Utilizing the Changing Landscape of Personal Jurisdiction

David J. Oberly

For years, the scope of personal jurisdiction over corporate defendants has expanded significantly through the reliance on tenuous corporate contacts or business conducted by a defendant in a particular forum. Recently, however, that all changed when the United States Supreme Court issued its decisions in Daimler AG v. Bauman, 564 U.S. 915 (2014), BNSF Railway Co. v. Tyrrell, 137 S.Ct. 1549 (2017), and Bristol-Myers Squibb v. Superior Court of California, 137 S.Ct. 1773 (2017), which significantly strengthened the requirements for exercising personal jurisdiction over corporate defendants. Combined, these three decisions are critical for corporate entities that find themselves embroiled in maritime litigation, as these cases have significantly limited where plaintiffs can bring claims and, in turn, have substantially curtailed the practice of litigation tourism and forum shopping as a result of the limitations that have been placed on a forum state’s exercise of personal jurisdiction.

The Big Three: Daimler, Tyrrell, and Bristol-Myers Squibb

There are two types of personal jurisdiction. The first, known as specific jurisdiction, encompasses cases in which the suit arises out of or relates to the defendant’s contacts with the forum. For specific jurisdiction to exist, a plaintiff’s action must arise out of a defendant’s forum-related activities. The second, general jurisdiction, is exercisable when a foreign corporation’s “continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.”

For years, courts and litigants have operated under the general rule that a court may exercise personal jurisdiction over a corporate defendant in any state where the company maintains “continuous and systematic” business contacts. As a result, businesses have been long subjected to being sued in any state across the country, regardless of strength of the business’s connection to the forum. The expansive scope of personal jurisdiction resulted in significant, egregious litigation tourism and forum shopping by plaintiffs’ attorneys in maritime actions, as plaintiffs took advantage of the significant leeway they had in filing large numbers of lawsuits in a select few extremely plaintiff-friendly courts, many of which are commonly known as some of the worst “judicial hellholes” for litigating these types of complex lawsuits.

In Daimler AG v. Bauman, 134 S.Ct. 746 (2014), the United States Supreme Court significantly curtailed plaintiffs’ ability to forum shop as a result of the court’s holding, which significantly narrowed the applicable standard for establishing general personal jurisdiction under the Fourteenth Amendment’s Due Process Clause. Specifically, the Daimler court held that general jurisdiction may only be exercised if a defendant is regarded as “at home” in the forum state. To date, the court has identified only two places where that condition will be met: the state of the corporation’s principal place of business, and the state of its incorporation. In addition, the Daimler court further held that a corporation is not deemed “at home” in a state merely by way of the fact that the company “engages in a substantial, continuous, and systematic course of business.” Based on the court’s reasoning, general jurisdiction should apply only in a forum state where the defendant is incorporated or has its principal place of business.

In 2017, the Supreme Court reaffirmed its decision in Daimler in BNSF Railway Co. v. Tyrrell, 137 S.Ct. 1549 (2017). Importantly, the Tyrrell court held that the Fourteenth Amendment’s due process constraint described in Daimler applies to all state court assertions of general jurisdiction over defendants, and that the constraint does not vary with the type of claim asserted or business enterprise sued. At the same time, the court emphasized that “in-state business” is not sufficient to allow the assertion of general jurisdiction over claims that are unrelated to any activity occurring in the forum. Taken together, the Tyrrell decision removed any doubt that the Daimler general jurisdiction standard applies in both state and federal forums from coast to coast.

Most recently, in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S.Ct. 1773 (2017), the Supreme Court provided additional, more focused rules for the exercise of specific jurisdiction, which also significantly benefits maritime defendants. In Bristol-Myers Squibb, the court held that “specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Thus, the suit itself—and not just some other aspect of the litigation—”must arise out of or relate to the defendant’s contacts with the forum.” As such, to exercise specific jurisdiction, there must be an “affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence which takes place in the forum State.” When such a connection is lacking—the court continued—specific jurisdiction cannot be utilized “regardless of the extent of the defendant’s unrelated activities in the State.” Accordingly, a defendant’s general connections with the forum cannot suffice to establish specific jurisdiction.

Takeaways

Ultimately, given the generally favorable reception of Daimler, Tyrrell, and Bristol-Myers Squibb in subsequent decisions, maritime defendants and their counsel should make sure to keep personal jurisdiction challenges in their litigation toolbelts, and should seek to utilize this game-changing defense whenever possible. Specifically, a corporate defendant can establish that it is not subject to general personal jurisdiction where it is not “at home” in the state in which suit has been filed (i.e., where the state is not the entity’s principal place of business or its state of incorporation).

Furthermore, a corporate defendant can establish that it is not subject to specific personal jurisdiction by demonstrating an absence of any forum-related activities on the part of the entity that caused the plaintiff(s) harm for which the defendant is allegedly responsible. Here, corporate defendants should aim to show that the plaintiff(s)’ claims do not arise out of, and are not related to, the entity’s contacts with the state in which the litigation is pending (i.e., that all of the entity’s activities that can be traced back to the plaintiff(s) took place beyond the state’s borders). Combined, if a corporate defendant can establish the lack of both general and specific jurisdiction, it can seek to obtain an early dismissal from a range of different types of maritime lawsuits. Utilized properly, corporate defendants can effectively combat forum shopping and litigation tourism by successfully removing lawsuits from state courts that lack the proper jurisdiction.