Source: https://www.litigationandtrial.com/2016/11/articles/attorney/personal-jurisdiction-daimler-walden/
Timestamp: 2019-04-23 02:22:04+00:00

Document:
Pfizer likes California. As the company brags on its website, “Pfizer La Jolla’s 25-acre campus includes five buildings totaling more than 500,000 square feet of state-of-the-art facilities, with specialized laboratories and equipment for structural and computational biology, molecular design, drug metabolism, high throughput chemistry, and pharmacology.” Pfizer reaps billions in profits from its California sales (profits Pfizer is going to avoid paying taxes on by asserting they were earned overseas), and Pfizer shovels that money right back into California politics, spending over $6 million this year trying to influence a California ballot measure that would cap prescription drug costs.
But that didn’t stop Pfizer from claiming in a court filing earlier this week that lawsuits against it cannot “be fairly heard by a California state court.” Pfizer claims that allowing lawsuits against it to be heard in California would deny Pfizer “its due process right not to be hailed into a foreign court that lacks both general and specific jurisdiction.” It’s as if California was some sort of totalitarian regime on the other side of the world, rather than the home to Pfizer’s 25-acre campus less than a mile from the Torrey Pines Golf Course.
If this sounds nuts, that’s because it is nuts. But this is the wacky world of personal jurisdiction that big corporate defendants want to create by way of the Supreme Court’s decision in Daimler AG v. Bauman, 571 U.S. 20 (2014). The proper application of Daimler AG has been one of the most contentious issues in the federal courts over the past two years, and it’ll remain contentious for years to come.
So grab a cup of coffee and let’s get to work.
The question presented is whether the Due Process Clause of the Fourteenth Amendment precludes the District Court from exercising jurisdiction over Daimler in this case, given the absence of any California connection to the atrocities, perpetrators, or victims described in the complaint. Plaintiffs invoked the court’s general or all-purpose jurisdiction. California, they urge, is a place where Daimler may be sued on any and all claims against it, wherever in the world the claims may arise.
Daimler AG v. Bauman, 134 S. Ct. 746, 751, 187 L. Ed. 2d 624 (2014)(emphasis added). Daimler was thus a factual outlier: there was no connection whatsoever between the allegations in the complaint, the defendant, and the chosen forum.
Accordingly, the inquiry under Goodyear is not whether a foreign corporation’s in-forum contacts can be said to be in some sense “continuous and systematic,” it is whether that corporation’s “affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.” 564 U.S., at ––––, 131 S.Ct., at 2851.
We do not foreclose the possibility that in an exceptional case, see, e.g., Perkins, described supra, at 755 – 757, and n. 8, a corporation’s operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State. But this case presents no occasion to explore that question, because Daimler’s activities in California plainly do not approach that level. It is one thing to hold a corporation answerable for operations in the forum State, see infra, at 763, quite another to expose it to suit on claims having no connection whatever to the forum State.
Daimler AG, 134 S. Ct. at 761 (2014)(emphasis added).
The contacts at issue in Daimler AG weren’t enough to meet the “exceptional case,” but that’s no surprise: as the Supreme Court recognized, “plaintiffs [did not] challenge on appeal the District Court’s holding that Daimler’s own contacts with California were, by themselves, too sporadic to justify the exercise of general jurisdiction.” Id. at 758.
In Perkins, the Court found that the defendant, a Philippine corporation, could be subject to general personal jurisdiction in Ohio based on its extensive contacts within the state. 342 U.S. at 448–49, 72 S.Ct. 413. Due to World War II, the corporation moved certain operations from the Philippines to Ohio. The corporation’s contacts with Ohio included: maintaining an office, keeping company files there, corresponding from Ohio about business and employees, paying salaries to the company’s president and two secretaries, maintaining company bank accounts, using an Ohio bank as a transfer agent for stock of the company, holding several directors’ meetings, managing company policies concerning rehabilitation of company property in the Philippines, and sending funds to pay for projects in the Philippines. Id. at 447–48, 72 S.Ct. 413.
Whatever the answer may be, the plaintiffs are certainly entitled to jurisdictional discovery on the issue. We’ll come back to jurisdictional discovery in a moment. For now, let’s talk about “relatedness” and then about why Pfizer avoids the California Supreme Court.
Although specific jurisdiction is “the centerpiece of modern jurisdiction theory,” Goodyear, 131 S.Ct., at 2854 (quotation omitted), it wasn’t at issue in Daimler AG. As the Supreme Court recognized, “Plaintiffs have never attempted to fit this case into the specific jurisdiction category.” Nonetheless, defendants have also started claiming that Daimler AG changed the analysis for specific jurisdiction, too.
In Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984), the Supreme Court explained that specific jurisdiction exists “[w]hen a controversy is related to or ‘arises out of’ a defendant’s contacts with the forum.” “Relatedness” shouldn’t be that difficult of a concept — is there some connection between the case and the forum? — but over the years defense lawyers convinced some courts into adding verbiage that mucked it up.
