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Location, Location, Location: Personal Jurisdiction in Products Liability Lawsuits

Insight
09.28.2016
By J. Nicci Warr

As every manufacturer, distributor, advertiser, or retailer of consumer products likely knows, the location in which a lawsuit is brought can have a large impact on the ultimate resolution of the matter. Whether because of perceived advantages in the jury pool, procedural rules, or substantive law, the plaintiffs’ bar consistently attempts to bring lawsuits in favored locations, even if the lawsuit has little or no connection to the forum. Two years ago, the U.S. Supreme Court struck a significant blow against forum shopping in its opinion in Daimler AG v. Bauman, which limited the exercise of general jurisdiction against corporate defendants. Since that time, the plaintiffs’ bar has pushed new theories to attempt to recover the ground lost in Daimler. A number of courts have rejected these new theories. But the California Supreme Court recently adopted a theory that has the potential, if adopted broadly, to resurrect problematic aspects of the pre-Daimler jurisdiction regime.

Daimler AG v. Bauman

There are two types of personal jurisdiction: general jurisdiction, which allows a court to adjudicate all claims against a defendant, and specific jurisdiction, which allows a court to adjudicate only those claims that arise out of the defendant’s activities in a specific state. Before 2014, most plaintiffs that wished to litigate in a particular location used general jurisdiction to accomplish that goal. At the time, many courts accepted that a defendant was subject to a court’s general jurisdiction so long as the defendant had continuous and systematic business contacts in the forum state. As a practical matter, this meant that a company generally could be sued in any state in which it had a substantial business presence (including sales of products within the state), even if the litigation was totally unrelated to the company’s business in the state. For companies that conducted business nationwide, this regime meant that they generally could be sued in any court in the nation.

In January 2014, however, the U.S. Supreme Court made clear in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), that a defendant is subject to general jurisdiction only in two locations: the state of incorporation and the state where the defendant has its principle place of business. According to the Court, permitting all-purpose jurisdiction anywhere the defendant engaged in a substantial, continuous, and systematic course of business was “unacceptably grasping” and violated due process. Only in an exceptional case could a court exercise jurisdiction over an out-of-state defendant on claims unrelated to the forum state.

The lower courts—both state and federal—have largely embraced the holding and import of Daimler, regularly rejecting plaintiffs’ attempts to narrow or distinguish the opinion. Perhaps for that reason, the plaintiffs’ bar has advanced two new theories to attempt to create jurisdiction over defendants in their favored locations: (1) general jurisdiction by consent and (2) expansive specific jurisdiction.

Consent to Jurisdiction

In Daimler, the Supreme Court explicitly stated that it was not addressing the issue of consent to jurisdiction. Building on that statement, many plaintiffs have argued that a corporate defendant consents to general jurisdiction of a state’s courts when it registers to do business in a state and appoints an agent for service of process. This is significant as the corporate laws of all fifty states and the District of Columbia require a company to register and appoint an agent for service of process prior to doing business in a state.

The registration statutes of the fifty states (and the District of Columbia) are not identical. In some states, such as Pennsylvania, the statutes are explicit that registering to do business amounts to consent to the general jurisdiction of the state’s courts. In other states, the registration statute is ambiguous. Prior to Daimler, the courts were split on whether registering to do business in a state operated as consent to general jurisdiction. Some courts found that a state registration statute that premised the right to do business on consent to general jurisdiction—whether explicitly or implicitly—did not violate due process. Other courts found that compliance with a state registration statute was not sufficient to confer general jurisdiction either as a matter of statutory construction or due process. Following Daimler, the courts remain split, but a number of important courts have held that registering to do business in a state and appointing an agent for service of process does not subject a company to general jurisdiction.

The only federal Court of Appeals to have addressed the issue of consent to general jurisdiction by registration post-Daimler is the Second Circuit. In Brown v. Lockheed Martin Corp., 814 F.3d 619 (2nd Cir. 2016), the court held that Connecticut’s registration statutes do not, as a matter of statutory construction, confer general jurisdiction over a corporate defendant. Although the court based its decision on construction of Connecticut’s statutory scheme, it noted substantial due process concerns inherit in finding general jurisdiction based solely on corporate registration. The court also distinguished pre-Daimler authority, explaining that the plaintiff’s expansive interpretation of general jurisdiction was at odds with the Supreme Court’s opinion.

