Supreme Court Delivers a Decisive Blow to Forum Shoppers and Magnet Jurisdictions: The Court’s Bristol-Myers Opinion Further Narrows the Scope of Personal Jurisdiction
Ellis & Winters
On June 19th, the United States Supreme Court issued an opinion that will have far reaching implications for mass manufacturers. The case is Bristol-Myers Squibb Company v. Superior Court of California (No. 16—466). The opinion clarifies the scope of a court’s personal jurisdiction.
Continuing a line of cases that constrict personal jurisdiction, the Supreme Court rejected California’s expansive view of specific jurisdiction. While the Court’s opinion partially resolves a circuit split among the lower courts, it leaves several questions unanswered. Still, Bristol-Myers is an important step toward limiting the states in which nationwide mass actions can proceed and likely will halt the flood of forum-shoppers to magnet jurisdictions.
Two Bases of Personal Jurisdiction
Due process has long been the foundation of the Court’s personal jurisdiction analysis. In 1945, the Court delivered its landmark decision in International Shoe Co. v. Washington, 326 U.S. 310 (1945). There, the Court held that a defendant must have “minimum contacts” with a state in order to be sued there. Absent minimum contacts, haling a defendant into a foreign court would “offend traditional notions of fair play and substantial justice.” Id. at 316.
Courts analyze “minimum contacts” in two ways: general jurisdiction and specific jurisdiction.
A court with general jurisdiction over a defendant may hear any claim involving that defendant, no matter where or how the claim arose. In recent years the Supreme Court has significantly narrowed the places in which corporate defendants are subject to general jurisdiction. Under the Court’s current analysis, general jurisdiction exists in only two places, absent extraordinary circumstances: (1) the state in which the corporation is incorporated, and (2) the state in which it has its principal place of business. Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014); BNSF Railway Co. v. Tyrrell, No. 16—405, __ S. Ct. __ , 2017 WL 2322834 (May 30, 2017).
When a court does not have general jurisdiction over a defendant, no judgment is binding unless the court has specific jurisdiction. Specific jurisdiction requires a nexus between the plaintiff’s claims and the defendant’s activities within the forum state.
Specific Jurisdiction Doctrine
Specific jurisdiction is only appropriate when a plaintiff’s claims “arise out of or relate to” the defendant’s activities within the forum state. E.g., Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). Until now, the Supreme Court had never elaborated on what it means for a claim to “arise out of or relate to” forum activities. Lower courts have adopted a variety of tests to apply the otherwise nebulous standard.
The first and most restrictive test is the “proximate cause” or “substantial relevance” test. O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 318—19 (3d Cir. 2007). Courts articulate this test in a variety of ways. Some require that “the defendant’s in-state conduct gave birth to the cause of action.” Id. at 318 (quoting Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass’n, 142 F.3d 26, 35 (1st Cir. 1998)). Other courts ask “whether any of the defendant’s contacts with the forum are relevant to the merits of the plaintiff’s claim.” Id. at 319.
The second test — the “but for” test — “is satisfied when the plaintiff’s claim would not have arisen in the absence of the defendant’s contacts.” Id.
The third and least restrictive test is the “substantial connection” or “discernible relationship” test. Id. This test asks “whether the tie between the defendant’s contacts and the plaintiff’s claim is close enough to make jurisdiction fair and reasonable.” Id. Courts following this approach do not require a causal connection between the defendant’s contact and the plaintiff’s claims. Id. Instead, “[t]he degree of relatedness required in a given case is inversely proportional to the overall ‘intensity of [the defendant’s] forum contacts.’” Id. (quoting Vons Cos, Inc. v. Seabest Foods, Inc., 926 P.2d 1085, 1096 (Cal. 1996)). “[T]he relationship between the contacts and the suit can be weaker when the contacts themselves are more extensive.” Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1078 (10th Cir. 2008).
Numerous courts have criticized this test for its “sliding scale” malleability. See, e.g., O’Connor, 496 F.3d at 322; RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1278 (7th Cir. 1997); Breathwit Marine Contractors, Ltd. v. Deloach Marine Servs., LLC, 994 F. Supp. 2d 845, 851 (S.D. Tex. 2014); Robinson v. Harley-Davidson Motor Co., 316 P.3d 287, 298 (Or. 2013). The test “necessarily defies prediction” and thereby precludes defendants from anticipating the jurisdictional consequences of their actions. O’Connor, 496 F.3d at 322 (calling the test “unbounded” and formless”). As the Seventh Circuit observed, “potential defendants should not have to wonder whether some aggregation of other past and future forum contacts will render them liable to suit.” RAR, 107 F.3d at 1278.
A majority of courts declined to adopt the substantial connection test. California was one of the few jurisdictions that followed it.
The Bristol-Myers Case
In Bristol-Myers, 592 out-of-state plaintiffs from 33 different states joined with 86 California residents to sue the manufacturer and distributor of Plavix, a prescription drug used to prevent blood clots. Although the plaintiffs all asserted identical claims, they strategically filed their complaints in sets of fewer than 100 to avoid removal under the Class Action Fairness Act.
Bristol-Myers moved to dismiss the claims of the nonresident plaintiffs for lack of personal jurisdiction. The company argued that jurisdiction was improper because the nonresident plaintiffs did not receive pills that were manufactured, distributed, marketed, or packaged in California. Moreover, those plaintiffs did not suffer any injury in California. Bristol-Myers argued those plaintiffs’ claims had no nexus to the company’s California activities.