For example, some courts tried to establish tests that determined “relatedness” by looking to whether the defendants’ actions in the forum were a “but for” cause of the plaintiff’s injuries. This made little sense: as the First Circuit said, “a ‘but for’ requirement has in itself no limiting principle; it literally embraces every event that hindsight can logically identify in the causative chain.” Harlow v. Children’s Hosp., 432 F.3d 50, 61 (1st Cir. 2005)(quotation omitted).
Other courts tried to paint over the issue by discarding “but for” and substituting “proximate cause.” This didn’t do any better, and so many courts abandoned creating any particular “relatedness” standard at all. See, e.g., Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1224 (11th Cir.2009)(“While we do not suggest that our decision today establishes a definitive relatedness standard—as flexibility is essential to the jurisdictional inquiry—we do find that the fact-sensitive inquiry must hew closely to the foreseeability and fundamental fairness principles forming the foundation upon which the specific jurisdiction doctrine rests.”).
The better rule was to simply apply the Supreme Court’s own language and look to whether the controversy “is related to or arises out of a defendant’s contacts with the forum.” See, e.g., Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1337 (Fed. Cir. 2008)(“Our own interpretation of the ‘arise out of or related to’ language is far more permissive than either the ‘proximate cause’ or the ‘but for’ analyses.”).
“Relatedness” hardly sounds like the ideal place for constructing a new theory of specific jurisdiction, but corporate defendants pay their lawyers to twist simple legal concepts into incoherent quagmires. Accordingly, defendants have latched onto this “relatedness” prong to propose a brand-new theory of specific jurisdiction, in which specific jurisdiction hinges on the plaintiff. That’s where California comes in.
Not only did BMS purposefully avail itself of the benefits of California by its extensive marketing and distribution of Plavix in this state and by contracting with a California distributor and employing hundreds of California-based salespersons, resulting in its substantial sales of that product here, but the company also maintains significant research and development facilities in California. All of plaintiffs’ claims either arose from these activities or are related to those activities. The circumstance that numerous nonresident plaintiffs have filed their claims alongside those of resident plaintiffs does not alter or detract from this substantial nexus.
Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874 (Cal. 2016)(petition for certiorari filed October 11, 2016). It’s quite clear that the plaintiffs’ claims are related to Bristol-Myers Squibb’s contacts with California.
Because respondents were not injured by Plavix in California and the Plavix they ingested was neither manufactured nor sold in California, Bristol-Myers is not subject to specific jurisdiction on respondents’ claims in California.
[T]he relationship must arise out of contacts that the “defendant himself” creates with the forum State. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Due process limits on the State’s adjudicative authority principally protect the liberty of the nonresident defendant—not the convenience of plaintiffs or third parties. See World–Wide Volkswagen Corp., supra, at 291–292, 100 S.Ct. 559. We have consistently rejected attempts to satisfy the defendant-focused “minimum contacts” inquiry by demonstrating contacts between the plaintiff (or third parties) and the forum State. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (“[The] unilateral activity of another party or a third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum State to justify an assertion of jurisdiction”).
Walden v. Fiore, 134 S. Ct. 1115, 1121, 188 L. Ed. 2d 12 (2014). The Court then chided the lower court for “allow[ing] a plaintiff’s contacts with the defendant and forum to drive the jurisdictional analysis.” Id. at 1125. But that’s exactly what Bristol-Myers Squibb, Pfizer, and all the other corporate defendants are claiming is how specific jurisdiction should be decided, i.e., by way of the plaintiff’s actions in the forum. Adopting such a standard would require reversing the last thirty years of precedent, from Helicopteros Nacionales de Colombia to Walden.
Bristol-Myers Squibb’s petition for certiorari dredges up scattered case law about “relatedness” being determined by the “but for” and “proximate causation” tests, but none of the cases Bristol-Myers Squibb cites came after Walden. For good reason, courts after Walden have been dismissive of the “but for” and “proximately caused” standards, and have instead used “the traditional minimum contacts analysis.” Rilley v. MoneyMutual, LLC, 884 N.W.2d 321, 332, 336 (Minn. 2016); accord TV Azteca v. Ruiz, 490 S.W.3d 29, 52–53 (Tex. 2016)(“This ‘substantial connection’ standard does not require proof that the plaintiff would have no claim ‘but for’ the contacts, or that the contacts were a ‘proximate cause’ of the liability.”), reh’g denied (June 10, 2016); accord In re Chinese-Manufactured Drywall Prod. Liab. Litig., 753 F.3d 521, 543–44 (5th Cir. 2014)(briefly referencing “but for” test, but then finding jurisdiction without regard to “but for” causation because the issue is “whether the defendant could foresee being haled into this forum to answer plaintiffs’ claims.”).
