Suits’ Location, Aggregation to Be Probed at High Court

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By Martina Barash

The U.S. Supreme Court is poised to turn the Rubik’s cube of constitutional law governing where injured people and others can sue companies ( Bristol-Myers Squibb Co. v. Superior Court of Cal., U.S., No. 16-466, argument scheduled 4/25/17 ; BNSF Ry. Co. v. Tyrrell, U.S., No. 16-405, argument scheduled 4/25/17 ).

In oral arguments April 25, the court will hear two challenges to state courts’ authority to hear claims by out-of-state plaintiffs against corporations that are based elsewhere.

The stakes are huge, with the potential to affect the number of individual cases, the cost of products, the places where businesses invest and the burden on the judicial system, attorneys say.

When state courts overlook established rules to aggregate suits in plaintiff-friendly states, “it can remove predictability for defendants,” Professor Adam L. Hoeflich of Northwestern University’s Pritzker School of Law told Bloomberg BNA.

It can also “discourage investments or doing business in certain states and it can clog state-court dockets,” he said.

Pharmaceutical cases often have a large percentage of out-of-state plaintiffs in states that allow it, such as California, Missouri and Illinois, attorney James M. Beck said when the court granted review in January. Beck, of Reed Smith LLP in Philadelphia, represents drugmakers and is a founder of the Drug and Device Law blog.

Multistate class actions are also a target, Scott Nelson of Public Citizen in Washington told Bloomberg BNA when the court granted review. Nelson is an attorney in the public interest group’s litigation department.

And even though neither case involves asbestos, a win for the defendants, particularly in Bristol-Myers-Squibb Co. v. Super. Ct. of Cal., could break what the Supreme Court has called the “elephantine mass” of asbestos cases “into a stampeding herd of elephants,” asbestos attorney Jonathan Ruckdeschel told Bloomberg BNA.

Bristol-Myers asks whether nonresidents may proceed in California state court with product liability claims over alleged injuries from the blood-thinner Plavix, made by Bristol-Myers Squibb Co. Some 592 of them are suing alongside 86 Californians, whose claims aren’t at issue.

The other jurisdiction case cued up for the court is BNSF Railway Co. v. Tyrrell, a consolidation of two cases involving railroad workers allegedly harmed on the job.

Kelli Tyrrell sued under the Federal Employees Liability Act, alleging her deceased husband was exposed—in South Dakota, Minnesota and Iowa—to chemicals that caused a fatal cancer. Robert Nelson, a resident of North Dakota, sued under the same law over an alleged knee injury in the state of Washington. Both Tyrrell and Nelson brought their suits in Montana.

The California Supreme Court in Bristol-Myers and the Montana Supreme Court in the consolidated FELA cases said the suits could constitutionally proceed. Bristol-Myers and BNSF Railway Co. appealed, saying the courts’ jurisdiction over them in these cases was inconsistent with due process. BNSF also said the Montana high court read FELA incorrectly.

Aspects of personal jurisdiction, relating to a court’s power over the parties to a suit, are at issue in both cases.

Bristol-Myers concerns specific jurisdiction, which rests on a defendant’s in-state activities related to the particular harm alleged in the suit.

Tyrrell, by contrast, deals with general, or all-purpose, personal jurisdiction. Under Daimler AG v. Bauman, courts have general jurisdiction over defendants incorporated or headquartered in the state.

But jurisdiction in Tyrrell is under a federal statute, whereas the Supreme Court case, Daimler AG v. Bauman, involved state-law tort claims. The plaintiffs argue that distinction matters because Congress was involved.

As aspects of personal jurisdiction have shifted in Daimler and other cases in recent years, questions have come up about how other aspects fit into the new understanding. For example, Daimler has been widely viewed as narrowing general jurisdiction. How will the high court handle plaintiffs’ other means of suing corporations, specific jurisdiction?

Justices Anthony M. Kennedy, Stephen G. Breyer, Samuel A. Alito Jr. and Ruth Bader Ginsburg are the ones to watch, plaintiffs’ appellate attorney John Vail said.

Kennedy’s opinion in a 2011 case reflected a territory-based view of jurisdiction and due process, which Breyer and Alito “were slow to endorse,” Vail said.

Ginsburg, who used to teach civil procedure, has penned some of the court’s most important recent jurisdiction opinions, including Daimler.

Plavix Case

Bristol-Myers’s marketing, distribution and research activities in California provided the necessary connection to the Plavix plaintiffs’ claims to support specific jurisdiction, the California Supreme court said in a 4–3 decision.

