Jurisdictional Reach of State Courts Limited
The U.S. Supreme Court reversed a closely-watched California Supreme Court ruling on Monday, finding that California state courts did not have specific jurisdiction to hear the claims of nonresident plaintiffs in a class action associated with the Bristol-Myers Squibb Company drug Plavix. The 8-1 opinion concluded that Bristol-Myers’ extensive contacts with California, including its marketing and distribution of the drug in California, as well as its research and development centers there, were not sufficient to establish specific personal jurisdiction of nonresident plaintiffs’ claims.
The underlying claims involve eight separate complaints filed in San Francisco by 86 Californians and 592 residents of 33 other states against Bristol-Myers, alleging the company’s drug Plavix had damaged their health. Each complaint contains the same allegations, including negligence, false or misleading advertising and strict product liability claims. Bristol-Myers is incorporated in Delaware and is headquartered in New York. Bristol-Myers does engage in business activities in California, including research and development facilities, employment of sales representatives in California, and a small state-government advocacy office. It also sold almost 187 million Plavix pills in California between 2006 and 2012, with revenue from those sales exceeding $900 million. But, the nonresident plaintiffs did not allege that they obtained Plavix from a California source, that they were injured in California, or that they were treated for their injuries in California. Little about the plaintiffs’ claims involved California, and the marketing and promotion of the drug was conducted on a nationwide basis and was not unique to California.
The California Supreme Court, in its June 2016 ruling, upheld the lower court’s decision that the company’s business contacts in the state were not sufficient to establish general jurisdiction, but applied a “sliding scale” approach to specific jurisdiction, under which “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” The majority concluded that in applying this test, Bristol-Myers’ extensive contacts with California permitted the exercise of specific jurisdiction based on a less direct connection between the company’s forum activities and plaintiffs’ claims “than might otherwise be required,” and the claims of the nonresident plaintiffs were similar in several ways to the claims of California residents.
The U.S. Supreme Court found the California Supreme Court’s sliding scale approach did not square with precedent, and that relaxing the strength of the requisite connection between the forum and the specific claims at issue if the defendant has extensive forum contacts unrelated to the claims resembles a “loose and spurious form of general jurisdiction.” The decision specifically notes that 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 nonresident plaintiffs' claims. “As we have explained, ‘a defendant’s relationship with a… third party, standing alone, is an insufficient basis for jurisdiction.’” Indeed, “What is needed -- and what is missing here -- is a connection between the forum and the specific claims at issue.”
Moreover, the U.S. Supreme Court rejected the argument that Bristol-Myers’ contracts with a California company to distribute Plavix nationally provided a sufficient basis for personal jurisdiction. It was not alleged that Bristol-Myers engaged in relevant acts together with that company in California, nor that Bristol-Myers is derivatively liable for that company’s conduct in California.
The good news for corporate defendants is that the decision reaffirms long-settled limits on the application of personal jurisdiction. The opinion concludes by rejecting the concept that it will result in a “parade of horribles,” noting that it will not prevent the California and nonresident plaintiffs from joining together in a state that has general jurisdiction over Bristol-Myers, or the residents of a particular state from potentially suing together in their home state. The decision also left open the question of whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.