficult to fathom.

During oral argument, though, most of the Supreme Court seemed receptive to BMS’s arguments, indicating that the company might be able to have its jurisdictional cake and eat it too. If that happens, then large companies like BMS will be able to exercise an enormous amount of control over where they are sued — and ensure that it is the least favorable forum possible from their victims’ perspective. So much for fundamental fairness.

This brings us to BNSF Railway Co. v. Tyrrell, the other personal jurisdiction case argued on April 25th. That case concerns a pair of suits brought by railroad workers (and in one suit, a surviving spouse) against railroad company BNSF for on-the-job injuries. The workers, from North Dakota and South Dakota, were allegedly injured outside of Montana. Nevertheless, they filed suit in that state under the Federal Employers’ Liability Act (FELA), arguing that Montana courts may exercise general jurisdiction over BNSF for two reasons.

First, they argued that the company’s activities in the state are so substantial it should be considered “at home” there, even though it is not incorporated in Montana and the state is not BNSF’s principal place of business. Next, the workers argued that FELA itself extends personal jurisdiction to state courts, relying on statutory language permitting workers to “bring a FELA claim in any jurisdiction where the railroad is ‘doing business’ at the time of the suit.”

Here too, this rule is especially favorable to corporations, who (absent exceptional circumstances) will be “at home” in two places: the place of incorporation and principal place of business.[3] Persons, by contrast, can establish residency in many states, and can be properly sued for all their activities in any one of them. It remains to be seen whether states could require a corporation to consent to all-purpose jurisdiction in order to register to do business there, or whether the high court will identify what level of corporate activity is required for a corporation to be “at home” in a state other than its formal place of principal business or incorporation.

Assuming states cannot impose such an all-purpose consent requirement, and that the current “at home” paradigm holds, it is critically important that specific jurisdiction continue to “flourish” — otherwise, there may be deep unfairness for plaintiffs who will have difficulty finding forums in which to seek a remedy.

 

Leslie A. Brueckner is a senior attorney at Public Justice, where her areas of practice include class actions, constitutional law, food safety, federal preemption, and combating court secrecy. Andre M. Mura is a partner at Gibbs Law Group and of counsel to Girard Gibbs LLP; he represents plaintiffs in class action and complex litigation concerning consumers’ and workers’ rights, products liability, drug and medical devices, federal jurisdiction and constitutional law.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] See, e.g., Hinrichs v. General Motors of Canada, 2016 WL 3461177 (Ala. 2016), petition for cert. filed No. 16-789 (2017); Magill v. Ford Motor Co., 379 P.3d 1033 (Col. 2016); DeMaria v. Nissan North America, 2016 WL 374145 (N.D. Ill. 2016).

[2] Supra note 1.

[3] Daimler, supra, 134 S. Ct. at 760.