Corporations’ Use of Personal Jurisdiction Defense on Trial in U.S. Supreme Court
By Leslie Brueckner
The following is cross-posted from Legal Examiner.
After years of being relegated to the dusty tomes of law school libraries, personal jurisdiction has recently become a red hot topic, particularly in the area of mass torts.
In the past few years, corporate defendants 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.
But luckily—or unluckily, as the case may be—the issue is now before the U.S. Supreme Court in Bristol Myers Squibb Company v. County of San Francisco (BMS), a case that will decide the propriety of this tactic and thus has enormous implications for injury victims’ access to justice.
I’m here to (hopefully) help you understand why BMS has the potential to be such a bombshell of a case. But first, a little background is in order, because personal jurisdiction can be about as dry as a dinosaur’s bone, even though it has the potential to make or break your client’s case.
The Good Old Days (Pre-2014)
Back in the good old days—before 2014, that is—personal jurisdiction was almost never raised as a defense by big companies that do business all over the country. After all, as every first-year law student knows, the touchstone of personal jurisdiction is fairness: is it fair, under the due process clause, for a state to “hale” a defendant into court to answer for its wrongs to a particular plaintiff?
And when it comes to a large, multistate company—like, say, General Motors—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. That’s just common sense.
As a result, before 2014, big corporations almost never raised personal jurisdiction as a defense, even if the plaintiff’s claim didn’t directly arise out of the company’s in-state business.
The Bad Old Days (Post-2014)
But then came the U.S. Supreme Court’s 2014 decision in Daimler AG v. Bauman, a weird case involving international parties and international laws and bizarre facts that had absolutely nothing to do with American companies injuring American consumers on American soil. Nonetheless, Daimler had a big—albeit perhaps unintended—impact on domestic litigation, by limiting the doctrine known as “general jurisdiction,” which had been the easiest basis for suing a non-resident company for claims unrelated to the company’s conduct in the forum state.
To be specific: Daimler was filed by Argentinian residents against a German corporation under the Torture Victims Protection Act, alleging that Daimler’s subsidiary (Mercedes-Benz USA) collaborated with state security forces to torture and kill the plaintiffs during Argentina’s “Dirty War.” The case was filed in the Northern District of California, of all places, and personal jurisdiction over Daimler was predicated on the California contacts of Mercedes–Benz USA, which was incorporated in Delaware with its principal place of business in New Jersey.
On these unlikely facts, Daimler ended up throwing the plaintiffs out of court, holding that the court lacked jurisdiction because “[n]either Daimler nor [Mercedes-Benz] USA is incorporated in California, nor does either entity have its principal place of business there.” The Court ultimately held that “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 principal 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.
BMS to the Rescue?
But in July 2016, the California Supreme Court offered a ray of hope by rejecting a corporation’s personal jurisdiction defense in sweeping terms, much to the dismay of the U.S. Chamber of Commerce and all its corporate cronies—and to the delight of fans of access to justice.
The case—Bristol Myers Squibb Co. v. County of San Francisco, 1 Cal.5th 783 (2016)—arose out of a prescription drug, Plavix, used to inhibit blood clots and help prevent heart attacks. A large number of plaintiffs from other states joined with 84 California residents to file suit in California state court against Bristol Myers—the manufacture of Plavix—and McKesson Corporation, one of many distributors for the drug. They all alleged personal injuries, principally internal bleeding, from Plavix.
Jurisdiction over Bristol Myers as to the California plaintiffs was conceded; the question before the court was whether California also had jurisdiction over Bristol Myers regarding identical Plavix defects claims brought by plaintiffs from other states.
The California Supreme Court held that, although California could not exercise general jurisdiction over Bristol Myers 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 Bristol Myers 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 has asked 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. A host of amici have weighed in, including the usual parade of defense amici (U.S. Chamber of Commerce, Washington Legal Foundation, Product Liability Advisory Council, Inc., and some pharmas).
Public Justice Weighs In
Now, Public Justice has weighed in with an amicus brief on the other side, arguing that the California Supreme Court got it 100% right. 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?
Our brief argues that the answer to this question is undoubtedly yes. Bristol Myers sold nearly $1 billion worth of Plavix to California customers from 2006 to 2012 alone. And it did so based on a nationwide marketing campaign that caused harm both in California and elsewhere.
We urged the Court to recognize that there is nothing unfair about suing a national corporation in a state where it has aggressively marketed and sold massive numbers of defective products to an unsuspecting public, particularly where it was simultaneously being sued on identical claims by dozens of in-state residents. In fact, given the extent of Bristol Myers’ 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 almost laughable.
Louis Bograd of Motley Rice LLC served as Counsel as Record for Public Justice, along with Public Justice Foundation President Anne McGinness Kearse (also of Motley Rice), and Rebecca L. Phillips of Heard Robins Cloud LLP. Oral argument in the case is scheduled for April 25, 2017.
Needless to say, we’ll be watching this one closely. Stay tuned for further updates!