Post-BMS, Courts Grapple with the Nexus Between Stream of Commerce Activities and the Plaintiff’s Claim Required for Specific Jurisdiction over Manufacturers in Product Liability Cases

Courts have struggled for decades to define the constitutional limitations on personal jurisdiction over major product manufacturers who sell their products nationwide. The central tension has been determining the validity and potential scope of the “stream of commerce” theory in a world of advancing technology and associated evolution of business operations and practices. That tension is increasing as state courts decide what kind of nexus is required, between a defendant’s “forum-directed” commercial activities and the plaintiff’s claim, to justify the exercise of specific jurisdiction. Specifically, how purposefully forum-directed and how closely tied to the specific claim must the activities be?

Stream of commerce theory posits that a defendant that has placed a product into the nationwide channels of commerce should anticipate that its products will thereby be “swept” into any state and if it causes injury there, it will be subject to suit. In its purest form, the theory collides to some degree with the fundamental limiting requirement that a defendant may be haled into a forum to litigate only where it has “purposely availed” itself of the privilege of doing business by, for example, directing its products into the forum.

The Supreme Court applied the theory to a manufacturer in Asahi Metal Indus. v. Superior Court, 480 U.S. 102 (1987). However, the Court was evenly and sharply divided as to whether placing a product into the stream of commerce, without more, was sufficient to authorize specific jurisdiction where the product allegedly causes an injury, or whether “something more,” some forum-directed activities purposely creating a “substantial connection” with the forum state, was required. A quarter-century later the Court revisited the issue to break the deadlock in J. McIntyre Machine v. Nicastro, 564 U.S. 873 (2011), but again fractured, producing no clear or definitive holding on the subject. Since Nicastro, courts have continued to debate the status and contours of the stream of commerce theory as a means of satisfying the requisite purposeful availment.

Bristol-Myers Squibb Co. v. Superior Court

Meanwhile, the Supreme Court’s seminal 2017 decision in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (BMS) examined the relationship between the defendant’s “purposeful” forum-related activities and the plaintiff’s injury/claim necessary to assert specific jurisdiction over a manufacturer. Hundreds of non-residents filed suit in California against Bristol-Myers for injuries from its drug Plavix®. The Court held that in order for a state to exercise specific jurisdiction, “the suitmust “[arise] out of or [relate] to the defendant’s contacts with the forum.” But the Court’s analysis demonstrated that only those activities having a fairly direct connection to both the forum and the claim are relevant. Bristol-Myers allegedly sold Plavix with deficient warnings in California and elsewhere. The nonresidents’ claims arose out of using prescribed Plavix – but crucially, not in California. Jurisdiction was therefore lacking.

The stream of commerce theory was not discussed in BMS, as the purposeful availment requirement was not contested. But in requiring that the claim bear a tight connection to the defendant’s forum-directed activities, BMS necessarily implies that there must be purposeful forum-directed activities to connect to the claim. Accordingly, the passive, “without more” formulation of stream of commerce theory advanced by one faction in Asahi and barely avoiding explicit rejection in Nicastro, appears to be a “dead letter.”

Justice Sotomayor in dissent observed that Bristol-Myers argued that a defendant’s in-state conduct must actually cause a plaintiff’s claim, adding a footnote that this question “appears to await another case.”

Recent Interpretation of Bristol-Myers

That other case may have arrived. In Bandemer v. Ford Motor Co., 913 N.W.2d 744 (Minn. 2019), the Minnesota plaintiff was injured in Minnesota in a Ford vehicle that was designed, manufactured and originally sold outside the state. Ford argued that Minnesota could not exercise jurisdiction because there was no causal connection between Ford’s Minnesota contacts and the plaintiff’s injury. The Minnesota Supreme Court disagreed. It found BMS (1) inapposite, and (2) inconsequential, as BMS addressed claims by non-resident plaintiffs and did not explicitly require a causal nexus; rather, the Court had framed the nexus issue more broadly, requiring the claim arise out of or relate to the defendant’s forum contacts. Ford’s purposeful acts of selling thousands of cars in Minnesota, including the same make and model at issue, and advertising there, were sufficiently related to plaintiff’s design defect claims as those claims “are about more than one specific car.” So even though the specific car had no direct, purposeful connection between Ford and the forum state, Ford’s business there combined with the local accident was sufficiently “related” to justify jurisdiction.

