Product manufacturers routinely hauled into court in far away, inconvenient jurisdictions can breathe a little easier with the Supreme Court’s decision this week in Bristol-Myers Squibb Co. v. Superior Court of California.
A group of plaintiffs, most of whom were not California residents, sued Bristol-Myers in California state court, alleging that the drug Plavix had damaged their health. Bristol Myers is incorporated in Delaware and headquartered in New York. It did not develop, create a marketing strategy for, manufacture, label, package, or work on the regulatory approval for Plavix in California, and Plaintiffs did not allege that they obtained the drug from a California source, that they were injured in California or were treated for their injuries in California. Plaintiffs alleged only that Bristol Myers conducted research in California on other drugs and contracted with a California distributor.
The Supreme Court recognizes two types of personal jurisdiction. International Shoe Co. v. Washington, 326 U. S. 310, 316–317 (1945). A court with general jurisdiction has the authority to hear any claim against a defendant, even if the claim arose out of injuries that occurred in a different state. General jurisdiction derives from a defendant’s place of incorporation and/or principal place of business. Since Bristol Myers was neither incorporated nor had headquarters in California, general jurisdiction was lacking.
Principles of specific jurisdiction thus controlled the Court’s analysis in this case. “Specific” jurisdiction relies upon “the defendant’s contacts with the forum.” Daimler AG v. Bauman, 571 U. S. slip op 8 (2014). It requires “an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U. S. 919 (2011). In other words, the claims asserted must arise out of or relate directly to the defendant’s contacts with the state.
The Supreme Court’s ruling in Bristol-Myers reverses the California Supreme Court’s assertion of specific jurisdiction which it had based on the defendant’s various activities in the state and supported with the similarity of claims alleged by both residents and nonresidents. The Supreme Court admonished the lower court’s decision for the perceived gap between the defendant’s alleged conduct in the forum and the claims nonresident plaintiffs asserted. For instance, the justices saw no affiliation between BMS conducting research unrelated to Plavix in California and the plaintiffs’ claim of product liability—the drug had been developed in New Jersey and New York. What the Supreme Court stated was lacking “[wa]s a connection between the forum and the specific claims at issue”. 582 U.S. ___ at slip. op. 2 (2017). “Restrictions on personal jurisdiction,” the Court upheld, “are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States.” Hanson v. Denckla, 357 U. S. 235, 251 (1958).
BMS took in more than $900 million in sales from Plavix in California, currently maintains five research facilities and a state-government advocacy office there, as well as partners with a local distributing company. Yet none of these ties, the Court concluded, demonstrated an actual connection between the forum and the underlying controversy of the plaintiffs’ claims.
This decision is important for product manufacturers for two interrelated reasons: 1) manufacturers are likely to be more successful dismissing actions filed against them in foreign jurisdictions, despite among other things, distributing, advertising and potentially even conducting R&D in the jurisdiction; and 2) manufacturers are likely to see an uptick in the number of actions filed against them in their home states.