Checking Out of Hotel California: The U.S. Supreme Court Holds That Plaintiffs Cannot Sue Companies Anywhere They Do Business
On June 19, 2017, the U.S. Supreme Court decided Bristol-Myers Squibb Co. v. Superior Court of California (BMS), an action brought in California state court that included some non-California plaintiffs alleging injuries not suffered in California. The Supreme Court – for the second time this term – narrowed where plaintiffs can constitutionally sue companies.
The decision already is impacting mass tort actions. On the same day as the BMS decision, a Missouri state court declared a mistrial in an action alleging that Johnson & Johnson’s talc products cause ovarian cancer.
BMS provides product liability defendants with an opportunity to argue that state courts do not have personal jurisdiction over them when the claims have no connection with the defendants’ activities in the forum state.
This term the Supreme Court addressed both types of personal jurisdiction: general and specific. In BNSF Railway Co. v. Tyrrell, the case that we wrote about here, the Court reaffirmed that courts have general jurisdiction over companies where they are incorporated and headquartered, but not in other locations. In BMS, the Court addressed specific jurisdiction, holding that there must be a connection between the state and the plaintiff’s specific claims.
California’s Far-Out Approach to Personal Jurisdiction
BMS involved product liability and other claims brought in California state court against Bristol-Myers Squibb. The issue? Many plaintiffs had no connection to California. They didn’t live in California, they didn’t buy or use the product in California, and they were not injured in the Golden State. Though Bristol-Myers Squibb did business in California, there was no direct connection between its activities in California and the plaintiffs’ claims.
The California state courts use a distinct test (which we explained here) to determine specific jurisdiction over a defendant. The test, called the “sliding scale,” considered the relationship between a company’s activities in the state and the plaintiff’s injury.
Here’s how the test worked: If a company had an insignificant presence in the state, the court had jurisdiction only if the company’s contact related closely to the plaintiff’s injury. But if a company had a substantial presence in the state, the state court had jurisdiction even if the company’s contact did not relate to the injury.
In BMS, the California Supreme Court held that it had jurisdiction over the nonresident plaintiffs’ claims. Because Bristol-Myers Squibb did substantial business in California, there didn’t need to be a direct connection between the company’s contacts and the plaintiffs’ injuries.
Being There Does Not Confer Specific Personal Jurisdiction
The Supreme Court rejected the California court’s approach as blurring the line between general and specific jurisdiction. It described the “sliding scale” approach as “a loose and spurious form of general jurisdiction” containing “no support” in the Court’s personal jurisdiction cases.
In an 8-1 decision written by Justice Alito, the Court held that California did not have jurisdiction over the nonresident plaintiffs’ claims. The Court explained that specific jurisdiction requires a “connection” between the “forum and the underlying controversy,” like “[an] activity or an occurrence that takes place in the forum State.”
The Court emphasized that there was no adequate link between the nonresident plaintiffs’ claims and California. The nonresidents did not purchase, use, or suffer any injuries from the product in the state. The “mere fact that other plaintiffs” in California alleged similar claims did not establish personal jurisdiction over the nonresidents’ claims. The Court reminded plaintiffs that continuous business activity in a state did not confer jurisdiction—the activity must relate to specific claims for specific jurisdiction.
The Impact of BMS on Pending Cases: Companies May Have a Second Chance
The BMS decision had quick repercussions nationwide. The day it was decided, a Missouri state court declared a mistrial in one of the pending talc cases against Johnson & Johnson. Plaintiffs in the talc cases chose to sue in Missouri because of its history of multi-million dollar product liability verdicts, relaxed standards for admitting expert testimony, and aggressive advertising by the plaintiffs’ bar to solicit plaintiffs and influence potential jurors, as we wrote about here.
Johnson & Johnson had previously – but unsuccessfully – challenged the court’s jurisdiction in Swann, et al. v. Johnson & Johnson, et al. After BMS, Johnson & Johnson tried again. The plaintiffs did not concede the issue but instead presented new evidence supporting their argument for specific jurisdiction. Because the court determined that the jurisdictional issue could take months to resolve, it declared a mistrial and released the jury.
For product liability defendants, BMS may have several implications.
Companies should be aware that, depending on the procedural rules of the forum, they may have a waiver or consent issue arguing a lack of personal jurisdiction if they did not make the argument at the outset of the case.
But there may be a way to address this challenge. Companies can frame the BMS decision as providing a new and previously unavailable jurisdictional defense. This approach could sideline any claim that a company waived its jurisdictional argument by not objecting sooner.
And companies defending claims in a jurisdiction that employs the “sliding scale” test may consider immediately challenging the state court’s jurisdiction over their claims. Bristol-Myers Squibb identified “sliding scale” jurisdictions including the Federal Circuit, and the highest courts in California, Texas, and the District of Columbia. The Supreme Court’s thorough rejection of the “sliding scale” opens the door to challenging personal jurisdiction based on this test.
In addition, companies may be able to leverage BMS to renew jurisdictional challenges in pending cases where the claims have no connection to the forum state. In those cases, a defendant could argue that the BMS decision clarifies any ambiguity about specific jurisdiction, and any “unconnected” plaintiffs’ claims should be dismissed.