Personal Jurisdiction over Non-resident Class Members? District Courts Diverge on Application of Bristol-Myers Squibb to Nationwide Class ActionsFollowing the Supreme Court’s landmark personal-jurisdiction decision in Bristol-Myers Squibb, federal district courts have continued to disagree about whether to apply the court’s holding to cases involving nationwide class actions. Although we believe the argument in favor of applying Bristol-Myers in the class context is overwhelming––after all, how could plaintiffs curtail defendants’ due process rights simply by invoking the procedural device of Rule 23?––the disagreement on this topic will very likely continue to deepen until it ripens into a circuit split that the court can resolve.

In Bristol-Myers Squibb, the Supreme Court held that a California state court was precluded from exercising personal jurisdiction over the defendant with respect to claims asserted by non-resident mass tort claimants. As Justice Sotomayor’s dissent noted, however, the holding of the majority did not explicitly address whether it applied to nationwide class actions.

Predictably, the majority’s silence on this issue has divided lower courts: “Whether Bristol-Myers extends to class actions is a question that has divided courts across the country.” See Chavez v. Church & Dwight Co., Inc., No. 17 C 1948, 2018 WL 2238191 at *10 (N.D. Ill. May 16, 2018), which dismissed claims of absent class members arising outside of the forum state.

While no circuit court has considered the issue, some federal district courts have applied Bristol-Myers Squibb to class actions:

  • Plumber’s Local Union No. 690 Health Plan v. Apotex Corp., Civ. A. No. 16-665, 2017 WL 3129147, at *9 (E.D. Pa. July 24, 2017) (dismissing non-Pennsylvania claims for certain defendants)
  • Spratley v. FCA US LLC, No. 3:17-CV-0062, 2017 WL 4023348, at *7–8 (N.D.N.Y. Sept. 12, 2017) (dismissing claims of out-of-state plaintiffs who had “shown no connection between their claims and Chrysler’s contacts with New York”)
  • In re Dental Supplies Antitrust Litig., No. 16 Civ. 696 (BMC)(GRB), 2017 WL 4217115, at *9 (E.D.N.Y. Sept. 2017) (“The constitutional requirements of due process does not wax and wane when the complaint is individual or on behalf of a class. Personal jurisdiction in class actions must comport with due process just the same as any other case.”)
  • Maclin v. Reliable Reports of Texas, Inc., No. 1:17-CV-2612, 2018 WL 1468821 (N.D. Ohio Mar. 26, 2018) (“[T]he Court cannot envisage that the Fifth Amendment Due Process Clause would have any more or less effect on the outcome respecting FLSA claims than the Fourteenth Amendment Due Process Clause, and this district court will not limit the holding in Bristol–Myers to mass tort claims or state courts.”)
  • Roy v. FedEx Ground Package Sys., Inc., No. 3:17-CV-30116-KAR, 2018 WL 2324092, at *9 (D. Mass. May 22, 2018) (rejecting argument that Bristol-Myers Squibb should be limited to cases originally filed in state court but finding the exercise of jurisdiction appropriate on the facts of the case)
  • In re Nexus 6P Prods. Litig., No. 17-cv-02185-BLF, 2018 WL 827958 at *5–6 (N.D. Cal. Feb. 12, 2018) (allowing plaintiffs to re-plead complaint to allege jurisdiction in a manner consistent with Bristol-Myers)
  • McDonnell v. Nature’s Way Prods., LLC, No. 16 C 5011, 2017 WL 4864910 at *4–5 (N.D. Ill. Oct. 26, 2017) (dismissing claims “brought on behalf of non-Illinois residents or for violations of Florida, Michigan, Minnesota, Missouri, New Jersey, New York, and Washington law without prejudice”)
  • Wenokur v. AXA Equitable Life Ins. Co., No. CV-17-00165-PHX-DLR, 2017 WL 4357916 at *4 n.4 (D. Ariz. Oct. 2, 2017) (“The Court also notes that it lacks personal jurisdiction over the claims of putative class members with no connection to Arizona and therefore would not be able to certify a nationwide class.”)