Since Daimler, two state Supreme Courts have also addressed consent to general jurisdiction by registration. In Genuine Parts Co. v. Cepec, 137 A.3d 123 (Del. 2016), the Delaware Supreme Court overturned a prior opinion in which it had held that corporations consented to general jurisdiction by registering to do business in the state. After examining the U.S. Supreme Court’s recent opinions on personal jurisdiction, the court held that “it is not tenable to read Delaware’s registration statutes as [the pre-Daimler opinion] did.” Indeed, the court found that the prior opinion’s “far-reaching interpretation of [the registration statute] collides directly with . . . Daimler, and subjects [the statute] to invalidation.” The court also recognized the federalism issues that would be raised if registration operated as consent to general jurisdiction, explaining that under the plaintiff’s theory, Delaware corporations that operated nationally could be sued in any other state on an internal-affairs claim.

The California Supreme Court also rejected the consent-by-registration theory in Bristol-Myers Squibb Co. v. Superior Court of San Francisco County, 377 P.3d 874 (Cal. 2016). Citing to pre-Daimler California Court of Appeals opinions, the court held that the “designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction.”1

Despite these rulings, the courts remain split on the consent-by-registration issue. U.S. District Courts in Iowa, Kansas, and Pennsylvania have found that registering to do business in the state was sufficient to confer general jurisdiction over a defendant, noting that Daimler did not address consent.2 U.S. District Courts in Massachusetts, Michigan, and Oklahoma, on the other hand, have rejected the theory, relying heavily on the rationale in Daimler.3 In many federal courts, there is a split of authority within a district. In the U.S. District Court for the Southern District of New York, for example, there are opinions both accepting and rejecting the consent-by-registration theory.4 The same is true for the U.S. District Courts for the District of New Jersey and the Eastern District of Missouri.5

Ultimately, additional state and federal appellate courts—and maybe the U.S. Supreme Court—will need to decide this issue. Until that time, defendants faced with a lawsuit in an unfavorable location should be prepared to argue that registration to do business is not sufficient to confer general jurisdiction based on the state’s statutory language and substantial due process concerns.

Expansive Specific Jurisdiction

It is not uncommon in products liability cases for hundreds of plaintiffs from across the nation to bring the exact same lawsuit in a single location. Some plaintiffs have attempted to escape the import of Daimler by arguing for an expansive view of specific jurisdiction in such cases. In a products liability case, a plaintiff usually cannot establish specific jurisdiction unless the product at issue was obtained and used by the plaintiff in the forum state, or the product was manufactured or created in the forum state. Under the expansive specific-jurisdiction theory, out-of-state plaintiffs acknowledge that they did not purchase or use (and were not harmed by) a defendant’s product in the forum state, but argue that specific jurisdiction is appropriate in the forum state because the claims are similar to the claims of resident plaintiffs who did purchase or use the product in the state.

At least one federal court has rejected the expansive theory of specific jurisdiction. In In re Testosterone Replacement Therapy Prod. Liab. Litig., 164 F. Supp. 3d 1040, 1049 (N.D. Ill. 2016), the U.S. District Court for the Northern District of Illinois analyzed whether plaintiffs from several states could bring claims about the nationwide sale and promotion of AndroGel (a testosterone replacement therapy) in a Missouri court. The court determined that Missouri courts lacked specific personal jurisdiction over the claims of the non-Missouri plaintiffs. According to the court, the plaintiffs’ theory “would subject defendants to general personal jurisdiction in Missouri for claims brought by any plaintiff who allegedly suffered injury by purchasing and using AndroGel anywhere in the country.” Such a result, the court held, “would be plainly contrary to ‘traditional notions of fair play and substantial justice,’” and thus violate due process.

Unlike the federal court, the California Supreme Court recently adopted the expansive theory of specific jurisdiction. In Bristol-Myers Squibb Co. v. Superior Court—the same opinion that rejected the consent-by-registration theory discussed above—a majority of the court found that California courts have specific jurisdiction over the claims of almost 600 out-of-state plaintiffs even though the actions giving rise to their claims occurred entirely outside California. The primary issue in Bristol-Myers Squibb Co. was whether the claims of the out-of-state plaintiffs were related to the defendant’s California activities. On that score, the majority found:

[b]oth the resident and nonresident plaintiffs‘ claims are based on the same allegedly defective product and the assertedly misleading marketing and promotion of that product, which allegedly caused injuries in and outside the state. Thus, . . . [defendant’s] nationwide marketing, promotion, and distribution of [the challenged drug] created a substantial nexus between the nonresident plaintiffs’ claims and the company’s contacts in California concerning [that drug].

