The U.S. Supreme Court’s decision in Daimler AG v. Bauman, 134 S.Ct. 746 (2014) established limits on state courts’ ability to assert general jurisdiction over foreign companies, which the legal community thought may result in less forum shopping.
Since Daimler, however, plaintiffs’ counsel have focused increasingly on establishing specific jurisdiction over non-resident defendants. As a result of their efforts, appellate decisions in California and Illinois have made it easier for plaintiffs to establish specific jurisdiction over non-resident defendants in those two states. Both courts found personal jurisdiction to be present over non-resident defendants based on marketing and development-related activities within the state, holding that the claims “arose out of” those activities either because the activities were part of a “nationwide” plan or “in part” informed defendants regarding the conduct at issue. In both cases, the courts emphasized that fairness favored a single location for the cases over a “scattershot” or “piecemeal” approach.
BRISTOL-MYERS SQUIBB V. SUPERIOR COURT (PLAVIX) (CA. CT. APP. AUGUST 29, 2016)
On August 29, the California Supreme Court held that California courts may exercise jurisdiction to hear claims brought by non-resident plaintiffs against non-resident defendants. The case involved coordinated proceedings against Bristol-Myers Squibb (BMS) relating to prescription drug Plavix. Nearly 90% of the plaintiffs in those coordinated proceedings were non-residents.
Relying on Goodyear and Daimler, the court found that BMS was not subject to general jurisdiction in California because it was neither “at home” nor incorporated in the state; however, the court found that BMS was subject to specific jurisdiction in California.
Specific jurisdiction requires that: (1) the defendant purposefully directs its activities to the forum; (2) the plaintiffs’ claims arise from or relate to those forum activities; and (3) exercise of jurisdiction be reasonable and fair. BMS did not challenge the fact that it purposefully directed its activities to the forum given that it markets Plavix in California and has a distribution agreement there. Rather, BMS argued that its California activities were unrelated to the claims brought by non-California residents. The court rejected this argument by finding that BMS’s nationwide marketing and distribution of Plavix and its California-based research facilities (that were not involved in developing Plavix) was a “single, coordinated, nationwide course of conduct,” rendering it subject to suit in California even by plaintiffs who lack any connection to the state. Finally, the California Supreme Court found that exercise of jurisdiction was fair and reasonable because coordinating and even trying cases together in California is more efficient than “scattershot” litigation throughout the country.
M.M., A MINOR, ET AL. V. GLAXOSMITHKLINE LLC ET AL. (ILL. APP. 1ST DIST. AUGUST 26, 2016)
On August 26, the Illinois Appellate Court, First District, upheld the trial court’s finding that Illinois had specific jurisdiction over claims brought by both in-state and out-of-state plaintiffs against out-of-state defendant GlaxoSmithKline (GSK) based on (1) GSK’s “substantial” Illinois contacts and (2) the fact that plaintiffs’ claims “arose from” acts or omissions by GSK during clinical trials for the prescription drug Paxil and the resulting inadequate warning labels.
Noting that the plaintiffs were not arguing for general jurisdiction, the court confined its analysis to specific jurisdiction, which requires that: (1) the defendant purposefully directs its activities to the forum; (2) the plaintiffs’ claims arise from or relate to those forum activities; and (3) exercise of jurisdiction be reasonable and fair.
Even though GSK had previously conceded that it had purposeful contacts with Illinois, the court stated that it would have found purposeful availment because GSK: (1) contracted with physicians in Illinois to conduct clinical trials; (2) conducted trials in Illinois for 18 years; (3) had employees in Illinois; and (4) maintained an agent for service of process in Illinois. The court noted that “[t]he quality of defendant GSK’s relationship with Illinois can hardly be characterized as random, attenuated or the like.”
Next, and citing the “lenient and flexible,” “arising from,” and “related to” standard, the court found that the claims “directly arose from or related to” GSK’s purposeful Illinois activities because plaintiffs alleged that: (1) their injuries arose out of deficiencies in the clinical trials; (2) the drug’s warning label contained inadequate warnings about birth defects; and (3) the warning label was “informed, in part, by the results of the Illinois clinical trials.” In doing so, the court rejected GSK’s arguments that: (1) there is no “meaningful link” between plaintiffs’ claims and the small fraction of Paxil trials that occurred in Illinois (17 of 361); (2) its Illinois activities must meet both “legal cause” and “cause in fact” tests to give rise to personal jurisdiction; and (3) there was nothing unique about the clinical trials done in Illinois.
Finally, the court found that the exercise of jurisdiction was reasonable because Illinois had “indisputable interest in resolving litigation stemming, in part, from clinical trials held in Illinois, run by Illinois doctors on Illinois subjects.” It held that exercise of jurisdiction over the out-of-state plaintiffs’ claim was reasonable because the litigation was going to go forward in Illinois whether or not the out-of-state claims were dismissed, and GSK did not put forth “any reason how piecemeal litigation in different forums” advanced the goals of judicial economy and social policies.
In short, both cases demonstrate a willingness by the appellate courts to find specific jurisdiction over out-of-state defendants even where the relationship between the defendant’s conduct in the state and the harm alleged is, at best, attenuated. If applied more widely, the reasoning in these decisions could subject companies conducting nationwide business to specific jurisdiction in any forum where the company has “purposefully” directed its conduct, regardless of whether the claim arises out of that conduct, further emphasizing the importance of removal strategy.