Article New York Law Journal

Supreme Court's Decision in 'BMS' Presents New Hurdles to Forum Shoppers

One of the biggest U.S. Supreme Court decisions of the past term was the court's June decision in Bristol-Myers Squibb Co. v. Superior Court of California, which severely curtailed the exercise of specific jurisdiction over out-of-state corporate defendants. 137 S. Ct. 1773 (2017). The decision has already sent shockwaves across the plaintiffs' bar. Plaintiffs in products liability cases have long endeavored to forum-shop for favorable state courts to hear their claims, and they have historically had wide latitude to do so when it came to products sold across the country.

That is no longer an option under BMS. There, over 600 individual plaintiffs from across the United States brought a mass action in California state court against drug company Bristol-Myers Squibb for injuries allegedly caused by a medicine called Plavix. While Bristol-Myers Squibb is not headquartered in California and does not manufacture Plavix in that state, it does sell the drug there. It also has some facilities, and several hundred employees, within the state. Based on those contacts, the California courts-all the way up to the Supreme Court of California-concluded that they had jurisdiction to hear Plavix claims from plaintiffs residing outside of California. Because Bristol-Myers Squibb is not "at home" in California, the plaintiffs did not establish general jurisdiction over the company (which would have allowed a court to hear nearly any claim). Instead, any authority over the Plavix claims would have to arise under specific jurisdiction, i.e., the company having certain "minimum contacts" with the forum state such that a court may exercise jurisdiction over issues arising from those contacts. Here, despite the dearth of clear ties between the forum and Plavix claims from out-of-state plaintiffs, the Supreme Court of California applied what it called a "sliding scale" of specific jurisdiction and held that the company's various ties to California warranted exercise of specific jurisdiction over Plavix claims brought by out-of-state plaintiffs.

The Supreme Court disagreed. It held that the exercise of specific jurisdiction requires a connection between the defendant's activities in the state and the claims that are actually before the court. In other words, courts can no longer exercise specific jurisdiction over an out-of-state corporation on claims brought by out-of-state plaintiffs unless there is some tie between the claims at issue and the forum. As to the underlying Plavix claims, the Supreme Court's holding required the California courts to dismiss any claims brought by out-of-state plaintiffs who were not alleging an injury in California.

The BMS decision represents the latest salvo by the Supreme Court against forum shoppers. In 2011, the court decided Goodyear Dunlop Tires Operations, S.A. v. Brown, holding that Goodyear's foreign subsidiaries could not be sued in North Carolina state court for a bus accident in Paris. 564 U.S. 915 (2011). And the court's 2014 decision in Daimler AG v. Bauman further curtailed general jurisdiction over foreign corporations for acts occurring overseas, when the court found that Daimler could not be sued in California federal district court by foreign plaintiffs for acts committed by the company's Argentine subsidiary in Argentina. 134 S. Ct. 746 (2014).

Now, with jurisdiction curtailed once again under the BMS decision, courts across the country have faced requests that cases be dismissed or that previous findings of jurisdiction be reconsidered. In deciding these issues, courts have had to confront questions left open by that decision, including its applicability in federal courts and its applicability to class actions. Courts have also had to address application of BMS in specific factual contexts and reconcile its holding with those of other Supreme Court cases.

Does 'BMS' apply in federal court? So far, yes. In the last few months, multiple federal courts have applied BMS in their jurisdictional analyses.

