United States: Reaping The Jurisdictional Whirlwind

Last Updated: October 25 2017
Article by James Beck

Literally for decades plaintiffs in mass torts have employed the business model of flooding jurisdictions seen as friendly to them with more solicited plaintiffs than any court system can possibly handle. They have employed every forum-shopping trick in the book to trap defendants in these jurisdictions, which usually have no relationship to any party. After swamping the courts, they finish the job by advocating procedural shortcuts, such as abbreviated discovery and consolidated trials, that make it virtually impossible for defendants to undertake anything approaching an effective defense.

The result is tens, if not hundreds, of thousands of non-resident plaintiffs filing suit in favored(?) fora having nothing to do with either the parties or the supposed disputes.

Having thus sown the jurisdictional wind, however, the other side is now on the verge of reaping the jurisdictional whirlwind. Their jurisdictional gamesmanship is circling the drain, following the United States Supreme Court's decisions in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) ("BMS"), and before that in Daimler AG v. Bauman, 134 S. Ct. 746 (2014) ("Bauman"). Without personal jurisdiction over the defendants, plaintiffs can't get to first base. Let them explain to all these clients, who probably wondered about having their suits pending in far-off places to begin with, why all is for naught and they have to start over again (assuming they can at all – not every state tolls the statute of limitations) in a more logical forum they could have been in all along.

Two recent cases illustrate the yawning precipice into which so many litigation tourists find themselves staring.

The first is the Illinois Supreme Court's decision a few weeks ago in Aspen American Insurance Co. v. Interstate Warehousing, Inc., ___ N.E.3d ___, 2017 WL 4173349 (Ill. Sept. 21, 2017), which we mentioned briefly in our recent post on Judge Herndon's blowing up of a bunch of misjoined complaints dragged out of St. Claire County. Aspen American wasn't a product liability case at all – but it just as well could have been. A litigation tourist insurance company sued on a subrogated claim in Chicago (Cook County). The insured was a New Jersey company that claimed damages when a warehouse owned by the defendant allegedly collapsed, with the end result being that perishable goods owned by the Jersey entity ... well, perished. 2017 WL 4173349, at *1.

The only trouble was that the warehouse wasn't in Illinois either – it was in Michigan. Id. at *1. The defendant owned another warehouse in Illinois, as it did in many other states, but the plaintiff had never stored anything there. Id.

After losing below, the non-resident defendant successfully argued that the non-resident plaintiff couldn't obtain personal jurisdiction over it for litigation concerning an accident that also occurred out of state.

The Illinois Supreme Court's decision was unanimous.

After Bauman and BMS, that the defendant conducted unrelated business – operating a different warehouse – in Illinois did not come close to a basis for personal jurisdiction. The defendant had operated the Illinois warehouse for decades, but mere "continuous and substantial" business in a state isn't enough anymore for general jurisdiction. Aspen American, 2017 WL 4173349, at *3. A warehouse wasn't enough:

[T]o comport with the federal due process standards laid out in [Bauman] . . ., plaintiff must make a prima facie showing that defendant is essentially at home in Illinois. This means that plaintiff must show that defendant is incorporated or has its principal place of business in Illinois or that defendant's contacts with Illinois are so substantial as to render this an exceptional case. Plaintiff has failed to make this showing.

Id. at *4. If operating one warehouse was enough for jurisdiction, "then defendant would also be at home in all the other states where its warehouses are located. The Supreme Court has expressly rejected this reasoning." Id.

Further, the defendant's registration to do business in Illinois, as it had to do to operate that other warehouse, likewise was insufficient to support jurisdiction over a non-resident's suit for out-of-state injuries. "[T]he fact that a foreign corporation has registered to do business under the Act does not mean that the corporation has thereby consented to general jurisdiction over all causes of action, including those that are completely unrelated to the corporation's activities in Illinois." Id. at *5,

So, why did Aspen American attract the attention of amici Illinois Trial Lawyers Association and the American Association for Justice, as well as several major asbestos defendants? Id. at *2. It all goes back to that gathering jurisdictional whirlwind. Cook, Madison, and St. Clair counties are three of plaintiffs' favorite litigation dumping grounds. Indeed, as we mentioned in our other post, the same intermediate Illinois appellate court that got spanked in Aspen American decided M.M. v. GlaxoSmithKline LLC, 61 N.E.3d 1026 (Ill. App. 2016), less than two months later (Aspen on June 30, 2016, and M.M. on August 26 of the same year). M.M. decided that a single clinical trial site was enough for jurisdiction, which means that it could be sued in "all the other states where" it recruited for such trials. Aspen American unanimously rejected such broad jurisdictional arguments in the context of warehouses – we don't see much difference.

Good luck with that now. The jurisdictional whirlwind is coming for the litigation tourist Rivieras of Illinois.

It's already sweeping away the talc swamp in Missouri.

