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Supreme Court clamps down on state-court forum shopping

Companies more likely to enjoy ‘home field advantage’

plavixThe U.S. Supreme Court capped off its latest term by handing two key victories to corporations seeking to avoid being sued in plaintiff-friendly state courts.

In BristolMyers Squibb Co. v. Superior Court of California, the Supreme Court held that California courts lacked specific jurisdiction over the claims of out-of-state plaintiffs who had joined a mass action filed in California state court against Bristol-Myers Squibb for injuries allegedly caused by the prescription blood thinner Plavix.

And in BNSF Railway Co. v. Tyrrell, the court held that due process did not allow Montana courts to exercise personal jurisdiction over out-of-state plaintiffs suing their employer under the Federal Employers’ Liability Act for injuries sustained outside Montana.

Experts say the rulings will increasingly force plaintiffs’ attorneys to bring mass tort and class actions on a state-by-state basis while providing defense attorneys the ammunition to argue that the most appropriate forum for a nationwide class action is the corporation’s home state.

While Bristol-Myers is a mass tort case, Boston attorney Donald R. Frederico said the decision provides support for defense arguments in the class action context as well.

The ‘Bristol-Myers’ effect

It didn’t take long for the U.S. Supreme Court’s ruling in Bristol-Myers to have an impact.

The afternoon the June 19 decision was handed down, a state judge in Missouri cited Bristol-Myers in declaring a mistrial in a product liability case against Johnson & Johnson. The mistrial was based on the fact that two out-of-state plaintiffs were part of the suit, which alleged Johnson & Johnson’s talcum powder products caused ovarian cancer.

According to the St. Louis Post-Dispatch, the Supreme Court ruling calls into question five previous verdicts from trials in St. Louis against Johnson & Johnson. Four of the five trials ended in plaintiffs’ verdicts exceeding $300 million.

Washington, D.C., attorney Lawrence S. Ebner said he fully expects plaintiffs’ attorneys to be hard at work figuring out strategies in response to Bristol-Myers and BNSF.

“They’re asking themselves whether they will have to change the way they normally conduct business and file several class actions in different states depending on where the plaintiffs come from,” said Ebner, who authored an amicus brief in Bristol-Myers on behalf of DRI-The Voice of the Defense Bar. “I also think they’re trying to come up with new theories to argue that the facts and circumstances of a particular case are enough for case-specific jurisdiction, even though the plaintiffs come from different states.”

On the other hand, Providence attorney Fidelma L. Fitzpatrick expects corporations to be even more cognizant of geographic location in the wake of Bristol-Myers.

“You’re going to see a lot of manufacturers moving their headquarters, choosing what they consider to be ‘corporate-friendly’ states as their principal place of business or place of incorporation, solely for the purpose of being able to choose the forum in which plaintiffs sue them,” Fitzpatrick said.

“I’m assuming lawyers in Delaware, New York and New Jersey are pretty happy about these developments,” said Tanya Monestier, a professor at Roger Williams University School of Law in Rhode Island.

“It’s clear from the case that a court cannot exercise jurisdiction over a defendant where the defendant is not subject to general jurisdiction, the class representatives are from other states, and the claim did not ‘arise’ in the forum state,” said Frederico, who heads the class action defense practice at Pierce Atwood in Boston.

The two decisions “significantly curtail” class actions or mass tort actions involving plaintiffs from multiple states, according to Lawrence S. Ebner, a Washington, D.C., attorney who authored an amicus brief in Bristol-Myers on behalf of DRI-The Voice of the Defense Bar.

“The net result of these two cases is that a class action or mass tort action can be filed where the cause of action arose — in other words, where there is a direct link between the plaintiffs’ claims and the cause of action, or there is general jurisdiction, meaning where the company is incorporated or headquartered,” Ebner said.

Professor Tanya Monestier of Rhode Island’s Roger Williams University School of Law sees Bristol-Myers in particular as dealing a blow to class action lawyers who may be forced to litigate certain claims state by state.

“They rely on strength in numbers in terms of leverage in settlement negotiations, and now they’re not going to have the numbers they otherwise would have,” she said. “That’s definitely going to be chipping away at their practice and strategy.”

Building on ‘Daimler’

In Bristol-Myers, 600 plaintiffs, most of whom were not California residents, sued the pharmaceutical company in California state court. The plaintiffs asserted state-law product liability claims for injuries caused by Plavix.

Bristol-Myers is incorporated in Delaware. Headquartered in New York, the company maintains substantial operations in both New York and New Jersey. The company unsuccessfully moved to dismiss the non-residents’ claims for lack of personal jurisdiction.

In upholding lower state courts, the California Supreme Court concluded that Bristol-Myers’ “wide ranging” contacts with the state were enough to support a finding of specific jurisdiction over the claims brought by the non-resident plaintiffs.

But the U.S. Supreme Court reversed in an 8-1 decision on June 19. In concluding that California courts lacked specific jurisdiction over the out-of-state residents’ claims, the court rejected the notion that there was a sufficient nexus with the state based on the mere fact that other plaintiffs used Plavix in California or the fact that Bristol-Myers contracted with a California company to distribute Plavix nationwide.

Ebner said that point was a key to the court’s decision.

“It says basically that no matter how extensive a company’s business activities are in a given state, that’s not enough to establish case-specific jurisdiction, unless the out-of-state plaintiffs’ claims are directly related to those forum-state activities,” Ebner said.

The sole dissenter, Justice Sonia Sotomayor, construed the majority as holding that a corporation that engages in a nationwide course of conduct cannot be sued in a state court by a group of injured people unless all of those people were injured in the forum state court.

