Jurisdictional Discovery in the Post-BNSF Ry. and Bristol-Myers Squibb Co. Era

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1 Jurisdictional Discovery in the Post-BNSF Ry. and Bristol-Myers Squibb Co. Era By: Sarah K. Lickus Adler Murphy & McQuillen LLP In its October 2016 term, the Supreme Court devoted significant attention to personal jurisdiction issues, culminating in the issuance of two significant opinions on the topic in 2017: BNSF Ry. v. Tyrrell 1 and Bristol-Myers Squibb Co. v. Superior Court 2. With the ink still drying, many practitioners anxiously await guidance and interpretation from lower courts regarding the practical impact of these recent decisions on jurisdictional discovery. The availability and scope of jurisdictional discovery is increasingly pertinent as more and more defendants elect to assert personal jurisdiction objections in the wake of the last decade of Supreme Court rulings on the subject. General Jurisdiction Awaiting the Ever-Elusive Modern Day Example of the Exceptional Case The BNSF Ry. decision confirmed that we still await a modern day example of the exceptional case, first described in the 2014 decision of Daimler AG v. Bauman 3, that would warrant the exercise of general jurisdiction over a defendant neither incorporated in nor headquartered in the state where the case is pending. While the Supreme Court considered BNSF s maintenance of approximately 5% of its workforce and approximately 6% (more than 2,000 miles) of its total track mileage in Montana, it reiterated that, because BNSF was neither incorporated in Montana nor headquartered there, it did not fit the paradigm for being at home in the state for purposes of general jurisdiction, as articulated in Daimler AG. 4 BNSF was not, in the Court s eyes, so heavily engaged in activity in Montana as to render [it] essentially at home in Montana, particularly when viewed in the context of BNSF s activity on the whole S. Ct (2017) S. Ct (2017) S. Ct. 746 (2014). 4 BNSF Ry., 137 S. Ct. at Id. 1

2 In BNSF Ry., familiar reference was made to Perkins v. Benguet Consol. Mining Co. 6, wherein, in 1952, the Supreme Court made a rare exception to the general rule and found general jurisdiction over the defendant in a location outside of its place of incorporation and principal place of business. There, wartime activities had forced the defendant to temporarily relocate its headquarters from the Philippines to Ohio, where the exercise of general jurisdiction was, at least, for the moment, deemed appropriate. 7 The passage of time since the Perkins decision has demonstrated that the same or similar circumstances are rarely, if ever, present. Thus, as the Supreme Court noted in Daimler AG, it is hard to see why much in the way of discovery would be needed to determine where a corporation is at home. 8 Consequently, voluminous jurisdictional discovery seeking blanket information regarding, for example, a corporate defendant s customers, contacts, suppliers, vendors, contracts, advertising, marketing, sales activities, revenue, employees, holdings, visits, property, accounts, or assets within the state is likely to be met with objection in the post-bnsf Ry. climate, particularly if the plaintiff s pleading lacks factual allegations to demonstrate the existence of personal jurisdiction. Specific Jurisdiction A Blurred Distinction Between Jurisdictional and Merits Discovery? Several months after issuing its BNSF Ry. decision, the Supreme Court addressed the Bristol-Myers Squibb Co. case, holding that a California court had no specific jurisdiction over non-resident plaintiffs claims where those claims did not arise out of or relate to the defendant s contacts with the state. 9 As a practical matter, the Bristol-Myers Squibb Co. decision has the potential to contribute to conflation of the notions of jurisdictional and merits discovery, particularly in product liability cases where there is some question as to whether a defendant s seemingly temporally or relationally remote activities in the state could possibly bear the required connection to the plaintiff s liability claims. Where a plaintiff has at least pled factual allegations that suggest the possibility of such a connection, defendants may be tempted to explore the plaintiff s position through discovery requests of their own before seeking a hearing on their motions to dismiss. However, practitioners must first consider whether engaging in this course of action runs the risk of waiving the defendant s jurisdictional objection under the laws of the forum state. To the extent that exploration of causation issues could arguably be construed as going to the merits of the case, there is some danger in seeking 6 72 S. Ct. 413 (1952). 7 Id. at Daimler AG, 134 S. Ct. at 761 n S. Ct. at

