The Importance of Jurisdictional Defenses for the Corporate Defendant Following Recent US Supreme Court Rulings

July 2017

Jurisdictional defenses, once largely dormant due to sprawling “minimum contacts” standards which were easily met by plaintiffs given the frequency of regional and national sales and other realities of the modern marketplace, have now been effectively revived and empowered.  Recent decisions by the United States Supreme Court have significantly narrowed where an out-of-state defendant is subject to suit.  As a result, motions based upon a lack of jurisdiction in the corporate context can now be powerful tools in obtaining dismissals for the out-of-state defendant and should be routinely considered as an integral part of the defense attorney’s arsenal when defending corporate clients.  Further, such decisions should serve to severely curtail a plaintiff’s ability to forum shop and to prejudice non-domiciliary corporate defendants by subjecting them to suit in plaintiff-friendly jurisdictions that have no relation to the facts at issue in the case.

The Bristol-Myers Squibb case, decided in June of this year by the US Supreme Court, continues the High Court’s significant narrowing and containment of where an out-of-state defendant can be properly sued as set forth in a grouping of cases that precede the recent decision.  In Daimler, Goodyear and Tyrell, the Supreme Court addressed general jurisdiction and eroded decades of increasingly expansive assessments under the sprawling “minimum contacts” standard.  It is now clear that a corporate defendant is subject to jurisdiction only in the limited scenario where it is considered “at home” in a particular state, defined by the Court as where it is incorporated and/or has its principal place of business.  The Bristol-Myers Squibb case now narrows the contours of where specific jurisdiction can be considered appropriate confining such instances, in the exemplary arena of products liability and toxic tort, to the forum where the harm occurred or where the defendants’ contacts with the forum were specifically, precisely and directly related to the harm alleged in the case at hand.  Further, and importantly, jurisdiction under Bristol-Myers Squibb will not be appropriate merely because the corporation may have sold products, even a high volume of products, in the forum state.  As a result, in the context of toxic tort and products liability actions, the evaluation of whether jurisdiction is appropriate with respect to the corporate defendant must now be at the forefront of the evaluation and defense of such cases.

In the Bristol-Myers Squibb case, multiple plaintiffs alleged injury as a result of taking one of the company’s drugs, Plavix, and brought suit in California.  The plaintiffs consisted of both California residents and residents of other states.  Reversing California’s highest court, the Supreme Court found that specific jurisdiction was not present over Bristol Myers Squibb in the actions brought by the non-California plaintiffs.  This was so, according to the Court, not simply because the out-of-state plaintiffs did not reside in the forum state (California), but because the harm did not occur in California, the forum state, with respect to the out-of-state individuals.  The plaintiffs who did not reside in California did not ingest the drug there, were not prescribed the drug there and were not injured in California and thus California was not the situs of the harm.  In rejecting the appropriateness of jurisdiction over the claims by the non-California residents, the US Supreme Court made it clear that  when an action is sought to be brought against an out- of- state defendant, the action must be directly related to the defendants’ contacts within the state.

The requisite contacts must establish, according to the Court, an articulable and case-specific nexus, which, the Court ruled, was not found here.  The requisite nexus with the forum is perhaps best illustrated by the facts of the Bristol Myers case itself, where the company clearly had abundant contacts with the California forum, including $1 billion in sales of Plavix (the drug at issue) in California.  Notably, however, Plavix was not manufactured or developed in California and, of utmost importance, irrespective of its sales in California, the harm alleged to the out-of-state plaintiffs did not occur in California nor was there an articulable nexus linking the company’s activities or contacts in California with the purported harm to the non-California residents.  Thus, as the decision makes clear, contacts with the forum state, even if extensive, do not suffice to confer jurisdiction absent a showing that such contacts are case-specific.

Notably, Bristol-Myers Squibb and the other jurisdictional decisions by the nation’s highest court have, in a relatively compressed time frame, served to expressly narrow in personam jurisdiction with respect to the non-domiciliary corporate defendant and has significantly limited  where an out-of-state corporate defendant will be subject to suit.  This is a significant change over the arguably sprawling jurisdiction effectuated by prior standards based upon a defendants’ contacts (i.e., sales) within the state which, although frequently such contacts had little or nothing to do with the lawsuit at issue, nonetheless frequently subjected out of state defendants to lawsuits in far flung, plaintiff-friendly states.   Previously the mere realities of the modern marketplace, including regional or national product sales or distribution could, without more, subject a corporate defendant to jurisdiction.  The recent Supreme Court decisions have expressly rejected broad-based jurisdiction and have contained both general and specific jurisdiction to carefully delineated parameters.

The New York long-arm statute, which governs specific jurisdiction in New York state, is consistent on its face with the newly-issued Bristol-Myers Squibb decision.  However, future cases decided under it must carefully observe the contours of specific jurisdiction as set forth in the High Court’s decision. Any broadening of the parameters delineated in the decision is a violation of due process.

The now favorable jurisdictional defenses are of potential significant benefit to any out-of-state defendant.  A careful evaluation of the jurisdictional parameters of both general and specific jurisdiction is essential when an out -of-state corporate client is sued in a non-domiciliary forum.  The jurisdictional contours and limits have been carefully sculpted and honed by the United States Supreme Court in a series of recent decisions.  As a critical facet of the specific jurisdiction inquiry, New York’s long-arm must be interpreted consistently with the Constitutional mandates of these decisions.  These cases have provided a powerful tool to utilize in obtaining potential dismissals of out-of-state defendants.  We have recently briefed and argued in New York state court on behalf of a non-New York-based corporate defendant the lack of specific jurisdiction under both Bristol Myers Squibb and the New York long arm statute in an action brought in New York where the alleged tortious conduct took place entirely in another state and where any corporate contacts with respect to New York state had nothing to do with the case at issue.  We are happy to discuss the importance of the changing dynamics of jurisdictional defenses and how they can be of benefit in the corporate context.