The United States Supreme Court recently issued an opinion which significantly limits the ability of a state court to assert personal jurisdiction over non-resident defendants. This ruling is hardly a surprise and is consistent with the Court’s recent decisions in BNSF Railway Co. v. Tyrrell, 137 S. Ct. 1549 (2017) which reaffirmed the court’s commitment to the limitations on state-court jurisdiction set forth a few years ago in Daimler AG v. Bauman, 134 S. Ct. 746, 187 L.Ed. 2d 624 (2014)(Due process did not permit exercise of general jurisdiction over German corporation in California based on services performed there by its United States subsidiary that were “important” to it).
In Bristol-Myers Squibb Company v. Superior Court of California, San Francisco County, et al., 137 S. Ct. 1773 (2017), the Supreme Court held that the due process clause of the United States Constitution did not permit exercise of specific personal jurisdiction by a California Court over non-resident consumer claims. The plaintiffs in Bristol were a group of 600 consumers, most of whom were not California residents. The plaintiffs had filed suit in California state court against Bristol-Myers Squibb (“BMS”) asserting a variety of state law claims, all based on injuries purportedly caused by a BMS drug, Plavix. The facts relied upon by the courts to analyze jurisdiction were as follows:
- BMS is a large pharmaceutical company incorporated in Delaware with its principal place of business in New York.
- BMS’s business activities in California are comprised of five research and laboratory facilities, 160 employees, 250 sales representatives, and a small state governmental advocacy office.
- Plavix was not developed, manufactured, labeled, or packaged in California. BMS did not create a marketing strategy or work on regulatory approval in California. All of these activities occurred in New York or New Jersey.
- Plavix is sold in California – approximately 187 million pills which amount to more than $900 million in revenue, a little over one percent of the company’s nationwide revenue.
After suit was filed in California, BMS moved to quash summons on the non-resident plaintiffs’ claims asserting that California did not have personal jurisdiction over those claims. The case made its way to the California Supreme Court who agreed with BMS that its contacts with California were insufficient for general personal jurisdiction under the United States Supreme Court’s decision in Daimler AG. However, in adoptiong a “sliding scale” test, the court found that specific personal jurisdiction could be established. The California court held that “[a] claim need not arise directly from the defendant’s forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction.” The court found that BMS, through its national advertising and distribution scheme and business conducted in California, had sufficient contacts with the forum for California to exercise specific personal jurisdiction over all Plavix claims. Therefore, California courts could hear the claim of every Plavix plaintiff nationwide, even those non-California plaintiffs whose injuries were not caused by conduct within California.
In a near unanimous decision, with Justice Sotomayor as the lone dissenting voice, the United States Supreme Court reversed California’s decision holding that the due process clause of the Fourteenth Amendment precluded California’s sliding-scale test. The Court re-affirmed prior precedent: to invoke specific personal jurisdiction, a claim must “arise out of” defendant’s conduct within the state. Quoting directly from World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980), the Court reasoned that the “primary concern” in determining personal jurisdiction is “the burden on the defendant.” Thus, a State can only invoke specific personal jurisdiction over claims that arise from the defendant’s activities within the forum state. This jurisdiction does not extend to claims arising from defendants’ identical activities in other states. California’s “sliding scale approach,” the Court wrote, “resembles a loose and spurious form of general jurisdiction” that does not comport with the Due Process Clause of the Fourteenth Amendment.
The Court further found that the Due Process Clause protects interstate federalism by divesting the state court’s power to hear claims that do not “arise out of or relate to” the defendant’s forum contacts. While the burden placed on the defendant remains the primary focus, a related concern is the “territorial limitations on the power of the respective States.” The “sovereignty of each state … implies a limitation on the sovereignty of other states.” Therefore, the facts that the defendant suffers no additional burden by litigating in the forum and that the forum state has a strong interest in applying its law to the controversy or is the most convenient forum does not circumvent the protections of the Due Process Clause.