United States Supreme Court Addresses Due Process Limits on the Exercise of Personal Jurisdiction Over Corporate Defendants
Kenneth M. Argentieri
Yuanyou (Sunny) Yang
Duane Morris LLP
These cases will likely have a significant impact for personal injury, toxic tort cases and other cases where plaintiffs sue large numbers of defendants in preferred jurisdictions.
In the past few weeks, the United States Supreme Court has issued two opinions in which it has further defined the circumstances under which courts can exercise general personal jurisdiction and specific personal jurisdiction over corporations. These decisions come after the Supreme Court’s 2014 landmark decision in Daimler AG v. Bauman, __ U.S.__, 134 S. Ct. 746 (2014), which held that general personal jurisdiction can only be exercised over a corporation in the state of its incorporation or where it has its principal place of business.
Prior to Daimler, plaintiffs brought lawsuits in favorable jurisdictions against corporate defendants who were not incorporated in the state, even when the cause of action did not arise in the jurisdiction. Since Daimler, defendant corporations have been successful in getting dismissed from these types of suits, arguing that the court lacked general personal jurisdiction over them. Of course, plaintiffs then explored a variety of arguments to distinguish Daimler and to maintain jurisdiction over the corporate defendants in the plaintiff-friendly jurisdictions. With its new decisions, the Supreme Court has clarified the scope of when courts can exercise general and specific jurisdiction over corporate defendants.
On May 30, 2017, in BNSF Railway Co. v. Tyrrell, No. 16-405, 581 U.S. __, 137 S. Ct. 1549 (2017), the United States Supreme Court, in an 8-1 opinion, confirmed the central holding in Daimler that the paradigm forum for the exercise of general personal jurisdiction over a corporation is its state of incorporation or its principal place of business. In BNSF Railway Co., two plaintiffs sued defendant BNSF Railway Co. (“BNSF”) in Montana state court, alleging that they developed a fatal cancer while working for BNSF. Neither plaintiff resided in Montana or was injured there. BNSF was not incorporated and did not maintain its principal place of business in Montana, although it engaged in substantial business in Montana. The Montana Supreme Court held that Montana courts could exercise general personal jurisdiction over BNSF under Section 56 of the Federal Employers’ Liability Act (“FELA”), because BNSF “did business” in Montana and that Montana law provided for jurisdiction over companies that are “found within” the state. Slip op. at 4. Thus, the Montana Supreme Court held that FELA and Montana law allowed the Montana court to exercise general personal jurisdiction over BNSF. The Montana Supreme Court found Daimler inapplicable because Daimler did not involve a FELA claim or a railroad defendant
The United States Supreme Court reversed. First, the United States Supreme Court found that the language in Section 56 of FELA does not relate to personal jurisdiction. The first sentence in Section 56 of FELA that “an action may be brought in a district court . . . in which the defendant shall be doing business at the time of commencing such action” is a venue provision, and does not confer personal jurisdiction. Slip op. at 5-7. The second sentence in Section 56 of FELA that “[t]he jurisdiction of the courts of the United States under this chapter shall be concurrent with that of the courts of the several States” refers to concurrent subject-matter jurisdiction between the state and federal courts over FELA actions, and also does not confer personal jurisdiction. Slip op. at 7-8. Second, the United States Supreme Court found that the Montana Supreme Court’s exercise of general personal jurisdiction under Montana law does not conform to the Fourteenth Amendment’s Due Process Clause. The United States Supreme Court again emphasized that under Daimler, a state court may exercise general jurisdiction over out-of-state corporations only when their “affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Slip op. at 10. Although Daimler did not involve a FELA claim or railroad defendant, the United States Supreme Court found that the due process requirement applies to all state-court assertions of general personal jurisdiction over nonresident defendants. Slip op. at 11. Thus, absent an “exceptional case,” a court may exercise general personal jurisdiction against a corporate defendant only where the corporation is incorporated or has its principal place of business. Slip op. at 10-11.
