The SCOTUS Decision in Ford v. Montana and Its Impact on the Defense of Life Science Companies

(Ryan M. Duffy, Partner-Washington, DC also contributed to this blog post)

The SCOTUS decision in Ford Motor Company v. Montana Eighth Judicial District Court[1] is a decision that we believe will alter the legal landscape in the defense of product liability matters with respect to the personal jurisdiction defense. We have reported on this case in prior posts (see The Law of Personal Jurisdiction Is About to Be Changed Again – What Life Science Companies Should Expect), and now that a decision has been handed down by the SCOTUS, we would like to share some of our thoughts on how we believe the decision will impact the defense of life science companies in product liability litigation throughout the United States.

As lower courts begin to interpret and apply the Supreme Court’s latest specific jurisdiction decision, it may turn out that the ability of plaintiffs to demonstrate personal jurisdiction over product manufacturers is expanded. The Court emphasized that a defendant’s contacts with a forum state need only “relate to” the plaintiffs’ claims to support jurisdiction. In other words, to support specific jurisdiction, the defendant’s contacts with the forum state do not need to be the actual alleged negligent or harmful actions that were the proximate cause of the plaintiffs’ injuries. The Court’s clarification on this point will make it easier for plaintiffs to argue that life science companies are subject to personal jurisdiction in states even in the absence of contacts that directly give rise to plaintiffs’ specific claims.

The Court’s unanimous 8-0 decision demonstrates that specific jurisdiction over Ford was not a close call. The Court repeatedly highlighted Ford’s extensive business contacts with the forum states,[2] with the majority opinion concluding that jurisdiction existed over Ford based on nearly “identical” cases previously decided by the Court. Ford, just as its competitors Volkswagen and Daimler before it, is subject to personal jurisdiction in a state that Ford extensively targeted for business related to the product at issue and where its product allegedly caused the resident plaintiff’s injury.

The overall impact of the Court’s decision may be to inject more ambiguity into the litigation of personal jurisdiction issues. This ambiguity may be amplified with respect to the life science industry in particular due to the unique features of the development and marketing of pharmaceutical and medical device products. The Court’s open-ended definition of the “relate to” prong of the specific jurisdiction test may encourage lower courts to assert jurisdiction over foreign defendants based on activities much different than Ford’s cultivation of car markets in Montana and Minnesota. After Ford, prescription medical product manufacturers should be on the alert for cases relying on newly constructed theories to link their business operations in a forum state to tenuously related legal claims.

THE NUTS AND BOLTS OF THE FORD v. MONTANA DECISION

Recognition of the Court’s Specific Jurisdiction Precedent
Particularly in life science and other product liability cases, battles over specific jurisdiction are often decided based on two critical requirements: whether the defendant has sufficient “minimum contacts” (i.e., business activity) with the forum state, and whether those contacts are sufficiently related to the plaintiff’s claims such that the Court’s exercise of personal jurisdiction is fair, reasonable and predictable. In Ford, the Court started its opinion with an assembly-line overview of many of its landmark specific personal jurisdiction decisions. The Court recognized that its “canonical decision” remains International Shoe Co. v. Washington, 326 U.S. 310 (1945), which held that jurisdiction must be based on a defendant having sufficient contacts with the forum such that exercising jurisdiction is reasonable and “does not offend traditional notions of fair play and substantial justice.”[3] The Court moved beyond International Shoe by referencing its many subsequent decisions that often had a common focus – the nature and extent of the defendant’s connection to the forum state.[4]

The Nature and Extent of Ford’s “Substantial Business” in the Forum States
The Court’s majority and concurring opinions unequivocally demonstrate that Ford had more than ample contacts with the forum states to support jurisdiction. As the majority opinion noted, Ford urged Montanans and Minnesotans to buy Ford vehicles, including the specific car models underlying plaintiffs’ claims, “by every means imaginable.”[5] The Court repeatedly stressed that Ford conducted “substantial business” in the forum states to cultivate a market for its cars, including the specific car models at issue in the cases before the Court. Ford’s relevant contacts with the forum states were so pervasive that Ford conceded it had “purposefully availed” itself of the privileges of conducting business in both forum states.

