The US Supreme Court Again Narrows the Scope of Personal Jurisdiction
The United States Supreme Court has once again limited the scope of personal jurisdiction over claims asserted against corporations. In its most recent decision, BristolMyers Squibb Co. v. Superior Court of California, San Francisco County (BMS) (decided June 19, 2017), the Court ruled that the California courts' exercise of specific personal jurisdiction over product liability claims asserted by nonresident plaintiffs violates the Due Process Clause of the Fourteenth Amendment.
Plaintiffs in BMS included 86 residents of California as well as 592 residents of thirty-three other states, all of whom alleged the same claims based on the same set of operative facts. In multiple complaints filed in the Superior Court of California for the County of San Francisco, plaintiffs asserted product liability claims arising out of injuries attributed to BMS' sale of the prescription drug Plavix. Each complaint named as defendants BMS, a biopharmaceutical company incorporated in Delaware with its principal places of business in New York and New Jersey, and McKesson Corporation, a Plavix distributor having its principal place of business in California.
BMS moved to dismiss the complaints of the plaintiffs who resided outside of California for lack of personal jurisdiction, noting the absence of any causal connection between the claims of those plaintiffs and California. First, BMS argued that the court could not exercise specific jurisdiction because there was no causal connection between the claims of the plaintiffs and California. In support of its argument, BMS noted that it did not develop or manufacture Plavix in California, nor did it promote the drug to the nonresident plaintiffs in California. Moreover, the nonresident plaintiffs did not purchase or ingest the drug in California and did not suffer any injuries or receive treatment in California.
Next, BMS argued that the court lacked general jurisdiction because BMS was not "at home" in California. In this regard, BMS' revenue from the sale of Plavix amounted to only 1.1% of its national sales revenue; California employees constituted only 3% of its total U.S. sales force; and only a small percentage of its sales force covered any part of California.
In response to BMS' jurisdiction motion, plaintiffs relied on BMS' significant ties to California, which included five research and laboratory facilities with approximately 160 employees, 250 sales representatives, and a government advocacy office. Between 20062012, BMS sold more than 180 million Plavix pills in California with sales revenue of $918 million. In addition, plaintiffs argued that jurisdiction existed because BMS had been registered to do business in California since 1936 and had a registered agent in California for service of process.
The Superior court ruled that it could assert general jurisdiction because of BMS' “wideranging, continuous, and systematic activities” in California. BMS then sought a writ of mandate, which the California Court of Appeal denied. However, on the same day that the Court of Appeal denied the writ, the U.S. Supreme Court decided Daimler AG v. Bauman, which greatly restricted a court's exercise of general jurisdiction. BMS then sought review of the Court of Appeal denial of its requested writ. The California Supreme Court vacated the denial and ordered the Court of Appeal to issue an order to show cause why the writ should not be granted in light of Daimler. On remand, the Court of Appeal agreed that Daimler prevented the courts of California from exercising general jurisdiction over BMS. However, the Court of Appeal concluded that BMS was subject to specific jurisdiction in California because BMS "has engaged in substantial, continuous economic activity in California, including the sale of more than a billion dollars of Plavix to Californians. That activity is substantially connected to the [nonresidents'] claims, which are based on the same alleged wrongs as those alleged by the California resident plaintiffs." The California Supreme Court affirmed, subjecting the jurisdiction analysis to a sliding scale test under which the “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Under the sliding scale test, "claim need not arise directly from the defendant's forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction."The U.S. Supreme Court granted certiorari to determine "whether the California courts' exercise of jurisdiction in this case violates the Due Process Clause of the Fourteenth Amendment."
The Court reversed the decision of the California Supreme Court, relying on "settled principles regarding specific jurisdiction."Initially, the Court noted that the exercise of personal jurisdiction requires a court to consider multiple interests, including those of the forum state and the plaintiff's interest in proceeding in the forum of its choosing. However, the primary concern to be considered in the personal jurisdiction analysis is the "burden on the defendant." This burden requires a court to assess the practical problems of requiring a defendant to litigate in the forum. But, the Court noted, restrictions on personal jurisdiction are not simply a matter of inconvenience to the defendant but "are a consequence of territorial limitations on the power of the respective States.” Thus, the personal jurisdiction calculus "also encom passes the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question."As a result, “[e]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.”
The Court concluded that California courts could not exercise specific personal jurisdiction over the claims asserted against BMS because there was no affiliation between California and the claims of the nonresident plaintiffs, noting that "the nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California." The fact that other plaintiffs (residents of California), who asserted the same claims, may have the requisite affiliation with California was insufficient for the California courts to exercise jurisdiction over the claims of the nonresidents because “a defendant’s relationship with a . . . third party, standing alone, is an insufficient basis for jurisdic tion,”regardless of any similarities between the claims of the resident and nonresident plaintiffs. "What is needed—and what is missing here—is a connection between the forum and the specific claims at issue."
The Court rejected the California Supreme Court's "sliding scale" analysis because it minimizes the critical importance of the connection between the forum and the asserted claims simply because the defendant has extensive contacts with the forum that are unrelated to the claim: "Our cases provide no support for this approach, which resembles a loose and spurious form of general jurisdiction. For specific jurisdiction, a defendant’s general connections with the forum are not enough."
Finally, the Court rejected the nonresident plaintiffs' argument that BMS' distribution relationship with McKesson provided a basis for the exercise of personal jurisdiction: "The bare fact that BMS contracted with a California distributor is not enough to establish personal jurisdiction in the State." In reaching this conclusion, the Court noted the absence of any allegation that McKesson and BMS acted together in committing relevant acts in California or that BMS was "derivatively liable" for McKesson's actions in California. Moreover, there was no evidence to demonstrate how Plavix reached the nonresident plaintiffs, specifically that the medication was distributed by McKesson.
At first blush, the Court's BMS decision can be viewed as encouraging or even requiring multiple lawsuits with the same substantive issues and same set of operative facts to be brought in multiple forums. Indeed, the nonresident plaintiffs advanced this scenario as a reason to affirm the California Supreme Court. But that conclusion, as the Court observed, overlooks the important role that general jurisdiction plays in assuring that all similar claims can be joined in a single proceeding, if the plaintiffs so choose: "Our straightforward application in this case of settled principles of personal jurisdiction will not result in the parade of horribles that respondents conjure up. . . .Our decision does not prevent the California and out-of-state plaintiffs from joining together in a consolidated action in the States that have general jurisdiction over BMS." Thus, all plaintiffs in BMS both California residents and nonresidents could have asserted their claims in the courts of Delaware or New York, the states in which BMS was incorporated and had its principal place of business. To be sure, BMS will force plaintiffs with similar claims to decide whether to consolidate in a single forum or go their separate ways, but it cannot be read as eliminating the option of a single forum for the resolution of all claims.