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March 10, 2017 Articles

Exploring the Limits of Specific Jurisdiction

Carolyn R. Davis and Allison H. Semaya

Earlier this year, in a controversial 4–3 decision, the California Supreme Court held that a global biopharmaceutical company was subject to specific jurisdiction in California despite the absence of a causal link between the defendant’s contacts with that forum and the plaintiffs’ claims. Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874 (Cal. 2016). The holding in Bristol-Myers Squibb carries broad implications for litigants nationwide because it would expand the limits of a court’s ability to exercise specific jurisdiction over a nonresident defendant. Bristol-Myers Squibb Company petitioned the Supreme Court of the United States for a writ of certiorari to review the California Supreme Court’s judgment, and, unsurprisingly, several amici curiae, including representatives of a broad range of products manufacturers and distributors, have weighed in to express their support for Bristol-Myers’s petition. On January 19, 2017, the U.S. Supreme Court granted certiorari.

Personal jurisdiction—which concerns a court’s authority over the parties to a lawsuit—takes two forms: general and specific. General jurisdiction refers to a court’s power to adjudicate any cause of action involving a particular defendant regardless of where the cause of action arises, based on a finding that the party’s activities in the forum state are “so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Id. at 880. On the other hand, specific jurisdiction refers to the court’s power to adjudicate claims against a defendant arising out of the defendant’s contacts with that forum.

The question of whether a court may exercise specific jurisdiction over a non-resident defendant involves examining (1) whether the defendant has “purposefully directed” its activities at the forum state; (2) whether the plaintiff’s claims arise out of or are related to these forum-directed activities; and (3) whether the exercise of jurisdiction is reasonable and does not offend “traditional notions of fair play and substantial justice.”

Id. at 885 (internal citations omitted).

In March 2012, 678 plaintiffs—only 86 of whom were California residents—brought claims against Bristol-Myers in superior court in California, alleging serious injuries as a result of ingesting Plavix, a prescription blood thinner manufactured by Bristol-Myers. While Bristol-Myers did not dispute that it was subject to specific personal jurisdiction for the claims of the California resident plaintiffs, it challenged the court’s extension of personal jurisdiction for purposes of adjudicating the claims of the 592 non-California residents. Bristol-Myers “conducts significant business and research activities in California but is neither incorporated nor headquartered” there. Id. The superior court held that Bristol-Myers’s conduct in California was “sufficiently extensive to subject it to the general jurisdiction of the state courts.” Just prior to the court of appeal’s decision, the U.S. Supreme Court issued its landmark decision in Daimler AG v. Bauman, which clarified the parameters of general jurisdiction, holding that it is essentially limited to those states where a corporation is incorporated and has its principal place of business. 134 S. Ct. 746, 751 (2014). The court of appeals reversed the superior court in part, finding that in light of Daimler, Bristol-Myers’s “activities in California were insufficient to subject it to general jurisdiction . . . but that, given the nature of the action and [its] activities in California,” California had specific jurisdiction over the matter. Bristol-Myers Squibb Co., 377 P.3d at 879.

Bristol-Myers petitioned for review by the Supreme Court of California, which affirmed the court of appeals’ decision. In light of Daimler, the state supreme court held that Bristol-Myers, which is incorporated in Delaware and maintains principal business centers in New York and New Jersey, was not subject to general jurisdiction in California. However, the court found that specific jurisdiction was proper despite the fact that Plavix was not prescribed, ingested, or obtained in California by the nonresident plaintiffs, and the marketing, packaging, and regulatory materials were not prepared in California. Id. at 895.

The California Supreme Court applied a “sliding scale approach,” otherwise described as an “inverse relationship” test, whereby the court “recognized that ‘the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.’” Id. (quoting Vons Cos., Inc. v. Seabest Foods, Inc., 14 Cal. 4th 434, 455 (1996)). By this reasoning, the court found that the “nationwide marketing, promotion, and distribution of Plavix created a substantial nexus between Plaintiffs’ claims and the company’s contacts in California concerning Plavix.” Id. at 888. Even though nonresidents did not allege that they ingested Plavix that was marketed, promoted, or distributed in California, their “claims [were] based on the same allegedly defective product and the assertedly misleading marketing and promotion of that product, which allegedly caused injuries in and outside the state.” Id. In other words, Bristol-Myers’s general activities concerning Plavix in California were sufficiently related to the claims of the nonresident plaintiffs who were prescribed and ingested Plavix elsewhere. The court emphasized that under this approach, the claim need not arise directly from the defendant’s forum contacts, nor satisfy the “but for” or “proximate” causation standards, to warrant the exercise of specific jurisdiction. Id. at 885.

Bristol-Myers petitioned the U.S. Supreme Court to review the California Supreme Court’s decision. Petition for Writ of Certiorari, Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (Oct. 7, 2016).  The petition explains that clarification is needed to unify three distinct “camps” that have emerged as a result of court interpretations of the ambiguous “related to” standard for specific jurisdiction: (1) the “but-for” group, comprising the Fourth, Ninth, and Tenth Circuits, and the high state courts of Arizona, Massachusetts, and Washington, which exercise specific jurisdiction only if the defendant’s forum state conduct is a “but for” cause of the plaintiff’s injury; (2) the “proximate cause” or “foreseeability” group, including the First and the Sixth Circuits, which have concluded that the plaintiff’s injuries must be “proximately caused” by the defendant’s forum contacts, and the Third, Seventh, and Eleventh Circuits, which also require a “closer and more direct causal connection than that provided by the “but-for” test; and (3) the most lenient group, which includes the California Supreme Court, the Federal Circuit, the highest court of Texas, and the District of Columbia, which have held that some general “relationship” or “connection” between the forum contacts and the claim is sufficient to confer specific jurisdiction. Only the third camp has taken the position that the relatedness requirement does not demand any causal connection between the defendant’s forum contacts and the plaintiff’s injury.

