United States: Breaking News – California High Court Expands "Specific" Personal Jurisdiction To Recreate Exorbitant" Personal Jurisdiction Rejected By Daimler v. Bauman

Last Updated: August 31 2016
Article by James Beck

It's been two years since the First District California Court of Appeals issued its ill-founded decision in Bristol-Myers Squibb Co. v. Superior Court, 175 Cal. Rptr. 3d 412 (Cal. App. 2014), which used specific personal jurisdiction to accomplish what the United States Supreme Court had, only six months earlier, condemned as "grasping" and "exorbitant" when attempted through general personal jurisdiction in Daimler AG v. Bauman, 134 S. Ct. 746 (2014). We immediately blogged about that decision in our " Hotel California" post – describing the California court's rationale in considerable detail.

Fortunately, the California Supreme Court promptly granted an appeal, which we duly noted here, of the following two questions: "(1) whether after Daimler AG v. Bauman, 571 U.S. ––––, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), general jurisdiction exists; and (2) whether specific jurisdiction exists." Bristol-Myers Squibb Co. v. S.C., 337 P.3d 1158 (Cal. 2014).

Thereafter "prompt" dropped out of the lexicon.

But today the wait is over. The California high court has answered the two questions "no" and "yes." This latter ruling – a 4-3 decision − is almost certain to be appealed to the United States Supreme Court, as it creates a form of "specific" jurisdiction in mass tort cases that is every bit as "grasping" and "exorbitant" as that rejected as a Due Process violation in Bauman. See Bristol-Myers Squibb Co. v. Superior Court (Anderson), S221038, slip op. (Cal. Aug. 29, 2016) (hereafter Anderson). Anderson involved mass tort litigation in California against a defendant that was neither headquartered nor incorporated in California, nor had any peculiar ties to the state. The plaintiffs in question were also nonresidents of California, so the jurisdictional questions boiled down to whether California can constitutionally provide a forum for non-resident plaintiffs to sue a non-resident defendants.

This is quite apart from the practical question of why, given the severe funding crisis everyone recognizes as facing the California judiciary, California taxpayers should be burdened by thousands (or more) of suits by non-residents against non-residents.

Bauman, of course, rejected general jurisdiction theories that would expose corporations to suit in any state about anything. As to Bristol-Myers-Squibb, a large pharmaceutical company that markets its products in all fifty states, the court unanimously agreed that general jurisdiction could not lie under Bauman.

Although the company's ongoing activities in California are substantial, they fall far short of establishing that is it at home in this state for purposes of general jurisdiction. . . . In assessing [defendant's] California business activities in comparison to the company's business operations "in their entirety, nationwide," we find nothing to warrant a conclusion that [it] is at home in California. As the high court warned in [Bauman], to conclude that [defendant] may be sued in California on any cause of action, whether or not related to its activities here, under a theory of general jurisdiction, would be to extend globally the adjudicatory reach of every state in which the company has significant business operations.

Slip op. at 14 (citations omitted). In Bauman, "the high court plainly rejected the theory that a corporation is at home wherever its sales are 'sizeable.'" Id. Merely being a large corporation selling products and having business operations in every state – including dealings with Calfornia distributors − isn't enough. Id. at 14-16. Nothing on the order of the "exceptional fact pattern" in Perkins v. Benguet Mining Co., 342 U.S. 437 (1952) (Philippine corporation moved its entire business to Ohio due to wartime occupation), is present in the interstate operations of a large pharmaceutical company. Slip op. at 15.

Anderson also rejected general jurisdiction based on "consent" – by virtue of the defendant's having registered to do business and maintained an agent for service of process in California.

California law, however, requires a foreign corporation transacting business here to name an agent in the state for service of process. . . . [T]he purpose of state statutes requiring the appointment by foreign corporations of agents upon whom process may be served is primarily to subject them to the jurisdiction of local courts in controversies growing out of transactions within the State. Accordingly, a corporation's appointment of an agent for service of process, when required by state law, cannot compel its surrender to general jurisdiction for disputes unrelated to its California transactions. The designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction.