One court has decided to hold the question open until class certification: Chernus v. Logitech, Inc., No.: 17-673(FLW), 2018 WL 1981481 (D.N.J. April 27, 2018), which recognized division in district court opinions regarding Bristol-Myers, found the balance weighing against applying it in the class context, then stated “no class has been certified, and therefore, to determine whether this Court has specific jurisdiction over Defendant with respect to the claims of the unnamed class members prior to class certification would put the proverbial cart before the horse.”

Some other courts have reached the opposite result. Several California district courts, for example, have opined that the Supreme Court’s holding in Bristol-Myers Squibb should be limited to mass tort cases based on the rationale that in such cases each plaintiff is named as an individual party and is a real party in interest:

  • Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., No. 17-CV-00564 NC, 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017)
  • Sloan v. General Motors LLC, 287 F. Supp.3d 840 (N.D. Cal. Feb. 7, 2018).
  • In re Morning Song Bird Foot Litig., No. 12-CV-01592 JAH-AGS, 2018 WL 1382746 (S.D. Cal. Mar. 19, 2018)

A few district courts outside of California have ruled similarly:

  • Molock v. Whole Foods Market, Inc., 297 F. Supp. 3d 114 (D.D.C. 2018)
  • Sanchez v. Launch Technical Workforce Solutions, LLC, 297 F. Supp. 3d 1360 (N.D. Ga. 2018)
  • Casso’s Wellness Store & Gym, L.L.C. v. Spectrum Lab. Prods., Inc., No. 17-2161 2018 WL 1377608 (E.D. La. March 19, 2018)
  • In re Chinese-Manufactured Drywall Prods. Liab. Litig., 2017 WL 5971622 (E.D. La. Nov. 30, 2017)

Given the importance of this issue and the divergent approaches taken by the federal district courts, it is clear that the appellate courts—and ultimately the U.S. Supreme Court—will eventually have to resolve the split. In fact, we may soon have the first federal circuit decision on this issue. The District of Columbia in the Molock case has recently certified the question of “whether the jurisdictional limits proscribed in Bristol-Myers Squibb extend to unnamed, nonresident members of a putative nationwide class in federal court” to the D.C. Circuit. See Molock v. Whole Foods Market Group, Inc., No. 16–cv–02483 (APM), 2018 WL 2926162 (June 11, 2018). It remains to be seen whether that interlocutory appeal will be accepted by the D.C. Circuit, but this is a case to watch.

In the meantime, defendants facing nationwide class action lawsuits should consider at the outset of the case whether to argue that the court lacks personal jurisdiction over the defendant with respect to claims asserted by non-resident putative class members (at least in venues that are not the defendant’s “home” jurisdiction). In some courts, this argument may be successful; it may serve to limit the aggregate value of the class claims, and potentially reduce the amount of discovery pain that class counsel can inflict. Even where not successful, there is value in preserving the argument by raising it in the answer and perhaps in an early motion to strike class allegations, before raising it again in opposition to class certification. No matter the precise procedures used, defendants will likely want to be in a position to benefit if the appellate courts ultimately determine that Bristol-Myers does apply equally to nationwide class actions. After all, personal jurisdiction is a waivable defense. While there may well be strategic reasons to waive the defense in a given case, that waiver should be a carefully considered, conscious choice. Inadvertent waiver by failure to preserve the argument is another thing entirely.

The Supreme Court’s decision last summer in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), is my pick for “2017 Class Action Practitioners’ Case of the Year”––and it’s not even a class case.

One of the most exciting areas in the class action arena is personal jurisdiction. Stifle that yawn. The Supreme Court’s recent decisions in this area could have a major effect on the scope of class actions where the claims sound in state law. Plaintiffs’ lawyers have long sought to bring class actions in the most plaintiff-friendly venues. As a general proposition, a plaintiff would prefer to cram a big nationwide class of claims into the most favorable venue instead of having to bring either several single-state class actions in several venues or a nationwide class in a less-favorable venue. Where plaintiffs are successful, this kind of forum shopping makes class cases all the more difficult for defendants: Not only do defendants have to face the high stakes of a large number of aggregated claims in one action, they also have to fight all those claims in a hostile venue.