“[] Ford does not contest that it does substantial business in Montana and Minnesota – that it actively seeks to serve the market for automobiles and related products in those states. Or to put that concession in more doctrinal terms, Ford agrees that it has ‘purposefully avail[ed] itself of the privilege of conducting activities in both places.’”[6]

Rather than dispute the extent of its activities in the forum states, Ford argued that its business activities were not sufficiently related to the plaintiffs’ claims to support jurisdiction. To demonstrate jurisdiction, Ford argued there must be a causal link between its forum contacts and plaintiffs’ claims, and that such a showing was impossible in the cases before the Court. Ford based its argument primarily on the simple facts that the allegedly defective cars at issue were not sold to the plaintiffs by Ford in the forum states, and that Ford did not design or manufacture the cars in the forum states. Instead, the particular cars at issue were sold by Ford years ago in other states to other persons, and only happened to eventually be resold to plaintiffs in the forum states.

The Court roundly rejected Ford’s causation-based theory of specific jurisdiction, with the majority finding “no support” for Ford’s approach in the Court’s precedent. The Court highlighted the “most common formulation” of its relatedness prong of specific jurisdiction, which mandates that the plaintiffs’ suit must “arise out of or relate to the defendant’s contacts with the forum.”[7] The Court noted that the latter half of this rule (“or relate to”) clearly contemplates that some activities will provide for jurisdiction without a causal showing that the plaintiffs’ claims specifically “arise out of” the defendant’s contacts with the forum.

To solidify its rejection of Ford’s causation-based argument against jurisdiction, the majority explained that it had already recognized specific jurisdiction in “identical” situations to the case at hand, such as its well-known decisions in World-Wide Volkswagen and Daimler.[8] In the majority’s view, those cases demonstrated, in controlling fashion, that specific jurisdiction exists when a forum resident brings suit in the forum for injuries caused in the forum state by an allegedly defective automobile regardless of whether the vehicle was sold, designed or manufactured in the forum. Thus, the well-known names of these global car manufacturers were essentially interchangeable from a specific jurisdiction perspective when comparing World-Wide Volkswagen and Daimler to the Ford case before the Court.[9]

Turning back to the case at hand, how did Ford’s general activities in the forum states sufficiently “relate to” the plaintiffs’ claims at issue? In the majority’s view, the answer was quite simple: “Ford had systematically served a market in Montana and Minnesota for the very vehicles that the plaintiffs alleged malfunctioned and injured them in those states.”[10] Thus, just like Volkswagen and Daimler in past landmark cases, Ford was subject to personal jurisdiction for claims brought against them by forum residents based on accidents occurring within the forum.

 Fairness and “Reciprocal Obligations”
Throughout the Court’s majority opinion, Justice Kagan directly and indirectly highlighted the extent of Ford’s activities in the forum states to demonstrate that permitting jurisdiction “treats Ford fairly.”[11] Ford conducts “so much business” in the forum states that it “enjoys the benefits and protections of their laws,” such as the “enforcement of contracts, the defense of property, [and] the resulting formation of effective markets.”[12] But the conducting of such substantial business in the forum states does not come without a price. Instead, as the Court explained:

“All that assistance to Ford’s in-state business creates reciprocal obligations, most relevant here, that the car models Ford so extensively markets in Montana and Minnesota be safe for their citizens to use there. Thus our repeated conclusion: a state court’s enforcement of that commitment, enmeshed as it is with Ford’s government-protected in-state business, can ‘hardly be said to be undue.’”[13]

As a result, the Court found that the exercise of jurisdiction is fair to Ford based on the benefits it obtained from doing business in the forum states, and also predictable in light of Ford’s extensive and related connections with the forum states.

THE TAKEAWAY FOR DRUG AND MEDICAL DEVICE MANUFACTURERS

Drug and medical device manufacturers may take some solace in the fact that the Court’s decision primarily affirms an uncontroversial conclusion: a company that extensively targets a state to develop a market for a specific product will be held to respond to claims from resident plaintiffs for injuries allegedly occurring in that state. However, when the facts are not so one-sided, the majority’s unspecified boundaries for the “relate to” type of activities that will support jurisdiction will present a loophole for plaintiff attorneys to fill in with novel theories to establish specific jurisdiction in forums of their choices.

