Last week, the United States Supreme Court also heard argument in the “other” litigation tourist personal jurisdiction case pending before it – BNSF Railway Co. v. Tyrell, No. 16-405 (U.S. argued April 25, 2017) (“BNSF”) (link to transcript).  While BNSF mostly concerned statutory issues under the Federal Employees Liability Act (“FELA”), it does involve a personal jurisdiction question related to litigation tourism.  The Court considered it sufficiently related to BMS that it scheduled oral argument back-to-back with BMS (see here for last week’s post on the BMS oral argument).  Because we’re interested in personal jurisdiction as a constitutional check on the litigation tourism phenomenon, we’ve also taken a look at what went down during the BNSF argument.

Once again the United States government appeared as amicus supporting the defense.  Tr. at 1, 12-18.  It appears to us that the plaintiff in BNSF had an even tougher time before the Court than the plaintiffs in BMS – and that’s saying something.  Another perhaps notable aspect of the oral argument was that the Justices, particularly as to the defense and defense-supporting United States arguments, were a lot less engaged than in BMS.  These counsel actually argued for entire pages of transcript without being interrupted by questions.  Indeed, the defendant’s rebuttal argument in BNSF drew no questions at all, and thus the defense used only a fraction of its reserved time.  Id. at 43-44.  The entire BNSF transcript was 44 pages – 20 pages (almost 1/3) shorter than BMS.

Justice Sotomayor, the sole dissenter from the personal jurisdiction rationale in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), seemed most animated when discussing an issue that was not even before the Court in BNSF – nonconsensual “consent” to general jurisdiction by virtue of mere registration to do business in a state.  Tr. at 4-6.  We’ve written on this Bauman dodge before, and were somewhat perplexed to see it arise in a United States Supreme Court argument – until we heard from Chief Justice Roberts:  “[T]he issue . . . was not addressed below and is not before us.”  Id. at 6.  Whew!   We thought we’d missed something significant.

The heart of the plaintiff’s argument was that FELA, in provisions that spoke only to venue (it’s a peculiar statute in that it allows plaintiffs to choose to bring federal claims in state court), somehow also authorized an expanded form of personal jurisdiction that permitted litigation tourism.  We gathered from the argument that the plaintiff was a North Dakota resident claiming workplace injuries in Washington State, id. at 40 – so of course, he sued the defendant in Montana, which was neither the defendant’s principal place of business nor its state of incorporation.

Since BNSF was a statutory case, the Court was interested in whether Congress could authorize litigation tourism by statute.  The defense response was that Congress could authorize nationwide service of process allowing expanded federal court jurisdiction, should it choose to create a federal cause of action, but that Due Process would render problematic any attempt to expand state-court personal jurisdiction to accommodate litigation tourists.  Tr. at 8.  The fundamental problem with the plaintiff’s statutory argument was put most succinctly by the Assistant Solicitor General arguing for the government:

[T]here’s a strong Federal interest in not having words that don’t say anything about service of process being interpreted to in fact say something about service of process[.  W]e have a first sentence that refers to venue only in Federal courts, and then a second sentence referring to State courts.  But all it does is to clarify that there’s concurrent jurisdiction in the State courts.  And we just don’t see how you can get to conferral of personal jurisdiction in the State courts.

Tr. at 13.

Nobody, not even Justice Sotomayor, the justice most sympathetic to litigation tourism, seemed comfortable with that argument. The statutory argument was criticized by:

Chief Justice Roberts:  Tr. at 23-24, 29-30.

Justice Ginsburg:  Id. at 19-20, 31, 40.

Justice Alito:  Id. at 25-26.

Justice Sotomayor never appeared inclined to support plaintiff’s statutory argument in BNSF.  Rather, she suggested that “we could just say it [FELA §56] doesn’t apply to State courts,” id. at 37 – which was precisely where the plaintiff had sued.

So, aside from the seemingly doomed argument that FELA should be interpreted to say what it didn’t say – and apparently what no federal statute has ever provided – about personal jurisdiction/service of process, what did the argument have to say about Bauman and Due Process?

The government argued that “[i]f the Court’s decisions in Goodyear and Daimler mean anything,” it “just can’t be correct” that “a company like BNSF is subject to general personal jurisdiction in 28 or more States.”  Tr. at 14.  Justice Breyer did not “really see the difference” between Bauman and BNSF.  Id. at 38-39.  Justice Kagan tried to limit the plaintiff’s non-statutory personal jurisdiction argument to railroads being “so unique that they should be subject to general jurisdiction everywhere.”  Id. at 32.  After some hemming and hawing plaintiff agreed, id. at 34, but plaintiff seemed even more interested in a fact-specific, Montana-only exercise of Bauman personal jurisdiction.  Id. at 33, 36 (arguing that the defendant was “at home” because it had Montana “lobbyists”).  Unlike the plaintiffs in BMS, the plaintiff in BNSF was never so bold as to call for overruling Bauman.