Does 'BMS' apply to class actions? Based on a small sample of early returns, it appears likely that BMS will apply to class actions. The Eastern District of New York applied BMS to dismiss a price-fixing complaint on behalf of a nationwide class of dentists against an out-of-state vendor of dental supplies, reasoning that "[t]he constitutional requirements of due process does not wax and wane when the complaint is individual or on behalf of a class." In re Dental Supplies Antitrust Litigation, 2017 WL 4217115 (E.D.N.Y. Sept. 20, 2017). Similarly, the Northern District of New York applied BMS to a putative class action, dismissing products liability claims against Chrysler to the extent the claims were brought by out-of-state plaintiffs. Spratley v. FCA U.S., 2017 WL 4023348 (N.D.N.Y. Sept. 12, 2017). At least one court, however, has refused to invoke BMS to dismiss claims brought on behalf of a nationwide class where the named plaintiffs were residents of the forum state. In a case brought against an out-of-state beverage manufacturer for false advertising, the court concluded that BMS did not require dismissal of claims brought on behalf of out-of-state class members. It reasoned, instead, that the named class representatives (there, California residents) were the only real parties in interest to the complaint. Fitzhenry-Russell v. Dr. Pepper Snapple Grp., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017).

How have federal courts applied 'BMS' to specific jurisdiction challenges? Federal courts have taken heed of BMS' holding that there must be some connection between the forum and the specific claims at issue, and have applied that holding with varying outcomes. For example, the Eastern District of Missouri dismissed injury claims brought by out-of-state plaintiffs against an out-of-state manufacturer of talcum powder because there was no "connection between Plaintiffs' injuries, the products which caused the harm in this matter, and Defendants' contacts in Missouri." Jinright v. Johnson & Johnson, 2017 WL 3731317 (E.D. Mo. Aug. 30, 2017). On the other hand, the Eastern District of Wisconsin considered BMS in its ruling allowing a Wisconsin couple to bring a products liability suit against Ford Motor Company over a car accident that took place in Pennsylvania, where Ford had not actually sold the car to the couple-Ford had merely sold the car to a dealership in Oklahoma. Thomas v. Ford Motor Company, 2017 WL 4541397 (E.D. Wis. Oct. 10, 2017). The Wisconsin court relied on the 1987 Supreme Court case Asahi Metal Industry v. Superior Court, which articulated a "stream of commerce" theory of jurisdiction-i.e., that constitutional minimum contacts could be satisfied where a manufacturer markets products nationwide with the knowledge that some will end up in the forum state. 480 U.S. 102 (1987). Relying on Asahi, the Wisconsin court concluded that "Ford's willingness to serve and sell to Wisconsin consumers, its pervasive marketing on multiple platforms to Wisconsin residents, and its accrual of benefits from Wisconsin consumers buying its products that make it reasonable for Ford to anticipate being haled into a Wisconsin court."

Does 'BMS' clarify the "stream of commerce" theory of jurisdiction? So far, no. The Supreme Court's 1987 decision in Asahi resulted in two plurality opinions on the level of minimum contacts required for the exercise of jurisdiction based on the "stream of commerce" theory. A subsequent decision on a similar issue, J. McIntyre Machinery Ltd. v. Nicastro, also generated only a plurality opinion. 564 U.S. 873 (2011). The BMS decision itself mentions Asahi only in passing and does not endorse either plurality opinion.

With some of these subsequent cases clarifying BMS and other cases generating additional uncertainty, the question for practitioners becomes how to best position themselves going forward-and, more specifically, how to leverage this emerging line of cases to their clients' maximum advantage.

For defendants, now may be the time to take aggressive positions on jurisdictional disputes. The Supreme Court's holding in BMS left a number of open issues, which courts have only partially and inconsistently begun to resolve. Given the clear trend against forum shopping present in both BMS and its predecessors, the defense bar should have the wind at its back.

While the plaintiffs' bar may be tempted to fight for a narrow interpretation of BMS, as a practical matter it could be unwise for them to do so. Prolonged jurisdictional fights bog down cases in preliminary matters while costs are incurred, evidence on the merits grows stale, and clients lose interest. And even after all of that the fight could still be lost, leaving counsel with an instruction to either drop its out-of-state plaintiffs or refile elsewhere. Instead, plaintiffs may now want to adopt a more conservative jurisdictional strategy in order to ensure that courts reach the merits as quickly as possible.

ATIF KHAWAJA is a partner at Kirkland & Ellis. He has broad experience litigating high-stakes commercial and intellectual property matters across a variety of industries.