We’ve blogged several times before how the logic of the United States Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), dooms nationwide class actions against corporations – except in jurisdictions where they are “at home.” BMS held, essentially, that a non-resident plaintiff could not sue a non-resident corporate defendant over injuries that did not occur in the forum – and that the presence of other, resident plaintiffs asserting the same claims didn’t create personal jurisdiction that otherwise wouldn’t exist. “In order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant’s contacts with the forum,” so that “there must be an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Id. at 1780; see also Id. at 1781 (lack of specific jurisdiction “remains true even when third parties (here, the plaintiffs who reside in California) can bring claims similar to those brought by the nonresidents”); 1783 (personal jurisdiction requirements “must be met as to each defendant over whom a state court exercises jurisdiction”; the “bare fact” that defendant has a “contract[] with” an in-state resident “is not enough”).
But that is exactly what any multi-state class action against a non-resident corporation necessarily does, since a large number of putative class members will necessarily be non-residents as well – with no injuries, and indeed no contact at all, with the forum jurisdiction.
BMS did not involve class actions, but the Court was well aware of the potential impact its ruling might have on purported nationwide classes, since this eventuality was mentioned in Justice Sotomayor’s lone dissent. Id. at 1789 n.4 (BMS “does not confront the question whether its opinion here would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there”).
The class action plaintiffs’ bar – their business model being threatened by BMS – launched a furious counter attack, claiming “we’ve always done it this way,” unnamed class members don’t count, and that class actions are different from other types of litigation. We’ve rebutted these arguments at length in our prior posts and won’t go into them in any detail here. A three sentence thumbnail: One: For decades before Daimler AG v. Bauman, 571 U.S. 117 (2014), everyone thought “continuous and substantial” business supported general jurisdiction – “always done it this way” doesn’t defeat due process. Two: The Rules Enabling Act precludes Rule 23 from creating personal jurisdiction for a claim where, without the class action mechanism, it would not exist. Three: Fed. R. Civ. P. 82 explicitly provides that the rules of civil procedure “do not extend or limit the jurisdiction of the district courts or the venue of actions in those courts.”
But unfortunately, it looks like this personal jurisdiction issue is going to require the Supreme Court, once again, to pick up that two-by-four, and beat the lower courts into compliance with due process as construed in BMS and Bauman.
Two courts of appeals recently looked at that question. The Seventh Circuit, in Mussat v. IQVIA, Inc., ___ F.3d ___, 2020 WL 1161166 (7th Cir. March 11, 2020), succumbed to the “we don’t wanna change, and you can’t make us” mantra of the plaintiffs’ class action bar: “Decades of case law show that this has not been the practice of the federal courts.” Id. at *3. Defendant “urges a major change in the law of personal jurisdiction and class actions.” Id. at *5. Mussat goes on to cite several decisions that ignore absent class members with respect to diversity jurisdiction and venue. Id. at *4. But Mussat ignores a critical difference. Those cases all involved statutes: 28 U.S.C. §1332, 28 U.S.C. §1367 (jurisdiction), and 49 U.S.C. §16(4) (venue under the Interstate Commerce Act). Mussat, however, construes nothing but Rule 23 – and Rule 23 cannot change the substantive rights of the parties or the substantive requirements of constitutional law. The same goes for Fed. R. Civ. P. 4, which Mussat attempts to draft into the expansion of personal jurisdiction for class actions. 2020 WL 1161166, at *5.
We continue to believe that all litigants are entitled to the same due process, and that due process (whether under the 5th or 14th Amendments) applies in the same way to defendants in all litigation – individual (Walden v. Fiore, 571 U.S. 277 (2014)), mass action (BMS), or class actions. No Federal Rule of Civil Procedure can change the stark fact that, if Plaintiff A can’t get personal jurisdiction over Defendant B in Jurisdiction C, then an entire class of Plaintiff As can’t use Rule 23 to sue Defendant B in Jurisdiction C for the exact same thing. Due process, the Rules Enabling Act, and the Federal Rules themselves all forbid it. See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048 (2016) (a court “violate[s] the Rules Enabling Act by giving plaintiffs and defendants different rights in a class proceeding than they could have asserted in an individual action”).
