The United States Supreme Court recently narrowed the scope of both specific and general jurisdiction in two seminal cases, Bristol-Myers Squib Co. v. Superior Court of California, San Francisco County, 137 S.Ct. 1773 (2017) and BNSF Railway Co. v. Tyrrell, 137 S.Ct 1549 (2017).

In June, the Supreme Court in Bristol-Myers reversed the California Supreme Court and clarified the test for specific personal jurisdiction in state courts for corporations, limiting the standard and creating a more stringent hurdle for plaintiffs to jump. The case involved Bristol-Myers Squib Company (BMS), a pharmaceutical company incorporated in Delaware and headquartered in New York that manufactures and sells Plavix, a prescription drug that thins the blood and inhibits blood clotting. In 2006, consumers around the world began to claim that they were injured by the drug, and 678 people brought suit against the corporation in California state court. Only 86 of the plaintiffs lived in the state of California. The remaining 592 did not allege that they obtained Plavix in California and only one percent of BMS’s revenue came from California Plavix sales. BMS thus asserted lack of personal jurisdiction and moved to quash service of summons on the nonresidents’ claims. The California Supreme Court unanimously agreed that under Daimler AG v. Bauman, 571 U.S. ___ (2014), there was no general personal jurisdiction over the nonresidents’ claims, but the majority held that there was specific personal jurisdiction. The California Supreme Court applied a “sliding scale” approach to specific personal jurisdiction, holding that the more contacts a corporation has with a forum state, the more readily a connection will be found between the forum contacts and the claim. The California Supreme Court therefore found that because BMS had extensive contact with California, the exercise of specific personal jurisdiction was permissible based on a less direct connection between BMS’s forum activities and plaintiffs’ claims than might have otherwise been required.

The United States Supreme Court, with Justice Alito writing for the majority, reversed. The Court held that Supreme Court precedent mandated that “in order for a court to exercise specific jurisdiction over a claim, 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.’” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). The Court held that there must be some connection between the forum and the specific claims at issue. The Court further iterated that there are three concerns to look to when determining whether personal jurisdiction is present: (1) the interests of the forum state; (2) the interests of the plaintiff in proceeding with the cause in the plaintiff’s forum of choice; and, (3) the burden on the defendant. The assessment of this burden requires both the practical assessment of litigating in the forum as well as the abstract problem of submitting to the coercion of a State that has “little legitimate interest in the claims in question.” The Court noted that there are federalism concerns at stake in the personal jurisdiction analysis and that restrictions on personal jurisdiction are “more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States.” Hanson v. Denckla, 357 U.S. 235 (1958). The majority then claimed that the “parade of horribles” which the plaintiffs asserted in their brief would not come true.  Justice Sotomayor dissented, arguing that precedent compelled the opposite conclusion and giving some credence to several of the alleged horribles cited to by the plaintiffs. She stated that the test for specific jurisdiction is: (1) the defendant purposefully availed itself of the privilege of conducting activities in the forum state; (2) the plaintiff’s claim arises out of or relates to the defendant’s forum conduct; (3) the exercise of jurisdiction is reasonable under the circumstances.

In May, the Supreme Court also reversed the Montana Supreme Court and narrowed the analysis for determining whether corporations are subject to personal jurisdiction in a given state in BNSF Railway Co. v. Tyrrell. The Montana Supreme Court found that BNSF Railway Company (BNSF) was “doing business” within the state of Montana by maintaining around five percent of its work force and six percent of its total track mileage in the state; however, BNSF was neither incorporated in Montana nor had its principal place of business in the state. The Montana Supreme Court nonetheless found that it was subject to general personal jurisdiction within the state of Montana under the Federal Employers’ Liability Act. The case involved two plaintiffs who were injured out of state, thus, there was no question that the Company was not subject to specific personal jurisdiction.

The Court reversed and found that the exercise of personal jurisdiction over BNSF did not comport with the Fourteenth Amendment’s Due Process Clause. The Court held that the relevant provisions of the Federal Employers’ Liability Act had to do with venue and subject matter jurisdiction, respectively, and thus focused its analysis on whether Montana’s statute that permitted the exercise of personal jurisdiction over “persons found” in Montana was consistent with the Fourteenth Amendment’s Due Process Clause. The Court held that it was not. The majority instead applied the tests from Goodyear and Daimler, stating that these clarified the holding of International Shoe to the more narrow test of only allowing a court to assert general jurisdiction over foreign corporations “when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Daimler, 571 U.S., at ___ (quoting Goodyear, 564 U.S., at 919).  The majority held that the “paradigm forums” in which a corporate defendant is at home includes its place of incorporation and its principal place of business, however, an “exceptional case” may exist when a corporate defendant’s operations in another forum are “so substantial and of such a nature as to render the corporation at home in that state.” Daimler, 571 U.S. at ___. The example the Court cited to was Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952), in which a corporation temporarily had to relocate to the forum state of Ohio and the Court found that the forum state “became the center of the corporation’s wartime activities.” The Court held that BNSF was not so “heavily engaged in activity in Montana ‘as to render [it] essentially at home’ in that state.” The Court applied a “comparative contacts” analysis to determine whether a corporation is “essentially at home” in a forum state, looking at contacts in the forum state in comparison with contacts with other states. Justice Sotomayor again dissented, arguing that this decision essentially means that corporations will only ever be subject to general personal jurisdiction in their principal places of business or place of incorporation, creating a windfall to large corporations and harming plaintiffs who will now have to bring suits in states in which they have no contacts.

Bristol-Myers and BNSF continue the trend that began in Goodyear and Daimler limiting the scope of personal jurisdiction.

For additional information, please contact Natalie Holden.