Defendants should consider personal jurisdiction defense following Supreme Court decision, especially when the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.
A recent Supreme Court decision may allow defendants to avoid lawsuits in distant courts that have little or no connection to the lawsuit, especially in cases (such as mass actions) where the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs. In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., — U.S. —, 137 S. Ct. 1773, 1775 (2017), the Supreme Court held that a California state court did not have personal jurisdiction to adjudicate claims against a drug company, at least for the plaintiffs who were not California residents and who had not alleged a connection between the alleged injury and the state of California. While law school civil procedure professors spend weeks covering personal jurisdiction, the defense rarely appears in real-world practice because most plaintiffs’ attorneys are smart enough to avoid a fight over jurisdiction. Thus, defendants may give this defense only cursory consideration at the outset of a lawsuit. Following Bristol-Myers, defendants may want to more carefully consider the personal jurisdiction defense as a way to avoid litigation in a hostile forum.
In Bristol-Myers, over 600 plaintiffs from multiple states joined together in a single lawsuit in California. The defendant was the maker of Plavix, a blood thinner that is sold nationwide. All plaintiffs claimed that the drug had injured them in some way. Importantly, the case was not brought as a class action but as a “mass action.”
Ordinarily, a defendant must “purposely avail” itself of the forum state before that state can exercise jurisdiction over the defendant—that is, the state can make the defendant litigate in its courts. Bristol-Myers argued that the state court did not have personal jurisdiction over it for the plaintiffs who had no connection to California. The California Supreme Court disagreed. It noted that the claims of the non-residents were nearly identical to the claims of the 86 California residents. Further, Bristol-Myers had a research lab in California where it conducted non-Plavix research and approximately 1% of Bristol Myer’s Plavix revenue came from sales in California. Thus, the California Supreme Court concluded that Bristol-Myers had sufficient minimum contacts to subject it to claims by plaintiffs from outside California.
The Supreme Court reversed in an 8-1 decision authored by Justice Alito. The Court explained that there are two types of personal jurisdiction—general and specific. General jurisdiction means that a party is so at home in that forum that it is fair to subject that party to any type of claim there. For a corporation, general jurisdiction exists in the state where it is incorporated or in the state where it has the base of its operations. California did not have general jurisdiction over Bristol-Myers because the company was incorporated in Delaware and had its base of operations in New York.
Specific jurisdiction exists when the corporation has purposefully directed its activity toward that state in relation to the events giving rise to the lawsuit. As for the 86 California residents, the California courts had specific jurisdiction because they bought Plavix in California and were injured there. But for the out-of-state residents, the California courts lacked jurisdiction. This was true even though the in-state and out-of-state plaintiffs were asserting the same type of claim against the same defendant for the same product. Even though the plaintiffs could properly join their claims together under California’s procedural rules, that did not mean that the California courts had jurisdiction to adjudicate those claims.
While this personal jurisdiction defense did not dispose of the lawsuit entirely, it significantly reduced the number of plaintiffs from over 600 to less than 90. As a result, the potential liability decreased. Further, it is likely that many of the dismissed plaintiffs will not refile their lawsuits in their home states, which will further decrease the potential exposure.
A word of caution—the personal jurisdiction defense must be raised at the outset of the lawsuit or it will be waived. Thus, defendants should decide early on whether to raise the defense. If the defendant believes that a quick settlement is possible, he may prefer to waive the defense and adjudicate all the claims in one stroke. Similarly, if the defendant believes that the plaintiffs are willing to litigate on multiple fronts if some claims are dismissed, it may be more advantageous to waive personal jurisdiction so that all the lawsuits are concentrated in a single forum. These are strategic decisions that will turn on the facts of each case.