In the second decision, the District of Columbia Circuit decided to punt. Molock v. Whole Foods Market Group., Inc., ___ F.3d ___, 2020 WL 1146733 (D.C. Cir. March 10, 2020). The class plaintiffs in Molock took the extreme position that “[Rule] 23 permits a federal court sitting in diversity to exercise personal jurisdiction over unnamed, nonresident class members’ claims, even if a state court could not.” Id. at *2. That, of course, directly implicated the Rules Enabling Act and Rule 82.
Rather than apply BMS to class actions, a 2-1 panel majority in Molock found prematurity, even though plaintiffs had never raised that issue in the district court:
It is class certification that brings unnamed class members into the action and triggers due process limitations on a court’s exercise of personal jurisdiction over their claims. Any decision purporting to dismiss putative class members before that point would be purely advisory. . . . Motions to dismiss nonparties for lack of personal jurisdiction are thus premature. . . . Because the class in this case has yet to be certified, [defendant’s] motion to dismiss the putative class members is premature.
2020 WL 1146733, at *3 (citations omitted). According to Molock, only after class certification may a defendant challenge a court’s personal jurisdiction over absent class member. Id. (“Only after the putative class members are added to the action − that is, when the action is certified . . . − should the district court entertain [defendant’s] motion to dismiss the nonnamed class members.”). Molock thus requires class action defendants to sacrifice themselves to the prospect of massive classwide liability in order to assert their due process rights under BMS. That is ironic in the extreme, since:
In determining whether personal jurisdiction is present . . . the “primary concern” is “the burden on the defendant.”
BMS, 137 S. Ct. at 1780 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)).
The dissent in Molock recognized that the prematurity argument was ridiculous. “[A] hypothetical named plaintiff would be entitled to extensive class discovery even after an on-point decision by the Supreme Court concluding, as I do, that the principles in [BMS] extend to class actions.” 2020 WL 1146733, at *8 (Silberman, J., dissenting). And the dissent got the merits right, too:
[F]or the question at hand, the party status of absent class members seems to me to be irrelevant. The Court’s focus in [BMS] was on whether limits on personal jurisdiction protect a defendant from out-of-state claims, and a defendant is subject to such claims in a nationwide class action as well. A court’s assertion of jurisdiction over a defendant exposes it to that court’s coercive power, so such an assertion must comport with due process of law. A court that adjudicates claims asserted on behalf of others in a class action exercises coercive power over a defendant just as much as when it adjudicates claims of named plaintiffs in a mass action. . . . And much like the class action mechanism cannot circumvent the requirements of Article III, it is not a license for courts to enter judgments on claims over which they have no power. A defendant is therefore entitled to due process protections − including limits on assertions of personal jurisdiction − with respect to all claims in a class action for which a judgment is sought.
Id. at *10 (citations and footnote omitted). Even if Congress could, by statute, authorize nationwide class actions under state law “Congress has done no such thing.” Id. at *11.
[T]he limits that do follow from applying [BMS] to class actions in federal court are no different from the limits that apply when individual plaintiffs sue on their own behalf, and that must be tolerated under current law. For example, it is true that plaintiffs likely would be unable to bring a unitary nationwide class action against two or more defendants who are subject to general jurisdiction in different states. . . . But similarly an individual plaintiff − not a class action − ordinarily cannot bring these sorts of defendants into a court to answer to claims that have nothing to do with the forum. And procedural tools like class actions and mass actions are not an exception to ordinary principles of personal jurisdiction.
Id. (citations omitted) (emphasis added).
Nuff said. Take it to the Supreme Court.