U.S. Supreme Court Asked to Review Issue of Jurisdiction for Non-Resident Plaintiffs in Products Cases

Johnson and Johnson (“J&J”) has asked the United States Supreme Court to overturn the $2.1 billion verdict entered against it in Ingham, et al. v. Johnson & Johnson, et al., a talcum powder class action filed in Missouri that included numerous non-resident plaintiffs. If review is granted, the Supreme Court will rule on just how far the “arise out of or relate to” prong of the test for specific jurisdiction extends with respect to the claims of a nonresident plaintiff. 

The inconsistent way differing jurisdictions determine the existence of specific jurisdiction for non-resident plaintiffs is readily apparent.  And the litigation involving the talcum powder products at issue in this case is a perfect example of this type of inconsistency.  Two courts, one in Missouri and the other in New Jersey, reached two very different conclusions regarding the exercise of personal jurisdiction over the same claims involving non-resident plaintiffs.  Missouri found that its exercise of jurisdiction was proper, while New Jersey did not.  This did not come as a shock to Missouri practitioners, because Missouri courts have long welcomed and been a favorite for out-of-state plaintiffs.   

Following the United States Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court,137 S.Ct. 1773 (2017), this practice of forum shopping was curtailed.  However, the Missouri Court of Appeals for the Eastern District re-opened the door for a non-resident plaintiff to bring a cause of action in Missouri for alleged damages based upon the use of a product that he did not purchase or use in Missouri, nor suffer damages in Missouri.  See Ingham, et al. v. Johnson & Johnson, et al., 608 S.W.3d 663 (Mo.App. E.D.  2020), trans. denied, 2020 Mo. LEXIS (Nov. 3, 2020).  However, the holding in Ingham regarding the exercise of specific jurisdiction is the diametric opposite of the decision of the United States District Court for the District of New Jersey deciding the same jurisdictional issue on the very same facts in the same week.  See Hannah v. Johnson & Johnson Inc., 2020 U.S. Dist. LEXIS 113284 (D.N.J. June 29, 2020).   

Background

In Ingham, plaintiffs sought recovery against two defendants: Johnson & Johnson Consumer Companies Inc. (“JJCI”) and its parent company, J&J. Twenty-two plaintiffs alleged they developed ovarian cancer after continued use of two of the defendants’ products: Johnson’s Baby Powder and Shower to Shower Shimmer Effects (“Shimmer”).  The parties agreed that defendants were not subject to general jurisdiction in Missouri because they are incorporated and headquartered in New Jersey. Five plaintiffs lived, purchased and used Johnson’s Baby Powder and/or Shimmer, and developed ovarian cancer in Missouri (“Missouri Plaintiffs”). Jurisdiction over JJCI with respect to the Missouri Plaintiffs was not disputed. 

Jurisdiction was disputed with respect to the other seventeen plaintiffs who lived, purchased and used Johnson’s Baby Powder and/or Shimmer and developed ovarian cancer outside Missouri (the “Non-Resident Plaintiffs”). Two of these Non-Resident Plaintiffs only used Baby Powder, while the remaining Non-Resident Plaintiffs used Shimmer or used both Shimmer and Baby Powder. 

The Non-Resident Plaintiffs alleged that defendants were subject to specific jurisdiction in Missouri because JJCI had two long-term contractual relationships with Pharma Tech Industries, a Missouri corporation for the manufacturing, packaging and supply of Shimmer and Johnson’s Baby Powder.   Fifteen of the Non-Resident Plaintiffs asserted that jurisdiction was proper in Missouri because they used Shimmer, which was manufactured, labeled and packaged by Pharma Tech Industries’ sister company, Pharma Tech Union, located in Union, Missouri, under defendants’ direction and control. The other two Non-Resident Plaintiffs claimed the defendants were subject to specific jurisdiction in Missouri because they used Johnson’s Baby Powder that was manufactured, labeled and packaged by Pharma Tech Industries’ sister company, Pharma Tech Royston, located in Royston, Georgia, under Pharma Tech Industries’ direction and control. 

Trial Court’s Findings on Jurisdiction

The trial court held that it could exercise specific jurisdiction over defendants on the Non-Resident Plaintiffs’ claims because their alleged conduct satisfied the Missouri long-arm statute. Specifically, the court opined that defendants transacted business in Missouri, allegedly committed a tortious act in Missouri, owned real estate in Missouri, and contracted with Pharma Tech Industries in Missouri to manufacture packaging materials and to manufacture, label and package both products. The trial court further found that these activities constituted sufficient minimum contacts to subject defendants to specific jurisdiction in Missouri. 

The Appeal

On appeal, the defendants did not challenge the trial court’s finding that the long-arm statute extended to them. Instead, with respect to jurisdiction, the defendants only appealed whether they established sufficient minimum contacts with Missouri that enabled the trial court to exercise specific jurisdiction over them.

The Missouri Court of Appeals recognized that it can only assert specific personal jurisdiction over the defendants if the defendants had certain minimum contacts with Missouri and if plaintiffs’ cause of action arose from those alleged minimum contacts.  Because of this requirement, the question of whether specific jurisdiction exists must be determined separately for each individual plaintiff’s claims. 

The Missouri Court of Appeals’ Holding Regarding Jurisdiction over the Non-Residents’ Claims Related to the Use of Shimmer

Citing the United States Supreme Court decision in Bristol-Myers Squibb Co. (“BMS”), the Missouri Court of Appeals held that the trial court properly exercised specific jurisdiction over JJCI for the claims of the Non-Resident Plaintiffs associated with Shimmer because JJCI “engaged in a host of significant activities in Missouri related to the Non-Resident Plaintiffs’ use of Shimmer.” Specifically, JJCI contracted with Missouri-based Pharma Tech to manufacture, package and label Shimmer pursuant to JJCI’s specification at Pharma Tech’s facility in Missouri. 

Defendants argued that its contract with a Missouri corporation alone was insufficient to subject defendants to personal jurisdiction in Missouri. For as the United States Supreme Court’s held in BMS, “[a] defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction… The bare fact that BSM contracted with a California distributor is not enough to establish personal jurisdiction in this State.” 137 S.Ct. at 1783. (citations omitted.) 

However, the Missouri Court of Appeals, apparently realizing that JJCI’s contract with Pharma Tech was insufficient to confer jurisdiction over JJCI, stretched further to justify its exercise of personal jurisdiction over JJCI in Missouri. To do this, the appellate court held that JJCI’s contacts constituted more than a “mere contractual relationship with a third party.”   Because JJCI engaged in activities related to the manufacture, packaging and labeling of Shimmer in Missouri, the Court of Appeals found that it was reasonable to require JJCI “to submit to the burdens of litigation” in Missouri. Instrumental in this finding is that the Non-Resident Plaintiffs’ claims alleged negligent manufacture, production, packaging and labeling of Shimmer.   Therefore, according to the Court of Appeals, JJCI’s activities with Pharma Tech in Missouri were a “direct link in the production chain of Shimmer’s eventual sale to the public … [and] … firmly connect JJCI’s activities in Missouri to the specific claims of the Non-Resident Plaintiffs” related to Shimmer.

This decision is in stark contrast to holding in Hannah. In Hannah, the United States District Court for the District of New Jersey held that it could not exercise jurisdiction over the J&J defendants for the claims of the non-Missouri residents because J&J’s contracts with Pharma Tech “to produce some of its products does not confer jurisdiction.” 2020 U.S. Dist. LEXIS 113284, at * 103 (D.N.J. June 29, 2020). As the District Court explained:

While those contacts might well constitute purposeful availment of the benefits and protections of the State of Missouri in a contract action, these contacts are irrelevant in this products liability action. Indeed, Plaintiffs have not demonstrated that their injuries in any way arise out of those specific agreements. In other words they neglect to allege a connection between their injuries and those specific distribution agreements.

Id. (citations omitted).

The Missouri Court of Appeals’ Holding Regarding Jurisdiction over the Non-Residents’ Claims Related to the Use of Johnson’s Baby Powder

The Court of Appeals, however, found that the trial court erred in exercising specific jurisdiction over JJCI on the claims of the two Non-Resident Plaintiffs who only used Johnson’s Baby Powder because the Petition “did not sufficiently allege JJCI engaged in significant activities in Missouri related to their use [of] Johnson’s Baby Powder.” Non-Resident Plaintiffs argued that because Pharma Tech in Missouri controlled and directed the manufacturing, processing, bottling, labeling and distribution of Johnson’s Baby Powder in Georgia from its headquarters in Union, Missouri, JJCI was subject to jurisdiction in Missouri for the claims involving Johnson’s Baby Powder. 

The court rejected the Non-Resident Plaintiffs’ claims. Specifically, the Court of Appeals explained that the “record is devoid of evidence that JJCI engaged in any activities related to Johnson’s Baby Powder, beyond the executing of … [the contracts] with a Missouri-based corporation, in Missouri.” Therefore, the contract JJCI executed with Pharma Tech in Missouri regarding Johnson’s Baby Powder was not sufficient to confer jurisdiction over JJCI in Missouri for the claims solely related to Johnson’s Baby Powder. This part of the decision by the Missouri Court of Appeals is in line with the Supreme Court’s holding in BMS because “contracting with an out-of-state party alone cannot automatically establish sufficient minimum contacts in the out-of-state party’s forum.” 

Conclusion

To the surprise of many observers, the Missouri Supreme Court declined to review the Court of Appeals ruling, which upheld an historically large verdict, in a case that seemed to collide rather sharply with the U.S. Supreme Court decision in Bristol-Myers Squibb. The Missouri Court of Appeals holding in Ingham allows a court to exercise jurisdiction over a company that contracts with a third party to make a product according to the company’s specifications. According to the Ingham court, jurisdiction in this situation is based on more than a mere contractual relationship. However, this reasoning was squarely rejected by the United States District Court for the District on New Jersey in Hannah. Should the United States Supreme Court grant review, it should follow the sound reasoning of BMS and Hannah and hold that Missouri courts cannot exercise jurisdiction over the claims of non-resident plaintiffs when they did not purchase, use or suffer injury in the State of Missouri.