Locke Lord QuickStudy: Bristol-Myers v. Sup. Ct.: Supreme Court Restricts Specific Jurisdiction and Limits Forum Shopping

June 19, 2017

In Bristol-Myers Squibb Co. v. Sup. Ct. of Calif., 2017 WL 2621322 (2017), the U.S. Supreme Court continued its push against forum shopping by holding that California state courts do not have specific personal jurisdiction over defendants for nonresident plaintiffs’ claims that arose outside of California. This is the Court’s third ruling on personal jurisdiction in three years, which began in 2014 by restricting general personal jurisdiction in the Daimler decision and continued in the Tyrrell opinion released earlier this term. Daimler AG v. Bauman, 134 S.Ct. 746 (2014); BNSF Railway Co. v. Tyrrell, 2017 WL 2322834 (2017). In all three opinions, Justice Sotomayor was the lone dissenting vote. 

These decisions bring predictability to companies that operate nationwide by limiting the states where they can be sued. A company will generally only be subject to suit in states where: (1) the company is incorporated or headquartered; or, (2) the company engaged in conduct from which the claim arose. The Court did hold open the possibility that that claims under certain federal statutes with nationwide service-of-process provisions (e.g., RICO) could allow for broader personal jurisdiction. That issue will need to be resolved in the future. 

Nonresident Plaintiffs sue in California state court even though their injuries occurred elsewhere. 

A group of 86 California residents and 592 nonresidents sued Bristol-Myers Squibb Company (BMS) in California state court for injuries allegedly caused by the drug Plavix. BMS is a Delaware corporation headquartered in New York, and it developed and manufactured Plavix outside of California. Although BMS sold Plavix into California, the nonresidents did not purchase or use Plavix in California. Thus, BMS moved to dismiss the nonresidents’ claims for lack of personal jurisdiction, arguing that its California contacts had nothing to do with the nonresidents’ Plavix-related injuries. 

California Supreme Court: specific personal jurisdiction exists under a “sliding-scale” approach. 

The California Supreme Court held specific jurisdiction existed over BMS for the nonresidents’ claims. Bristol-Myers v. Sup. Ct., 377 P.3d 874 (2016). The court first concluded that no general jurisdiction existed because California (where BMS was neither incorporated nor headquartered) was not BMS’s “home state” under Daimler. Although BMS had a significant presence in California (five offices; 400+ employees), and sold substantial amounts of Plavix there (over $900 million), the court found that was insufficient under Daimler to support general jurisdiction because that presence and sales were a relatively small percentage of BMS’s nationwide operations. Id. at 883–84.

The California Supreme Court found specific jurisdiction based on a three-part test under which: (1) a defendant must have “purposefully directed” its activities at the forum state; (2) the claims arise from or relate to the forum-directed activities; and (3) jurisdiction is otherwise reasonable. Bristol-Myers, 377 P.3d at 885. BMS acknowledged that it purposefully directed activity towards California and did not dispute jurisdiction under the reasonableness prong. Instead, BMS argued the nonresidents’ claims did not relate to its California activities as Plavix was neither developed nor manufactured there, and the nonresidents did not purchase Plavix or see Plavix advertising in California. The California Supreme Court disagreed, adopting a “sliding-scale” approach to finding relatedness. Id. at 889 (“the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.”) Given BMS’s significant California contacts, the court held that those contacts were related to the nonresident’s claims even though BMS’s California activities “bear [no] substantive legal relevance to the nonresident plaintiffs’ claims ….” Id. at 888. 

U.S. Supreme Court: No specific jurisdiction where there is no connection between forum-related contacts and claims. 

The U.S. Supreme Court rejected the California Supreme Court’s sliding-scale approach, holding the connection required between BMS’s California contacts and plaintiffs’ claims was the same regardless of how significant BMS’s California contacts were. Bristol-Myers, 2017 WL 2621322, at *8. The Court found no such connection because the nonresidents’ claims did not arise from any of BMS’s California contacts. Id. (“What is needed—and what is missing here—is a connection between the forum and the specific claims at issue.”). 

The Court also found the minimal burden on BMS (which was defending dozens of other Plavix claims in California) was irrelevant, noting that constitutional limits on personal jurisdiction are not just about inconvenience but reflect “territorial limitations” on states’ powers. Id. at *7. In short, BMS could not be sued in California for Plavix-related injuries by nonresidents simply because BMS could be sued there by residents. Id. at *8 (“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.”).

Impact: Forum Shopping Has Been Significantly Restricted.

The combination of Bristol-Myers and Tyrrell from this term, and Daimler from 2014, present significant obstacles to a plaintiff’s ability to sue in states where neither plaintiff nor defendant is located. Daimler, and later Tyrrell, limited general jurisdiction to states where defendants are incorporated or headquartered. The California Supreme Court’s sliding-scale approach could have diluted those decisions, but the U.S. Supreme Court in Bristol-Myers rejected that approach and reaffirmed that specific jurisdiction requires a specific connection between the defendant’s forum-related contacts and the plaintiff’s claimed injury. This will impact the law in California, as well as Texas and the Federal Circuit, which had adopted similarly broad approaches to specific jurisdiction. See TV Azteca v. Ruiz, 490 S.W.3d 29, 52-53 (Tex. 2016); Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1336-35 (Fed. Cir. 2008).  

Bristol-Myers did not answer every question about personal jurisdiction. The Court explicitly left open the question of whether a broader jurisdictional approach would be permitted in cases under federal statutes that contain nationwide service-of-process provisions, such as racketeering claims under RICO or antitrust claims under the Clayton Act. That question involves nuanced issues of how jurisdictional contacts are analyzed, as well as whether venue and service are proper, and must wait for another day to be resolved.