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June 29, 2017Download PDF

U.S. Supreme Court Limits Plaintiffs' Ability To Choose a Forum

In a pair of recent decisions, the Supreme Court changed the calculus for plaintiffs deciding where to bring to bring a case. In BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (May 30, 2017), the Court ruled that district courts may exercise general personal jurisdiction over a corporate defendant in a given forum only if the defendant is incorporated, has its principal place of business, or maintains substantial operations in that forum. The Supreme Court found that the Montana Supreme Court had erred in holding that courts in Montana could assert general jurisdiction over BNSF because it had over 2,000 miles of railroad track and employed more than 2,000 workers in the state. The Court reasoned that the “general jurisdiction inquiry does not focus solely on the magnitude of the defendant's in-state contacts. Rather, the inquiry “calls for an appraisal of a corporation's activities in their entirety; [a] corporation that operates in many places can scarcely be deemed at home in all of them.” Thus, while BNSF’s operations might have subjected it to specific personal jurisdiction in Montana on claims related to the business it carries out in that state, its in-state activities were not sufficient for general jurisdiction.

A few weeks later, the Supreme Court ruled in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (June 19, 2017), that courts in California could not exercise specific personal jurisdiction over nonresident consumers’ claims. In this mass tort case involving 600 plaintiffs, most of whom were not California residents, the California Supreme Court held that its lower courts had specific personal jurisdiction to entertain nonresidents’ claims utilizing a “sliding scale approach,” which holds that the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” The California Supreme Court applied its sliding scale approach to the defendant’s “extensive” but “unrelated” contacts in California to hold that the similarity between the resident and nonresident claims over an allegedly defective drug were sufficient to confer California courts specific jurisdiction over the nonresident claims.

In reversing the California Supreme Court, the United States Supreme Court found 8-to-1 that the sliding scale approach was at odds with precedent and referred to it as a “loose and spurious form of general jurisdiction.” The Court reasoned that specific jurisdiction requires “an affiliation between the forum and the underlying controversy.” In this case, the nonresidents were not prescribed the drug in California, did not purchase it in California, did not ingest it in California, and were not injured in California. The Court rejected the notion that the similarity between the nonresidents’ and the residents’ claims cured any jurisdictional issues, stating that “defendant’s relationship with a third party [here the resident-plaintiffs], standing alone, is an insufficient basis for jurisdiction.”

While the Supreme Court reaffirmed long-standing principles of personal jurisdiction, many questions remain. Take, for example, a consumer fraud class action arising out of mislabeling being brought against two defendants asserting violations of several states’ laws. Even if the plaintiffs file in the state where at least one of the plaintiffs is a resident and purchased the product (but not where the defendants are “at home”), the defendants may argue that, under Bristol-Myers, the forum court lacks specific jurisdiction over the other non-resident plaintiffs’ claims.

The plaintiffs could consider filing in the state where one of the defendants is incorporated or headquartered to assert general jurisdiction. Indeed, the Supreme Court suggested this approach in rejecting the notion that its ruling would lead to a “parade of horribles.” But, this assumes that where multiple defendants’ conduct is involved, one forum will have general jurisdiction over all defendants. In the only dissent in Bristol-Myers, Justice Sotomayor envisioned this very problem, stating that the Court’s ruling “will make it impossible to bring a nationwide mass action in state court against defendants who are ‘at home’ in different States.” This concern is exacerbated by the Supreme Court’s ruling in BNSF, which will leave litigants fighting over what activities are “substantial” enough for a court to assert general jurisdiction.

Another question left-open by the Court in Bristol-Myers is whether the Fifth Amendment imposes the same restrictions the exercise of personal jurisdiction by a federal court, given that the Court specifically limited its opinion to the exercise of jurisdiction by a state under Fourteenth Amendment rubric. If the same restrictions apply, then the plaintiffs may have to file in separate states and seek consolidation before the Judicial Panel on Multi-District Litigation for pre-trial proceedings in one of their chosen forums. Perhaps such centralization would ease the concerns raised by Justice Sotomayor that the ruling will result in “piecemeal litigation and bifurcation of claims.” But if plaintiffs are faced with consolidation in non-favorable, “at-home” forum of the defendant(s), the stakes in such proceedings will be even higher.

In short, the lower courts will be left to sort out these questions as class action attorneys and their clients seek to represent multi-state classes.