Personal Jurisdiction

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Child:  “Can I have ice cream before dinner?”

Parent:  “No”

Child:  “What if it’s strawberry ice cream?”

Parent:  “Still, no”

Child:  “What if my teacher told me I had to eat ice cream for homework?”

Parent: “Still, no”

Child:  “What if a monster ran in here right now and said I had to eat ice cream or he’d take me away to his evil lair forever?”

Parent:  “…..”

Child:  “Well”

Parent:  “Give me a minute, I’m thinking.”

            That’s the “What if” game.  If you’ve been a parent, you’ve played it in some form.  It’s a close cousin of the “Why” game or the “But” game.  It’s also possible that you played What If” during a late-night college cram session that led to a serious conversation about a zombie apocalypse.  Come to think of it, late-night camping, late-night tequila, or late-night horror movies are all stimuli for the zombie apocalypse “What If” game.

In the recent case of McDonald v. Schriner, 2019 U.S. Dist. LEXIS 34514 (W.D. Tenn. Mar. 5, 2019), the court allowed plaintiff to play the “What If” game on a motion to dismiss.  In this context, it’s probably more appropriately titled the “Assuming Arguendo” game.  This is how it went.

Plaintiff:  “Can I keep my claim?”

Court:  “No, you don’t have subject matter jurisdiction.”  Plaintiff’s complaint failed to allege the place of incorporation or principal place of business for any defendant, but rather only provided the address of their registered agents.  Id. at *7.  Because that doesn’t establish the residence of any defendant, the court could not determine if the parties were diverse and could not just assume they were.  Id.  Case dismissed.

Plaintiff:  “Assuming, arguendo, I fixed that and showed you there was diversity, can I keep my claim?”

Court:  “Still dismissed because you also don’t have personal jurisdiction.”  The court shot down general jurisdiction, but we don’t need to cover that since post  Daimler AG v. Bauman, 571 U.S. 117 (2014) we know “merely doing business” isn’t sufficient for general jurisdiction.  McDonald, 2019 U.S. Dist. LEXIS 34514, *10-12.  As to specific jurisdiction – jurisdiction only over claims that arise out of or relate to the defendant’s contacts with the forum – plaintiff couldn’t satisfy the first prong of the test, showing that defendant purposefully availed itself of acting in the forum.  Id. at *12.  In the Sixth Circuit, courts use a “stream of commerce plus” approach to determine purposeful availment.  Id. at *13.  The “plus” concerns things like the amount of control a defendant had over the flow of the product into the state or the quantity sold in the state.  But all plaintiff’s complaint alleged was the drug was sold in Tennessee.  Not enough.  Case dismissed.

Plaintiff:  “Assuming, arguendo, I added more allegations that satisfied the purposeful availment test, can I keep my claim?”

Court:  “Still dismissed because you’ve also failed to state a claim.”  In addition to the manufacturers of the drug at issue, plaintiff sued the pharmacy where he filled his prescriptions.  But claims against pharmacies in Tennessee are governed by the Tennessee Health Care Liability Act (“THCLA”) which requires both that plaintiff provide pre-suit notice and a certificate of good faith – neither of which plaintiff did.  Id. at *16-17.  Pharmacy case dismissed.

Plaintiff’s claims against the manufacturer are governed by the Tennessee Products Liability Act (“TLPA”).  First and foremost, the TLPA provides that FDA-approved products are “presumptively not defective or unreasonably dangerous.”  Id. at *17.  But plaintiff’s only allegation of defect was a conclusory statement that the drug used to treat his restless leg syndrome induced his gambling.  That wasn’t enough to rebut the presumption or to show that the alleged defect existed at the time the drug left the manufacturer’s control.  Id. at *18.  Plaintiff also failed to state a claim for failure to warn.  He didn’t allege any facts about the warnings.  In fact the complaint only included a conclusory allegation that his losses were caused by a failure to warn.”  Id. at *19.  Manufacturer case dismissed.

But, there was one last “What if.”  Plaintiff never bothered to respond to defendants’ motions to dismiss.  Instead, only after the magistrate issued his report and recommendations and after the time allowed for objections to the magistrate’s findings did plaintiff file an objection.  Id. at *20.  So,

Plaintiff:  “Assuming, arguendo, I had timely raised any of my responses or objections, would I get to keep my case?”

Court:  “Still dismissed.”  In fact, the only new facts plaintiff’s objections added was that he couldn’t remember any effective warnings.  What he still didn’t allege was that he read or attempted to read the warnings when they were provided to him.  Id. at *22.  So, plaintiff’s claims failed for lack of proximate cause.

Having running out of “assuming, arguendo” propositions, the Court had the last words:  “Dismissed with prejudice.”

Bexis recently filed a personal jurisdiction amicus brief in Pennsylvania – ground zero in the battle over general jurisdiction by “consent” due to a foreign corporation’s registration to do business in the state (technically, commonwealth).  As is readily apparent from our 50-state survey on general jurisdiction by consent, most states reject such an expansive reading of corporate domestication statutes.  But those states that don’t rely on a hoary United States Supreme Court decision, Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), from deep within the old “territorial” age of personal jurisdiction, an age that ended over 70 year ago when International Shoe Co. v. Washington, 326 U.S. 310 (1945), supplanted Pennoyer v. Neff, 95 U.S. 714 (1877).

In Pennsylvania, where Bexis filed, that reliance has a Tinker to Evers to Chance flavor to it.  Webb-Benjamin, LLC v. International Rug Group, LLC, 192 A.3d 1133 (Pa. Super. 2018), followed Bors v. Johnson & Johnson, 208 F. Supp.3d 648 (E.D. Pa. 2016), which we blogged about here.  Bors, in turn, refused to “ignore” (208 F. Supp.3d at 652) the pre-Bauman Third Circuit decision in Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991).  Bane had this to say about general jurisdiction by consent back in 1991:

[Defendant’s] application for a certificate of authority can be viewed as its consent to be sued in Pennsylvania under section 5301(a)(2)(ii), which explicitly lists “consent” as a basis for assertion of jurisdiction over corporations. Consent is a traditional basis for assertion of jurisdiction long upheld as constitutional.  See Hess v. Pawloski, 274 U.S. 352, 356-57 (1927).

Id. at 641 (other citation omitted).  Those three sentences are the entirety of the discussion of “consent” in Bane.  Right now, you could say those three sentences are the bane of our existence.

Hess, finally, relied on Pennsylvania Fire:

The mere transaction of business in a state by nonresident natural persons does not imply consent to be bound by the process of its courts.  The power of a state to exclude foreign corporations, although not absolute, but qualified, is the ground on which such an implication is supported as to them.  Pennsylvania Fire Insurance Co. v. Gold Issue Mining Co., 243 U. S. 93 [(1917)].

274 U.S. at 355 (other citation omitted).  See also Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1198 (8th Cir. 1990) (also relying on Hess for the proposition “[t]:he doing of various acts within the State . . . was equated, by statute, with consent or submission to the jurisdiction, even by nonresidents”).

