- No More Spurious Contacts: SCOTUS on Specific Jurisdiction
- November 22, 2017
In a widely anticipated opinion that may be one of the most impactful cases of the U.S. Supreme Court’s 2016-2017 term, Bristol-Myers Squibb Co. v. Superior Court clarified the legal standard for establishing specific personal jurisdiction over out-of-state defendants in lawsuits brought by non-resident plaintiffs. Since the Supreme Court’s decision on June 19, numerous federal district courts across the country have already relied on BMS v. Superior Ct. as dispositive of pending motions to dismiss for lack of personal jurisdiction, starting a collective excited whisper amongst the defense bar. BMS v. Superior Ct. is a landmark case that will be taught in law school classrooms and cited in many motion to dismiss briefs for years to come.
BackgroundIn BMS, more than 600 plaintiffs brought suit in California state court against Bristol–Myers Squibb Company (“BMS”), asserting a variety of state-law claims based on injuries allegedly caused by the pharmaceutical Plavix® manufactured by BMS. Plaintiffs also included as a defendant pharmaceutical distributor McKesson Corporation, headquartered in California, to defeat diversity jurisdiction. As stated in its briefing, BMS is incorporated in Delaware and headquartered in New York, and as expected of most large pharmaceutical companies, BMS marketed, distributed and sold Plavix® in virtually every U.S. state, including California. However, BMS did not develop, manufacture, label, package or create a marketing strategy for Plavix® within the state of California. Nevertheless, a group of plaintiffs consisting of 86 California residents and 592 residents from 33 other states filed a number of complaints against BMS in California Superior Courts, asserting claims under California state law. BMS moved to dismiss based on lack of personal jurisdiction over the non-California residents’ claims. The California Superior Court denied the motion, finding that California courts had general jurisdiction over BMS due to its “extensive activities in California[.]” The California Court of Appeal disagreed and overturned the trial court’s ruling, finding no general jurisdiction was present, but that California courts had specific jurisdiction over nonresidents’ claims against BMS.California “Sliding Scale” Test OverturnedAfter the ruling by the California Court of Appeal, the question of specific jurisdiction in BMS v. Superior Ct. went to the California Supreme Court, which applied a “sliding scale approach to specific jurisdiction.” Under this approach, “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” The California Supreme Court was persuaded that even though Plavix® was not designed or developed in California, the other Plavix® product research conducted in California was significant enough to confer specific jurisdiction over Bristol-Myers Squibb for all cases brought by out-of-state plaintiffs.The U.S. Supreme Court granted certiorari to decide whether the California Supreme Court’s interpretation of specific jurisdiction violated the Fourteenth Amendment’s Due Process Clause, and disagreed with the California Supreme Court for a number of reasons. Laying the groundwork from its previous jurisprudence on specific jurisdiction, the Supreme Court explained that for a state court to exercise specific jurisdiction, “the suit must arise out of or relate to the defendant’s contacts with the forum.” The Court went on to disapprove of the California Supreme Court’s approach, which relaxed the requirements for strength of the connection between the forum state and the specific claims at issue if the defendant has extensive contacts with the forum state, even if unrelated to those claims. In other words, under the California Supreme Court’s test, if a defendant had extensive contacts with the forum state but no activity related to the specific claims at issue took place in the forum state, that defendant could still be hailed into court there under the “sliding scale” standard. The U.S. Supreme Court, in its 8-1 decision, expressly overturned California’s “sliding scale” standard, calling it a “loose and spurious form of general jurisdiction.”The Court made clear that “for specific jurisdiction, a defendant’s general connections with the forum are not enough”, and a corporation’s continuous activity within a state is insufficient to raise the specter of specific jurisdiction subjecting that corporation to lawsuits unrelated to that activity.Implications for Corporate DefendantsSo what does this mean for corporations and corporate defendants, especially companies who sell and market goods nationwide? If a non-resident consumer does not purchase, use, or become injured by defendant’s product in state X, is there any basis for specific jurisdiction over the defendant in state X? BMS v. Superior Ct. tilts the scale in favor of corporations by limiting the options available to plaintiffs - the Supreme Court ruled that the danger in California’s sliding scale approach was its broad permission of specific jurisdiction where there was no adequate link between the forum state and the nonresidents’ claims. The Supreme Court also was not convinced by plaintiffs’ “last ditch contention” that specific jurisdiction was proper due to BMS’ contract with California corporation McKesson to distribute Plavix®.In our new post-BMS era, there are a few avenues that savvy plaintiffs’ attorneys may try to explore. The BMS Court criticized the non-resident plaintiffs for not having claimed to have suffered any harm in the forum state, implying that filing suit where they experienced their alleged injuries would have changed the jurisdictional analysis. The BMS Court further explained that its ruling might be distinguishable if Plaintiffs had alleged that BMS could be derivatively liable for its California distributor’s alleged actions or that BMS had acted in concert with its California distributor, potential loopholes for plaintiffs to exploit post-BMS. Further, plaintiffs may view BMS as an open invitation to emphasize the activities of defendants that reside in the forum state. Such a strategy would be manifest in cases with multiple defendants where plaintiffs may try to argue that the resident defendant or defendants occupy a central or important position in the litigation. The Supreme Court did not undo the prevailing rule that courts can still exercise general jurisdiction over corporate defendants in either their states of incorporation or their principal places of business, where they are “at home”, which may also result in a uptick of cases filed in the states where companies are incorporated or have a principal place of business. Lastly, there is a possibility that the BMS ruling will result in more Multi-District Litigation petitions, as plaintiffs may decide that instead of filing suit in multiple state courts for essentially the same claims and face potential removal, the best way to obtain the efficiencies of consolidated discovery would be through the MDL process.On balance, BMS is a favorable decision for defendants in that it clarifies that specific jurisdiction cannot exist solely because of a defendant’s marketing or sale of a product in the forum state, and that plaintiffs must demonstrate a link between the forum state and the nonresidents’ claims to survive motions to dismiss. The overall tone of the BMS decision reprimands liberal findings of specific jurisdiction where there is no alleged activity related to the specific claims at issue took place in the forum state, calling such contacts “loose and spurious.” No more spurious contacts? Looks like the heyday of litigation tourism is in the rearview mirror. Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, et al., 137 S.Ct. 1773 (2017) (“BMS v. Superior Ct.”) Id. at 1778. Citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472–473 (1985) (internal quotations omitted). Bristol-Myers Squibb Co. v. Superior Ct., 137 S.Ct. at 1781. Id. (noting “the nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California. 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.”). Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).Back