CLIENT ALERT: Supreme Court's Personal Jurisdiction Ruling Sounds Potential Death Knell to Plaintiff Litigation Forum Shopping

by

In a momentous 8-1 ruling handed down yesterday, the United States Supreme Court plainly limited the reach of state courts to assert personal jurisdiction over corporate defendants in Bristol-Myers Squibb Co. v. Superior Court of CA, San Francisco County, et al.

Reaffirming and building on its holding in Daimler AG v. Bauman, the Supreme Court affirmed that large corporations cannot be sued in any state chosen by a plaintiff simply because the corporation has some (and oftentimes many) contacts with the State having nothing to do with the plaintiff’s underlying claim.

By lucidly making this point—twice in three years—the Supreme Court may have effectively shut the door on the widespread “litigation tourism” that has plagued the country for decades by forcing plaintiffs in product liability cases to sue where they reside, where the defendant is “at home,” or where the defendant’s product was used and allegedly caused injury to the plaintiff. The ruling will greatly impact mass-tort litigation by curtailing plaintiffs’ well-engrained practice of suing in a handful of jurisdictions of their choice, aggregating claims with plaintiffs from a multitude of jurisdictions in plaintiff-friendly forums.

The Backdrop

There are two types of personal jurisdiction—“general” and “specific.” General or “all purpose” jurisdiction allows a state court to hear any claim against a particular defendant, even if the incidents underlying the claim occurred in a different State, so long as the defendant is “domiciled” or “at home” in the State. Specific or “case-linked” jurisdiction permits state courts to exercise jurisdiction over a defendant only when the defendant’s State-specific contacts form the basis for the underlying litigation. Consequently, specific jurisdiction is confined to adjudicating issues connected with the incidents that establish jurisdiction.

In 2014, the Supreme Court issued its opinion in Daimler AG v. Bauman, which straightforwardly held that a corporation is only “at home,” and thus subject to a state court’s general jurisdiction, in two states: the State of its incorporation and the State of its principal place of business. The ruling thus limited the number of states where a corporation can be hailed into court. Unless it is sued in the State of its incorporation or principal place of business, a corporation can only be sued in the State(s) where its contacts or conduct form the bases of the plaintiff’s underlying claim.

Despite Daimler’s holding, plaintiffs (and their creative  attorneys) throughout the United States continued to file claims against large corporations in states where they are not “at home” and  where their contacts with the State have absolutely nothing to do with the plaintiff’s underlying claim. Plaintiffs have argued that the unique facts in Daimler—a foreign corporation lacking contacts with California being improperly hailed into a California court due to the contacts of its indirect subsidiary—preclude applying the case broadly to limit a plaintiff’s right to select the forum of its choice.

In other words, plaintiffs contended Daimler did not prevent state courts from exercising specific jurisdiction over corporations in states where their contacts are continuous and systematic. This argument has been greeted with mixed success. Some courts have interpreted Daimler broadly, rejecting plaintiffs’ efforts to limit its application to run-of-the-mill cases; others have found Daimler does not preclude a state court from asserting specific jurisdiction over large corporations having significant contacts in that State.  

Yesterday’s Opinion

The facts of Bristol-Myers are relatively straightforward. Plaintiffs, comprised of 86 California residents and 592 residents of 33 other States, filed suit in San Francisco Superior Court alleging Bristol-Myers’ blood-thinner drug Plavix caused their injuries. Bristol-Myers moved to quash service on it for the 592 cases involving the out-of-state plaintiffs, claiming that the state court lacked personal jurisdiction over it under Daimler because the incidents giving rise to their claims did not occur in California.

The record confirmed the non-California residents had no connection to California: they were not prescribed Plavix in California, did not purchase or ingest Plavix in California, and were not injured by Plavix in California. Bristol-Myers, a Delaware corporation with substantial operations in New York and New Jersey, did not develop, manufacture, label, or package Plavix in California. It did, however, employ over 150 salespeople in the State, and between 2006 and 2012, it sold 187 million Plavix pills, resulting in $900 million in revenue.