Other courts in the post-Bauman minority rely on Pennsylvania Fire much more directly.  For example, take a look at the only other post-Bauman appellate decision allowing general jurisdiction by consent:

In this appeal, we consider whether [defendant] consented to general personal jurisdiction in New Mexico courts when it registered to do business here.  To answer this question, we must determine whether the United States Supreme Court’s decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917) . . . remain binding precedent in light of the evolution of general jurisdiction jurisprudence. . . .  We recognize the tension between the two lines of cases.  Nevertheless, because we conclude that . . . Pennsylvania Fire . . . [is] are still binding, we conclude that [defendant] consented to general jurisdiction in New Mexico.

Rodriguez v. Ford Motor Co., ___ P.3d ___, 2018 WL 6716038, at *1 (N.M. App. Dec. 20, 2018).

The rigor of briefing an issue – rather than writing blogposts – required Bexis to go back and actually read a number of the foundational Supreme Court personal jurisdiction decisions for the first time, probably, since law school.  It was a useful exercise, one that led him to conclude that, not only is Pennsylvania Fire no longer good law in light of Bauman, as so many recent decisions in our 50-state survey have concluded, but that Pennsylvania Fire has already been expressly overruled – more than 40 years ago.  The United States Supreme Court just didn’t overrule it by name.

We start with International Shoe Co. v. Washington, 326 U.S. 310 (1945), which discussed the demise of the “fictional” concept of corporate “presence” in a state under the new non-territorial version of Due Process.

Since the corporate personality is a fiction . . . it is clear that unlike an individual its “presence” without, as well as within, the state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it.  To say that the corporation is so far “present” there as to satisfy due process requirements . . . is to beg the question to be decided.  For the terms “present” or “presence” are used merely to symbolize those activities of the corporation’s agent within the state which courts will deem to be sufficient to satisfy the demands of due process.  Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there. . . .

Id. at 316-17 (citations omitted) (emphasis added).  Indeed, the concept of “consent” was no longer needed for the exercise of what becomes known as “general” personal jurisdiction.

“Presence” in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept service of process has been given.

Id. at 317 (citation omitted) (emphasis added).  Likewise, “consent” is not essential to what becomes known as “specific jurisdiction.  As to “the commission of some single or occasional acts of the corporate agent in a state”:

True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit. . . .  But more realistically it may be said that those authorized acts were of such a nature as to justify the fiction. . . .  Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.

Id. at 318-19 (citations omitted) (emphasis added).  “Consent” in the context of corporate activity, was thus repeatedly denounced in International Shoe as a “fiction,” while what was henceforth determinative was the “quality and nature of the [corporation’s] activity.”

The Court returned to the “fiction” of corporate “consent” in Shaffer v. Heitner, 433 U.S. 186 (1977), rejecting “statutory presence” of intangible property (corporate securities) as a basis for personal jurisdiction.  The Court expressly abandoned “the fiction[] of implied consent to service on the part of a foreign corporation” in favor of “ascertain[ing] what dealings make it just to subject a foreign corporation to local suit.”  Id. at 202-03

Shaffer also observed that Pennoyer had “approved the practice of considering a foreign corporation doing business in a State to have consented to being sued in that State.”  433 U.S. at 201 (citing 95 U.S. at 735-36).  However, this “consent” theory was difficult to administer in practice:

[B]oth the fictions of implied consent to service on the part of a foreign corporation and of corporate presence required a finding that the corporation was “doing business” in the forum State.  Defining the criteria for making that finding and deciding whether they were met absorbed much judicial energy.

Id. at 202 (citations omitted).

International Shoe drastically changed all that:

Thus, the inquiry into the State’s jurisdiction over a foreign corporation appropriately focused not on whether the corporation was “present” but on whether there have been “such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there.”  Mechanical or quantitative evaluations of the defendant’s activities in the forum could not resolve the question of reasonableness.

Id. at 203-04 (quoting International Shoe, 326 U.S. at 317).

Now we get to the good part.  Shaffer went on to bring the jurisdictional rules for in rem actions into line with International Shoe’s dramatic change[s],” id. at 205, to in personam personal jurisdiction.  Id. at 205-10.  The state statute before the court had “the express purpose . . . to compel the defendant to enter a personal appearance.”  As such, it was unconstitutional:

In such cases, if a direct assertion of personal jurisdiction over the defendant would violate the Constitution, it would seem that an indirect assertion of that jurisdiction should be equally impermissible.  The primary rationale for treating the presence of property as a sufficient basis for jurisdiction to adjudicate claims over which the State would not have jurisdiction if International Shoe applied. . . .

Id. at 209.

With that, the Court in Shaffer held that a state statute that sought to create a jurisdictional basis “to adjudicate claims over which the state would not have jurisdiction” under International Shoe Due Process was unconstitutional.  That’s exactly what the “general jurisdiction” language in the Pennsylvania Long Arm Statute does.  Critically, Shaffer reinforced its point by expressly overruling all contrary Pennoyer-era precedent:

We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.39

39 It would not be fruitful for us to re-examine the facts of cases decided on the rationale[] of Pennoyer . . . to determine whether jurisdiction might have been sustained under the standard we adopt today.  To the extent that prior decisions are inconsistent with this standard, they are overruled.

Id. at 212 & n. 39 (emphasis added).  That’s the 40+ years ago.  And we think “all” does mean all.

Given what the Court had already held in Shaffer about:  (1) the “fiction” of corporate “consent”; (2) its origins in Pennoyer; (3) that state statutes couldn’t gin up jurisdiction that doesn’t exist under International Shoe; and (4) that “all assertions” of personal jurisdiction must accord with International Shoe, there should be no doubt that Pennsylvania Fire (and its lesser-known adjunct Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd., 308 U.S. 165 (1939)), is among the prior “inconsistent” decisions that Shaffer expressly overruled.

We could end this post here, but we didn’t stop reading there, either.  So we find the overruling of Pennsylvania Fire is further bolstered by what the Supreme Court has done since.  We start with the admonition in Bauman itself that Pennoyer-era cases “should not attract heavy reliance today.”  Daimler AG v. Bauman, 571 U.S. 117, 138 n.18 (2014).  But the Supreme Court has said considerably more related specifically to general jurisdiction by consent.  That includes Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445 (1952), which has since became Bauman’s “exceptional” case.  Perkins also rejected ipso facto personal jurisdiction based on a corporation’s “secur[ing] a license and [] designat[ing] a statutory agent upon whom process may be served” – those actions only “provide[] a helpful but not a conclusive test” for specific jurisdiction.  Id. at 445.  Ditto for McGee v. International Life Insurance Co., 355 U.S. 220 (1957):

[W]here this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations.  In a continuing process of evolution this Court accepted and then abandoned ‘consent,’ ‘doing business,’ and ‘presence’ as the standard for measuring the extent of state judicial power over such corporations.

Id. at 222 (citations and quotation marks omitted) (emphasis added).