That's the other decision we want to discuss, Fox v. Johnson & Johnson, ___ S.W.3d ___, 2017 WL 4629383 (Mo. App. Oct. 17, 2017). Fox was an appeal from one of those gigantic talc verdicts we've all read about. The plaintiff was a non-resident (we don't know where from, and that doesn't matter), who found her way into St. Louis by virtue of all that jurisdictional gamesmanship we mentioned earlier. She was one of 65 plaintiffs from all over the country joined in the same complaint with one St. Louis resident. Id. at *1. However, after BMS, that jurisdictional subterfuge – and the boxcar verdict it produced – is for naught.

[A] non-resident plaintiff must establish an independent basis for specific personal jurisdiction over the defendant in the state. . . . [S]pecific personal jurisdiction requires a connection between the forum state and the specific claims at issue. "When there is no such connection, specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the state." The fact that resident plaintiffs sustained similar injuries does not support specific jurisdiction as to non-resident claims. The parties agree that BMS is controlling here, but they disagree on the resulting outcome.

Id. at *2 (BMS citations omitted). Another unanimous decision.

Plaintiff in Fox wanted to scurry about to see if she could find talc-related contacts between the defendant and an in-state company with which the defendant allegedly did business. Id. The court in Fox refused to allow such ex post facto discovery and argument. Id. at *3 ("we find no authority supporting [plaintiff's] request to rewind the case so as to supplement the pre-trial record to establish jurisdiction under the new standard"). Poof. A half billion dollars or so in talc verdicts just went up in smoke.

Further, that kind of discovery doesn't advance the ball under BMS. The contacts that matter are the defendant's own relationship with the forum – not that the defendant had a relationship with somebody else that was in turn a resident of the forum. This point was litigated in BMS. The BMS plaintiffs themselves (like the 63 non-resident plaintiffs in the complaint in Fox) had no contacts with California.

[T]he nonresidents were not prescribed [the drug] in California, did not purchase [the drug] in California, did not ingest [the drug] in California, and were not injured by [the drug] in California. The mere fact that other plaintiffs were prescribed, obtained, and ingested [the drug] in California − and allegedly sustained the same injuries as did the nonresidents − does not allow the State to assert specific jurisdiction over the nonresidents' claims.

BMS, 137 S. Ct. at 1781. Nor did the defendant's allegedly contracting with a drug wholesaler that was, in turn, located in California:

[Plaintiffs] contend that [defendant's] "decision to contract with a California company to distribute [the drug] nationally" provides a sufficient basis for personal jurisdiction. . . . [T]he requirements of [personal jurisdiction] must be met as to each defendant over whom a state court exercises jurisdiction. In this case, it is not alleged that [defendant] engaged in relevant acts together with [the resident defendant] in California. . . . The bare fact that [defendant] contracted with a California distributor is not enough to establish personal jurisdiction in the State.

Id. at 1783 (citations and quotation marks omitted). "[C]ontracting with" an in-state entity doesn't move the jurisdictional needle.

That a separetely owned/incorporated in-state subcontractor was involved in some of the steps by which a product was prepared to enter the stream of commerce doesn't cut it. Whether it's a frantic search for a Missouri talc subcontractor, or for some similar Pennsylvania subcontractor to try to prevent the coming whirlwind from decimating the Philadelphia litigation business, such efforts are highly unlikely to succeed. What kind of facts are needed to circumvent the usual limits on personal jurisdiction? Bauman told us. Doing so requires an "exceptional case." 134 S. Ct. at 761 n.18 (emphasis added). Ordinary business relationships with third parties who themselves reside in the state aren't going to be enough to support litigation tourism. "Exceptional" cases that would expand specific jurisdiction under BMS should be about as frequent as "exceptional" cases that expand general jurisdiction under Bauman. It takes something exceptional to make an exception to the constitutional Due Process limits to personal jurisdiction.

This is why we saw asbestos amici descend on Aspen American. Non-resident asbestos plaintiffs aren't going to be able, any more, to obtain personal jurisdiction over the great majority of the scores of defendants that they sue – only those few unfortunate enough to be "at home" in the forum. The same would be true in a multi-defendant suit involving prescription medical products. And what happens when those unfortunate few viable defendants find themselves unable to pursue cross-claims or otherwise obtain relief against absent parties, simply because the plaintiff didn't sue in state where s/he was injured? "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. §1404(a); see, e.g., Schmidt v. Leader Dogs for the Blind, Inc., 544 F. Supp. 42, 47 (E.D. Pa. 1982) ("[d]efendant's inability to implead or cross-claim herein against the medical defendants dismissed from this lawsuit is a determinative factor"; §1404(a) transfer of venue granted). It took us all of two minutes to find a cross-claim-based venue transfer decision; there are undoubtedly more.

The jurisdictional whirlwind is upon us. Toto, we're not going to be in Madison County anymore.

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

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