Similarly, in Ford Motor Co. v. Montana Eighth Judicial District Court, 395 Mont. 478 (2019), the Ford at issue was not manufactured, designed or originally sold in Montana. Ford mounted the same causal nexus requirement argument. The Montana Supreme Court disagreed and held that because the accident occurred in Montana, Ford sells products that it expects will cross state lines, and Ford serves the local market, Montana courts could exercise specific jurisdiction.

Both opinions found BMS of little significance in a case involving residents injured within the state, notwithstanding the holding in Walden v. Fiore, 134 S. Ct. 1115 (2014), that the due process inquiry must focus on defendant’s activities directed at the forum, and not the plaintiff’s linkage between the defendant and the forum. Both courts honed in on the “related to” verbiage to relax the required nexus between activities and claim, even though Bristol-Myers’s contacts with California were similarly “related” to the claims and were deemed too disconnected to support specific jurisdiction in BMS. Both opinions seem generally inconsistent with the comparatively rigorous connection between forum-related activities and the plaintiffs’ claims required by BMS.

So the exercise of specific jurisdiction based largely on the manufacturer’s activities in the general stream of commerce retains vitality for the moment, notwithstanding BMS. But Ford is expected to petition for certiorari in both cases. At some point in the not-too-distant future, the U.S. Supreme Court will have to deliver additional, more definitive guidance on the quality of the relationship between a manufacturer’s forum activities and a plaintiff’s claim required to support specific jurisdiction. Perhaps it also will take the opportunity to make explicit the rejection of the pure, foreseeability-based notion of stream of commerce theory.

Biotin Supplement Suit Dismissed on Preemption Grounds

A California federal judge tossed a proposed class action against allegedly “worthless” biotin dietary supplements on preemption grounds earlier this week, citing the Ninth Circuit’s recent decision in Dachauer v. NBTY, Inc., 913 F.2d 844 (9th Cir. 2019).

In Greenberg v. Target Corp., et al., the plaintiff filed a putative class action alleging that labeling for Target’s Up & Up brand of biotin dietary supplements was misleading under California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA).

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The Trend Toward MDLs in Products Cases

A review of multidistrict litigation (MDL) statistics confirms the increasing percentages of federal cases being consolidated into MDLs. According to the Judicial Panel on Multidistrict Litigation (JPML) website, as of June 2019, 202 MDLs were pending in 46 different federal districts, in 32 different states, before 160 different transferee judges. California boasts the largest number of MDLs, with 30. New York State is close behind with 26. The 141,721 cases included in these MDLs represent more than 50 percent of the federal civil docket. More than 30 percent (or 70 MDLs) of the pending MDLs are products liability cases, a significant increase from 16 percent in 2005. And, of the 70 MDLs, more than 50 are litigations involving pharmaceutical products and/or medical devices. These numbers highlight the increase in the frequency with which products liability cases are being coordinated in MDL proceedings.

The MDL statute enacted in 1968 allows for the transfer of cases “involving one or more common questions of fact … pending in different districts” to “any district for coordinated or consolidated pretrial proceedings.” 28 U.S.C. § 1407(a). After an MDL is established, later-filed cases involving the same questions of fact are seamlessly transferred to the MDL as tagalong cases. The efficiencies seen in MDL proceedings since 1968 have caused the MDL docket to grow dramatically. In the early years, the “caseload was relatively flat—in the late 1970s and throughout the 1980s, the Panel averaged only around 40 [consolidation] motions per year.” Emery G. Lee III et al., “Multidistrict Centralization: An Empirical Examination,” 12 Journal of Empirical Legal Studies,  211, 221 (2015). By the 1990s, the MDL caseload was growing rapidly. Today, the JPML reports that it considers more than 55 motions per year on average, and as of the end of 2018, MDLs accounted for 52 percent of all civil cases pending in federal court.
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Products in a New Dimension: Manufacturing Considerations for 3D-Printed Products

Since its advent more than 30 years ago, the 3D printing market has grown, and will continue to expand for a myriad of reasons, including sustainability and reduced energy consumption. As the process, including the applicable technology, becomes more cost-effective, its widespread use continues to increase across many industries, such as aerospace and defense, energy, architecture and construction, automotive, food/culinary, consumer products and health care.