The Court’s most comprehensive, relatively recent, analysis of consent jurisdiction took place in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982) (“ICI”).  Each and every one of the “variety of legal arrangements” recognized as “consent” in ICI were grounds for case specific – not general − jurisdiction:

  • “[S]ubmi[ssion] to the jurisdiction of the court by appearance”;
  • “[P]arties to a contract may agree in advance”;
  • “[A] stipulation entered into by the defendant”;
  • “[C]onsent [is] implicit in agreements to arbitrate”;
  • “[C]onstructive consent to the personal jurisdiction of the state court [inheres] in the voluntary use of certain state procedures;”
  • “[W]aive[r] if not timely raised”; and
  • “[F]ail[ure] to comply with a pretrial discovery order.”

Id. at 704-06 (citations and quotation marks omitted).  These are all actions that take place on a one-off basis in particular cases.

The only item on the ICI list that could possibly encompass general jurisdiction by consent – “constructive consent” due to “voluntary use of certain state procedures – really doesn’t.  The ICI Court gave two examples of what it was describing, both of which were likewise specific to individual cases.  See Adam v. Saenger, 303 U.S. 59, 67-68 (1938) (non-resident plaintiff consents to counterclaims); Chicago Life Insurance Co. v. Cherry, 244 U.S. 25, 30 (1917) (“filing a plea in abatement, or taking the question to a higher court”).  Those are the kind of things that parties decide to do (or not) on a case-by-case basis.  Thus, while there is reason to believe that Adams and Chicago Life are not victims of Shaffer’s global overruling of Pennoyer-era precedent, conversely, there is no basis for saving Pennsylvania Fire.  In accordance with Shaffer, ICI did not even recognize corporate registration as a modern form of “consent.”

Then, in Burnham v. Superior Court, 495 U.S. 604 (1990), similarly to Shaffer, the Court again expressly “cast aside” “consent” arguments for general jurisdiction as “purely fictional”:

We initially upheld [corporate registration] laws under the Due Process Clause on grounds that they complied with Pennoyer’s rigid requirement of either “consent,” or “presence.”  As many observed, however, the consent and presence were purely fictional.  Our opinion in International Shoe cast those fictions aside. . . .

Id. at 617-18 (citations omitted) (plurality opinion).

Finally, the fate of general jurisdiction by consent is also discussed in the “stream of commerce” case, J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011).  The plurality listed “consent” as one of four possible bases of jurisdiction.  Id. at 880-81.  Absent consent, “those who live or operate primarily outside a State have a due process right not to be subjected to judgment in its courts.”  Id. at 881.  “Purposeful availment” was a basis for the “more limited form,” specific jurisdiction, only.  Id.  Interestingly, in Nicastro, the more pro-jurisdiction dissenters were even less kind to notions of “consent”:

Finally, in International Shoe itself, and decisions thereafter, the Court has made plain that legal fictions, notably “presence” and “implied consent,” should be discarded, for they conceal the actual bases on which jurisdiction rests. “[T]he relationship among the defendant, the forum, and the litigation” determines whether due process permits the exercise of personal jurisdiction . . ., and “fictions of implied consent” or “corporate presence” do not advance the proper inquiry. . . .  [C]onsent [a]s the animating concept draws no support from controlling decisions of this Court. Quite the contrary, the Court has explained, a forum can exercise jurisdiction when its contacts with the controversy are sufficient; invocation of a fictitious consent, the Court has repeatedly said, is unnecessary and unhelpful.

Id. at 900-01 (citations omitted) (Ginsburg +2, dissenting). Thus, even the justices who were inclined to interpret personal jurisdiction more expansively in Nicastro weren’t willing to endorse the “consent” notions that animated Pennsylvania Fire.

Based on the above analysis, we think it is entirely proper, not only for defendants in general-jurisdiction-by-consent cases to argue that Pennsylvania Fire should not be followed because it is obsolete and inherently inconsistent with Bauman, but to go further and argue that Pennsylvania Fire – and thus the entire concept of general jurisdiction by consent – was already expressly overruled on its jurisdictional holding in Shaffer.  Overruling Pennsylvania Fire 40+ years ago is entirely consistent with how the United States Supreme Court has since treated that decision and the “consent” concept.  First, International Shoe and Shaffer thoroughly trashed the notion of “consent” as a basis for general jurisdiction.  Second, Pennsylvania Fire has not been cited for any jurisdictional proposition whatever since Shaffer (as opposed to its holding about the Full Faith and Credit clause, 243 U.S. at 96-97, which appears to remain valid).  Third, every Supreme Court case since Shaffer has treated “consent” jurisdiction generally as a factor for resolving specific jurisdiction, not general jurisdiction.

Finally, we’d also recommend that our readers share this post with anyone in their firms who is engaged in asbestos litigation.  While defeating general jurisdiction by consent is important to our drug/device clients, it is absolutely critical in asbestos litigation.  Asbestos plaintiffs typically sue dozens of corporate defendants, so that litigation requires a general, not specific, jurisdiction theory to continue aggregating cases in plaintiff-friendly places where plaintiffs don’t reside.  Defeating general jurisdiction by consent in asbestos cases will force asbestos plaintiffs to stay home, where they can assert specific jurisdiction over most (if not all) of their defendants.  Otherwise, asbestos litigation tourists should stand to lose 95% or so of the defendants they sue to personal jurisdiction defenses.

Happy birthday, Bob Marley. (We mean the transcendent reggae singer, not the Maine comedian.) Now let’s get together and feel alright about another good personal jurisdiction decision, In re Pradaxa, No. CJC-16-004863 (Cal. Super. Ct. Jan. 31, 2019). The case strikes a blow against California litigation tourism. There were some awful decisions out of California on this topic in the past. Call this new decision a redemption song.

A bunch of non-California residents claimed injuries from Pradaxa, and sued a number of corporate defendants associated with the medicine’s manufacture and sale. But none of those corporate defendants was incorporated in California, nor did they own, lease, or maintain any property in the Golden State. The defendants challenged personal jurisdiction. The plaintiffs did not even argue that there was general personal jurisdiction over the defendants. The Bauman case thoroughly foreclosed that notion. Instead, the issue was whether the SCOTUS BMS decision left any room for jammin’ the out of state defendants into a California court via specific personal jurisdiction.

Remember, the plaintiffs took the medicine outside California. So what bases could the plaintiffs lively up themselves to show that their claims related to or arose out of the defendants’ contacts with California? The plaintiffs did what some other plaintiffs have done by exploiting the existence of an in-state clinical trial of the drug. If the mere existence of clinical trials does the trick, then the SCOTUS BMS case is a dead letter for pharma companies, since clinical trials often take place in big (and plaintiff-friendly) states. That would be a crazy baldhead result, given that BMS itself involved a pharma defendant. The Pradaxa court was too smart for that. It looked to the qualitative and quantitative nature of the clinical trial in California, and concluded that, in the grand scheme of things, questions relating to 32 in-state clinical trial sites in one massive clinical trial were “too attenuated to support the exercise of specific jurisdiction.” All non-resident Pradaxa plaintiffs were consequently dismissed from the California mass tort for lack of specific personal jurisdiction under BMS. Their exodus is our freedom time.

