Back to the Future: Recent Supreme Court Decisions Reaffirm Standards for Exercising General and Personal Jurisdiction

Defense Digest, Vol. 23, No. 3, September 2017

By Robert W. Stanko, Esq.*

The geographical footprint of a large, corporate defendant can often undermine a challenge to jurisdiction. Fortunately, however, the United States Supreme Court has in the last several years issued a series of decisions that have resurrected and reaffirmed the previously eroding standards for exercising general and specific personal jurisdiction.

The trend began in early 2014 in the form of Daimler AG v. Bauman, 134 S.Ct. 746 (2014), where the Supreme Court clarified the standard relative to the exercise of general jurisdiction. The Daimler decision reaffirmed that the traditional paradigms of general jurisdiction over a foreign corporation are the place of incorporation and principal place of business, and the Court made clear that general jurisdiction may only be asserted “[w]hen their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum state.” This determination requires a focus on the “[c]orporation’s activities in their entirety, nationwide and worldwide.” The Court cautioned that without a detailed analysis of such considerations, corporations operating on a national or international scale would theoretically be subject to general jurisdiction in all fifty states, but soundly rejected such an anomaly.

Shortly thereafter, the Court issued its decision in Walden v. Fiore, 134 S.Ct. 1115 (2014) where it set forth the standard necessary to give rise to specific jurisdiction. While the conduct of a corporate defendant was not at issue in Walden, the Court’s analysis applies just the same. For instance, the Court reiterated that specific jurisdiction “[f]ocuses on the relationship among the defendant, the forum, and the litigation.” Indeed, “[t]he defendant’s suit-related conduct must create a substantial connection with the forum State.”

The Daimler and Walden decisions provided a fresh framework to attack jurisdiction on behalf of a large corporate defendant. For instance, we recently secured dismissal of a claim based almost entirely on Daimler and Walden.

The DeLuca v. Hyatt Hotels Corporation, et al. case was filed in Pennsylvania state court against Hyatt Hotels Corporation and one of its subsidiaries relative to an incident that occurred at a Hyatt-branded hotel in Aruba. After removing the case to the District Court for the Eastern District of Pennsylvania based on diversity, we moved to dismiss on the basis that the court lacked jurisdiction over a Pennsylvania citizen’s claims against a company headquartered in Illinois and incorporated in Delaware involving an incident that occurred in Aruba.

Citing Daimler, and taking judicial notice that Hyatt is one of the United States’ larger hotel chains, the court dismissed for lack of general jurisdiction. The court concluded that the “[e]xercise of general jurisdiction over Hyatt for an event occurring in Aruba would offend due process under Daimler.” The court likewise declined to exercise specific jurisdiction under Walden, finding that the only link to the forum state was the plaintiffs themselves.

The logic and perspective underlying the court’s reasoning in DeLuca demonstrates a refreshing reluctance to exercise personal jurisdiction over a corporate defendant regardless of its significant presence within the forum state. For instance, despite acknowledging that Hyatt has numerous locations in Pennsylvania (and perhaps implying that defending a case here would not be administratively difficult), the DeLuca court declined to find jurisdiction, reasoning that if it “[a]llowed general jurisdiction, Hyatt would be subject to general jurisdiction in nearly every state for causes of actions occurring around the world.”

The standard set forth in Daimler was just recently reaffirmed and further clarified by the United States Supreme Court in BNSF Railway Co. v. Tyrrell, 137 S. Ct. 810 (2017). Again, as in Daimler, the Court explained the importance of an all-encompassing analysis of a corporation’s activities, cautioning that “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” In Tyrrell, the Court found that the plaintiffs failed to satisfy the burden required to establish the kind of “exceptional” circumstances that would allow a forum state to exercise jurisdiction over a corporation that was neither headquartered nor incorporated within its borders.

While Daimler and Tyrrell provide a sound basis for a corporate defendant to challenge general jurisdiction, the Supreme Court’s most recent opinion in Bristol-Myers Squibb v. Superior Court of California, 137 S.Ct. 1773 (2017), further bolsters the standard set forth in Walden by delineating an equally corporation-friendly standard relative to specific jurisdiction. Bristol-Myers Squibb arose from a series of eight lawsuits in California involving 678 plaintiffs, 592 of whom were residents of other states, all of whom alleged they suffered various injuries as a result of a blood-thinning drug manufactured by the pharmaceutical giant. Bristol-Myers Squibb Company (BMS) argued that California lacked personal jurisdiction over the claims of the non-resident plaintiffs, citing that it was headquartered in New York, incorporated in Delaware, and that its sales of the drug at issue in California amounted to less than 1.5% of its annual revenue.

The California Supreme Court sided with the plaintiffs, noting the presence of five BMS research facilities and the fact that BMS’s sales of similar drugs in California between 2006 and 2012 generated nearly $1 billion. After considering the rule announced in Daimler, the California court concluded that California lacked general jurisdiction under Daimler, but it held that the pharma company’s “wide ranging” contacts within the state sufficiently established specific jurisdiction over the plaintiffs’ claims.

The U.S. Supreme Court reversed by an 8-1 margin. As it did in Daimler, Walden and Tyrrell, the Court reiterated the basic core principles of both general and specific jurisdiction, though, in doing so, it recognized that the standard applied to the latter is “very different.” The Court expressly rejected the notion that the inquiry of underlying specific jurisdiction turns on the activities of the corporation within the forum generally. On the contrary, the Court explained that specific jurisdiction requires that the lawsuit arise from the corporation’s contacts within the forum. According to the Court, “[w]hen there is no such connection, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.”

Applying that reasoning to the dispute before it, the Supreme Court found that the business BMS conducted in California coupled with the revenue generated as a result was insufficient. Because there was no factual connection between the forum state and the claims of the non-resident plaintiffs, specific jurisdiction did not vest.

This recent trend of favorable decisions renews “traditional notions of fair play and substantial justice” and reinforces the long-standing principles underlying personal jurisdiction. While such precedent is not an invitation to disregard corporate form, the burden associated with the exercise of jurisdiction over a corporate defendant seems to have reached a new height.

*Rob is a shareholder in our Philadelphia, Pennsylvania office. He can be reached at 215.575.2807 or rwstanko@mdwcg.com

_{Defense Digest, Vol. 23, No. 3, September 2017. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal 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. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2017 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}