By: Lehoan T. Pham
In a pair of recent rulings, the Supreme Court continues to narrow a state's authority to hale non-resident defendants, such as foreign corporations, into their courts. One decision, BNSF Railway Co. v. Tyrrell et al., narrowed a state's general jurisdiction authority; the other, Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County et al., narrowed specific jurisdiction authority.
Those cases each affirm non-resident defendants' right to due process. Described as a "fundamental right," the Fourteenth Amendment ensures no state may deprive any person of life, liberty, or property, without due process of law. One of the Fourteenth Amendment's core principles is ensuring that a state must have jurisdiction over the "person" before exercising its legal authority. In developing precedent on personal jurisdiction, the Supreme Court split personal jurisdiction in half: "specific" jurisdiction and "general" jurisdiction.
A state has general jurisdiction, or "all-purpose" jurisdiction, where the defendant's contacts with the state are "so continuous and systematic" that the defendant is "at home." Where the state has general jurisdiction, it may exercise its authority over the defendant on any claim, even if the underlying controversy occurred in a different state. A state has specific jurisdiction, or "case-linked" jurisdiction, when the defendant has sufficient minimum contacts with the state and the underlying controversy—i.e., the lawsuit—arises out of those contacts.
As for general jurisdiction, to ensure no state abuses this power, the Supreme Court recently narrowed when this power even exists. In BNSF Railway Co. v. Tyrrell et al.1, the Supreme Court reversed the Montana Supreme Court's attempt to exercise general jurisdiction over the foreign-defendant railway company. In relevant part, even though the company conducted business in Montana (i.e., managing over 2000 miles of railroad track and employing over 2,000 employees), the company was not lawfully "at home" in Montana, thus the state lacked general jurisdiction.
Though, one did not need a crystal ball to predict the Supreme Court's ultimate conclusion in BNSF. Just a short three years ago, the Supreme Court gave substantial guidance on how it would rule on future general jurisdiction issues in Daimler A.G. v. Bauman2.
Put another way, conducting business in a state—even substantial business—does not automatically give that state general jurisdiction over the defendant. Instead, as set forth in BNSF, the two "paradigm" forums in which a corporation is "at home" is its place of incorporation and principal place of business. Without these two paradigms, then a state may only exercise general jurisdiction over the defendant in "exceptional cases"—such as a corporation re-locating because of an ongoing war.3
For non-resident defendants, BNSF may bring a small sigh of relief. If they find themselves litigating outside of their "home" and in an uneasy forum—i.e., a plaintiff-friendly state—they may have persuasive grounds to seek dismissal for lack of personal jurisdiction. Following BNSF, a state should understand that they cannot liberally exercise general jurisdiction over non-resident defendants. And, as the Supreme Court did in BNSF, it has and may continue to cut off any abuse of this power.
In addition, the Supreme Court recently narrowed when a state has specific jurisdiction over non-resident defendants. In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County et al.4, a group of plaintiffs—many not even residents of California—sued the foreign-defendant drug manufacturer in a California state court. They alleged that the manufacturer's drug caused various injuries. Relevant here, the manufacturer conducted significant, yet unrelated to the lawsuit, business in California—i.e., operating an office, employing over 200 employees, and running several research and laboratory facilities. The California Supreme Court later held that California had specific jurisdiction over the manufacturer by using the "sliding scale approach." Under this approach, "the more wide-ranging the defendant's forum contacts, the more readily is shown a connection between the forum contacts and the claim."
The Supreme Court held that the sliding scale approach was "difficult to square with [its] precedents" and reversed the decision below. The Supreme Court re-affirmed its earlier analysis that for a state to exercise personal jurisdiction, "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."
Bristol-Myers brings another small sigh of relief, particularly for a corporate defendant that is routinely sued in certain plaintiff-friendly states. The Supreme Court demands more than superficial evidence that a corporate defendant has contacts with the state. Legitimate proof must exist showing a causal connection between the lawsuit and the defendant's contacts with the state. A corporate defendant's unrelated operations in the state—no matter how substantial—do not give the state specific jurisdiction.
Again, the Supreme Court's ultimate holding in Bristol-Myers should not come as an overwhelming shock. Three years ago, the Supreme Court clarified the scope of specific jurisdiction in Walden v. Fiore5, in which it held that the analysis "focuses on the relationship among the defendant, the forum, and the litigation." Put another way, for a state to exercise specific jurisdiction, non-resident "defendants' suit-related conduct must create a substantial connection with the forum State."
These recent decisions, some newly minted, send a clear message: plaintiffs must be cautious where they file their lawsuits. If they continue to file lawsuits in states that cannot lawfully exercise jurisdiction over the defendant, then they should anticipate a challenge to the state's personal jurisdiction authority.
These recent cases particularly bolster the personal jurisdiction defense for non-resident defendants—especially corporations—that are currently or soon-to-be litigating mass tort and product liability actions. Gone are the days where plaintiffs can force non-resident defendants into plaintiff-friendly forums. Now, more so than ever before, non-resident defendants need to preserve all personal jurisdiction challenges, so that they may leverage these recent decisions to obtain favorable rulings.
1 581 U. S. ____ (2017), 137 S. Ct. 1549 (2017), available at https://www.supremecourt.gov/opinions/16pdf/16-405_4gdj.pdf
2 571 U.S. ____ (2014), 134 S. Ct. 746 (2014), available at https://www.supremecourt.gov/opinions/13pdf/11-965_1qm2.pdf
3 Perkins v. Benguet Consol. Min. Co., 342 U.S. 437, 72 S. Ct. 413 (1952), available at https://www.law.cornell.edu/supremecourt/text/342/437
4 582 U. S. ____ (2017), 137 S. Ct. 1773 (2017), available at https://www.supremecourt.gov/opinions/16pdf/16-466_1qm1.pdf
5 571 U.S. ____ (2014); 134 S. Ct. 1115 (2014), available at https://www.supremecourt.gov/opinions/13pdf/12-574_8mj9.pdf