California Supreme Court Invites Suits against Defendants Doing Any Business in California

In a hotly contested 4-3 decision, the California Supreme Court in Bristol-Myers Squibb Company v. The Superior Court of San Francisco County, 2016 WL 4506107 greatly expanded the concept of specific jurisdiction to allow a non-resident plaintiff to file suit in California courts against any defendant who conducts or transacts any business in California, even though the plaintiff purchased that defendant’s product in another state.   The Court broadened the scope of specific jurisdiction to overcome the requirements of International Shoe Co. v. Washington, 326 U.S. 310 (1945), finding that a tangential use of the forum constitutes a “substantial” connection between plaintiff’s claim and the defendant’s forum activities.

PrescriptionThe product in question was Plavix, developed and manufactured by Bristol-Myers Squibb outside of California.  BMS was sued in California by 678 plaintiffs, of which 592 were residents of other states who had obtained the drug outside the state.  BMS moved to quash service on it by the non-resident plaintiffs.  Its affidavit in support of the motion showed that BMS is incorporated in Delaware, is headquartered in New York City, and maintains substantial operations in New Jersey.  Fifty-one percent of its 6500 employees work in New York and New Jersey.  BMS employs 164 people in R&D in California (unrelated to Plavix) and 250 sales representatives.  The development and manufacturing of Plavix did not take place in California, nor was any work relating to its labeling, packaging, regulatory approval or advertising or marketing performed by its employees in California.  California sales of Plavix constitute 1.1 percent of the company’s total nationwide sales revenues of all products.

In opposition, plaintiffs showed that over a six year period, BMS sold 187 million Plavix pills with a sales revenue of nearly $918 million.  Plaintiffs also argued that Plavix was sold to California residents pursuant to a “common nationwide course of distribution” and that the product defect and representations made about the product were common issues sufficient to justify specific jurisdiction over the non-resident defendant by non-residents who had not purchased Plavix in California.

The Supreme Court adopted the plaintiffs’ position, stating that BMS had been given “fair warning” because it conducted business in California; the injuries to the non-residents were sufficiently related to BMS conduct in California even though they did not arise directly from its conduct in California; it was not unreasonable to require BMS to litigate in California; and BMS did not offer any evidence to establish the cost of litigating in California versus other relevant forums.

The lesson of Bristol-Myers is that insurers who underwrite product manufacturers may now find themselves and their insureds embroiled in multi-party class action litigation in plaintiff friendly California, losing the benefit of tort reform measures.  Moreover, it will be imperative that defendants now mount a more aggressive defense showing the additional costs of litigating in California than in the forum states of the plaintiffs.  As the dissent suggests, the decision will increase rather than reduce multiplicity of litigation because MDL litigation is not available in state courts, and there are no mechanisms to prevent multiple class actions in different states.

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