Since it is a sure thing that forum-shopping plaintiff lawyers will continue to pursue the clinical trial angle, you should pay heed to the factors the California court considered in finding the clinical trial insufficient to establish specific jurisdiction: (1) the forum state was not overrepresented in the trial, and (2) the alleged problems with the trial did not relate to the claimed inadequacies in the warnings. The plaintiffs made much of the fact that there had to be corrections made to label with respect to the adverse event reports out of the California clinical trial, but the “negligible changes in the data” could not support claims. (E.g., the hazard ratio for a life-threatening bleed went from 0.80 to 0.81.). The court was not impressed by the plaintiffs’ argument.

But we are impressed by the rigor and clarity of the court’s reasoning. If corporate defendants can earn such a good and sensible result in San Francisco, we all have cause for optimism. Hallelujah. Don’t worry about a thing. Could you be loved? Every little thing is gonna be alright. And never give up. We offer congratulations, gratitude, and a tip of the cyber hat to Eric Hudson at Butler Snow, who argued and won the motion.

By the way, speaking of congratulations, and speaking of never giving up, today is the birthday of another pop star. In fact, according to an MTV Europe poll in 2008, he is the “Best Act Ever.” We won’t tell you who he is; you’ll have to click on the link at the end. Of course, since we’re telling you to click on a link, you might have some idea what awaits you. Feeling dread? Don’t. Embrace the wonderful, sheer inanity of the Best Act Ever.

Last week business took us to South Florida. Thank you business, as it was 50 degrees warmer in Miami than it was in our frigid Philly suburb. We always love the Sunshine State, but we especially love it in January and February. We love it, even though Florida is the target of many barbs about how it is the home of much News of the Weird. Adam Carolla has his “Florida or Germany” game, where contestants must decide which of those two places is the residence of some recent report of human craziness. An episode of John Oliver’s Last Week Tonight show hardly seems complete without a reference to a Florida outrage.

But sometimes Florida gets it right. The Southern District of Florida got personal jurisdiction right in Goldstein v. Johnson & Johnson, No. 18-20341 (S.D. Fla. Jan. 21, 2019). The plaintiff claimed that Levaquin caused him to suffer an aortic heart tear, valve, which necessitated open heart surgery. He sued defendants who arguably had something to do with making and selling the product, but also – possibly out of a desire to include and harass a bigger player — sued a defendant, J&J, that did not actually have anything to do with making or selling the product. J&J was a holding company. It did not have any relevant contacts with Florida. Consequently, J&J moved to dismiss the case against it for lack of personal jurisdiction.

To support its motion to dismiss, J&J submitted an affidavit from a corporate employee who could speak to organization structure. The affidavit stated that J&J (a) is a New Jersey corporation with its principal place of business in New Jersey; (b) is a holding company for J&J subsidiaries, all of whom operate independently of J&J; and (c) is neither registered nor qualified to do business in Florida; (d) does not ship any products into Florida; and (e) does not design, manufacture, market or distribute any product at all. This affidavit did such a good job of undermining potential jurisdiction over J&J that it shifted the burden to the plaintiff to show personal jurisdiction.

And it turns out that the plaintiff had nothing. At least, the plaintiff had no facts. The plaintiff submitted no counter-affidavit. All that the plaintiff had was a whole lot of jaw-boning about how J&J’s “ubiquitous brand name and various products bearing the J&J logo distributed throughout Florida warrant the assertion of personal jurisdiction over J&J.” That’s not a legal argument; that’s wishful thinking. It smacks more of demagoguery than analysis. The bad news for the plaintiff is that the court preferred analysis. In deciding whether J&J is “at home” in Florida (the way it is in New Jersey), the court focused on J&J’s lack of any “offices, employees, bank accounts, or other assets” within the state. Under the Bauman framework, there was no basis to assert general jurisdiction over J&J.

What about specific jurisdiction? The plaintiff still had nothing. J&J did not do any business in, nor ship any products into, Florida. As mentioned above, J&J did not design, manufacture, market, or sell any product whatsoever because it is a “mere holding company.” It functions as an entirely distinct entity from its subsidiaries. The plaintiff did not dispute any of these crucial facts. Instead, the plaintiff was content to argue that because J&J’s “product brand name on multiple products” is distributed in Florida, J&J should expect to be “hailed into court in this state.” Wrong. No case supports that argument. The Goldstein court identified no basis to assert specific jurisdiction over J&J.

Inevitably, the plaintiff’s back-up argument was to request jurisdictional discovery. But it was a half-hearted request, embedded within a footnote of its opposition brief, and that sort of subterranean maneuver does not constitute a “formal motion or other showing as to scope of any proposed jurisdictional discovery request.” In any event, the plaintiff failed to specify with sufficient particularity what jurisdictional discovery could reveal, even if the court granted the plaintiff’s request.

J&J was dismissed from the case, and the plaintiff’s request for jurisdictional discovery was denied.

We are usually sorry to depart Florida, but we doubt J&J grieved over its departure from the Goldstein case.

We’ve been chronicling the troubles that defendants have been having in getting Pennsylvania courts to follow the Due Process requirements of personal jurisdiction since Daimler AG v. Bauman, 571 U.S. 117 (2014).  We lamented that Pennsylvania seemed to be going off the deep end while discussing Webb-Benjamin, LLC v. International Rug Group, LLC, 192 A.3d 1133 (Pa. Super. 2018).  Webb-Benjamin relied on a couple of federal district court opinions, Bors v. Johnson & Johnson, 208 F. Supp.3d 648 (E.D. Pa. 2016) (which we discussed here), and Gorton v. Air & Liquid Systems Corp., 303 F. Supp.3d 278, 299 (M.D. Pa. 2018), to conclude that general personal jurisdiction – which Bauman limited to the “at home” standard of principal place of business or state of incorporation – existed in Pennsylvania because a state statute (42 Pa. C.S. §5301) mandated use of a lesser standard that could be satisfied by nothing more than a foreign corporation’s registration to do business in Pennsylvania.  192 A.3d at 1138-39.

We’ve never given this statute – or the cases relying on it – much credence because it’s been pretty darn clear, at least since the Civil War, that state statutes cannot supersede the federal constitution.  Courts holding otherwise must be channeling John C. Calhoun.

On the Pennsylvania state court side, things are in hiatus at the moment, because in another case, the Pennsylvania Superior Court has agreed to en banc reconsideration of this issue.  See Murray v. American Lafrance, LLC, 2018 Pa. Super. Lexis 1320 (Pa. Super. Dec. 7, 2018).  If the en banc court agrees with us, that would nullify Webb-Benjamin and result in the Pennsylvania state courts following Bauman (as practically every other state in the country already does).

On the federal side, however, Bors and Gorton professed to be bound by the pre-Bauman Third Circuit decision which held that “consent” is a separate jurisdictional theory from “general”/”all purpose” and “specific”/”case-linked” personal jurisdiction.  That nearly thirty-year-old decision, Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991), held as follows:

[Defendant’s] application for a certificate of authority can be viewed as its consent to be sued in Pennsylvania under section 5301(a)(2)(ii), which explicitly lists “consent” as a basis for assertion of jurisdiction over corporations.  Consent is a traditional basis for assertion of jurisdiction long upheld as constitutional.  We hold that because [defendant] was authorized to do business in Pennsylvania, it was subject to the exercise of personal jurisdiction by Pennsylvania courts under [the Pennsylvania statute].

