Bernstein Shur Business and Commercial Litigation Newsletter #72

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April 2017 | Issue 72

Our April recap highlights cases addressed to the U.S. Supreme Court’s review of its jurisprudence concerning personal jurisdiction over out-of-state corporations, notable jury verdicts against large multinational corporations, and other news that will have an impact on business and litigation.

The U.S. Supreme Court will decide a case that could have a significant impact on when courts may exercise jurisdiction over out-of-state defendants.

In the case Bristol-Myers Squibb Co. v. Superior Court of Ca., the Supreme Court will revisit its jurisprudence regarding the “minimum contacts” to a forum state required to maintain jurisdiction over a defendant in compliance with the Due Process Clauses of the Fifth and Fourteenth Amendments of the U.S Constitution. Under the traditional “minimum contacts” analysis, a state court may exercise jurisdiction over an out-of-state defendant if there are sufficient minimum contacts with the forum state and traditional notions of fair play and justice are not offended. Courts typically analyze these requirements using a multi-pronged inquiry aimed at establishing whether there is a sufficient connection between the defendant and forum state. In the Bristol-Myers Squibb case, California’s Supreme Court held that California state courts may exercise jurisdiction over the company to address claims based on its Plavix blood thinner, despite the fact that most of the plaintiffs do not reside in the state and the company does not maintain its headquarters there. At oral argument, several justices expressed concern over the exercise of jurisdiction for claims asserted by out-of-state residents. In a more recent case, Walden v. Fiore, the U.S. Supreme Court held that a court’s analysis of specific contacts to a jurisdiction rests only upon the defendant’s contacts and conduct in the forum state, while also noting that a plaintiff cannot be the only link between the defendant and the forum. Analysts believe that the case may result in further limitation on a plaintiff’s ability to exercise jurisdiction over out-of-state corporate defendants.

A jury has held that GlaxoSmithKlein is liable for $3 million in damages based on its role in the drug formulation and label for a generic version of the drug, Paxil.

In the underlying case, plaintiff brought suit against GlaxoSmithKlein for wrongful death after a 57-year old man took his own life while taking a generic version of the Paxil. GlaxoSmithKlein did not manufacture the generic version of Paxil, but it did have control of the content of the warning label for the generic version of the drug. A Chicago jury held that the drug maker was legally responsible for the death of the individual. Among other things, plaintiff alleged that the warning label for the drug failed to disclose that paroxetine, an SSRI-type antidepressant, can increase the risk of suicide in older users by more than 650 percent. The label for the generic Paxil only disclosed that such risks existed for users who were under 25 years old. The jury presiding over the case awarded $3 million to plaintiffs against GlaxoSmithKlein, which has indicated it intends to appeal the verdict.

A jury awarded a verdict of $454 million against Kimberly-Clark based on fraud claims asserted by purchasers of the company’s products.

In the case, a California federal jury was asked to examine claims that Kimberly-Clark and its spinoff Halyard Health Inc. misled customers by claiming that their MicroCool surgical gowns were impermeable, providing protection against diseases like Ebola and HIV. The plaintiffs, who had purchased the gowns, provided evidence during the trial that the defendant companies knew that the surgical gowns were defective and had failed tests. The jury’s award consisted of approximately $4 million in compensatory damages and $450 million in punitive damages, even in the absence of evidence of any injuries caused by the defects. Kimberly-Clark has stated that it would challenge the verdict on appeal, describing the damages award as excessive.

The U.S. Supreme Court has overturned a $2.7 million sanction for discovery violations against Goodyear Tire & Rubber Co.

The sanction was awarded in a case alleging that a tire manufactured by Goodyear had failed, causing severe injuries after a family’s motorhome swerved off the road and flipped over. After the case settled, it was discovered that Goodyear had failed to disclose test results indicating that the tire model at issue became unusually hot at highway speeds. Goodyear ultimately admitted that it withheld this information, causing a federal judge in Arizona to award the plaintiffs $2.7 million as a sanction. The trial court based the amount of the award on the total amount of legal fees incurred by plaintiffs from the time of Goodyear’s first incomplete discovery response. On appeal, the Supreme Court vacated the amount of the award, stating that only those specific fees that were incurred because of Goodyear’s violation could be awarded as a sanction. The Court further found that it was not clear that the plaintiffs would have avoided all $2.7 million in fees if Goodyear had properly disclosed the test results. The Supreme Court remanded the case to the trial court for further consideration of the amount of the sanction.