There’s No Place Like Home: United States Supreme Court Reaffirms Daimler, Sends Out-of-State Plaintiffs Packing In Two Highly Anticipated Cases

By and on June 20, 2017

The United States Supreme Court has issued two highly-anticipated personal jurisdiction decisions limiting suits against defendants who are not “at home” in a state, or alternatively, did not commit a wrongful act in that state.

Specific Jurisdiction

“General jurisdiction” exists over a defendant only where it is “at home,” generally where it is incorporated or has its principal place of business.  “Specific jurisdiction” exists only when the claims in a lawsuit arises out of a defendant’s connection to the jurisdiction, such as selling products. The Supreme Court reaffirmed these limits on jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, No. 16-466 (June 19, 2017).

Some 678 plaintiffs (592 of whom were out-of-state residents) filed suit in California state court against Bristol-Myers Squibb Company (“BMS”), asserting various state-law claims based on injuries allegedly caused by a BMS drug called Plavix. BMS moved to quash the non-residents’ suits for lack of jurisdiction. BMS was headquartered and incorporated outside California, so there was no general jurisdiction. Despite the fact that the nonresidents had not taken the drug in California, the California Supreme Court held that California courts had “specific jurisdiction to entertain the nonresidents’ claims.”  The United States Supreme Court reversed.

The California Supreme Court had applied a “sliding scale approach to specific jurisdiction,” finding that BMS’s “extensive contacts with California” permitted a “less direct connection between BMS’s forum activities and plaintiffs’ claims than might otherwise be required.” Because the claims of both the resident plaintiffs and non-resident plaintiffs were similar and “based on the same allegedly defective product and the . . . misleading marketing and promotion of that product,” the “less direct connection” requirement as met. Thus, the court reasoned, it had personal jurisdiction over all the claims of all the plaintiffs, even in the absence of any California conduct as to the out-of-state plaintiffs.

The Supreme Court rejected this in no uncertain terms:

“Under the California approach, the strength of the requisite connection between the forum and the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims. Our cases provide no support for this approach, which resembles a loose and spurious form of general jurisdiction. For specific jurisdiction, a defendant’s general connections with the forum are not enough….What is needed—and what is missing here—is a connection between the forum and the specific claims at issue.”

This is true even if the defendant would suffer minimal or no inconvenience, even if the defendant has extensive contacts with the state, even if the forum had a strong interest in the application of its laws, and even if the forum state were the most convenient location for the litigation. Bristol-Myers should serve to help defendants limit the jurisdictions in which suit may properly be brought, and reduce forum-shopping in mass tort and perhaps other cases.

General Jurisdiction

On the issue of general jurisdiction, BNSF Railway Co. v. Tyrrell, No. 16-405 (May 30, 2017), the Supreme Court made clear that its 2014 ruling in Daimler AG v. Bauman precludes the exercise of general jurisdiction over a non-resident defendant unless that defendant has contacts which are so “continuous and systematic” so as to render that defendant essentially at home in the forum state. Thus, the Court rejected multiple theories on which plaintiff attempted to justify jurisdiction over BNSF in Montana.

First, it ruled that the Federal Employers’ Liability Act (“FELA”), a federal law that allows railroad workers to sue their employers for injuries that occur on the job, does not itself create a special rule authorizing jurisdiction over railroads just because they happen to do business in a particular place. Second, and most notably, the Court held that a Montana law that allows courts in the state to exercise jurisdiction over “persons found” was in violation of the Constitution. That is, even if BNSF conceded that it is “found” in Montana, the Court held that exercising jurisdiction over BNSF must still be consistent with the Due Process clause. Under its earlier decision, the Court explained, BNSF Railway can only be sued in Montana if it is “at home” there – something which normally means that the company is either incorporated in the state or has its principal place of business there.

With neither of those criteria met, the railroad was not so “heavily engaged in activity” in Montana as to present the kind of “exceptional” case in which jurisdiction could exist even outside the company’s state of incorporation and principal place of business. Thus, although BNSF could be sued in Montana for claims that are related to its business in Montana, it could not be sued there for claims that aren’t related to anything it did within the state.

Analysis

The Court’s two defense-friendly decisions on jurisdiction should bode well for defendants challenging jurisdiction, even in cases outside these specific factual contexts. General jurisdiction can only exist where a defendant is actually “at home,” and creative efforts – such as California’s “sliding scale” – will not pass constitutional muster to establish specific jurisdiction without a clear connection, such as a wrongful act, actually occurring in the forum state.

Filed under Daimler AG v. Baumann, Federal Practice, Jurisdiction, Mass Tort, Uncategorized

California Greenlights “Jurisdiction by Joinder” in Mass Tort Cases

By on September 1, 2016

9-1The California Supreme Court earlier this week issued an opinion that, in the words of the dissent, allows for “jurisdiction by joinder.” (Bristol-Myers Squibb Co. v. Superior Court (Anderson), Case No. S221038.) Plaintiffs with claims arising wholly outside California, against non-California defendants, may nevertheless be entitled to jurisdiction in a California court. The keys appear to be (a) whether the claims are similar to those of California residents (b) who are also plaintiffs in the suit (c) against a defendant that conducts significant activity in California as well as elsewhere. While Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or activity conducted in multiple states. The 4-3 decision may also be the subject of a petition for certiorari to the United States Supreme Court.

