Connecticut Superior Court Imposes Jurisdiction on Texas Defendant and Narrowly Interprets Daimler AG v. Bauman

By and on October 9, 2017

Since the United States Supreme Court’s decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014) defendants, especially those defending product liability claims, have increasingly pursued motions to dismiss on personal jurisdiction grounds. A Connecticut superior court recently denied such a motion and held that a Texas-based manufacturing company was subject to personal jurisdiction in Connecticut, even though the defendant’s sales into Connecticut were less than .01% of total company sales, and the defendant did not sell to plaintiff’s workplace until after he worked there. Daimler held that a specific jurisdiction is limited to where the defendant’s in-state activities are continuous and systematic, and give rise to the liabilities sued on, the Connecticut decision, suggests that at least one Connecticut superior court does not consider the Daimler as greatly limiting the reach of the state’s long-arm statute.

The Honorable Judge Barbara Bellis of the Connecticut Superior Court in the Judicial District of Fairfield at Bridgeport decided Rice v. American Talc Co., No. FBT CV-15-6053658-S (Sept. 7, 2017), applying Connecticut’s broad long-arm statute:

Every foreign corporation shall be subject to suit in this state, … on any cause of action arising as follows: … (3) out of the production, manufacture or distribution of goods by such corporation with the reasonable expectation that such goods are to be used or consumed in this state and are so used or consumed, regardless of how or where the goods were produced, manufactured, marketed or sold or whether or not through the medium of independent contractors or dealers; …

Conn. Gen. Stat. § 33-929 (f)(3).

The plaintiff argued that the defendant Texas company was subject to the court’s jurisdiction under Conn. Gen. Stat. § 33-929 (f)(3) because plaintiff’s decedent was allegedly exposed to defendant’s asbestos-containing talc while working at an American Standard plant in Connecticut. Plaintiff further argued that the defendant had a reasonable expectation that its products would be used in the State of Connecticut. Defendant was a producer of talc, American Standard allegedly used that talc in the manufacturing process, and American Standard was one of the defendant’s customers. Additionally, plaintiff proffered that the defendant purposefully sought out the Connecticut market, and shipped products directly to consumers there.

Defendant, on the other hand, argued that the plaintiff’s decedent’s injuries could not have arisen out of any transaction by the defendant in Connecticut because the defendant did not acquire rights to mine allegedly asbestos-containing talc until three years after plaintiff’s decedent stopped working at the American Standard plant. Defendant manufacturer also argued that it did not have the minimum contacts in the forum state to justify jurisdiction because it never had offices, employees, or sales agents in Connecticut, had no sales to any company in the forum state after the 1970s and the few sales that it did have into Connecticut were less than .01% of its sales in any given year.

The court used a two-part test to consider the defendant’s challenge to personal jurisdiction via motion to dismiss. First, the court determined that the state’s long-arm statute authorizes jurisdiction over the defendant because the “arising… out of” language does not require a plaintiff’s cause of action and defendant’s contacts with the forum state to be causally connected. The court further agreed that a plaintiff does not need to show that the defendant solicited business in the state, only that the defendant could reasonably anticipate being sued by some person who had been solicited in Connecticut.

In Rice, the plaintiff submitted a deposition transcript stating that, when the defendant was selling products to a distributor, defendant also knew who the distributor’s customer was. Sales records established that the defendant sent a sample shipment of twenty bags of talc to Connecticut in November 1972, and sales invoices showed numerous shipments to Connecticut between 1969 and 1976. Based on this evidence, the court concluded that it was reasonably foreseeable that the defendant could be sued in Connecticut.

Under part two of the test, the court determined that whether the exercise of jurisdiction over the defendant under Connecticut’s long arm statute did not violate Constitutional principles of due process. Daimler held that a state could exercise personal jurisdiction over an out-of-state defendant if the defendant had minimum contacts with the forum state such that the suit does not offend the “traditional notions of fair play and substantial justice.” Rice found that “minimum contacts” was satisfied because the defendant shipped products to Connecticut (even if it was a small percentage of sales) and was aware of the ship-to-point when sending products to distributors. Moreover, the court reasoned that while the defendant shipped products to Connecticut after plaintiff’s decedent stopped working at the American Standard plant, the defendant shipped other products to Connecticut while the plaintiff’s decedent was allegedly exposed to defendant’s asbestos-containing products working as a painter.

