Does a court have the power to adjudicate a case when the case is not causally connected to a defendant’s in-state conduct?
In this case, the Supreme Court will determine whether courts have specific jurisdiction over defendants only when the case arises out of conduct that is causally connected to a defendant’s in-state conduct. The case comes before the Supreme Court after Bristol-Myers Squibb was sued in California for manufacturing a defective anticoagulant, despite having manufactured the anticoagulant in New Jersey and having only a transient connection with California. Bristol-Myers Squibb argues that the California court lacks power to adjudicate this case, because the company’s conduct in California is not causally connected to the plaintiffs’ injuries. California Superior Court, on the other hand, argues that specific jurisdiction does not require proof of causation. Much is at stake in this action: some assert that California’s victory would result in gross injustice to defendants; others claim that BMS’s victory would cause judicial resources to be squandered with duplicative litigation.
Questions as Framed for the Court by the Parties
Whether a plaintiff ’s claims arise out of or re-late to a defendant’s forum activities when there is no causal link between the defendant’s forum contacts and the plaintiff ’s claims—that is, where the plaintiff ’s claims would be exactly the same even if the defendant had no forum contacts?
Defendant Bristol-Myers Squibb Company (“BMS”) manufactures anticoagulants—drugs meant to inhibit blood clotting. Seven hundred residents of thirty-three states claimed to have been injured by BMS’s anticoagulant; of these seven hundred, 86 were residents of California and 592 were residents of other states. All residents claimed, among other things, that BMS’s anticoagulant was defective in design or manufacturing, that BMS was negligent, and that BMS deceived them through false advertisement. They filed complaints in the Superior Court of California, and delivered the complaints to BMS in California.
After receiving the complaints, BMS challenged the delivery process for the complaints of the 592 out-of-state residents. Specifically, BMS argued that California lacked personal jurisdiction over BMS and thus could not exercise power over BMS to try the out-of-state residents’ case. In support of its argument, BMS showed that it was incorporated in Delaware, had headquarters in New York City, and did most of its business in New Jersey. Additionally, BMS showed that it did not manufacture, promote, test, label, package or distribute the anticoagulants in California; rather, BMS performed these acts in New York and New Jersey facilities. Sales of the anticoagulants in California accounted for 1.1% of BMS’s total revenue.
In response, the out-of-state residents argued that BMS had substantial operations in California, so the Superior Court could adjudicate their claim against BMS. For example, the out-of-state residents showed that BMS had five research facilities in California that employed 164 people, employed an additional 250 sales representatives, and maintained an office in Sacramento for advocacy before the state government. Further in support of their position, the out-of-state residents offered that BMS sold nearly a billion dollars’ worth of the anticoagulants in California between 2006 and 2012 and that BMS employed an agent to receive complaints in California.
The Superior Court sided with the out-of-state residents, holding that California had general jurisdiction over BMS. BMS appealed the decision to the California Court of Appeals, but the Court of Appeals agreed with the Superior Court. California Supreme Court, however, remanded the case back to the Court of Appeals, because of an intervening United States Supreme Court decision regarding general jurisdiction, Daimler AG v. Bauman, 134 S. Ct. 746 (2014). This time, the Court of Appeals concluded that California lacked general jurisdiction over BMS, but had specific jurisdiction over the matter, such that the Superior Court could adjudicate the out-of-state residents’ claims. California Supreme Court agreed and affirmed the Court of Appeals’ decision on August 29, 2016. BMS petitioned for a writ of certiorari, which the Supreme Court granted.
MUST A DEFENDANT’S SUFFICIENT CONTACTS BE CAUSALLY RELATED TO A PLAINTIFF’S INJURIES FOR A STATE TO EXERCISE JURISDICTION?
BMS claims that California erred in applying its “sliding scale” approach to personal jurisdiction, which allows wider ranging contacts in the forum to compensate for the lack of any causal connection between the contacts and the injured parties’ claims. BMS’s main argument rests on the delineation between “general or all-purpose jurisdiction, and specific or case-linked jurisdiction.” BMS argues that while general jurisdiction focuses on the strength of a defendant’s affiliations with the forum (be it an individual’s domicile or a corporation’s state of incorporation or principal place of business) relative to a defendant’s activities as a whole, specific jurisdiction exists only when the defendant’s contacts with the forum meet the seminal case of International Shoe Co. v. Washintgon’s “minimum”—if they caused the plaintiff’s alleged injuries. BMS analogizes its case to Goodyear v. Dunlop Tires Operations, S.A. v. Brown, where the bus accident that gave rise to the litigation occurred in France, leading the Court to find that the contacts posed an insufficient link for North Carolina to obtain jurisdiction.
