United States: Another Domino Teetering – Stream Of Commerce Personal Jurisdiction After BMS

Last Updated: March 13 2018
Article by James Beck

Several decisions since the beginning of the year, and two appellate rulings in the last couple of weeks, highlight another aspect of Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) ("BMS"), that should be valuable to defendants. BMS – which dealt with what the Court called "case-linked" (also known as "specific") personal jurisdiction, had some choice things to say about what kind of forum-related contacts suffice to confer jurisdiction.

Under BMS, case-linked jurisdiction "must "arise out of or relate to the defendant's contacts with the forum." Id. at 1780 (internal quotes omitted) (emphasis original). Where the "relevant conduct occurred entirely" out of state, "the mere fact that this conduct affected plaintiffs with connections to the forum state did not suffice to authorize jurisdiction." Id. (internal quotes omitted) (emphasis original). Without a plaintiff/case-specific factual hook, "specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the State." Id.

Finally, the BMS court reiterated that a defendant's distributing a product through independent third parties doesn't create case-linked jurisdiction either.

A defendant's relationship with a third party, standing alone, is an insufficient basis for jurisdiction. In this case, it is not alleged that [defendant] engaged in relevant acts together with [its distributor] in [the forum]. . . . The bare fact that [the defendant] contracted with a [forum] distributor is not enough to establish personal jurisdiction in the State.

Id. at 1783 (various citations and quotation marks omitted). BMS also cited (many times) and followed World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), which BMS described as holding that an "isolated occurrence" is not capable of supporting jurisdiction where "the defendant carried on no activity" in the state "whatsoever" and one of its products, in a "fortuitous circumstance," caused injury when it "happened to suffer an accident while passing through" the state. BMS, 137 S. Ct. at 1782.

And, of course, as we've mentioned before, there is also the federalism aspect of BMS:

[T]he primary concern is the burden on the defendant. . . . [E]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

Id. at 1780-81 (several internal quotation marks from World-Wide Volkswagen omitted).

The discussion in BMS – particularly given that it was authored by Justice Alito – suggested to us that so-called "stream of commerce" ("SoC") jurisdiction is also likely on its way out. SoC jurisdiction, for those of you who don't live with this stuff day in and day out, doesn't involve litigation tourists. Rather, it is s theory that plaintiffs advance when they claim to be injured in the forum by the product of a defendant that has nothing to do with that forum, except that in Tinker to Evers to Chance to Steinfeldt to Kling to Sheckard to Slagle to Schulte fashion, its product wound up in the state due to the independent actions of others. The product causing harm in the jurisdiction, without more, is purportedly enough to create case-linked personal jurisdiction under this theory. The defendant need not have intended, or even be aware, that its products were present in the forum state.

As we discussed here, in connection with the last time the United States Supreme Court addressed this variant of case-linked jurisdiction directly, SoC jurisdiction, particularly in its more extreme forms, does not depend the defendant having deliberately acted to market its products in the forum state. Instead "stream of commerce" is just what it sounds like. The only connection between the defendant and the jurisdiction is happenstance, in that random acts of intermediate product distributors-owners-sellers-whoever happened that brought the particular injury-causing product into the jurisdiction.

SoC jurisdiction has never commanded a majority on the Supreme Court. The best it ever did was four justices in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987), which not surprisingly arose from California. In Asahi, Justice Brennan, speaking for four justices, stated:

As long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise. Nor will the litigation present a burden for which there is no corresponding benefit. A defendant who has placed goods in the stream of commerce benefits economically from the retail sale of the final product in the forum State, and indirectly benefits from the State's laws that regulate and facilitate commercial activity. These benefits accrue regardless of whether that participant directly conducts business in the forum State, or engages in additional conduct directed toward that State.

480 U.S. at 117. This passage was dictum (no jurisdiction existed on the facts of Asahi) in a concurring opinion, but the concept of SoC jurisdiction in the absence of any forum-directed conduct by the defendant has persisted for decades.

In 2011, the Supreme Court held that SoC jurisdiction could not be asserted as a form of general jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 929 (2011). However, due to a concurring opinion by Justice Alito, the Court was unable to administer the coup de grâce in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011). Four justices "conclu[ded] that the authority to subject a defendant to judgment depends on purposeful availment," thus rejecting "the undesirable consequences of Justice Brennan's approach" in Asahi. Id. at 885. This Nicastro plurality held: (1) "jurisdiction is in the first instance a question of authority rather than fairness"; (2) "personal jurisdiction requires a forum-by-forum, or sovereign-by-sovereign, analysis"; and (3) "a defendant may in principle be subject to the jurisdiction of the courts of the United States but not of any particular State." Id. at 883-84.

However, Justice Alito, joined by Justice Breyer, refused "to announce a rule of broad applicability" that would have consigned SoC jurisdiction to the dustbin of history. Id. at 887. Instead, they agreed only that "a single sale of a product in a State does not constitute an adequate basis for asserting jurisdiction over an out-of-state defendant, even if that defendant places his goods in the stream of commerce, fully aware (and hoping) that such a sale will take place." Id. at 888-89.

We've thought, ever since BMS, that Justice Alito's enunciation (discussed above), of the federalist model of jurisdiction in BMS should be the deathblow to the kind of SoC jurisdiction without purposeful availment that has bedeviled product liability defendants for decades. He's now on-board with what he wasn't willing to join in Nicastro. But our thoughts and a dime will get us a cup of coffee. Now, however, several recent post-BMS decisions suggest that we're right.