3 discovery to that end in a jurisdiction where engaging in merits discovery constitutes a waiver of one s jurisdictional challenge. One thing Bristol-Myers Squibb Co. serves to remind us is that the primary concern in assessing personal jurisdiction is the burden on the defendant. 10 This point should be at the forefront as lower courts consider hastily issued jurisdictional discovery that goes well beyond the narrow issues that remain in light of the BNSF Ry. and Bristol-Myers Squibb Co. decisions. Proportional to the Needs of the Case The Interplay of Recent Rule 26 Amendments In late 2015, discovery in federal cases was reined in significantly via amendments to Federal Rule of Civil Procedure 26(b)(1). Through those amendments, the Court revived the so-called proportionality factors, which were first introduced in 1983 but had been minimized through interim amendments. 11 The proportionality factors instruct as to what may be considered in assessing whether discovery issued by a party, assuming it is relevant to any party s claim or defense, is proportional to the needs of the case, as the amended Rule requires. 12 The factors for consideration include the importance of the issues at stake in the action, the amount in controversy, the parties relative access to relevant information, the parties resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. 13 Although the Advisory Committee Notes make clear that a party need not address every factor in order to propound discovery and that the intent is not to invite a responding party to make blanket objections as to proportionality, these amendments represent a refinement of the scope of discovery at the federal level, and recent decisions have showcased lower courts hanging their hats on one or more of these factors in reaching decisions regarding the availability of jurisdictional discovery. As an initial matter, Rule 26 serves to remind us of a plaintiff s burden at the initial pleading stage. Indeed, in order to be entitled to conduct jurisdictional discovery in the first place, a plaintiff must meet her pleading burden. Courts considering requests to engage in jurisdictional discovery have not hesitated to turn first to the plaintiff s pleadings post-bnsf Ry. and Bristol-Myers Squibb Co. A complaint that lacks factual allegations suggesting, with reasonable particularity, the existence of 10 Id. at 1780 (internal citations omitted). 11 Fed. R. Civ. P. 26(b)(1). 12 Id. 13 Id. 3

4 personal jurisdiction is subject to dismissal on the pleadings, and without the benefit of discovery. 14 Courts will expect discovery-seeking plaintiffs to make at least a threshold 15, colorable or prima facie 16 showing of jurisdiction at the outset, before entertaining such requests. Several courts have emphasized the parties relative access to relevant information factor in cases brought by individual plaintiffs against large corporations, reasoning that there is an informational imbalance that may entitle a plaintiff to jurisdictional discovery. 17 The other side of this argument, however, is that the basis for any legitimate contact-based (specific) personal jurisdiction argument should necessarily fall within the plaintiff s own knowledge. If a plaintiff has a theory as to how the defendant s conduct damaged her, she should already have the information she needs to establish the required causal link, assuming her claim was not frivolously pled. At the very least, in a court that gives significant weight to the informational imbalance consideration, defendants should be entitled to a significantly limited scope for any jurisdictional discovery, in light of the other proportionality factors. Doing What Has Been Done in the Past is No Longer Appropriate, and May Even Be Sanctionable In federal court, an attorney, in signing a pleading, motion, or other paper, impliedly certifies that it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation. 18 In light of Rule 11, attorneys should take heed not to issue outdated, boilerplate jurisdictional discovery requests as a means of buying themselves time to recalibrate their litigation strategy in light of the recent Supreme Court decisions, lest they risk facing a motion for sanctions. 19 Moreover, attorneys who have already propounded extensive form jurisdictional discovery requests should consider withdrawing them, to the extent that they exceed the probable scope permitted under Rule 26(b)(1). There is substantial risk under Rule 11, to the signing attorney, her firm, and her client, in issuing voluminous jurisdictional recovery where the facts alleged and existing evidence do not appear to support a finding of jurisdiction under the current case law. In light of the Supreme Court precedent discussed above, one can anticipate that federal courts will seek to curtail unsubstantiated attempts to engage in 14 See, e.g., Lindsley v. Am. Honda Motor Co., 2017 U.S. Dist. LEXIS (E.D. Pa. Jul. 7, 2017); Collins v. James W. Turner Constr., Ltd., 2017 U.S. Dist. LEXIS 6728 (D.N.J. Jan. 18, 2017). 15 Collins v. James W. Turner Constr., Ltd., 2017 U.S. Dist. LEXIS 6728 (D.N.J. Jan. 18, 2017). 16 Everett v. Leading Edge Air Foils, 2017 U.S. Dist. LEXIS (E.D. Wis. Jul. 7, 2017). 17 See Lindsley, 2017 U.S. Dist. LEXIS at * Fed. R. Civ. P. 11(b)(1). 19 Fed. R. Civ. P. 11(c). 4

5 burdensome, expensive, and ultimately useless jurisdictional discovery propounded by forum shopping plaintiffs. 5