With apologies to Mick Jagger and Keith Richards (who wouldn’t have jurisdiction either, being UK citizens), that is what the Sixth Circuit told a pack of Spanish plaintiffs recently in In Re DePuy Orthopædics, Inc. ASR Hip Implant Products Liability Litigation, ___ F.3d ___, 2020 WL 1482384 (6th Cir. March 27, 2020).
All companies with overseas affiliates should pay attention to this one, and so should counsel representing them.
This appeal arose from multi-district litigation, and in typical MDL excess, the plaintiffs typically named not only the manufacturer of the medical device, but several corporate affiliates, including at least one overseas entity. So far, so good (or bad), but after the MDL had been going on for a while, foreign plaintiffs decided to get in on the act. Id. at *1 (“Foreign plaintiffs, by contrast, brought the twelve suits at issue in this appeal.”). They used direct filing, which we’ve warned defendants about before. Id.
That was in 2012. In the meantime, as we discussed here, the defendants had won a forum non conveniens motion, except the MDL judge,
conditioned its dismissal of these suits on the defendants’ submitting to the jurisdiction of a Spanish court, on their waiving any limitations defenses, and on their satisfying any final judgments for the plaintiffs.
Id. at *2. Plaintiffs took an appeal. Id. Not until the current appeal eight (maybe seven) years later was the subject matter jurisdiction issue of foreigners on both sides of the “v.” recognized – by the Sixth Circuit sua sponte (meaning, for you non-lawyers, “on its own with no help from the parties”). Id.
Here’s the problem. The diversity rules are different when a lawsuit involves somebody from a different country. Section “1332(a)(2), grants jurisdiction over a civil action between “citizens of a State and citizens or subjects of a foreign state[.]” That didn’t apply here because “citizens of a State” were not sole parties on either side of the “v.” Section 1332(a)(3), grants jurisdiction over a civil action between “citizens of different States” even when “citizens or subjects of a foreign state are additional parties[.]” That didn’t apply because there were no U.S. citizens on one (the plaintiff side) of the “v.’ See DePuy Orthopædics, 2020 WL 1482384, at *2. Since no provision of the diversity statute provided a basis for jurisdiction – subject matter jurisdiction was lacking:
Section 1332(a) thus does not give federal courts jurisdiction over this fact pattern. That rule dooms diversity jurisdiction in these cases. The complaints allege that the plaintiffs . . . are residents of Spain and citizens of either the United Kingdom or Spain. Yet at least one defendant . . is incorporated in the United Kingdom and has its principal place of business there. On these facts, the plaintiffs cannot satisfy §1332(a)(2) or (a)(3). Section 1332(a)(2) will not work because citizens of foreign states fall on both sides of the dispute and so complete diversity is lacking. And §1332(a)(3) will not work because citizens of different states do not fall on both sides. While some other defendants are citizens of a state, the plaintiffs identify no state-citizen plaintiffs. . . . The district court thus could not exercise diversity jurisdiction.
Id. at *3 (citation omitted). So the actions, as filed did not confer subject matter jurisdiction in the federal courts.
Both sides tried to find some way around this problem. Plaintiffs tried to amend on appeal to add a Magnuson-Moss consumer fraud claim based on federal subject matter jurisdiction. Id. That failed because, (1) “defective allegations of jurisdiction” cannot be cured under 28 U.S.C. §1653 by substantive amendments to complaints; and (2) courts “have rejected arguments that medical devices qualify as “consumer products” covered by the Magnuson-Moss Warranty Act.” Id. at *4 (citations omitted).
Defendants tried to distinguish forum non conveniens situations, but that failed because: (1) the Sixth Circuit “definitively decided that it lacks jurisdiction”; and (2) the conditions imposed by the district court on defendants constituted an independent exercise of jurisdiction that now had no basis. Id. at *5.
Adios. The action was remanded to the district court so that it could be dismissed. Id. at *6. In effect that meant that the defendants ended up getting more than they bargained for. Not only were the actions dismissed, but they were dismissed without any of the preconditions to forum non conveniens (submission to jurisdiction in Spain; waiving the statute of limitations defense) that the defendants had been forced to agree to. The district court could not impose such conditions without any basis for jurisdiction.
The lesson to be learned by this case is the one stated by the Sixth Circuit at the outset, “it ‘behooves parties to be meticulous in jurisdictional matters.’” DePuy Orthopædics, 2020 WL 1482384, at *1 (quoting Prime Rate Premium Financial Corp. v. Larson, 930 F.3d 759, 765 (6th Cir. 2019)). That means many defendants will have another weapon – and a strong one when applicable − for dealing with foreign plaintiffs. We doubt that the DePuy Orthopædics is all that unusual, particularly in MDLs, in including overseas defendants among the roster of parties being sued. There have been a fair number of so-called corporate “inversions” among drug and device manufacturers.
Since foreign plaintiffs usually just copy existing complaints by rote, the situation facing the Sixth Circuit here – all foreigners on the plaintiff side and mixed foreign and domestic corporate defendants – can be expected to recur. If defendants are aware, they can pounce at a time of their choosing (subject matter jurisdiction is never waived) on foreign litigation tourists who make the same mistake as the plaintiffs in DePuy Orthopædics.