Article

SCOTUS’ game changing decision threatens Litigation Tourism

July 24, 2017
| United States

On June 19, 2017 the Supreme Court handed down a decision which promises to have a major impact on how product liability litigation is brought against Pharmaceutical Companies in the USA. In an 8-1 opinion1, the Supreme Court of the United States reversed an earlier California Supreme Court’s decision2 in which California had permitted plaintiffs from all over the country to sue Bristol-Myers Squibb Co. ("BMS") for products liability with respect to the prescription drug Plavix. While BMS engaged in business activity in California and sold Plavix there, BMS did not specifically develop, manufacture, label, package, or work on the regulatory approval for Plavix in the State. In fact, BMS conducted most of its activities at its headquarters in NY and in nearby NJ and only 1% of its revenue was derived from California. Further, the nonresident plaintiffs did not allege that they obtained Plavix from a California source, that they were injured by Plavix in California or that they were treated for their injuries in California. Nevertheless, California determined that the extensive corporate contacts BMS had with the State permitted plaintiffs to sue BMS there.

California’s approach gave support to a favored tactic of the Plaintiffs’ Bar, establishing the requisite connection between their forum of choice and the claims at issue by arguing that the defendant has extensive, albeit unrelated, forum contacts. The Supreme Court termed this a “loose and spurious” form of general jurisdiction and emphatically sided with BMS. “The relevant plaintiffs are not California residents and do not claim to have suffered harm in that State. In addition, … all the conduct giving rise to the nonresidents’ claims occurred elsewhere. It follows that the California courts cannot claim specific jurisdiction.” Indeed, when there is no “affiliation between the forum and the underlying controversy,...specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.” at 7 (emphasis added).

This has the potential to be one of the most important product liability decisions to date, because it ends - or at least puts major limits - on plaintiffs’ ability to forum-shop. For many years, expansive application of personal jurisdiction allowed large companies to be sued almost anywhere on the thinnest of connections. Product liability plaintiffs, suing manufacturers of FDA-regulated products, flocked to what they viewed as their most favorable venues - notorious counties in Missouri, Illinois, Pennsylvania, New Jersey, New York and California. The vast majority of plaintiffs (often as many as 90%) in such venues were non-residents and the Supreme Court has removed the fuel behind the growth of “judicial hellholes”, which previously served to attract plaintiffs from all over the country regardless of whether the chosen forum had any true connection to plaintiffs or the alleged harm that they suffered. There will still be mass torts, but this case suggests that must either be defendant-specific – filed in the target defendant’s state of incorporation or principal place of business – or limited to plaintiffs from the state where the litigation is located.

Defendant companies should expect the entrepreneurial Plaintiffs” bar to look for roadmaps from the decision to lead them to use the specific facts of each case to establish a judicial connection to favorable venues. Litigation tourism has been lucrative business so be on the lookout for lobbying in state capitals and on the Federal level, as the plaintiff’s bar seeks to overcome this ruling through regulation and legislation.


Endnotes

  1. Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (U.S. June 19, 2017)
  2. Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874 (Cal. 2016).