Trial Magazine

The U.S. Supreme Court’s recent decisions on personal jurisdiction threaten to multiply the number of lawsuits involving a single incident, while insensibly providing corporations with greater due process rights than it accords individuals.

In Bristol-Myers Squibb Co. v. Superior Court of California, the Court voted 8-1 that California courts could not hear the products liability claims of nonresidents who sued the company for injuries allegedly caused by its blood thinner Plavix—even though the pharmaceutical giant was defending identical claims by Californians.¹

Its codefendant, California-based distributor McKesson Corp., still had to defend all claims by residents and nonresidents alike. While the decision further constricts prior understandings of jurisdiction, defendants have argued that it is a broader obstacle to jurisdiction than it actually is. Plaintiff attorneys must be prepared to push back on these over-the-top claims.

No party in Bristol-Myers disputed that California courts may exercise personal jurisdiction over all claims against McKesson or that they may exercise jurisdiction over California plaintiffs’ claims against Bristol-Myers. For McKesson, general jurisdiction applied. General jurisdiction exists when a defendant’s presence can be described as “so ‘continuous and systematic’ as to render them essentially at home in the forum State.”² Generally, though not exclusively, a defendant is at home in its state of incorporation or its principal place of business.³ Anyone can sue the defendant in its home state.

Because general jurisdiction is so limited, the Court has advised litigants that specific jurisdiction has now displaced it as the “centerpiece of modern jurisdiction theory.”⁴ Plaintiffs seeking to hold an out-of-state corporation accountable in court should focus on specific jurisdiction.

A corporation is subject to specific jurisdiction in a state when there is a meaningful connection between the defendant, the litigation, and the forum state.⁵ Put another way, the lawsuit must “‘aris[e] out of or relat[e] to the defendant’s contacts with the forum.’”⁶ Bristol-Myers is subject to specific jurisdiction for the California residents; it has the necessary contacts for those plaintiffs’ claims because it sold Plavix to them in California. Similarly, the non-California plaintiffs could maintain actions against Bristol-Myers in the states where they purchased Plavix. The issue was whether California courts could decide all of the cases against Bristol-Myers, including the nonresidents’ claims.

To the Supreme Court, it was irrelevant that the company has a significant California presence. Between 2006 and 2012, Bristol-Myers sold 187 million Plavix pills in California, generating nearly $1 billion in revenue.⁷ It also operates four research facilities and a government affairs office in the state and employs an additional 250 sales representatives there.⁸ But plaintiff attorneys who focus on a defendant’s generalized presence are in danger of being accused of trying to make a case for general jurisdiction, which is likely to fail. The plaintiffs in the Bristol-Myers case and the California Supreme Court, which had supported them using a “sliding-scale” approach, received exactly that criticism.⁹

The Court acknowledged that the “primary concern” when evaluating the exercise of personal jurisdiction is “the burden on the defendant” in having to litigate in the state.¹⁰ But the Court quickly skipped over that primary concern because Bristol-Myers would use the same defense against the non-Californians as it would against the state residents and therefore suffer no real burden. Instead, the Court focused on California’s interest in litigating nonresidents’ claims, which it found to be nonexistent and offensive to other states’ sovereignty interests.¹¹ In basing its decision on concepts of federalism and the separate sovereignty of each state, the Court contradicted its holding 35 years ago in Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee that personal jurisdiction is not “a matter of sovereignty.”¹²

Will Geography be Destiny?

One of the decision’s implications is that cases that gather all relevant parties into a single action could be forced to split the action into multiple ones that would have to be tried over and over against different jointly liable defendants spread among far-flung jurisdictions. It is possible that no single state would have jurisdiction over all defendants, creating opportunities for an empty-chair defense that blames absent defendants and results in inconsistent verdicts. If the Court’s current trend continues, the rules governing jurisdiction could return to an archaic and mechanical geographic test more in line with the standards abandoned with International Shoe Co. v. Washington in 1945.¹³

Before 1945, courts largely approached jurisdiction woodenly, relying on purely geographical considerations. Courts exercised jurisdiction over an out-of-state defendant by serving the defendant when visiting the state or attaching in-state property the defendant owned.¹⁴ International Shoe served as the culmination of a growing unhappiness with that approach, resulting in the revolutionary declaration that only due process considerations limited a state’s jurisdictional reach.

If a defendant maintained “minimum contacts” with the state and hearing a lawsuit did not offend “traditional notions of fair play and substantial justice,” the state could exercise jurisdiction.¹⁵

After International Shoe, states quickly enacted long-arm jurisdiction statutes constricted only by what due process placed off limits. The decision ushered in an increasing reliance on specific, rather than general, jurisdiction.