Id. at 541 (citing Hess v. Pawloski, 274 U.S. 352, 356-57 (1927), and Dehne v. Hillman Investment Co., 110 F.2d 456, 458 (3d Cir. 1940)).

That’s it.  Bane’s consent-based ruling is all of three sentences, supported by two ancient decisions pre-dating International Shoe Co. v. Washington, 326 U.S. 310 (1945). We know what Bauman had to say about that kind of precedent – “citations to these [pre-International Shoe] cases, both decided in the era dominated by Pennoyer’s territorial thinking, should not attract heavy reliance today.”  571 U.S. at 138 n.18.  Heck, Bane didn’t even cite International Shoe itself.

Nonetheless, like lemmings over the cliff, Pennsylvania district court decisions have continued to follow Bane, to ignore Bauman, and thus to hold defendants subject to general jurisdiction under Pennsylvania law on nothing more than registration to business.  See Shipman v. Aquatherm L.P., 2018 WL 6300478, at *2 (E.D. Pa. Nov. 28, 2018); Aetna Inc., v. Mednax, Inc., 2018 WL 5264310, at *5 (E.D. Pa. Oct. 23, 2018); Pager v. Metropolitan Edison, 2018 WL 491014, at *2 (M.D. Pa. Jan. 19, 2018); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147, at *10-11 (E.D. Pa. July 24, 2017); Hegna v. Smitty’s Supply, Inc., 2017 WL 2563231, at *3 (E.D. Pa. June 13, 2017).

In the most recent of these decisions, Youse v. Johnson & Johnson, 2019 WL 233884 (E.D. Pa. Jan. 16, 2019), the plaintiff did not even attempt to argue that Pennsylvania had general jurisdiction – or even the “minimum contacts” necessary to establish specific jurisdiction – over the moving defendant, a company that sold raw talc, but not in Pennsylvania.  Youse didn’t care that the defendant had no factual contacts at all with Pennsylvania – as long as it filed that piece of paper decades ago, that was enough.

[C]ourts in this district have continued to apply the precedent established by the Third Circuit in Bane to hold that registration to do business in Pennsylvania constitutes consent to jurisdiction. Other judges in this district have found that under §5301, business registration constitutes consent to jurisdiction in Pennsylvania, even after [Bauman].  Without the Third Circuit overruling Bane or distinguishing [Bauman], we follow these decisions and conclude that registration to do business in Pennsylvania is sufficient to create general personal jurisdiction.

2019 WL 233884, at *3-4 (cites and quotes of the same cases we just finished string-citing omitted).

Defense counsel – listen up youse guys – the courts are telling you what you have to do to get your clients out of this unconstitutional box.  Bauman “did not address whether registration to do business is a sufficient basis for general personal jurisdiction, and the Third Circuit has not addressed the question of consent-based jurisdiction” since.  Id. at *3.  Forget about convincing a district court; nothing’s going to happen on the federal front until the Third Circuit reconsiders and overrules Bane.

This is a classic issue warranting interlocutory appeal under 28 U.S.C. §1292(b).  Interlocutory appeal by permission under §1292(b) must:  (1) “involve[] a controlling question of law as to which there is substantial ground for difference of opinion,” and (2) “an immediate appeal from the order may materially advance the ultimate termination of the litigation.”  As to the first prong, our 50-state survey of general jurisdiction by consent precedent discusses at great length how every federal court of appeals to address this question since Bauman, and all eight state high courts, have unanimously concluded that “consent” based on corporate registration alone is fundamentally inconsistent with current principles of constitutional Due Process.  That meets any standard of “substantial grounds.”  Under prong two, an erroneous decision on personal jurisdiction puts at risk of nullification everything that follows in the litigation.  See, e.g., Estate of Fox v. Johnson & Johnson, 539 S.W.3d 48 (Mo. App. 2017), transfer denied (Mo. Dec. 19, 2017) & (Mo. March 6, 2018) (overturning multimillion dollar talc verdict and dismissing for lack of personal jurisdiction).  If there’s no personal jurisdiction, then there’s no case at all to litigate.  Thus the requirement that “ultimate termination” of the litigation be “materially enhanced” should also be a lead pipe cinch.

Thus, we strongly recommend that defense counsel, in order to stop our clients from ceaselessly dog-paddling in the Pennsylvania deep end, seek interlocutory appeals in every future case where Bane and general jurisdiction by consent are all that is preventing dismissal for lack of personal jurisdiction.  Sooner or later, hopefully sooner, one of the judges will grant that relief.

A complaint gets filed in California naming hundreds of plaintiffs, only 20 of whom reside in California, against out-of-state manufacturers.  Sound familiar?  Sound like something the Supreme Court rejected in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).  It should.  So, why are we here again?  I guess you can credit plaintiffs’ counsel with persistence.  But you what they say about the definition of insanity?  Well, it’s getting close to that point.

In BMS, the Supreme Court held that California’s courts could not exercise specific personal jurisdiction over an out-of-state defendant unless there is “an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.”  Id. at 1781 (2017).  That means there must be a causal link between the defendant’s forum contacts and the alleged injury to the plaintiff.  Contacts with other people do not count.  And while BMS primarily focused on the contacts of resident versus non-resident plaintiffs, it also says that the presence of a California distributor – equally uninvolved with the plaintiffs who brought the suit – does not change the result one iota.  “The bare fact that BMS contracted with a California distributor is not enough to establish personal jurisdiction in the State.”  Id. at 1783.

But plaintiffs in In re Amiodarone Cases, No. JCCP 4956, slip op. (Cal. Super. Jan. 10, 2019) may not have been paying close enough attention to that portion of the decision.  When defendant manufacturers challenged the lack of personal jurisdiction over the claims of non-residents, plaintiffs relied exclusively on the manufacturers’ relationship with an in-state distributor.  BMS wasn’t decided that long ago as to have been forgotten already?  No, the court remembered it quite accurately.

Plaintiffs, whose claims were premised on allegations of off-label use and failure to provide the Medication Guide, argued that the supply agreements entered into by the drug manufacturers and the California-based distributor conferred specific personal jurisdiction because they contained provisions agreeing the contracts were governed by California law.  But that didn’t amount to a contact related to plaintiffs’ lawsuit that would give rise to personal jurisdiction.  The choice of law provision applied to disputes over the contract, not plaintiffs’ products liability claims.  Id. at 7.  Additional provisions of the supply agreements provided that California law applied and California was the appropriate venue for disputes regarding the indemnification requirements of the agreements.  Those provisions even said that for such disputes, the parties agreed to waive personal jurisdiction and inconvenient forum arguments.  Id. at 7-8.  Despite the plain language of the agreements, plaintiffs tried to argue that those provisions should equally apply to the underlying claims that may trigger the indemnification provisions.  And once again the court reiterated that the contractual obligations between the manufacturers and distributor was “not evidence of a contact for jurisdictional purposes.”  Id. at 8.

