United States: Supreme Court 4/25 Personal Jurisdiction Argument

Last Updated: April 28 2017
Article by James Beck

The other day, the United States Supreme Court heard argument in Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (U.S. argued April 24, 2017) ("BMS") (link to transcript). We've blogged many times about the issues in Bristol-Myers-Squibb. In BMS, the United States government, as amicus curiae, appeared in support of the defense position that personal jurisdiction did not be extend to suits in state courts brought by non-resident plaintiffs against non-resident defendants.

Here's a description of what went down.

Justice Sotomayor, who had been the sole dissenter from the personal jurisdiction rationale in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), was seemingly hostile to the defense position. Her initial questioning suggested that not allowing an in-state resident's successful assertion of personal jurisdiction to supply jurisdiction for out-of-state residents who simply took the same product in their home states somehow destroyed pendent jurisdiction. Tr. at 5-6. As we've discussed before, pendent jurisdiction typically applies to consolidated claims, not consolidated lawsuits.

Justice Ginsburg (author of Bauman) rode to the rescue, pointing out that general jurisdiction, and perhaps specific jurisdiction where there was a more substantial link than just using a product, would allow plaintiffs from across the country to sue in one place. Id. at 7.

The defense position (articulated in response to a question from Justice Kagan) was that federalism, predictability, and fairness all weighed against allowing anybody and everybody who took a product to sue in a single state with no connection to the litigation beyond the presence of other, resident plaintiffs. Fairness involved extending state-specific principles – the defense mentioned choice of law, procedural standards, such as for summary judgment, expert admissibility (Daubert), and evidentiary issues – to plaintiffs from other states who had no reason to benefit from California's peculiarly pro-plaintiff rules. There was also whether it was fair to have 600+ separate trials in California involving non-residents. Id. at 10-12. Fairness, in the Due Process context, does not allow every plaintiff in the country to go forum shopping for the "least common denominator." Id. at 14.

There was also the issue of predictability, as discussed in Bauman. A company incorporating in a particular state, or having a principal place of business in a particular state, such as BMS in New Jersey, expects to be sued there by anyone with a claim. That is not the case in every other state in the country. Id. at 15-16.

Justice Breyer asked whether Due Process principles in personal jurisdiction could affect MDL practice and class actions. The response was that federal jurisdictional issues are different, and where federal issues are involved, the minimum contacts analysis at the federal level controls, rather than rivalry between the states, with one state potentially offering more to out-of-state litigants than those litigants' home states. Id. at 17-19. Justice Ginsburg wondered if Congress could expand MDL practice to include trials, and heard that MDL practice could be reserved until that change happened, and the plaintiffs' anybody-in-any-state could nonetheless fail Due Process, as it should. Id. at 19-20.

That concluded the defendant's principal argument, with only Justices Ginsburg, Kennedy, Breyer, Kagan, and Sotomayor being heard from.

Then the United States argued.

The government's position is familiar to us – because it's always been our position – that a state cannot recreate the same "exorbitant" and "grasping" scope of jurisdiction under the "specific" rubric that Bauman rejected under the "general" rubric as incompatible with Due Process. Neither other in-state plaintiffs nor other in-state defendants matter, as jurisdiction is personal to each party. Tr. at 20. Justice Ginsburg wanted to know about a California co-defendant. Unless they were conspiring, jurisdiction is personal to each defendant. Id. at 21. Justice Kennedy wondered if California plaintiffs could skirt due process by trying to join an out-of-state defendant to an earlier-filed suit against a California defendant by claiming "necessary party" status. Essentially the same answer. Id. at 22-23.

In response to Justice Sotomayor, the government stated that, given the realities of the federal system, with jurisdiction over state-law claims determined for states individually, mass torts asserting state-law claims may well not be amenable to a single aggregated forum with all plaintiffs able to sue all defendants. Not so for federal criminal prosecutions. Id. at 23-25.

