United States: Supreme Court Decision Alert - June 19, 2017

Today, the Supreme Court issued two decisions, described below, of interest to the business community.

  • Due Process—Specific Personal Jurisdiction
  • Trademarks—First Amendment

Due Process—Specific Personal Jurisdiction

Bristol-Myers Squibb Co. v. Superior Court of Cal., No. 16-466

The due process clauses of the Fifth and Fourteenth Amendments govern whether and when courts may exercise "personal jurisdiction" over a defendant by adjudicating claims against it. A defendant is always subject to personal jurisdiction in its home state, under so-called "general" jurisdiction; when general jurisdiction is unavailable, "specific" jurisdiction allows a court to exercise jurisdiction over a defendant when the defendant's acts within or relating to the forum state create a sufficient connection between the forum, the defendant, and the claim. Today, the Supreme Court held that a court may not exercise specific jurisdiction over the claims of plaintiffs whose injuries did not occur in the forum state by relying on contacts that have nothing to do with those plaintiffs' claims. The immediate impact of the decision is to limit nationwide mass actions in state courts to those states in which the defendant is subject to general jurisdiction (which is virtually always limited to the states of incorporation and principal place of business).

In this case, a group of 86 California residents joined together with 575 nonresidents to sue Bristol-Myers Squibb in California, alleging injuries from its drug Plavix. None of the events that gave rise to the nonresidents' claims occurred in California: for example, they did not obtain the drug in California and did not allege that they were injured there. But the California Supreme Court held that California state courts could nonetheless exercise specific jurisdiction over the nonresidents' claims because (1) the nonresidents' alleged injuries arose out of the same nationwide course of conduct that gave rise to the in-state residents' claims; and (2) Bristol-Myers Squibb conducted substantial research activities in California.

The Supreme Court reversed by a vote of 8-1. Writing for the majority, Justice Alito held that specific jurisdiction requires "a connection between the forum and the specific claims at issue." Thus, he explained, "[t]he mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California— and allegedly sustained the same injuries as did the nonresidents—does not allow the State to assert specific jurisdiction over the nonresidents' claims." Moreover, it was not "sufficient—or even relevant—that BMS conducted research in California on matters unrelated to Plavix."

The plaintiffs also had pointed to Bristol-Myers' distribution contract with McKesson Corp., a California company. But they did not allege that Bristol-Myers and McKesson had engaged in the relevant acts together, or that Bristol-Myers was in some way derivatively liable for McKesson's acts, or that the nonresident plaintiffs had obtained their drugs through McKesson. "The bare fact that BMS contracted with a California distributor is not enough to establish personal jurisdiction in the State," the Court said.

The Court noted that the case involved only the Fourteenth Amendment's limits on the power of state courts. Thus, it explained, the question "whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court" remains open.

Justice Sotomayor dissented. She argued that the nonresidents' claims against Bristol-Myers Squibb "concern[ed] conduct materially identical to acts the company took in California," which established the necessary connection between those claims and California and made the exercise of specific jurisdiction with respect to those claims fair and reasonable.

Trademarks—First Amendment

Matal v. Tam

The Lanham Act prohibits the registration of trademarks that "disparage ... or bring ... into contemp[t] or disrepute" any "persons, living or dead." The Federal Circuit held this provision facially unconstitutional pursuant to the First Amendment's Free Speech Clause. Today, in a splintered set of opinions that all agreed with the ultimate outcome, the Supreme Court affirmed.

Justice Alito announced the judgment of the Court and issued an opinion that was, in part, the opinion of the Court. In a portion of the opinion joined by seven of the eight participating Justices, he rejected the statutory argument that the disparagement clause prohibits only trademarks that disparage particular natural persons, as opposed to members of a racial or ethnic group more broadly. And in a portion of the opinion joined by all participating Justices, he rejected the suggestion that trademarks constitute government speech.

The remainder of Justice Alito's opinion was joined by the Chief Justice and Justices Thomas and Breyer. That four-Justice bloc concluded that precedents appearing to apply a different standard to government decisions to subsidize certain speech could be distinguished because those cases involved cash subsidies. The plurality likewise refused to approve the disparagement clause under a new "government-program" doctrine that would merge the Court's government-speech and subsidy cases. The plurality concluded that the disparagement clause is unconstitutional because, even if trademarks are considered to be commercial speech subject to the relaxed scrutiny of Central Hudson, the disparagement clause cannot satisfy that standard, as the prohibition is not narrowly drawn to the interests it purports to advance.

Justice Kennedy issued a separate opinion for another four-Justice bloc, joined by Justices Ginsburg, Sotomayor, and Kagan. In his view, the disparagement clause amounts to viewpoint discrimination, which renders it unconstitutional, irrespective of whether commercial speech is involved.

Justice Thomas also issued a separate concurrence that appeared to stake a middle ground between Justice Alito's opinion (which he joined) and Justice Kennedy's. Although Justice Thomas agreed with Justice Alito that the disparagement clause would not satisfy Central Hudson's intermediate scrutiny, he believed that strict scrutiny would ultimately apply because the government was seeking to restrict truthful speech in order to suppress the ideas it conveys.

Justice Gorsuch did not participate.

Originally published June 19, 2017

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