US Supreme Court Rejects Exercise of Specific Jurisdiction
In a June 19, 2017 opinion, the United States Supreme Court held that a California court did not have specific jurisdiction over nonresidents’ claims against a foreign corporation when their alleged injury did not occur within the state. In doing so, Justice Alito, writing for the majority, rejected the California Supreme Court’s “sliding scale” approach to jurisdiction and affirmed that “[i]n order for a court to exercise specific jurisdiction over a claim, there must be an “affiliation between the forum and the underlying controversy.”
In this case, a group of plaintiffs — consisting of 86 California residents and 592 residents from 32 other states — filed a civil action in a California state court against Bristol-Myers Squibb Company (“BMS”) for injuries allegedly caused by a BMS drug called Plavix. Bristol-Meyers Squibb Company is incorporated in Delaware and headquartered in New York, and it maintains substantial operations in both New York and New Jersey. Under the law established in Daimler, all parties agreed that BMS was not subject to general personal jurisdiction in California. Rather, the Court was asked to determine whether BMS was subject to specific jurisdiction in California with respect to the nonresident claims.
Bristol-Meyers Squibb Company conceded that it was subject to jurisdiction with respect to the resident Californians’ claims, but moved to dismiss the nonresidents’ claims. Bristol-Meyers Squibb Company argued that California lacked specific jurisdiction because it did not develop Plavix in California, did not create a marketing strategy for Plavix in California, 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 and did not claim that they were injured by Plavix or were treated for their injuries in California.” The plaintiffs argued that BMS was subject to specific personal jurisdiction because BMS sold and marketed Plavix in California (making almost $900,000 from Plavix in California from 2006 to 2012, or a little over 1% of its nationwide sales revenue), and performed substantial research within the state.
In a majority opinion, the California Supreme Court found that it had specific personal jurisdiction over BMS. The court applied a “sliding scale approach to specific jurisdiction,” such that “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Applying its “sliding scale” test, the majority concluded that “BMS’ extensive contacts with California” permitted the exercise of specific jurisdiction “based on a less direct connection between BMS’ forum activities and plaintiffs’ claims than might otherwise be required.” The majority found the attenuated requirement was met because the claims of the nonresidents were similar in several ways to the claims of the California residents, as to whom specific jurisdiction was uncontested.
In yesterday’s opinion, the United States Supreme Court reversed the California Supreme Court. In doing so, it specifically rejected the California Court’s sliding scale approach, specifically stating that it was “difficult to square with [United States Supreme Court] precedents.” The Supreme Court affirmed its settled principles that “[i]n order for a court to exercise specific jurisdiction over a claim, there must be an “affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.” It further stated that absent such connection, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State, even if the defendant has extensive forum contacts that are unrelated to those claims. In doing so, the Court has reaffirmed the clear separation between specific and general jurisdiction. Moreover, the Court clarified that “a defendant’s relationship with a... third party, standing alone, is an insufficient basis for jurisdiction.” Applying that test to this case, the court held that there was no connection between the nonresidents’ claims and California: 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. Thus, the mere fact that the resident plaintiffs obtained and ingested Plavix in California — and allegedly sustained the same injuries as did the nonresident plaintiffs — did not allow California to assert specific jurisdiction over the nonresidents’ claims, even though their claims may be “materially identical” to the nonresidents’ claims.
This decision continues the United States Supreme Court’s trend of limiting the exercise of general jurisdiction in state courts (following its decisions in Daimler v. AG Bauman, 134 S. Ct. 746 (2014), BNSF Railway Company v. Tyrell, Case No. 16-405, and Walden v. Fiore, Case No. 12-574). Eight Justices — including the newest appointee, Justice Gorsuch — formed an 8-1 majority, suggesting that this area of law will remain settled for the foreseeable future. The decision affirms that restrictions on personal jurisdiction “are more than a guarantee of immunity from inconvenient or distant litigation,” that “they are a consequence of territorial limitations on the power of the respective States,” and that the Fourteenth Amendment “may act to divest a state of its power to render a valid judgment if it has little legitimate interested in the claims in question.”
Defense counsel should take note that this ruling will allow defense firms to aggressively pursue motions to dismiss for lack of personal jurisdiction in cases of mass action against multiple defendants who are “at home” in multiple states. Indeed, as the lone dissenter, Justice Sotomayor wrote:
“The majority’s rule will make it difficult to aggregate the claims of plaintiffs across the country whose claims may be worth little alone. It will make it impossible to bring a nationwide mass action in state court against defendants who are ‘at home’ in different states. it is difficult to imagine where it might be possible to bring a nationwide mass action against two or more defendants headquartered and incorporated in different States. And it will result in piecemeal litigation and the bifurcation of claims."
For additional information, please contact Simon Baker at email@example.com. A full copy of the decision is available here.