But plaintiffs pressed on.  They also argued that they were third-party beneficiaries under the supply agreements and therefore could enforce the personal jurisdiction waiver.  Id.  But just because the supply agreements set up the chain of distribution that may have ultimately led to plaintiffs ingesting the drug did not make plaintiffs third-party beneficiaries.  Moreover, the waiver was “expressly limited” to indemnification disputes and so wouldn’t apply to products liability actions anyway.  Id.

Choice of law didn’t work.  Third-party beneficiary didn’t work.  What about compliance clauses?  The supply agreements contained compliance clauses that stated that the drugs shall comply with all governing laws and regulations, will not be adulterated or misbranded, and will comply with the Prescription Drug Marketing Act.  Id. at 8-9.  But again, the court found those clauses don’t run to plaintiffs or their claims and so can’t be used to establish specific personal jurisdiction.

If not the supply agreements, what about compliance with regulations?  Plaintiffs argued that manufacturers were required to provide the California distributor with the Medication Guide which it in turn was required to distribute to physicians and pharmacies.  This, they claimed, evidenced a sufficient connection between California and the non-resident plaintiffs’ claims.  Id. at 9.  But, going back to BMS, that a manufacturer has business transactions with third-parties isn’t sufficient.  To satisfy due process, a defendant must be “haled into court in a forum state based on its own affiliations with the State, not based on the ‘random, fortuitous, or attenuated’ contacts he makes by interacting with other persons affiliated with the State”  Id.  Here, plaintiffs have more than enough evidence to establish a relationship between the manufacturers and their supplier, but they’ve offered no evidence to take the leap of a connection to the non-resident plaintiffs.  There is no evidence that any non-resident plaintiff took Amiodarone distributed by any California-based distributor.  Id.

What about derivative liability?  Plaintiffs argued, but offered no authority to support, that the indemnification provisions in the supply agreement create derivative liability by manufacturers for conduct of McKesson.  Id. at 10.  The best plaintiffs could come up with here was to rely on California’s old sliding scale approach to personal jurisdiction.  But that was expressly rejected by BMS.

Finally, what about the fact that the manufacturers sold the drug to the distributor in California?  It’s irrelevant because it’s completely unconnected to the plaintiffs.

Call it persistence.  Call it “E” for effort.  Call it insanity.  If the question of personal jurisdiction via third-party contacts wasn’t sufficiently answered in BMS (by the way, it was), In re Amiodarone should be viewed as shutting the door for good in California.

That part of this title is borrowed from a fellow blogger’s post does not at all detract from its fundamental truth.  Attention to personal jurisdiction wins cases – particularly in MDLs in which lawyers are out there recruiting clients, rather than the other way around.  The latest example is In re Zostavax (Zoster Vaccine Live) Products Liability Litigation, 2019 WL 121199 (E.D. Pa. Jan. 7, 2019).  Zostavax also underscores why a case we recently discussed, In re Biomet M2A Magnum Hip Implant Products Liability Litigation, ___ F. Supp.3d ___, 2018 WL 6426830 (JPML Dec. 6, 2018), is significant.

Zostavax is not one of your typical litigation tourist MDL cases.  Both of the two plaintiffs, whose cases were ultimately dismissed, were residents of the forum in which they initially brought suit – Florida.  However, indicative of how lawyer solicitation scrapes the bottom of the barrel in MDLs, both plaintiffs had used the product quite a few years earlier before they (probably retired and) moved to Florida.  One plaintiff used the product in July, 2011, and the other a year later in July 2012.  Zostavax, 2019 WL 121199, at *1.  Suit was not filed until 2018, according to the docket numbers.

No basis existed to subject the defendant to general jurisdiction in Florida, id. at *3, and since the plaintiffs both took the product and were diagnosed with their alleged injuries before they moved to Florida, neither did the facts support specific, case-linked jurisdiction in the state.  “For purposes of personal jurisdiction, we must look to the place where the injury occurred, not to the place where it was diagnosed.”  Zostavax, 2019 WL 121199, at *4.  Rather:

The relevant activity or occurrence with respect to [the first plaintiff] took place in Edgartown, Massachusetts when she received the [product].  The relevant activity or occurrence with respect to [the second plaintiff] took place in Connecticut where she was injected with [the product].  The torts which allegedly caused their injuries happened in places other than Florida.  While plaintiffs were long-time residents of Florida, [defendant] did nothing to and had no interaction with either of them in that state.  [Defendant] was not at home in Florida, and plaintiffs’ injuries did not arise out of and were not related to any contact it had with Florida, regardless of what [defendant’s] other activities in the state may have been.

Id..  That’s straight out of BMS – where the product did not injure the plaintiff in the forum state, no matter how extensive the defendant’s non-case-related in-state activities are, they cannot establish specific jurisdiction.  You’ll have to go somewhere else.

Nor does personal Jurisdiction turn on how “convenient” the forum might be:

Florida’s power does not extend to [defendant] in these actions even if Florida would be a convenient place for plaintiffs to sue and would not be inconvenient or burdensome to large corporations such as defendants.

Id.

Zostavax underscores a jurisdictional point defendants need to keep in mind.  Personal jurisdiction motions are not limited to litigation tourists.  Once Bauman took out the old notion of general jurisdiction everywhere a major corporation did business, plaintiffs either have to sue corporate defendants where they are “at home” or where they can obtain specific jurisdiction.  Specific jurisdiction is necessarily quite commonly where the plaintiff resides – but not always.  Plaintiffs who change their states of residence in between injury and filing suit can create, as in Zostavax, jurisdictional problems for themselves.  In these non-litigation-tourism cases, defendants might choose to waive the jurisdictional defect.  However, in prescription medical product cases, where the “learned intermediary” prescriber is often the most important witness, such a waiver can create discovery problems for defendants (can’t subpoena the prescriber), so there is good reason to stand on a valid jurisdictional defense.

Equally interesting is the discussion about what happens once the absence of personal jurisdiction is established.  In Zostavax, plaintiffs alternatively sought a transfer.

Denied.  Cases dismissed.

Why?  That involves the issue decided in the Biomet M2A Magnum case we discussed previously.  That case established that an MDL judge can only remand cases to the courts from which they were originally filed.  Zostavax, 2019 WL 121199, at *5.  MDL courts are “preclude[d] . . . from transferring a case to any other district, whether under §1404(a), §1406(a) or §1631.”  Id. (citing various statutes allowing transfer in various circumstances).  This means that if an MDL plaintiff’s initial filing is in a court without personal jurisdiction, it’s curtains.  The action must be dismissed, because it cannot be remanded to the transferor court – because cases can’t be sent to a court that was just determined to lack jurisdiction – nor can they be transferred anywhere else, given the terms of the MDL statute.

If the case (as in Zostavax) has to be dismissed, then see our post here about savings statutes.  In some states the MDL dismissal may bar the claim from being refiled under the applicable statute of limitations.

