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A Jurisdictional Trifecta: The Supreme Court Restores Order on Venue and Jurisdiction

A JURISDICTIONAL TRIFECTA:

THE SUPREME COURT RESTORES ORDER ON VENUE AND JURISDICTION

The Supreme Court has issued a trio of decisions this term signaling a tightening of limitations on courts’ authority over out-of-state corporations. These opinions solidify that the once little-used doctrines of venue and personal jurisdiction are now important tools for defendants seeking to stave off forum-shoppers.

TC HEARTLAND LLC V. KRAFT FOOD GROUP BRANDS LLC.

137 S. Ct. 1514 (May 22, 2017). In this 8-0 opinion authored by Justice Thomas (Justice Gorsuch was not yet on the Court when the case was argued), the Court reversed the Federal Circuit’s decision that a corporation may be sued for patent infringement wherever it is subject to personal jurisdiction. This had been the Federal Circuit’s position on the issue for nearly 30 years.

The patent venue statute at issue, 28 U.S.C. § 1400(b), provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” Fifty years ago, the Supreme Court determined that for purposes of this statute, a domestic corporation “resides” only in the state where it is incorporated.[1]

Since that time, § 1400(b) has not been amended, but the general venue statute, 28 U.S.C. § 1391(c), has been amended twice to state a broader interpretation of “residence.” Section 1391 now states that “[e]xcept as otherwise provided by law” and “[f]or all venue purposes,” a corporation “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”[2]

In TC Heartland, the Federal Circuit below concluded that the § 1391(c) amendments effectively amended § 1400(b). The Supreme Court rejected that view, finding no basis in the statute for that conclusion, noting that “[w]hen Congress intends to effect a change of that kind, it ordinarily provides a relatively clear indication of its intent in the text of the amended provision.”

The Court reaffirmed its holding in Fourco fifty years ago: For domestic corporations “residen[ce]” in § 1400(b) means only state of incorporation.

BNSF RAILWAY CO. V. TYRRELL.

137 S. Ct. 1549 (May 30, 2017). In this 8-1 decision, the Supreme Court reversed the Montana Supreme Court’s finding of personal jurisdiction over railroad BNSF Railway Co., reaffirming its test for general jurisdiction stated three years earlier in Daimler AG v. Bauman.

In BNSF, the plaintiffs—one a North Dakota resident and the other an estate administrator appointed in South Dakota—had filed suit against BNSF under the Federal Employers’ Liability Act (FELA) in Montana, even though the plaintiffs did not live in Montana, did not work in Montana, and did not allege any injuries related to Montana. BNSF is incorporated in Delaware with its principal place of business in Texas.

In the opinion authored by Justice Ginsburg, the Court found there was no personal jurisdiction over the claims. First, the Court held that FELA does not address personal jurisdiction of state courts. The Court then addressed the remaining argument: whether general personal jurisdiction comports with due process. On this point, the plaintiffs in BNSF contended that BNSF was subject to general jurisdiction in Montana based on its extensive business contacts in Montana. BNSF has over 2,000 miles of railroad track and more than 2,000 employees in the State of Montana. The Supreme Court held the exercise of personal jurisdiction under these circumstances does not comport with due process, reaffirming its decisions in Goodyear and Daimler.[3]

Under Goodyear and Daimler, a corporation is only subject to general personal jurisdiction in the state of its incorporation or its principal place of business, or in exceptional cases, where the operations in another forum are so substantial that the corporation is essentially “at home” in that other state. Though BNSF certainly did substantial business in Montana, general jurisdiction is not about quantity, but rather “calls for an appraisal of a corporation’s activities in their entirety” to determine where the company is “at home.”[4] A corporation that does business in many states cannot be considered “at home” in each of them.

With BNSF, the Supreme Court made clear that Daimler’s holding is not limited to its facts. Rather, Daimler “applies to all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.”[5] And Daimler means exactly what it says: a corporation is only subject to general personal jurisdiction where it is “at home”—typically, only in its principal place of business and state of incorporation.

BRISTOL-MYERS SQUIBB V. SUPERIOR COURT OF CALIF.

No. 16-466, ____ S. Ct. ____, 2017 WL 2621322 (June 19, 2017). In this 8-1 decision authored by Justice Alito, the Supreme Court reversed the California Supreme Court’s finding of specific personal jurisdiction over non-California residents’ claims in that state.

In Bristol-Myers Squibb, more than 600 plaintiffs from around the country joined together to file suit in California, all alleging injuries related to the drug Plavix, sold by defendant Bristol-Myers Squibb. Bristol-Myers Squibb is incorporated under the laws of the State of Delaware and has its principal place of business in New York. Plaintiffs also sued McKesson Corporation, a California distributor of Plavix.

The California Supreme Court ruled that there was no general personal jurisdiction over Bristol- Myers Squibb under Daimler, but found that there was specific jurisdiction based on the company’s activities in the state.

The Supreme Court reversed, finding that “settled principles regarding specific jurisdiction control this case.”[6] The Court rejected California’s “sliding scale” test for specific jurisdiction, instead reaffirming the traditional test: “In order for a 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.’”[7]

The Court also clearly established that personal jurisdiction must be established by each plaintiff as to each defendant. Thus, the fact that the non-California plaintiffs had joined with California plaintiffs to file suit did not extend personal jurisdiction: Each plaintiff had to establish jurisdiction independently. Nor did the presence of McKesson Corporation create jurisdiction, as the requirements of personal jurisdiction must be met as to each defendant.

In sum, under the facts of Bristol-Myers Squibb, the plaintiff had two and only two options for suing the company in state court: (1) his or her home state, (2) the defendant’s home state. Anywhere else would be a violation of due process.


[1] Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957).

[2] 28 §§ 1391(a), (c).

[3] Daimler AG v. Bauman, 134 S. Ct. 746 (2014); Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, (2011).

[4] BNSF Ry. Co., 137 S. Ct. at 1559 (quoting Daimler, 134 S. Ct. at 762 n.20).

[5] Id. at 1553.

[6] Bristol-Myers Squibb Co. v. Superior Ct. of Calif., 2017 WL 2621322, at *7 (U.S. June 19, 2017).

[7] Id. (quoting Goodyear, 564 U.S. at 919).

Finis