Id. at 15 (citation and quotation marks omitted) (emphasis added).

Specific personal jurisdiction, however, is based on a "minimum contacts" analysis that precludes only assertion of jurisdiction that would violate "traditional notions of fair play and substantial justice." Slip op. at 5 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). This requires that the litigation "arise out of or are connected with the [company's] activities within the state." Id. at 6 (same). This Due Process language was pliable enough to allow the same thing – "jurisdiction for disputes unrelated to its California transactions" – for any mass tort. All plaintiffs have to do is simultaneously have California residents make the same allegations.

California uses a multi-factor test (Anderson calls it a "sliding scale," id. at 26) for "relatedness" for evaluating specific jurisdiction as "fair" or not:

This test requires courts to evaluate the nature of the defendant's activities in the forum and the relationship of the claim to those activities in order to answer the ultimate question under the due process clause: whether the exercise of jurisdiction in the forum is fair. Under the substantial connection test, the intensity of forum contacts and the connection of the claim to those contacts are inversely related. The more wide ranging the defendant's forum contacts, the more readily is shown a connection between the forum contacts and the claim.

Slip op. at 19 (citation and quotation marks omitted). Critically enough to be quoted three times, in California "[a] claim need not arise directly from the defendant's forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction." Id. at 19, 20, 22 (identical quotations).

First, the court had find "purposeful availment." For that jurisdictional requirement, it was enough that the defendant corporation advertised and sold its products in California – even if the plaintiffs in question were out-of-state litigation tourists. Id. at 20.

For relatedness, the more difficult proposition, the court relied primarily upon prior precedent involving a California third-party plaintiff (Von's grocery stores, in a third-party action) suing out-of-state defendants. Id. at 20-22 (discussing Vons Companies, Inc. v. Seabest Foods, Inc., 926 P.2d 1085 (Cal. 1996)). That the majority in Anderson could not find any precedent at all involving non-resident plaintiffs demonstrates how great a stretch its expansion of specific jurisdiction really is. According to Anderson's gloss on Vons, any "substantial connection" between the defendant's activities and the forum, even if totally non-causal of the specific plaintiff's injuries, is enough – even for a non-resident plaintiff – as long as a resident plaintiff has brought a similar suit. Here's the money quote:

Both the resident and nonresident plaintiffs' claims are based on the same allegedly defective product and the assertedly misleading marketing and promotion of that product, which allegedly caused injuries in and outside the state. Thus, the nonresident plaintiffs' claims bear a substantial connection to [defendant's] contacts in California. [Defendant's] nationwide marketing, promotion, and distribution of [the drug] created a substantial nexus between the nonresident plaintiffs' claims and the company's contacts in California concerning [that drug].

Slip op. at 23. Anderson reached the same attenuated jurisdictional conclusion with respect to other claims that targeted the drug's development and design. Id. at 24 ("that the company engages in research and product development in these California facilities is related to plaintiffs' claims . . . that even if those claims do not arise out of [defendant's] research conduct in this state").

Thus, the California Supreme Court has, for mass torts at least, created the same universal sort jurisdiction that Bauman condemned as "grasping" and "exorbitant" in the context of general jurisdiction – only it calls it "specific jurisdiction." Under this logic, any plaintiff could sue this defendant (or any other large company) in any state of the union, as long as some in-state plaintiff is making the same claim. This result is broader even than the discredited concept of pendent jurisdiction, through which other plaintiffs failed to obtain the same result.

