Significant Developments in Personal Jurisdiction:

Transcription

1 Significant Developments in Personal Jurisdiction: Daimler Creates New Tools for the Defense Corena G. Larimer Tucker Ellis LLP One Market Plaza Steuart Tower, Suite 700 San Francisco, CA (415)

2 Corena G. Larimer is a litigator at Tucker Ellis LLP, where she represents pharmaceutical and medical device manufacturers in complex litigation in California and throughout the United States. She serves on national and regulatory counsel teams, including at trial and in coordinated proceedings, and handles complex legal briefing before trial and appellate courts.

3 Significant Developments in Personal Jurisdiction: Daimler Creates New Tools for the Defense Table of Contents I. General Jurisdiction: Creating a Forum for Any Suit...5 A. Pre-Goodyear Supreme Court Decisions Focusing on General Jurisdiction: Few and Far Between...5 B. Daimler and Goodyear Narrow the Application of General Jurisdiction...5 C. Consent to General Jurisdiction by Registering to Do Business: An Exception to Daimler?...7 II. Specific Jurisdiction: Jurisdiction Premised on the Facts of a Particular Case...8 III. Strategies for Practitioners...9 Significant Developments in Personal Jurisdiction: Daimler Creates New... Larimer 3

4

5 Significant Developments in Personal Jurisdiction: Daimler Creates New Tools for the Defense Developments in personal jurisdiction have moved at a fast clip in the last two years, sparked by the Supreme Court s 2014 decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014). There, a near-unanimous court made clear that general, or all-purpose, jurisdiction over a corporation is available in very limited circumstances and cannot be based solely on a company s regular business activities in the state. Daimler touched off a flurry of activity in the courts. It gives new weight to the arguments of corporate defendants, weary of defending themselves in courts across the country that lack ties to the dispute, that they are being dragged into the wrong courts by plaintiffs trying to create an advantage. As more courts have applied Daimler s reasoning, corporate defendants have made significant headway in combatting litigation tourism and removing cases from state courts that lacked proper jurisdiction. This area of the law continues to develop quickly, and defense attorneys and corporate counsel should stay abreast of the innovative jurisdictional arguments being advanced by litigants on both sides of the v. I. General Jurisdiction: Creating a Forum for Any Suit A. Pre-Goodyear Supreme Court Decisions Focusing on General Jurisdiction: Few and Far Between Daimler s focus was general, or all-purpose, jurisdiction, which gives a court authority over a party to adjudicate any cause of action, regardless of where the claim arose. Such far-reaching authority has long been understood to satisfy due process only where a company 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. Int l Shoe Co. v. Washington, 326 U.S. 310, 318 (1945). International Shoe explained that a company s continuous activity of some sorts within a state is not necessarily sufficient to support general jurisdiction, id., but in the decades that followed the Court provided little guidance as to when a company s operations within a state were substantial enough to confer general jurisdiction. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, (2011) (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952), and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984)). B. Daimler and Goodyear Narrow the Application of General Jurisdiction In two recent decisions, however, the Supreme Court clarified the limited applicability of general jurisdiction. First, in a unanimous 2011 decision, the Court held that North Carolina courts lacked jurisdiction over several foreign subsidiaries of an American tire company for product liability claims stemming from a bus accident near Paris. Goodyear, 131 S. Ct The Court explained that general jurisdiction over out-ofstate defendants exists only where their affiliations with the State are so continuous and systematic as to render them essentially at home in the forum State. Id. at 2851 (internal quotation marks omitted); see also id. at ( paradigm forum for the exercise of general jurisdiction is where the corporation is fairly regarded as at home ). In that case, Goodyear s subsidiaries in Turkey, France, and Luxembourg which manufactured tires for sale primarily in Europe and Asia had not contacts with North Carolina other than distribution of a small percentage of their tires there. Id. at That attenuated connection, the Court held, fell far short of the continuous and systematic general business contacts necessary to empower North Carolina to entertain Significant Developments in Personal Jurisdiction: Daimler Creates New... Larimer 5

