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California Supreme Court to Hear Drug Company Challenge to Personal Jurisdiction

California Supreme Court to Hear Drug Company Challenge to Personal Jurisdiction

by Leslie Brueckner
Senior Attorney

One of the first things I learned in law school was that a corporation’s “continuous and systematic” economic activities in a particular state were sufficient to subject the company to personal jurisdiction in that state. That’s what the U.S. Supreme Court held way back in 1945 (in everyone’s favorite civil procedure case, International Shoe). And that that remained essentially undisturbed for over 70 years.

From the plaintiffs’ perspective, that has made it possible to sue most large, national companies in every state of the union. Unless a plaintiff named the wrong company as a defendant, most multi-state companies conceded personal jurisdiction in every state because it made no sense to fight a losing jurisdictional battle.

International Shoe’s teaching has also made it possible for resident and non-resident plaintiffs to consolidate their claims in a single lawsuit against a common defendant, enabling them to join forces in a common cause.

In January 2014, however, the United States Supreme Court threw a wrench in the works when it decided Daimler AG v. Bauman, a case that gave corporations a brand-new defense that they are now employing with great gusto in courts across the country: lack of personal jurisdiction.

In case after case, corporate defense counsel are asserting, based on Daimler AG, that their clients can only be sued (1) in the state where the violation occurred; or (2) the state where the corporate entity was either headquartered or incorporated. The corporations are often winning these jurisdictional battles, forcing plaintiffs out of the court of their choosing—or out of court altogether.

But the jury is still out in a lot of jurisdictions, including California, where the California Supreme Court is poised to decide the precise scope of Daimler AG in a case involving a prescription pharmaceutical drug used to prevent blood clots following a heart attack or stroke.

The specific issue in Bristol-Meyers Squibb Company v. Superior Court for the County Of San Francisco is whether California courts have personal jurisdiction over a drug company (Bristol-Myers Squibb [BMS]), that is not headquartered or incorporated in the state.

BMS manufactures and sells a drug—Plavix—that allegedly increases the risk of heart attack, stroke, blood disorders, and death. And if BMS succeeds, this case could greatly restrict the ability of injury victims to take companies like them to court in California.

A host of pro-corporate amici have filed briefs in support of BMS, including the American Tort Reform Association, the United States Chamber of Commerce, and the Washington Legal Foundation. Last week, Public Justice filed our own amicus brief, focusing on one of the key issues in the case: whether the lower court correctly found specific jurisdiction based on BMS’s substantial contacts with California and the existence of similar claims by California residents.

The California Court of Appeal held that, although California could not exercise general jurisdiction over BMS because the company was not “at home” in the State, California could exercise specific jurisdiction because of the company’s substantial business activities in California (including the sale of more than $1 billion worth of Plavix to Californians) and the existence of similar claims by California residents.

We think the Court of Appeal got it exactly right. At bottom, specific jurisdiction is about fundamental fairness: is it fair for the defendant to be sued in the forum of the plaintiffs’ choosing?

In this case, the answer has to be yes, given that the company has sold over $1 billion of Plavix to California residents and maintains a robust physical presence in California and the claims concern the same product that BMS markets and sells in California. When you add the fact that BMS has registered to do business in California and has appointed an agent for service of process in the state, it is hard to imagine how a finding of personal jurisdiction could possibly offend due process.

BMS nonetheless complains that, under the lower court’s approach, “California [c]ould be seen as a prime destination for product liability litigation.” That may be true, but it’s no reason to find a lack of jurisdiction: If a company chooses to make California a “prime destination” for its business activities, then it should expect to be sued there as well. It’s that simple.

Public Justice took on this challenge because, in this case and many others, corporations are attempting to limit injured plaintiffs’ access to justice by advocating such a narrow reading of Supreme Court precedent as to effectively deny injury victims access to state courts. Hopefully the California Supreme Court will deny BMS’s challenge and grant these plaintiffs the access to justice they deserve. Due process demands nothing less.