The mention of federalism brought Justice Gorsuch forward. He wanted to know about the implications of the California rationale on other states administering their own procedures for resident tort plaintiffs. The obvious answer was that all states have equal interest in adjudicating conduct occurring within their borders (such as drug sales and marketing). Id. at 25-26. Justice Kagan wanted to know whether the residence of the plaintiff or the residence of the defendant was the concern. The government's counsel responded that either of those states had a strong interest sufficient to support jurisdiction, with the implication that other states do not. Id. at 26.

Justice Kagan then made an important point – that the interest of the plaintiff's home state becomes "attenuated" where the plaintiff has abandoned his/her own state and gone elsewhere – it was "weak to say that the State has a very strong interest in protecting its own citizen that doesn't want to be there." Id. Justice Kennedy added the flip side of federalism, "State A has a very strong interest in confining State B to State B's territorial...." The flow was interrupted by the government's quick agreement. According to the Justice, states are limited territorially, whereas the federal government is not. Id. at 27.

Justice Breyer then had a tall order − asking for the government's "solution to mass torts." Id. at 28. The government's position was that state-law mass torts can be brought according to the limits of general jurisdiction, as can MDLs. If a "particular" mass tort is not being adequately handled by state law, Congress could step in. Id. Justice Ginsburg asked if the government was arguing that Congress could "create a nationwide claim." Id. at 29. The government agreed that Congress had that prerogative in the mass tort field.

Justice Alito asked the final question of the government, asking how it would "phrase the rule" being sought. The government's response:

[T]he Court could simply say in this case that for purposes of specific jurisdiction, when we're talking about conduct that arises out of . . . activity within the forum, there has to be something that's connected to the claim, some causal connection between the individual claim . . . and the forum, the parties in the forum.

Tr. at 30.

Then it was time for the plaintiffs to argue.

Plaintiffs asserted four bases for personal jurisdiction: (1) the defendant exploited the California market; (2) litigation in California did not create significant additional burdens on the defendant, which would be defending litigation there in any event; (3) a governmental interest in aggregating mass torts. Counsel didn't get to four. Id. at 30-31.

The idea of a governmental interest in aggregating mass torts in a single state stuck in a lot of craws. Justice Kennedy wanted to know which state had that interest. Justice Ginsburg opined that single-forum aggregation was "impossible" as long as plaintiffs get to choose where to sue. Id. at 31-32.

Actually, plaintiffs did get to four, only several pages later. The fourth being the presence of a California defendant as an alleged nationwide distributor. Id. at 32-33.

However, as Justice Kagan pointed out, the California distributor was not common to all plaintiffs. Plaintiffs had to admit that it was "impossible" to trace the distribution of any given individual's pills. Id. at 33. That meant that the involvement of a California distributor was not a case-specific fact, but only of general significance.

Plaintiffs tried to respond to Justice Ginsburg, arguing for an interest in "allowing the litigation to be centralized," which they asserted was preferable to litigation in multiple states. Justice Kennedy found that statement to be "a very patronizing view of federalism" that ranked some states (such as California) over others. "[T]hat's not the idea of the Federal system. The Federal system says that States are limited." Id. at 34. Chief Justice Roberts, and Justices Kennedy and Ginsburg agreed that plaintiffs' reliance on the Keeton libel case was not well taken because that case involved in-state injury, and even then was "peculiar to" or "sui generis" in libel cases." Id. at 34-36.

Interrupting plaintiffs' explanation of why a libel rule was pertinent, Justice Kagan looked to the other side of the "v."

Well, how about the interest of the State that Bristol-Myers resides in? In other words, they might have an interest in not having their citizens hailed [sic] into court against their will in another part of the country.

Tr. at 37. Plaintiffs disagreed and attacked the defendant's suggestion that plaintiffs not wanting to sue in their own states could bring suit in New Jersey.

That answer led Justice Breyer to expound on the differences between general and specific jurisdiction, whereby defendants could be sued in states where they actually caused the plaintiff's harm, but not in states where they did not. Jurisdiction thus depended on which states had a "special federalism interest" – a defendant's "home" state having such an interest. Id. at 37-38.