On appeal, the California Supreme Court held its courts could assert specific jurisdiction over Bristol-Myers for the non-California residents. Noting the strictures of Daimler, the court conceded Bristol-Myers was not “at home” in California and thus not subject to general jurisdiction there. Yet the court found Bristol-Myers subject to specific jurisdiction because of its substantial and continuous contacts with the State through its marketing and sales of Plavix in California—despite the fact that Bristol-Myers’ marketing and sales did not affect the non-California residents or their claims against Bristol-Myers. Other courts throughout the country have used similar “logic” to continue to assert specific jurisdiction over large corporations with substantial yet unrelated contacts with the plaintiff’s chosen state.

In Bristol-Myers the United States Supreme Court reversed the California Supreme Court’s ruling. While it found that the California Supreme Court properly held that California could not assert general jurisdiction over Bristol-Myers, the Supreme Court held that the California Supreme Court’s analysis and finding of specific jurisdiction “resembles a loose and spurious form of general jurisdiction.” The Supreme Court found that the California Supreme Court’s finding turned the specific jurisdiction analysis on its head, as it did not require Bristol-Myer’s contacts with California to have anything to do with the non-California residents’ claims. The Court noted that by disconnecting the specific jurisdiction requirement that a corporation’s State contacts must be part of the basis of a plaintiff’s claim, the California Supreme Court had in effect created an improper form of general jurisdiction that would conceivably subject large corporations to personal jurisdiction in any State that they conduct business. Further increasing the reach of the decision, the Supreme Court held that the commonality of the plaintiffs’ claims was immaterial to the personal jurisdiction analysis. The fact that the 86 California-resident plaintiffs were prescribed, obtained, and ingested Plavix in California and suffered the same injuries as the non-California residents did not alter the jurisdictional question.

The Opinion’s Effect

Bristol-Myers has far-reaching implications for litigation involving large corporations, particularly mass-tort litigation that is typically not amenable to class action status. The Supreme Court has clearly held that state courts may only assert general jurisdiction over a corporation incorporated in the State or having its principal place of business there. Moreover, state courts can only assert specific jurisdiction over a corporate defendant where the alleged incident or injury occurred. This drastically limits the venues in which corporations can be sued, bringing a new measure of foreseeability and fairness to potential litigation—assuming corporate defendants are prepared to assert their procedural rights and challenge improperly filed suits.

In the wake of Bristol-Myers, plaintiffs can no longer seek out a favorable, plaintiff-friendly jurisdiction in which to file hundreds or thousands of mass tort or pattern litigation claims against a corporate defendant when the defendant is not at home in the jurisdiction and its contacts with the State have no connection to the facts underlying the suit. San Francisco County, Cook County, Madison County and other notorious jurisdictions should no longer be the safe havens they have historically been for plaintiffs and plaintiffs’ attorneys from around the country.  In addition, plaintiffs will have a dramatically decreased ability to aggregate their claims into one proceeding in any jurisdiction, potentially reducing strategic advantages and negotiating leverage they have long held.

The immediacy and depth of the impact of the ruling is already apparent. Yesterday afternoon—in the middle of a two-week trial—a Missouri trial judge granted Johnson & Johnson’s motion for mistrial in a product-liability action involving three plaintiffs because two of them resided out of state and the specific facts of their claims did not occur in Missouri. Jurisdictional arguments had been previously asserted in the case and preserved.

The potential impact of Bristol-Myers is clearly profound, yet in practice it will only take effect when corporate defendants assert their newly recognized rights by taking the initiative to challenge personal jurisdiction in any venue in which they are not legitimately subject to being sued under the authority established by the Supreme Court. Corporations involved in mass-tort or pattern tort litigation must aggressively pursue dismissal or transfer of cases out of the familiar—but plaintiff-friendly—jurisdictions where the bulk of such litigation has been domiciled for so many years, and into appropriate venues where the cases belong. In our view, any cost or perceived risk in litigating in a less familiar venue is well worth the effort.

Forcing plaintiffs to file their claims in appropriate and often far less favorable venues will greatly decrease the value of many claims, make those cases less attractive to plaintiffs’ attorneys who have built their careers on litigating in a chosen, plaintiff-friendly jurisdiction, and likely result in many such claims not being filed at all. Bristol-Myers, in short, may radically alter the mass-tort and pattern litigation landscape.

Get Updates By Email

Blog Contributors