Forum-shopping plaintiffs’ attorneys have long sought to file their claims against large businesses in jurisdictions with reputations for favoring plaintiffs—without regard to whether the claims actually arose in those jurisdictions. They justify their assertions of personal jurisdiction in such cases by arguing that a company that does business nationwide should be amenable to suit in any State in which it conducts substantial business. In its 2014 Daimler AG v. Bauman decision, the US Supreme Court called into serious question the validity of such venturesome assertions of jurisdiction. The Court’s decision last week in Bristol-Myers Squibb Co. v. Superior Court may have put such claims entirely to rest.
At issue in Bristol-Myers were product-liability claims filed in California against a drug company by 661 unrelated plaintiffs from across the country. Each claimed to have suffered injury after taking Plavix, a blood-thinner manufactured by the defendant, Bristol-Myers Squibb Co. (BMS). Only 86 of the plaintiffs were California residents; the other 575 lived in 33 other States and did not claim that their injuries arose in California. The non-residents nonetheless asserted “specific” jurisdiction over BMS in California, noting that: (1) BMS conducts a substantial amount of business in the State; (2) BMS sells large quantities of Plavix in California, pursuant to a uniform, nationwide marketing campaign; and (3) the product-liability claims asserted by California users of Plavix are substantially similar to the claims asserted by the nonresident plaintiffs.
An “Affiliation” Between Forum and Controversy
In its June 19 ruling, the US Supreme Court reversed a California Supreme Court decision that had upheld specific personal jurisdiction over BMS with respect to the claims of the nonresident plaintiffs. (Full disclosure: I served as counsel for Washington Legal Foundation on an amicus curiae brief filed in support of BMS.) The Court held that the Due Process Clause prohibits a state court from exercising personal jurisdiction over a nonresident defendant unless there exists an “affiliation” between the forum and the underlying controversy—in most cases, that means “an activity or occurrence that takes place in the forum State.”
The Court held that no such affiliation existed here; in particular, it rejected the plaintiffs’ assertion that a sufficient affiliation could be established based on evidence that the defendant engaged in substantial in-state activities unconnected to the controversy. Moreover, it held, the mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California—and allegedly sustained the same injuries as did the nonresidents—did not allow the State to assert specific jurisdiction over the nonresidents’ claims. That holding undercuts the theory used in thousands of lawsuits across the country to join together, in a single suit, plaintiffs from multiple States who assert similar product-liability claims against a single defendant.
Likely Responses from Plaintiffs’ Bar
It would be unrealistic, of course, to expect plaintiffs now to abandon altogether their efforts to file out-of-state claims in plaintiff-friendly forums. While the forum contacts alleged in Bristol-Myers were deemed insufficient to establish a sufficient affiliation between the forum and the underlying controversy, plaintiffs can be expected in future cases to trot out a wide array of alleged forum contacts as a basis for asserting jurisdiction over nonresident defendants. For example, drug companies regularly conduct clinical trials in numerous States when seeking Food and Drug Administration approval to market a drug. Plaintiffs are likely to argue that a sufficient affiliation exists between the forum State and the underlying controversy if any clinical trials for the drug at issue took place in that State. A similar argument might be attempted if the drug passed through the forum State—however briefly—on its way from the manufacturing plant to the State in which it was prescribed to the plaintiff.
But any state court that gives a fair reading to Bristol-Myers should realize that most, if not all, such arguments are untenable. The Supreme Court stated in no uncertain terms that due process prevents state courts from exercising jurisdiction over claims that do not bear a direct relationship with the forum, without regard to the extensiveness of the defendant’s contacts with the forum. Justice Sotomayor argued in dissent that due process should not prevent exercise of personal jurisdiction over a nonresident defendant when the defendant’s extensive forum contacts are such that being haled into court there would pose no hardship; but her approach was joined by no other justice.
Indeed, the Court emphasized that hardship to the defendant is not the sole focus of the due-process analysis. Rather, the Court explained, limits on personal jurisdiction are more than a guarantee of immunity from inconvenient or distant litigation. They are also a consequence of territorial limitations imposed by the Constitution on the power of the respective States. California oversteps its proper role in our federal system when it seeks to assert jurisdiction over controversies lacking a significant connection with the State.
An End to Nationwide Class Actions?
Perhaps the single most important question left unanswered by Bristol-Myers is the future of nationwide class actions. The plaintiffs’ bar regularly seeks to have a single plaintiff (or a small group of plaintiffs) certified as the representatives of a nationwide class of similarly situated individuals. Such class actions raise numerous procedural difficulties. For example, relevant legal standards in the named plaintiffs’ State(s) of residence may differ considerably from those in other States, and choice-of-law principles generally require that a claim be governed by the law of the State in which the claim arose. But Bristol-Myers may well prevent trial courts from even reaching the class-certification issue. The Supreme Court’s decision suggests that a trial court lacks personal jurisdiction over the claims of absent class members who are not residents of the forum State—unless the defendant is being sued in its “home” state, where it is subject to suit on any and all claims.
In other words, Bristol-Myers may sound the death knell for all but a handful of nationwide class actions. While attorneys will still be permitted to assert single-state class actions and thereby render economically feasible the assertion of small claims possessed by similarly situated individuals within that State, the administratively unwieldy and effectively untriable nationwide class action may become a relic of the past.
A Blockbuster Decision
In sum, it would be difficult to overstate the importance of the Supreme Court’s Bristol-Myers decision. The Court has left very little wiggle room for lawyers intent on engaging in forum shopping in distant but friendly courtrooms. It has made clear that plaintiffs have the choice of filing suit where the cause of action arose or where the defendant is “at home,” and it has shown no patience with lawyers who seek to sue elsewhere.
*Also published by Forbes.com on WLF’s contributor page*