September 22, 2016, Trial News
State may exercise specific jurisdiction over nonresidents’ claims against drugmaker
California courts may exercise specific jurisdiction over nonresidents’ claims against a pharmaceutical company because of its significant business activities there, the state high court has ruled. Bristol-Myers Squibb Co. challenged a California appellate court’s ruling that the state had jurisdiction over several hundred claims nonresidents filed against the company for injuries allegedly resulting from its blood thinner Plavix.
California courts may exercise specific jurisdiction over nonresidents’ claims against a pharmaceutical company because of its significant business activities there, the state high court has ruled. Bristol-Myers Squibb Co. challenged a California appellate court’s ruling that the state had jurisdiction over several hundred claims nonresidents filed against the company for injuries allegedly resulting from its blood thinner Plavix. (Bristol-Myers Squibb Co. v. Super. Ct. of San Francisco Cnty., 2016 WL 4506107 (Cal. Aug. 29, 2016).)
The injured plaintiffs sued the drugmaker in California for strict products liability, negligence, false or misleading advertising, and wrongful death, among other claims. Suit alleged that Plavix caused adverse health effects, including bleeding, heart attack, stroke, and—in some cases—death. Of the 678 plaintiffs, 592 were not California residents.
The cases were consolidated in San Francisco Superior Court, and Bristol-Myers moved to quash service of the summons, arguing that the court did not have personal jurisdiction over the nonresident plaintiffs’ claims. The drugmaker asserted that it is not incorporated or headquartered in California, that most of its business operations occur in other states, and that it never developed or manufactured Plavix in California. It did, however, have laboratory facilities and sales representatives in the state. The plaintiffs contended that Bristol-Myers had a widespread distribution network for Plavix in California, with sales of more than $900 million.
After the trial court denied Bristol-Myers’s motion, the drugmaker petitioned the appellate court for a writ of mandate. But the appellate court denied the petition, even after the U.S. Supreme Court issued its decision in Daimler AG v. Bauman (134 S. Ct. 746 (2014)), which addressed whether general or specific jurisdiction can be exercised over a corporation.
The California Supreme Court considered Daimler and a prior decision, Goodyear Dunlop Tires Operations v. Brown (131 S. Ct. 2846 (2011)), in deciding whether the state had general or specific jurisdiction over Bristol-Myers. In Goodyear, the Court expounded an “at home” standard: For a state to have general jurisdiction, the corporation’s “contacts with the forum state must be so extensive as to render the company essentially ‘at home’ in the state.” The Court reemphasized this in Daimler. In both cases, the plaintiffs brought claims in U.S. courts arising out of incidents that occurred abroad.
Based on the general jurisdiction test set forth in these cases, the California Supreme Court concluded that Bristol-Myers’s business contacts in the state could not create general jurisdiction—it had significant operations in California and “sizeable” sales, but that was not enough for Bristol-Myers to be “at home,” especially compared to its larger operations in other states.
But the drugmaker’s Plavix-related activities in California created specific jurisdiction regarding the nonresident plaintiffs’ claims. The court considered three issues when determining specific jurisdiction: “whether the defendant has ‘purposefully directed’ its activities at the forum state,” “whether the plaintiff’s claims arise out of or are related to these forum-directed activities,” and “whether jurisdiction is reasonable and does not offend ‘traditional notions of fair play and substantial justice.’” Whether the plaintiff’s claims are related to the defendant’s activities requires a “substantial connection” between the two, but the defendant’s activities are not required to be the proximate or but-for cause of the plaintiff’s injuries.
The court found that Bristol-Myers purposefully directed its business activities at California—in addition to its facilities and salespeople in the state, it marketed and promoted Plavix there and contracted with an in-state distributor. A substantial connection between the drugmaker’s activities in the state and the alleged injuries of both the resident and nonresident plaintiffs also existed. Plavix was sold to both sets of plaintiffs as part of a national distribution strategy through the California-based distributor, McKesson Corp., and all the plaintiffs’ claims stem from national marketing and distribution that Bristol-Myers directed. “[T]hat numerous nonresident plaintiffs have filed their claims alongside those of resident plaintiffs does not alter or detract from” the substantial connection, the court noted.
Finding these two prongs of the specific jurisdiction test satisfied, the court turned to whether exercising specific jurisdiction was reasonable or whether it would violate due process. The court concluded that Bristol-Myers was on notice that it could be sued in California by resident and nonresident plaintiffs and reiterated that the specific jurisdiction analysis rests on “the relationship among the defendant, the forum, and the litigation”—the state in which a plaintiff resides is not part of that analysis. Demonstrating that jurisdiction would be unreasonable rests with the defendant, and the court’s role is to consider the state’s interests, the plaintiff’s interests, and whether the litigation will be burdensome for the defendant.
The court determined that litigating all the claims in California was reasonable, highlighting the streamlining of resources used for litigating the claims in one forum and the state’s interest in protecting consumers. It also noted that trying the claims together would aid the efficient resolution of the residents’ claims.
New York City attorney Hunter Shkolnik, who represents some of the plaintiffs, called the decision “monumental” and noted that it affects more than drug cases. “To my knowledge, it is the first state supreme court to interpret the Daimler personal jurisdiction decision—that you have to focus on specific as opposed to general jurisdiction in terms of mass torts or products liability or other claims. Defendants have taken the Daimler decision about not being able to bring claims against an out-of-country defendant to the furthest reach—arguing that it means the same for out-of-state claims,” he said.
Shkolnik found the court’s opinion on specific jurisdiction to be “spot on” but cautioned that it is still a fact-intensive inquiry that will depend on the record in each case. Here, he said, the facts were clear: “We have a drug company that intentionally goes to California to contract with a company that distributes drugs nationally, to avail itself of the distribution network and take the burden off its own shoulders. How could California not be the appropriate place to sue then? And consolidating the cases in that forum makes sense—there’s nothing unfair about it.”