The Supreme Court continues to treat International Shoe as the “canonical opinion” for personal jurisdiction,¹⁶ recognizing that “modern transportation and communications have made it much less burdensome for a sued party to defend himself in a State where he engages in economic activity.”¹⁷ Recent decisions, however, suggest a retrenchment from International Shoe’s broad reach, even though these newer rulings are inconsistent with the realities of the modern global economy.
What is remarkable about the Supreme Court’s new approach is that it presumes corporations have greater difficulty litigating away from home than individuals do. But consider these scenarios:

• A Delaware corporation, with headquarters in New York, has significant manufacturing plants in California, along with an employee population 10 times the size of its staff in Delaware and three times its staff in New York. It is sued in California over injuries from a product it makes in its Tennessee plant, similar to but distinct from what it makes in California. Under the Bristol-Myers decision, only the California residents who purchased the product in that state may pursue a case in California courts. All others are barred because the assertion of jurisdiction is inconsistent with due process.
• The CEO of that Delaware corporation drives his vehicle into another car in New York, just before the other party moves to California. The injured party wants to litigate in his new home of California, reads that the CEO is coming to address a sales convention in California, and serves process on the CEO while in California. Sued as an individual, the CEO must answer for the New York collision in California under tag jurisdiction, even though his presence in California was fleeting and unrelated to the dispute.

These two results demonstrate the problem with the current conception of jurisdiction that somehow finds it fair to make the nonresident individual try the case in California—but not the corporation that has a vastly greater ability to do so.

What the Court Did Not Say

The Court left open the question of whether the restrictions that the Fourteenth Amendment’s due process clause imposes on state court exercise of personal jurisdiction apply to federal courts, which are subject to the Fifth Amendment’s identically framed due process clause.¹⁸ The Court may have left the question unanswered because a number of federal statutes provide for nationwide service of process,¹⁹ and courts have recognized that the authorization provides a statutory basis for personal jurisdiction without offending due process.²⁰

In state courts, defendants now claim that Bristol-Myers limited jurisdiction to the place of injury. That is not what the Court held. Instead, the Court emphasized that 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.”²¹ Use of the term “affiliation” suggests a loose, even if meaningful, connection that need not be very deep.

Jurisdictional Discovery Becomes Critical

Plaintiffs in a Missouri court claiming Johnson & Johnson’s (J&J) talc-based hygiene products are linked to an increased risk of ovarian cancer felt the impact of the Bristol-Myers decision almost immediately. In one case involving the deaths of three women, the judge declared a mistrial on the day Bristol-Myers was handed down.²² J&J then successfully moved to remove that case and 19 others, wielding a jurisdictional club to end the cases, in which it claims 95 percent of the plaintiffs are from other states.²³

Before Bristol-Myers, there seemed to be little reason to explore early on the “affiliation” between the defendant and the underlying cause of action to establish jurisdiction. Now, discovery will play a bigger role than ever before. For the Missouri talc cases, the jurisdictional issue appears to center on the role of a nonparty, Pharma Tech Industries, which allegedly packaged, labeled, and distributed J&J’s talc products from Missouri. If the products handled by Pharma Tech reached all the plaintiffs, the necessary affiliation may exist. Similar evidence was not produced in Bristol-Myers about the plaintiffs’ receipt of Plavix through McKesson, which may have made all the difference.

Another drug company, GlaxoSmithKline (GSK), asked the Supreme Court to review an Illinois appellate court ruling upholding personal jurisdiction.²⁴ The case involves four Illinois residents and 12 nonresidents who sued for failure to warn, among other claims, that ingesting Paxil during pregnancy could cause catastrophic congenital birth defects. The Illinois court found that the plaintiffs asserted a sufficient affiliation between GSK and its litigation-related activities in the state: GSK had conducted a number of clinical trials in Illinois that informed the warning label it used for Paxil.²⁵ Discovery was critical to realizing the clinical trial connection to Illinois.

In its petition for certiorari, GSK argued that a deeper connection to the state is required, that the Illinois clinical trials were a fraction of all trials, and that the in-state activities must be a “proximate cause” rather than a “but for” cause of the injury. The court denied the petition on Oct. 2. Normally, this says nothing about the merits of the case. But the fact that the Court did not exercise its option to remand the case for reconsideration in light of Bristol-Myers strongly suggests that the lower court’s reliance on in-state clinical trials properly anticipated what Bristol-Myers would say.