Sotomayor wrote that the court’s decision was a “first step” toward contracting the scope of specific jurisdiction, similar to the court’s contraction of the exercise of general jurisdiction in the landmark Daimler AG v. Bauman decision in 2014.

“The majority’s rule will make it difficult to aggregate the claims of plaintiffs across the country whose claims may be worth little alone,” the justice wrote. “It will make it impossible to bring a nationwide mass action in state court against defendants who are ‘at home’ in different States. And it will result in piecemeal litigation and the bifurcation of claims.”

But in his majority opinion, Justice Samuel A. Alito Jr. rejected that “parade of horribles.”

“Our decision does not prevent the California and out-of-state plaintiffs from joining together in a consolidated action in the States that have general jurisdiction over BMS,” he wrote.

In addition, Alito pointed out that plaintiffs who are residents of a particular state could sue together in their home states.

Fidelma L. Fitzpatrick, who represents plaintiffs in toxic tort and medical device actions, said she is not certain whether and to what degree Bristol-Myers will impact class-action cases, but the applicability of the decision to mass tort actions brought in state courts is clear.

For both plaintiffs and defendants, Bristol-Myers will negatively impact the “efficiencies” of being able to handle claims as mass torts, Fitzpatrick said. The Providence attorney stressed it is important that the mass action be preserved as a vehicle for vindicating the rights of plaintiffs.

“These companies are leveraging and banking on the fact that they can out-litigate individual claimants,” she said. “What they can’t do is out-litigate a group of claimants who come together to pursue a mass action.”

Robert S. Peck authored an amicus brief filed in Bristol-Myers on behalf of the American Association for Justice. The Virginia attorney said he did not think the Supreme Court went as far in Bristol-Myers as some in the plaintiffs’ bar feared.

“What it has done is it has made what was a fairly common practice of aggregating plaintiffs — essentially for economies of scale — more difficult,” Peck said. “You cannot pull plaintiffs from various states unless there is some sort of affiliation between the cause of action and the defendant.”

Fitzpatrick said plaintiffs may have more success establishing specific jurisdiction than people realize.

“These corporations are so big it’s really hard for them to keep their activities with respect to these drugs or [medical] devices localized to a single state,” Fitzpatrick said. “What you’re looking at is defendants purposefully availing themselves of a particular state for the purpose of testing, developing or marketing drugs. In those states, you are going to be able to get specific jurisdiction.”

The two decisions “significantly curtail” class actions or mass tort actions involving plaintiffs from multiple states, according to Washington, D.C.’s Lawrence S. Ebner.

Class actions affected

Frederico does not believe Bristol-Myers “changes” the law regarding specific jurisdiction, per se.

“What it does do, in the class action context in particular, is make it more difficult for plaintiffs to seek certification for multi-state classes,” Frederico said. “If they want to do that, now, they are more likely going to have to file suit in the defendant’s home state.”

Peck said Bristol-Myers has “enormous potential” to affect class actions.

“You’re assuming jurisdiction on behalf of a group of plaintiffs, some of whom may not have any connection with that state,” Peck said. “Some of those questions can be taken care of during the course of certification. But it does create a couple more hurdles that have to be dealt with.”

According to Monestier, Bristol-Myers raises a question about jurisdiction in a class action with respect to absent class members.

Bristol-Myers forecloses the possibility that you can create jurisdiction simply by linking to the claims of plaintiffs where there is proper jurisdiction,” Monestier said. “If you can’t do that in an aggregated setting like Bristol-Myers, I don’t see how you can do that in a class action where you have a lead plaintiff and ‘tag along’ plaintiffs from all 50 states. How could you do that in a class action setting where you couldn’t do it in a joinder or consolidation setting?”

Bristol-Myers forecloses the possibility that you can create jurisdiction simply by linking to the claims of plaintiffs where there is proper jurisdiction.”

— Tanya Monestier, RWU School of Law

General jurisdiction

While Bristol-Myers addressed the issue of specific jurisdiction, BNSF Railway Co. v. Tyrrell took up the question of general jurisdiction, building on Daimler.

In Daimler, the court held that a state court may exercise general jurisdiction over out-of-state corporations when their connections with the state are so “continuous and systematic” as to render them essentially at home in the forum state

BNSF involved two FELA claims filed in Montana state court, one by a North Dakota resident who claimed he was injured while working for the railroad, and another by the estate of a South Dakota railroad employee who allegedly developed cancer as a result of his exposure to certain chemicals in the workplace. Neither employee alleged injury from work in Montana.

Because BNSF was neither incorporated nor headquartered in Montana, the railroad argued that it was not “at home” in Montana for purposes of the exercise of general personal jurisdiction under Daimler.

The Montana Supreme Court held that Montana courts could exercise general personal jurisdiction over BNSF under a state rule allowing the exercise of jurisdiction over “persons found within” the state.

The U.S. Supreme Court reversed in an 8-1 decision on May 30. Writing for the majority, Justice Ruth Bader Ginsburg cited Daimler in concluding that “the Fourteenth Amendment’s Due Process Clause does not permit a State to hale an out-of-state corporation before its courts when the corporation is not ‘at home’ in the State and the episode-in-suit occurred elsewhere.”

Boston attorney Michelle I. Schaffer said she does not see Bristol-Myers and BNSF as representing a “sea-change” in the law.

“To me, these cases are codifying and reinforcing the prior U.S. Supreme Court precedent on personal jurisdiction,” said Schaffer, president of the Massachusetts Defense Lawyers Association.

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