March 06, 2018 Articles

Supreme Court Solidifies Its Position on Personal Jurisdiction

By Chijindu Obiofuma

On June 19, 2017, the U.S. Supreme Court issued a decision in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017). The case originated from product-liability claims lodged against Bristol-Myers, stemming from allegations of negative side effects caused by their drug Plavix. In an overwhelmingly majority (8–1) decision, the Court formally restricted the constitutionally defined limits of personal jurisdiction.

Although over 600 product-liability claims were lodged against Bristol-Myers Squibb Co. (BMS), only 86 claims were brought by California residents. The remaining 500-plus claims were brought by nonresidents from 33 different states whose claims did not originate in California. Despite that Plavix was neither manufactured nor designed in California, the plaintiffs hoped to tie Bristol-Myers to the forum via drug marketing that was targeted at the state. Each plaintiff brought the same 13 state-related claims under California law, which included claims of products liability, negligent misrepresentation, and misleading advertising.

Initially, the California Supreme Court found in favor of the plaintiffs, determining that it had personal jurisdiction over both the non-residents and Bristol-Myers. Using a substantial-connection assessment, the California Supreme Court determined that the “nature of [Bristol-Myers’] activities in the forum and the relationship of the claim to those activities,” supported a finding in favor of personal jurisdiction over Bristol-Myers. Upon review, the Supreme Court found fault with this due to the fact that most of the out-of-state plaintiffs had not been exposed to Plavixmarketing in California nor had they alleged contact with the drug while in California.

Interestingly, the U.S. Supreme Court rejected the sliding-scale approach adopted by the California Supreme Court, dismissing it as “a loose and spurious form of general jurisdiction . . . [that was] difficult to square with [the] Court’s precedents” and reasserting that, for specific jurisdiction, “[w]hat is needed is a connection between the forum and the specific claims at issue.” The Court dismissed BMS’s decision to contract with a California company and the company’s national distribution of Plavix as insufficient for establishing specific jurisdiction. They also found BMS’s employment of over 400 operatives in California, their maintenance of several labs and research buildings in the state, and their recovery of $900 million in revenue based on the sale of 187 million pills in the state to be unconvincing. The Court re-asserted the standard articulated in Daimler requiring a finding of specific jurisdiction to “‘aris[e] out of or relate to the defendant’s contacts with the forum.’” The Court went on to cite Goodyear, asserting that “[w]hen no such connection exists, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.’”

The majority’s opinion turned primarily on a Federalist argument implicating state sovereignty and due process. Although an assessment of personal jurisdiction involves a multi-factor analysis, including the interests of the forum state and of the plaintiff in proceeding on a specific claim, the primary concern when evaluating personal jurisdiction is the burden a particular forum would have on the defendant. This not only implicates “‘. . . inconvenient or distant litigation, [but] . . . [is] a consequence of territorial limitations of the power of the respective States.’” Relying on past precedent, the Court reasoned that “[b]ecause ‘[a] state court’s assertion of jurisdiction exposes defendants to the State’s coercive power,’ it is ‘subject to review for compatibility with the Fourteenth Amendment’s Due Process Clause.’” In particular, the Court stressed the importance of states as sovereign powers to be able to try cases in their courts and the necessity of states, even in their sovereignty, to be limited by the sovereignty of other states. Invoking its decision in the classic law-school case World-Wide Volkswagen, the Court illustrated due-process limitations on personal jurisdiction. 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,” even if all other factors point to a reasonable finding of jurisdiction.

The majority did not discuss the consequences of the case beyond asserting that the decision would not “result in the parade of horribles” alleged by respondents. The dissent dealt with the consequences of the case more directly. The dissent was particularly discouraged by the majority’s departure from its own precedent and the holding’s effect of limiting access to the courts. It further focused on the consequences of the holding for negative-value suits (those claims which, brought alone, would be worth little). The dissent similarly rejected the majority’s refutation of the principle of fairness—a cornerstone of mass tort actions—concluding that 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 non-residents alike.

The holding of this case will likely result in a limitation of the ability of plaintiffs to bring mass actions. Plaintiffs’ lawyers should prepare for the eventuality that “the defendant’s home jurisdiction often will be the only state-court forum for a consolidated nationwide suit.”

 
Chijindu Obiofuma is a J.D. candidate at Columbia Law School.


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