The Supreme Court’s recent decision in Bristol-Myers Squibb, has given defendants a powerful new argument against this tactic. Bristol-Myers Squibb involved a mass action in which nearly 600 plaintiffs who did not live in California joined their claims with California residents’ claims. The defendant challenged personal jurisdiction, but the California courts found specific jurisdiction to exist. By an 8-1 vote, the United States Supreme Court reversed, holding that the California courts could not exercise personal jurisdiction over the defendant as to claims of non-resident defendants who could not satisfy the well-settled test for specific jurisdiction. As a result, the plaintiffs face the choice of either bringing their nationwide class in a forum where the defendant is subject to general jurisdiction (i.e., state of incorporation of principal place of business, thanks to the Supreme Court’s recent Daimler decision) or limiting the class to those plaintiffs whose claims involve the kind of minimum contacts necessary to support the exercise of specific jurisdiction.

As mentioned above, Bristol-Myers Squibb is not a class action case––but that is likely of no consequence. The decision rests on the constitutional due process rights of defendants, and, under the Rules Enabling Act, the purely procedural class action rules cannot abrogate those rights. (We’ll address this point further in a future post, along with looking at how lower courts have applied Bristol-Myers Squibb in the class context.)

Practically speaking, Bristol-Myers Squibb should curb the most blatant forum shopping in diversity cases. Defendants should use it to channel more litigation to the jurisdictions where defendants are incorporated or headquartered or where the plaintiffs reside. The case may also lead to an increase in single-state class cases, which is a potential downside—but defendants can waive personal jurisdiction as a defense to permit consolidation where appropriate. The increase in state-specific suits may also make removal under diversity or CAFA easier, as plaintiffs will be less free to use joinder to defeat diversity jurisdiction and will likely run afoul of the no-similar-case rule of 28 U.S.C. § 1332(d)(4)(A)(ii). We also predict an uptick in multidistrict-litigation petitions, which both plaintiffs and defendants can perceive as an advantageous way of consolidating geographically dispersed litigation.

A Look Back at Significant Developments in Class Action Law in 2017From the standpoint of class action practice, 2017 was as important for what did not happen as for what did.  Here are some of the highlights and lowlights of the 2017 class action scorecard, with a look forward to how the impact of some of those developments may be felt in 2018.

A brave new world for personal jurisdiction

If you got out of law school more than a decade or so ago, most of what you learned about personal jurisdiction is now obsolete.  The once determinative “minimum contacts” analysis has now all but gone the way of the human tail. Whatever remains of it is fairly insignificant at this point.  What matters now is the “general” versus “specific” jurisdiction dichotomy. In simplified terms, to the extent the defendant is being sued specifically for sales or other conduct in the forum state, specific jurisdiction perhaps attaches. Otherwise, the defendant is likely subject to suit only where it is incorporated or has its principal place of business.  This lesson was driven home in Bristol-Myers Squibb v. Superior Court of California, San Francisco County, 582 U.S. ___ (2017), where a large number of nonresident plaintiffs joined a large number of resident plaintiffs in a mass action alleging tort claims associated with the drug Plavix.  In an 8-1 decision, the Supreme Court ruled as a matter of substantive due process that there was personal jurisdiction over BSM only as to the claims of the resident plaintiffs.  The prevailing wisdom, and the view of a majority of courts to address the issue since this decision came down, is that the same analysis applies to class actions (e.g., LDGP, LLC v. Cynosure, Inc., Case No. 15 C 50148 (N.D. Ill. Jan. 16, 2018); McDonnell v. Nature’s Way Prods., LLC, No. 16-cv-5011 (N.D. Ill. Oct. 26, 2017); Spratley v. FCA US LLC, No. 3:17-cv-62 (N.D.N.Y. Sept. 12, 2017); In re Dental Supplies Antitrust Litig., No. 16-cv-696 (E.D.N.Y. Sept. 20, 2017); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., No. 16-cv-665 (E.D. Pa. July 24, 2017); Jordan v. Bayer Corp., No. 4:17-cv-865 (E.D. Mo. July 14, 2017)).  The effective result would seem to be that a corporation can now be subjected to nationwide class certification only in its home states.  Smart corporations now domiciled in class-friendly jurisdictions will now therefore evaluate whether there is reason to relocate their domicile and principal place of business to more defendant-friendly jurisdictions.

