California’s courts have never met a case they did not like. Or, more precisely, they have never met a case over which they would not exercise jurisdiction if arguably supported by the facts, and even when not supported by the facts. We are exaggerating, of course, but not by much. You will recall that the California Court of Appeal and the California Supreme Court really got the ball rolling on specific personal jurisdiction with their opinions in Bristol-Myers Squibb v. Superior Court (discussed here and here). Those opinions found specific personal jurisdiction over a non-California defendant in defiance of the U.S. Supreme Court’s opinion in Daimler AG v. Bauman. Harking back to the days of International Shoe, the California opinions relied on a non-California defendant’s substantial, continuous economic activities in California to find personal jurisdiction over disputes bearing no direct relationship to those activities. This was the sort of “exorbitant exercise” of personal jurisdiction that the U.S. Supreme Court condemned in Bauman.
The U.S. Supreme Court predictably slapped California down in Bristol-Myers Squibb v. Superior Court, which has set the tone for personal jurisdiction for the last five years.
Old habits, however, die hard, and the California Court of Appeal reverted to its former ways last week in Daimler Trucks North America LLC v. Superior Court, No. B316199, 2022 Cal. App. LEXIS 594 (July 7, 2022). In Daimler Trucks, an Oregon-based truck manufacturer sold a truck to a Nebraska company and shipped it to Georgia. The Nebraska purchaser then sold the truck used to a company in California, where it was driven by a California resident to Oklahoma and was involved in a single-vehicle accident. Id. at *1-*2. In the driver’s subsequent lawsuit, the California court found personal jurisdiction over the Oregon company, which of course did not sell the truck to the driver’s employer, nor to anyone else in California.
How can this be? Well, if the U.S. Supreme Court’s opinion in BMS in the yin of specific personal jurisdiction, its more recent opinion in Ford v. Montana is the yang. In Ford, the Supreme Court provided some leeway under BMS for resident plaintiffs to sue out-of-state companies over events (e.g., injuries or accidents) occurring within the forum state, even when the product was made and originally sold elsewhere. (You can read our initial take on Ford here.)
So Ford gave the California Court of Appeal an opening, but in our view, the court in Daimler Trucks overreached. Citing California authorities that predated BMS, the court applied a three-factor test:
A court may exercise specific jurisdiction over a nonresident defendant only if: (1) the defendant has purposefully availed himself or herself of forum benefits; (2) the controversy is related to or arises out of [the] defendant’s contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice.
Id. at *11-*12 (internal citations and quotations omitted). For a company that does business nationwide, the rub for specific jurisdiction is factor number 2—whether the controversy is related to or arises out of the defendant’s forum contacts. In Daimler Trucks, the court noted that the defendant advertised its truck nationwide, had 32 dealerships in California, and had sold thousands of trucks in California. Id. at *14. The defendant also sold truck parts to multiple California dealers, some of which provided truck repair services performed by mechanics trained by the defendant. Id. Those facts and others (such as telephone and online support available in California) demonstrated that the defendant “does substantial business in California” in relation to its trucks. Id.
Okay, the defendant does substantial truck-related business in California, but what does that have to do with a truck accident in Oklahoma? The defendant in Bristol-Myers Squibb did substantial pharmaceutical-related business in California, but that did not open California’s court to all comers. What is the difference here? Citing Ford, the court framed it this way:
[P]ut just a bit differently, “there must be ‘an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.’” [Citation.] “The first half of the ‘arise out of or relate to’ standard ‘asks about causation; but the back half, after the “or,” contemplates that some relationships will support jurisdiction without a causal showing.’”
Id. at *15 (internal citations omitted). Thus, according to this court, a controversy “arises from” the forum contacts if the forum contacts were in the alleged chain of causation, e.g., the defendant sold the product to the plaintiff within the forum. On the other hand, a controversy “relates to” the defendant’s forum contacts under a looser standard. This was the court’s major takeaway from Ford—that “arises from” and “relates to” are independent standards, i.e., “a new layer to specific jurisdiction.” Id. at *15.
We are not so sure about that. But taking this gloss on Ford at face value, what is the “relates to” standard, this “new layer”? We can’t really tell, other than it requires some relationship that “will support jurisdiction without a causal showing.” Even the California court acknowledged that the standard “was left rather undefined” and that it “does not mean anything goes.” Id. at *18. Against this “not anything goes” standard, the court reviewed the defendant’s forum contacts, and also the plaintiffs’ forum contacts, and concluded that the plaintiffs’ claims “relate to” the defendant’s California activities. Id. at *17-*21.
We believe this opinion is wrongly decided, but we see a significant silver lining. It is wrongly decided because the California court accepted jurisdiction over a non-California defendant in a case involving a truck that was neither designed nor manufactured in California, was sold by the defendant outside California, and was involved in an accident outside California. Moreover, the court based that jurisdiction on the defendant’s substantial and continuous economic activity within California. This looks to us a lot like an “exorbitant exercise” of jurisdiction, which BMS prohibits. If BMS taught us anything, it was that substantial and continue economic activity within a state is not sufficient to bestow specific personal jurisdiction, even when that substantial activity involved the exact type of product at issue in the case.
The silver lining is that the plaintiffs in Daimler Trucks were California residents. In our campaign against litigation tourism, where non-resident plaintiffs flock to one state’s courts to gain strategic advantages, Daimler Trucks will have little impact. For that matter, neither will Ford v. Montana, where the plaintiffs similarly resided in the forum state. In foreclosing litigation tourism, BMS still reigns Supreme—with a capital S.