6 suit against them on claims unrelated to anything that connects them to the State. Id. at 2857 (quoting Helicopteros, 466 U.S. at 416). The Supreme Court s new general jurisdiction test came further into focus two years later, in Daimler AG v. Bauman. There, the Court explained that a corporation is at home in the state where it is incorporated and has its principal place of business. Daimler, 134 S. Ct. at 760. Significantly, the Court held that a corporation is not deemed at home in a state merely because it engages in a substantial, continuous, and systematic course of business there. Id. at 761. A corporation that operates in many places can scarcely be deemed at home in all of them, the Court explained, and general jurisdiction must be analyzed with an eye toward the corporation s activities in their entirety, nationwide and worldwide, not solely on the magnitude of the defendant s in-state contacts. Id. at 762 n.20. The defendant in Daimler was a German corporation sued in California for alleged human rights abuses in Argentina by an Argentinian subsidiary; the only connections to California were the business and automobile distribution activities by a different Daimler subsidiary incorporated in Delaware with its principal place of business in New Jersey. Applying its newly articulated test, the Court found that the Daimler subsidiary s regional facilities and sales in California did not subject its German parent corporation to general jurisdiction of the California courts, even if the subsidiary s contacts with California could be imputed to the parent a question the Court did not resolve. Id. at 752, In short, the Court found that general jurisdiction rarely applies in a forum other than the state in which the defendant is incorporated or has its principal place of business. In Daimler s wake, many courts have employed that straightforward rule to find general jurisdiction lacking in drug or medical device cases where the defendant is sued outside of those paradigm locations. See, e.g., Barthomome v. Pfizer, Inc., No. 4:15- cv-788, 2016 WL (E.D. Mo. Jan. 29, 2016) ( mere marketing of Zoloft in Missouri does not render manufacturer at home in the state); Keeley v. Pfizer Inc., No. 4:15-CV-583, 2015 WL , at *2 (E.D. Mo. July 1, 2015) ( Simply marketing and selling a product in a state does not create general jurisdiction.); Teva Pharm. Indus. v. Ruiz, 181 So. 3d 513, 521 (Fla. Dist. Ct. App. 2015), reh g denied (Dec. 8, 2015) ( [N]either Teva USA nor Teva Industries is incorporated in Florida or has its principal place of business here. Therefore, pursuant to Daimler, Florida does not have general jurisdiction over either company. ). Daimler did, however, leave open the possibility that general jurisdiction may be found elsewhere: in an exceptional case, 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. Daimler, 134 S. Ct. at 761 n.19 (internal citation omitted). The Court cited Perkins v. Benguet Consolidated Mining Co., in which the defendant was a Philippines-based corporation forced to temporarily relocate to Ohio during Japan s World War II occupation of the Philippines. 342 U.S. at In essence, because of the war, Ohio was the corporation s principal, if temporary, place of business and could be considered a surrogate for the place of incorporation or head office. Daimler, 134 S. Ct. at 756 n.8 (internal quotation marks and citation omitted). Under those exceptional facts, the company was temporarily at home in Ohio and therefore subject to general jurisdiction in that state. Daimler s discussion of Perkins does not suggest an alternative basis for general jurisdiction. Rather, it recognizes that, in rare circumstances, a corporation s activities in the forum closely approximate the activities that ordinarily characterize a corporation s place of incorporation or principal place of business. Carmouche v. Tamborlee Mgmt., Inc., 789 F.3d 1201, 1205 (11th Cir. 2015). Courts have declined plaintiffs invitations to use Perkins to expand the general jurisdiction paradigms set out in Daimler, finding, for example, that typical business activities to market a drug or device within a state are not exceptional circumstances that would justify general jurisdiction by that state s courts. See, e.g., In re Plavix Related Cases, No L5688, 2014 WL , at *7 (Ill. Cir. Ct. Aug. 11, 2014) (finding that appointing an Illinois agent for 6 Drug and Medical Device May 2016

