As we’ve written about before, California is a hotbed for class-action lawsuits due to our state’s plaintiff-friendly laws. Last month, however, the U.S. Supreme Court said “let’s reevaluate this before it gets out of hand” and made an important ruling regarding state court jurisdiction in lawsuits with plaintiffs from other states. In this post, we’ll explore what this means.
Two recent cases spurred this ruling: Bristol-Myers Squibb Co. v. Superior Court of California (BMS) and BNSF Railway Co. v. Tyrrell (BNSF). In each, a class-action lawsuit was brought against the company in a state court: California and Montana, respectively. Even though each company did business in the state where the case was filed, many of the plaintiffs named in the suit a) were not state residents, b) did not purchase or use the related product or service in said state, and c) did not sustain their injury there.
These factors complicate the California “sliding scale” test used for determining appropriate specific or general jurisdiction over a defendant. According to the National Law Review, California state courts determined they have specific jurisdiction only “if the company’s contact related closely to the plaintiff’s injury” if the company has an insignificant presence in the state.
However, if the company has a significant presence in the state, California courts claimed they have jurisdiction even if the “company’s contact did not relate to the injury,” meaning that if the company is headquartered in the state, California has general jurisdiction over it even if the plaintiffs reside and were injured in another state.
In the BMS case, California courts claimed specific jurisdiction over BMS because they do a substantial amount of business in California, even though many of the plaintiffs do not reside, and did not sustain their injuries, in California. It’s easy to see how this can be considered overreach. The Supreme Court agrees.
The Supreme Court’s Response
On June 19, 2017, the Supreme Court ruled in an 8-1 decision that specific jurisdiction requires a connection between the “forum and the underlying controversy,” such as an “activity or an occurrence that takes place in the forum State” and the named plaintiffs. Therefore, nonresident plaintiffs who sustain injuries outside of California did not have a valid claim against California companies and California state courts did not have proper jurisdiction over the named defendants.
What Does this Really Mean?
All this is to say, you will likely be wasting your time if you attempt to initiate or join a class-action lawsuit if you do not reside, or were not injured, in the state where the case is filed.
The ruling has already affected class-action lawsuits in other states. One Missouri suit against Johnson & Johnson (regarding their use of talc powder in their products and its alleged link to ovarian cancer) was declared a mistrial due to the fact that the plaintiffs filed the case in Missouri simply because of the state’s “history of multi-million dollar product liability verdicts, relaxed standards for admitting expert testimony, and aggressive advertising by the plaintiffs’ bar to solicit plaintiffs and influence potential jurors” there, even though the company is not headquartered there and many of the plaintiffs named have no ties to Missouri. The presiding judge declared a mistrial because it would take months to prove the state has specific jurisdiction over Johnson & Johnson.