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
This is the second time in two years that we have written the Drug and Device Law Christmas blogpost. Last year, your dedicated blogger posted on Christmas Day a nice little piece on innovator liability that we are sure you all read while listening to Andy Williams, drinking egg nog, and roasting chestnuts on an open fire (note: If you would rather not light an open fire, a gas grill is a very capable substitute for roasting chestnuts, if that is your thing.) If you did not read our post last year, we forgive you. And whether you read us regularly or just pop in from time to time to read about preemption, please accept our holiday greetings and our undying gratitude. To all our readers, Happy Holidays from the DDLB!
Our gift to you on this Friday, December 23, 2016, is a blogpost discussing a topic on which we have not written a lot—alter ego personal jurisdiction. That is when a court takes jurisdiction over a corporation based on the forum contacts of a corporate subsidiary. We wrote about a district court rejecting alter ego jurisdiction here, but there is not much else discussing the subject in detail in the archive. That could be because successful examples of alter ego jurisdiction are exceedingly rare. The most common scenario is where plaintiffs sue an alleged corporate wrongdoer and try to hale into court not only the alleged wrongdoer, but also its out-of-state corporate parent. Their motivation is not a mystery: Plaintiffs want more defendants, larger balance sheets, and deeper pockets to reach into. And if the corporate parent has a recognizable “big” name, that’s all the better.
Unfortunately for plaintiffs and fortunately for the defense, this transparent ploy rarely works, and it did not work in a recent hip replacement case, Goldthrip v. Johnson & Johnson, No. 15-00651-KD-B, 2016 U.S. Dist. LEXIS 170801 (S.D. Ala. Dec. 8, 2016). In Goldthrip, the plaintiffs sued not only the company that made and sold the hip implant, but also its corporate parent. There were, however, two problems: First, the plaintiffs sued in Alabama, but the parent corporation was a New Jersey company. Second, the parent corporation neither made nor sold products; it was a holding company, as parent companies often tend to be. Id. at **2-4.
Not all personal jurisdiction cases coming out of Pennsylvania are bad. To be sure, an ED Pa judge’s recent embrace of the consent theory to get around Bauman was bad news – almost as bad as Philadelphia 76ers soon-to-be superstar Ben Simmons’s foot injury. Happily, a much better opinion arrived last week: Baker v. Livanova PLC et al., No. 1:16-cv-00260 (M.D. Pa. Sept. 29, 2016). The author was Judge John E. Jones, the same judge who presided over the intelligent design case a couple of years ago. Judge Jones has a reputation for being smart and trying to get things right, and the Baker decision won’t hurt that reputation one bit.
Baker is a putative class action, seeking medical monitoring based on an allegation that a heater-cooler system for regulating blood temperature during open heart surgeries exposed patients to a nasty bacterium. In addition to suing companies that the court calls “Sorin” and “Sorin USA,” the plaintiffs also sued the parent company, LivaNova PLC, which is incorporated and headquartered in the United Kingdom. The issue was whether there was personal jurisdiction over LivaNova. (Sorin and Sorin USA did not contest personal jurisdiction.) The plaintiffs said there was specific jurisdiction over LivaNova based on: (1) LivaNova’s contacts with Pennsylvania regarding the heater-cooler system, (2) LivaNova functioned as the alter ego of its subsidiaries, and (3) the almost ancient case of Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), placed distributors on the jurisdictional hook. Note that general jurisdiction was not at issue, so the lovely Bauman case does not make even a cameo appearance. Then again, neither does the Walden case, which was decided by SCOTUS around the same time as Bauman and which says very important things about specific jurisdiction. But even without discussing Walden, Judge Jones addresses plaintiffs’ argument correctly and coherently. You might even say that the Baker case has an intelligent design.