Indeed, the majority essentially concedes this point, calling it an "invalid assumption" that a defendant's "forum contacts must bear some substantive legal relevance to the nonresident plaintiffs' claims." Slip op. at 25 (once again relying solely on Vons, which involved only a resident plaintiff). Any "forum contacts" that "are part of the nationwide marketing and distribution of [a product]" are ipso facto "substantially connected to the nonresident plaintiffs' claims" also involving that product. Id. Under this rationale, any "nationwide marketer" of a product may be sued by anyone in any state, as long as some in-state plaintiff also makes the same allegations. See Id. at 31 (arguing that given 86 California plaintiffs, addition of another 592 litigation tourists is less of a "burden" than litigating where those other plaintiffs reside); at 32 ("other injuries" anywhere in the country, can be evidence of defect).

Finally, Anderson seems to be creating a special – and particularly pro-plaintiff – jurisdictional rule specifically for mass torts:

[B]ecause mass tort injuries may involve diverse injuries or harm not amenable to the efficiency and economy of a class action, they present special problems for the proper functioning of the courts and the fair, efficient, and speedy administration of justice. Without coordination, those who win the race to the courthouse and bankrupt a defendant early in the litigation process would recover but effectively shut out other potential plaintiffs from any recovery. Moreover, coordinated mass tort actions also avoid the possible unfairness of punishing a defendant over and over again for the same tortious conduct.

Slip op. at 35 (citations and quotation marks omitted). Anderson cites no jurisdictional cases for this totally unprecedented result (not even Vons). Nothing in United States Supreme Court precedent supports the contention that mass tort defendants are entitled to less Due Process consideration than other defendants in other sorts of litigation.

Thus, the result in Anderson is indistinguishable from the jurisdictional result condemned in Bauman. The supposed "sliding scale," id. at 26, in Vons has become a slippery slope, and in Anderson California has slid all the way to the bottom. The extensive, three justice dissent recognized that the majority's result is untenable and contrary to modern Due Process principles:

[M]inimizing the relatedness requirement undermines an essential distinction between specific and general jurisdiction. In [Bauman], the United States Supreme Court made clear that general jurisdiction − jurisdiction to adjudicate controversies unrelated to the defendant's forum contacts − is not created merely by commercial contacts that are "continuous and systematic, but only by contacts so extensive as to render the defendant "at home" in the forum state. . . . But by reducing relatedness to mere similarity and joinder, the majority expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction. At least for consumer companies operating nationwide, with substantial sales in California, the majority creates the equivalent of general jurisdiction in California courts. What the federal high court wrought in [Bauman] − a shift in the general jurisdiction standard from the "continuous and systematic" test . . . to a much tighter "at home" limit − this court undoes today under the rubric of specific jurisdiction.

Anderson, dissenting slip op. at 4-5 (citations and quotation marks omitted) (emphasis added).

California has no discernible sovereign interest in providing an Ohio or South Carolina resident a forum in which to seek redress for injuries in those states caused by conduct occurring outside California. A mere resemblance between the nonresident plaintiffs' claims and those of California residents creates no sovereign interest in litigating those claims in a forum to which they have no substantial connection.

Id. at 11. See also Id. at 17-18 (pointing out that Vons involved a California third-party plaintiff seeking indemnity for the defendants' "California activities").

There's lots else in the dissent (interest analysis, interstate comity, and analysis of lots of cases, to name three), which we commend to any interested readers, but for our purposes, it's time to refocus on the United States Supreme Court, where Anderson in undoubtedly headed. We think that the Supreme Court – in its rejection of "grasping" and "exorbitant" theories of personal jurisdiction – would be interested in what the dissent has to say:

Such an aggressive assertion of personal jurisdiction is inconsistent with the limits set by due process. Although those limits are more flexible and less strictly territorial than in the past, the high court has explained that they still act to keep any one state from encroaching on the others. . . . That [defendant] marketed and sold [a product] throughout the United States, presumably using much of the same advertising in many markets, does not give California authority, under our federal system, to assert jurisdiction over claims arising throughout the nation.

Id. at 33-34 (citation and quotation marks omitted) (emphasis added).

At this point, we can only say "take it up," and hope that the Supreme Court will once again be willing to review a blatant attempt to nullify its recent precedent.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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