First, the Oklahoma Supreme Court the other day decided Montgomery v. Airbus Helicopters, Inc., ___ P.3d ___, 2018 WL 1164671 (Okla. March 6, 2018), and held that BMS eliminated the remaining jurisdictional underpinnings of SoC jurisdiction. "[S]ubsequent, to [BMS] we must conclude that any 'stream of commerce' test applied to [defendants'] products . . . cannot establish Oklahoma jurisdiction":

[BMS] requires an affiliation between the forum and the underlying controversy, an activity or an occurrence that takes place in the forum State, which subjects the cause to the State's regulation. The adjudication of issues must derive from, or be connected with, the very controversy that establishes jurisdiction. Accordingly, a "sliding scale" approach, or "totality of the contacts" or "stream of commerce" approach is insufficient to establish specific personal jurisdiction.

Id. 2018 WL 1164671, at *9. While Oklahoma had "an interest in adjudicating this case," since "most of the harm" occurred there, "these facts alone, without [defendants] having further direct and specific conduct with this State directly related to the incident giving rise to the injuries, is insufficient for asserting specific personal jurisdiction over them" after BMS. Id. at *10. Montgomery thus wipes out a pro-plaintiff decision on SoC jurisdiction handed down within weeks of BMS. See Tarver v. Ford Motor Co., 2017 WL 3527710 (W.D. Okla. Aug. 16, 2017).

Second, as discussed last week, Shuker v. Smith & Nephew, PLC, ___ F.3d ___, 2018 WL 1096185 (3d Cir. March 1, 2018), disposed of a SoC–based jurisdiction claim against the target defendant's parent. The Third Circuit had for decades avoided taking a position on Asahi-style SoC jurisdiction, neither adopting nor definitively rejecting it. See, e.g., D'Jamoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 105-06 (3d Cir. 2009) (avoiding SoC issue by holding that airplane crashing in state did not "enter" the stream of commerce "as that term is generally understood"). But, with BMS on the books, the court flatly rejected SoC jurisdiction in Shuker. "We perceive no merit in [plaintiffs'] stream-of-commerce theory of personal jurisdiction." 2018 WL 1096185, at *14. Observing that "[a] plurality of Supreme Court Justices has twice rejected the stream-of-commerce theory," Shuker took notice of (as did we) of the relevant language in BMS:

Indeed, the Supreme Court has recently held that "[t]he bare fact that [a non-resident defendant] contracted with a [resident] distributor is not enough to establish personal jurisdiction in the State." [citing BMS] We thus have no cause to revisit our Court's precedent on this issue, and we decline to adopt [plaintiffs'] stream-of-commerce theory of specific personal jurisdiction.

2018 WL 1096185, at *14 (affirming rejection of SoC jurisdiction without any discovery). The Third Circuit's precedential rejection of broad SoC jurisdiction in Shuker calls into question some backward-looking district court decisions that we came across in writing this post, those being Antonini v. Ford Motor Co., 2017 WL 3633287 (M.D. Pa. Aug. 23, 2017), and Lindsley v. American Honda Motor Co., Inc., 2017 WL 3217140 (E.D. Pa. July 28, 2017).

Third, Venuti v. Continental Motors, Inc., ___ P.3d ___, 2018 WL 312532 (Utah App. Jan. 5, 2018), similarly rejected SoC jurisdiction in another plane crash case. Beyond selling the product generally, "there [wa]s no evidence that [defendant] took any additional steps to target [the forum state] for the sale of the product." Id. at *4. "[A] series of third-party sales" rather than "any deliberate action on the part of" the defendant brought the product into the state. Id. at *5. "[M]erely placing a product into the stream of commerce knowing that it could be swept into the forum state does not subject a manufacturer to personal jurisdiction." Id. Without some "target[ing]" of the forum, that the defendant sold a lot of products generally doesn't create jurisdiction, particularly after BMS:

When there is no connection between the forum and the underlying controversy, "specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the State."

Id. at *6 (quoting BMS, 1347 S. Ct. at 1781).

Fourth, also in 2018, Moseley v. Suzuki Motor, Inc., 2018 WL 539330 (D. Idaho Jan. 24, 2018), reached the same conclusion. The plaintiff in Moseley asserted SoC jurisdiction over a foreign product manufacturer without even bothering to allege how the product, which had been sold by a now-defunct independent distributor in Utah in 2008, made its way to Idaho by 2015, where it was involved in a fatal accident. Id. at *1; see id. at *2 ("Plaintiffs have failed to explain how the motorcycle even ended up in Idaho").

In the absence of any evidence that the defendant manufacturer ever "specifically targeted" the forum state, id. at *2, the Moseley court rejected SoC jurisdiction. Where "only the distributor, but not the manufacturer, purposefully availed itself of the benefits of doing business" in a state, personal jurisdiction over the manufacturer does not exist, even if the distributor, in this particular case, was a corporate subsidiary of the defendant. Id. at *3.

Courts are thus starting to get it. While BMS was not a SoC jurisdiction case, it did authoritatively delineate the standards for case-linked personal jurisdiction, which under Goodyear is the only possible basis for SoC jurisdiction. The holding in BMS that merely having in-state distributors is not enough for case-linked jurisdiction should therefore be fatal to non-purposeful availment versions of SoC jurisdiction, which rest on "contacts" (if they can even be called that) that are less significant.. In that respect, it should not matter that – unlike BMS – the plaintiffs in SoC jurisdiction cases are not litigation tourists, but rather resident plaintiffs. If, and only if, "purposeful availment" rather than the "fortuitous" conduct of third persons brought the product into the jurisdiction, can there be personal jurisdiction under any sort of SoC jurisdiction theory after BMS – as courts now appear to be recognizing.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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