7 service of process, occupying buildings in Illinois, employing Illinois residents, and receiving substantial Illinois sales revenue are far from exceptional for jurisdiction purposes); Kraft v. Johnson & Johnson, 97 F. Supp. 3d 846, 853 (S.D. W. Va. 2015) (finding absent some showing of activity typical of corporate headquarters,... the fact that the defendants train and direct employees in the forum fails to confer general jurisdiction and distinguishing Perkins as a case in which the defendant s supervisory operations in the forum effectively rendered the forum the defendant s principal place of business ). These decisions and many others plainly recognize Daimler s impact: if a state is not the defendant s place of incorporation or principal place of business, general jurisdiction likely does not apply. C. Consent to General Jurisdiction by Registering to Do Business: An Exception to Daimler? Plaintiffs have attempted to carve out a potentially far-reaching exception to Daimler s holding: consent to general jurisdiction by registering to do business in a state. In the past, some courts found that an out-of-state company s statutorily required registration to do business in the forum state and appointment of an agent for service of process there constituted consent to jurisdiction for all suits. See, e.g., Sternberg v. O Neil, 550 A.2d 1105, 1116 (Del. 1988) (holding that the defendant, by registering as a foreign corporation and appointing an agent for service, consented to the exercise of general jurisdiction by the Courts of Delaware ); Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1200 (8th Cir. 1990) (finding that the appointment of an agent for service of process gives consent to the jurisdiction of Minnesota courts for any cause of action, whether or not arising out of activities within the state and resort to minimum-contacts or due-process analysis to justify the jurisdiction is unnecessary ). These decisions find support in a 1917 Supreme Court opinion finding jurisdiction over an out-of-state defendant based on appointment of an agent for service of process within the state. See Pennsylvania Fire Insur. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917); see also Acorda Therapeutics Inc. v. Mylan Pharm. Inc., --- F.3d ----, 2016 WL , at *11 (Fed. Cir. Mar. 18, 2016) (O Malley, J., concurring) (relying on Pennsylvania Fire and related precedent). In Pennsylvania Fire, the Court rejected the defendant s due process arguments and found that the document the defendant signed provided notice that the company could be subject to any suit in the courts of the forum state. Pennsylvania Fire, 243 U.S. at 95. Whether statutorily required registration remains a valid consent to general jurisdiction under International Shoe, Goodyear, and Daimler, however, is a nettlesome and increasingly contentious question. Brown v. Lockheed Martin Corp., 814 F.3d 619, 622 (2d Cir. 2016). Given the significant doctrinal shifts since Pennsylvania Fire and particularly the Court s recent pronouncements that doing business in a state is not sufficient to create general jurisdiction, courts are split on the effect of a registration statute. The Second Circuit recently refused to treat registration and appointment of an agent as consent to jurisdiction for all purposes, at least based on a registration statute that did not explicitly state such an effect. Though the Second Circuit rested on the ambiguous language of Connecticut s registration statute in rejecting consent by registration, it expressed concern that a more sweeping interpretation would raise constitutional concerns prudently avoided absent a clearer statement of express consent. Brown, 814 F.3d at 623. Other courts are split on the issue, even when interpreting identical registration statutes. Compare, e.g., Keeley, 2015 WL , at *4 & n.2 (holding consent by registration contrary to Daimler), with Mitchell v. Eli Lilly & Co., --- F. Supp. 3d ----, 2016 WL , at *7-9 (E.D. Mo. Jan. 29, 2016) (finding drug manufacturer consented to unlimited jurisdiction in Missouri under the registration statute and explaining that Daimler, Goodyear, and Walden [v. Fiore] may only serve to underscore Knowlton s holding that consent is an independent basis for jurisdiction, which requires no foray into Due Process ). The Federal Circuit recently declined to address that question in Significant Developments in Personal Jurisdiction: Daimler Creates New... Larimer 7

