Supreme Court Slams Door on Out-of-State Plaintiffs’ Suits

The Fourteenth Amendment to the U.S. Constitution restricts a state court’s ability to entertain a lawsuit against a non-resident defendant. The U.S. Supreme Court recently clarified the scope of jurisdiction over out-of-state defendants in tort suits arising under state law. In Bristol-Myers Squibb Co. v. Superior Court of California,[1] multiple plaintiffs sued Bristol-Myers Squibb Co. (BMS) in a California state court to recover damages allegedly caused by their use of BMS’ anti-clotting drug, Plavix. Most of the plaintiffs resided outside California. All asserted tort claims under California state law.

BMS, pointing to an insufficient connection between the non-resident plaintiffs’ injuries and the California forum, challenged the California court’s jurisdiction to hear the claims of the out-of-state plaintiffs. The trial court initially ruled that it had general jurisdiction over BMS. In a series of appeals through the California state courts, the California Supreme Court ultimately held that general jurisdiction was lacking, but in a divided opinion, that specific jurisdiction existed. The California Supreme Court’s majority based its determination of specific jurisdiction on a sliding scale. The court articulated its approach as, “the more wide-ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” As a result of BMS’ wide range of business contacts in California, the court ruled that this specific jurisdiction properly could be exercised.

Here, there was little question that BMS had a strong presence in California. BMS engaged in research activities in California, employing some 160 employees at five research centers in the state. BMS also employed about 250 sales representatives in California. However, BMS was not incorporated or headquartered in California, nor did BMS develop, manufacture, label, seek regulatory approval, or plan marketing strategy for Plavix in California. Rather, BMS was incorporated in Delaware and headquartered in New York. Plavix was developed and prepared for the market largely in those two states, and not in California.

The U.S. Supreme Court disagreed with the California Supreme Court’s sliding scale approach to specific jurisdiction, characterizing it as “a loose and spurious form of general jurisdiction.” The court discussed the difference between general jurisdiction and specific jurisdiction. For general jurisdiction to exist, the defendant must be “at home” in the forum state. When a court has general jurisdiction over a defendant, the court may hear practically any type of tort claim against the defendant, even if the defendant’s conduct occurred in a different state. An individual defendant is considered “at home” in the state of his or her domicile. A corporation typically is “at home” in its state of incorporation and in the state of its principal place of business. In its “home” state, then, an individual or corporation properly may be sued on virtually any claim that arises at any place in the country. Applying these principles to BMS, the company is “at home” in Delaware (its place of incorporation) and New York (its principal place of business). Under principles of general jurisdiction, BMS could be sued for virtually any tort in either of those two states.

But a company may be sued outside its home state only if specific jurisdiction exists. The Supreme Court in Bristol-Myers Squibb explained that, for a court to have specific jurisdiction over an out-of-state defendant, “the suit must arise out of or relate to the defendant’s contact with the forum. … There must be an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum [s]tate. Where there is no such connection, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities” in the state. Thus a defendant’s business activities in a state other than its “home” state, no matter how extensive those activities are, will not support specific jurisdiction unless the suit arises out of those particular activities.

Here, BMS did not dispute that the California state court had specific jurisdiction over the claims of the California plaintiffs. The California plaintiffs presumably were prescribed Plavix, purchased Plavix, and ingested the drug in that state. But according to the Supreme Court, these facts did not authorize the California court to adjudicate claims of non-California plaintiffs when the conduct giving rise to those plaintiffs’ claims did not occur in California. The court explained that a defendant’s relationship with a third party—here, the California residents—does not, by itself, provide a basis for specific jurisdiction over the claims of other parties.

The court was not persuaded by the fact that all plaintiffs suffered similar harm from a similar course of conduct or that judicial efficiency would be served by having all of their claims heard in California. The court pointed out that its decision leaves open the option for plaintiffs within a single state to join together in one suit. As a further option, all plaintiffs could join together in consolidated actions in Delaware or New York, whose courts would have general jurisdiction over BMS.

In a dissenting opinion, Justice Sotomayor took issue with her colleagues’ reading of the Due Process clause and the court’s precedent. Since the touchstone of a jurisdiction analysis is fairness to the defendant, “there is nothing unfair about subjecting a massive corporation to suit in a State for a nationwide course of conduct that injures both forum residents and nonresidents alike.” The dissenting justice expressed concerns about the ramifications of the court’s decision, including the difficulty of bringing a nationwide mass action in state court against defendants who are “at home” in different states.

While Bristol Myers-Squibb provides guidance on jurisdictional principles applicable to individual defendants, it remains to be seen how courts will deal with the question of piecemeal litigation when all defendants cannot be joined in a single forum.

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Dona Szak represents foreign and domestic clients in business and commercial matters. She has taken cases through all stages of litigation: pre-lawsuit investigation, trial, appeal, and judgment collection. She has designed and implemented strategies for resolving complex commercial problems. By conducting preventive counseling, she has helped her clients achieve favorable resolutions to their business controversies, often without the necessity of filing or defending lawsuits. As co-counsel in an ERISA action, her successes include alleging that plan fiduciaries breached duties of loyalty and prudence by selecting and maintaining inappropriate funds for a company’s 401(k) plan and in negotiating a business resolution of on behalf of an automotive parts supplier facing a lawsuit against a major automobile manufacturer for misrepresentation and breach of contract. Learn more at http://ajamie.com/.