The California Supreme Court earlier this week issued an opinion that, in the words of the dissent, allows for “jurisdiction by joinder.” (Bristol-Myers Squibb Co. v. Superior Court (Anderson), Case No. S221038.) Plaintiffs with claims arising wholly outside California, against non-California defendants, may nevertheless be entitled to jurisdiction in a California court. The keys appear to be (a) whether the claims are similar to those of California residents (b) who are also plaintiffs in the suit (c) against a defendant that conducts significant activity in California as well as elsewhere. While Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or activity conducted in multiple states. The 4-3 decision may also be the subject of a petition for certiorari to the United States Supreme Court.
“Bristol-Myers Squibb Company (BMS), a pharmaceutical manufacturer, conducts significant business and research activities in California but is neither incorporated nor headquartered here.” Eight California lawsuits were filed against it related to BMS’s drug Plavix. Plaintiffs were 86 California residents and 592 nonresidents. None of the residents purchased the drug in or from California, or had other relevant contacts with the state.
The opinion recognizes that “BMS’s business contacts in California are insufficient to invoke general jurisdiction,” because under Daimler AG v. Bauman (2014) 571 U.S. __ , 134 S.Ct. 746, 187 L.Ed.2d 624 that is restricted to a corporation’s state of incorporation or principal place of business. (We have blogged about Daimler and its progeny before: California Court rules no jurisdiction over foreign parent corporations; No in state dealings for years – no jurisdiction; Out of state defendant? Out of state exposure? File suit somewhere else; Registered in Delaware Is Not At “Home” There; and A More Personal Touch: Challenge to Madison County Jurisdiction.) Bristol-Myers held, however, that “the company’s California activities are sufficiently related to the nonresident plaintiffs’ suits to support the invocation of specific jurisdiction.”
The court found that it was undisputed that there was specific jurisdiction over the California plaintiffs’ claims, and found that there should be jurisdiction over the nonresidents’ claims as well because “BMS sold Plavix to both the California plaintiffs and the nonresident plaintiffs as part of a common nationwide course of distribution.”
The California activities that Bristol-Myers found “related” to the nonresident plaintiffs’ claims: “BMS’s extensive contacts with California, encompassing extensive marketing and distribution of Plavix, hundreds of millions of dollars of revenue from Plavix sales, a relationship with a California distributor, substantial research and development facilities, and hundreds of California employees” is enough for California courts to “exercise specific personal jurisdiction over nonresident plaintiffs’ claims in this action, which arise from the same course of conduct that gave rise to California plaintiffs‘ claims: BMS’s development and nationwide marketing and distribution of Plavix.”
Bristol-Myers pointed out that the court had previously “adopted a sliding scale approach to specific jurisdiction,” such that that “the more wide ranging the defendant‘s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Specific jurisdiction is thus proper in this case because “BMS’s contacts with California are substantial and the company has enjoyed sizeable revenues from the sales of its product here — the very product that is the subject of the claims of all of the plaintiffs.”
The court identified several California interests in the joint litigation. One is that “evidence of the injuries allegedly suffered by the nonresident plaintiffs may be relevant and admissible to prove that Plavix similarly injured the California plaintiffs,” so “trying their cases together with those of nonresident plaintiffs could promote efficient adjudication of California residents’ claims.” Similarly, the court was concerned that “separating the nonresident plaintiffs from the resident plaintiffs and forcing the nonresidents to sue in other states” could result in “delays in the California proceedings that would be created by the litigation and appeals of discovery and factual conflicts in the various other forums.” A further, case-specific reason was that “California also has an interest in regulating the conduct of BMS’s codefendant, McKesson Corporation, which is headquartered in California, as a joint defendant with BMS.”
As the dissenting opinion stated: “The majority expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction.” The dissent argued that “mere similarity of claims is an insufficient basis for specific jurisdiction. The claims of real parties in interest, nonresidents injured by their use of Plavix they purchased and used in other states, in no sense arise from BMS’s marketing and sales of Plavix in California, or from any of BMS’s other activities in this state.” The dissent quoted with approval a law review article on the Court of Appeal’s decision: “The claims of the California and nonresident plaintiffs are merely parallel.”
Although the majority opinion was couched in terms of “the particular circumstances of this case,” the dissent looked to the broader precedent being set.
“[T]he majority notes that BMS maintains some research facilities in California, although the majority concedes Plavix was not developed in those facilities. … This second ground of relatedness is both illogical and startling in its potential breadth. Because BMS has performed research on other drugs in California, claims of injury from Plavix may, according to the majority, be adjudicated in this state. Will we in the next case decide that a company may be sued in California for dismissing an employee in Florida because on another occasion it fired a different employee in California, or that an Illinois resident can sue his automobile insurer here for bad faith because the defendant sells health care policies in the California market?”
“As California holds a substantial portion of the United States population, any company selling a product or service nationwide, regardless of where it is incorporated or headquartered, is likely to do a substantial part of its business in California. Under the majority’s theory of specific jurisdiction, California provides a forum for plaintiffs from any number of states to join with California plaintiffs seeking redress for injuries from virtually any course of business conduct a defendant has pursued on a nationwide basis, without any showing of a relationship between the defendant’s conduct in California and the nonresident plaintiffs’ claims. The majority thus sanctions our state to regularly adjudicate disputes arising purely from conduct in other states, brought by nonresidents who suffered no injury here, against companies who are not at home here but simply do business in the state.”
The dissent took issue with other reasons proffered by the majority. While “[t]he majority argues that taking jurisdiction over the nonresidents’ claims furthers a California interest because evidence of their injuries may be admissible to help the California plaintiffs prove Plavix was a defective product,” the dissent pointed out that “admissibility of other injuries does not depend on joinder of the other injured person.” The majority thought that joint litigation would help the California plaintiffs, but the dissent pointed out that there are many other Plavix suits in other courts around the country. “Whether or not real parties’ claims are heard together with those of the California plaintiffs, inefficiency and the potential for conflicting rulings will exist so long as actions are simultaneously pending in several state and federal courts….No mechanism exists for centralizing nationwide litigation in a state court; there is no means by which pending actions in Illinois courts, for example, can be transferred to a California court.”
The dissent also answered the question, what’s the superlative of “red herring?”
“Finally, the majority asserts that California’s interest in regulating the conduct of codefendant McKesson Corporation (McKesson), a pharmaceutical distributor headquartered in California, justifies adjudicating real parties’ claims against BMS in a California court.…Of all the majority’s red herrings, this is perhaps the ruddiest.” Because of course the question is jurisdiction against Bristol-Myers, not the co-defendant (and there was question as to its role anyway). Research indicates this is the first use of “ruddiest” in a reported California decision. It may not be the last.
As stated above, while Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or an activity conducted in multiple states. The most significant limitation appears to be that a nonresident plaintiff still may not be able to challenge a nonresident defendant in California courts alone; the nonresident needs to find California plaintiffs with similar claims. In any event, counsel who have been advising clients that the Daimler decision forecloses claims in California courts based on general jurisdiction should re-examine that position in light of the Bristol-Myers ruling on specific jurisdiction.