Bristol-Myers argues that the “sliding scale” approach is “not how specific jurisdiction works” because it conflates the analysis with general jurisdiction, where it is proper to consider the magnitude of the defendant’s overall forum contacts that bear no relation to the claim. Id. at 3. Bristol-Myers further argues that “no amount of forum-state contacts unrelated to respondents’ suit” should substitute for the relatedness requirement. Id. (relying on select Supreme Court precedent, including Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014) (holding that jurisdiction lies only when “the defendant’s suit-related conduct create[s] a substantial connection with the forum State”), and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) (declining to extend specific jurisdiction where injuries and the production of the product that caused injury occurred abroad)).

The Product Liability Advisory Council, Inc. (PLAC)—a nonprofit with 94 corporate members across several industries—filed an amicus brief in support of Bristol-Myers’s petition. See Brief of Product Liability Advisory Council, Inc. as Amicus Curiae in Support of Petitioner, Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (Nov. 10, 2016). PLAC criticizes the California court’s reliance on the fact that Bristol-Myers had sold Plavix to consumers in California and had engaged in nationwide marketing and promotion of the drug in California to find a sufficient connection between the nonresidents’ claims and the company’s forum contacts. Given the number of companies engaged in similar nationwide marketing and sales of uniform products, PLAC raises a valid concern—namely, that this “same product” rationale “is open-ended and overlooks the fundamental regulatory and economic reasons why most manufacturers, both large and small, make uniform products.” Id. at 8. Likewise, “nationwide advertising” in the Internet age is hardly a luxury reserved for large corporations. PLAC raises a pivotal question: Does the fact that a plaintiff in New York views the same advertisement and ingests the same drug as a plaintiff in California speak to the “relatedness” of the New York plaintiff’s claim and the California forum?

Other amici—including the Chamber of Commerce of the United States of America, California Chamber of Commerce, and American Tort Reform Association (which jointly submitted a brief), and the Washington Legal Foundation, Pharmaceutical Research and Manufacturers of America (PhRMA), and GlaxoSmithKline, LLC—echo PLAC’s concerns about the “limitless nature” of the court’s holding. In addition to the court’s reliance on the “same product” and “nationwide advertising” rationale to support a nexus, they identify as troubling the opinion’s focus on Bristol-Myers’s research and laboratory facilities in California, even though none of those facilities conducted any research, design, or development activities related to Plavix.

Another key theme of the amicus briefs is California itself. As PhRMA notes, many corporations, and pharmaceutical companies in particular, are not “at home” in California but do have some facilities and personnel there and sell their products nationwide. See Brief of Pharmaceutical Research and Manufacturers of America as Amicus Curiae in Support of Petitioner at 4, Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (Nov. 10, 2016). PLAC goes even farther, observing that “[g]iven the size of the California market, any company that aspires to conduct business on a nationwide basis has no choice but to conduct business in California.” Brief of Product Liability Advisory Council, Inc. as Amicus Curiae in Support of Petitioner at 9. PLAC argues that the California Supreme Court’s decision has the potential to make that state, already an “attractive destination for forum-shopping plaintiffs’ lawyers, “a magnet for all sorts of product-related litigation involving large national manufacturers of non-customized products, even in situations where the plaintiff, the product sale, and the alleged injury have no connection whatsoever to that state.” Id. at 23.

The amici all contend that “relates to” is “not a predictable or determinate standard,” and they call on the U.S. Supreme Court to put an end to the “hopeless” divide among jurisdictions by providing clarity and uniformity to an area of law riddled with inconsistencies and confusion. They also express a shared sentiment that a manufacturer is best able to make informed decisions about whether and to what extent to sell its products in a given state if it knows that specific jurisdiction will only lie over product-related claims in a state where it manufactured or sold that product, and only as to the specific products that caused injury in that state.

The respondents, for their part, encourage the Court to reject Bristol-Myers’s request for a categorical rule regarding specific jurisdiction in favor of a flexible, case-by-case approach, which the Court has previously endorsed. Brief in Opposition at 7, Bristol-Myers Squibb v. Superior Court, No. 16-466 (Dec. 7, 2016). They urge an expansive reading of the “relatedness” inquiry by arguing, for instance, that while Bristol-Myers’s research and development facilities in California do no work related to Plavix, they are nonetheless relevant to the nonresident plaintiffs’ claims regarding Bristol-Myers’s “practices in developing drugs.” Id. at 10. Above all, they emphasize that all of the plaintiffs’ claims arise out of Bristol-Myers’s nationwide marketing and distribution of Plavix, and they highlight the impracticality of forcing resident and nonresident plaintiffs to assert their claims in different forums in a mass tort action. Id. at 13–14.

On January 19, 2017, the U.S. Supreme Court granted certiorari in Bristol-Myers Squibb Co. v. Superior Court, agreeing to review the California Supreme Court’s controversial decision. All are in agreement that the U.S. Supreme Court’s ruling will have a significant impact on an issue frequently litigated throughout the country. Given the consequential nature of the matter, it is likely that a number of amici curiae will express their support for both petitioner and respondents. On the heels of its game-changing pronouncement on general jurisdiction in Daimler, we will soon know whether the Supreme Court is ready to close the loop and take a similarly bold stance on the ever-present issue of specific jurisdiction.

Keywords: litigation, mass torts, personal jurisdiction, forum contacts, Daimler AG v. Bauman

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