The life science industry operates in a distinctively different way than the Automobile industry. Unlike cars sold by Ford, which may be resold and redistributed across state lines over decades, drugs and medical devices are very rarely purchased second-hand or in components. Instead, they are most often prescribed by licensed physicians directly to the end users, i.e., the patients. We also don’t often see patients being treated with a drug or a device in a state other than the state where the products were prescribed, which means the place of purchase and place of injury are usually one and the same. However, these differences do not make the jurisdictional analysis for the drug and device manufacturers any less complicated than for Volkswagen, Daimler or Ford. Drugs and medical devices require substantial research and development, are subject to lengthy and extensive regulatory processes both before and post-marketing, and face some unique liability theories such as the theory of innovator liability, which holds liability even when the company does not manufacture the product. All of these special features may be exploited by plaintiffs to assert that the “relate to” prong is satisfied in states that are not the companies’ directly cultivated markets. Needless to say, like any other industry, the major life science companies promote their products nationwide and are therefore at risk of being subject to specific jurisdiction throughout the country.

To direct their business strategy to avoid litigation, it will be important for prescription product manufacturers to take a close look at the Ford opinion to examine where the Court’s precedent will draw the line between activities that “relate to” a legal claim and those that do not.

Forum Shoppers Are Explicitly Disfavored
The majority devotes a significant portion of their opinion to distinguishing Ford from the Court’s recent decision in BMS. In doing so, the majority repeatedly emphasizes the fact that the BMS plaintiffs were not residents of the forum state, did not use the product in the forum state and were not injured in the forum state.[14] In contrast, the plaintiffs in Ford were residents of the forum states and were injured in the forum states; as the majority puts it, in Ford, “each of the plaintiffs brought suit in the most natural State.”[15]

In BMS, the Court sent back home 592 non-California plaintiffs whose claims the Court found lacking any connection with BMS’s forum activities, despite the fact that 86 California resident plaintiffs took the same drug and sustained the same injury.[16] In Ford, the Court takes it one step further by pointing out that the nonresident plaintiffs in BMS “were engaged in forum-shopping – suing in California because it was thought plaintiff-friendly, even though their cases had no tie to the State.”[17]

After BMS and Ford, we can expect that the lower courts are likely to be more cautious regarding forum tourists, and are more likely to withhold jurisdiction in cases filed by out-of-state plaintiffs suing out-of-state defendants for out-of-state injuries, even when the injuries arise from nationally marketed products.

Business Activities That May or May Not Establish Specific Jurisdiction
Forum shopping aside, industry players should know what types of business activities may establish specific jurisdiction and what types may not in order to gear their business operations to reduce litigation cost.

The active marketing efforts that Ford conducted in Montana and Minnesota, which involved the product type at issue in the lawsuits, will certainly be viewed as “purposefully availing” of the benefit of the forum state. In turn, this will generate a “reciprocal obligation” for the company to answer lawsuits in the forum state when their products allegedly cause injury within the state. To drug and medical device manufacturers, these types of activities may include retaining sales representatives, making promotional visits to clinics and hospitals, organizing trainings and demonstrations, servicing medical devices and other types of promotional efforts. Even when these activities do not target the specific product at issue, under Ford they may still be held as “relating to” a plaintiff’s product liability claims against the same company. In addition, a company’s nationwide advertising campaign also may be held sufficient to establish specific jurisdiction in a forum state, especially if the in-state plaintiff, or his/her prescribing physician, claims to have been influenced by the advertisement.

With respect to researching and testing, Ford does not provide any guidance. In BMS, the defendant pharmaceutical company ran five research and laboratory facilities in California.[18] The Supreme Court held that it was not “sufficient – or even relevant – that BMS conducted research in California on matters unrelated to Plavix”[19] for purpose of specific jurisdiction. After BMS, lower courts have largely rejected researching and testing activities as basis for specific jurisdiction.[20] That said, at least in two cases brought by nonresident plaintiffs, the Northern District of California found specific jurisdiction based on the companies’ conducting clinical trials in California.[21] Clinical trials, although governed by established protocols, involve the same events as in normal courses of treatment – the prescription of, and treatment by, a medication or a medical device. Therefore, risk remains and companies should try to avoid aggregating their clinical trials in one state, or may consider strategically locating their clinical trials in certain jurisdictions.