“Bristol-Myers Squibb Company (BMS), a pharmaceutical manufacturer, conducts significant business and research activities in California but is neither incorporated nor headquartered here.” Eight California lawsuits were filed against it related to BMS’s drug Plavix. Plaintiffs were 86 California residents and 592 nonresidents. None of the residents purchased the drug in or from California, or had other relevant contacts with the state.

The opinion recognizes that “BMS’s business contacts in California are insufficient to invoke general jurisdiction,” because under Daimler AG v. Bauman (2014) 571 U.S. __ , 134 S.Ct. 746, 187 L.Ed.2d 624 that is restricted to a corporation’s state of incorporation or principal place of business. (We have blogged about Daimler and its progeny before: California Court rules no jurisdiction over foreign parent corporations; No in state dealings for years – no jurisdiction; Out of state defendant? Out of state exposure? File suit somewhere else; Registered in Delaware Is Not At “Home” There; and A More Personal Touch: Challenge to Madison County Jurisdiction.) Bristol-Myers held, however, that “the company’s California activities are sufficiently related to the nonresident plaintiffs’ suits to support the invocation of specific jurisdiction.”

The court found that it was undisputed that there was specific jurisdiction over the California plaintiffs’ claims, and found that there should be jurisdiction over the nonresidents’ claims as well because “BMS sold Plavix to both the California plaintiffs and the nonresident plaintiffs as part of a common nationwide course of distribution.”

The California activities that Bristol-Myers found “related” to the nonresident plaintiffs’ claims: “BMS’s extensive contacts with California, encompassing extensive marketing and distribution of Plavix, hundreds of millions of dollars of revenue from Plavix sales, a relationship with a California distributor, substantial research and development facilities, and hundreds of California employees” is enough for California courts to “exercise specific personal jurisdiction over nonresident plaintiffs’ claims in this action, which arise from the same course of conduct that gave rise to California plaintiffs‘ claims: BMS’s development and nationwide marketing and distribution of Plavix.”

Bristol-Myers pointed out that the court had previously “adopted a sliding scale approach to specific jurisdiction,” such that that “the more wide ranging the defendant‘s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Specific jurisdiction is thus proper in this case because “BMS’s contacts with California are substantial and the company has enjoyed sizeable revenues from the sales of its product here — the very product that is the subject of the claims of all of the plaintiffs.”

The court identified several California interests in the joint litigation. One is that “evidence of the injuries allegedly suffered by the nonresident plaintiffs may be relevant and admissible to prove that Plavix similarly injured the California plaintiffs,” so “trying their cases together with those of nonresident plaintiffs could promote efficient adjudication of California residents’ claims.” Similarly, the court was concerned that “separating the nonresident plaintiffs from the resident plaintiffs and forcing the nonresidents to sue in other states” could result in “delays in the California proceedings that would be created by the litigation and appeals of discovery and factual conflicts in the various other forums.” A further, case-specific reason was that “California also has an interest in regulating the conduct of BMS’s codefendant, McKesson Corporation, which is headquartered in California, as a joint defendant with BMS.”

As the dissenting opinion stated: “The majority expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction.” The dissent argued that “mere similarity of claims is an insufficient basis for specific jurisdiction. The claims of real parties in interest, nonresidents injured by their use of Plavix they purchased and used in other states, in no sense arise from BMS’s marketing and sales of Plavix in California, or from any of BMS’s other activities in this state.” The dissent quoted with approval a law review article on the Court of Appeal’s decision: “The claims of the California and nonresident plaintiffs are merely parallel.”

Although the majority opinion was couched in terms of “the particular circumstances of this case,” the dissent looked to the broader precedent being set.

“[T]he majority notes that BMS maintains some research facilities in California, although the majority concedes Plavix was not developed in those facilities. … This second ground of relatedness is both illogical and startling in its potential breadth. Because BMS has performed research on other drugs in California, claims of injury from Plavix may, according to the majority, be adjudicated in this state. Will we in the next case decide that a company may be sued in California for dismissing an employee in Florida because on another occasion it fired a different employee in California, or that an Illinois resident can sue his automobile insurer here for bad faith because the defendant sells health care policies in the California market?”

“As California holds a substantial portion of the United States population, any company selling a product or service nationwide, regardless of where it is incorporated or headquartered, is likely to do a substantial part of its business in California. Under the majority’s theory of specific jurisdiction, California provides a forum for plaintiffs from any number of states to join with California plaintiffs seeking redress for injuries from virtually any course of business conduct a defendant has pursued on a nationwide basis, without any showing of a relationship between the defendant’s conduct in California and the nonresident plaintiffs’ claims. The majority thus sanctions our state to regularly adjudicate disputes arising purely from conduct in other states, brought by nonresidents who suffered no injury here, against companies who are not at home here but simply do business in the state.”