On June 19, 2017, in Bristol-Myers Squibb Co. v. Superior Court of California, No. 16-466, 582 U.S. __ (2017), the United States Supreme Court, in an 8-1 opinion, clarified the scope of when a court can exercise specific personal jurisdiction over a corporate defendant. In Bristol-Myers Squibb Co., a group of California residents and non-residents filed a lawsuit against defendant Bristol-Myers Squibb Co. (“BMS”) in California state court, alleging that BMS’ drug Plavix had damaged their health. BMS did not develop, create a marketing strategy for, manufacture, label, package, or work on the regulatory approval for Plavix in California. However, BMS did engage in business in California and sold Plavix there. None of the non-resident plaintiffs were injured in California, obtained Plavix through any California source, were treated for their injuries in California, or had any other connections to California. The California Supreme Court, while admitting that California lacked general personal jurisdiction over non-resident plaintiffs under Daimler, found that it was appropriate for California courts to exercise specific personal jurisdiction over BMS under a “sliding scale approach” because BMS had extensive contacts with California and the claims of the nonresident-plaintiffs were substantially similar to those of the California resident plaintiffs. Slip op. at 3.
The United States Supreme Court reversed, finding that the California court’s exercise of specific personal jurisdiction violated the Fourteenth Amendment’s Due Process Clause. Under the due process requirement, for a court to exercise specific personal jurisdiction over a claim, “the suit” must “aris[e] out of or relat[e] to the defendant’s contacts with the forum.” Slip op. at 5. The Supreme 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.” Slip op. at 5-6. The United States Supreme Court found that the California “sliding scale approach” where “the strength of the requisite connection between the forum and the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims,” in essence, “resembles a loose and spurious form of general jurisdiction,” in violation of the Fourteenth Amendment Due Process Clause. Slip op. at 7. Applying this principal, the United States Supreme Court found that “a defendant’s relationship with a . . . third party, standing alone, is an insufficient basis for jurisdiction,” and thus, the mere fact that other California residents plaintiffs were injured similarly has no bearing on those non-residents’ claims. Slip op. at 8. “What is needed—and what is missing here—is a connection between the forum and the specific claims at issue.” Id.
Justice Sotomayor concurred and dissented in part in BNSF Railway Co. Justice Sotomayor concurred that FELA does not confer personal jurisdictions to state courts, but continued to dissent, as she did in Daimler, that general personal jurisdiction over a corporate defendant should be limited to a corporation’s place of incorporation and principal place of business. Justice Sotomayor further found that even if applying Daimler standard, the correct approach the Court should take is to remand the case back to Montana state court to conduct a fact-intensive analysis in determining whether BNSF has engaged in sufficient business in Montana to make this case an “exceptional case” under Daimler. Slip op., dissent, at 4.
The BNSF Railway Co. and Bristol-Myers Squibb Co. decisions provide greater context and clarity to Daimler regarding when it is constitutionally permissible to exercise personal jurisdiction over a corporation. These cases will likely have a significant impact for personal injury, toxic tort cases and other cases where plaintiffs sue large numbers of defendants in preferred jurisdictions. Absent exceptional circumstances, a plaintiff will be able to assert general personal jurisdiction against a corporate defendant only where the defendant is incorporated or has its principal place of business. Plaintiffs likewise will not be able to establish specific personal jurisdiction based on a defendant’s contacts with a state, even if substantial, when there is no connection between the alleged injury and defendant’s actions in the jurisdiction.
It is anticipated that plaintiffs will continue to develop creative arguments to obtain jurisdiction over defendants in their preferred jurisdictions, for example, by arguing that a corporation’s registration to do business in a state or designation of an agent to accept service in a state constitute consent to the jurisdiction in that state. Circuit and state courts are currently split on this issue, and the United States Supreme Court has not yet ruled on it.