Spokeo produces mixed results for subject matter jurisdiction in statutory damages class actions

It has been more than a year and a half since the Supreme Court handed down its landmark Spokeo, Inc. v. Robins, 578 U.S. ___ (2016) decision, which made clear that Article III requires all plaintiffs to have suffered a “concrete” injury to bring suit in federal court.  Unfortunately, in that time, Spokeo has not become the statutory class action panacea that the defense bar hoped for—and, as we documented in a previous blog post, lower courts attempting to apply Spokeo have done so in often confusing and inconsistent ways.  Spokeo’s application to claims brought under some of the most frequently sued-under federal consumer protection statutes provide a good illustration of this.  For example, courts have reached mixed results when it comes to applying Spokeo to alleged FDCPA violations.  Mere technical timing FDCPA violations, such as a slight delay in sending a required notice that does not result in any prejudice, are almost certainly insufficient to confer Article III standing.  But the outright denial of information may be sufficient, even where there are no allegations that the denial caused any real harm.  Or maybe not.

Alleged FACTA violations have also generated mixed results, including divergent views on whether printing a credit card expiration date is alone sufficient to confer Article III standing (compare Meyers v. Nicolet Rest. Of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016) with Deschaaf v. Am. Valet & Limousine Inc., 234 F. Supp. 3d 964 (D. Ariz. 2017)).  And perhaps most confused is how courts have applied Spokeo to FCRA claims.  For example, in Dreher v. Experian Information Solutions, Inc., the Fourth Circuit held that the failure to provide the sources of credit information on the plaintiff’s credit report was not, by itself, a sufficiently concrete harm to confer Article III standing; a plaintiff must show that the denial of information has caused him “‘real’ harm with an adverse effect.”  In sharp contrast, in In re Horizon Healthcare Services Inc. Data Breach Litigation, the Third Circuit refused to require any showing of harm or a material risk of harm from an alleged FCRA violation, holding instead that in creating a private right of action to enforce the FCRA, Congress demonstrated its judgment that any “violation of FCRA causes a concrete harm to consumers.”  The only relative consistency:  TCPA violations—which generally result in the plaintiff’s phone line being tied up and ink and paper being used—are almost always sufficient to confer Article III standing.

Unfortunately, it doesn’t look like the Supreme Court will provide additional guidance any time soon about how to determine whether an alleged statutory violation has resulted in a sufficiently “concrete” injury for Article III standing purposes.  Earlier this week, the Court denied the Spokeo defendants’ cert petition, which had sought review of the Ninth Circuit’s decision on remand that the plaintiff’s alleged injury in that case—dissemination of false credit information that may have actually improved the plaintiff’s credit score—was sufficient to confer standing under Article III.

The Circuit split over ascertainability gets even deeper

2017 saw the Ninth Circuit join the Sixth, Seventh, and Eighth Circuits in rejecting the (until recently) long-settled notion that Rule 23’s “numerosity” requirement implicitly contains a requirement that the class be ascertainable in an administratively feasible way before a class can be certified.  To varying degrees, these courts endorse concepts like “fluid recovery” and self-identification through affidavits in addition to finding that Rule 23 does not require that the actual class member be known before proceeding past certification to the merits.  This of course presents all sorts of due process concerns for class defendants, who protest the unfair settlement pressure, one-way res judicata effect, and due process problems associated with kicking the class member identification problem to the very end of the class litigation timeline.  The Second, Third, and Eleventh Circuits all still require some meaningful degree of ascertainability.  This is an issue class defendants will want to be sure to preserve if they find themselves in a jurisdiction hostile to the ascertainability requirement.  Class defendants in jurisdictions hostile to an ascertainability requirement will also want to recast any ascertainability problem as one of commonality, predominance, and/or superiority.