Plaintiffs responded that New Jersey as a forum meant that plaintiffs there were not suing in their home states, which overlooked the fact that they always could sue in their home states. Plaintiffs were more interested, however, in highlighting their joinder of a California defendant. Justice Gorsuch wasn't impressed, finding that to be too "fact-specific" when the question before the Court was "whether we have some sort of causation requirement or permit this sliding scale business that California engages in." Id. at 38. He thought plaintiffs were attempting to "collapse" the prongs of "purposeful availment" and "fairness," removing all the "bite" from the former – which "suggest[ed] some problem doctrinally" with the plaintiffs' position. Id. at 39.

Plaintiffs rejected any causation requirement, asserting that they only needed to show "continuous and systematic exploitation" of the market and that each claim be "on the same operative facts." Id. Justice Kagan was skeptical:

[T]hat's like saying . . . that the claim relates to another claim that relates to contacts with the forum. . . . I'm missing what the relationship is between an Ohio plaintiff's claim and the defendant's contacts with the forum that doesn't go through another claim.

Tr. at 39. Justice Kagan thought that specific personal jurisdiction involved claims that arose from the defendant's contacts with the state in that particular case, not on some general basis.

Plaintiff's response that "the relevant contact is the nationwide activity" of marketing the drug. Id. at 40. Because the activity was national, any state in the country, such as California, could equally adjudicate the "same conduct." Id. at 41. That, and don't forget the California defendant that plaintiffs decided to sue. If plaintiffs can find an in-state defendant to sue in whatever jurisdiction they choose, that state can assume jurisdiction over any plaintiff's similar claim, wherever in the country that plaintiff may be located. Id. at 41-42.

Justice Ginsburg returned to the issue of class actions – could this be a class action, and if so where could it be brought. Plaintiffs' answer was California, because of the California defendant. Id. at 42-43.

Plaintiffs then tried to make some hay about there being a "special master" for cases across the country. Id. at 43-44. However, they appear to concede that this "master" was "best regarded as Federal," so that didn't help much with their state-law arguments. Id. at 44. That concession led Justice Breyer to suggest that the "answer" to this "terrible problem for mass torts" is to "[b]ring your case in Federal court." Id. at 44-45. "[T]he solution to this great mass tort problem is that's what Federal courts are for." Id. at 45. However, as Justice Ginsburg pointed out "there's no complete diversity" since plaintiffs saw fit to join a California defendant. Id. at 46. However, plaintiffs "could redesign the case" to fix that problem. Id.

Plaintiffs, of course don't want to be in federal court, and did what they did in BMS specifically to avoid that. So they effectively abandoned their efficiency arguments when federal court was the alternative and argued that just because there was a more efficient way didn't mean their way violated Due Process. "[Y]es, there are other ways to do it, but that doesn't make the way we are doing it unconstitutional. What the Court has talked about here is minimum due process." Id. at 47.

Chief Justice Roberts then changed the subject, looking for a "simple" jurisdictional rule. Id. A sliding scale, suggested in Plaintiffs' papers, where some percentage of out-of-state plaintiffs passed muster, whereas a smaller (unstated) percentage would not, would be hard to administer. Plaintiffs' response was that everything should be decided "case-by-case" and Due Process imposed no "categorical rule." Id. at 48. The Chief rejoindered, "but you're articulating a rule that requires businesses trying to figure out where to do business and plaintiffs where to sue," so what was the line? Id. Plaintiffs were unable – or unwilling − to give one. Justice Kagan then took Plaintiffs' reluctance to its logical conclusion:

[O]n your theory, it could be zero California plaintiffs, because . . . [y]ou told me . . . that an Ohio citizen's claim arises out of the contacts in California is because the contacts in California are really nationwide contacts. And if that's so, it's met regardless of whether there are any California plaintiffs are not.

Tr. at 50. "Right," Plaintiffs agreed. Id.