The trial court denied Bristol-Myers’ motion and the California Supreme Court affirmed. It reasoned that Bristol-Myers was subject to specific jurisdiction in California because of the company’s nationwide marketing and promotional efforts. The court found that the nonresidents’ claims were based on the same allegedly defective product and misleading marketing and promotion as the California residents’ claims.
Bristol-Myers appealed to the United States Supreme Court arguing that “specific jurisdiction requires a causal connection between the defendant’s forum contacts and the plaintiff’s claim.” It urged the Court to sanction the most restrictive test adopted by some lower courts: the proximate cause test.
The plaintiffs sought to expand the scope of specific jurisdiction to make up for ground lost in the Court’s recent narrowing of general jurisdiction. They asked the Court to depart from the “arising from or related to” standard altogether. They argued jurisdiction was “fair and reasonable” because Bristol-Myers engaged in activities and possessed assets in California. The plaintiffs further advocated for a return to the jurisdictional analysis first articulated in the Court’s 1978 Pennoyer v. Neff decision. Long displaced by the International Shoe standard, Pennoyer allowed a state to exercise jurisdiction up to the value of the defendant’s assets in the state.
The Court’s Opinion
The Supreme Court reversed the California Supreme Court with a decisive 8—1 majority. The Court, with Justice Alito writing for the majority, quickly dispelled any notion that it would depart from well-established precedent. The Court reinforced its earlier holdings, confirming that “specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Bristol-Myers Squibb v. Super. Ct., No. 16—466, 2017 WL 2621322, at *6 (June 19, 2017) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).
The Court emphasized the importance of interstate federalism to its jurisdictional analysis. In deciding whether to exercise personal jurisdiction, courts must consider the “burden on the defendant.” Id. at *7 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)). This burden is not limited to the practical considerations attendant to litigating in a foreign jurisdiction. It also includes “the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question.” Id. After all, “restrictions on personal jurisdiction ‘are more than a guarantee of immunity from inconvenient or distant litigation.’” Id. “They are a consequence of territorial limitations on the power of the respective States.” Id.
California’s sliding-scale approach impermissibly encroached on the power of other states to adjudicate the case—namely, the nonresidents’ home states and Bristol-Myers’ home states. California upheld the exercise of specific jurisdiction “without identifying any adequate link between the State and the nonresidents’ claims.” Id. at *8. The nonresidents were not prescribed Plavix in California, did not purchase or ingest it in California, and were not injured in California. Absent these connections, California’s approach “resemble[d] a loose and spurious form of general jurisdiction.” Id. The Court could find “no support” in its prior precedent that supported California’s jurisdictional analysis. Id.
While the Court confirmed that exercise of specific jurisdiction requires some nexus between a defendant’s forum contacts and the underlying suit, it did not clarify the extent of connection that is required. Some lower courts require that the defendant’s forum contacts proximately cause the plaintiff’s claims. Others will exercise jurisdiction if the defendant’s forum contacts are a “but-for” cause of those claims. Bristol-Myers did not require the Court to resolve this split because California exercised jurisdiction in the absence of any causal connection at all.
The Court’s dictum raises a second question: is a plaintiff’s place of injury relevant to a specific jurisdiction analysis? The Court based its analysis, in part, on the fact the nonresident plaintiffs were not injured in California. Bristol-Myers and multiple amici curiae, too, noted that none of the nonresident plaintiffs were injured in California. Given the Court’s prior precedent, however, it is not immediately clear why the plaintiff’s place of injury is relevant.
The Court has previously held that specific jurisdiction must rest on contacts created by the defendant itself. See Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014). A plaintiff’s contacts with the forum state cannot establish specific jurisdiction. See id.; Helicopteros, 466 U.S. at 417. This rule applies because due process protects the defendant’s liberty interests, “not the convenience of plaintiffs or third parties.” Walden, 134 S. Ct. at 1122.
If the only contacts that count are the ones created by the defendant itself, why is the plaintiff’s place of injury relevant? Suppose, for instance, that the Bristol-Myers plaintiffs purchased Plavix in Oregon but, through their own unilateral activities, ingested it and suffered injury in California. Could California exercise jurisdiction under those facts?
The Court has previously held that the unilateral activity of the plaintiff or another third party is not an appropriate consideration on which to base personal jurisdiction. See, e.g., Helicopteros, 466 U.S. at 417 (citing cases). Under that precedent, a plaintiff’s place of injury — standing alone — is not a relevant contact on which to base personal jurisdiction. The Bristol-Myers opinion (bolstered by the parties’ briefing) suggests, however, that a plaintiff’s place of injury bears some relevance to the jurisdictional inquiry.
Implications of Bristol-Myers
Bristol-Myers continues the Court’s steady contraction of personal jurisdiction. While there are still questions to be answered in future cases, the opinion offers defendants greater predictability in anticipating the states in which their activities might subject them to suit. The case should stymie mass-action plaintiffs’ efforts to forum-shop their way into friendly jurisdictions. After Bristol-Myers, plaintiffs seeking to join their claims into mass actions will have a limited number of jurisdictions from which to choose: (1) their own home states; (2) the defendant’s place of incorporation; (3) the state in which the defendant has its principal place of business; or (4) any other state where the defendants’ forum contacts bear a substantial connection to the joined plaintiffs’ claims. Bristol-Myers makes clear that plaintiffs can no longer piggy-back their way into a magnet forum.
Defendants sued in states other than where they are incorporated or have their principal place of business should give renewed focus to the Court’s recent guidance on personal jurisdiction. A potentially hefty defense weapon, personal jurisdiction is waived if not raised at the outset of a case.
**This article originally appeared in the DRI RX for the Defense – The Newsletter of the Drug and Medical Device Committee, Volume 25, Issue 3, June 30, 2017.