Effort Asks U.S. High Court to Reverse Expansion of State Jurisdiction in Lawsuits

The California Chamber of Commerce has joined an effort to shut down unexpected litigation for companies that do business in California.

The CalChamber has joined the U.S. Chamber of Commerce, American Tort Reform Association and Civil Justice Association of California in asking the U.S. Supreme Court to overturn a California Supreme Court decision that expands the situations in which non-California residents may file lawsuits here.

The case is Bristol-Myers Squibb Company v. Superior Court of California (Case No. 16-466), currently pending at the U.S. Supreme Court.

The friend-of-the court brief joined by the CalChamber earlier this month argues that states “have no legitimate interest in asserting specific jurisdiction so expansively and regulating conduct that occurred exclusively in other states.”

Background

Bristol-Myers Squibb (BMS) manufactures Plavix, a prescription drug used to inhibit blood clotting. In the case, 86 California residents and 575 residents of 33 other states sued BMS and McKesson Corporation, a pharmaceutical distributor headquartered in California, for injuries allegedly arising out of the plaintiffs’ use of Plavix.

The California Supreme Court concluded that although BMS’ “ongoing activities in California are substantial, they fall far short of establishing that it is at home in the state for purposes of general jurisdiction.”

But the state high court said California courts may exercise “specific jurisdiction” over the non-California resident plaintiffs’ claims in the case. The court noted that the nonresident plaintiffs’ claims arise from similar conduct that gave rise to the California plaintiffs’ claims — the nationwide marketing and distribution of Plavix.

The court also pointed to BMS’ “extensive contacts with California,” including hundreds of millions of dollars from Plavix sales, a relationship with a California distributor, maintenance of research and development facilities in California, and hundreds of California employees.

In-State Activities

The friend-of-the-court brief filed by the CalChamber and others pointed out that the claims by the out-of-state plaintiffs did not arise out of BMS contacts with California as the drug was not manufactured here, not purchased here and the plaintiffs did not have any connection to or suffer injury here. Moreover, the research facilities in California had nothing to do with the development of the drug in question.

Flood of Litigation

The brief also detailed the harm resulting from California’s “sliding scale” approach to establishing specific jurisdiction, in which the more wide-ranging a defendant’s contacts with a state, the more readily a court presumes a connection between the claims and the state contacts. The sliding scale approach rests on the determination that a defendant’s alleged in-state conduct parallels its alleged conduct in other states, expanding the concept of specific jurisdiction “beyond recognition.”

In addition, the brief noted that the sliding scale approach is unfair to litigants because a potential defendant would be unable to predict where litigation might be filed, which would be harmful to the economy.

Ultimately, consumers would bear some of the costs of that unpredictability in the form of higher prices. “The legal costs imposed on businesses whenever they are forced to litigate high-stakes cases in unexpected forums would surely increase in an environment where a product liability claim against a nationwide manufacturer could essentially be brought anywhere.”

Furthermore, the sliding scale approach would enable plaintiffs’ attorneys to “shop aggressively for plaintiff-friendly forums and bring as many claims as possible there.”

Strictly enforcing the requirement that an action be related to the defendant’s contacts with the state where the claim is filed “maintains appropriate limits on specific jurisdiction ­— allowing states to protect their citizens and control conduct within their borders while preventing them from adjudicating claims that should be heard elsewhere,” the brief concludes in urging the U.S. Supreme Court to reject the sliding scale approach. The case is scheduled for oral argument on August 25, 2017.

Staff Contact: Heather Wallace

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Heather Wallace
About Heather Wallace
Heather Wallace has been CalChamber associate general counsel since November 2011. She is a seasoned litigator with experience on employment law, health care, intellectual property and more. She came to the CalChamber from the Managed Risk Medical Insurance Board (MRMIB), where she was senior staff counsel, providing legal advice on the Healthy Families Program, the Pre-Existing Condition Insurance Plan and the Major Risk Medical Insurance Program. She holds a B.A. in history from the University of New Orleans and earned her J.D. with honors from Santa Clara University School of Law, where she was technical editor of the Computer and High Technology Law Journal.