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Two Post-Daimler Cases Invite Supreme Court to Test Limits of Specific Jurisdiction

Kevin D. Benish

            Two cases pending certiorari before the U.S. Supreme Court have the potential to further transform where defendants may be sued in the United States.  Personal jurisdiction, the area of law that governs this subject, was fundamentally transformed by the Supreme Court’s 2014 decision in Daimler AG v. Bauman.[1]  This Term, the Court is presented with two major personal jurisdiction decisions on appeal from lower courts:  TV Azteca v. Ruiz[2] and Bristol-Meyers Squibb Co. v. Superior Court.[3]  If granted for review, these cases are likely to alter the shape of U.S. litigation even further.

Personal jurisdiction is governed in the United States by the Due Process Clauses of the Constitution.[4]  The Daimler decision curtailed general, all-purpose jurisdiction based on its interpretation of this constitutional limitation.  Consequently, Daimler put significant pressure on other areas of personal jurisdiction to expand.[5] 

Specific jurisdiction is one such pressure point.  Specific personal jurisdiction exists when there is a sufficiently close connection between the defendant being sued, the claims being asserted, and the state in which the court is located.  Exercising it requires a court to find (1) that the defendant has “purposely directed” its activities or “purposely availed” itself of the forum state; (2) that the plaintiff’s claims “arise from or relate to” these forum-directed activities; and (3) that exercise of jurisdiction would be “reasonable.”  There is no uniform approach to these elements among lower U.S. courts, and the Supreme Court’s most recent decisions provided little guidance.[6]  However, a decision in either Ruiz or Bristol-Meyers Squibb (BMS) could remedy this issue. 

In Ruiz and BMS, out-of‑state defendants argue that the Due Process Clause prohibits the theories of specific jurisdiction that the Texas and California state courts have asserted against them.  The cases are factually unrelated (each involves different plaintiffs, claims, and defendants).  However, by taking a broader approach to “purposeful availment” (Ruiz) and “relatedness” (BMS), each case highlights ways in which specific jurisdiction could expand—or contract. 

TV Azteca v. Ruiz

In Ruiz, a family of Texas residents filed a defamation action in Texas state court against two Mexico-based television companies and a Mexican citizen.  The action arose out of broadcasts that originated in Mexico but were viewable in Texas.[7]  Ruiz reached the Texas State Supreme Court after lower courts rejected the Mexico-based defendants’ challenges to personal jurisdiction. 

The Texas Supreme Court upheld specific jurisdiction over all three defendants.  Critical to the court’s holding was its interpretation of specific jurisdiction’s “purposeful availment” requirement, which requires a defendant to somehow take advantage of “the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.”[8]  Analyzing that issue, the state supreme court noted that neither directing a tort at a Texas resident, making signal broadcasts that reached into Texas, nor defendants’ knowledge that these broadcasts would reach the homes of Texas residents were enough to show that the defendants had purposefully availed themselves of Texas.[9] 

However, the defendants “physically entered Texas, sought revenue from Texas, and made efforts to distribute and increase their popularity in Texas.”[10]  According to the court, this conduct showed that “the defendant[s] ‘continuously and deliberately exploited’ the Texas market.”[11]  Because the defendants gained a financial benefit from the broadcasts that reached Texas and because the defendants were each found to be taking advantage of that fact, purposeful availment was established.

Bristol-Meyers Squibb Co. v. Superior Court

            In BMS, a group that consisted of both resident and nonresident plaintiffs brought a products liability action in California state court against BMS and the McKesson Corporation.  BMS is a Delaware corporation with its principal place of business in New York, while McKesson is a Delaware corporation with its principal place of business in California. The group of plaintiffs consisted of 86 California residents and 592 non-California residents hailing from 33 other states.  All of these individuals allegedly suffered harm after being prescribed and ingesting Plavix—the prescription drug at the center of the dispute, which BMS manufactures and McKesson distributes and markets.

            The California State Supreme Court upheld specific jurisdiction over both McKesson and BMS for all of the claims—including those brought by the 592 non-state residents.  According to the court, each claim was sufficiently “related” to BMS’s California activities.[12]  Per the court’s “substantial connection” test for relatedness, “claim[s] need not arise directly from the defendant’s forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction.”[13]  Instead, “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.”[14]  Under this test, the court upheld specific jurisdiction over both the state and non-state plaintiffs’ claims, holding that every claim was connected to the state through BMS’s California-based business activities and product sales, as well as the fact that BMS “heavily marketed directly to consumers” in California and nationwide via the Internet and other media.

Conclusion

            The U.S. Supreme Court may clarify specific jurisdiction by granting review of Ruiz and BMS this Term.  Until the Court provides guidance, businesses engaged in interstate, international, or Internet commerce should become familiar with the nuances that individual states apply when specific jurisdiction is at issue.  It is also important to remember that just because a business can be sued in a particular state does not mean a court will apply the laws where that court is located.  Businesses should thus consider how choice‑of‑law rules could be used to minimize risk in a lawsuit where personal jurisdiction does exist.  Choice of law is famously complex, but it may be important to any entity that unexpectedly finds itself in an unfamiliar forum.

Any views expressed in this article are those of the author(s) alone and do not necessarily reflect the views of Holwell Shuster & Goldberg LLP.

[1] 134 S. Ct. 746 (2014).

[2] 490 S.W.3d 29 (Tex. 2016), reh’g denied (June 10, 2016).

[3] 377 P.3d 874 (Cal. 2016).

[4] Personal jurisdiction requires (1) procedurally proper service of process; (2) a statutory or common law basis for personal jurisdiction that renders service of process effective; and (3) that the exercise of personal jurisdiction satisfies due process under the Constitution.  See, e.g., Licci ex. Rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59-60 (2d Cir. 2012).  This Article focuses solely on the constitutional requirements for exercising personal jurisdiction.  See generally Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (requiring “certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”).

[5] Linda J. Silberman, The End of Another Era: Reflections on Daimler and Its Implications for Judicial Jurisdiction in the United States, 19 Lewis & Clark L. Rev. 675 (2015).

[6] See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873 (2011) (no majority decision); Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014) (noting a “substantial connection with the forum State” is required for specific jurisdiction without articulating that standard).

[7] Ruiz, 490 S.W.3d at 34-35.  None of the defendants had any other meaningful contact with Texas other than the broadcasts that resulted in the alleged defamation.

[8] McIntyre, 564 U.S. at 877.

[9] Ruiz, 490 S.W.3d at 43-47.

[10] Id. at 52.

[11] Id. at 47 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 (1984)).

[12] To determine “relatedness,” lower courts generally apply a variation on one of three tests.  Courts examine (1) if there is a “substantial connection” with the state where the case is being heard; (2) if the defendant’s activities were the but-for cause of the plaintiffs harm; or (3) if those activities were the alleged proximate cause of the plaintiff’s injury.  See, e.g., O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 323 (3d Cir. 2007) (applying a heightened but‑for test).

[13] BMS, 377 P.3d at 885.

[14] Id. (internal citations and quotation marks omitted).  

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