Rice found that jurisdiction accorded with “fair play and substantial justice,” based on five factors: (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of justice of the forum state in adjudicating the case; (3) the plaintiff’s interests in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies.

Rice weighed factor (1) in favor of the defendant, stating that travel costs could be a burden because the defendant is incorporated in Texas and would have to defend a suit in Connecticut. According to the court, however, factors (2) through (5) all weighed in favor of the plaintiff. Connecticut has a strong interest in adjudicating personal injury actions involving its own citizens where the claimed injury was caused in part by a defendant who purposefully distributed products in the state. Furthermore, the plaintiff is a resident of the forum state and has an interest in obtaining convenient and effective relief in the state. The court decided that adjudicating in Connecticut would also be the most efficient use of judicial resources because the plaintiff has sued multiple defendants over a single and indivisible injury (mesothelioma). Requiring the plaintiff to maintain multiple actions in different jurisdictions would not only be inefficient, but impose a greater burden on the plaintiff than the burden of subjecting the defendant to suit in Connecticut.

The Rice decision displays that shipping products to Connecticut, even only a small fraction of a company’s sales, may be enough to reasonably foresee being sued in Connecticut. This can be enough to subject a foreign company to specific jurisdiction in Connecticut, even if the dates of sales do not overlap with the timing of the alleged injury. Additionally, solely being incorporated in a distant state and incurring travel costs during trial likely will not be sufficient to establish that the traditional notions of fair play and substantial justice have been violated.

As a trial court ruling, the Rice decision is not binding precedent. But if it is followed by other Connecticut courts, the result will be s a heavy burden on foreign corporations seeking to apply Daimler to limit Connecticut jurisdiction. There is no word yet on whether an appeal will be filed.

Filed under Asbestos, Connecticut, Daimler AG v. Baumann, Jurisdiction, long arm statute, minimum contacts, Talc

Illinois Supreme Court Rejects Plaintiff’s Fishy Basis for General Jurisdiction, Mandating that Out-of-State Corporation Be “Essentially at Home” Pursuant to Daimler

By on September 25, 2017

On September 21, 2017, in Aspen American Insurance Co. v. Interstate Warehousing, Inc., No. 121281 (Illinois, September 21, 2016), the Illinois Supreme Court held that an out-of-state corporation must be “essentially at home” in Illinois before general jurisdiction may be found, rejecting plaintiff’s argument that the presence of a single warehouse in the state meets this standard.  In a straightforward interpretation of Daimler AG v. Bauman, et al., 134 S.Ct. 746 (2014), the court confirmed that general jurisdiction requires “continuous and systematic” contacts with Illinois, which can be met by showing that a defendant is either incorporated in Illinois or has its principal place of business there.  The Illinois Supreme Court’s ruling follows on the heels of two recent U.S. Supreme Court Decisions, both of which confirm that Daimler meant what it said about the limits of general jurisdiction, and Illinois now joins other states – such as Delaware, Missouri, and Rhode Island – which have rendered similar rulings.

Aspen  arose after Eastern Fish Company, a corporation in the business of importing fish products, contracted with defendant Interstate Warehousing Inc. to store its products at one of defendant’s warehouses located in Michigan.  When the warehouse’s roof collapsed, the importer’s products were contaminated and deemed unfit for human consumption.  Plaintiff, which insures Eastern, paid Eastern’s claim for the loss and then brought this subrogation action in the circuit court of Cook County.  ¶ 3.

