June 21, 2017

Closing Up Shop: Supreme Court Solidifies Protections Against Plaintiff Forum Shopping

At the end of 2016, we highlighted the United States Supreme Court’s hearing of Bristol-Myers Squibb Co. v. Superior Court as a decision “of great concern to drug and device companies” as it pertains to plaintiff forum shopping. In particular, we noted that the Court’s decision would determine whether “a nonresident company [could] be haled into a court by a nonresident plaintiff over products bearing no connection whatsoever to the jurisdiction (not prescribed, implanted, ingested or otherwise existing in that state at any time)” — a concern for all drug and device companies after the California Supreme Court essentially upheld this practice in its 4-3 opinion in Bristol-Myers Squibb Co. v. Superior Court.

On June 19, 2017, the U.S. Supreme Court addressed these issues directly in an 8-1 decision that carries enormous implications for drug and device companies and has had an immediate impact on pending litigation.

In keeping with the longstanding precedent of International Shoe and Burger King, the Court held that in determining if a forum’s exercise of specific personal jurisdiction over a party complies with the Fourteenth Amendment’s Due Process Clause, the nature of the required connection between the suit and the proposed forum jurisdiction may not be relaxed based on a “sliding scale” that depends on the extent of the defendant’s general connections with that jurisdiction.

The issue arose after several hundred plaintiffs from 38 states filed a single action against Bristol-Myers Squibb (BMS) — which is incorporated in Delaware and headquartered in New York — in California state court. The plaintiffs claimed injuries related to BMS’s manufacture and sale of the blood-thinning drug Plavix. BMS challenged the state court’s personal jurisdiction over the claims of the non-California plaintiffs on the ground that it “did not develop Plavix in California, did not create a marketing strategy for Plavix in California, and did not manufacture, label, package or work on the regulatory approval of the product in California,” and because “[t]he nonresident plaintiffs did not allege that they obtained Plavix through California physicians or from any other California source; nor did they claim that they were injured by Plavix or were treated for their injuries in California.”

The California courts held that they had specific jurisdiction over BMS, adopting a “sliding scale” approach to specific jurisdiction under which “the more wide ranging the defendant’s forum contacts,” the more easily a plaintiff may establish personal jurisdiction “based on a less direct connection between [the defendant’s] forum activities and the plaintiffs’ claims.” Applying this rule, the California courts found specific jurisdiction because BMS had other operations in California, and because the California and non-California plaintiffs’ claims were “based on the same allegedly defective product and the assertedly misleading marketing and promotion of that product.”

The Supreme Court reversed, holding the “sliding scale” approach “resemble[d] a loose and spurious form of general jurisdiction.” The Court reiterated that specific jurisdiction does not arise merely “when third parties (here, the plaintiffs who reside in California) can bring claims similar to those brought by the nonresidents.” The Court also held that “BMS’s decision to contract with a California company … to distribute Plavix nationally” did not supply the needed connection because “the nonresidents have adduced no evidence to show how or by whom the Plavix they took was distributed to the pharmacies that dispensed it to them.”

Litigants immediately felt the impact of the holding when, on June 19 (the same day that the Supreme Court decided Bristol-Myers), a Missouri state court judge in St. Louis declared a mistrial in a lawsuit brought on behalf of three women — only one of whom resided in Missouri — who died of ovarian cancer after using Johnson & Johnson’s talcum powder. Johnson & Johnson moved for the mistrial, arguing “[u]nder the reasoning of Bristol-Myers, the mere fact that nonresident plaintiffs have joined their claims with those of a handful of Missouri residents does not suffice to give rise to personal jurisdiction over the Johnson & Johnson defendants with respect to their claims.” The judge’s grant of the mistrial indicates that judges are taking heed of the Supreme Court’s growing jurisprudence (e.g., Daimler AG v. Bauman and BNSF Railway Co. v. Tyrrell) that increasingly indicates that — for mass-tort cases — plaintiffs will likely have only three choices for where to file suit: (1) their individual home states, (2) a defendant-company’s principal place of business or (3) a defendant-company’s place of incorporation.

Even so, in Bristol-Myers and Tyrrell, the Court did not rule on the issue of so-called “consent jurisdiction,” whereby some pre-Daimler courts held that defendant-companies consent to personal jurisdiction by registering to do business in a forum. These holdings seemingly eviscerate Daimler and its progeny, as noted by the Missouri Supreme Court in State ex rel. Norfolk So. Ry. Co. v. Hon. Colleen Dolan. In Norfolk, the court reasoned that because “every state requires a foreign corporation doing substantial business in a state to register under the foreign corporation statutes” permitting consent jurisdiction on this basis “would allow national corporations to be sued in every state,” rendering Daimler “pointless.” Although the Supreme Court declined to address consent jurisdiction this October Term, its holdings in Bristol-Myers and Tyrrell further solidify Daimler’s protection against plaintiffs’ forum shopping.

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