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Hotel California: Supreme Court Will Review Whether Plaintiffs Can Check in to California Courts from Afar

On January 9, 2017, the United States Supreme Court granted review over a case from the California Supreme Court that could affect whether plaintiffs can bring product liability and mass tort claims in states where they don’t live and didn’t suffer an injury.

In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, No. 16-466, the Court will decide whether the California courts properly asserted jurisdiction over Bristol-Meyers Squibb (BMS). It will consider where companies that operate nationwide businesses can be sued, and how their activities in a state—including marketing or sales—could expose them to a lawsuit there.

If the Court decides that California courts have jurisdiction over BMS in this case, then companies could face more nonresident plaintiff lawsuits, particularly in California. For companies, these lawsuits could mean facing potentially plaintiff-friendly laws and courts and the inconvenience of defending a case in another part of the country.

Background

In Bristol-Meyers Squibb, 575 non-California residents joined 86 California residents suing BMS in San Francisco Superior Court. They alleged product liability and other claims stemming from the heart medication, Plavix. The nonresident plaintiffs were not treated by doctors in California, nor did they suffer any alleged injuries in the state.

The parties disagreed about whether those nonresident plaintiffs’ claims belong in a California court. The California Supreme Court determined that they did, holding that BMS had a significant presence in the state, and that the nonresident plaintiffs’ claims were related enough to the company’s business in California to satisfy due process. BMS had argued that the plaintiffs’ claims were not connected to its contacts with the state.

Those Summons Are Coming from Far Away

Bristol-Meyers Squibb arises out of the constitutional due process requirements courts must follow when claiming personal jurisdiction over a party. If a party has “minimum contacts” with a state, then the court there may have jurisdiction over it.

Courts can find personal jurisdiction in one of two ways: general or specific. When a business is operating in multiple states, courts will ask whether the business’s contacts in the forum state were “general” enough to warrant jurisdiction over any claim filed there, or “specific” in relating to the underlying claims in a particular lawsuit. The Supreme Court has set a high bar for general jurisdiction, holding that it applies only when a company’s contacts are so “continuous and systematic” that it is “at home” in the forum state.

The standard for determining specific jurisdiction—referred to as the “relatedness” requirement—is murkier. In its petition, BMS identified three tests used by courts to assess whether a claim is related to a company’s contacts in the state. Two tests base jurisdiction on whether a company’s contact with a state actually or legally caused a plaintiff’s injury. According to BMS, nine circuits follow this approach, making it the majority rule.

The third test—which California, Texas, and DC state courts, and the Federal Circuit use—is referred to as the “sliding scale.” The sliding scale approach considers how significant a company’s contacts with a state are. If a company has very minor contacts with a state, then the claim must be closely related to those contacts to obtain jurisdiction. Conversely, if a company has substantial contacts with a state, then a state court could find it has jurisdiction over a party even if the contacts are not related to the claim.

Applying the sliding scale in Bristol-Meyers Squibb, the California Supreme Court in a 4-3 ruling decided that it had jurisdiction over BMS and the plaintiffs’ claims. Though the court acknowledged that the nonresident plaintiffs’ claims were not directly related to BMS’s contact with California, it stressed the substantial contacts BMS had with California, particularly its nationwide marketing and distribution plans for Plavix.

The court further determined that BMS’s marketing and distribution in California related to the resident plaintiffs’ claims, and that because the same marketing and distribution plans existed in the nonresident plaintiffs’ home states, their claims were substantially connected to BMS’s contacts in California. BMS has now urged the U.S. Supreme Court to interpret “relatedness” to mean a direct causal relationship between a company’s contacts with a state and the underlying claim in the lawsuit.

Such a Lovely Place—to File a Lawsuit

The big issue here is how this decision will affect plaintiffs’ attempts to file complaints in jurisdictions that provide them legal or tactical advantages, known as “forum shopping.” California is known for having plaintiff-friendly courts, it has the largest economy in the United States, and many companies have business operations there. The Court’s decision will clarify whether companies must face a lawsuit brought by nonresidents as a cost of doing business in the Golden State.

© 2017 Schiff Hardin LLP

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About this Author

Christopher Nelson, Schiff Hardin Law Firm, Associate
Associate

As a first-year associate, Christopher A. Nelson is working in several practice areas to learn and gain experience before choosing a practice group.

Chris gained valuable experience as a 2015 Schiff Hardin summer associate. After law school, he was a PILI Graduate Fellow at Cabrini Green Legal Aid, assisting subsidized housing tenants and applicants with various termination, eviction, and denial of admission claims.

312-258-5864
Amy M. Rubenstein, general commercial and corporate disputes attorney, Schiff Hardin Law Firm
Partner

Amy M. Rubenstein handles a wide range of cases, such as general commercial and corporate disputes, reinsurance, intellectual property and federal constitutional law. 

312-258-5625