Bristol-Myers Squibb Co. v. Superior Court of California

Mark E. Haddad and Naomi A. Igra

Why It Made the List

Bristol-Myers Squibb (BMS)1 made the list because it reshaped the landscape for mass tort litigation. Many tort reformers considered that landscape distorted by the effects of “litigation tourism”—the practice of non-resident plaintiffs filing mass actions against non-resident defendants in a few jurisdictions that plaintiffs considered favorable for their cases. BMS restricted that practice. It reiterated that a state court may not assert specific jurisdiction over a non-resident plaintiff’s claims against a non-resident defendant, unless the defendant’s in-state conduct is connected to those claims. The decision had an immediate impact. In many mass actions, the claims of nonresident plaintiffs were promptly dismissed. Those cases included actions against pharmaceutical manufacturers facing long battles in reputedly plaintiff-friendly jurisdictions, including Missouri, California, and Illinois. Still, the full impact of BMS remains to be seen. In particular, the decision did not address whether federal courts should apply BMS in class actions and refuse to adjudicate the claims of non-resident class members against non-resident defendants. District courts have already begun to disagree about the answer to that critical question. The application of BMS in class action litigation will be an issue to watch in 2018 and beyond.

Discussion

Background

Bristol-Myers Squibb (BMS) is the manufacturer of the anti-coagulant, Plavix. BMS is incorporated in Delaware and maintains substantial operations in New York and New Jersey. Between 2006 and 2012, BMS sold nearly 190 million Plavix pills in California. Those sales generated more than $900 million for BMS, representing roughly one percent of the company’s nationwide revenue. BMS also operates laboratory facilities in California, employs California sales representatives, and maintains an office in Sacramento focused on state-government advocacy. But none of the work to develop, manufacture, or create a marketing strategy for Plavix took place in California.

In March 2012, a group of 678 plaintiffs named across eight nearly-identical complaints filed suit against BMS in California state court, asserting false advertising and product liability claims related to Plavix. Eighty-six of the plaintiffs were California residents; the other 592 were residents of 33 other states. None of the non-resident plaintiffs alleged that they obtained Plavix from a California physician or that they were injured or treated in California. BMS moved to quash service of summons as to the non-residents. The California Superior Court denied the motion, finding that California courts could exercise general jurisdiction because BMS engaged in what it considered “extensive activities” in California.2 BMS sought review from the California Court of Appeal but to no avail. The same day the California Court of Appeal denied BMS’s writ of mandate, the U.S. Court decided Daimler AG v. Bauman.3 In that case, the Court reiterated that general jurisdiction over a non-resident defendant exists only where a corporation is essentially at home. The Court explained that a corporation will generally be “at home” where it is incorporated or has a principal place of business.4

In light of Daimler, the California Supreme Court granted review and transferred the matter back to the Court of Appeal. The Court of Appeal issued a new decision, holding that BMS’s forum activities did not suffice for general jurisdiction under Daimler but were sufficient to establish specific jurisdiction. In a 4-3 decision, the California Supreme Court affirmed. It concluded that California courts had specific jurisdiction over BMS as to the non-residents’ claims
according to a “sliding scale” approach. Under that approach, “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection
between the forum contacts and the claim.”5 The majority found a sufficient connection because the resident and non-resident plaintiffs all asserted claims based on the same allegations about the same product, which BMS promoted through the same nationwide marketing program, and distributed through a California-based distributor. Applying the sliding scale, the majority concluded that was enough to establish specific jurisdiction.6

A vigorous dissent admonished the majority for undermining “the essential distinction between specific and general distinction.”7 In the dissenters’ view the
non-residents’ claims arose from marketing and sales of Plavix in other states so there was no connection between their claims and any of BMS’s activities in the forum. They argued that the majority’s loose application of the sliding scale would undo Daimler for many corporate defendants and subject them to unconstitutional assertions of authority by California state courts.

The U.S. Supreme Court Majority Opinion8

The U.S. Supreme Court agreed with the California dissenters and reversed the decision below. In an 8-1 opinion, the majority rejected the sliding-scale approach as “a loose and spurious form of general jurisdiction.”9 The Court reiterated that “a defendant’s general connections with the forum are not enough,” to establish specific jurisdiction “regardless of the extent of a defendant’s unconnected activities in the State.”10 Specific jurisdiction requires “‘an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.’”11 In other words, it requires “a connection between the forum and the specific claims at issue.”12 Non-resident plaintiffs could not establish the requisite connection. “The mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California—and allegedly sustained the same injuries as did the nonresidents—does not allow the State to assert specific jurisdiction over the nonresidents’ claims.”13

BMS’s contacts with a California distributor also did not satisfy the Court’s requirement. As the Court made clear, a “‘defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction.’”14 Because there was no allegation that the two defendants had engaged in “relevant acts” in California together, or that BMS was derivatively liable for the distributor’s conduct, the “bare fact” that BMS had contracted with a California-based distributor was insufficient to establish specific jurisdiction.15 The Court acknowledged that its decision was based on considerations beyond the inconvenience of out-of-state litigation. There was also “the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question.”16 A federal system demands that state courts respect the sovereignty of other States. For that reason, the Court held that federalism concerns “may be decisive” in the personal jurisdiction analysis.17

