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Article: January 2018: Transnational Litigation Update

January 01, 2018
Business Litigation Reports

Supreme Court Trend Against Extraterritorial Jurisdiction Continues in 2017. Two 2017 Supreme Court decisions and a recent Ninth Circuit opinion soundly rejected district courts’ exertions of jurisdiction over foreign corporations, reinforcing the message that corporations will not easily be sued in U.S. Court where they are not “essentially at home.”

All told, 2017 was a year that solidly reinforced the jurisprudential focus on “at home” personal jurisdiction that began with Daimler AG v. Bauman, 134 S. Ct. 746, in 2011.  In May, in BNSF Ry. Co v. Tyrrell, 137 S. Ct. 1549 (2017), the Supreme Court refused to permit general  jurisdiction over a nonresident railroad corporation even though the railroad had “over 2,000 miles of railroad track and more than 2,000 employees” in the forum state. The case involved employees’ Federal Employers’ Liability Act claims brought in Montana state court: the employees neither lived in Montana nor were injured there, and the employer was neither incorporated in Montana nor had its principal place of business there.   Reversing the Montana Supreme Court,  the  Court made clear that  general jurisdiction  over a non-resident defendant requires more than sustained business in the forum and exists only where the forum is analogous to the defendant’s primary place of operation  or residence—that is, the defendant’s “home.”

A month later, the Supreme Court addressed personal jurisdiction again, this time in the context of specific, or “case-linked” jurisdiction, the  type of personal jurisdiction that can arise from a defendant’s specific contacts with the forum state. In Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty., 137 S. Ct. 1773 (2017), the Supreme Court found that specific jurisdiction could not be exercised over a pharmaceutical company for personal injury claims resulting from the use of a drug that the company sold in the forum  state  when  the plaintiffs bringing the suit had purchased and used that same drug in other states.  The Court found that the plaintiffs’  alleged injuries  did not arise out of the pharmaceutical company’s conduct in the forum state, but rather from the company’s activities in other states, even though the plaintiff’s injuries  were  connected to the same drug that was sold by the defendant in the forum state.  The plain language upshot here is that the plaintiffs could sue only  where the  pharmaceutical company had its headquarters and place of incorporation (where the court had general jurisdiction) or in states where the plaintiffs actually used the drugs (where the claims would arise out of the defendant’s contacts with a forum state and the court had specific jurisdiction).

The effects of 2017’s back-to-back Supreme Court guidance on the limits of personal jurisdiction over defendants not regularly at home in the forum is already evident.  A recent decision from the Ninth Circuit Court of Appeals, Axiom Foods, Inc. v. Acerchem International, Inc., 874 F.3d 1064 (9th Cir. 2017), applied the recent high court precedent to its analysis and held that specific personal jurisdiction could not be exercised over a UK subsidiary of a Chinese wholesale food manufacturer when the sole basis for specific personal jurisdiction was the manufacturer sending an infringing newsletter to various recipients, only ten of which were located in California. The court held that Acerhem’s “case-linked” or “suit related” conduct did not create a sufficient connection with California for the proper exercise of specific personal jurisdiction.  On these facts, the court held that Acerchem’s conduct was “barely connected to California.”  The court explained that to the extent Acerchem created California contacts by sending a single newsletter to 55 recipients of unknown residence, those contacts are too “attenuated” and “isolated” to support specific personal jurisdiction over a corporation that is not at home in California.  The court further explained that “Acerchem UK itself conducts no business in California ….It can hardly be said that ‘California [wa]s the focal point of the [newsletter] and of the harm suffered.”

Tyrrell and Bristol-Myers Squibb mark the Supreme Court’s fifth and sixth opinions in six years addressing personal jurisdiction. In all six, the Court has held that a forum’s exercise of jurisdiction over the defendant was improper.  The basic rules: general jurisdiction is strictly limited to where a defendant can be said to be “at home” (where it is incorporated and where it keeps its principal place of business), and specific jurisdiction requires a direct connection between the plaintiff’s claim, the defendant’s conduct, and the forum.  The end result: suing a corporation where it isn’t at home or didn’t hurt you will not be easy.