The California Superior Court (“the Superior Court”) counters by pointing to the variation in standards used by the Court to evaluate personal jurisdiction, which it says stem from the language “in a suit arising out of, or relating to the defendant’s contact with the forum.” The Superior Court argues that the Court inserted the broad phrase “relating to,” indicating a connection between two things, to be differentiated from the phrase “arise out of” thus avoiding the creation of a bright line rule. The Superior Court posits that when a defendant purposefully directs its activities at the forum, the state may hale the defendant and adjudicate any claims “connected with that controversy” so long as its exercise of jurisdiction is fair and reasonable. In other words, the Superior Court claims that a state’s power to adjudicate the claims and controversies arising out of a defendant’s purposeful activities in its jurisdiction include the ancillary authority to assess all claims “connected with” those activities whether in-state or not.
BMS criticizes the Superior Court’s view that the Court intended to establish two different classes of sufficient connections between a defendant’s forum contacts and a plaintiff ’s claim by interpreting “arise out of” to mean cause and “relate to” to mean something else. BMS claims the Superior Court errs in thinking that just because the Court used two different words, each one must mean something different. . BMS points out that courts “frequently say two (or more) things when one will do”. To illustrate, BMS then provides a list of seemingly redundant phrases commonly used in the legal profession: “cease and desist,” “arbitrary and capricious,” or “good faith and fair dealing.” Ultimately, BMS argues that a State has little legitimate interest in adjudicating a dispute that has no causal connection with conduct that took place in its territory. BMS claims if the plaintiff did not receive, use, or suffer injuries from a product in the forum, it is quite unlikely that the selection of that forum stems from convenience, but rather arises from a strategic attempt to pick a forum perceived as plaintiff-friendly.
The Superior Court argues that a causality component is a fiction of corporate defendants and that this case is primarily governed by Keeton v. Hustler Magazine, Inc., where the Court refused to find that the defendant’s forum contacts had to cause the plaintiffs out-of-state injuries. In Keeton, the Superior Court notes, the Court unanimously agreed that New Hampshire possessed specific jurisdiction over a non-resident plaintiff’s defamation claim against a non-resident publisher, for injuries occurring from the defamation in each of the fifty states. The Superior Court views the state court as the best forum to adjudicate the same claim that would be litigated elsewhere by the same plaintiff against the same defendant, because the forum is already adjudicating a closely related claim. The Superior Court adds that BMS’s cry of unfairness rings hollow because no defendant would be burdened to appear anywhere it was not already appearing for the forum claims, and nowhere that “it has not already purposefully created an obligation to defend itself.”
IF CAUSALITY IS A REQUIREMENT, DOES SPECIFIC JURISDICTION FURTHER REQUIRE PROXIMATE CAUSE TO ESTABLISH SUFFICIENT CONTACTS?
BMS’s proposed standard would require both that a defendant’s forum contacts bear a direct relation to the litigation and that the possibility of suit on a plaintiff’s claims in said forum be reasonably foreseeable to the defendant. BMS claims that the proximate cause requirement comes from the Court’s decision in Burger King Corp. v. Rudzewicz, explaining that “where individuals purposefully derive benefit from their interstate activities, it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities.” Additionally, BMS points to Kulko v. Superior Court of California where the Court did not find specific jurisdiction because the defendant’s forum contacts were merely a but-for cause of the litigation.
The Superior Court attacks BMS’s focus on the “for consequences that arise proximately from those activities” language from Burger King as a “dicta hunt.” While the Superior Court concedes that the “proximate” language explains one of several reasons for a forum to exercise specific jurisdiction, it points out that the very next sentence in the Burger King opinion states that “in a state where the defendant engages in economic activity . . . it will usually not be unfair to subject him to the burdens of litigating in another forum for disputes arising or relating to such activity.”
BMS also argues that defining “arise out of or relate to” in terms of proximate cause promotes the principles that underlie specific jurisdiction—federalism, predictability, and fairness. BMS analogizes to a lawyer who hypothetically commits malpractice in Virginia and is subsequently sued in Massachusetts on a claim where the plaintiff relies solely on the attorney’s law school alma mater being in Cambridge to meet specific jurisdiction forum requirements. BMS’s concern is that under a but-for-only approach, almost all claims would satisfy the “arise out of or relate to” standard despite a defendant’s contacts with the forum having only the most attenuated connection with the plaintiff ’s claims.