Defendant moved to dismiss the complaint on the ground that Illinois courts lacked personal jurisdiction.  ¶ 6.  In response, Plaintiff first argued that because the dcfendant has a warehouse located in Joliet, Illinois, it was doing business in the state and thus subject to personal jurisdiction.  Plaintiff further argued that because defendant Interstate was registered to do business in Illinois, it could be sued in Illinois.  ¶ 8.  The circuit court denied the motion to dismiss and the Appellate Court for the First District affirmed, finding that Plaintiff had made a prima facie showing of general jurisdiction.  Illinois’ highest court reversed the lower courts’ decisions.

The Illinois Supreme Court first examined the federal due process standards set forth in Daimler, as well as Illinois’ long-arm statute, codified at 735 ILCS 5/2-209 , which governs the exercise of personal jurisdiction over non-resident defendants.  In doing so, the court followed in Daimler’s footsteps by finding that a “plaintiff must make a prima facie showing that defendant is essentially at home in Illinois.”  ¶ 18.  In order to do so, a plaintiff must show that the “defendant is incorporated or has its principal place of business in Illinois or that defendant’s contacts with Illinois are so substantial as to render this an exceptional case.”  Id.

Although the defendant does business through its Joliet warehouse, the court found that it was insufficient to establish Illinois as a  “surrogate home,” even though the evidence established that the warehouse had been in continuous use in Illinois for 25 years.  ¶ 19.  If it were sufficient, the court reasoned, then that the defendant would be considered at home in every state in which it has a warehouse, opening up numerous forums for it to be sued within.  Id.  The U.S. Supreme court had previously rejected this idea in Daimler, holding that “[a] corporation that operates in many places can scarcely be deemed at home in all of them.”  Daimler AG v. Bauman, 134 S. Ct. 746, 762 n. 20 (2014). Aspen followed suit and held that general jurisdiction was not authorized under Illinois’ long-arm statute as it would deny defendant due process of law.  ¶ 20.

The Illinois Supreme Court next looked to the Business Corporation Act of 1983 (“Act”) to see if it permitted general jurisdiction.  Upon examination, the court found that Defendant’s registration to do business within Illinois under the Act is not enough to subject it to personal jurisdiction within the state.  The court further found that the fact that the defendant has a registered agent in Illinois for service of process is also not enough to subject it to personal jurisdiction.  ¶ 22.  The court reasoned that the Act does not require out of state corporations to consent to general jurisdiction as a condition of doing business in Illinois and that a corporation does not waive its due process rights by registering in Illinois or appointing a registered agent.  ¶ 24.  For these reasons, the court held that general jurisdiction is also not permitted under the Business Corporation Act of 1983.

Illinois now joins other states which have made clear that they will apply the Daimler court’s test for personal jurisdiction, requiring that a defendant’s “affiliations with the forum state be so ‘continuous and systematic’ as to render them essentially at home.” Under Daimler, this can be accomplished by a showing defendant’s incorporation in that state or by showing that the defendant’s principal place of business is located there.  Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).”    Accordingly, Aspen provides Illinois defendants a powerful new tool to fight forum shopping, and to ensure Constitutional due process to litigants in Illinois courts.

 

 

Filed under Daimler AG v. Baumann, Illinois, Jurisdiction, long arm statute, minimum contacts

There’s No Place Like Home: United States Supreme Court Reaffirms Daimler, Sends Out-of-State Plaintiffs Packing In Two Highly Anticipated Cases

By and on June 20, 2017

The United States Supreme Court has issued two highly-anticipated personal jurisdiction decisions limiting suits against defendants who are not “at home” in a state, or alternatively, did not commit a wrongful act in that state.

Specific Jurisdiction

“General jurisdiction” exists over a defendant only where it is “at home,” generally where it is incorporated or has its principal place of business.  “Specific jurisdiction” exists only when the claims in a lawsuit arises out of a defendant’s connection to the jurisdiction, such as selling products. The Supreme Court reaffirmed these limits on jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, No. 16-466 (June 19, 2017).

