More of What You Will See on Personal Jurisdiction Following BMS

by Reed Smith
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We wrote a few months ago about what you will see from the plaintiffs’ side as they try to evade the Supreme Court’s opinion in BMS v. Superior Court.  That opinion has combined with Bauman to reset personal jurisdiction and restore fairness to a system that had gotten out of whack, particularly in the mass tort world in which we often dwell.  Plaintiffs have resisted this reset, even though there is no rational reason why they should.  A more disciplined approach to personal jurisdiction imposes absolutely no burden on plaintiffs, who remain free to sue where the defendants are “at home” or (if different) where the operative facts occurred with regard to those defendants.  The resistance comes from their attorneys, who would prefer to concentrate masses of case in fewer jurisdictions of their choosing so they can make more money with less effort.  We are not judging; they are merely exploiting the incentives built into our civil litigation system.

So what is in their personal jurisdiction playbook? We reported before that plaintiffs will try to stretch even the most tenuous forum contacts into specific personal jurisdiction.  Or they will assert that defendants “consented” to jurisdiction in a particular state through such routine activities as registering to do business.  If those do not work, the fallback position will always be to request “jurisdictional discovery,” even when the facts relevant to forum contacts are either undisputed or are already within the plaintiffs’ control.

Plaintiffs recently added to those tactics in a hernia mesh MDL in New Hampshire, In re Atrium Medical Corp. C-Qur Mesh Products Liability Litigation, No. 16-md-2753, 2017 WL 5514193 (D.N.H. Nov. 14, 2017), where the issue was whether the court had personal jurisdiction over a holding company based in Sweden.  The company did not make or sell the products in question, and it was undisputed that the company had no direct contacts with the United States.  Of course, the plaintiffs sued the device manufacturers too, and those companies did not contest jurisdiction in New Hampshire.  But wanting deeper pockets in which to reach, or simply to increase their nuisance value through harassment, the plaintiffs opposed the holding company’s motion to dismiss on multiple grounds.

First, the plaintiffs argued that the Swedish company waived its personal jurisdiction defense by participating in the MDL and complying with the court’s initial case management orders.  That argument was obviously frivolous.  The Swedish company asserted the lack of personal jurisdiction as an affirmative defense in its answer and simultaneously filed a motion to dismiss on that basis.  It is certainly possible for a defendant to waive its personal jurisdiction defense, but the Federal Rules allow a defendant to preserve a personal jurisdiction defense by way of answer (unlike some states).  The Swedish company did that, and it also moved to dismiss as soon as it answered.  That is not a waiver.  Id. at *2.

Second, the plaintiffs argued that the Swedish company was judicially estopped from contesting jurisdiction because the company participated in product liability cases in New Hampshire and California and had itself sued someone in Delaware state court.  This argument borders on frivolous as well.  Judicial estoppel prevents litigants from taking a contested legal position in one case to gain an advantage then taking the opposite position in another case to gain an advantage there, too.  A common example is a plaintiff who discharges his debts in bankruptcy by representing that he has no product liability claims, but then turns around and represents to another court that he actually has a claim by filing a complaint.  You can’t do that.  Another example, which we wrote about here, is when a plaintiff defeats preemption by arguing that a drug manufacturer’s label change was voluntary, but then turns around and argues later that the label change was not a subsequent remedial measure because it was actually mandatory.  That’s wrong, too.  Here, the Swedish company was neither talking out of both sides of its mouth nor trying to gain an unfair advantage.  There are many reasons why a defendant would voluntarily submit to a court’s jurisdiction in one case but not in another, especially when the rules have recently changed.  Moreover, if the plaintiffs were correct, a defendant who voluntarily submitted to personal jurisdiction in any state would be permanently estopped from asserting the defense anywhere and everywhere.  Ridiculous.  The court did not think much of the argument either. Id. at *3.

Third, the plaintiffs argued that the other defendants’ forum contacts could be attributed to the Swedish company because the Swedish company assumed responsibility for the other companies’ liabilities and because the companies were alter egos or agents of each other.  This version of “piercing the corporate veil” is very difficult for plaintiffs to satisfy, and while the plaintiffs gained some traction with this argument, they are hardly out of the woods yet.  The rules as applied in an MDL are a little different, and because we have never seen them set forth quite so clearly, we will repeat them here:

In multi-district litigation cases . . . the [specific personal jurisdiction] inquiry is often more complicated. In multi-district litigation based on diversity jurisdiction, ordinarily personal jurisdiction in the transferee court is based on the jurisdiction of the transferor court.  The transferee court then separately applies the state law pertaining to personal jurisdiction applicable in each of the transferor courts.  The transferee court, however, conducts “this analysis according to the law not of the transferor circuit,” but rather according to the law of the circuit in which it sits.

2017 WL 5514193, at *4 (citations omitted).  In other words, an MDL court applies the long-arm statute of the state in which the case was initially filed, but ultimately determines personal jurisdiction under the precedent of the circuit in which it sits.  There are also issues around personal jurisdiction over out-of-state defendants when MDL judges permit “direct filing” into multidistrict litigation, which we discussed at some length here.  This is one reason why the venue of an MDL, as selected by the J.P.M.L., matters.

The court also set forth the various procedural approaches to deciding a personal jurisdiction challenge: The court can determine whether the plaintiff has made a mere prima facie showing that personal jurisdiction exists, or it can conduct a full-blown evidentiary hearing and decide personal jurisdiction on a preponderance-of-the-evidence standard.  A third option falls in between these two ends of the spectrum.  Under the “intermediate standard,” also known as the “likelihood standard,” the court can weigh evidence and find “whether the plaintiff has shown a likelihood of the existence of each fact necessary to support personal jurisdiction.” Id. at **4-5.

The district court decided it would apply the “intermediate standard,” but would do so only after allowing additional discovery. That’s right—jurisdictional discovery.  We have expressed our opinion on jurisdictional discovery—we don’t think that it will make any difference except in the most exceptional cases and should not be allowed.  We also think that jurisdictional discovery is an area appropriate for cost-shifting under Rule 26(c)(1)(B).  This court, however, is allowing it.  But not the oppressively overreaching discovery that, of course, the plaintiffs proposed, which the court rejected as “broader than necessary to address the jurisdictional issues that have arisen.” Id. at *9.  Instead, the court directed the plaintiffs to serve discovery “focused on the issues,” which presumably includes the agency and alter ego theories that the plaintiffs advanced. Id. The discovery many or may not make any difference.  Only time will tell, but either way, the DDL Blog will be monitoring.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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