A personal jurisdiction coup d'état

APPELLATE ZEALOTS

You might have missed the coup d'état. Jurisdiction cases rarely make the front page, and here the regime change took the form of two straightforward opinions by Justice Ruth Bader Ginsburg, the U.S. Supreme Court's resident jurisdiction expert, with no dissents. Yet in those two cases the Supreme Court quietly overhauled the law of personal jurisdiction - and the court just granted review in another case that could solidify that shift.

Most of us learned in law school that states can assert general jurisdiction over companies with continuous and systematic contacts with the forum, such as regular, large-scale business operations. States were often deemed to have general jurisdiction over corporations with large offices and substantial sales within their borders, even if the companies were headquartered and incorporated elsewhere.

But not anymore. The court hinted at a new rule in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), but that decision left enough open questions that it was not until Daimler AG v. Bauman, 134 S. Ct. 746 (2014), that the change became clear. Under Daimler, corporations are subject to general jurisdiction only where they are essentially "at home." In the vast majority of cases (or perhaps all), only the state of incorporation and principal place of business will qualify. Daimler left a tiny bit of wiggle room for a corporation to be deemed at home in a third state, but stressed this assessment should not focus on the sheer magnitude of the corporation's contacts with the state, but rather their relative importance to the corporation's overall business. This means that states can no longer assert jurisdiction simply because a corporation has large operations within the state.

The court wrote matter-of-factly, suggesting the rule should have been obvious from prior cases. And in retrospect it is clear after a careful reading of the key Supreme Court cases and an understanding of the historical roots of general jurisdiction. But lower courts had long cobbled together scraps of those opinions to yield a more expansive test. As a consequence, the defendant in Daimler hardly bothered to dispute that general jurisdiction would be appropriate for a company with substantial sales in California - the parties focused on whether those contacts could be attributed to the parent company.

A mass tort case involving Plavix, an anti-clotting medication, illustrates the effect of the change - and sets the state for the next Supreme Court battle. In the pre-Daimler days a California trial court found general jurisdiction over the global biopharmaceutical company Bristol-Myers Squibb, even though BMS is incorporated and headquartered on the East Coast and has less than four percent of its workforce in California. But as luck would have it, the U.S. Supreme Court handed down Daimler the same day the court of appeal summarily denied BMS's writ petition challenging jurisdiction.

The California Supreme Court unanimously held the trial court erred in subjecting BMS to general jurisdiction in California. Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874, 894 (Cal. 2016). Even though BMS had over 400 workers, millions of dollars in sales, and a registered agent for service in California, the court followed Daimler in evaluating these contacts not in absolute terms but only in relation to the company as a whole. While significant, these contacts "fall far short of establishing that [BMS is] at home in this state for purposes of general jurisdiction."

This might have ended the saga. But no. After holding California could not assert general jurisdiction, the California Supreme Court went on to split 4-3 in holding that California nevertheless had specific jurisdiction over the claims of nonresident plaintiffs against the nonresident defendant based on tenuous connections to California.

As you probably recall, personal jurisdiction comes in two flavors. General jurisdiction allows suits for all purposes. Specific jurisdiction focuses on whether the suit is connected to the defendant's contacts with the forum. Only activities that the defendant purposefully directs at residents of the state are considered for this test, and the lawsuit must arise out of or relate to those in-state activities.

Everyone agreed that specific jurisdiction was proper as to the 86 California plaintiffs since BMS advertised Plavix in California and arranged for its distribution there. The dispute centered on the 592 nonresident plaintiffs who sued BMS for injuries occurring out of state. Nothing linked Plavix to the state - BMS did not develop or manufacture the medication in California. But the California Supreme Court applied a broad test derived from older state precedents, holding the out-of-state claims "related to" BMS's activities in California because BMS used a nationwide marketing plan for Plavix and manufactured some other drugs in California.

That test for specific jurisdiction guts the Daimler limits. If a company can be sued in any state because of a nationwide advertising campaign - even for harms that occurred to nonresident plaintiffs entirely outside the state - many large companies will be subject to suit in every state. If the contacts with the state only need be similar to the events that gave rise to the suit, plaintiffs will have their pick of forums for many mass torts.

But the story isn't over. BMS filed a petition for certiorari in the U.S. Supreme Court, and in January the court agreed to review the specific jurisdiction issue.

While the court agrees to review less than one percent of certiorari petitions, the grant here didn't come as much of a surprise. The California Supreme Court's majority opinion reads like an end-run around inconvenient U.S. Supreme Court precedent, which aggravates U.S. Supreme Court justices across the board. But it was good news for corporations. The Supreme Court won't review the general jurisdiction issue, so the California Supreme Court's opinion recognizing Daimler's limits on general jurisdiction still stands. And as for the specific jurisdiction ruling, the U.S. Supreme Court reverses in about 70 percent of cases.