United States: United States Supreme Court Addresses Due Process Limits On The Exercise Of Personal Jurisdiction Over Corporate Defendants

In the past few weeks, the United States Supreme Court has issued two opinions in which it has further defined the circumstances under which courts can exercise general personal jurisdiction and specific personal jurisdiction over corporations. These decisions come after the Supreme Court's 2014 landmark decision in Daimler AG v. Bauman, __ U.S.__, 134 S. Ct. 746 (2014), which held that general personal jurisdiction can only be exercised over a corporation in the state of its incorporation or where it has its principal place of business.

Prior to Daimler, plaintiffs brought lawsuits in favorable jurisdictions against corporate defendants who were not incorporated in the state, even when the cause of action did not arise in the jurisdiction. Since Daimler, defendant corporations have been successful in getting dismissed from these types of suits, arguing that the court lacked general personal jurisdiction over them. Of course, plaintiffs then explored a variety of arguments to distinguish Daimler and to maintain jurisdiction over the corporate defendants in the plaintiff-friendly jurisdictions. With its new decisions, the Supreme Court has clarified the scope of when courts can exercise general and specific jurisdiction over corporate defendants.

On May 30, 2017, in BNSF Railway Co. v. Tyrrell, No. 16-405, 581 U.S. __, 137 S. Ct. 1549 (2017), the United States Supreme Court, in an 8-1 opinion, confirmed the central holding in Daimler that the paradigm forum for the exercise of general personal jurisdiction over a corporation is its state of incorporation or its principal place of business. In BNSF Railway Co., two plaintiffs sued defendant BNSF Railway Co. ("BNSF") in Montana state court, alleging that they developed a fatal cancer while working for BNSF. Neither plaintiff resided in Montana or was injured there. BNSF was not incorporated and did not maintain its principal place of business in Montana, although it engaged in substantial business in Montana. The Montana Supreme Court held that Montana courts could exercise general personal jurisdiction over BNSF under Section 56 of the Federal Employers' Liability Act ("FELA"), because BNSF "did business" in Montana and that Montana law provided for jurisdiction over companies that are "found within" the state. Slip op. at 4. Thus, the Montana Supreme Court held that FELA and Montana law allowed the Montana court to exercise general personal jurisdiction over BNSF. The Montana Supreme Court found Daimler inapplicable because Daimler did not involve a FELA claim or a railroad defendant.

The United States Supreme Court reversed. First, the United States Supreme Court found that the language in Section 56 of FELA does not relate to personal jurisdiction. The first sentence in Section 56 of FELA that "an action may be brought in a district court . . . in which the defendant shall be doing business at the time of commencing such action" is a venue provision, and does not confer personal jurisdiction. Slip op. at 5-7. The second sentence in Section 56 of FELA that "[t]he jurisdiction of the courts of the United States under this chapter shall be concurrent with that of the courts of the several States" refers to concurrent subject-matter jurisdiction between the state and federal courts over FELA actions, and also does not confer personal jurisdiction. Slip op. at 7-8. Second, the United States Supreme Court found that the Montana Supreme Court's exercise of general personal jurisdiction under Montana law does not conform to the Fourteenth Amendment's Due Process Clause. The United States Supreme Court again emphasized that under Daimler, a state court may exercise general jurisdiction over out-of-state corporations only when their "affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Slip op. at 10.  Although Daimler did not involve a FELA claim or railroad defendant, the United States Supreme Court found that the due process requirement applies to all state-court assertions of general personal jurisdiction over nonresident defendants. Slip op. at 11. Thus, absent an "exceptional case," a court may exercise general personal jurisdiction against a corporate defendant only where the corporation is incorporated or has its principal place of business. Slip op. at 10-11.

