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June 20, 2017

A Tough Pill for Plaintiffs to Swallow: Supreme Court Finds No Specific Personal Jurisdiction Over Manufacturer in State Court for Nonresident Claims

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The United States Supreme Court established clear separation between specific jurisdiction and general jurisdiction in a June 19, 2017 ruling that prevents nonresident plaintiffs from asserting specific jurisdiction in a State with no connection to their injury. The ruling reversed a 2016 California Supreme Court decision that applied a “sliding scale approach” to find specific jurisdiction over Bristol-Myers Squibb Company (“BMS”) for nonresident plaintiffs’ claims where BMS had unrelated contacts with the forum. The United States Supreme Court found that exercising specific personal jurisdiction over BMS for the nonresidents’ claims in California violated the Due Process Clause of the Fourteenth Amendment.

The Bristol-Myers Squibb decision is favorable for product manufacturers, effectively preventing nonresident plaintiffs from maintaining actions in state courts where general jurisdiction does not otherwise exist and where it would be subject to a jurisdiction’s procedural disadvantages, substantive oddities, or plaintiff-oriented jury pools. The Court left open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.

A group of plaintiffs comprising 86 California residents and 592 residents from 33 other states filed eight separate complaints in California Superior Court against BMS. The plaintiffs asserted California state law product liability, negligent misrepresentation, and misleading advertising claims for injuries allegedly caused by the blood-thinning drug, Plavix. While BMS maintained five research facilities with 160 employees in California (not related to Plavix) and 250 California sales representatives, the California Supreme Court agreed that general jurisdiction over BMS was not established (nor was it, when BMS was not “at home” in California”). Yet, on BMS’ appeal of the lower court’s finding of jurisdiction, the supreme court held that “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Based on these contacts, the court held that greater contacts with the forum permitted the exercise of specific jurisdiction “based on a less direct connection between [BMS’] forum activities and plaintiffs’ claims that might otherwise be required.”

In an 8-1 decision written by Justice Alito with Justice Sotomayor as the lone dissenter, the United States Supreme Court maintained the separation between general and specific jurisdiction, holding that the California Supreme Court’s exercise of personal jurisdiction over BMS for nonresidents’ claims in California violated the due process clause of the Fourteenth Amendment. The Court noted that “[t]he nonresident plaintiffs did not allege that they obtained Plavix through California physicians or any other California source; nor did they claim they were injured or treated for their injuries in California.”

The Court found that the “sliding scale” approach could not be squared with Supreme Court precedent. The Court clarified “‘specific jurisdiction is very different’ [from general jurisdiction] because ‘the suit’ must ‘arise out of or relate to the defendant’s contacts with the forum.’” (Citation omitted). It reiterated its jurisprudence that, in determining whether personal jurisdiction is present, the “‘primary concern’ is ‘the burden on the defendant.’” Highlighting the importance of federalism in the jurisdictional analysis, the Court stated that “[a]ssessing this burden obviously requires a court to consider the practical problems resulting from litigating in the forum, but it also encompasses the more abstract matter of submitting to the corrosive power of a state that may have little legitimate interest in the claims in question.” The Court further explained that restrictions on personal jurisdiction “are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective states.”

The Court made clear that where no affiliation exists between the forum and the underlying controversy, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.” The Court held that “the mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California – and allegedly sustained the same injuries as did the nonresidents – does not allow the State to assert specific jurisdiction over the nonresidents’ claims.”

The Court also rejected the plaintiffs’ “last ditch” reliance on the fact that one of BMS’s national distributors for Plavix was located in California, finding that “a defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction” where plaintiffs did not allege BMS was derivatively liable for the distributor’s conduct in California or that BMS engaged in relevant acts with the distributor in California. The Court pointed out that its Bristol-Myers Squibb decision does not prevent the California and out-of-state plaintiffs from joining together in a consolidated action in the states that have general jurisdiction over BMS. Alternatively, the Court stated that plaintiffs who are residents of a particular state “could probably sue together in their home states.” In effect, the Court significantly confined plaintiffs to bringing state court claims only in proper jurisdictions where general jurisdiction exists and restricted state courts from exercising specific jurisdiction over defendants absent a sufficient connection with the forum state and the plaintiff’s claims.

The Bristol-Myers Squibb ruling had an immediate effect on a Missouri state court trial proceeding against Johnson & Johnson where plaintiffs alleged a link between talcum powder products and ovarian cancer. On the same day as the Supreme Court ruling, the presiding trial judge declared a mistrial for the reason that two of the three plaintiffs were residents of Virginia and Texas.

If the Missouri court’s response is any indication, Bristol-Myers Squibb should make it more difficult for forum-shopping plaintiffs to drag manufacturers into judicial hellholes and other inhospitable venues simply to avail themselves of anti-manufacturer laws and procedures. Not only will manufacturers be able to fend off lawsuits in these hostile venues, but a better understanding of when and where they can be sued will enhance predictability and facilitate the management of risk. In the end, a more predictable, effective management of risk is probably the greatest benefit of all flowing from Bristol-Myers Squibb.

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