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April 4, 2020

SCOTUS Due to Provide Guidance on the “Arising from or Related to” Inquiry for Specific Jurisdiction

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In 2013, a used pick-up truck was traded in to a dealership in Texas City, Texas, by Mark Oberholtzer of Mark-1 Plumbing, Inc. The truck had been used primarily for work purposes by Oberholtzer, and bore “Mark-1 Plumbing” decals, which the dealership assured would be removed before resale. The dealership then sold the truck to a buyer in Turkey – decals intact. The buyer shipped the truck to Syria where, in 2015, ISIS equipped it with a Soviet-made 23-mm twin-barreled anti-aircraft autocannon and tweeted a photo of the truck racing down a dirt road, guns blazing, with the “Mark-1 Plumbing” decals clearly visible. Oberholtzer and Mark-1 sued the dealership in Texas state court for negligence, libel, and deceptive trade practices, among other claims.

The “Mark-1” fact pattern demonstrates the convoluted and often unpredictable path a product may take over the course of its useful life after it leaves the hands of the manufacturer. Although the “Mark-1” lawsuit was not a product liability case and did not focus on issues of personal jurisdiction, the story of how the Mark-1 pick-up truck made its way into Syria offers a telling example of post-sale product movement that has given rise to an issue that has been heavily litigated for years – when and under what circumstances may a court exercise specific personal jurisdiction over a foreign defendant for injuries presumably caused by one of its products?

According to the standard announced by the United States Supreme Court in Burger King v. Rudzewicz, 471 U.S. 462 (1985), under the Due Process Clause of the United States Constitution, a court may exercise specific jurisdiction over a non-resident defendant only when the plaintiff’s claims “arise out of or relate to” the defendant’s forum activities. But what does that phrase mean in the context of product liability claims involving a product that was marketed and sold nationwide (and possibly worldwide)? Can a product liability plaintiff injured in his or her home state sue a defendant manufacturer/distributor in that jurisdiction only if the defendant originally sold the specific product that gave rise to their claim in that state? What if a resident plaintiff is injured by a product that was manufactured and/or sold by the defendant in another state, but serendipitously made its way into the forum? What if the forum also happens to be a state where the defendant has advertised, marketed, or sold its products generally, but is not where the product at issue was originally sold? How deep-rooted would a product liability defendant’s business contacts with a particular forum need to be in order for a defendant to reasonably anticipate they could be haled into court in that jurisdiction?

The plethora of questions which seem to be continually evolving and developing around this “arise out of or relate to” requirement seem never-ending. But litigants and courts nationwide may soon be receiving instruction from the United States Supreme Court, which recently accepted certiorari review over two consolidated cases to answer the following question:

Whether the “arise out of or relate to” requirement for a state court to exercise specific personal jurisdiction over a nonresident defendant under Burger King v. Rudzewicz is met when none of the defendant’s forum contacts caused the plaintiff’s claims, such that the plaintiff’s claims would be the same even if the defendant had no forum contacts.

The Supreme Court’s answer to this question will undoubtedly alter the specific jurisdiction landscape for years to come. Up until now, state and federal courts alike have long struggled over how to interpret and apply this particular prong of the specific jurisdiction analysis. Not surprisingly, this has led to much discord amongst the courts, leading to inconsistent results across the United States, even amongst cases with seemingly indistinguishable jurisdictional facts. 

The majority of courts across the United States – including the Fourth, Ninth, and Eleventh Circuits, as well as the highest courts in Arizona, Massachusetts, and Washington – have interpreted the phrase “arise out of or relate to” to mean that a defendant’s forum-state contacts must have proximately caused the plaintiff’s injury in some way. Under this interpretation, the required jurisdictional connection exists only if the defendant’s forum-state conduct is a “but for” cause of the plaintiff’s injury. Courts applying this interpretation have found that specific jurisdiction over a manufacturer or distributor does not exist unless the specific product at issue was designed, manufactured, or sold to a consumer in the forum state, even if the defendant cultivated a market for its products in that state. This analysis is seemingly consistent with the Supreme Court’s assertion in Goodyear Dunlop Tires Ops. S.A. v. Brown, 564 U.S. 915, 931, n.6 (2011), that “even regularly occurring sales of products in a state do not justify the exercise of jurisdiction over a claim unrelated to those sales.”

