Three Little-Noticed Wins for Corporations at the Supreme Court

Some class-action plaintiffs will have to find less-friendly courts for their lawsuits.

The Supreme Court wrapped up its 2016–17 term this week, with decisions on two high-profile cases on religion and gay rights, and the announcement that this fall it will hear arguments regarding President Donald Trump’s 90-day ban on immigration from six mostly Muslim countries, which it partially revived in the meantime.

For corporations threatened by lawsuits, three other, less-noticed rulings handed down in recent weeks may prove to be no less important, at least for their bottom lines. The trio of decisions place new limits on “forum shopping,” a longstanding practice among plaintiffs’ lawyers who seek out jurisdictions viewed as liberal or pro-consumer. In effect, the high court tilted the scales of justice toward corporate defendants. 

The rulings, which were either unanimous or nearly so, provoked an ecstatic reaction from business interests. “For too long too many lower courts have encouraged litigation tourism,” Tiger Joyce, president of the American Tort Reform Association, a Washington-based, corporate-supported advocacy group, wrote via email. He added that the “trifecta” of rulings will provide “welcomed relief” for companies targeted in courts in California, Montana, parts of Texas, and other venues considered plaintiff-friendly. “It is a dramatic and welcome development for businesses that have had to bear extraordinary expense to defend cases in judicial hellholes,” said Victor Schwartz, a partner with Shook, Hardy & Bacon LLP, a firm that defends companies. 

The most recent, and most significant, of the decisions came on June 19, when the high court ruled (PDF) for Bristol-Myers Squibb Co. The company had been sued in California state court by consumers alleging that the drug maker had misrepresented the risk of heart attack and stroke caused by its blood thinner Plavix. Broadly speaking, the key to establishing jurisdiction is showing a connection between the court in question and the parties; the California courts had allowed plaintiffs’ attorneys to add almost 600 non-Californians to a suit on behalf of 86 state residents pursuing claims against Bristol-Myers. 

By an 8-1 vote, the justices said that state courts can’t hear claims brought by out-of-state plaintiffs against companies that aren’t based there if the alleged injuries occurred elsewhere, too. Writing for the majority, Justice Samuel Alito noted that consumers from multiple states could still band together to sue Bristol-Myers in New York, where the company is based, or Delaware, where it’s incorporated. The California plaintiffs, moreover, may proceed against the company in their home state. 

In dissent, Justice Sonia Sotomayor said the ruling “may make it impossible to bring certain mass actions—specifically when the suits include plaintiffs from across the country. Her point was demonstrated that very day, when Johnson & Johnson persuaded a St. Louis city court judge that, in light of the Supreme Court's action, he ought to end a trial over the deaths of three women whose families blame exposure to talc for their ovarian cancers. The case was part of a much larger group filed in that courthouse—a well-known plaintiffs’ haven—combining claims of Missouri residents with those of out-of-state residents. J&J has recently lost four jury verdicts in the St. Louis court, totaling $307 million in damages. (The company, which is based in New Brunswick, N.J., has also won one trial there.)

On May 30, the justices issued what will be seen as a companion ruling (PDF) to the one about Bristol-Myers. By another 8-1 vote, they rejected a lower-court decision in Montana that allowed out-of-state plaintiffs to sue there over injuries suffered anywhere in the national network of Texas-based BNSF Railway. In her majority opinion, Justice Ruth Bader Ginsburg said that, although BNSF has 2,000 miles of track and 2,000 employees in Montana, this isn’t a sufficient basis to sue there for injuries unconnected to the state. Sotomayor, again in lonely dissent, called the decision a “jurisdictional windfall” for large corporations with far-flung operations.

The third high court ruling was narrower but still important. The justices unanimously ruled (PDF) on May 22 that patent suits should be filed only in the state where the defendant is incorporated. The decision will prevent many patent owners from bringing cases in the Eastern District of Texas, a federal jurisdiction known to be especially hospitable to patent-violation claims, which has made it a favorite of so-called “patent trolls.” More than one-third of all infringement suits are now filed there.

But while the decisions were largely agreed on by the justices, plaintiffs’ advocates warned of dire consequences for ordinary people harmed by faulty products or corporate misbehavior. Paul Bland, executive director of Public Justice, a pro-plaintiff law firm in Washington, said in an email that the high court had rejected the notion, embraced by some lower courts, that “a broad sense of fairness” ought to govern where parties may sue. Now, he added, “corporations will be able to interpose all sorts of procedural and formalistic hurdles to impede plaintiffs from pursuing their claims.”  Raymond Brescia, an associate professor at Albany Law School, agreed that the decisions would have unfortunate effects. “At a time when the Trump administration and Congress show little sign of serving as a check on corporate malfeasance,” Brescia asserted, “the courts, too, are taking a restrictive view of their role as a forum for plaintiffs to pursue consumer protection.”


    Paul Barrett
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