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Personal Jurisdiction in Federal Class Actions: Three New Rulings but Little Clarity

Related Lawyers: Sarah R. LaFreniere
Related Practice Areas: Antitrust / Competition
Authors: By Sarah LaFreniere*

Introduction

Since the Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court (“Bristol-Myers”) in 2017,[1] defendants have sought to break-up nationwide class actions and disperse civil plaintiffs into 50 individual state actions. In spite of the Court’s insistence that it was simply applying settled principles of law, Bristol-Myers incited a swath of litigation over an ostensibly settled matter—when may courts hear claims of non-resident plaintiffs in accordance with the doctrine of personal jurisdiction? Recently, one circuit has ruled that Bristol-Myers does not bar personal jurisdiction over non-resident plaintiffs in nationwide class actions,[2] and two have punted while considering dismissal motions—leaving the question open until a later point procedurally.[3] This article addresses the background that led to those decisions, summarizes their impact, and posits that given the absence of a constitutional imperative, Bristol-Myers should not apply to federal class actions.

Personal Jurisdiction—A Primer

General Jurisdiction vs. Specific Jurisdiction

The doctrine of personal jurisdiction has largely stemmed from the Supreme Court’s consideration of when the “Fourteenth Amendment limits the power of a state court to render a valid personal judgement against a nonresident defendant.”[4] The doctrine aims: (1) to “protect[] the defendant against the burdens of litigating in a distant or inconvenient forum;” and (2) to “ensure that the States through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.”[5]

The Supreme Court has recognized two types of personal jurisdiction: general and specific. When a court has general jurisdiction, it may hear any claims over the defendant regardless of the nature of those claims.[6] A court may only exercise general jurisdiction over a defendant said to be “at home,” i.e., either incorporated in or having its principal place of business in the state.[7] If the court lacks general jurisdiction, it may only exercise specific-personal jurisdiction over those claims which “arise[] out of or relate[] to the defendant’s contacts with the forum” state.[8]

Bristol-Myers Squibb

In Bristol-Myers, six hundred plaintiffs consolidated their claims into a single mass tort action, asserting state-law claims for injuries allegedly caused by the drug Plavix.[9] The U.S. Supreme Court ruled that the Superior Court of California lacked jurisdiction over those plaintiffs who neither resided in California, nor purchased, used, or were injured by Plavix in California.[10] Asserting that the case was simply a “straightforward application . . . of settled principles of personal jurisdiction,” the Court held that the plaintiffs’ claims must “arise out of or relate to the defendant’s contacts with the forum” in order for a state court to exercise personal jurisdiction.[11] But the Court explicitly declined to consider how its reasoning would apply in the context of federal courts, stating “we leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.”[12] The Court also said nothing as to whether its ruling applied to class actions as distinguished from mass tort actions in which all plaintiffs are parties to the suit from the start.

The implication of Bristol-Myers in state mass-tort cases was simple; unless the court could establish general jurisdiction over the defendant, plaintiffs could only bring claims in the state court where the defendant was “at home,” or in the place where the plaintiff’s injury occurred. In effect, for a collective action of plaintiffs from different states such as a mass tort case, the only state court with personal jurisdiction is the one where the defendant is “at home.”

Fostering Confusion—Three Recent Decisions Considering the Application of Bristol-Myers to Federal Class Actions

Molock v. Whole Foods

In Molock, plaintiffs brought a federal diversity class action in the District Court for the District of Columbia to recover lost wages related to their employment at Whole Foods.[13] Whole Foods is headquartered in Texas and incorporated in Delaware, and the employees brought various state-law claims.[14] Whole Foods unsuccessfully moved to dismiss on the ground that the district court lacked jurisdiction over nonresident absent class member claims, and sought interlocutory appeal of that ruling.[15] Rather than ruling outright, the D.C. Circuit held that it was premature to rule on personal jurisdiction.