8 a drug patent dispute because it found specific jurisdiction, but a concurring opinion supported finding consent to general jurisdiction through Delaware s registration statute and explained that Daimler confirms that consent to jurisdiction is an alternative to the minimum contacts analysis. Acorda Therapeutics Inc., 2016 WL , at *13 (O Malley, J., concurring). The jurisdictional effect of registering to do business is likely to remain contested until additional appellate courts, or perhaps the Supreme Court, weigh in. Until then, corporate defendants should be prepared to respond to such arguments using both the express language of the registration statute at issue and the significant due process concerns articulated in Brown and elsewhere. II. Specific Jurisdiction: Jurisdiction Premised on the Facts of a Particular Case As general jurisdiction s application has narrowed, specific jurisdiction has become the primary basis on which plaintiffs seek to maintain claims against out-of-state corporate defendants. Unlike general jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction. Goodyear, 131 S. Ct. at 2851 (internal quotation marks omitted). Additionally, defendants should take note of the long-arm statute of the forum state, which may further limit the jurisdiction of its courts over out-of-state defendants. See J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780, 2800 & n.8 (2011) (Ginsburg, J., dissenting). A court may exercise specific jurisdiction consistent with due process if the defendant has purposefully directed his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (citations omitted) (internal quotation marks omitted). The focus of the inquiry is the relationship among the defendant, the forum, and the litigation, and it is the defendant, not the plaintiff or third parties, who must create contacts with the forum State. Walden v. Fiore, 134 S. Ct. 1115, 1126 (2014) (quoting Calder v. Jones, 465 U.S. 783, 788 (1984)). If a plaintiff establishes that his or her suit arises from or relates to a defendant s purposefully directed contacts with the forum, a court may employ a multipronged reasonableness check to determine whether exercising jurisdiction is reasonable under the facts of the case. Daimler, 134 S. Ct. at 762 n.20, citing Burger King Corp., 471 U.S. at (listing factors for assessing reasonableness). In the product liability context, a plaintiff usually cannot establish specific jurisdiction unless either he or she obtained and used the product in the forum state or the product was manufactured or otherwise tied to the forum state. As the Supreme Court noted in Goodyear, North Carolina s courts lacked specific jurisdiction over the plaintiff s product liability claims because the bus accident and manufacture and sale of the tires at issue occurred elsewhere. Goodyear, 131 S. Ct. at Other courts have recognized the same principles in drug and medical device cases, finding specific jurisdiction lacking in states unrelated to the plaintiff or the product that allegedly caused injury. See, e.g., In re Testosterone Replacement Therapy Prods. Liab. Litig. Coordinated Pretrial Proceedings, --- F. Supp. 3d ----, 2016 WL , at *6 (N.D. Ill. Feb. 18, 2016) (sale and promotion of a drug within Missouri was insufficient to support specific jurisdiction over claims by non-missouri plaintiffs); Keeley, 2015 WL , at *3 (rejecting specific jurisdiction by Missouri courts where [t]here are no facts suggesting Plaintiff was prescribed the medication in Missouri, purchased the medication in Missouri, saw the advertisements in Missouri, or in any way was injured in Missouri ). There remains an unanswered question that has particular significance for drug and medical device litigation: whether placing a product into the national market without targeting a particular state creates sufficient contacts with that state to justify specific jurisdiction. The Supreme Court has issued fractured decisions 8 Drug and Medical Device May 2016

9 on whether this stream-of-commerce theory comports with the requirement that a defendant must purposefully avail itself of the privileges of conducting business in the forum state. Most recently, on the same day it unanimously decided Goodyear, the Court issued a decision debating that issue with no majority opinion. See J. McIntyre, 131 S. Ct. 2780; see also Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102 (1987). Lower courts are split on whether the doctrine remains valid. Compare Ainsworth v. Moffett Eng g, Ltd., 716 F.3d 174, 175, 178 (5th Cir. 2013) (finding that application of the stream-of-commerce approach in this case does not run afoul of McIntyre s narrow holding ), with Sarver v. Johnson & Johnson, No. 2:14- cv-19968, 2016 WL , at *5 n.1 (S.D. W. Va. Feb. 5, 2016) (expressing skepticism that a prior streamof-commerce decision has any continuing vitality after the Supreme Court s J. McIntyre decision ). Where a court rejects the stream-of-commerce theory, plaintiffs seeking to establish specific jurisdiction must show that a drug or device manufacturer did more than simply put its product on the market. III. Strategies for Practitioners The recent wave of jurisdiction jurisprudence provides powerful tools for the defense in drug and device products liability litigation. Most obviously, Daimler, Goodyear, and their progeny should curb the litigation tourism that has become overwhelmingly common in states perceived as plaintiff-friendly. Under those decisions, a plaintiff should no longer be able to file suit against an out-of-state manufacturer in California or Illinois, for example, unless the facts of his or her case demonstrate a real connection to that state. That reasoning should apply with equal force to show lack of jurisdiction over non-resident plaintiffs who include a resident plaintiff in a multi-plaintiff complaint. In multidistrict litigation involving testosterone replacement therapy, the court found no jurisdiction for claims involving non-resident plaintiffs who joined with a resident plaintiff in filing suit. In re Testosterone Replacement Therapy, 2016 WL , at *6. The MDL court rejected the argument that sale and promotion of AndroGel within Missouri, which allegedly caused a Missouri plaintiff s injury, 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. Id. Not at all courts have agreed, however. In a notable decision that is now before the California Supreme Court, an intermediate appellate court found specific jurisdiction over out-of-state plaintiffs in the Plavix litigation. Bristol-Myer Squibb Co. v. Superior Court, 228 Cal. App. 4th 605 (Cal. Ct. App. 2014), review granted and opinion depublished, 337 P.3d 1158 (Cal. 2014). That decision notwithstanding, defendants have a strong argument that jurisdiction over non-resident plaintiffs under these circumstances is contrary to Daimler and other Supreme Court precedent. Defense attorneys should also scrutinize the basis for jurisdiction against each defendant named in a lawsuit. A court may have either general or specific jurisdiction over one defendant but lack jurisdiction over another. In Goodyear, as an example, the American defendant did not contest jurisdiction but its indirect subsidiaries did so successfully. Goodyear, 131 S. Ct. at More recently in the medical device context, the court overseeing multidistrict litigation involving mesh devices dismissed claims against a supplier of unfinished mesh for lack of jurisdiction, analyzing that defendant s contacts with the forum separately from the other defendants contacts. Sarver, 2016 WL , at *4-6. The same argument may be made to show lack of jurisdiction over an out-of-state parent company even if its subsidiary does not contest jurisdiction. See, e.g., Tansey v. Cochlear Ltd., No. 13-CV-4628, 2014 WL , at *4 (E.D.N.Y. Sept. 26, 2014). Finally, Daimler provides an important tool for removal to federal court. With a bright-line rule for general jurisdiction, courts have begun dismissing non-diverse plaintiffs from multi-plaintiff complaints for lack of personal jurisdiction before analyzing diversity of citizenship for subject-matter jurisdiction purposes. See, e.g., Seymour v. Johnson & Johnson, No. 2:15-cv-01542, 2015 WL , at *4 (S.D. W. Va. Apr. 8, 2015) Significant Developments in Personal Jurisdiction: Daimler Creates New... Larimer 9

