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Supreme Court’s latest jurisdiction ruling a victory for product manufacturers

By Ryan Wiesner 

Ryan Wiesner is an associate and member of the litigation group at Davis & Kuelthau. He handles an array of complex litigation nationwide, specializing in intellectual property disputes covering trademarks, copyrights, patents, and unfair competition. Please contact him at rwiesner@dkattorneys.com for questions or inquiries.

Ryan Wiesner is an associate and member of the litigation group at Davis & Kuelthau. He handles an array of complex litigation nationwide, specializing in intellectual property disputes covering trademarks, copyrights, patents, and unfair competition. Please contact him at rwiesner@dkattorneys.com for questions or inquiries.

This term the United States Supreme Court issued two decisions that place limits on plaintiffs’ ability to file lawsuits in states with no connection to their claims.

It first issued a decision in BNSF Railway Co. v. Tyrell, which reaffirmed that courts have general personal jurisdiction over a company only in states where the company is incorporated or does substantial business—think International Shoe. On June 19, 2017 the Supreme Court went further – in the pharmaceutical-products liability cases of Bristol-Myers Squibb Co. v. Superior Court of California – and limited specific personal jurisdiction. The court ultimately held that California was an improper venue for non-resident plaintiffs to file in because their claims had no connection to the defendant-company’s conduct in that state.

This decision will affect products-liability and mass-tort claims moving forward. Defendants can now both challenge a venue as being improper and prevent plaintiffs from choosing an unrelated forum if the plaintiffs are seeking to go there for no better reason than its laws or verdict history are more favorable.

Background facts and lower court holdings

A group of plaintiffs, most of whom were not California residents, sued Bristol-Meyers in California state court claiming they had suffered health effects from using the drug Plavix. The non-resident plaintiffs did not buy Plavix in California, nor were they injured in the state.

Bristol-Meyers is incorporated in Delaware and maintained substantial operations in New York and New Jersey. And while it sold Plavix in California, it did not “develop, create a marketing strategy for, manufacture, label, package, or work on the regulatory approval for Plavix in the State.” Therefore, the non-residents’ claims had no connection to California.

Bristol-Meyers challenged personal jurisdiction concerning the non-residents’ claims but the superior court denied that motion, finding that Bristol-Meyers’ extensive activities in the state gave California courts general jurisdiction over the non-resident claims. The California Court of Appeals and state supreme court partially disagreed. The court of appeals found general jurisdiction lacking but determined that California had specific jurisdiction over the non-resident plaintiffs’ claims.

The California Supreme Court agreed. It applied a “sliding scale approach” that assessed (1) the defendants’ presence in the state and (2) its connection to the specific injury. If the defendant did not have a substantial presence, it could still be subject to jurisdiction if its conduct in the state was related to the plaintiff’s claimed injury, and vice versa. The state supreme court held that Bristol-Meyers’ “wide-ranging” contacts with the state were sufficient to confer specific jurisdiction over the non-resident plaintiffs’ claims because those claims were similar to those raised by the resident-plaintiffs.

The U.S. Supreme Court disagrees

The U.S. Supreme Court disagreed with the California Supreme Court and found that compelling Bristol-Meyers to defend the non-resident claims in California violated the Due Process Clause of the Fourteenth Amendment. In doing so, the U.S. Supreme Court found that the California Supreme Court’s sliding-scale approach blurred the lines between general and specific jurisdiction and was unsupported by previous U.S. Supreme Court decisions assessing personal jurisdiction. Eight of nine justices agreed

In an opinion by Justice Samuel Alito, the court held that California did not have jurisdiction over the non-resident claims. Although Bristol-Meyers had done some business in California, its business operations were wholly unrelated and unconnected to the non-resident claims. A link between Bristol-Myers’ conduct and the non-resident plaintiff’s injuries was needed, but lacking.

The big takeaway is that a defendant’s continuous business activity in California is insufficient to subject it to personal jurisdiction in that forum, especially if the forum state uses a sliding-scale approach to jurisdiction. More is needed before a defendant can be burdened with defending a lawsuit in an unrelated forum; a connection between the defendant’s conduct and the claims asserted, rather, must exist.

Justice Sonia Sotomayor was the lone dissenter. She touted “fairness,” believing that the majority’s holding would “make it difficult to aggregate the claims of plaintiffs across the country whose claims may be worth while.” Simply put, she feared that territorial limitations may hinder mass-tort and class litigation that spans several jurisdictions.

Moving forward

Pharmaceutical and products manufacturers can view the Bristol-Meyers decision as a victory and should take note of the decision to ensure that they raise proper objections and affirmative defenses to personal jurisdiction. This is especially true if they are defending cases in states that use a similar sliding-scale analysis for personal jurisdiction, which obviously includes California but also the products-liability-heavy venue of Texas.

This decision should limit the instances in which manufacturers find themselves defending lawsuits in forums that are wholly unrelated to the injuries claimed. It will also limit forum shopping, as it should prevent plaintiffs’ counsel from choosing an otherwise improper forum just because the forum has favorable procedural or evidentiary rules, or has a history of large verdicts in similar cases.

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