The D.C. Circuit did not rule out the possibility that it could dismiss nonresident absent class members’ claims if and when the class was certified. This was because, “class certification [] brings unnamed class members into the action and triggers due process limitations on a court’s exercise of personal jurisdiction over their claims.”[16] And, in a nod to the Supreme Court’s reasoning in Bristol-Myers, it emphasized that its ruling was “not peculiar to class actions; rather it [was] merely a specific application of the more general principle that personal jurisdiction entails a court’s ‘power over the parties before it.’”[17] Thus, any ruling on the court’s jurisdiction over absent class members’ claims before class certification would be “purely advisory” and prohibited pursuant to Article III of the Constitution.[18]

Importantly, the D.C. Circuit did not accept plaintiffs’ argument that Rule 23 of the Federal Rule of Civil Procedure creates an exception to the general rules of personal jurisdiction—that a “federal court sitting in diversity [may] exercise personal jurisdiction over unnamed, nonresident class members’ claims, even if a state court could not.”[19] The court noted that if a class was certified, the district court could at that time “entertain Whole Foods’s motion to dismiss the nonnamed class members.”[20]

While the majority in Molock declined to directly address whether Bristol-Myers might apply in either federal courts or in class actions, the dissent by Senior Circuit Judge Silberman indicated that it should.[21] He declared that “a class action is just a species of joinder,” and Bristol-Myers was essentially indistinguishable from a federal class action.[22] Judge Silberman would have ruled that Bristol-Myers barred the exercise of specific jurisdiction over non-resident class members injured elsewhere.[23] He also rejected the notion that Rule 23 itself creates an exception to the principles of personal jurisdiction.[24]

Cruson v. Jackson National Life Insurance Company

Like the D.C. Circuit, the Fifth Circuit in Cruson also addressed the appropriate timing of defendant’s personal jurisdiction challenge to non-resident absent class members. The district court had certified a class of individuals who purchased annuities from defendant Jackson, which plaintiffs alleged had violated class member annuity contracts.[25] Jackson did not challenge the court’s personal jurisdiction over non-resident plaintiffs when it initially moved to dismiss, so the posture on appeal was whether Jackson therefore had waived its personal jurisdiction defense.

Similar to the D.C. Circuit’s reasoning in Molock, the Fifth Circuit avoided ruling on the Bristol-Myers issue by reasoning that absent class members are non-parties prior to class certification.[26] The panel held that Jackson could not have challenged the court’s jurisdiction because such an argument was not “available” pursuant to Rule 12(g)(2).[27] When the motion to dismiss was filed, “the only live claims belonged to the named plaintiffs, all Texas residents as to whom Jackson conceded personal jurisdiction.”[28] Instead, “[p]rior to certification, those non-residents were ‘not yet before the [district] court,’ their possible ‘future’ claims against Jackson were ‘hypothetical,’ and so there was no ‘justiciable controversy.’”[29] The court also declined to consider whether Bristol-Myers might apply if the class was later certified.[30]

Mussat v. IQVIA

In Mussat, plaintiff, an Illinois-based physician, brought claims alleging violations of the federal Telephone Consumer Protection Act (“TCPA”) on behalf of a nationwide class of consumers who had received junk faxes.[31] The defendant, IQVIA, is a Delaware corporation headquartered in Pennsylvania. The district court granted the defendant’s motion to strike the class definition on the basis of Bristol-Myers, holding that the court lacked jurisdiction over the claims of non-resident putative class members. The district court had granted defendant’s motion to strike under Fed. R. Civ. P. 12, without yet having ruled on class certification. Nevertheless, the Seventh Circuit declared that the district court’s decision was the “functional equivalent” of denying class certification and therefore appealable under Rule 23(f).[32] Procedurally, the Seventh Circuit held it had jurisdiction pursuant to Fed. R. Civ. P. 23(f), which allows for interlocutory appeals of decisions granting or denying class certification. The Seventh Circuit reversed the district court’s decision, holding that Bristol-Myers did not “apply to the case of a nationwide class action filed in federal court under a federal statute.”[33] In contrast to Bristol-Myers, the panel held, absent class members are non-parties, whereas the participants in a mass-tort are all plaintiffs because they are appearing before the court.

In a manner somewhat similar to the D.C. Circuit, the panel considered the Supreme Court’s decisions in Devlin v. Scardelletti,[34] Taylor v. Sturgell,[35] and Exxon Mobil Corp. v. Allapattah Servs., Inc.,[36] in ruling that absent class members are non-parties. In Taylor, the Supreme Court held that absent class members could not be bound to the outcome of a suit prior to class-certification. And in Exxon, the Supreme Court held that only named-plaintiffs needed to meet the amount-in-controversy requirement for subject matter jurisdiction. The Seventh Circuit panel saw “no reason why personal jurisdiction should be treated any differently from subject-matter jurisdiction and venue” prior to class certification.[37] Thus, the court held that “the named representatives must be able to demonstrate either general or specific personal jurisdiction, but the unnamed class members are not required to do so.”[38] The court did not address whether or how class certification transforms the status of absent class members or why Bristol-Myers would not then apply.