Finally, the transfer discussion points out another consequence of Bauman/BMS personal jurisdiction:  in some cases, plaintiffs simply might not be able to join all the defendants they want to in the same lawsuit:

[T]here does not appear to be any one forum where general jurisdiction could be exercised over all defendants.  As to specific jurisdiction, there is nothing in the record pointing to any ties between causation of plaintiffs’ injuries in Massachusetts and Connecticut and any activity of [the non-moving defendant] in those states.  In sum, the court is not able to determine . . . in what district or districts, if any, either of these actions could have been brought at the time they were filed.

Zostavax, 2019 WL 121199, at *5.

If you’ve ever wondered why so many of the post-Bauman personal jurisdiction cases have involved asbestos plaintiffs, this is why.  The Bauman/BMS personal jurisdiction regime is fatal to asbestos litigation tourists (or plaintiffs who, like the plaintiffs in Zostavax, just didn’t sue where they were injured) because without “case-linked” personal jurisdiction tied to the place of injury it’s impossible to obtain jurisdiction over scores of unrelated corporations.  Because we (at least Bexis) also dabble in asbestos litigation, we’re careful to specify in our cheat sheet which cases involve asbestos.

Zostavax demonstrates that blanket personal jurisdiction can also be impossible for litigation tourists in prescription medical product MDLs.  Multiple defendants – be they physicians, hospitals, distributors, affiliates, whatever – may well not be amenable to personal jurisdiction in the same forum, unless the plaintiff sues where s/he allegedly was injured.  There’s now a real downside to litigation tourism, in that cases can be dismissed without ability to refile.  To us, that’s the most interesting aspect of Zostavax:  judicial recognition that in multi-defendant cases, litigation tourism itself may not be possible.

We are old enough to treasure the memory of sitting in a darkened movie theater with our mother and sisters watching the original “Mary Poppins.”  We were transfixed and transported by the sheer magic of the film, and we spent the next many months playing our souvenir cast album over and over on our tiny phonograph until the record was so battered that it was lovingly retired to the shelf.   This coming weekend, fifty-plus years later, our now 84-year-mother and her three aging daughters will go together to see the new Mary Poppins “update.”  We feel excited and nostalgic about this outing, but we harbor a suspicion that there can never be another Mary Poppins.   Mary was adventurous, courageous, resourceful, mysterious, resolute, and dauntless.  She was way ahead of her time — “practically perfect in every way.”

As is the tidy personal jurisdiction and venue decision on which we report today.  In Carney v. Guerbet, LLC, 2018 WL 6524003 (E.D. Mo. Dec. 12, 2018), the plaintiff  alleged that he was injured by a linear gadolinium-based contrast agent with which he was injected, in New Jersey, before he underwent an MRI.   He filed suit in the Eastern District of Missouri asserting diversity jurisdiction and naming several corporate defendants, among them Guerbet, LLC (“Guerbet”) and Liebel-Flarsheim Company, LLC (“Liebel’).

Guerbet, LLC’s Motion to Dismiss

The plaintiff alleged that Guerbet was a Delaware LLC with is principal place of business in Indiana and that it had contracted with co-defendants Mallinckrodt, Inc. and Mallinckrodt, LLC to purchase their Missouri-based company which, the plaintiff alleged, produced the contrast agent in question.  The plaintiff alleged that the court had specific personal jurisdiction over Guerbet because the company “engaged in the business of designing, licensing, marketing and/or introducing [the contrast agent] into interstate commerce,” either directly or through third parties.  Carney, 2018 WL 6524003 at *3.  The plaintiff did not allege that he was injected with the contrast agent in Missouri, suffered his injury in Missouri, or received treatment in Missouri.  Guerbet moved to dismiss, asserting the court lacked personal jurisdiction over it.   Guerbet denied that it purchased a Missouri-based business from Mallinckrodt, that any of its members or managers resided in Missouri, that the contrast agent was produced in Missouri, that it received any sales revenue for the contrast agent in Missouri, or that it advertised in any Missouri medium or any medium targeted at Missouri.  Guerbet also submitted an affidavit attesting to the fact that its principal place of business is in New Jersey, not Indiana.

The  court cited BMS for proposition that, “[i]n order for  court to exercise specific jurisdiction over a claim, 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. .  . . When there is no such connection, specific jurisdiction is lacking, regardless of the extent of a defendant’s unconnected activities in the State.  Even regularly occurring sales of a product in a state do not justify the exercise of jurisdiction over a claim unrelated to those sales.”  Id. at *4 (internal punctuation and citations omitted).   As such, the court emphasized, allegations that “a non-resident pharmaceutical company researches, designs, tests formulates, inspects, markets or promotes a drug within the forum state are not enough to establish specific personal jurisdiction.”  Id. (citations omitted).    The court concluded that, even if Guerbet had acquired Mallinckrodt’s Missouri-based business, which Guerbet denied, sufficient minimum contacts would not arise from that ownership to confer specific personal jurisdiction over Guerbet.  But rather than dismiss the plaintiff’s claims against Guerbet, the  court found that it was “in the interest of justice”  to transfer the case to the District of New Jersey pursuant to the transfer statute, 28 U.S.C. § 1406(a), “to avoid the costs and delay associated with requiring [the] plaintiff to refile the case in the transferee district.”  Id. at *5.

Liebel’s Motion to Dismiss

Liebel did not challenge the court’s jurisdiction over it.  Instead, it moved to dismiss for improper venue.  Under 28 U.S.C. § 1391(b), venue is proper in a judicial district in which any defendant resides if all defendants are residents of the state in which the district is located, or in a district in which a substantial part of the events giving rise to the action occurred.  If there is no district that qualifies under either of these standards, “any judicial district in which any defendant is subject to the court’s personal jurisdiction” is a proper venue for the action.

Always remember: jurisdictional objections are waivable.  If a party fails to object to a court’s exercise of personal jurisdiction over it, it waives the objection and suffers the ripple effects of that waiver.  Because Liebel did not move to dismiss for lack of jurisdiction, it waived that defense and was deemed to have submitted to the court’s jurisdiction.  In turn, because Liebel was subject to the court’s jurisdiction, venue was proper under the final catch-all provision of 28 U.S.C. § 1391(b) and Liebel’s motion to dismiss was denied.  As the court emphasized, “[i]t would defy logic to deem [a defendant] subject to [the court’s] personal jurisdiction yet dismiss the plaintiff’s claims against it for improper venue for want of personal jurisdiction.”  Id. (internal punctuation and citations omitted).

Instead, the court granted Liebel’s alternative motion to transfer venue to the District of New Jersey, holding that the transfer was appropriate under 28 U.S.C.  § 1404(a) because the convenience of the parties, the convenience of the witnesses, and the interests of justice were best served by transfer.

And so, in the wake of statutes and precedents correctly applied, the case ended up where it belonged in the first place.  We like this decision.  We’ll let you know how we feel about “Mary.”

