Supreme Court Says “No” to “Litigation Tourism”

There has been a lot said already about the effect on product liability (especially drug) cases and “mass actions” as a result of the United States Supreme Court’s June 17, 2017 decision in Bristol-Myers Squibb Co. v. Superior Court of California, No. 16-466.  But what about consumer class actions?  California is a destination venue not just for mass tort cases.  It is also the principal destination of litigation-tourism for consumer class actions that seek nationwide classes.  For example, a recent Chamber of Commerce study reports that three-fourths of food-related consumer class actions are filed in just four states, with California (36%), New York (22%), Florida (12%), and Illinois (7%) leading the way.[1]  Does Bristol-Myers have anything to teach us about the continuing viability of those suits?

It does.  If you are a non-resident sued in a nationwide class action (and/or suit is brought against you on behalf of one or multiple state-only non-resident plaintiff classes), Bristol-Myers may provide relief.  The rationale of the eight-to-one decision is grounded in traditional concepts of personal jurisdiction, but make no mistake: the real message of Bristol-Myers is its rejection of “litigation tourism,” and that rationale will apply to putative nationwide consumer class actions brought against non-resident defendants.  The decision could affect hundreds of existing class action cases.  This post explains.

Bristol-Myers In Brief. 

In Bristol-Meyers, 678 plaintiffs from 34 states (including 86 from California) brought claims in California state court alleging that they were injured by Plavix, a prescription drug manufactured by the defendant.  In the superior court, Bristol-Myers Squibb (BMS), an out-of-state company, moved to quash service of summons, arguing that the California court lacked personal jurisdiction as to claims brought by the non-California plaintiffs.  The superior court denied the motion, finding that BMS was subject to general jurisdiction in California.  The California Court of Appeal disagreed that BMS was subject to general jurisdiction but found that California courts had specific jurisdiction over the nonresidents’ claims against BMS.

At the California Supreme Court, BMS argued that the non-California plaintiffs’ claims were not causally linked to BMS’s conduct in the state.  A divided California Supreme Court rejected BMS’s “causal connection” argument, applied a “sliding scale” test to determine BMS’s relation to the forum, and found that BMS’s “nationwide marketing, promotion, and distribution” of the challenged product created a “substantial nexus” between the nonresident plaintiffs’ claims and BMS’s forum activities.

The United States Supreme Court overruled the California Supreme Court’s finding of specific jurisdiction over BMS, stating that the “sliding scale approach” to personal jurisdiction in California had “no support” in the Court’s past decisions.  Rather, specific personal jurisdiction requires an “adequate link” between the nonresident plaintiff’s claims and the forum state; Bristol-Myers rejects the California Supreme Court’s “sliding scale” approach to personal jurisdiction.  The firm published a Client Alert summarizing the decision, providing expert analysis and offering key takeaways on June 20, 2017, available here.  Because there was no “adequate link” between the company’s contacts related to Plavix in the state and the plaintiffs’ claims, specific jurisdiction over non-resident claims was inappropriate.

A Blow to “Litigation Tourism”

Bristol-Meyers delivers a serious blow to “litigation tourism”—the all-too-common practice of class action plaintiffs bringing claims in the most favorable venue regardless of residency or company contacts with the forum.  While litigation-tourism has been most prevalent in food misbranding cases, especially to California, it extends to all kinds of class actions, including product liability and defect cases, privacy cases, financial services litigation, and cases brought under federal statues such as the Telephone Consumer Protection Act.  After Bristol-Myers, tenuous connections to the forum won’t cut it, and non-resident plaintiffs can no longer piggyback on the claims of resident plaintiffs against an out-of-state defendant to remain in the forum.  Rather, to sue in a forum other than the plaintiffs’ or defendant’s state of residence, plaintiffs must now demonstrate an “adequate link” between the defendant’s conduct in that forum and their claims.

Recharging the Defense Against Plaintiffs Seeking to Import Out-of-State Law

Bristol-Myers is not just consistent with prior cases addressing plaintiff attempts to apply out-of-state law in a particular forum; it potentially provides those decisions with a jolt of energy.  California courts have declined to apply materially different state law to cases involving geographically diverse classes.  See, e.g., Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012).  Bristol-Myers potentially bolsters this principle by giving it a due process backing.

Takeaways

Bristol-Myers has the potential to affect numerous pending and future class actions.  Plaintiffs will need to carefully consider the contours of their class vis-à-vis the defendant they choose to sue and the forum in which they choose to litigate or face a motion to dismiss for lack of personal jurisdiction.  The question for defendants is one of strategy: what are the consequences of such a motion?  Plaintiffs have various options: they may file a nationwide class action where the defendant resides (if the defendant is resident in the United States and its state of residence permits nationwide classes); they may file actions in all or most states where the purported class members reside; or they may limit their class to California residents.  If plaintiffs file actions in multiple jurisdictions, the end result may be MDL practice to once again coordinate the action in a single court.  Defendants thus will want to evaluate all the circumstances of their particular case in deciding whether to file a Bristol-Myers motion.

[1] See http://www.instituteforlegalreform.com/uploads/sites/1/TheFoodCourtPaper_Pages.pdf, at p. 2.

*Co-author Spencer Sean McManus is a summer associate in our San Francisco office.