The Seventh Circuit panel also considered the defendant’s argument that Rule 4(k) of the Federal Rules of Civil Procedure, governing service of process, also prohibited jurisdiction over the non-resident class members’ claims. The panel rejected the argument, ruling that Rule 4(k) only deals with how to effectuate service, but does not address who the court has jurisdiction over.[39]

Analysis—Reconsidering the Approach

Three Rulings—Little Clarity

These three Court of Appeals decisions have hardly provided clarity or certainty to the law. The three panels seemed to agree on only one critical matter: prior to class certification unnamed class members are not “parties” to litigation for personal jurisdiction reasons. And the Fifth and D.C. Circuits both ruled that the motion to dismiss phase is too early for defendants to seek dismissal of absent class members on personal jurisdiction grounds. Neither the Seventh nor D.C. Circuits held that Rule 4(k) is an impediment to a federal court’s exercise of personal jurisdiction over absent class members.

Beyond those few similarities as to timing and procedure, the three rulings raise more questions than they answer. The Fifth and D.C. Circuits declined to consider whether Bristol-Myers may apply to bar the claims of non-resident class members in federal class actions, leaving that decision for a potential future determination. The Seventh Circuit declared that Bristol-Myers is distinguishable because it involved a mass tort claim and all the plaintiffs are parties before the court in such cases. Further, relying on three Supreme Court decisions in which the Court allowed the cases to continue without commenting about the fact that the class included non-resident members,[40] it declared that federal class actions with non-resident plaintiffs can proceed against a non-resident defendant as long as the court can establish jurisdiction over the defendant as to the named plaintiffs’ claims.

Other commentators have lamented the issue caused by the D.C. and Fifth Circuit holdings—namely, if not at the motion to dismiss stage, when should a defendant challenge personal jurisdiction? Further, should plaintiffs be entitled to engage in nationwide discovery if only the claims of resident plaintiffs will eventually be adjudicated? These are reasonable questions for parties on both sides of the “v.” And further, should plaintiffs simply exercise caution and file virtually all class cases in Delaware? (and if so, what to do about foreign defendants?).

Limiting Bristol-Myers

Perhaps the reticence of the three circuits to go out on a limb and reject nationwide class actions outside of a defendant’s “home” state represents a recognition of the fundamental change in the law such a decision would have. As the Seventh Circuit stressed, before Bristol-Myers, not even the Supreme Court questioned the legitimacy of a federal court’s exercise of jurisdiction over claims of non-resident absent members of a nationwide class. Bristol-Myers should not be extended beyond mass tort cases for at least three additional, and constitutionally-sound reasons.

First, and perhaps most importantly, unlike state-court jurisdiction over out-of-state defendants, a federal court’s exercise of jurisdiction over a non-resident defendant does not raise the same constitutional issues as Bristol-Myers didFor a federal court to exercise jurisdiction in accordance with the Fifth Amendment, the defendant must have sufficient contacts with the United States as a whole, not the specific state in question.[41] Thus, as far as U.S. defendants are concerned, there is no constitutional bar to federal class actions that include non-resident members of a particular state.

Second, defendants incur no prejudice litigating the claims of resident and non-resident class members in the same forum. Rule 23 provides adequate, and stringent, safeguards to protect a non-resident defendant from being unreasonably “haled into court.”[42] If named plaintiffs can overcome the hurdle of Rule 23(b)(3) in particular, which requires common questions of law or fact to “predominate,” defendants face little prejudice in facing claims of non-resident plaintiffs at the same time. Taking for example, the TCPA claims involved in Mussat, the class will not be certified unless the plaintiffs can demonstrate a class-wide approach to assessing liability and a formulaic approach to calculating damages. Absent such congruity, the class likely will not be certified, and defendants will not need to face them collectively.

Third, pragmatically, broad application of Bristol-Myers is hardly judicious or efficient. Requiring parties to litigate identical claims in numerous courts across the country would have significant practical consequences. Piecemeal litigation and inconsistent rulings have long been key considerations underlying federal class action principles.[43] As the Court has said, “one of the major goals of class action litigation [is] to simplify litigation.”[44] Expanding Bristol-Myers without a constitutional compulsion to do so undermines this goal. And as much as defendants are seeking broad application of Bristol-Myers to federal class actions, litigating the same issues in multiple courts drives up the cost of litigation for defendants just as much as it does for plaintiffs.