10 (first deciding personal jurisdiction because that analysis is straightforward, whereas the issue of subject matter jurisdiction raises difficult and novel questions of federal procedural law ); Locke v. Ethicon, Inc., 58 F. Supp. 3d 757, (S.D. Tex. 2014) (granting defendants motion to dismiss out-of-state plaintiffs for lack of personal jurisdiction and then denying plaintiffs motion to remand because complete diversity existed among the remaining parties). The Supreme Court blessed that approach in a 1999 decision, finding that judicial economy and restraint are served by first ruling on personal jurisdiction where a case presents a straightforward personal jurisdiction issue... and the alleged defect in subject-matter jurisdiction raises a difficult and novel question. Ruhrgas v. Marathon Oil Co., 526 U.S. 574, 586, 588 (1999). The court overseeing multidistrict litigation involving testosterone replacement therapy did just that. Plaintiffs from nine states had filed a multi-plaintiff complaint in Missouri state court; only one plaintiff, an Illinois resident, destroyed complete diversity. In re Testosterone Replacement Therapy, 2016 WL , at *1. Faced with competing motions the defendants motion to dismiss the non-diverse plaintiff for lack of personal jurisdiction and the plaintiffs motion to remand for lack of complete diversity the court determined that addressing the defendants straightforward personal jurisdiction argument before reaching subject matter jurisdiction would promote judicial economy without offend[ing] principles of federalism. Id. at *4. Finding no general jurisdiction over the defendants by Missouri courts, the court considered and rejected the plaintiffs argument that the non-missouri plaintiffs could piggyback on the specific jurisdiction applicable to the Missouri plaintiff. Id. at *4-6. As the court explained, the plaintiffs theory would subject defendants to general personal jurisdiction in Missouri for claims brought by any plaintiff who allegedly suffered injury by purchasing defendants product anywhere in the country. Id. at *6. The court found that such a result would be particularly at odds with Supreme Court jurisprudence requiring minimum contacts with the forum that relate to a plaintiff s claims. Id. Having dismissed the claims of the nondiverse Illinois plaintiff for lack of personal jurisdiction, the court found complete diversity among the remaining parties and denied the plaintiffs remand motion. That decision is part of a wave of cases demonstrating a renewed focus on personal jurisdiction since Daimler and Goodyear. Courts have taken note of the narrow applicability of general jurisdiction and have begun to more carefully scrutinize the basis for their jurisdiction over the parties when contested. As these new developments take hold in courts across the country, pharmaceutical and medical device manufacturers would be wise to keep jurisdictional challenges on their shortlist of defense tools the next time a process server comes calling. 10 Drug and Medical Device May 2016