It’s easy to see why the “but for” and “proximate causation” tests have fallen out of favor, because they necessarily focus on the relationship between the plaintiff and the forum, the exact same theory rejected by the Supreme Court in Walden.
Let that sink in for a moment. Bristol-Myers argues that plaintiffs can’t sue in California because they weren’t injured in California, then drops a footnote arguing that plaintiffs can’t sue where they were injured, either. So where can they sue?
Bristol-Myers Squibb is coy about answering that obvious question. Instead, they come up with a litany of reasons why a plaintiff can’t sue in this forum or that forum, without ever presenting a coherent theory of specific jurisdiction. Truth is, the only logical conclusion of Bristol-Myers Squibb’s arguments (and Pfizer’s arguments, and the arguments of all the other companies pushing this theory) is that specific jurisdiction should be eliminated entirely, leaving corporations amenable to a lawsuit only in the same jurisdictions where there is general jurisdiction.
It’s Pennoyer v. Neff, 95 U.S. 714 (1878), all over again, that darling of the Gilded Age that made it impossible to sue corporations except in the jurisdictions where they had the most favorable courts and juries. Unfortunately for these defendants, Pennoyer was overruled more than seventy years ago by International Shoe Co. v. Washington, which remains “the canonical opinion in this area.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011). Daimler AG and Walden didn’t change that — indeed, they reinforced the importance of the International Shoe analysis.
Adopting the defendants’ arguments would thus require not just reversing the last thirty years of specific jurisdiction precedent, but indeed reversing the very foundation of it established by International Shoe.
The majority’s approach will also lead to greater unpredictability by radically expanding the scope of jurisdictional discovery. Rather than ascertaining the extent of a corporate defendant’s forum-state contacts alone, courts will now have to identify the extent of a company’s contacts in every other forum where it does business in order to compare them against the company’s in-state contacts.
Daimler AG v. Bauman, 134 S. Ct. 746, 770–71, 187 L. Ed. 2d 624 (2014).
Indeed. The same is true for specific jurisdiction as well. The big corporate defendants think they can re-write specific jurisdiction to make it easy and cheap to decide by looking solely at the plaintiff, but that simply isn’t how personal jurisdiction works. Just like how the Daimler AG ruling forces courts to engage in extensive discovery regarding general jurisdiction before deciding a defendant’s motion to dismiss, the new push by defendants to evade specific jurisdiction means that courts will have to engage in even more discovery. As soon as a defendant argues that a plaintiff’s claim is “unrelated” to the defendants’ actions in a given forum, that necessarily opens the door to extensive jurisdictional discovery into what, exactly, the defendant did in that state. These aren’t issues that can be decided based on a couple briefs filed by the lawyers.
I’m sure the defendants will, as always, complain endlessly about the “burden” and “expense” of this discovery, but the defendants can hardly blame plaintiffs for the discovery required to resolve the defendants’ own motions to dismiss. Even under the new “proportionality” standard, there can be no doubt that, when “considering the importance of the issues at stake in the action … [and] the importance of the discovery in resolving the issues,” Fed. R. Civ. P. 26(b)(1), the plaintiffs are entitled to full and complete discovery on this issue before the court can decide whether or not to dismiss their case.
In fashioning an appropriate Rule 37 sanction, the court may permissibly “presume from a party’s willful failure to answer a discovery request relating to a particular issue that the facts of that issue are established against the noncompliant party.” Southern New England Telephone Co. v. Global NAPs Inc., 624 F.3d 123, 147 (2d Cir. 2010). A defendant who has failed to obey a district court’s order to produce information relating to his defense of lack of personal jurisdiction may properly be sanctioned by the striking of his personal jurisdiction defense. See Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 705, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982).
Chevron Corp. v. Donziger, 833 F.3d 74, 147 (2d Cir. 2016). Keep that in mind in your next jurisdictional discovery fight.
One other issue bears mention. For nearly a century, “the [Supreme] Court has upheld state procedures which find constructive consent to the personal jurisdiction of the state court in the voluntary use of certain state procedures.” Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704 (1982)(citing, inter alia, Chicago Life Ins. Co. v. Cherry, 244 U.S. 25, 29–30 (1917)). Many states, like Pennsylvania, require consent to jurisdiction as a condition of doing business there. 42 Pa.C.S.A. § 5301. Daimler AG didn’t change that one bit, but that hasn’t stopped big corporate defendants from claiming otherwise. Recently, in a Pennsylvania federal court, the manufacturer of a baby powder that (allegedly) caused a woman in Pennsylvania to develop ovarian cancer argued that the court “should ‘overrule’ (more specifically ignore) our Court of Appeals’ precedent in Bane based on the Supreme Court’s 2014 holding in Daimler” and preclude the woman from bringing her lawsuit anywhere except Delaware. Bors v. Johnson & Johnson, No. CV 16-2866, 2016 WL 5172816, at *3 (E.D. Pa. Sept. 20, 2016). The defendant rightly lost.

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