Chicago Partner Rusty Perdew, a member of the Firm’s Class Actions Practice Group, commented on the decision by the U.S. Supreme Court in Bristol-Myers Squibb v. Superior Court of California, noting: “The decision brings predictability to companies that operate nationwide by limiting the states in which they can be sued.” Rusty also said that a “company can always be sued where it’s incorporated or headquartered, but to sue a company in state court outside of its home states, a plaintiff has to show a connection between the defendant's California conduct and the relevant facts of the case.”
Read the full article below (Reproduced with permission from Life Sciences Law & Industry Report, 11 LSLR 13 (June 23, 2017). Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com).
The U.S. Supreme Court continued to roll back where corporations can be sued June 19 (Bristol-Myers Squibb Co. v. Superior Court for the Cty. of San Francisco, U.S., No. 16-466, reversed6/19/17).
Bristol-Myers Squibb Co. can't be sued by out-of-state plaintiffs in California courts, even though the pharmaceutical giant is already being sued there by California residents alleging injuries from the company's billion-dollar blood thinner Plavix, the high court said, in an opinion by Justice Samuel A. Alito Jr.
It's the latest in a string of Supreme Court cases saying that it's unfair—and thus a violation of due process—to sue corporations in jurisdictions where they have little to no connections.
The court continued to push back on “forum shopping” by plaintiffs, Rusty Perdew of Locke Lord LLP, Chicago, who represents companies in complex litigation and class actions, said in a June 19 email sent to Bloomberg BNA. Perdew was referring to the charge that plaintiffs often sue in jurisdictions that have procedural or substantive rules that are more friendly to their case.
The decision, though, could limit the ability of plaintiffs to collectively sue large corporations, potentially spreading their cases across the country, Timothy Droske of Dorsey & Whitney LLP, Minneapolis, who is also involved in complex litigation, told Bloomberg BNA in a June 19 email.
“Ultimately, the majority of the Court is taking the position that the constitution's due process requirements impose certain limitations upon the exercise of jurisdiction over corporate defendants, and that those constitutional limitations trump any practical concerns over how that will impact plaintiffs’ ability to bring suit,” Droske said.
The case involves more than 600 plaintiffs who sued Bristol-Myers in California, most of whom were not California residents. The plaintiffs alleged that Bristol-Myers's drug Plavix damaged their health.
Originally, California courts determined that they had general, or all-purpose, jurisdiction over the company due to its substantial activities in the state. Such jurisdiction would allow Bristol-Myers to be sued in California for any purpose.
But the Supreme Court limited the reach of general jurisdiction in Daimler AG v. Bauman. Corporations could only be sued where they are essentially “at home"—namely, in the states in which they are incorporated and headquartered.
The California courts then looked to specific, or case-linked, jurisdiction. Under that theory, corporations can be sued in the state when the actions giving rise to the suit occurred there.
The California courts said there was specific jurisdiction over Bristol-Myers based on a combination of the company's contacts with the state, including research unrelated to Plavix, and because the claims of the nonresidents were similar to the claims of the California residents.
That “relaxed” version of specific jurisdiction is “difficult to square” with the court's prior cases, the Supreme Court said.
Specific jurisdiction looks only at the “affiliation between the forum and the underlying controversy,” the court said. “When there is no such connection, specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the State.”
“Here, Bristol-Myers (a non-California corporation) didn't develop the drug (Plavix) in California,” Perdew explained. Although “it sold millions of Plavix pills in California, none of the non-California plaintiffs bought or used Plavix in California, and none of those plaintiffs were injured in California.”
So the Supreme Court “found no basis for jurisdiction in California state courts over claims brought by non-California plaintiffs,” Perdew said.
The court also “rejected the argument that jurisdiction was appropriate because it wouldn't be burdensome to Bristol-Myers to defend in California, where it was already defending other Plavix litigation filed by California residents,” he said. The court said “constitutional limits on personal jurisdiction are about more than inconvenience,” Perdew said.
“The decision brings predictability to companies that operate nationwide by limiting the states in which they can be sued,” Perdew said.
“A company can always be sued where it's incorporated or headquartered,” he said. “But to sue a company in state court outside of its home states,” a “plaintiff has to show a connection between the defendant's California conduct and the relevant facts of the case.”
Mass Actions Will Splinter
The decision prompted a strong dissent from Justice Sonia Sotomayor, the only justice to disagree with the court's decision.
“Three years ago, the Court imposed substantial curbs on the exercise of general jurisdiction in its decision in Daimler,” Sotomayor said. The court now “takes its first step toward a similar contraction of specific jurisdiction.”
She feared the consequences would be “substantial.”
“The majority's rule will make it difficult to aggregate the claims of plaintiffs across the country whose claims may be worth little alone,” and “will result in piecemeal litigation and the bifurcation of claims,” she said. “None of this is necessary.”
The decision will also make it harder to bring a nationwide mass action against a defendant headquartered and incorporated internationally, Sotomayor argued.
After Daimler, specific jurisdiction is “generally what is needed to bring an international corporation into U.S. court,” Droske said.
But the court's decision will “frustrate efforts to bring a nationwide mass action by residents of different states against an international defendant,” Droske said.
“The majority does not dispute this point,” he said. “Instead, it asserts that instead of a nationwide mass action, residents of a particular state would need to file their own action in their respective home state. “
Perdew agreed. The combination of Bristol-Myers and Daimler “certainly narrows the options for plaintiffs to sue a foreign corporation, at least for state-law claims,” Perdew said.
“Plaintiffs can only assert state-law claims against foreign corporations where the injury occurs or where there's some other relevant conduct,” he said.
The majority did leave open the possibility of bringing certain federal-law claims against foreign defendants, but plaintiffs would have to clear other procedural hurdles in such cases, Perdew said.
Class Actions Next?
Although the case doesn't specifically address class action jurisdiction, it does raise the question “whether the extension of specific jurisdiction principles to class actions could be the next issue the Court takes up,” Droske said.
“Some courts have held that if the forum State may exercise case-linked jurisdiction over the named plaintiffs’ claims, it also may adjudicate the claims of the absent class members,” Andy Pincus of Mayer Brown, Washington, said in an email statement sent to Bloomberg BNA June 19.
“That reasoning is significantly undermined,” by the decision here, “which squarely held” that the fact that “other plaintiffs could invoke case-specific jurisdiction in California” doesn't mean all plaintiffs, including out-of-state plaintiffs, can, Pincus said.
That “provides class action defendants with powerful arguments to challenge the filing of class actions in a forum that lacks personal jurisdiction with respect to each of the absent class members’ claims,” he said.
Droske, however, noted that the court specifically left that question open by distinguishing its previous ruling regarding class actions.
One other “striking” thing about this and the court's “other recent personal jurisdiction decisions is the near unanimity from the Court,” Droske said in a statement emailed to Bloomberg BNA June 19.
Daimler was written by Justice Ruth Bader Ginsburg, and Alito wrote the decision here. The two justices are on the opposite sides of the court's ideological spectrum.
But both decisions “were unanimous with the sole exception of Justice Sotomayor, who concurred in Daimler and dissented” here. Sotomayor's fear regarding the consequences of these decisions “may prove to be correct, but that has not dissuaded both the liberals and conservatives on the bench from reining in personal jurisdiction's reach,” Droske said.
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