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Supreme Court Permits Nonresident Plaintiffs to Sue Nonresident Pharmaceutical Company in California

The California Supreme Court has determined that, consistent with the requirements of due process, California courts may exercise specific jurisdiction over Bristol-Myers Squibb Company (BMS) to adjudicate the tort claims of nonresident plaintiffs. See Bristol-Myers Squibb Company v Superior Court (Aug. 29, 2016, S221038) 2016 WL 4506107, 2016 Cal Lexis 7124.

Background

Six hundred and seventy-eight individual plaintiffs sued BMS in California, alleging that they were prescribed and ingested Plavix—a drug created, manufactured, and marketed by BMS—and, as a result, suffered a variety of injuries, such as bleeding, heart attack, stroke, and death. Eighty-six of the plaintiffs were California residents and the remaining 592 were residents of 33 other states.

BMS moved to quash service of summons on the ground that the San Francisco superior court lacked personal jurisdiction over it to adjudicate the claims of the nonresident plaintiffs, arguing that none of their injuries occurred in California and that the company is incorporated in Delaware, headquartered in New York City, and has its major research facilities in New Jersey. In addition, the research and development of Plavix did not take place in California, nor did any work related to its labeling, packaging, advertising, or marketing. In opposition, the plaintiffs submitted evidence that BMS sold nearly 187 million Plavix pills to distributors and wholesalers in California between 2006 and 2012, amounting to $918 million in sales revenue. Further, the plaintiffs noted that BMS maintains a registered agent for service of process in California.

The superior court denied BMS’s motion to quash, and BMS petitioned the court of appeal for a writ of mandate. The court of appeal denied the writ, but held that although BMS’s contacts with California were insufficient to subject it to general jurisdiction, the superior court could properly exercise specific jurisdiction over it in light of the particular claims in the case and BMS’s activities in California. The California Supreme Court granted BMS’s petition for review.

General jurisdiction

The supreme court began by considering whether the superior court could exercise general jurisdiction over BMS, which is proper when a corporation’s continuous activities within the state “have been found so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” The court noted that recent U.S. Supreme Court cases had clarified that to support the exercise of general jurisdiction, a corporation’s contacts with the forum state “must be so extensive as to render the company essentially at home in the state.”

In this case, the court found that BSM’s contacts with California—selling large volumes of its products in California, employing approximately 164 people in research and laboratory facilities and 250 sales representatives, and having a small office in Sacramento to advocate for BMS in state governmental affairs—were insufficient to meet this “at home” standard. A corporation is not subject to general jurisdiction in a state solely on the basis that its sales there are sizeable. Further, BMS’s California operations, judged in terms of the number of employees and size of its facilities, are relatively small in comparison to its overall operations, and particularly in New York and New Jersey. Although a corporation may be “at home” for general jurisdiction purposes in a state that is neither its state of incorporation nor its principal place of business, the plaintiffs have not shown that BMS’s conduct in California is “so substantial and of such a kind as to render it at home here.”

Specific jurisdiction

To determine whether the exercise of specific jurisdiction is proper, courts examine the following factors:

  • Whether the defendant has purposefully directed its activities at the forum state (purposeful availment);
  • Whether the plaintiff's claims arise out of or are related to these forum-directed activities; and
  • Whether the exercise of jurisdiction is reasonable and does not offend traditional notions of fair play and substantial justice.

The plaintiff has the burden of demonstrating facts to support the first two factors. If successful, the burden then shifts to the defendant to show the third factor, i.e., that the exercise of jurisdiction would be unreasonable. Here, the court found that all three factors weighed in favor of the exercise of specific jurisdiction.

First, BMS purposely availed itself of the privileges of conducting business in California by marketing and advertising Plavix in California, employing salespeople in California, contracting with a California-based pharmaceutical distributor, operating research and laboratories in California, and maintaining an office in the state capitol to lobby on the company’s behalf.

As to the second factor, BMS contested that the nonresident plaintiffs’ claims arise out or and are related to its California-directed activities. The court disagreed, finding that those plaintiffs’ claims did bear a substantial connection to BMS’s contacts in California because the company’s “nationwide marketing, promotion, and distribution of Plavix created a substantial nexus between the nonresident plaintiffs’ claims and the company’s contacts in California concerning Plavix.” In addition, although Plavix was not developed in California, the fact that BMS has research and development facilities in this state “provides an additional connection between the nonresident plaintiffs’ claims and the company’s conduct in California.” The court rejected the argument that the superior court lacks jurisdiction simply because the nonresident plaintiffs themselves have no connection to and were not injured in California, noting that the test focuses on the relationship between the defendant, the forum, and the litigation, and not on the residence status of the plaintiffs.

Third, the burden on BMS in litigating these claims in California weighs in favor of exercising jurisdiction because BMS would have to litigate the California plaintiffs’ claims anyway, and, although the burden of adding the nonresident plaintiffs’ claims is not insignificant, it is better than the alternative of possibly litigating the nonresident plaintiffs’ claims in 33 separate states. In addition, California has an interest in providing a forum for all the plaintiffs because “[t]o the extent that evidence of the injuries allegedly suffered by the nonresident plaintiffs may be relevant and admissible to prove that Plavix similarly injured the California plaintiffs, trying their cases together with those of nonresident plaintiffs could promote efficient adjudication of California residents’ claims.” Finally, judicial economy is served by adjudicating all the plaintiffs’ claims in one action, and the San Francisco superior court is equipped to handle mass tort cases through its complex litigation department.

For further discussion of litigating mass tort actions, see CEB’s California Tort Guide.