Supreme Court Taps the Brakes on Personal Jurisdiction

december 22, 2017

By: Andy Roth, aroth@heylroyster.com

In two decisions released in May and June of 2017, the United States Supreme Court narrowed state courts’ ability to exercise personal jurisdiction over an out-of-state corporate defendant. These two decisions must be read in context with the Supreme Court’s 2014 decision in Daimler AG v. Bauman, 134 S. Ct. 746. In Daimler, the Court confirmed that there are two avenues for a court to exercise personal jurisdiction over an out-of-state defendant – general and specific jurisdiction. A court may exercise general jurisdiction over an out-of-state defendant if the defendant’s contacts with the forum state are so constant as to render the defendant “at home” within that state. This is generally true when a defendant is incorporated or has its principle place of business in the forum state. A court may exercise specific personal jurisdiction over a defendant if the defendant’s suit-related contacts with the forum state are related to the underlying claim. Substantial questions remained after Daimler as to the scope and application of both of these doctrines.

Supreme Court Narrows General Personal Jurisdiction

The first of the 2017 decisions addressed the scope of general personal jurisdiction over a corporate defendant. In BNSF Railway Co. v. Tyrell, 137 S. Ct. 1549 (May 30, 2017), the defendant/appellant BNSF argued that it was error for a Montana court to exercise general personal jurisdiction over it because while BNSF conducted business within the state, it was not incorporated in Montana nor did it have its principle place of business in Montana. The Supreme Court of Montana disagreed, finding that Montana’s state statute on personal jurisdiction allowed it to exercise personal jurisdiction over “all persons found within” the state, and since BNSF had over 2,000 employees and over 2,000 miles of track within the state, its courts could exercise general personal jurisdiction over BNSF. The Montana Supreme Court also interpreted a section of FELA as giving it jurisdiction over any railroad that “does business” in the state.

The United States Supreme Court reversed. The Court held that BNSF’s contacts with Montana were not so continuous and systematic as to make BNSF “at home” in Montana. Citing to Daimler, the Court held that for an out-of-state corporate defendant, the paradigm forums for where the defendant is “at home” are 1) the state in which it is incorporated and 2) the state of its principle place of business. Neither of these criteria was met in this case. Further, the Court rejected arguments that the exercise of personal jurisdiction varies based on the type of claim (e.g., FELA), holding that the limitations on the exercise of general personal jurisdiction, “does not vary with the type of claim asserted or business enterprise sued.” The Supreme Court ruled that the application of the Montana personal jurisdiction statute and the decision of its supreme court violated the 14^th Amendment’s Due Process Clause.

Supreme Court Narrows Specific Personal Jurisdiction

After narrowing the application of general personal jurisdiction in BNSF, the Supreme Court issued another decision less than a month later addressing specific personal jurisdiction in the case of Bristol-Meyers Squib, Co. v. Superior Court of California, 137 S. Ct. 1773 (June 19, 2017). In this case, a group of out-of-state residents filed suit in California state court alleging that a drug manufactured by defendant Bristol-Meyers Squib Co. (“BMS”) had damaged their health. It was undisputed that BMS was not incorporated in California nor was it BMS’ principle place of business. Thus, there was no argument on appeal that BMS was “at home“ in California and subject to general personal jurisdiction. Rather, the California Supreme Court held that BMS had sufficient case specific contacts with California to allow for specific personal jurisdiction. In support of this finding, the California Supreme Court utilized a “sliding scale” approach to the necessary minimum contacts for the exercise of personal jurisdiction. The court held that “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” The California Supreme Court pointed out that BMS had five research facilities in California; BMS employed over 100 people in California; and BMS had sold 187 million pills of the drug at issue in California and took in more than $900 million in revenue from those sales.

The Supreme Court reversed and held that the California court’s exercise of personal jurisdiction over BMS under these facts violated the Due Process Clause of the 14^th Amendment. The Court held that for specific or “case linked” jurisdiction to exist, the suit must arise from the defendant’s contacts with the forum state. While the Court considers in its personal jurisdiction analysis the interest of the forum state and the plaintiff’s choice of forum, the primary concern in a personal jurisdiction analysis is the burden on the defendant. In rejecting the California Supreme Court’s “sliding scale” approach, the majority stated that they could find no support in the precedents for an approach that allows the connection between the forum contacts and the specific injury to be relaxed if the defendant has extensive connections unrelated to the injury. The majority described such an approach as a “loose and spurious form of general jurisdiction.” The Court concluded that there was no evidence of any connection between BMS’ contacts with California and the claims of the out-of-state residents, as these plaintiffs were not prescribed the drug in California; did not ingest the drug in California; did not purchase the drug in California; and did not suffer injury in California.

Effect on the Trucking Industry

The decisions in BNSF and Bristol-Meyers Squib may have important implications for the trucking industry. Traditionally, the tools available to a corporate defendant to combat forum shopping by plaintiff’s attorneys were limited to the forum state’s statutory venue law and common law doctrines such as forum non conveniens. These doctrines typically acknowledge a court’s authority to hear a matter, but assert the forum is not convenient to the parties and witnesses. The Supreme Court, through its decisions in Daimler, BNSF, and Bristol-Meyers, has breathed new life into an additional challenge to being dragged into court in a far-away forum – that a state court does not have the authority to enter a judgment against an out-of-state defendant in the first place. When a corporate defendant is served with a lawsuit filed in a different state that has no apparent connection to the underlying accident/injury, it should be investigated by defenses counsel as to whether that court can properly hear the matter consistent with the holdings in BNSF and Bristol-Meyers. This issue must be addressed at a very early juncture in the case. In many jurisdictions, personal jurisdiction must be challenged, if at all, in the first pleading from the defense or deemed waived.