Special Law Alert - New United States Supreme Court Decision Limits the Exercise of Specific Jurisdiction Over Out-Of-State Corporate Defendants
by John J. Hare
In an important jurisdiction decision issued on June 19, 2017, the US Supreme Court has again limited the right of plaintiffs to sue corporate defendants in foreign states.
By a vote of 8-1, the Court ruled in Bristol-Myers Squibb v. Superior Court of California, that California could not exercise jurisdiction over claims brought by non-residents against an out-of-state drug maker. The case involved eight lawsuits filed by more than 600 plaintiffs, most of whom were not California residents, alleging that they suffered harm after ingesting the defendant’s blood thinning drug. While California State courts had held that the defendant’s “wide ranging” contacts with California were sufficient to vest specific jurisdiction over the non-residents’ claims, the Supreme Court disagreed, and returned the specific jurisdiction analysis to basic principles. To exercise specific jurisdiction, the Court emphasized, 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.” When such an affiliation is lacking, specific jurisdiction may not be exercised regardless of the extent of the defendant’s unrelated activities in the State. This rulings, which is not limited to pharmaceutical defendants, is a sweeping reaffirmation of the principle that specific jurisdiction may be exercised only where the defendant’s contacts with a forum give rise to the subject lawsuit.
The decision is also the latest in a series of US Supreme Court rulings that have squarely rejected the notion that large companies can be sued anywhere by anyone. This trend began with the Court’s landmark 2014 decision in Daimler AG v. Bauman, which rejected the common perception that general jurisdiction exists so long as a corporate defendant has “continuous and systematic” contacts with the forum. Henceforth, Daimler held, general jurisdiction may not be exercised unless such a defendant is fairly regarded as “at home” in the forum. “At home” includes a corporate defendant’s state of incorporation, the state of its principal place of business, or other “exceptional” contacts that the Supreme Court did not define. Although the Daimler Court emphasized that it merely explained what the law had always been, its decision has significantly raised the standard for exercising general personal jurisdiction, and its impact has been felt in many subsequent federal and state cases.
More recently, on May 30, 2017, the US Supreme Court reaffirmed Daimler in another 8-1 vote in BNSF Railway Co. v. Tyrrell. In that case, citing Daimler, the Supreme Court reiterated that ‘“the general jurisdiction inquiry does not focus solely on the magnitude of the defendant’s in-state contacts’. . . . Rather, the inquiry ‘calls for an appraisal of a corporation’s activities in their entirety’; ‘[a] corporation that operates in many places can scarcely be deemed at home in all of them.’“ Ultimately, the Supreme Court held that general jurisdiction could not be exercised because the defendant was not incorporated in the forum state (Montana), had no principal place of business there, and its activities there were not so substantial as to render it “at home.”
Taken together, Daimler, Tyrrell, and now BMS provide a rational, cohesive framework for analyzing general and specific jurisdiction. Daimler and Tyrell rejected the common view that general jurisdiction lies so long as the defendant has “continuous and systematic” contacts with the forum, and they further suggested that specific jurisdiction is lacking without substantial contacts even if the lawsuit arises from the defendant’s single or isolated contacts with the forum. BMS completed the jurisdictional analysis by emphasizing that specific jurisdiction is lacking unless the lawsuit arises from the defendant’s contacts with the forum, even if the defendant’s unrelated activities in the forum are extensive. When sued in foreign jurisdictions, defendants should make full use of these cases to challenge both general and specific jurisdiction.
This Special Law Alert is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2017 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.