Some 678 plaintiffs (592 of whom were out-of-state residents) filed suit in California state court against Bristol-Myers Squibb Company (“BMS”), asserting various state-law claims based on injuries allegedly caused by a BMS drug called Plavix. BMS moved to quash the non-residents’ suits for lack of jurisdiction. BMS was headquartered and incorporated outside California, so there was no general jurisdiction. Despite the fact that the nonresidents had not taken the drug in California, the California Supreme Court held that California courts had “specific jurisdiction to entertain the nonresidents’ claims.”  The United States Supreme Court reversed.

The California Supreme Court had applied a “sliding scale approach to specific jurisdiction,” finding that BMS’s “extensive contacts with California” permitted a “less direct connection between BMS’s forum activities and plaintiffs’ claims than might otherwise be required.” Because the claims of both the resident plaintiffs and non-resident plaintiffs were similar and “based on the same allegedly defective product and the . . . misleading marketing and promotion of that product,” the “less direct connection” requirement as met. Thus, the court reasoned, it had personal jurisdiction over all the claims of all the plaintiffs, even in the absence of any California conduct as to the out-of-state plaintiffs.

The Supreme Court rejected this in no uncertain terms:

“Under the California approach, the strength of the requisite connection between the forum and the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims. Our cases provide no support for this approach, which resembles a loose and spurious form of general jurisdiction. For specific jurisdiction, a defendant’s general connections with the forum are not enough….What is needed—and what is missing here—is a connection between the forum and the specific claims at issue.”

This is true even if the defendant would suffer minimal or no inconvenience, even if the defendant has extensive contacts with the state, even if the forum had a strong interest in the application of its laws, and even if the forum state were the most convenient location for the litigation. Bristol-Myers should serve to help defendants limit the jurisdictions in which suit may properly be brought, and reduce forum-shopping in mass tort and perhaps other cases.

General Jurisdiction

On the issue of general jurisdiction, BNSF Railway Co. v. Tyrrell, No. 16-405 (May 30, 2017), the Supreme Court made clear that its 2014 ruling in Daimler AG v. Bauman precludes the exercise of general jurisdiction over a non-resident defendant unless that defendant has contacts which are so “continuous and systematic” so as to render that defendant essentially at home in the forum state. Thus, the Court rejected multiple theories on which plaintiff attempted to justify jurisdiction over BNSF in Montana.

First, it ruled that the Federal Employers’ Liability Act (“FELA”), a federal law that allows railroad workers to sue their employers for injuries that occur on the job, does not itself create a special rule authorizing jurisdiction over railroads just because they happen to do business in a particular place. Second, and most notably, the Court held that a Montana law that allows courts in the state to exercise jurisdiction over “persons found” was in violation of the Constitution. That is, even if BNSF conceded that it is “found” in Montana, the Court held that exercising jurisdiction over BNSF must still be consistent with the Due Process clause. Under its earlier decision, the Court explained, BNSF Railway can only be sued in Montana if it is “at home” there – something which normally means that the company is either incorporated in the state or has its principal place of business there.

With neither of those criteria met, the railroad was not so “heavily engaged in activity” in Montana as to present the kind of “exceptional” case in which jurisdiction could exist even outside the company’s state of incorporation and principal place of business. Thus, although BNSF could be sued in Montana for claims that are related to its business in Montana, it could not be sued there for claims that aren’t related to anything it did within the state.

Analysis

The Court’s two defense-friendly decisions on jurisdiction should bode well for defendants challenging jurisdiction, even in cases outside these specific factual contexts. General jurisdiction can only exist where a defendant is actually “at home,” and creative efforts – such as California’s “sliding scale” – will not pass constitutional muster to establish specific jurisdiction without a clear connection, such as a wrongful act, actually occurring in the forum state.

