Legal Alert: U.S. Supreme Court Continues to Limit State Court Jurisdiction Over Out-of-State Corporations
On the heels of the U.S. Supreme Court’s decision to limit general jurisdiction over out-of-state corporations in BNSF Railway Co. v. Estate of Brent Tyrrell, -- U.S. – (Decided May 30, 2017), the Supreme Court again limited personal jurisdiction over an out-of-state corporation in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, et al, -- U.S. – (Decided June 19, 2017).
In Bristol-Myers Squibb Co., the Supreme Court rejected the California Supreme Court’s use of a “sliding scale” approach to finding specific jurisdiction over nonresident plaintiffs’ claims against an out-of-state corporation. Initially, the California Supreme Court held that because Bristol-Myers has such substantial contacts with California, it was appropriate for the California courts to exercise specific jurisdiction over the nonresidents’ claims against Bristol-Myers. As Justice Alito explained, however, there was no direct link between the State of California and the nonresident plaintiffs’ claims:
[T]he nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California. The mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California—and allegedly sustained the same injuries as did the non-residents—does not allow the State to assert specific jurisdiction over the nonresidents’ claims.
Accordingly, the Supreme Court held that California lacked specific jurisdiction to entertain nonresidents’ claims. By reversing this sliding-scale, substantial contacts approach to specific jurisdiction, the Court reiterated its commitment to the limitations on state-court jurisdiction announced a few years ago in Daimler AG v. Bauman, -- U.S. – (Decided Jan. 14, 2014). Based on this opinion, the Supreme Court will only find specific jurisdiction over a foreign defendant corporation when a defendant’s business activities in the forum state are directly connected/related to the specific claims at issue.
Overall, in light of the Court’s decisions in Tyrrell and Bristol-Myers Squibb Co., state-court jurisdiction over out-of-state corporations will be difficult to obtain in the absence of a direct link between the forum State and the alleged acts or omissions, regardless of the corporation’s unconnected business in the forum State. These two decisions further impact nationwide class actions, limiting the forums in which such actions may be filed to the states where the defendant is subject to general jurisdiction, i.e. the state where the defendant is incorporated and the state of its principal place of business. It should be noted, however, that the Court expressly limits its holding to “the due process limitations on the exercise of specific jurisdiction by a State,” and leaves open the question of whether the same limitations would apply in federal court. Corporations facing out-of-state actions should be cognizant of these jurisdictional defenses when the claims asserted have no link to any business conducted within the forum state.