The dissent Bristol-Myers Squibb Co., on the other hand, explained that “by reducing relatedness to mere similarity and joinder, the majority expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction.” “Such an aggressive assertion of personal jurisdiction,” the dissent found, “is inconsistent with the limits set by due process.”

It is likely that the U.S. Supreme Court will be asked to review the California Supreme Court’s opinion in Bristol-Myers Squibb Co. Whether or not the case is accepted for review, defendants that operate and sell products nationwide, and are involved in products liability litigation in an unfavorable location, should be prepared to address the due process considerations that make specific jurisdiction inappropriate for the claims of non-forum plaintiffs.

Impressions

In January 2014, the U.S. Supreme Court made clear in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), that a defendant is subject to general jurisdiction only in two locations: the state of incorporation and the state where the defendant has its principle place of business. Since then, both state and federal lower courts have largely embraced the holding and import of Daimler, regularly rejecting plaintiffs’ attempts to narrow or distinguish the opinion. However, the plaintiffs’ bar has since advanced two new theories to attempt to create jurisdiction over defendants in their favored locations: (1) general jurisdiction by consent and (2) expansive specific jurisdiction. Ultimately, additional state and federal appellate courts—and maybe the U.S. Supreme Court—will need to decide these issues. Until that time, companies faced with a lawsuit in an unfavorable location should be prepared to argue that registration to do business in a state is not sufficient to confer general jurisdiction based on the state’s statutory language and substantial due process concerns. Companies that operate and sell products nationwide, and are involved in products liability litigation in an unfavorable location, should also be prepared to address the due process considerations that make specific jurisdiction inappropriate for the claims of non-forum plaintiffs.

For more information about the regulation of bedside sleepers, please contact J. Nicci Warr, Michelle Corrigan or the Stinson Leonard Street attorney with whom you regularly work.


1. Although the Colorado Supreme Court did not explicitly address the issue of consent-by-registration, in Magill v. Ford Motor Company, --- P.3d ---, 2016 WL 4820223 (Colo. 2016), the court held that a company that had a registered agent in the state was not “at home” in the state, and thus not subject to general jurisdiction there. In Yelp, Inc. v. Hadeed Carpet Cleaning, Inc., 770 S.E.2d 440 (Va. 2015), two justices of the Virginia Supreme Court explicitly rejected the consent-by-registration theory in an opinion concurring in part and dissenting in part. The majority opinion in that case did not address the issue.

2. See v. Am. Pop Corn Co., No. 15-4071, 2016 WL 1465400 (N.D. Iowa Apr. 14, 2016); In re Syngenta AG MIR 162 Corn Litig., No. 14-2591, 2016 WL 1047996 (D. Kan. Mar. 11, 2016); Bors v. Johnson & Johnson, No. 16-2866, 2016 WL 5172816 (E.D. Pa. Sept. 20, 2016). 

3. See In re: Zofran (Ondansetron) Prod. Liab. Litig., No. 15-13760, 2016 WL 2349105 (D. Mass. May 4, 2016); Magna Powertrain De Mexico S.A. De C.V. v. Momentive Performance Materials USA LLC, No. 16-11249, 2016 WL 3574652 (E.D. Mich. June 16, 2016); Aclin v. PD-RX Pharm. Inc., No. 15-00561, 2016 WL 3093246 (W.D. Okla. June 1, 2016). 

4. Compare Vera v. Republic of Cuba, 91 F. Supp. 3d 561, 570 (S.D.N.Y. 2015) (general jurisdiction by registration) with Chatwal Hotels & Resorts LLC v. Dollywood Co., 90 F. Supp. 3d 97, 104 (S.D.N.Y. 2015) (no general jurisdiction by registration). 

5. Compare Otsuka Pharm. Co. v. Mylan Inc., 106 F. Supp. 3d 456, 469 (D.N.J. 2015) (general jurisdiction by registration) with Display Works, LLC v. Bartley, No. 16-583, 2016 WL 1644451 (D.N.J. Apr. 25, 2016) (no general jurisdiction by registration); and Trout v. SmithKline Beechman Corp., No. 15-1842 CDP, 2016 WL 427960 (E.D. Mo. Feb. 4, 2016) (general jurisdiction by registration), with Neeley v. Wyeth LLC, No. 11-00325, 2015 WL 1456984 (E.D. Mo. Mar. 30, 2015) (no general jurisdiction by registration)

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