American Pipe re-fitting

In a pair of cases, the Supreme Court used 2017 to answer some long unsettled questions relating to class action tolling under American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).  The American Pipe rule generally holds that the statute of limitations is tolled for the claims of class members during the pendency of a class action until certification is denied or abandoned.  In California Public Employees’ Retirement System v. ANZ Securities, Inc., et al., 137 S. Ct. 2042 (2017), the Supreme Court held that there is no such tolling with regard to rules of repose, and in China Agritech, Inc. v. Resh, Dkt. No. 17-432, it granted cert to resolve a circuit split over whether such tolling applies only to subsequent individual claims by class members or also to successive class actions by class members.

The Congressional Review Act trumps the CFPB’s effort to prevent financial institutions from utilizing class waivers

In 2017, the CFPB finally made good on its threat to ban financial entities from utilizing arbitration clauses with class waivers to avoid or limit class actions. A few weeks later, both houses of Congress invoked the Congressional Review Act to nullify this CFPB rule.  President Trump then signed the nullification resolution, which under the CRA has the effect of prohibiting the CFPB from attempting any similar rule again.  Bradley’s Class Action team chair Mike Pennington was a principal author of DRI’s written comments opposing the CFPB rule.

New amendments to Rule 23 proposed to become effective in December 2018

In 2017, a set of settlement-related amendments to Rule 23 were formally set in motion, on a track likely to make them effective this December. The amendments front-load the evidentiary proof and modernize the notice and objection procedures necessary to achieve so-called “preliminary approval” and “final approval” of a class settlement. On behalf of DRI, Bradley’s Class Action team members Mike Pennington (whose hearing transcript is available here), Scott Smith, and John Parker Sweeney all submitted written comments and testified in public hearings before the Advisory Committee on Civil Rules and its Rule 23 Subcommittee regarding these and other proposed amendments to Rule 23.

SCOTUS holds that voluntary dismissal cannot be used as a tool to seek mandatory appellate review of class certification denials

In Microsoft v. Baker, a unanimous Supreme Court closed a loophole recognized in some circuits that permitted class action plaintiffs to seek immediate appellate review of an adverse class certification decision by voluntarily dismissing their claims with prejudice.  The practical effect of the Court’s ruling is that class action plaintiffs no longer have a mechanism for seeking immediate mandatory appellate review of class certification denials.  Instead, to obtain interlocutory review, plaintiffs must rely on either Rule 23(f), 28 U.S.C. § 1292(b), or a writ of mandamus, all of which give circuit courts discretion on whether to hear an appeal.

Judge Posner retires after nearly 40 influential years on the bench

Arguably the country’s most influential non-Supreme Court jurist ever, Judge Richard Posner retired abruptly from the Seventh Circuit in September 2017.  During his nearly 40 years on the bench, he had tremendous impact in shaping legal views and discourse on a host of issues.  Rule 23 was no exception, as Judge Posner’s views on the appropriateness of class certification have become deeply ingrained in the collective legal consciousness.  For example, relatively early in his career as a jurist, Judge Posner authored several opinions that reigned in class certification excesses, recognizing that plaintiffs often use class certification of dubious claims as a tool to extract “blackmail settlements.”  Notably, in In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995), Posner is credited with sounding the death knell for the class treatment of personal injury class actions.

