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U.S. Supreme Court Reins in Attempts to Expand Jurisdiction

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06.21.2017 | Advisory

This past Monday, the U.S. Supreme Court drastically changed the landscape of mass tort litigation. In Bristol-Myers Squibb Co. v. Superior Court of California, the Court found that the State of California did not have jurisdiction over the claims of out-of-state plaintiffs brought against Bristol-Myers Squibb (BMS), arising out of the alleged use of Plavix, a drug manufactured by BMS. The Supreme Court held that California lacked jurisdiction over the claims of out-of-state residents “regardless of the extent of [the] defendant’s unconnected activities in the State.” In other words, even if a defendant, like BMS, has a significant presence in the state, an out-of-state plaintiff generally cannot bring suit in that state unless the actual claims “arise out of” or “relate to” the defendant’s contacts with the forum.

Key Takeaways

  • This holding will immediately alter mass tort litigation in state courts across the country. Historically, plaintiffs’ lawyers have selected jurisdictions they deemed favorable, such as Madison County, Illinois; St. Louis City, Missouri; and frequently, California. This flexibility will no longer be their prerogative.
  • On this issue, the Supreme Court very clearly sided with the defendants, explicitly acknowledging the inequity of a defendant “submitting to the coercive power of a State that may have little legitimate interest in the claims in question.”
  • Given the Bristol-Myers Squibb decision, as well as other recent Supreme Court precedent, plaintiffs’ choice of forum will be extremely limited in the future.

"Doing Business” vs. “At Home”

In 2014, the Supreme Court decided Daimler AG v. Bauman. This case addressed the scope of “general jurisdiction”; a court with general jurisdiction can hear any claim against a defendant, “even if all the incidents underlying the claim occurred in a different forum.” The Court significantly narrowed the scope of this type of jurisdiction, essentially holding that a corporate defendant could only be subject to general jurisdiction in the state in which it was “at home.” The Court held that the paradigmatic examples of states in which a corporation was “at home” were the corporation’s place of incorporation or its principal place of business. In other words, the Court signaled that state courts would only have general jurisdiction over corporate defendants who were incorporated in a particular state or had their principal place of business there.

Since Daimler, the general jurisdiction landscape has significantly narrowed. Just last month, the Supreme Court again reaffirmed Daimler’s holding in BNSF Railway Co. v. Tyrell. The plaintiffs in BNSF challenged whether Daimler applied to personal injury suits brought under the Federal Employers’ Liability Act (FELA) against their employer, BNSF Railway Company (BNSF). In a controversial decision, the Montana Supreme Court held that Daimler did not apply to FELA actions and exercised general jurisdiction because BNSF was “doing business” in Montana through its in-state maintenance of employees and railroad track.

The U.S. Supreme Court reversed the Montana Supreme Court, holding that Daimler’s due process limitation “applies to all state-court assertions of general jurisdiction over nonresident defendants.” Accordingly, despite thousands of employees and thousands of miles of track in Montana, the Court could not exercise general jurisdiction because BNSF was not incorporated or based in Montana and thus was not “essentially at home” in Montana. This decision is likely the death knell for any state courts that were still trying to evade Daimler by applying similar “doing business” standards; it is now crystal clear that a corporation must not only be “doing business” in a state, it must be “at home” there.

Supreme Court Addresses Specific Jurisdiction

The Bristol-Myers Squibb decision addressed another basis for jurisdiction: specific jurisdiction, which is jurisdiction related to the (specific) allegations in the lawsuit at issue. Last August, the California Supreme Court attempted to end-run Daimler by holding that, while it did not have general jurisdiction over BMS, it did have specific jurisdiction, even in cases where the plaintiff was not a resident of, or injured in, California. This was in spite of the fact that BMS did not manufacture the product at issue in California or have any specific product-related activities in California, other than selling the drug to California residents (not the particular plaintiffs at issue).

In an 8-1 decision, the U.S. Supreme Court again reversed the state court’s attempt to expand jurisdiction. The Court held that, without a connection between the state and the underlying controversy, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.” The Court further held that “the bare fact that BMS contracted with a California distributor is not enough to establish personal jurisdiction in the State,” where the distributor appeared unrelated to the nonresidents’ claims. A defendant’s general connections with the state, even if extensive like BMS’s business activities, cannot be sufficient to establish jurisdiction, even if plaintiffs must now engage in multi-state litigation.

Indeed, it seems likely that plaintiffs will now be forced to engage in multi-state litigation in state mass tort cases, and the days in which plaintiffs’ counsel could cherry-pick favorable forums may be over. Defendants facing significant product liability exposure around the country should now have much more control over where those cases are brought and tried.

This advisory was prepared by Sarah Kelly, partner and Deputy Chair of Nutter’s Litigation Department, and Meghan Stubblebine, an associate in the department, both members of the Product Liability practice group. For more information, please contact Sarah or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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