Finally, when pushed by Justice Gorsuch, plaintiff abandoned altogether the argument that Bauman be limited to “foreign corporations.”  Id. at 41-42.

We’ve been burned making Supreme Court predictions before, but we frankly can’t see a path to affirmance for the plaintiff in BNSF.  It could well be a unanimous reversal of the Montana Supreme Court, albeit with at least one concurrence offering a different rationale (similar to Bauman).

 

The other day, the United States Supreme Court heard argument in Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (U.S. argued April 25, 2017) (“BMS”) (link to transcript).  We’ve blogged many times about the issues in Bristol-Myers-Squibb.  In BMS, the United States government, as amicus curiae, appeared in support of the defense position that personal jurisdiction did not be extend to suits in state courts brought by non-resident plaintiffs against non-resident defendants.

Here’s a description of what went down.

Justice Sotomayor, who had been the sole dissenter from the personal jurisdiction rationale in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), was seemingly hostile to the defense position.  Her initial questioning suggested that not allowing an in-state resident’s successful assertion of personal jurisdiction to supply jurisdiction for out-of-state residents who simply took the same product in their home states somehow destroyed pendent jurisdiction.  Tr. at 5-6.  As we’ve discussed before, pendent jurisdiction typically applies to consolidated claims, not consolidated lawsuits.

Justice Ginsburg (author of Bauman) rode to the rescue, pointing out that general jurisdiction, and perhaps specific jurisdiction where there was a more substantial link than just using a product, would allow plaintiffs from across the country to sue in one place.  Id. at 7.

The defense position (articulated in response to a question from Justice Kagan) was that federalism, predictability, and fairness all weighed against allowing anybody and everybody who took a product to sue in a single state with no connection to the litigation beyond the presence of other, resident plaintiffs. Fairness involved extending state-specific principles – the defense mentioned choice of law, procedural standards, such as for summary judgment, expert admissibility (Daubert), and evidentiary issues – to plaintiffs from other states who had no reason to benefit from California’s peculiarly pro-plaintiff rules.  There was also whether it was fair to have 600+ separate trials in California involving non-residents.  Id. at 10-12.  Fairness, in the Due Process context, does not allow every plaintiff in the country to go forum shopping for the “least common denominator.”  Id. at 14.

There was also the issue of predictability, as discussed in Bauman.  A company incorporating in a particular state, or having a principal place of business in a particular state, such as BMS in New Jersey, expects to be sued there by anyone with a claim.  That is not the case in every other state in the country.  Id. at 15-16.

Justice Breyer asked whether Due Process principles in personal jurisdiction could affect MDL practice and class actions. The response was that federal jurisdictional issues are different, and where federal issues are involved, the minimum contacts analysis at the federal level controls, rather than rivalry between the states, with one state potentially offering more to out-of-state litigants than those litigants’ home states.  Id. at 17-19.  Justice Ginsburg wondered if Congress could expand MDL practice to include trials, and heard that MDL practice could be reserved until that change happened, and the plaintiffs’ anybody-in-any-state could nonetheless fail Due Process, as it should.  Id. at 19-20.

That concluded the defendant’s principal argument, with only Justices Ginsburg, Kennedy, Breyer, Kagan, and Sotomayor being heard from.

Then the United States argued.

The government’s position is familiar to us – because it’s always been our position – that a state cannot recreate the same “exorbitant” and “grasping” scope of jurisdiction under the “specific” rubric that Bauman rejected under the “general” rubric as incompatible with Due Process.  Neither other in-state plaintiffs nor other in-state defendants matter, as jurisdiction is personal to each party.  Tr. at 20.  Justice Ginsburg wanted to know about a California co-defendant.  Unless they were conspiring, jurisdiction is personal to each defendant.  Id. at 21. Justice Kennedy wondered if California plaintiffs could skirt due process by trying to join an out-of-state defendant to an earlier-filed suit against a California defendant by claiming “necessary party” status.  Essentially the same answer.  Id. at 22-23.

In response to Justice Sotomayor, the government stated that, given the realities of the federal system, with jurisdiction over state-law claims determined for states individually, mass torts asserting state-law claims may well not be amenable to a single aggregated forum with all plaintiffs able to sue all defendants. Not so for federal criminal prosecutions.  Id. at 23-25.

The mention of federalism brought Justice Gorsuch forward.  He wanted to know about the implications of the California rationale on other states administering their own procedures for resident tort plaintiffs.  The obvious answer was that all states have equal interest in adjudicating conduct occurring within their borders (such as drug sales and marketing).  Id. at 25-26. Justice Kagan wanted to know whether the residence of the plaintiff or the residence of the defendant was the concern.  The government’s counsel responded that either of those states had a strong interest sufficient to support jurisdiction, with the implication that other states do not.  Id. at 26.

Justice Kagan then made an important point – that the interest of the plaintiff’s home state becomes “attenuated” where the plaintiff has abandoned his/her own state and gone elsewhere – it was “weak to say that the State has a very strong interest in protecting its own citizen that doesn’t want to be there.”  Id.  Justice Kennedy added the flip side of federalism, “State A has a very strong interest in confining State B to State B’s territorial….”  The flow was interrupted by the government’s quick agreement.  According to the Justice, states are limited territorially, whereas the federal government is not.  Id. at 27.

Justice Breyer then had a tall order − asking for the government’s “solution to mass torts.” Id. at 28.  The government’s position was that state-law mass torts can be brought according to the limits of general jurisdiction, as can MDLs.  If a “particular” mass tort is not being adequately handled by state law, Congress could step in.  Id.  Justice Ginsburg asked if the government was arguing that Congress could “create a nationwide claim.” Id. at 29.  The government agreed that Congress had that prerogative in the mass tort field.

Justice Alito asked the final question of the government, asking how it would “phrase the rule” being sought.  The government’s response:

[T]he Court could simply say in this case that for purposes of specific jurisdiction, when we’re talking about conduct that arises out of . . . activity within the forum, there has to be something that’s connected to the claim, some causal connection between the individual claim . . . and the forum, the parties in the forum.

Tr. at 30.

Then it was time for the plaintiffs to argue.

Plaintiffs asserted four bases for personal jurisdiction: (1) the defendant exploited the California market; (2) litigation in California did not create significant additional burdens on the defendant, which would be defending litigation there in any event; (3) a governmental interest in aggregating mass torts.  Counsel didn’t get to four.  Id. at 30-31.

The idea of a governmental interest in aggregating mass torts in a single state stuck in a lot of craws. Justice Kennedy wanted to know which state had that interest.  Justice Ginsburg opined that single-forum aggregation was “impossible” as long as plaintiffs get to choose where to sue.  Id. at 31-32.

Actually, plaintiffs did get to four, only several pages later. The fourth being the presence of a California defendant as an alleged nationwide distributor.  Id. at 32-33.

However, as Justice Kagan pointed out, the California distributor was not common to all plaintiffs. Plaintiffs had to admit that it was “impossible” to trace the distribution of any given individual’s pills.  Id. at 33.  That meant that the involvement of a California distributor was not a case-specific fact, but only of general significance.

Plaintiffs tried to respond to Justice Ginsburg, arguing for an interest in “allowing the litigation to be centralized,” which they asserted was preferable to litigation in multiple states.  Justice Kennedy found that statement to be “a very patronizing view of federalism” that ranked some states (such as California) over others.  “[T]hat’s not the idea of the Federal system.  The Federal system says that States are limited.” Id. at 34.  Chief Justice Roberts, and Justices Kennedy and Ginsburg agreed that plaintiffs’ reliance on the Keeton libel case was not well taken because that case involved in-state injury, and even then was “peculiar to” or “sui generis” in libel cases.” Id. at 34-36.

Interrupting plaintiffs’ explanation of why a libel rule was pertinent, Justice Kagan looked to the other side of the “v.”

Well, how about the interest of the State that Bristol-Myers resides in? In other words, they might have an interest in not having their citizens hailed [sic] into court against their will in another part of the country.

Tr. at 37. Plaintiffs disagreed and attacked the defendant’s suggestion that plaintiffs not wanting to sue in their own states could bring suit in New Jersey.

That answer led Justice Breyer to expound on the differences between general and specific jurisdiction, whereby defendants could be sued in states where they actually caused the plaintiff’s harm, but not in states where they did not. Jurisdiction thus depended on which states had a “special federalism interest” – a defendant’s “home” state having such an interest.  Id. at 37-38.

Plaintiffs responded that New Jersey as a forum meant that plaintiffs there were not suing in their home states, which overlooked the fact that they always could sue in their home states.  Plaintiffs were more interested, however, in highlighting their joinder of a California defendant.  Justice Gorsuch wasn’t impressed, finding that to be too “fact-specific” when the question before the Court was “whether we have some sort of causation requirement or permit this sliding scale business that California engages in.” Id. at 38.  He thought plaintiffs were attempting to “collapse” the prongs of “purposeful availment” and “fairness,” removing all the “bite” from the former – which “suggest[ed] some problem doctrinally” with the plaintiffs’ position. Id. at 39.

Plaintiffs rejected any causation requirement, asserting that they only needed to show “continuous and systematic exploitation” of the market and that each claim be “on the same operative facts.” Id. Justice Kagan was skeptical:

[T]hat’s like saying . . . that the claim relates to another claim that relates to contacts with the forum. . . .  I’m missing what the relationship is between an Ohio plaintiff’s claim and the defendant’s contacts with the forum that doesn’t go through another claim.

Tr. at 39. Justice Kagan thought that specific personal jurisdiction involved claims that arose from the defendant’s contacts with the state in that particular case, not on some general basis.

Plaintiff’s response that “the relevant contact is the nationwide activity” of marketing the drug.  Id. at 40.  Because the activity was national, any state in the country, such as California, could equally adjudicate the “same conduct.”  Id. at 41.  That, and don’t forget the California defendant that plaintiffs decided to sue.  If plaintiffs can find an in-state defendant to sue in whatever jurisdiction they choose, that state can assume jurisdiction over any plaintiff’s similar claim, wherever in the country that plaintiff may be located.  Id. at 41-42.

Justice Ginsburg returned to the issue of class actions – could this be a class action, and if so where could it be brought. Plaintiffs’ answer was California, because of the California defendant.  Id. at 42-43.

Plaintiffs then tried to make some hay about there being a “special master” for cases across the country.  Id. at 43-44.  However, they appear to concede that this “master” was “best regarded as Federal,” so that didn’t help much with their state-law arguments.  Id. at 44.  That concession led Justice Breyer to suggest that the “answer” to this “terrible problem for mass torts” is to “[b]ring your case in Federal court.”  Id. at 44-45.  “[T]he solution to this great mass tort problem is that’s what Federal courts are for.”  Id. at 45.  However, as Justice Ginsburg pointed out “there’s no complete diversity” since plaintiffs saw fit to join a California defendant.  Id. at 46.  However, plaintiffs “could redesign the case” to fix that problem.  Id.

Plaintiffs, of course don’t want to be in federal court, and did what they did in BMS specifically to avoid that.  So they effectively abandoned their efficiency arguments when federal court was the alternative and argued that just because there was a more efficient way didn’t mean their way violated Due Process.  “[Y]es, there are other ways to do it, but that doesn’t make the way we are doing it unconstitutional.  What the Court has talked about here is minimum due process.”  Id. at 47.

Chief Justice Roberts then changed the subject, looking for a “simple” jurisdictional rule.  Id.  A sliding scale, suggested in Plaintiffs’ papers, where some percentage of out-of-state plaintiffs passed muster, whereas a smaller (unstated) percentage would not, would be hard to administer.  Plaintiffs’ response was that everything should be decided “case-by-case” and Due  Process imposed no “categorical rule.”  Id. at 48.  The Chief rejoindered, “but you’re articulating a rule that requires businesses trying to figure out where to do business and plaintiffs where to sue,” so what was the line? Id. Plaintiffs were unable – or unwilling − to give one.  Justice Kagan then took Plaintiffs’ reluctance to its logical conclusion:

[O]n your theory, it could be zero California plaintiffs, because . . . [y]ou told me . . . that an Ohio citizen’s claim arises out of the contacts in California is because the contacts in California are really nationwide contacts. And if that’s so, it’s met regardless of whether there are any California plaintiffs are not.

Tr. at 50. “Right,” Plaintiffs agreed.  Id.

Perhaps sensing that he had gone too far, Plaintiffs’ counsel started to backtrack, but Justice Sotomayor wouldn’t let him.  She asked for Plaintiffs’ definition of “relating to.”  Id. at 52.  Getting the expected definition, which involved only the “same conduct,” without any causation requirement, that led Justice Sotomayor to comment, “[s]o is that a yes to Justice Kagan’s question about it wouldn’t matter if there were no California plaintiffs?”  Id.  Plaintiffs’ response was that the first prong of Due Process (fairness, we think) would be satisfied, but not the reasonableness prong.  Justice Gorsuch followed up:

[If you don’t need a single plaintiff to satisfy the first prong of the due process inquiry, again, what function does that first prong have left to do?  Why doesn’t it all just run into the second fundamental fairness test?

Tr. at 53.  After some word salad, Plaintiffs got to their basic point – they were seeking a redefinition of Due Process – apparently a return to Pennoyer v. Neff, 95 U.S. 714 (1877), so that California could adjudicate claims against any defendant, to the extent that the defendant had property in the state.  Thus, they asked that both Bauman and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), be overruled.  Tr. at 53–54.

Notwithstanding these arguments, Plaintiffs denied that they were trying to accomplish through specific jurisdiction what Bauman had – in the middle of the case – eliminated under the rubric of general jurisdiction.  All well and good, Justice Breyer thought, but what is the one-sentence basis for personal jurisdiction in this case?  The answer, “You’re already here on this claim, and there is nothing unfair about having you . . . with respect to another plaintiff, because that plaintiff could quite clearly get you estopped.”  Id. at 56.  Justice Breyer summed it up, “[s]o once I’m here, I can now sue him.”  Id.  Plaintiffs then discussed “nonmutual offensive collateral estoppel.”  Id. at 57.

Chief Justice Roberts did not seem convinced.  “[T]he same thing’s going to happen in every other State.  I don’t see that it increases the efficiency at all.”  Id.  Plaintiffs responded by returning to bootstrap argument – that because we chose to join a California defendant, that gave California a leg up over any other state.  Id. at 58.  After further discussion of MDLs, Plaintiffs finished their argument by asserting their maximalist position − restoring Pennoyer, at least as an alternative basis of jurisdiction:

It doesn’t seem unfair to me to say his clients did almost a billion dollars’ worth of business in the State of California. They have enormous assets that they have placed in the State.  That they could be held liable up to the extent of those assets is not a violation of due process.

Tr. at 60.

In rebuttal, defendant pointed out that joinder of the California defendant was a red herring, since Plaintiffs admitted they could not prove that defendant distributed any particular plaintiff’s medication.  It is “plainly unconstitutional to exert [sic] jurisdiction over one defendant based on the activities of another.”  Id. at 62.  An out-of-state defendant could be liable to actual California residents for any injuries they suffered – for the entire $918 million in sales (Plaintiffs’ “almost one billion”), but those in-state injuries don’t confer jurisdiction in other, distinct cases with different, non-resident plaintiffs.  In response to Justice Sotomayor’s question, the defense clarified that it didn’t matter who distributed any particular pill in California, the defendant’s manufacture of then was what established specific jurisdiction as to in-state residents.

The defense pointed out that, under CAFA, federal jurisdiction was already available.  The reason these claims were in state court was that Plaintiffs deliberately structured them to avoid CAFA, by “filing less than a hundred claims in each action.”  Id. at 63.  So Plaintiffs themselves brought about the inefficiency of which they complain.  Finally, the defendant ended with a plea for “business predictability.”  Id. at 64.

What do we think?  Predictions are always dangerous, particularly if they involve the future.  However, we sensed no groundswell on the Court to overturn decades of personal jurisdiction precedent and return to Pennoyer.  In fact, we don’t think that the lineup will be much different from Bauman – which was an 8-1 decision from 2014.  Eight-1 decisions just aren’t overruled that soon after being decided.  The Plaintiffs’ efficiency arguments are undercut by their original forum-shopping.  Their fairness arguments are undercut by the fact that every plaintiff could sue in his or her home state, or if aggregation were important, where the defendant is “at home.”  The California court’s mid-course correction from general to specific jurisdiction after Bauman was decided does look like a “backdoor” move to avoid that precedent – which Plaintiffs alternatively seek to overrule.  Our gut tells us that the votes are there to reverse, perhaps with a statement like that in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011), that Congress can act to federalize mass torts (like it did interstate tort class actions under CAFA) if it so chooses.

In any event, we’ll know if we’re on target – or just all wet – in a couple of months at the most.

Charges of discovery abuse get thrown around frequently in product liability litigation.  We have not done a scientific survey, but we guess that such charges are levied against the manufacturer defendants more often than against individual plaintiffs.  For one thing, seeking burdensome discovery, and then discovery on discovery, has been in the product liability plaintiff game plan for a long time.  There also tends to be more discovery that a defendant could produce—and, therefore, be accused on wrongfully withholding—than a plaintiff could produce.  There is also the practical consideration that large manufacturers tend to have the financial wherewithal to pay fees when ordered and contingency plaintiffs do not—although the lawyers who front the money for those plaintiffs and make the decisions about how to proceed in discovery typically do.  While there are occasions where courts require plaintiffs and their lawyers to pay substantial defense costs because of bad conduct in discovery or in the litigation more broadly, an argument about how to calculate fees to be awarded for discovery abuse is something that we generally hope to avoid.  It is not quite up there with arguing about the maximum acceptable ratio of punitive to compensatory damages that can be awarded, but it still makes us a little uncomfortable.

The Supreme Court’s decision in Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. __ (2017), slip op., involves a very large award of fees based on the district court’s conclusion that the manufacturer defendant in a product liability case had intentionally withheld important internal testing documents.  The plaintiffs did not learn about the documents until after they had settled, when a reference appeared in a newspaper article about another similar case.  Because the case had resolved, the late application to shift costs and fees appealed to the court’s inherent authority.  Using that authority, the court not only determined that the defendant had engaged in bad faith discovery for years, but that it should pay the plaintiff $2.7 million for all costs and fees since the initial “dishonest discovery response.” Slip op. at 3.  It specifically determined that egregious conduct by a party negates the typical requirement that fees be limited to those caused by the sanctionable conduct. Id. As a back-up in case the Court of Appeals reduced the award, the court determined that the costs and fees excluding what plaintiffs estimated they incurred in pursuing other defendants and in proving medical damages, would be $2 million. Id. at 4.  (We find the whole concept of the fees incurred in the context of a presumably contingency fee representation somewhat bizarre.  Did the plaintiffs’ lawyers actually charge more than $2.7 million in costs and fees to their clients when the proceeds of the settlement(s) were divided up?)  The Court of Appeals affirmed the full amount and the Supreme Court granted cert.

The Haeger Court started by distinguishing between sanctions that compensate and sanctions that punish.  The latter can only be awarded if the trial court provides the “procedural guarantees applicable in criminal cases, such as a ‘beyond a reasonable doubt’ standard of proof.” Id.at 6 (citation omitted).  (As an aside, we are not sure that each state requires such a standard of proof when punitive damages are offered, so maybe this Court would be strict in its evaluation of punitive damages.)  “When (as in this case) those criminal-type protections are missing, a court’s shifting of fees is limited to reimbursing the victim.” Id. Damages to reimburse must have been caused by the sanctionable conduct, not merely come after it started.

The court’s fundamental job is to determine whether a given legal fee—say, for taking a deposition or drafting a motion—would or would not have been incurred in the absence of the sanctioned conduct. The award is then the sum total of the fees that, except for the misbehavior, would not have occurred.

Id. at 7-8 (citation omitted).  The court has some leeway in making large sanction award as long as the touchstone is causation.  A plaintiff can be hit for all costs of a defending case initiated in “complete bad faith,” such as we have seen relatively recently. Id. at 8.  Sanctions can also be based on the court’s assessment of whether failure to disclose “evidence fatal to its position” affected the timing (but not amount) of settlement. Id. at 8-9.

In Haeger, the trial court did not apply a but-for causation test to its damages calculation, so it will have to do it over with the right standard (unless it determines that there was some sort of waiver).  While we do not know what the amount of the sanction will be on remand, we do have an inkling that the damages imposed for discovery misconduct will tend to be less if the Haeger standards are followed in other cases.  In a case where a fundamental lie by the plaintiff—claiming to have used the defendant’s product, claiming legal authority to initiate a suit, claiming no knowledge of the injury or its cause until shortly before bringing suit—caused a case to be brought or stick around, some bold judges can still impose significant sanctions following Haeger’s principles.

 

The Defendant/Petitioner has filed its merits brief in the U.S. Supreme Court in BMS v. Superior Court.  This is the case where the California Supreme Court expanded specific personal jurisdiction beyond recognition by basing specific jurisdiction on a pharmaceutical company’s forum contacts involving different products and people other than the plaintiffs.  We wrote about the opinion and its problems here, here, and here, and the opinion came in at number one on our 2016 worst ten list.

As expected, the Petitioner pharmaceutical company has put forth compelling arguments that the California Supreme Court’s version of specific jurisdiction runs against binding precedent and is an all-around bad idea. The Petitioner is also joined by a number of amici, most notably the United States of America.  (You can view all the briefs on the SCOTUSblog here.)  If we have been critical of the Solicitor General in the past, we will voice no concern this time around.  The SG hit the nail on the head, and the United States’ brief reinforces the Petitioner’s very strong arguments—and adds another, which we will get to in a minute.

First, the briefs. The general thrust of both briefs is that the California Supreme Court’s “sliding scale” approach to specific jurisdiction impossibly contradicts binding precedent.  A court simply court cannot base specific jurisdiction on a defendant’s forum contacts involving other individuals and other products, no matter how intense those contacts are.

For the Petitioner, it comes down mainly to one concept—proximate causation. That is to say, for a claim to “arise from or relate to” a defendant’s forum contacts, the defendant’s activities in the state must be a proximate cause of the plaintiff’s lawsuit.  Take, for example, this opening salvo:

The [California Supreme Court] concluded that Bristol-Myers could be haled into California on respondents’ claims merely because Bristol-Myers sold Plavix to other persons and developed other products in the State.

            That is not how specific jurisdiction works.  Since International Shoe Co. v. Washington, 326 U.S. 310 (1945), this Court has made clear time and again that “specific or case-linked” jurisdiction requires a causal connection between the defendant’s forum conduct and the litigation. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).  That bedrock requirement ensures that a common connection links the defendant, the forum, and the litigation; that States do not assert jurisdiction over matters occurring and directed entirely outside their borders; and that any litigation to which a defendant is subject is a direct and foreseeable consequence of its in-state activities.  Courts cannot dispense with this causation requirement because a defendant has wide-ranging contacts with a State.  Only general jurisdiction allows that, and then only where the defendant is at home.

Petitioner’s Br. at 2. This is (or at least should be) an uncontroversial description of specific jurisdiction, and the Petitioner draws from it that specific jurisdiction requires a “causal connection” between the defendant’s forum contacts and the plaintiff’s claims. Id. at 14.

Continue Reading Solicitor General Urges Supreme Court to Reverse California’s Ill-Conceived Version of “Specific Jurisdiction”

When we heard about Judge Neil Gorsuch being nominated for the United States Supreme Court, our first move was to enter his name in Westlaw along with the term “preemption.” That’s the constitutional doctrine most important to our medical device, generic drug, and (unfortunately to a lesser extent) innovator drug clients.  It’s also a doctrine more likely to get less attention in what promises to be the upcoming brouhaha.

By far the most important Gorsuch preemption decision is Caplinger v. Medtronic, Inc., 784 F.3d 1335 (10th Cir. 2015), cert. denied, 136 S. Ct. 796 (2016), the very favorable PMA medical device preemption decision that we discussed previously here and named as our #2 best case of the year for 2015.  We’re not reprising those posts here.  Rather, we’re examining Caplinger for what it might tell us about Judge Gorsuch’s broader views of FDCA preemption.  His dissatisfaction with the Supreme Court’s tortured approach to express preemption in medical device product liability cases is very clear.

Caplinger begins with the strong statement that, in enacting the Medical Device Amendments, Congress “[e]xercis[ed] its authority under the Supremacy Clause” in enacting 21 U.S.C. §360k(a). 784 F.3d at 1336.  Before looking at relevant Supreme Court authority, Caplinger comments:

At first glance the answer to this appeal might appear easy enough.  Section 360k(a) preempts “any requirement” imposed by states on manufacturers that differs from or adds to those found in the FDCA.  Given this expansive language one might be forgiven for thinking all private state law tort suits are foreclosed.  After all, a “requirement” usually means a request, need, want, or demand.  And an adverse tort judgment seems to involve just that: a demand that a defendant appear to answer for its conduct and pay damages for failing some state law duty.

Id. at 1337 (dictionary citation omitted).  A string citation about the lower courts’ “struggles” to make sense of medical device preemption followed.  Id. at 1337-38.

The problem was, when the Supreme Court got involved, rather than interpreting Congress’ “expansive” preemptive language according to its terms, the Court “issued a number of opinions that embody ‘divergent views’ about the proper role of the MDA’s preemption provision, a fact that has yielded considerable ‘uncertainty’ among the lower courts.”  Id. (citation omitted).

Continue Reading Gorsuch Looks Pretty Good On Preemption

The United States Supreme Court today granted certiorari in Bristol-Myers Squibb Co. v. Superior Court.  Here is a link to the order.  The California Supreme Court decision in this case was our worst case for all of 2016.  Here is our description of what the Supreme Court has just agreed to review:

Bristol-Myers-Squibb v. Superior Court, 377 P.3d 874 (Cal. 2016). Ultimately (and fortunately) there was not much contest for the worst drug/device product liability decision of the year.  The highest court of the largest state in the country – check.  Direct defiance of United States Supreme Court precedent on a significant constitutional issue – check.  Significant impact on the litigation of mass torts – check.  In Bauman, the Supreme Court condemned “exorbitant exercises” of general jurisdiction that do not “permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.”  Such “unacceptably grasping” “[e]xercises of personal jurisdiction [are] so exorbitant” that they “are barred by due process.”  The paradigm of such overly “grasping” jurisdiction is that which “would presumably be available in every other State in which a [defendant’s] sales are sizable.”  So the California Supreme Court promptly fashions a theory of “specific” jurisdiction that allows masses of plaintiffs, anywhere in the country, to sue a drug company (and presumably any other large corporation), as long as one Californian (or, here, 86 of 678) is suing over the same conduct.  The reason?  Because the defendant does significant general business in California.  If your reaction is that BMS simply shifted the pre-Bauman “continuous and substantial” jurisdiction standard from general jurisdiction to specific jurisdiction, you would be right.  We haven’t seen such blatant defiance of Supreme Court precedent in our bailiwick since the First Circuit in Bartlett (2012-1), and that one headed up our bottom ten, too.  Here’s hoping for a similar result in the Supreme Court.  We chronicled California sliding to the bottom of the slippery slope here and here.

If our side wins this, then we’ll see a significant reduction in both the size and reach of litigation in all those places where we don’t want to be. We’ll be following this closely.

We’ve always been bothered by the presumption against preemption – so much that this blog’s first major substantive post was on that subject.  Even before that, back in the Bone Screw days, we remember the presumption against preemption accompanying the death of express preemption for 510(k) medical devices in Lohr.  In Lohr, the presumption was used as a narrowing principle of statutory construction: “[W]e use[] a presumption against the pre-emption of state police power regulations to support a narrow interpretation of such an express command.”  Id. at 485.  Then along came Riegel v. Medtronic, Inc., 552 U.S. 312 (2008), which (as we pointed out at the time) upheld preemption of pre-market approved medical devices under the same statutory provision with nary a peep about any preemption-busting presumption.  Nonetheless, even after Riegel, some lousy circuit court decisions still invoked the presumption as a way of poking holes in PMA preemption, most notoriously the en banc Ninth Circuit in Stengel v. Medtronic Inc., 704 F.3d 1224, 1227-28 (9th Cir. 2013), which fawned over the presumption at some length before deciding that a duty to provide information to a governmental agency wasn’t any different than a bog standard product liability duty to warn.

The presumption also came up in the context of the Vaccine Act, where one court (discussed here) sought to nullify statutory preemption by latching onto a statement in Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005) (a non-FDCA case), about there being “a duty to accept the reading [of a statute] that disfavors pre-emption,” even where there are other equally “plausible” interpretations. Id. at 449.  That view was shot down by the Supreme Court in Bruesewitz v. Wyeth LLC, 562 U.S. 223 (2011), which interpreted the Vaccine Act’s preemption clause in a pro-preemption direction with nary a mention of the erstwhile adverse presumption – something else we mentioned at the time.

Then along came PLIVA v. Mensing, 564 U.S. 604 (2011), where four justices found, if anything, a presumption in favor of presumption, id. at 621-23 (viewing the Supremacy Clause as a constitutional “non obstante” provision), four justices disagreed, and one didn’t take a position.  Mensing, of course, was an implied preemption case.

For these reasons, we speculated a little over a year ago whether the presumption against preemption might be dead.  Then a little later, we thought we might be wrong.

Turns out we’re half right.

Continue Reading The Demise of the Presumption Against Preemption in Express Preemption Cases

We can’t stand no-injury class actions – brought by plaintiffs who allege only that “I got exactly the product I paid for, and wasn’t hurt, but for X reason I paid ‘too much’ for it.” Such litigation is a waste of time and money, and is inevitably driven by class action lawyers looking for fees, not by any real injury, which is why they’re called ‘no injury” to start with.  We see them in our sandbox, mostly in connection with third-party payor actions, although some FCA cases also spout similar damage theories.  They’re usually based on some sort of technical violation of the FDCA.  But our clients are hardly the only defendants burdened by this kind of senseless litigation for litigation’s sake.

Statutory violations – otherwise not causing harm to anyone – are widely asserted as the basis for classwide relief in many areas of the law. Such violations were at issue in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), decided last month. Spokeo came to the Court on the question of whether certain alleged violations of the Fair Credit Reporting Act (“FCRA”) could suffice to create the Article III standing needed to proceed in federal court.  The Court gave the defense community some relief, at least rhetorical, from no-injury class actions – but ultimately remanded the action without making a definitive ruling on the claims before it.

In a nutshell, sufficient for our purposes here, FCRA imposes penalties for (among other things) false reporting of credit-related information. The defendant, Spokeo, operated an internet search engine that, for a fee, allowed anybody to conduct web searches on anybody else.  136 S. Ct. at 1546.  Given that the Internet (present company excepted) often seems to be a giant garbage can, the plaintiff claimed that some of the information about him was false.  Since the information on file was (or could be) used for determining credit, he brought a FCRA class action.  Id.   He sought statutory damages ($100-$1000 per “violation”), without any showing that he had ever actually been denied credit.  Id.  The district court dismissed for lack of standing, but the court of appeals (the Ninth) reversed.  Id.

Continue Reading Spokeo – Half a Loaf, Maybe More, from the Supreme Court

Today’s guest post is courtesy of Reed Smith’s Lindsey Harteis. She’s been following the big-deal UHS v. Escobar False Claims Act that the Supreme Court could decide any day now (or could wait until the end of June), which involves the existence and (perhaps) extent of the so-called “implied certification” theory of FCA liability.

As always our guest posters deserve all the credit, and any blame, for the contents of their posts.

Finally – be sure to read the IMPORTANT ANNOUNCEMENT at the end of this post. DDLaw blog is getting ready to move, and that means you’ll have to resubscribe to continue getting our posts. But don’t worry, it’s easy.

******************

We spent this past weekend chasing our ten-week old Samoyed puppy around the backyard, where he ventured “down in the weeds” more than a few times. This caused the OCD in us to go over him multiple times with a fine-toothed comb: We reasoned that he was bound to pick up some ticks. Lucky for us, he didn’t. But it got us thinking that when courts go down in the weeds like our dog did, they are bound to pick up a few nasty buggers themselves. In the oral argument for the appeal in United Health Services v. Escobar, 780 F. 3d 504 (1st Cir. 2015), the Court definitely took a run through the weeds. (We blogged briefly on the case here). We’re taking our fine tooth comb through the oral argument to look for ticks, and we fear we’re bound to find in this ruling another “corpus juris festooned with various duties.”

That’s a quote from a Justice we missed dearly while listening to the oral argument in this case. Justice Scalia used it in his concurring opinion in Skilling v. United States, 561 U.S. 358 (2010), which limited a fraud statute in the criminal context due to vagueness and via the 5th Amendment Due Process route.

Skilling reminds us of United Health Services for a couple of reasons: (1) It dealt with defining the contours of a sort of fraud – honest services fraud – for which the lower courts took an expansive view that wasn’t foreseeable based on the plain language in the statute; (2) Scalia was accusing the Courts of Appeals of invention of law rather than interpretation in their rulings on what constituted honest services fraud; and (3) the case involved a fusion of Restatement and black letter law in an unrelated area (Agency and Trusteeship) but was a criminal case.

Continue Reading Guest Post − Implied Certification: An Eradicated Pest or Here to Stay?

Earlier this month the United States Supreme Court agreed to hear Universal Health Services, Inc. v. United States ex rel. Escobar (No. 15-7), in which the Court will decide whether a False Claims Act claim can succeed under the so-called “implied certification” theory, and if so whether that theory goes beyond situations where compliance is an express precondition to payment.  We’re not FCA lawyers, but other folks at Reed Smith are, so rather than sorting through all this ourselves, we’re linking (a first for us) to a Reed Smith client alert that has what we think is a good explanation of why this case – and this FCA theory – is important to our clients and to our readers generally.