On June 19, 2017, in Bristol-Myers Squibb Co. v. Superior Court of California, No. 16-466, 582 U.S. __ (2017), the United States Supreme Court, in an 8-1 opinion, clarified the scope of when a court can exercise specific personal jurisdiction over a corporate defendant.  In Bristol-Myers Squibb Co., a group of California residents and non-residents filed a lawsuit against defendant Bristol-Myers Squibb Co. ("BMS") in California state court, alleging that BMS' drug Plavix had damaged their health. BMS did not develop, create a marketing strategy for, manufacture, label, package, or work on the regulatory approval for Plavix in California. However, BMS did engage in business in California and sold Plavix there. None of the non-resident plaintiffs were injured in California, obtained Plavix through any California source, were treated for their injuries in California, or had any other connections to California. The California Supreme Court, while admitting that California lacked general personal jurisdiction over non-resident plaintiffs under Daimler, found that it was appropriate for California courts to exercise specific personal jurisdiction over BMS under a "sliding scale approach" because BMS had extensive contacts with California and the claims of the nonresident-plaintiffs were substantially similar to those of the California resident plaintiffs. Slip op. at 3.

The United States Supreme Court reversed, finding that the California court's exercise of specific personal jurisdiction violated the Fourteenth Amendment's Due Process Clause.  Under the due process requirement, for a court to exercise specific personal jurisdiction over a claim, "the suit" must "aris[e] out of or relat[e] to the defendant's contacts with the forum." Slip op. at 5. The Supreme Court emphasized that 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." Slip op. at 5-6. The United States Supreme Court found that the California "sliding scale approach" where "the strength of the requisite connection between the forum and the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims," in essence, "resembles a loose and spurious form of general jurisdiction," in violation of the Fourteenth Amendment Due Process Clause. Slip op. at 7. Applying this principal, the United States Supreme Court found that "a defendant's relationship with a . . . third party, standing alone, is an insufficient basis for jurisdiction," and thus, the mere fact that other California residents plaintiffs were injured similarly has no bearing on those non-residents' claims. Slip op. at 8. "What is needed—and what is missing here—is a connection between the forum and the specific claims at issue."  Id.

Justice Sotomayor concurred and dissented in part in BNSF Railway Co. Justice Sotomayor concurred that FELA does not confer personal jurisdictions to state courts, but continued to dissent, as she did in Daimler, that general personal jurisdiction over a corporate defendant should be limited to a corporation's place of incorporation and principal place of business. Justice Sotomayor further found that even if applying Daimler standard, the correct approach the Court should take is to remand the case back to Montana state court to conduct a fact-intensive analysis in determining whether BNSF has engaged in sufficient business in Montana to make this case an "exceptional case" under Daimler. Slip op., dissent, at 4.    

Justice Sotomayor also dissented in Bristol-Myers Squibb Co., finding that the majority's approach towards specific personal jurisdiction essentially means that a corporation engaging in a nationwide course of conduct cannot be held accountable in a state court by a group of injured people unless all of those people were injured in the forum state, because the majority's rule will make it difficult to aggregate the claims of plaintiffs across the country whose claims may have little value alone, and further make any nationwide mass action impossible. She asserted that the majority's ruling will result in piecemeal litigation and the unnecessary bifurcation of claims. Justice Sotomayor noted that she saw no due process violation for subjecting a massive corporation to suit in a state for a nationwide course of conduct that injures both forum residents and nonresidents alike. Slip op., dissent, at 1.

The BNSF Railway Co. and Bristol-Myers Squibb Co. decisions provide greater context and clarity to Daimler regarding when it is constitutionally permissible to exercise personal jurisdiction over a corporation. These cases will likely have a significant impact for personal injury, toxic tort cases and other cases where plaintiffs sue large numbers of defendants in preferred jurisdictions. Absent exceptional circumstances, a plaintiff will be able to assert general personal jurisdiction against a corporate defendant only where the defendant is incorporated or has its principal place of business. Plaintiffs likewise will not be able to establish specific personal jurisdiction based on a defendant's contacts with a state, even if substantial, when there is no connection between the alleged injury and defendant's actions in the jurisdiction. 

It is anticipated that plaintiffs will continue to develop creative arguments to obtain jurisdiction over defendants in their preferred jurisdictions, for example, by arguing that a corporation's registration to do business in a state or designation of an agent to accept service in a state constitute consent to the jurisdiction in that state. Circuit and state courts are currently split on this issue, and the United States Supreme Court has not yet ruled on it.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions