The Law of Personal Jurisdiction Is About to Be Changed Again – What Life Science Companies Should Expect

The concept of personal jurisdiction refers to a court’s authority to order a defendant to answer legal claims filed in a particular state. “Lack of personal jurisdiction” is a powerful defense that will not only get the defendant out of the case at the very outset but also deter any future cases brought against that defendant in the same state. The law of personal jurisdiction therefore has both legal and business impacts – it is part of a company’s risk profile and it may determine where the company should direct its marketing efforts. While that law is ever-changing and never clear, the U.S. Supreme Court’s upcoming decision in two cases involving similar personal jurisdiction issues – Ford Motor Co. v. Mont. Eighth Judicial Dist. Court¹ and Bandemer v. Ford Motor Co.,² consolidated as Ford Motor Co. v. Mont. Eighth Judicial Dist. Court (Ford v. Mont.)³ – may change personal jurisdiction law once again and affect business decision-making in various industries, and the life science industry in particular, where most companies have more than one physical location, market their products across the country and are often sued in states not their domicile.

Personal jurisdiction can be found under two theories: general jurisdiction and specific jurisdiction. General jurisdiction is a straightforward test – a corporate defendant must be “at home” (i.e., the place of incorporation or principal place of business) in the forum state in order for the court to exercise jurisdiction over it. In states where the defendant is not “at home,” there needs to be specific jurisdiction to subject the defendant to the laws of the forum state. Specific jurisdiction requires that “the suit must arise out of or relate to the defendant’s contacts with the forum.”⁴ This test, however, is anything but clear and easy to apply. How a court should interpret the “arise out of or relate to” test is at the center of Ford v. Mont.

On July 24, 2020, my colleague Garrick Josephs posted an article on this blog about this consolidated case, after all the legal briefs were filed and the case was set for oral argument before the Court. Since Garrick’s article provided a detailed review of the background facts and procedural history, they will not be repeated here. Instead, the current piece will focus on the parties’ oral argument, the issues presented for the Court’s ruling, and how the Court’s decision will change the present law on personal jurisdiction and affect life science companies.

Oral Argument and Issues Before the Court
Oral argument was heard on October 7, 2020. In sum, Ford argued that the “arise out of or relate to” standard requires a causal relationship between the company’s forum contacts and the plaintiff’s injuries, i.e., the company’s forum activities must be the “proximate cause” of the plaintiffs’ injuries for it to be subject to personal jurisdiction in the foreign state. Since the accidents could have happened without any of Ford’s business operations in Montana or Minnesota, Ford contended the suits did not “arise out of or relate to” Ford’s forum contacts, and specific personal jurisdiction therefore did not exist.⁵ Plaintiffs, on the other hand, argued an “active cultivation” theory, explaining that by operating subsidiary companies, advertising its products and registering to do business in both states, Ford deliberately cultivated a market in these states and therefore purposefully availed itself to their jurisdiction.⁶

Among the issues before the Court, the following may reshape personal jurisdiction analysis:

• Whether Montana and Minnesota Supreme Courts conflated the two distinctive concepts of specific and general jurisdiction. In other words, can a corporate defendant in a forum where it is not “at home” be subject to personal jurisdiction based on its forum activities that although broad in extent are nonetheless unrelated to the plaintiff’s cause of action?
• Whether the terms “arise out of” and “relate to” refer to the same general concept, as Ford argued, or do these terms represent two different standards, each of which if satisfied would suffice to find personal jurisdiction, as plaintiffs argued?
• Does either term require the finding of a “causal relationship,” as argued by Ford?

The Court has yet to decide.

The Present State of the Law on Specific Jurisdiction
As the Montana Supreme Court noted, the states split on how to interpret the “arise out of or relate to” standard in decisions involving Ford’s products. Some states have taken an approach similar to that of the Montana Supreme Court and focused on whether Ford’s forum activities make it “reasonably foreseeable” that an accident might occur and lawsuits may be brought against Ford in the forum state. The fact that the product at issue was not originally sold in the state is immaterial. These states include Minnesota, Texas, Wisconsin, Pennsylvania and Oklahoma.⁷

Other states have interpreted the “arise out of or relate to” test much more narrowly and found no specific personal jurisdiction when the product was only purchased second-hand in the forum state, reasoning that the plaintiffs’ injuries would have occurred regardless of Ford’s forum activities. These states include California, Florida and Mississippi.⁸

Outside of the automobile industry, the present law on specific personal jurisdiction is the Supreme Court’s most recent decision in Bristol-Myers Squibb Co. (Bristol-Myers).⁹ There, the Court found no specific personal jurisdiction in California courts on claims brought by the nonresident plaintiffs, who bought the defendant’s drug, Plavix, outside of California and were allegedly injured by the drug outside of California.¹⁰ The Court reasoned: “For specific jurisdiction, a defendant’s general connections with the forum are not enough. … [a] corporation’s continuous activity of some sorts within a state … is not enough to support the demand that the corporation be amenable to suits unrelated to that activity.”¹¹ Bristol-Myers represents where the Court currently stands on the “arise out of or relate to” test – that it requires more than the defendant’s forum contacts unrelated to the claims.