More recently, Judge Posner authored opinions permitting class certification where the class action device was seen by him as the most efficient (and, as a practical matter, only) tool for resolving the class members’ disputes.  As Posner stated in Carnegie v. Household International, Inc., 376 F.3d 656 (7th Cir. 2004), which affirmed certification of a settlement-turned-litigation class, if the individual claims in a putative class are of sufficiently low value, then the “realistic alternative to a class action” may not be “17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”  Most recently, Judge Posner overturned a series of class action settlements that offered little benefit to the class but huge fees to class counsel (see, e.g., In re Walgreen Co. Stockholder Litig., 832 F.3d 718 (7th Cir. 2016); Redman v. Radioshack Corp., 768 F.3d 622 (7th Cir. 2014); Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014)).  Judge Posner’s immense impact on class action litigation will not be soon forgotten.

SCOTUS to clarify SLUSA’s application to class claims brought under the Securities Act of 1933

Currently pending before the Supreme Court is Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439 (filed May 24, 2016), which concerns the preemptive scope of the Securities Litigation Uniform Standards Act of 1998 (SLUSA).  By way of refresher, SLUSA preempts all state law causes of action for fraud in connection with the purchase or sale of securities—any such fraud claim must be based on federal law, i.e., the Securities Act of 1933 or the Securities Exchange Act of 1934.  At issue in Cyan is whether SLUSA also divests state courts of jurisdiction to hear class action claims brought under the Securities Act of 1933 (e.g., claims based on fraudulent misrepresentations or omissions in a registration statement).  Federal courts already have exclusive jurisdiction over claims brought under the Securities Exchange Act of 1934 (e.g., 10b-5 securities fraud claims).

Oral argument in Cyan occurred on November 28, 2017, although it only revealed the Court’s complete confusion about how to interpret SLUSA, which was (aptly) described as “obtuse,” “odd,” and, by Justice Alito, “gibberish.”  The Justices’ confusion has been mirrored in the state and lower federal courts, which have reached wildly inconsistent and chaotic results on the issue.  If the Court rules in Cyan’s favor, then all class claims under the Securities Act will have to be brought in federal court, subject to the procedural strictures of the PSLRA.  But if the Court rules in the plaintiffs’ favor, then investors will be able to avoid the PSLRA by filing their Securities Act claims in more favorable state court jurisdictions.  The Solicitor General has also entered the fray, advocating for a hybrid position: that SLUSA permits plaintiffs to bring Securities Act claims in state court, but also permits defendants to then remove those claims to federal court, should they so choose.  We anticipate a decision in the first half of 2018.

A welcome narrowing of the scope of the TCPA

As everyone reading this blog well knows, the TCPA has become a boon for the consumer protection plaintiffs’ bar.  This shouldn’t be surprising, given the TCPA’s (mostly) strict liability, statutory damages of at least $500 per violation (and up to $1500 for “willful” violations), and no damages cap.  Fortunately, however, a pair of D.C. Circuit cases may be beginning to reverse the tide.  First, was the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017), which struck down an FCC rule that had required senders of faxes to include opt-out notices on all messages, even though the statute itself only required such notices on non-solicited messages.  Now, pending before the D.C. Circuit is ACA International v. FCC, Case No. 15-1211 (D.C. Cir., filed Nov. 25, 2015), which challenges the validity of the FCC’s broad and oft-criticized interpretation of what constitutes an Automatic Telephone Dialing System, as well as FCC rules concerning the identity of the “called party” in the reassigned number context and the means by which a called party may revoke consent.  How the D.C. Circuit resolves ACA International could potentially have a huge impact on stemming the tide of rampant TCPA class actions.

The Fairness in Class Action Litigation Act stalls in the Senate

Finally, the House passed H.R. 985, also known as the “Fairness in Class Action Litigation” Act, in March 2017 by a largely party-line vote.  We have already discussed in detail how the current version of the bill could potentially change class action litigation—and made proposals to improve the bill.  Thus far, the Senate has taken no action on the bill, just as the Senate took no action on an earlier and more modest version of the Fairness in Class Action Act previously passed by the House.  It remains to be seen whether the bill will be revisited this year, although currently there does not appear to be any political momentum to do so.  If the bill does not become law by the end of 2018, then the legislative process will go back to square one.