A favorite strategy among class-action lawyers is to find a consumer-friendly jurisdiction and then file as many lawsuits there as possible. The new cases often involve consumers from around the country. In a recent decision, the United States Supreme Court all but ended that tactic.
The decision, Bristol-Myers Squibb v. Superior Court, dealt with a nationwide class of consumers who bought Bristol-Myer’s blood-clotting drug Plavix, which allegedly harmed them. All sides agreed that the California class members could properly sue in that state. The question the Supreme Court had to answer was whether the U.S. Constitution permits residents of other states to sue in California over those same injuries. In an eight-to-one ruling, the Supreme Court said no.
The problem with California courts exercising jurisdiction in that situation, Justice Samuel Alito wrote on behalf of the majority, is that Bristol-Myers did not have a sufficiently strong connection to that state to justify being haled into court by out-of-state parties. Example of places that could properly exercise that jurisdiction, Alito noted, were those states in which Bristol-Myers was headquartered or incorporated.
In her dissenting opinion, Justice Sonia Sotomayor aptly summarized the likely effects of this holding. “[T]he upshot of today’s opinion,” she predicted, “is that plaintiffs cannot join their claims together and sue a defendant in a state in which only some of them have been injured.” That obstacle will “eliminate nationwide mass actions in any State other than those in which a defendant is essentially at home,” she opined.
What lessons should multi-state companies take from this decision? First, they should make sure the states in which they are incorporated and maintain their principal places of business have laws that favor their interests. If not, they should find states that do. Second, it is not clear whether the Supreme Court would reach the same decision if this lawsuit had been filed in federal court, but chances are strong that it would. So this line of reasoning will likely also apply to federal lawsuits as well. Third, even if consumers now will have a harder time bringing nationwide class actions, don’t forget about coordinated actions among law-enforcement agencies, which is called swarming. Groups of state attorneys generals, for example, often band together against common targets, like Ocwen Mortgage Servicing, and are normally very successful in forcing companies to pay fines.