On June 19, 2017, the United States Supreme Court limited the ability of plaintiffs to pursue mass consumer actions in state court. In Bristol-Myers Squibb Co. v. Superior Court, the Supreme Court limited personal jurisdiction over corporations in state courts on due process grounds, holding that persons purportedly injured outside of the forum state did not have jurisdiction to prosecute claims against a corporation who was not a resident or incorporated in that state.
The consolidated actions sought relief in California state court for 678 plaintiffs who used a BMS drug called Plavix – the vast majority of whom were not California residents. BMS is a Delaware corporation that maintains substantial operations in both New York and New Jersey. BMS moved to quash service of summons on the nonresidents’ claims for lack of personal jurisdiction.
The California Court of Appeal and California Supreme Court found that there was no general jurisdiction over BMS in the wake of the Supreme Court’s Daimler AG v. Bauman decision (limiting general jurisdiction to a company’s state of incorporation and principal place of business), but found that there was specific jurisdiction based on the similarity of the claims by California residents and the nonresidents, BMS’ “extensive contacts with California,” and the fact that the California distributor of Plavix was also a named defendant.
Reversing the California courts, the Supreme Court was clear that specific jurisdiction can only be exercised if the suit arises out of the defendant’s contacts with the forum, and here “the nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, and were not injured by Plavix in California.” Because “all the conduct giving rise to the nonresidents’ claims occurred elsewhere,” California had no specific jurisdiction over BMS. Neither BMS’s “substantial” operations in the state, nor the fact that the Plavix distributor was a California corporation were relevant to establishing personal jurisdiction because BMS’s California operations were unrelated to Plavix and jurisdictional requirements cannot be met through a third-party.
This decision raises the question of whether nationwide class actions can proceed in jurisdictions where a defendant is not subject to general jurisdiction. Previously, and relying on the Court’s opinion in Phillips Petroleum Co. v. Shutts, it was taken for granted that so long as the forum state had personal jurisdiction over the named plaintiffs’ claims, it could also exercise jurisdiction over the out-of-state class members claims. The Court rejected that Shutts had any bearing on the issue here because “the authority of a State to entertain the claims of nonresident class members is entirely different from its authority to exercise jurisdiction over an out-of-state defendant.”
The ruling therefore appears to give defendants another weapon for challenging the scope of state court class actions. Cutting down the size of the class is one of the primary goals during class certification, and this ruling could give defendants a means for doing so much earlier in the case.
In single defendant cases, it could push mass or class action matters to states where the defendant is unquestionably a citizen, and away from preferred jurisdictions favored by the plaintiffs’ bar, like California. Alternatively, it could cause counsel to limit the plaintiffs to state residents and file multiple cases in preferred jurisdictions. In multiple defendant cases where general jurisdiction over each defendant is not appropriate in a single state, plaintiffs must now decide whether they really want the headache of prosecuting multiple suits against multiple defendants in differing jurisdictions.
On the other hand, the decision could also create headaches for defendants, potentially forcing them to defend multiple suits across many states. Moreover, it could complicate settling national class actions, as defendants will have trouble arguing that jurisdiction is not appropriate in the first instance but that a national settlement should be approved if it ultimately suits them.