How the Supreme Court May Rule and How Its Ruling May Impact Life Science Companies
The Court that rules on Ford v. Mont. will be different from the one that ruled on Bristol-Myers, with Justice Brett Kavanaugh replacing Justice Anthony Kennedy and Justice Amy Coney Barrett replacing Justice Ruth Bader Ginsburg. In another article on this case, the author examined prior rulings of Justice Kavanaugh and Justice Barrett and predicted that the new Court would likely rule in favor of Ford.¹²

Be that as it may, it should be noted that Ford’s purported “proximate cause” standard contradicts some of the basic principles the Court has set forth on personal jurisdiction. For example, personal jurisdiction is a threshold, procedural issue; the “proximate cause” test, on the contrary, requires a court to evaluate the merits of the case.¹³ Additionally, the “proximate cause” approach requires the Court to look at each individual act of a defendant, instead of “a course of conduct” that should be evaluated as a whole in determining whether the sovereignty may constitutionally adjudicate the defendant concerning those conducts.¹⁴ Adopting the “proximate cause” standard would require the present Court to deviate from all of its precedents on this issue.

However the Court may decide the issue, its decision will likely change the landscape of personal jurisdiction law. Automobile companies may be able to successfully dismiss a lawsuit for lack of personal jurisdiction in states where they are not “at home” and where the subject vehicle was not sold by their dealer, even when the lawsuits were brought by resident plaintiffs for injuries suffered in accidents that occurred in the forum state.

Life science companies operate in a slightly different fashion. Unlike cars, drugs and medical devices often are obtained by physician prescription and are rarely purchased second-hand. This means that the Court’s decision in favor of Ford may not directly benefit life science companies in the same way as it would automobile companies, especially in states such as California where the Bristol-Myers decision is followed by the lower courts, unless the Court goes as far as requiring a causal relationship between the defendant’s forum activities and the plaintiff’s injury.

On the reverse side, however, the Court’s decision in favor of the plaintiffs will likely hurt life science companies just as much as it will hurt Ford – drug and medical device manufacturers may find themselves subject to personal jurisdiction in cases brought by out-of-state plaintiffs on drugs prescribed, or devices used, out-of-state, so long as the companies have some marketing activities in the forum state that might be viewed as “encouraging” the plaintiffs, or their treating physicians, to choose the products at issue.

We will continue to track the Court’s decision in Ford v. Mont. and post a follow-up article once the decision is published. Should you have any questions or comments about this issue or any other risk issues unique to life science companies, please don’t hesitate to contact the author.

^{This blog post was published originally on December 22, 2020.}

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^{1 Ford Motor Co. v. Mont. Eighth Judicial Dist. Court (2019) 395 Mont. 478.
2 Bandemer v. Ford Motor Co. (2019) 931 N.W2d 744.
3 Ford Motor Co. v. Mont. Eighth Judicial Dist. Court (2020) 140 S.Ct. 917.
4 Bristol-Myers Squibb Co. v. Superior Court of Cal. (2017) 137 S.Ct. 1773.
5 Ford Motor Co., supra, 140 S. Ct., Petitioner Ford Motor Company’s Brief, Filed February 28, 2020.
6 Ford Motor Co., supra, 140 S. Ct., Respondents Charles Lucero’s Brief, Filed March 30, 2020.
7 Ford Motor Co., supra, 395 Mont, fn. 3, 4.
8 Ibid.
9 Bristol-Myers Squibb Co., supra, 137 S.Ct.
10 Id.
11 Id. at 1781.
12 Ford v. Montana, et al.: Specific Jurisdiction’s Next Mile Marker, https://www.lexology.com/library/detail.aspx?g=ecaef3fe-4591-468a-933c-5a196d35dada
13 Ford Motor Co., supra, 140 S. Ct., Brief for the United States as Amicus Curiae Supporting Petitioner, filed in March 2020, pg. 31.
14 Ibid.}