Another area ripe for personal jurisdiction controversy is class actions. Defendants have already begun to argue that Bristol-Myers precludes class actions that involve out-of-state class members. The discussion of class actions in the decision, though, gives little credence to that claim. The Bristol-Myers plaintiffs, in arguing that California had jurisdiction over the nonresidents, invoked an earlier Supreme Court decision, Phillips Petroleum Co. v. Shutts, which upheld a Kansas court’s exercise of personal jurisdiction over nonresident class members.²⁶

The defendant in Shutts argued that due process was violated because those class members lacked minimum contacts with the state. The Shutts Court distinguished the authority of a state to entertain the claims of nonresident class members from its authority to exercise jurisdiction over an out-of-state defendant. In Bristol-Myers, the Court found Shutts inapposite because it “concerned the due process rights of plaintiffs,” not defendants.²⁷ To the current Court, the defendant in Shutts had only raised the due process rights of the nonresident plaintiffs and not its own. This leaves open the question of the new decision’s impact on class actions but, at least, puts a premium on naming class representatives whose claims fit the new personal jurisdiction paradigm.

The sole dissent in Bristol-Myers came from Justice Sonia Sotomayor. She raised concerns about how the ruling would affect plaintiffs, noting that “a core concern in this Court’s personal jurisdiction cases is fairness. And there is nothing unfair about subjecting a massive corporation to suit in a State for a nationwide course of conduct that injures both forum residents and nonresidents alike.”²⁸

Justice Sotomayor’s concerns about the decision’s consequences reflect an appropriate distress about the jurisdictional journey that the Court has embarked on. Nonetheless, she took her rhetoric too far when she further stated that “the upshot of today’s opinion is that plaintiffs cannot join their claims together and sue a defendant in a State in which only some of them have been injured.”²⁹ That quote is likely to adorn many defendants’ briefs. The assertion, however, would be wrong. All a plaintiff needs to show is a meaningful “affiliation” between the defendant’s conduct within the forum state and the underlying dispute.

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Robert S. Peck is the founder and president of the Center for Constitutional Litigation in New York City. He can be reached at robert.peck@cclfirm.com.

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Notes

1. Bristol-Myers Squibb Co. v. Super. Ct. of Calif., 137 S. Ct. 1773 (2017). AAJ filed an amicus brief in the case. In a another case last Term, in which AAJ also filed an amicus brief, the Supreme Court held that the Federal Employers Liability Act did not grant jurisdiction to a Montana state court to hear the cases of employees who contracted cancer allegedly as a result of on-the-job exposure while working for an out-of-state railroad. BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (2017).
2. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).
3. Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014).
4. Id. at 755.
5. Walden v. Fiore, 134 S. Ct. 1115, 1125 (2014).
6. Bristol-Myers, 137 S. Ct. at 1780 (citation omitted).
7. Bristol-Myers Squibb Co. v. Super. Ct. of Calif., 377 P.3d 874, 879 (Calif. 2016).
8. Id.
9. Under the sliding-scale approach, the scope of a defendant’s in-state activities can be a thumb on the scale, making up for a paucity of claim-related in-state activities and tipping the balance in favor of the exercise of jurisdiction.
10. Bristol-Myers, 137 S. Ct. at 1780 (citation omitted).
11. Id. at 1780–81.
12. 456 U.S. 694, 702 (1982).
13. Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945).
14. See Pennoyer v. Neff, 95 U.S. 714 (1877).
15. Int’l Shoe Co., 326 U.S. at 316 (internal quotation marks omitted).
16. Daimler AG, 134 S. Ct. at 754 (quoting Goodyear, 564 U.S. at 923).
17. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)).
18. Bristol-Myers, 137 S. Ct. at 1784.
19. See, e.g., Federal Interpleader Act, 28 U.S.C. §1335, §2361 (which provides for ¬nationwide service of process); Mudd v. Yarbrough, 786 F. Supp. 2d 1236,
20. 1242–43 (E.D. Ky. 2011) (finding personal jurisdiction over a defendant under the Federal Interpleader Act “even if she lacks minimum contacts” with the forum state).
    20. See, e.g., Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir. 1997); Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671 (7th Cir. 1987), cert. denied, Lisak v. Mercantile Nat’l Bank of Ind., 485 U.S. 1007 (1988).
21. Bristol-Myers, 137 S. Ct. at 1780. 
22. Swann v. Johnson & Johnson, No. 1422-CC09326-01 (E.D. Mo. June 19, 2017).
23. Id.
24. M.M. ex rel. Meyers v. GlaxoSmithKline LLC, 61 N.E.3d 1026 (Ill. Ct. App. 2016), appeal denied sub nom., M.M. v. GlaxoSmithKline LLC, 65 N.E.3d 842 (Ill. 2016), petition for cert. denied, No. 16-1171. The author serves as counsel of record in the Supreme Court in this case.
25. Id.
26. 472 U.S. 797 (1985).
27. Bristol-Myers, 137 S. Ct. at 1783.
28. Id. at 1784 (Sotomayor, J., dissenting).
29. Id. at 1788–89 (Sotomayor, J., dissenting).