The Ford opinion provides no guidance on whether regulatory activities may establish specific jurisdiction. In BMS, however, the Court noted that the company “did not develop [the product] in California, did not create a marketing strategy for [the product] in California, and did not manufacture, label, package, or work on the regulatory approval of the product in California.”[22] This holding at least suggests that, when none of the manufacturing, developing, labeling and marketing activities exists, regulatory submission alone will not support specific jurisdiction. This comports with the “fairness” principle the Ford court unanimously follows – working on regulatory submissions does not avail the company to any benefit or protection of the laws of the forum state, and thus finding jurisdiction on this basis will violate the limits set in both the Fourteenth Amendment and International Shoe.

Ford Does Not Address Internet Transactions
In a potentially important footnote, the majority draws a distinction between a company’s continuous forum business activities that will support jurisdiction and “isolated or sporadic transactions” that will not support specific jurisdiction. But the majority does not provide much guidance as to what constitutes isolated or sporadic transactions in the modern business world, which will be left mostly to future courts to determine. In the same footnote, the majority excludes internet transactions from their consideration, but not-so-subtly hints that internet transactions raise “doctrinal questions of their own” that will likely have to be decided in the near future. Therefore, this opinion does not explicitly apply to internet transactions. But, as the majority’s footnote alludes and as Justice Gorsuch explicitly notes in his concurring opinion, the ubiquitous presence of modern corporations, the realities of modern business, and the impact of the internet may require substantial alteration of the Court’s personal jurisdiction law in the near future.

[1] 589 U.S. ____, 2021 U.S. LEXIS 1610 (2021).

[2] The forum states at issue were Montana and Minnesota based on two separate defective-product suits consolidated for purposes of the present appeal.

[3] 589 U.S. ____, 2021 U.S. LEXIS 1610 (2021). at 11, quoting International Shoe Co. v. Washington, 326 U.S. at 316-17.

[4] Id. quoting Bristol-Myers Squibb Co. v. Superior Court, 582 U.S. __, 137 S. Ct. 1773, 1779 (2017).

[5] Id. at 19-20.

[6] Id. at 14-15 (internal citations omitted).

[7] Id. at 16 (emphasis in original), quoting Bristol-Myers Squibb, 582 U.S. at ___; 137 S. Ct. at 1786.

[8] World-Wide Volkswagen v. Woodson, 444 U.S. 286 (1980); Daimler AG v. Bauman, 571 U.S. 117 (2014).

[9] See Ford Motor Co., 2021 U.S. LEXIS 1610 at 19-20.

[10] Id. at 20-21.

[11] Id. at 23-24.

[12] Id. quoting International Shoe, 326 U.S. at 319.

[13] Id.

[14] Id. at 27.

[15] Id. at 28.

[16] Bristol-Myers Squibb, 137 S. Ct. 1773.

[17] Ford Motor Co., 2021 U.S. LEXIS 1610, at 27.

[18] Bristol-Myers Squibb, 137 S. Ct. at 1778.

[19] Id. at 1781.

[20] See, e.g., Coordination Proceeding Special Title Rule 3.550 v. Janssen Research & Dev., JCCP No. 4862, 2018 Cal. Super. LEXIS 3218 (Cal. Sup. Ct. Feb. 6, 2018); Moore v. Bayer Corp., 2018 U.S. Dist. LEXIS 147020 (E.D. Mo. Aug. 29, 2018); Hinton v. Bayer Corp., 2018 U.S. Dist. LEXIS 133910 (E.D. Mo. July 27, 2018).

[21] Dubose v. Bristol-Myers Squibb Co., 2017 U.S. Dist. LEXIS 99504 (N.D. Cal. June 27, 2017); Cortina v. Bristol-Myers Squibb Co., 2017 U.S. Dist. LEXIS 100437 (N.D. Cal. June 27, 2017).

[22] Bristol-Myers Squibb, 137 S. Ct. at 1778.

This blog post was published originally on April 23, 2021.