The majority relied on California precedent using a “sliding scale” between the “intensity” of a defendant’s contacts with the state and how closely those contacts are connected to the claim. California is one of several states to use such a test.

“That is not how specific jurisdiction works,” Bristol-Myers said in briefs to the U.S. Supreme Court. Some courts have criticized the sliding-scale approach because it “unacceptably blurs the line between general and specific jurisdiction,” Bristol-Myers said.

Rather, there must be a “causal connection” between the defendant’s conduct in the state and the litigation, Bristol-Myers said.

Hoeflich, of Northwestern, agreed and told Bloomberg BNA that the Supreme Court in Walden v. Fiore “limited specific jurisdiction over corporations to cases where the corporation’s conduct targeted the jurisdiction and gave rise to the action in that jurisdiction.” Hoeflich also practices at Bartlit Beck Herman Palenchar & Scott LLP in Chicago. He’s taught in the areas of complex litigation, class actions and legal ethics, and represents major companies in complex litigation.

The Walden v. Fiore formulation is “where specific jurisdiction is supposed to be,” he said. “Once you do what the California court did in the BMS case, then essentially a large corporation can be hauled in wherever the plaintiffs want” to file suit—a result known as forum-shopping, he said.

The nonresident Plavix plaintiffs, on the other hand, argued that the “causation test” is new and shouldn’t be adopted.

“People want to have tests, bright-line tests,” Ruckdeschel, the plaintiff-side asbestos attorney, said. “And what the Supreme Court has said, over and over, is jurisdiction doesn’t work like that.”

The key concepts are fairness and reasonableness, he said. Ruckdeschel practices in Ellicott City, Md.

International Shoe Co. v. Washington, a central jurisdictional case from 1945, struggled “to define what’s fair to a corporation,” plaintiffs’ attorney Vail told Bloomberg BNA. “It’s not necessary that we treat a corporation as wholly analogous to a human for all purposes,” he said. Vail practices in Washington, D.C.

There’s also the “important question of what’s fair to plaintiffs,” he said.

“The right to go to court and seek a remedy for a private wrong is itself a fundamental constitutional right,” he said.

Federal Statute

In Tyrrell, the Montana Supreme Court allowed the worker-injury suits to go forward under FELA.

But BNSF argued that the statutory provision the court relied on for personal jurisdiction—wherever a railway company does business—is actually a venue provision and doesn’t confer authority to exercise jurisdiction over parties at all.

And even if the provision is intended to be about personal jurisdiction, it violates the due process clause of the Constitution, the company said.

Daimler made very clear that due process prohibits a state from exercising general jurisdiction over a defendant that is not at home in the state,” Hoeflich said.

But the plaintiffs argue the federal nature of the statute and the claim distinguishes it from Supreme Court cases involving state causes of action.

To the plaintiffs, the congressional grant of jurisdiction “isn’t really an exercise of state power, it’s an exercise of congressional power,” Vail said.

If the Other Side Wins..

“These cases, especially the Plavix case, will have enormous consequences for companies,” Hoeflich said. If every plaintiff who claims an injury in New Jersey can drag a company out to defend the case in Missouri or California, “that just has enormous consequences and increases the costs of the products,” he said.

“And most importantly,” he said, there’s “the ability of courts to handle what’s potentially the overwhelming workload of having everybody’s case filed in their backyard because the plaintiffs’ lawyers think the jury’s friendliest.”

But in Vail’s view, a decision for the companies in these cases would affect not just redress for injured plaintiffs but also competitive fairness in the marketplace. In previous eras, “you never had corporations so big or ubiquitous,” he said.

They can “create harms and distort markets” on a broad scale, he said.

A decision for Bristol-Myers in the California case could make some types of litigation more expensive, he said. That would mean fewer cases would be brought in smaller states. “This conservative doctrine would be a blow to rural America,” he said.

Asbestos cases tend to have multiple defendants rather than multiple plaintiffs, Ruckdeschel said. The effects of a a decision for Bristol-Myers would be significant for such cases, he said.

A single asbestos suit involving exposure in five different states would require “a minimum of five lawsuits,” he said, with different verdicts and the application of different laws, including on issues of apportionment of fault. This could lead to “game theory” situations where one defendant could have to “eat the entire verdict” and then sue other companies for contribution elsewhere.

“You end up with the exact opposite of what should happen in these cases. Tort law is designed to spread the loss among those responsible.”

Instead, the parties would see a “concentration of liability” and “the magnification of lawsuits across the country—in terms of number, in terms of burden, transactional costs,” he said.

To contact the reporter on this story: Martina Barash in Washington at MBarash@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

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