Supreme Court Rules Plaintiffs Can't Sue Company Anywhere They Do Business

This past June, the U.S. Supreme Court ruled that plaintiffs cannot sue companies in a state where they may do business, but do not have significant connections to that state. What does this mean?

The case heard by the Supreme Court was Bristol-Myers Squibb Co. v. Superior Court of California (BMS). The action was brought at the state court level and included several non-California residents whose injuries did not occur in the state, but were part of a consolidated action with other plaintiffs who had similar claims against Bristol-Myers Squibb Co.

This marks the second time in a single term the Supreme Court ruled in a manner that narrows where plaintiffs can sue companies. Earlier in the term, the Court reaffirmed courts have general jurisdiction over companies where they are incorporated and headquartered, but not in other locations, which upheld the BNSF Railway Co. v. Tyrrell ruling.

Sliding Scale Test

The Bristol-Myers Squibb product liability case included plaintiffs with no connection to California, and despite the company doing business in California, the court found no direct link between its activities and the plaintiff’s claims.

California uses a litmus test to determine whether a court has jurisdiction over a defendant. The test, known as the sliding scale, looks at how significant a presence a company has in the state. If that presence is deemed insignificant, California courts have no jurisdiction. However, if the presence is significant, California courts have jurisdiction - even if there is no direct link to injuries. In the Bristol-Meyers Squibb case, according to the sliding scale test, the state had jurisdiction despite the plaintiffs not being residents because the company does substantial business in California.

The Supreme Court rejected this in an 8-1 decision, saying it “blurred the line between general and specific jurisdiction,” and called the sliding scale “a loose and spurious form of general jurisdiction” without any support. The court saw no connection between the “forum and underlying controversy,” such as an activity taking place in the state.

Since the plaintiffs had not purchased, used, or suffered their injuries in California, the Supreme Court determined the state of California had no jurisdiction, despite other plaintiffs in California making similar allegations, there was no personal jurisdiction established for non-resident claims.

Ramifications of the Supreme Court Decision

This decision has had an immediate impact on mass torts and consolidated actions. On the same day as the ruling, a Missouri state court declared a mistrial in a lawsuit involving the link between cancer and Johnson & Johnson talc products.

Now, as a result of the ruling, companies have the option of providing a new jurisdictional defense that could sideline claims even if the company waived its jurisdictional argument by not objecting at an earlier date. Additionally, any company defending claims filed against it in a state court that uses the sliding scale test could immediately challenge the court’s jurisdiction.

The Supreme Court’s ruling opens the floodgates on challenging personal jurisdiction based on use of this sliding scale test alone. It might also be possible for the companies that are defendants to use this decision as leverage in an attempt to renew issues of jurisdiction in pending cases where claims may not be directly connected to the state where the lawsuit was filed by arguing the decision clarifies any ambiguity about specific jurisdiction. This puts the claims of anyone not residing in or connected to the state where the lawsuit was filed at risk for being dismissed.

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