By contrast, other courts – including the District of Columbia, Minnesota, Montana, Texas, and West Virginia, as well as the U.S. Court of Appeals for the Federal Circuit – have read the “arise out of or relate to” prong less stringently. These courts allow the exercise of specific personal jurisdiction when the plaintiff would have suffered the same injuries, and thus had the same claims, even if the defendant had never made contact with the forum. They require that a plaintiff show only that their injuries are “sufficiently related to” the defendant’s connections with the forum state. No causation is necessary. Such contacts may include a defendant’s intent to serve the forum state’s market with its products, i.e., the general marketing, advertising, and sale of products within the jurisdiction. In these courts, the location of sale of the actual product at issue is not relevant. All that matters is that a defendant’s contacts were related to the product – although, how related is unclear, as no specific test has been developed for relatedness.

And yet there are other courts – such as the First, Third and Sixth Circuits, as well as New Hampshire, Nevada and Oklahoma – which have taken modified approaches. These jurisdictions require either a stronger causal connection, or have unspecified casual connections, i.e., noting that at least “some” causal connection is required between a plaintiff’s claims and a defendant’s connections. Although, neither have settled on a precise test or formulation.

The two consolidated cases currently pending review before the United States Supreme Court arise out of disputes in jurisdictions that implement the minority approach to specific jurisdiction: Montana and Minnesota. In both cases, the plaintiffs urge that a state may exercise specific jurisdiction over a foreign defendant if the defendant systematically cultivated a market for that product in that state and a resident-plaintiff was injured in the state by such a product. This rule would apply even though the specific product that caused the injury was not manufactured, designed or sold within the forum state, but rather, somehow made its way into the forum post-sale. For instance, if an automobile manufacturer deliberately cultivated a market for its vehicles in New York, then a claim that such a vehicle has injured a plaintiff in New York is sufficiently related to the manufacturer’s New York contacts to support the exercise of specific personal jurisdiction, even if the manufacturer originally sold the actual car that caused the plaintiff’s injuries in California.

By contrast, the defendants insist that the majority’s “proximate cause” approach is correct, and that a non-resident defendant is subject to personal jurisdiction in a forum only for claims that arise from a product that the defendant actually sold in that forum. In other words, there must be a specific factual connection between the defendant’s forum contacts and the legal claims made in the lawsuit. This result would promote predictability and fairness in jurisdictional adjudications, permitting defendants to more readily anticipate when they will be subject to a particular state’s adjudicatory authority. It would also make the resolution of jurisdictional disputes more cost-effective and efficient by delivering certainty and predictability consistent with the principles of Due Process.

There is obviously much at stake here, particularly where corporate defendants are concerned. The Supreme Court’s opinion on this matter will unquestionably have longstanding consequences affecting the circumstances under which defendants could reasonably expect to be haled into court in a particular jurisdiction. The argument propounded by the plaintiffs in the cases pending review gives a slightly more expansive interpretation to the phrase “arising out of or related to” in the specific jurisdiction calculus by eliminating the requirement that the defendant’s forum contacts be substantively relevant to the claims actually being made by the plaintiff in the lawsuit. Arguably, under this approach, the “related to” prong could permit reliance on any connections the defendant might have to the forum when a resident plaintiff has brought the lawsuit – even those connections which are extraneous to the litigation. This could potentially open the door to courts exercising specific jurisdiction over defendants based on any number of abstract or loose connections between a plaintiff’s injuries and the defendant’s in-forum contacts.

While, arguably, this result would be antithetical to the requirement that personal jurisdiction be consistent with due process, it is difficult to predict which approach the Supreme Court will adopt. The Court may affirm that one of the existing standards is correct, or it may “split the baby” and create a new, specific test that attaches to the “arises out of or related to” analysis with a less stringent inquiry into location of sale, but which establishes specific factors that go to the Court’s understanding of “arises out of or related to.”

Oral argument as to this issue was scheduled to take place on April 27, 2020. However, on April 3, 2020, the United States Supreme Court was forced to postpone its April argument session in light of the coronavirus pandemic – resulting in the second time the court has had to postpone arguments due to the COVID-19 crisis. While the Court will consider rescheduling some cases from its March and April sessions before the end of the term in July, it remains unclear if or when the argument on these cases will held. As always, Bowman and Brooke will continue to monitor this and other issues relating to our clients’ needs and will provide strategies on how to best navigate the ever-changing landscape of products liability litigation.

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