Clarifying Minimum Contacts: Personal Jurisdiction over Corporations

Clarifying Minimum Contacts: Personal Jurisdiction over Corporations

By: Etheldreda C. Smith

 

In 2014, following the United States Supreme Court’s decisions in Daimler AG v. Bauman,[1] we provided an update on the shift in policy away from the landmark International Shoe[2] decision regarding states’ exercise of general personal jurisdiction over corporations.  Notably, International Shoe’s “minimum contacts” test for general personal jurisdiction was murky and resulted in judicial expansion of personal jurisdiction as globalization evolved over the last seventy years. Since Daimler, the Court has continued its shift away from International Shoe in the general jurisdiction analysis and also taken aim at exercises of specific jurisdiction that could undermine Daimler. The cases discussed here illustrate the Supreme Court’s desire to realign the states’ exercise of personal jurisdiction over corporations with the constitutional guarantees of due process and the burden placed on the defendant.

The Daimler decision provided clarity to corporations regarding the jurisdictions in which they might be subject to suit under a general jurisdiction analysis. Following Daimler, corporations could be subject to suit only in jurisdictions in which their “affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.”  Simply put, general personal jurisdiction over corporations can properly be exercised in their state of incorporation or where their principal place of business or corporate headquarters are located. In a footnote, the Supreme Court left open the possibility that in an “exceptional case” a defendant could be subject to general jurisdiction in another state, but did little to elaborate on what factors would create such an “exceptional case;” and subsequent cases have yet to find one.

Walden v. Fiore[3] was decided that same year.  In Walden, the Supreme Court provided further insight into personal jurisdiction—this time focusing on specific personal jurisdiction over foreign defendants.   The Court underscored that the focus of the inquiry is “the relationship among the defendant, the forum, and the litigation” rather than the defendant’s relationship with persons who reside in the forum.  Rather than focusing on the situs of the injury as was done in many prior decisions examining the existence of specific personal jurisdiction, Walden held that the defendant’s suit-related conduct must connect him to the forum state in a meaningful way. Injury might be relevant to that inquiry, but it would no longer be controlling.

Last year, the Supreme Court again granted certiorari for two cases presenting issues of personal jurisdiction: BNSF Railway Co. v. Tyrrell, et al. and Bristol-Myers Squibb Company v. Superior Court of California, et al.

In BNSF, railroad employees filed suit under the Federal Employers’ Liability Act, which makes railroads financially liable for job related injuries sustained by their employees.  In two consolidated cases, the Montana Supreme Court held that Montana could properly exercise general personal jurisdiction[4] over the railroad because it “did business” within the state under Section 65 of FELA and was “found within” the State under Montana Rule of Civil Procedure 4(b)(1).  The Montana Supreme Court further stated that the due process limits articulated in the Daimler decision did not apply to FELA claims or railroad defendants. Writing for eight of the nine members of the Court and reversing the Montana Supreme Court’s holding, Justice Ginsburg explained that the constraints of Daimler apply to “all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.”[5]

Bristol-Myers Squibb and BNSF were argued the same day. There, the California Court of Appeal applied Daimler to determine that California lacked general personal jurisdiction over the Plavix manufacturer, but affirmed the lower court’s decision that it had specific jurisdiction over claims asserted by out-of-state plaintiffs by applying a “sliding scale” approach to specific jurisdiction.  Bristol-Meyers Squibb involved claims by both non-resident and domestic plaintiffs, and specific jurisdiction over the non-residents’ claims were at issue.  A divided California Supreme Court found that Bristol-Myers’ “extensive” contacts with California permitted the exercise of a modified version of specific personal jurisdiction over claims by the non-resident plaintiffs; and that the requisite connection between the forum state and the suit-related conduct was “relaxed” where the foreign defendant has wide ranging general contacts with the forum state unrelated to the underlying controversy.  Specific jurisdiction attached to the non-residents’ claims, the court held, in part because the non-residents’ claims were similar in many ways to the California residents’ claims.  Fairness and judicial economy permitted joinder of the residents’ claims (to which specific jurisdiction inarguably applied) and the non-residents’ claims (which had no direct nexus with California).

The Supreme Court reversed and remanded.  Relying on Walden, the same eight justices as in BNSF[6] rejected California’s exercise of specific personal jurisdiction over the non-residents’ claims because there was no nexus between their claims and California. All of the non-residents’ alleged harm in Bristol-Myers was suffered outside of the forum state.  The fact that the California plaintiffs were prescribed, obtained, and ingested the drug in California and sustained the same injuries as the non-residents was insufficient to exercise specific jurisdiction over the non-residents’ claims. According to the Court, specific jurisdiction requires a connection between the forum and the specific claims at issue. The Court further explained that Bristol-Myers’ contractual relationship with a resident co-defendant for distribution of Plavix was insufficient, standing alone,[7] to confer specific personal jurisdiction over the company.

Despite repeated references to the “settled” nature of the law, the Court explicitly left open the question of whether the Fifth Amendment imposes the same due process requirements on federal courts’ exercise of personal jurisdiction as the Fourteenth Amendment does on the states’.[8]  The implication being that these cases signal a marked shift in the jurisprudence dealing with personal jurisdiction over defendant corporations in state courts.

With these cases in mind, new state court matters should be evaluated with a close eye to determine whether the forum’s exercise of general or specific personal jurisdiction over your corporate client is proper.

[1] 134 S.Ct. 746 (2014).

[2] International Shoe Co. v. Washington, 326 U.S. 310 (1945).

[3] 134 S.Ct. 1115 (2014).

[4] Because the workers were not injured in the forum state, an evaluation of specific jurisdiction was not at issue in BNSF.

[5] Justice Sotomayor wrote a partial dissent.  While she concurred with majority’s conclusion that the nature of the claim has no bearing on the personal jurisdictional analysis, she expressed her disapproval of “the path the Court struck in Daimler AG v. Bauman,” and urged for a return to the International Shoe standard.

[6] Justice Sotomayor again dissented.

[7] There were no allegations that the contractual relationship was related to the alleged harm in this case, therefore, the contractual relationship alone would not create specific personal jurisdiction over Bristol-Myers Squibb.

[8] Since Bristol-Meyers Squibb concerned the exercise of personal jurisdiction by a state court, the Court’s analysis focused on due process as applied to the states under the Fourteenth Amendment.  In contrast, the Fifth Amendment provides due process restrictions on federal courts’ exercise of personal jurisdiction; and the Court expressly reserved for another day whether the Fifth Amendment analysis is different.