The Superior Court combats BMS’s concerns of mere “attenuated” connections by citing Walden v. Fiore, in which the Court held that for a state to exercise personal jurisdiction consistent with due process, the defendant’s “suit-related conduct must create a substantial connection with the forum State.” The Superior Court further argues that BMS’s billion-dollar marketing and sales effort in California is clearly “suit-related” and surely established such a “substantial connection” with California. And returning to Keeton, California submits that forcing the defendant to answer for such suit-related conduct not only comports with the principles of reasonableness and fairness, but also advances judicial economy by promoting efficient adjudication of claims, and all without any burden on the corporate defendant, who here has conceded the reasonableness of the jurisdiction.
UNFAIRNESS TO DEFENDANTS VS. HARM TO JUDICIAL ECONOMY
Washington Legal Foundation and GlaxoSmithKline, in support of BMS, argue that the Superior Court’s rule would unfairly force defendants to travel to distant states and defend against lawsuits in states where none of the acts pertinent to the lawsuit occurred and where key witnesses may be unavailable. GlaxoSmithKline and Product Liability Council caution that this may make trials unfairly difficult for defendants, particularly small businesses. Furthermore, Washington Legal Foundation, the United States, the Chamber of Commerce, and the Atlantic Legal Foundation argue that the Superior Court’s rule also harms defendants because it leaves them uncertain as to whether they can be sued in a given state. The Chamber of Commerce emphasizes that such unpredictability could discourage companies from selling goods across state lines or individuals from starting a business for fear that they could be hauled off to a distant state to defend against a lawsuit. Finally, numerous amici argue that the Superior Court’s rule unduly favors plaintiffs, because it allows anyone to sue in courts known to be biased against defendants, such as the California courts—a place so biased that American Tort Reform Foundation’s annual list designates it a “Judicial Hellhole.”
The Superior Court, on the other hand, urges the Supreme Court to recognize the judicial efficiency that its rule advances. According to the Superior Court, the rule allows numerous related cases to proceed together, which decreases the duration and cost of litigation. The Superior Court argues that BMS’s position subverts this judicial efficiency, replacing a single action in a single court with fifty plaintiffs in fifty different states. Per the Superior Court, this is particularly problematic because fifty lawsuits could result in varying verdicts, making judgments uncertain for plaintiffs and defendants. Furthermore, the Superior Court argues that BMS’s position would eliminate multi-party litigation entirely, further burdening the courts with multiple litigations. Accordingly, the Superior Court urges the Supreme Court to adopt its rule, arguing it creates the most uniformity and lowers the cost of litigation.
DUE PROCESS INTERESTS
The Washington Legal Foundation, the United States, the Product Liability Council, and Dri argue that the Superior Court’s rule violates defendants’ due process rights. Washington Legal Foundation explains that the Supreme Court in DaimlerChrysler AG v. Bauman held that state courts are forbidden by the Due Process Clause of the Fourteenth Amendment from exercising power over defendants for conduct that did not occur within the state, and where the defendants do not have sufficient contact within the state. According to Washington Legal Foundation, because the Superior Court’s rule allows California to try unrelated, out-of-state defendants for unrelated, out-of-state conduct, the rule violates defendants’ Due Process. Additionally, Product Liability Advisory Council, GlaxoSmithKline, and the Chamber of Commerce assert that the Superior Court’s rule violates the Constitution’s federalism limitations, because it allows California to enforce its laws on citizens of other states, thereby infringing on the sovereignty of other states.
In response, Alan B. Morrison, in support of the Superior Court, argues that the Supreme Court should overrule its prior cases that based personal jurisdiction on the Due Process Clause. Morrison maintains that the text of the Fourteenth Amendment that the Supreme Court interpreted to limit the power of the states over out-of-state individuals is silent as to personal jurisdiction, stating no more than “nor shall any state deprive any person of life, liberty or property, without due process of law.” Morrison also asserts that the Due Process formulation is confusing and has occasionally led to inconsistent results. Accordingly, Morrison contends that the Supreme Court erred when it interpreted the Due Process clause as imposing personal jurisdiction requirements. Instead, Morrison suggests that the Supreme Court should limit state courts’ power over out-of-state defendants using the Dormant Commerce Clause, which prohibits states from unduly interfering with foreign and interstate commerce.
- Adam Steinman, SCOTUS Cert Grant on Personal Jurisdiction: Bristol-Myers Squibb v. Superior Court, LPB Network (Jan. 19, 2017).
- Erica Teicher, U.S. Top Court to Hear Bristol-Myers Out-of-State Injury Appeal, Reuters (Jan. 19, 2017).