Perhaps sensing that he had gone too far, Plaintiffs' counsel started to backtrack, but Justice Sotomayor wouldn't let him. She asked for Plaintiffs' definition of "relating to." Id. at 52. Getting the expected definition, which involved only the "same conduct," without any causation requirement, that led Justice Sotomayor to comment, "[s]o is that a yes to Justice Kagan's question about it wouldn't matter if there were no California plaintiffs?" Id. Plaintiffs' response was that the first prong of Due Process (fairness, we think) would be satisfied, but not the reasonableness prong. Justice Gorsuch followed up:

[If you don't need a single plaintiff to satisfy the first prong of the due process inquiry, again, what function does that first prong have left to do? Why doesn't it all just run into the second fundamental fairness test?

Tr. at 53. After some word salad, Plaintiffs got to their basic point – they were seeking a redefinition of Due Process – apparently a return to Pennoyer v. Neff, 95 U.S. 714 (1877), so that California could adjudicate claims against any defendant, to the extent that the defendant had property in the state. Thus, they asked that both Bauman and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), be overruled. Tr. at 53–54.

Notwithstanding these arguments, Plaintiffs denied that they were trying to accomplish through specific jurisdiction what Bauman had – in the middle of the case – eliminated under the rubric of general jurisdiction. All well and good, Justice Breyer thought, but what is the one-sentence basis for personal jurisdiction in this case? The answer, "You're already here on this claim, and there is nothing unfair about having you . . . with respect to another plaintiff, because that plaintiff could quite clearly get you estopped." Id. at 56. Justice Breyer summed it up, "[s]o once I'm here, I can now sue him." Id. Plaintiffs then discussed "nonmutual offensive collateral estoppel." Id. at 57.

Chief Justice Roberts did not seem convinced. "[T]he same thing's going to happen in every other State. I don't see that it increases the efficiency at all." Id. Plaintiffs responded by returning to bootstrap argument – that because we chose to join a California defendant, that gave California a leg up over any other state. Id. at 58. After further discussion of MDLs, Plaintiffs finished their argument by asserting their maximalist position − restoring Pennoyer, at least as an alternative basis of jurisdiction:

It doesn't seem unfair to me to say his clients did almost a billion dollars' worth of business in the State of California. They have enormous assets that they have placed in the State. That they could be held liable up to the extent of those assets is not a violation of due process.

Tr. at 60.

In rebuttal, defendant pointed out that joinder of the California defendant was a red herring, since Plaintiffs admitted they could not prove that defendant distributed any particular plaintiff's medication. It is "plainly unconstitutional to exert [sic] jurisdiction over one defendant based on the activities of another." Id. at 62. An out-of-state defendant could be liable to actual California residents for any injuries they suffered – for the entire $918 million in sales (Plaintiffs' "almost one billion"), but those in-state injuries don't confer jurisdiction in other, distinct cases with different, non-resident plaintiffs. In response to Justice Sotomayor's question, the defense clarified that it didn't matter who distributed any particular pill in California, the defendant's manufacture of then was what established specific jurisdiction as to in-state residents.

The defense pointed out that, under CAFA, federal jurisdiction was already available. The reason these claims were in state court was that Plaintiffs deliberately structured them to avoid CAFA, by "filing less than a hundred claims in each action." Id. at 63. So Plaintiffs themselves brought about the inefficiency of which they complain. Finally, the defendant ended with a plea for "business predictability." Id. at 64.

What do we think? Predictions are always dangerous, particularly if they involve the future. However, we sensed no groundswell on the Court to overturn decades of personal jurisdiction precedent and return to Pennoyer. In fact, we don't think that the lineup will be much different from Bauman – which was an 8-1 decision from 2014. Eight-1 decisions just aren't overruled that soon after being decided. The Plaintiffs' efficiency arguments are undercut by their original forum-shopping. Their fairness arguments are undercut by the fact that every plaintiff could sue in his or her home state, or if aggregation were important, where the defendant is "at home." The California court's mid-course correction from general to specific jurisdiction after Bauman was decided does look like a "backdoor" move to avoid that precedent – which Plaintiffs alternatively seek to overrule. Our gut tells us that the votes are there to reverse, perhaps with a statement like that in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011), that Congress can act to federalize mass torts (like it did interstate tort class actions under CAFA) if it so chooses.

In any event, we'll know if we're on target – or just all wet – in a couple of months at the most.

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

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