A federal court in Utah ruled the other day that it had no personal jurisdiction over a corporate parent, even though the plaintiffs alleged that the defendant subsidiary was the “alter ego” of its owner.  We read the order with great interest for a couple of reasons.  First, one of our first assignments out of law school was to respond to discovery and write motions for an insurance company’s parent—a holding company that held considerable assets, but did not underwrite insurance policies.  We have learned over the years that some companies don’t care so much about corporate parents being sued, and others care a great deal.  Our insurance company client was in the “cared a great deal” bucket, leaving us to parse endlessly how the “company” differed from the “group,” how the company did all the business and had all the employees, and how they all scrupulously observed every corporate formality.  It usually worked, because it was all true.  The holding company was a holding company, and the insurance company had the wherewithal to answer for his own debts.  Ever since this experience, we have held a persistent (perverse?) interest in alter ego, agency, and other ploys to “pierce the corporate veil.”

The second reason the recent District of Utah case caught our interest is because one of the underappreciated aspects of the Supreme Court’s reset of general personal jurisdiction in Bauman is how the Court discarded so-called “agency jurisdiction.”  That was where a court could impute a subsidiary’s forum contacts to the corporate parent by applying a relaxed “agency” standard.  That form of jurisdiction does not exist anymore.  See Daimler AG v. Bauman, 571 U.S. 117, 134-36 (2014).  The Supreme Court closed the loop when it recalibrated specific personal jurisdiction in BMS and held that specific jurisdiction cannot be based on another defendant’s forum contacts.  See Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1783-84 (2017).

So where did that leave the plaintiff in the recent Utah case who was trying to sue a medical device company and its corporate parent?  Because there was no general jurisdiction over the non-resident parent, the plaintiff had to prove specific jurisdiction through the rigorous and difficult-to-prove “alter ego” standard.  The case is Jorgensen v. Wright Medical Group, Inc., No. 2:18-cv-366, 2018 WL 6250606 (D. Utah. Nov. 29, 2018), and the plaintiff sued the medical device manufacturer (the “company”) and its holding company (the “parent”) alleging injuries resulting from treatment with the device.

The district court rejected jurisdiction over the parent, and there are three interesting points.

First, the district court considered evidence, even though it was ruling on a motion to dismiss.  In an attempt to establish sufficient forum contacts, the plaintiffs alleged that both the company and the parent “sold, distributed, and marketed” the device within Utah.  Id. at *2.  But the parent submitted uncontroverted affidavits explaining that it did no business in Utah and had no place or business or property there.  Id.  The plaintiff submitted press releases and SEC filings where the parent spoke of its medical device business generally, but the district court found that consolidated statements are a “common business practice” that did not undermine the specific facts in the sworn affidavits.  Id. at *3.  The lesson is that unproven allegations will not carry the jurisdictional day.  Even on a motion to dismiss, courts can and should consider evidence.

Second, the alter ego standard is difficult to meet.  In attempting to attribute the company’s forum contacts to the parent, the plaintiff relied on the same press releases and SEC filings as before, but they were not sufficient.  Rather, “(1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual [shareholder] no longer exist . . . and (2) the observance of the corporate form would sanction a fraud, promote injustice, or an inequitably result would follow.”  Id at *4.  This standard is based on Utah law, but it is similar to standards we have seen in other states.  Here, the parent’s affidavits again held sway:  They attested that the parent “maintains separate accounting and banking records from the accounting and banking records of [the company].”  Id.  The plaintiff neither rebutted this evidence, nor alleged that any fraud or injustice would result from observance of the corporate form.  Id.

Third, in what might be the most useful part of the order, the district court denied “jurisdictional discovery.”  Id. at 5.  The following standard applied:  “‘The district court does not abuse its discretion by denying jurisdictional discovery where there is a very low probability that the lack of discovery’ would affect the outcome of the case.”  Id.  The plaintiff had to suggest specific discovery that would lead to a different result, and he came up with just one set of documents that purportedly would show the parent’s “direct involvement” in the medical device at issue.  But another plaintiff had offered those same documents to establish liability against the parent in another case, and the parent was dismissed, making is “highly unlikely” that the documents would make a difference here.  Id.

All is not lost for this plaintiff.  He still has jurisdiction over the medical device company, although we know nothing from this order about the arguable merits of his claims.  He will not, however, be allowed to reach into the parent company’s pockets.

We’ve discussed personal jurisdiction a lot on the Blog lately, and not so lately, and for good reason. The Supreme Court’s reining in of both general and specific jurisdiction provides additional ways for defendants to win cases – particularly where the other side isn’t paying enough attention to the now more difficult legal environment.  The recent decision in Wagner v. Terumo Medical Corp., 2018 WL 6075951 (S.D. Cal. Nov. 21, 2018), is an example of what we mean.

The factual key to Wagner was that the plaintiff sued the wrong entity.  The named defendant didn’t start making the medical device in question until after the plaintiff’s implantation surgery.  Plaintiff’s failure to research the ownership history of the product at issue proved fatal in the current, less forgiving personal jurisdiction environment.

First, the plaintiff tried general jurisdiction, relying on the largely discredited theory that registering to do business/designating an agent for service of process constituted “consent” to general jurisdiction. That doesn’t work in California:

Plaintiff’s reliance on California Corporations Code Section 2100 to support general personal jurisdiction is misplaced. Although [defendant’s] status as a registered foreign corporation in California is relevant to the personal jurisdiction inquiry, . . .  California does not require corporations to consent to general personal jurisdiction in that state when they designate an agent for service of process or register to do business. . . .  The designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction.  As such, Section 2100 does not provide a basis for general personal jurisdiction.

Wagner, 2018 WL 6075951, at *5 (citations and quotation marks omitted).

The general jurisdiction argument was pretty poor, but since the plaintiff in Wagner was a California resident, one would expect plaintiff to have a better time of it with specific personal jurisdiction.  Not this time, though.  The specific jurisdiction test is one part “purposeful direction” of activities to the forum and one part that the case “arises out of or is related to” those aforesaid activities.  Wagner assumed the first prong.  In California (at least when its supreme court wasn’t trying to expand the mass tort industry), the second half of that test requires “but for” causation:

The second prong requires Plaintiff’s claim to be one which arises out of or relates to the defendant’s forum-related activities. . . .  [T]he second prong of the specific jurisdiction test [i]s a “but for” test.  Under the “but for” test, a lawsuit arises out of a defendant’s contacts with the forum state if a direct nexus exists between those contacts and the cause of action.

Id. at *6 (citations and quotation marks omitted). On this test, plaintiff’s failure to do the necessary homework lost the case. “Given that, at the point of plaintiff’s alleged injury, it had not yet acquired the rights to that [relevant] line of products, Plaintiff fails to show a causal nexus between [defendant’s] activities in the forum and her injury.” Id. (footnote omitted).

Thus, unless plaintiff is able to find some jurisdictional basis in “successor liability,” she is out of court.  Id. at *6 n.9.  Maybe plaintiff can.  California’s “product line exception” is a notoriously lax form of successor liability (Pennsylvania has a version of that, too).  But our general point remains the same.  Personal jurisdiction is no longer a “gimme” for plaintiffs, and defendants need to be familiar with all its ins and outs, because we can win cases that way.  Conversely, plaintiffs need to exercise considerably more care in where they file cases.  Thus, here on the Blog, we are devoting ourselves to exploring those ins and outs.