Conclusion

In the wake of Bristol-Myers, litigants and courts faced critical questions about whether and when a federal court may exercise jurisdiction over non-resident plaintiffs in a class action. The three appellate decisions that have addressed this issue, MolockMussat, and Cruson, raised more questions than they answered. Litigants should be cognizant of the evolving discourse as district courts continue to grapple with the questions as to if and how Bristol-Myers may apply to federal class actions.

Footnotes

[1] Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).

[2] Molock v. Whole Foods Market Group, Inc., No. 18-7162, 2020 WL 1146733 (D.C. Cir. Mar. 10, 2020).

[3] Mussat v. IQVIA, No. 19-1204, 2020 WL 1161166 (7th Cir. Mar. 11, 2020); Cruson v. Jackson Life Insurance Co., No. 18-40605, 2020 WL 1443531 (5th Cir. Mar. 25, 2020).

[4] World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980) (emphasis added); see International Shoe Co. v. Washington, 326 U.S. 310 (1945).

[5] World-Wide Volkswagen Corp., 444 U.S. at 292.

[6] See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

[7] Daimler AG v. Bauman, 571 U.S. 117, 118 (2014).

[8] Id.

[9] Bristol-Myers Squibb, 137 S. Ct. 1733. The defendant Bristol-Myers was incorporated in Delaware and had its principle place of business in New York. Bristol-Myers also had five laboratories in California employing approximately 160 individuals, as well as 250 sales representatives working in California. But at the Supreme Court, it was unchallenged that California courts had general jurisdiction over Bristol-Meyers based on its being “at home” in the state.

[10] Bristol-Myers Squibb, 137 S. Ct. at 1783-84.

[11] Id. at 1780.

[12] Id. at 1784; see also id. at 1789 n.4 (Sotomayor, J., dissenting) (“The Court today does not confront the question whether its opinion here would also apply to a class action...”).

[13] Molock, 2020 WL 1146733, at 295.

[14] Id.

[15] Id.

[16] Id. at 298.

[17] Id.

[18] See id. The panel also rejected arguments that American Pipe, which allows the claims of absent class members to toll in advance of a class certification decision, necessitated a finding that absent class members were parties. Molock, 2020 WL 1146733, at 3. But the D.C. Circuit found even “for the purpose of tolling … putative class members are not parties.” Id.

[19] Molock, 2020 WL 1146733, at 296.

[20] Id.

[21] Id. at 304.

[22] Id. at 306.

[23] Id. at 307.

[24] Id.

[25] Cruson, 2020 WL 1443531, at 1-2.

[26] Id. at 9.

[27] Id. at 8.

[28] Id. at 9.

[29] Id. at 10 (quoting In re Checking Account Overdraft Litigation, 780 F.3d 1031, 1037 (11th Cir. 2015)).

[30] Id. at 7; id. at n.7.

[31] Mussat v. IQVIA, No. 19-1204, 2020 WL 1161166 (7th Cir. Mar. 11, 2020).

[32] Id. at 2 (citing Microsoft v. Baker, 137 S. Ct. 1702 (2017)).

[33] Id. at 1.

[34] Devlin v. Scardelletti, 536 U.S. 1 (2002).

[35] Taylor v. Sturgell, 553 U.S. 880 (2008).

[36] Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005).

[37] Mussat, 2020 WL 1161166, at 4.

[38] Id. at 5.

[39] See id. at 5.

[40] See Mussat, 2020 WL 1161166 at 3 (citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011); Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985); Califano v. Yamasaki, 442 U.S. 682, 702 (1979)).

[41] Repub. of Argentina v. Weltover, Inc., 504 U.S. 607, 619–20 (1992).

[42] C.f. World-Wide Volkswagen Corp. v. Woodson, 44 U.S. 286, 297 (1980) (for personal jurisdiction to comport with due process the “defendant's conduct and connection with the forum are such that he should reasonably anticipate being hauled into court there”).

[43] See also Hargrave v. Oki Nursery, Inc., 646 F.2d 716, 720 (2d Cir. 1980) (“The unified federal courts certainly have a stake in discouraging duplicative litigation not only within a single district but within the entire system.”); LaDuke v. Burlington N. R.R. Co., 879 F.2d 1556, 1560 (7th Cir. 1989) (citations omitted) (“the results of simultaneous litigation of identical issues in the state and federal courts may be both “unseemly” and a “grand waste” of the efforts of the parties and the courts”).

[44] Devlin v. Scardelletti, 536 U.S. 1, 10 (2002).

*Sarah LaFreniere is an Associate in the Washington, D.C. office where she represents claimants in antitrust matters, financial services, and other complex litigation.

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