The evolving landscape of personal jurisdiction
For a civil lawsuit to proceed, a court must have jurisdiction over the case and parties. A plaintiff chooses the initial court in which to file suit. The plaintiff naturally will select the place believed to be most favorable. But a defendant may be able to challenge the court’s personal jurisdiction over it. Simply put, not every court is the right place to bring a particular lawsuit.
There are two overall types of jurisdiction: subject matter jurisdiction and personal jurisdiction. Subject matter jurisdiction is jurisdiction by the court to hear the type of case. For instance, patent and bankruptcy cases can only be heard in federal courts. Personal jurisdiction refers to jurisdiction by the court over the particular parties involved in the case. A court might have proper jurisdiction over a local defendant, but not over one based somewhere else that does no business in the state.
Just as there are two types of overall jurisdiction, there are two sub-categories of personal jurisdiction: general and specific jurisdiction. General jurisdiction addresses whether a defendant can be sued in the courts of a state for its activities occurring anywhere. Specific jurisdiction focuses on a defendant’s particular activities in a given forum state.
Updated case law
Recently, the law regarding general jurisdiction has changed significantly. In 2014, the U.S. Supreme Court ruled in Daimler A.G. v. Bauman that a company is subject to this type of broad, “all purpose” jurisdiction only where that company is “essentially at home.” Specifically, Bauman held that, absent exceptional circumstances, general jurisdiction will exist only in two places: where a company is incorporated and where it has its principal place of business.
Thus, following Bauman, merely doing some business in a state will typically not be enough to establish general jurisdiction. And in order to establish “exceptional circumstances,” a plaintiff would have to show that the defendant company’s activities rise to the level equal to being incorporated or having a principal place of business—a high bar under Bauman. Accordingly, after Bauman, the only way to guarantee general jurisdiction over a defendant is to bring suit in the state where a defendant is incorporated or has its principle place of business.
Another recent Supreme Court case clarified—and arguably significantly narrowed—the analysis applicable to specific jurisdiction. In Walden v. Fiore, the Supreme Court explained that the relevant inquiry centers on the relationship between a defendant, the forum and the lawsuit at issue—the nexus between the defendant and its suit-related activities in the state. Walden made clear that a defendant’s suit-related conduct must create a “substantial connection” with the forum state. Critically, the plaintiff cannot be the only connection between the forum and the defendant, and jurisdiction over a defendant cannot be based on the activity of another party or a third person not a party to the suit at issue.
Thus, after Walden, where suit is brought against a non-local defendant, the crucial issue is whether a plaintiff can establish that the defendant conducted activities in the state that can be related specifically to what the plaintiff is claiming in a lawsuit.
Most recently, on June 19, 2017, the Supreme Court applied the principles set out in Walden to reject specific jurisdiction over non-resident plaintiffs. In Bristol-Myers Squibb Co. v. Superior Court of California, a group of primarily non-resident plaintiffs sued Bristol-Myers Squibb (BMS) in California state court, claiming they had been injured by its medication Plavix. Analyzing BMS’s California activities, the Court noted that it sells Plavix and engages in other business activities in California, but did not develop, create a marketing strategy for, manufacture, label, package or work on the regulatory approval for Plavix there. Further, the non-resident plaintiffs were not prescribed or sold Plavix in California, nor did they receive or get treatment for their alleged injuries there.
Chief Justice John Roberts, writing for the nearly unanimous Court, explained that a primary concern in evaluating specific jurisdiction is the burden on the defendant, which requires consideration of “the practical problems resulting from litigating in the forum,” and also the issue of requiring a defendant to submit to “the coercive power of a State that may have little legitimate interest in the claims in question.”
The Court found that because the nonresident plaintiffs had not suffered harm in California and none of the conduct giving rise to their claims occurred there, the needed “connection between the forum and the specific claims at issue” was missing. The Court held that California could not exercise personal jurisdiction over non-residents’ claims, resulting in the dismissal of 592 complaints. The Court noted that these plaintiffs could bring their suits where there is general jurisdiction over BMS or in their home states.
In sum, the law governing personal jurisdiction has evolved quickly and significantly over the past few years and the key Supreme Court cases on these issues are still in the process of being interpreted and applied by lower state and federal courts. The key takeaway for a company—whether plaintiff or defendant—is to carefully evaluate jurisdiction prior to bringing a lawsuit or as soon as possible after a company is sued.