The dissent took issue with other reasons proffered by the majority. While “[t]he majority argues that taking jurisdiction over the nonresidents’ claims furthers a California interest because evidence of their injuries may be admissible to help the California plaintiffs prove Plavix was a defective product,”  the dissent pointed out that “admissibility of other injuries does not depend on joinder of the other injured person.” The majority thought that joint litigation would help the California plaintiffs, but the dissent pointed out that there are many other Plavix suits in other courts around the country. “Whether or not real parties’ claims are heard together with those of the California plaintiffs, inefficiency and the potential for conflicting rulings will exist so long as actions are simultaneously pending in several state and federal courts….No mechanism exists for centralizing nationwide litigation in a state court; there is no means by which pending actions in Illinois courts, for example, can be transferred to a California court.”

The dissent also answered the question, what’s the superlative of “red herring?”

“Finally, the majority asserts that California’s interest in regulating the conduct of codefendant McKesson Corporation (McKesson), a pharmaceutical distributor headquartered in California, justifies adjudicating real parties’ claims against BMS in a California court.…Of all the majority’s red herrings, this is perhaps the ruddiest.” Because of course the question is jurisdiction against Bristol-Myers, not the co-defendant (and there was question as to its role anyway). Research indicates this is the first use of “ruddiest” in a reported California decision. It may not be the last.

As stated above, while Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or an activity conducted in multiple states. The most significant limitation appears to be that a nonresident plaintiff still may not be able to challenge a nonresident defendant in California courts alone; the nonresident needs to find California plaintiffs with similar claims. In any event, counsel who have been advising clients that the Daimler decision forecloses claims in California courts based on general jurisdiction should re-examine that position in light of the Bristol-Myers ruling on specific jurisdiction.

Filed under California, Jurisdiction, Pharmaceuticals

The End of Litigation Tourism in St. Louis?

By on February 28, 2012

St. Louis, Missouri is a beautiful city with many attractions, but few want to be dragged there involuntarily, besides the attractions it also have great places to visit like hotels and luxury pools, since fiberglass pool prices have gotten low in the last years. Yet that has been the case for a number of corporate defendants in recent years, who have been sued in St. Louis City courts in mass tort litigation by thousands of plaintiffs from all over the country, despite their having no connection at all with St. Louis or even Missouri.

Why St. Louis? The City is a small urban geographical area in the middle of the greater St. Louis area (including St. Louis County), with a reputation for overly plaintiff-friendly juries. It holds a prominent place on the American Tort Reform’s list of “Judicial Hellholes,” which cites litigation “infused with junk science,” massive verdicts, excessive lawsuit advertising poisoning the jury pools, abusive actions, and blatant forum shopping.

So it’s no surprise that plaintiffs’ attorneys in the talc ovarian cancer body powder litigation picked St. Louis city courts for one of their favored venues. Beginning in 2014, Johnson & Johnson and its talc supplier, Gordon & Rees client Imerys Talc America, were sued in numerous multi-plaintiff cases, with hundreds of out of state and non-St. Louis plaintiffs. Trial after trial occurred over the next four years, with verdicts in the tens of millions, and even in the billions, against Johnson & Johnson. The trial court repeatedly denied motions challenging jurisdiction, venue, and joinder. The court also denied motions to exclude what the defendants deemed (and other courts had found to be) unreliable scientific evidence that talc-based powders even can cause ovarian cancer.

How did this all happen in St. Louis? It happened because when one St. Louis plaintiff filed suit there, dozens of out-of-state and non-St. Louis plaintiffs joined in her suit. The St. Louis judge ruled that if one plaintiff had proper venue in St. Louis, all the others could piggy-back on her suit no matter where they were from or where they were allegedly injured, thus establishing venue for everyone. The defendants argued that joinder could not create venue under Missouri law, but were shot down time after time. Motions, briefs, arguments, and pre-trial writs, all to no avail; trial after trial, with the court trying claims of non-Missouri plaintiffs for the most part.

Then the defendants got the attention of the Missouri Supreme Court. In response to writs of prohibition filed by Imerys and Johnson & Johnson, the Court stayed a 2017 trial set to begin with a plaintiff who the defendants argued had proper venue in the county, not the city, to review the venue issue that had created a litigation hub in the city courtroom. On February 13, 2019, the Missouri Supreme Court appears to have ended litigation tourism in St. Louis, in a significant ruling that should stop non-St. Louis plaintiffs from bringing their claims there, and halt the pervasive forum shopping. In two companion suits the Missouri Supreme Court held that a tort plaintiff must establish proper venue for her own claims—she cannot merely join in a suit filed by a St. Louis city plaintiff and obtain proper venue by piggy-backing. In other words, joinder cannot create venue. Period. “It cannot and does not,” as evidenced by Missouri rules and “40 years of Supreme Court precedent.” Click here for a prior post on cases rejecting “jurisdiction by joinder.”

The 4-3 opinion reads strongly, as do the dissents.  But there is no mistaking that the forum shopping that brought hundreds, even thousands, of plaintiffs into St. Louis city courts even though they had no relation to the forum should be at an end.  And that is good news for those who don’t want to be dragged into St. Louis.

Filed under Jurisdiction, Talc