California courts continue to find ways to exercise personal jurisdiction over out-of-state defendants, even when there is little or no dispute that the Constitution and the United States Supreme Court’s opinion in Bristol-Meyers Squibb Co. v. Superior Court do not permit it. “Resistance” is probably too strong a word, insofar as it calls up images of barricades in the streets or some other organized effort to thwart authority. Or maybe it isn’t. “Defiance” maybe? We don’t know, but whatever you call it, there is an unmistakable inclination on the part of California’s courts—including in the now-reversed California Supreme Court opinion in the BMS case itself—to hold out-of-state defendants to answer, even to plaintiffs who have no connection with California either.
This all is a lead in to a second Petition for Certiorari from the Lipitor litigation to raise jurisdictional issues in the United States Supreme Court. The issue is whether a defendant “forfeits” a perfectly valid personal jurisdiction defense by removing a case to federal court and actively litigating subject matter jurisdiction. In a case of déjà vu all over again, Pfizer, Inc. v. Superior Court, No. 19-278, involves thousands of plaintiffs from all over the country who sued an out-of-state drug manufacturer in California state court alleging injuries in connection with a prescription drug. (You can view the petition by going to the docket here and clicking on “petition.”) Following a familiar playbook, the plaintiffs sought to avoid federal subject matter jurisdiction by dividing their action into multiple actions, each with fewer than one hundred plaintiffs. They also made sure there was no complete diversity in any one complaint. And, for good measure, they sued McKesson, which has been sued in California state court thousands of times for the sole reason that it used to have its principal place of business in California, but no longer does.
This scenario raises multiple jurisdictional issues. On the one hand, this action appears to be removable to federal court as a mass action under the Class Action Fairness Act, an issue of subject matter jurisdiction. On the other hand, California courts undisputedly have no personal jurisdiction over a defendant that neither is “at home” in California nor has claim-related contacts with California. In other words, the thousands of plaintiffs from outside California had no business suing a New York company in California state court.
So what is a defendant to do? This defendant removed the case to federal court, and it preserved its objections to personal jurisdiction in Answers filed upon removal. This was clearly the correct course to take: Removing a case to federal court does not waive any Rule 12 defenses (including lack of personal jurisdiction), and Rule 12(h) allows a defendant to preserve a personal jurisdiction defense by including it in an answer.
The cases were then transferred to multidistrict litigation, where substantial proceedings took place, including motions for summary judgment and Daubert motions. But the drug manufacturer defendant made clear along the way that the removed cases were subject to remand motions, and it reserved its right to renew its motion for summary judgment in those cases at a later time. (Petition at 6-8) Eventually, the cases were remanded to the transferor district, where the Defendant again asserted its personal jurisdiction defenses and the district court acknowledged that the Defendant had not “waived any . . . defenses or arguments or issues.” (Petition at 8) In the end, the case was remanded to state court, then removed again, then remanded again. (You can read our take on the last remand order and the pending Petition for Certiorari raising issues of CAFA jurisdiction here).
It is important to note that these proceedings did not occur overnight. By the time the cases settled down in California state court, some had been pending for years. The Defendant therefore was finally in a position to challenge personal jurisdiction, which it did by way of a motion under California procedure. (Petition at 8-9)
And here is where things went sideways. The California judge denied the motion and ruled that the Defendant had forfeited its personal jurisdiction defense under federal procedure because it “had more than enough time to” file a personal jurisdiction motion while it was litigating subject matter jurisdiction in federal court. The court analogized to cases where parties litigate on the merits for multiple years and thereby waive personal jurisdiction defenses. (Petition at 9-10) After petitions in the California Court of Appeal and California Supreme Court were unsuccessful, the Defendant filed its Petition for Certiorari.
We think the Defendant/Petitioner has a pretty compelling case. There is no dispute that the California courts lack personal jurisdiction. The only issue is forfeiture, and on that point, the Petition essentially makes three points. First, the California court cannot evade BMS v. Superior Court and due process by fashioning a “forfeiture rule” purportedly based on federal procedure that has never been recognized by any federal court. Second, the Defendant acknowledged that failure to timely assert a personal jurisdiction defense can result in waiver, but not while litigating subject matter jurisdiction. It is a matter of black letter law that removing a case to federal court does not constitute consent to personal jurisdiction, and litigating motions to remand following remove should not form consent either. (Petition at 15-17)
Third, the Defendant cited the well-worn opinion in Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), which holds that subject matter jurisdiction is typically decided first, unless personal jurisdiction is also dispositive. Because the personal jurisdiction defense applied only to the non-California plaintiffs, the Defendant had no choice but to litigate subject matter jurisdiction in the MDL. (Petition at 20-23) The Defendant should not be punished by risk of forfeiture for following the preferences of federal procedure.
That makes two Petitions for Certiorari raising jurisdictional issues arising from the same set of cases, and the Defendant/Petitioner has suggested that the Supreme Court consider them on the same schedule. We will keep you posted.