Businesses Urge Justices to Limit Reach of State Courts

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By Kimberly Strawbridge Robinson

The U.S. Supreme Court seemed likely to restrict the reach of state courts in two cases argued April 25 ( BNSF Ry. Co. v. Tyrrell, U.S., No. 16-405 , argued 4/25/17 ; Bristol-Myers Squibb Co. v. Superior Court for the Cty. of San Francisco, U.S., No. 16-466 , argued 4/25/17 ).

In one, pharmaceutical giant Bristol-Myers Squibb Co. wants the Supreme Court to toss several California cases relating to the company’s billion dollar blood thinner Plavix. In the other, railroad titan BNSF Railway Co. wants the court to throw out two workplace injury suits pending in Montana.

The defendant businesses in both cases say the plaintiffs chose those particular states because they are “plaintiff-friendly” forums, not because of any special relationship the states have with either the defendants or the events giving rise to the cases.

Even though the case against BNSF is essentially one of statutory interpretation, both companies point to the Supreme Court’s unanimous decision in Daimler AG v. Bauman, to say that such “forum shopping” violates the Constitution if there isn’t an adequate connection between the state and either the business defendant or the events giving rise to the case. Daimler was a game-changer for businesses because it limited where they could be sued.

In both cases argued April 25, the justices suggested that it would be unfair to haul business into states where they wouldn’t expect to be sued. Attempts to convince the justices otherwise, particularly in BNSF, seemed to fall on deaf ears.

You’re making a “valiant effort,” Justice Stephen G. Breyer told the plaintiffs’ attorney in that case. But the justices seemed unmoved.

Fairness Is Key

To deal with the cases, the justices had to go back to the fundamental legal concept of personal jurisdiction—that is, the ability states have to exercise judicial power over defendants.

Courts can exercise specific personal jurisdiction over defendants when the defendant engaged in specific acts within the state that gave rise to the plaintiff’s claims. Or states can have general personal jurisdiction over defendants, meaning that the defendant’s activities within the state are so substantial that they can expect to be sued in that state for any reason.

Though the case against Bristol-Myers involves specific personal jurisdiction and the one against BNSF involves general personal jurisdiction, both seemed to come down to one thing: fairness to the defendant.

Before the Supreme Court’s landmark 1945 decision in Int’l Shoe Co. v. Washington, states could basically open up their courts to anyone, Breyer said. After International Shoe, states could only do so if it wasn’t unfair to the defendant, Breyer said.

Specifically, defendants could be sued in a state’s courts only if doing so didn’t “offend traditional notions of fair play and substantial justice,” the court in International Shoe said.

Loading the Dice

The fairness inquiry cut both ways in BNSF. Plaintiffs’ attorney Julie Murray of Public Citizen Litigation Group, Washington, said that it would be unfair not to allow the plaintiffs here to sue in Montana, where BNSF has substantial business activities.

She pointed to one plaintiff, Robert Nelson, who is a citizen of North Dakota, but was injured in Washington state. Under BNSF’s view, Nelson would have to sue the railroad either in Washington, where the injury occurred, Texas, where BNSF has its principal place of business, or Delaware, where the company is incorporated. That’s quite a long way to travel for a plaintiff in a personal injury suit, Murray suggested.

It’s not clear why Congress would have wanted such a plaintiff to be able to sue in Montana, Justice Samuel A. Alito Jr. countered.

Chief Justice John G. Roberts Jr. suggested that Nelson didn’t bring his case in Montana courts because of convenience, but instead because of the state’s plaintiff-friendly rules.

But that’s the kind of result that Congress wanted when passing the Federal Employers’ Liability Act, under which Nelson brought his claim, Murray said. Congress wanted to “load the dice” a little in favor of plaintiffs by allowing them to sue railroads anywhere they do business, she said.

That’s led to the kind of “wild west” scenario we have now, BNSF’s attorney Andrew S. Tulumello of Gibson, Dunn & Crutcher LLP, Washington, told the justices. Dozens of plaintiffs that have no connection to Montana, and who weren’t injured in Montana, are currently suing BNSF there, he said.

Under the plaintiff’s theory, that kind of scenario could happen in any one of the more than 20 states that BNSF does business, Nicole A. Saharsky of the Justice Department, Washington, said. Saharsky argued for the United States as amicus curiae supporting BNSF. That can’t be right under Daimler, Saharsky said.

Daimler specifically limited general personal jurisdiction to the states where the defendant business is essentially “at home.” That typically will be either the place of incorporation or the principal place of business.

Sliding Scale

Daimler dealt with general personal jurisdiction, but it came up in Bristol-Myers, too.

The California court originally found that it had general personal jurisdiction over Bristol-Myers, Justice Ruth Bader Ginsburg pointed out. The state court changed its theory once the Supreme Court handed down Daimler.

Instead, the state court said it had specific personal jurisdiction over Bristol-Myers, using a “a sliding scale approach.” Under that approach, the more contacts that the defendant has with the state, the easier it will be for the plaintiff to show that the defendant’s actions within the state gave rise to the plaintiff’s product liability claims, the Supreme Court of California said.

That “impermissibly blurs” the lines between specific and general jurisdiction, Bristol-Myers said in its brief.

Justice Elena Kagan seemed to agree. Specific personal jurisdiction requires that the plaintiff’s claim “relates to or arises out of the defendant’s contacts with the forum state,” Kagan said. Here, it’s hard to see how an Ohio plaintiff’s claims arise out of or relate to Bristol-Myers’s contacts with California, she said.

‘Patronizing View of Federalism’

But Kagan didn’t see how it was unfair to Bristol-Myers to be sued by Ohio plaintiffs given that there were also California residents in the cases. Why “is it unfair to glom on Texas claims and New York claims to the California claims, once we already have a mass action” that California courts unquestionably have the authority to hear, Kagan asked.

Bristol-Myers attorney Neal K. Katyal of Hogan Lovells US LLP, Washington, said it was unfair to apply California substantive and procedural law to those Texas and New York claims.

Under federalism principles, don’t Texas and New York have an interest in administering their own procedures with respect to their own citizens for torts that occur in their own states, Justice Neil M. Gorsuch wanted to know.

Plaintiffs’ attorney Thomas C. Goldstein, of Goldstein & Russell P.C., Bethesda, Md., suggested that a suit in California would be able to take care of those other states’ interests.

That’s “a very patronizing view of federalism,” that “California will tell Ohio, oh, don’t worry, Ohio, we’ll take care of you,” Justice Anthony M. Kennedy said. “That’s not the idea of the federal system,” he said. Instead, the idea is that “states are limited,” Kennedy said.

Moreover, the defendant’s home state or states also have an interest in protecting their citizen, which has been sued in another state, Kagan said.

More Efficient

Goldstein countered that the plaintiffs’ rule would be more efficient for courts, as it would concentrate the cases in one state.

But no matter what the court does in these cases, there will still be some litigation in other states, Ginsburg noted.

True, the plaintiffs’ proposed rule wasn’t “perfect,” but it’s better than Bristol-Myers’s proposed rule, which would require much more fracturing of the cases, Goldstein said.

Ginsburg didn’t seem convinced, however. The plaintiffs could have brought their case as a single class action, she said. They specifically avoided doing that, Katyal noted, likely because they probably would end up in federal court, which is seen as more defendant-friendly.

To contact the reporter on this story: Kimberly Strawbridge Robinson in Washington at krobinson@bna.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com

For More Information

Full Bristol-Myers transcript at http://src.bna.com/oeA. Full BNSF transcript at http://src.bna.com/oeB.

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