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The CPSC Releases Framework of Safety for the Internet of Things

The rapidly developing technology of interconnected software allows consumers to reach new heights of convenience and efficiency. We can start our dinner remotely, listen to our music in every room in the house, track and log our heart rate and step count, and program our coffeepot to be ready for us in the morning. This technology sometimes is called the Internet of Things (IoT), which describes the interconnectedness of devices via the internet. These devices can exchange data between themselves to coordinate a variety of helpful functions. While this technology is exciting and signifies many positive new directions for consumer products, manufacturers should be aware of the potential risks that come with creating such products.

To that end, the U.S. Consumer Product Safety Commission (CPSC) released a Framework of Safety for the IoT (the CPSC Framework) in January 2019. The CPSC Framework provides “technology-neutral best practices to ensure consumer product safety” and to prevent “death, physical injury or illness” resulting from the use of IoT products. It is not intended to address privacy or confidentiality. While general in tone, the CPSC Framework is intended to assist with an “active approach” to safety rather than a reactive one in this quickly growing industry.

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Third Circuit Holds Online Retailers May Be Liable for Defective Third-Party Products Under Pennsylvania Product Liability Laws

The Third Circuit Court of Appeals has held that online retailers such as Amazon could be held liable for allegedly defective third-party products sold through its website.
In a 2−1 panel decision in Oberdorf v., Inc., — F.3d —, 2019 WL 2849153 (3d Cir. July 3, 2019), the Third Circuit Court of Appeals reversed the district court’s ruling that Amazon was not a “seller” under § 402A of the Restatement Second of Torts, and therefore could be held strictly liable under Pennsylvania products liability law.

Pennsylvania has adopted Restatement Second of Torts § 402A, which “specifically limits strict products liability to ‘sellers’ of products.” Because the Pennsylvania Supreme Court has not yet addressed whether an online sales listing service such as Amazon Marketplace qualifies as a “seller” under § 402A, the district court was tasked with predicting what the Pennsylvania Supreme Court would decide under Pennsylvania law.

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Does Pennsylvania Recognize Strict Liability Claims Against Medical Device Manufacturers? A Pennsylvania federal court calls the question.

For at least two decades, Pennsylvania law has recognized an exemption from strict liability for prescription drug manufacturers based on the state Supreme Court’s interpretation of the Restatement (Second) of Torts Sec. 402A cmt. k.  Comment k carves out an exception to traditional strict product liability claims for “unavoidably unsafe products,” or those which bear inherent risks—such as medicines which must be prescribed by a doctor.  A less settled question is whether that exemption extends to manufacturers of prescription medical devices, specifically regarding manufacturing defect claims.  On June 25, 2019, Judge Robreno of the U.S.D.C. Eastern District of Pennsylvania asked the Third Circuit to answer it.

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Worth the Wait? Some Semi-Mature Thoughts on Albrecht

For some long-awaited events, a little time and distance can add a measure of clarity. Not always – many still are processing the Game of Thrones finale, with no end in sight. But over the past few weeks pharmaceutical products liability lawyers have had the opportunity to acquire some Zen and enlightenment about the Supreme Court’s highly anticipated preemption decision in Merck Sharp & Dohme, Inc. v. Albrecht, 2019 WL 2166393 (U.S. May 20, 2019). An initial description of the decision is here.

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District of Delaware Grants Motions for Summary Judgment in Three Risperdal Gynecomastia Cases

In a trio of recent decisions arising out of cases alleging that an antipsychotic medication, Risperdal, and its generic, risperidone, had caused gynecomastia (breast tissue growth) in men, the United States District Court for the District of Delaware granted motions for summary judgment for defendant Janssen Pharmaceuticals, Inc. The three opinions clarify that Delaware law would not impose innovator liability on a branded drug manufacturer when the plaintiff had used only a generic drug, and addressed “but-for” warnings causation and proximate cause in prescription drug products liability cases. [Disclosure: Drinker Biddle & Reath. LLP attorneys were co-counsel of record in these cases for Janssen.]

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Third Circuit Tackles Third-Party Funding Issues in In Re: National Football League Players’ Concussion Injury Litigation

Third-party litigation funding has received increased scrutiny over the past several years, particularly in the context of mass torts, class actions, and multidistrict litigation. Most of this scrutiny has focused on pre-litigation or pre-resolution commercial loans to fund the litigation, and particularly whether parties are required to disclose such funding during the course of the litigation.
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