The Court concluded by emphasizing that plaintiffs from different states could still bring a consolidated action in a forum with general jurisdiction. It also expressly held open the question of whether its decision would apply with equal force to mass actions brought in federal courts; it said nothing about nationwide class actions. In the Court’s view, its decision did not represent a shift in its jurisprudence. Instead, a “straightforward application” of the Court’s “settled principles” required reversal of the decision below.18

Justice Sotomayor’s Dissent

Justice Sotomayor dissented. In her view, the majority departed from the Court’s precedents to the detriment of individuals injured by the conduct of corporate defendants. All of the plaintiffs’ claims related to the nationwide marketing and distribution of Plavix; that meant the claims were connected to BMS’s activities in California. The burden of litigating the case would be minimal for BMS so it would not offend “traditional notions of fair play and substantial justice” to call BMS into California state court.19 The Court’s failure to measure the scope of the forum’s jurisdiction according to the “yardstick” of fairness struck Justice Sotomayor as an unwarranted deviation from the Court’s precedents and the purpose of the Due Process Clause. Justice Sotomayor also expressed concern about the practical consequences of the majority’s holding. She predicted that BMS would make it “profoundly difficult for
plaintiffs who are injured in different States by a defendant’s nationwide course of conduct to sue that defendant in a single, consolidated action.”20 The decision “hand[ed] one more tool to corporate defendants determined to prevent the aggregation of individual claims, and forces injured plaintiffs to bear the burden of bringing suit in what will often be far flung jurisdictions.”21 In her view, that could not be a result that due process requires.

Impact of the Case

BMS was a victory for defendants in general and particularly those in the pharmaceutical industry. Several federal district courts quickly concluded that BMS
limited their jurisdiction, and courts in reputedly plaintiff-friendly jurisdictions dismissed the claims of non-resident plaintiffs in multiple mass actions against drug manufacturers. Whether BMS will have a similarly profound impact on nationwide class actions remains to be seen. Defendants across the country have argued that BMS prevents courts from exercising specific jurisdiction as to the claims of non-resident class members against a non-resident defendant. So far, the courts that have confronted the issue have reached conflicting conclusions.

Some read BMS as articulating Constitutional limits on jurisdiction that must apply in every case, including class actions. For example, a federal court in Illinois applied BMS to a consumer class action in McDonnel v. Nature’s Way Prods.22 There, the class representative alleged that the non-resident defendant misrepresented a product that she bought in Illinois. Applying BMS, the court found that it could assert specific jurisdiction only as to the claims of the named plaintiff and other Illinois purchasers; it could not adjudicate the claims of non-residents because those claims were unconnected to the defendant’s activities in Illinois.23

Other courts have reached the opposite result in factually similar circumstances. In Fitzhenry-Russel v. Dr. Pepper Snapple Grp.,24 a federal court in California considered the implications of BMS in a consumer class action alleging misrepresentations about a product that the class representative bought in California. But there, the court found that it only needed specific jurisdiction over the defendant as to the named plaintiffs’ claims even if those plaintiffs represented a nationwide class. In its view, class actions are distinguishable from mass tort actions because unnamed class members are not considered parties for all purposes. Absent clear instruction from the Supreme Court, the district court refused to extend the reasoning in BMS to class actions.25
At the time of writing, no circuit court had reached the issue of whether BMS limits the jurisdiction of federal courts as to nationwide class claims against nonresident defendants. The issue will be one to watch for years to come.

Mark E. Haddad leads the Supreme Court and Appellate practice in Sidley Austin LLP’s Los Angeles office and is a co-leader of the firm’s global Appellate practice.
Naomi A. Igra is an associate in the Supreme Court and Appellate group and practices litigation in Sidley Austin LLP’s San Francisco office.

  1. Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017)
  2. Id. at 1778.
  3. 571 U.S. 117 (2014).
  4. See id.
  5. Bristol-Myers Squibb Co. v. Superior Court, 1 Cal. 5th 783, 806 (2016) (quotation and citation
    omitted).
  6. See id. at 804-805.
  7. Id. at 817.
  8. The authors of this article were counsel to the Pharmaceutical Research and Manufacturers of
    America as amicus curiae in support of BMS.
  9. BMS, 137 S. Ct. at 1776.
  10. Id.
  11. Id. at 1780 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919
    (2011)).
  12. Id.
  13. BMS, 137 S. Ct. at 1781 (emphasis in original).
  14. Id. at 1783 (citation omitted).
  15. Id.
  16. Id. at 1780.
  17. Id. at 1781.
  18. Id. at 1783.
  19. See id at 1785-89 (quotations and citations omitted).
  20. Id. at 1789.
  21. Id.
  22. 2017 U.S. Dist. LEXIS 177892 (N.D. Ill. Oct. 26, 2017).
  23. Id. at **10-11.
  24. 2017 U.S. Dist. LEXIS 155654 (N.D. Cal. Sept. 22, 2017).
  25. Id. at **14-16.
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