Filed under Daimler AG v. Baumann, Federal Practice, Jurisdiction, Mass Tort, Uncategorized

How Much is too Much? Counsel’s Active Conduct in Asbestos Suit Results in Forfeiture of Jurisdictional Defense

By and on June 9, 2016

Since the jurisdictionU.S. Supreme Court handed down Daimler AG v. Bauman 134 S.Ct. 746 (2014), personal jurisdiction defenses have experienced a renaissance in asbestos litigation.  Defendants that wish to win such arguments, however, are well advised to heed a recent ruling by Judge Gibney, who presides over Rhode Island’s state court asbestos docket.  In Bazor v. Abex Corporation et al., C.A. No. PC-10-3965 (R.I. Super. May 2, 2016), Judge Gibney issued a ruling that is instructive on what a defendant must do to preserve its right to contest jurisdiction, holding that a defense counsel’s “active conduct constitute[d] forfeiture of the defense of lack of personal jurisdiction.”  The court referred to “forfeiture” as opposed to “waiver” because the defendant had properly asserted the lack of personal jurisdiction as a special defense.

In this instance, the “active participation” included the following conduct during the two years and nine months between the filing of an answer and the motion to dismiss: filing an objection to the trial date, attending a plaintiff’s deposition, requesting and participating in the reopening of that deposition, participating in the deposition of the plaintiffs’ expert, objecting to the expert’s deposition on non-jurisdictional grounds, disclosing eight  expert witnesses, filing 15 motions in limine, supplementing its expert witness disclosure, producing two expert witnesses for depositions, responding to discovery (without preserving the defense of lack of personal jurisdiction), supplementing its expert discovery, moving to compel the production of the plaintiffs’ bankruptcy trust documents, and participating in at least ten status/settlement conferences.  In short, defense counsel’s very active participation in the litigation was so active so as to constitute “forfeiture” of a claim of lack of personal jurisdiction.

Looking to federal jurisprudence for guidance, the court focused on defense counsel’s litany of activity over several years.  Synthesizing federal decisions, the court identified two  principal elements to weigh to determine whether a defense of personal jurisdiction is forfeited: (a) the delay in asserting the defense; and (b) the “nature and extent” of the defendant’s involvement in the case.  The court noted that the first factor could be met by as little as four months’ delay; but reasoned that the second factor weighed more heavily than the mere passage of time.  With regard to the second factor, the court cited defendant’s filing of an appearance, participation in discovery, attending and taking depositions, and filing and opposing motions as evidence of active participation.  Notably, the court found that the defendant had created “substantial delay” without “a sufficiently meritorious reason” for failing to assert its defense for two years and nine months after the filing of its answer.  The level of participation appears to have been the deciding factor; with special attention brought to “the fifteen motions in limine [defendant] filed which sought merits-based rulings” and the failure to continually assert the defense throughout the course of litigation.  However, of concern is that the ruling did nothing to establish a “bright line” rule of precisely how much participation is “too much” so as to result in a forfeiture of a jurisdictional defense.

It is unclear where this decision leaves litigants who need to participate in early discovery and who also want to preserve their jurisdictional defenses.  Defendants who wish to maintain their defenses are faced with choosing from various interpretations of the Bazor decision, focusing on the assertion of their rights and carefully monitoring the level of their participation.  The decision could reasonably be read to indicate that a party may participate in discovery, but only if they continue to maintain and pursue their jurisdictional defense.  Alternatively, some parties may refuse to participate in non-jurisdictional discovery for fear of inadvertent forfeiture. This may create friction with plaintiff’s counsel when their clients are in poor health, which frequently occurs in asbestos cases across the country.  Ultimately, the lesson of Bazor may be that safest resolution for defense counsel will be to file and pursue dispositive jurisdictional motions as early in the case as possible.  At the very least, defense counsel should raise the defense in pleadings and discovery which precede the filing of the motion to dismiss on jurisdictional grounds and/or reach some sort of agreement with opposing counsel to prevent forfeiture despite some level of active participation in the case. For example, defense counsel in the asbestos litigation should obtain a stipulation that attendance at an exigent deposition does not constitute a waiver of personal jurisdiction arguments; and that stipulation should be placed on the record.

Filed under active participation, Asbestos, Daimler AG v. Baumann, Discovery, Federal Court Litigation, Jurisdiction, Litigation Issues and Factors, Toxic Tort/Product Liability Litigation