Greetings, August!  These are called the Dog Days of Summer, but a lot more gets done this month than you might think.  Sure, we usually take our vacation in August.  And yes, there are some especially silly official days in August, e.g. Wiggle Your Toes Day (6th), Sneak Some Zucchini onto Your Neighbor’s Porch Day (8th), Bad Poetry Day (18th), and Frankenstein Day (30th).  But for some reason, August has figured mightily in the history of intellectual property.  Copyrights were filed for The Wonderful Wizard of Oz on August 1, 1900, and for “Hey Jude” on August 30, 1968.  Philo Farnsworth patented the television on August 20, 1930 (and yet August is a month full of reruns). 

 

Who are we kidding?  You are probably on a beach as you read this, or at least wishing you were on a beach.  So we’ll keep today’s discussion short and light.  (Almost as short and light as the district court’s analysis that drew scorn from the Second Circuit in the case we review below.)  After you read this little post, feel free to stick it into a blender with tequila, Grand Marnier, lime juice, and ice, and press “puree.”

 

Earlier this week we mentioned Langan v. Johnson & Johnson Consumer Companies, Inc., – F.3d -, 2018 WL 3542624 (2d Cir. July 24, 2018), a case that said some very useful things about class certification when there are plaintiffs from multiple states.  It is not a drug or device case, but it makes the point that when the laws of many different states are implicated for many different plaintiffs, aggregated treatment might not be such a good idea.  The plaintiff in Langan alleged that baby products were labeled “natural” when they were not. The complaint claimed that this labeling was deceptive and violated the Connecticut Unfair Trade Practices Act (CUTPA) as well as the state consumer protection laws (charmingly referred to as “mini-FTC acts”) of twenty other states, and sought to certify a plaintiff class covering many states.  (Permit us a brief, but utterly characteristic moment of cynicism:  many states = many plaintiffs = huge attorneys’ fees.)     

 

The district court certified a class of consumers who purchased two baby bath products.  (For some reason, baby sunscreens were omitted from the class.)  The plaintiff petitioned for permission to appeal pursuant to Federal Rule of Civil Procedure 23(f), and the Second Circuit granted leave.  The appeal was directed against the district court’s conclusions that (1) the plaintiff had Article III standing to bring a class-action claim on behalf of consumers in states other than Connecticut, and (2) the state laws in the other states are sufficiently similar to support certifying the class. 

 

An appellate court will overturn class certification if the district court abused its discretion.  That is not an easy standard for an appellant to meet.  But it was met here.  The Second Circuit was not receptive to the standing argument, but did conclude that the district court did not adequately analyze whether the multiplicity of applicable laws meant that common legal issues did not predominate over individual legal issues.  The district court found predominance of common issues because the “minor differences” the defendant  identified among the various state consumer protection laws would not “overwhelm the questions common to the class” given that “[a]ll the states have a private right of action for consumer protection violations, allow class actions, and have various other important similarities.”  The district court’s discussion of this issue occupied a single paragraph.  Brevity can be the sole of wit.  But sometimes not. 

 

The Second Circuit held that the issue of the effect of the various state consumer laws on predominance rated a bit more analysis than that solitary paragraph. Under Rule 23(b)(3), the district court has a “duty,” before certifying a class, to “take a close look” at whether the common legal questions predominate over individual ones.  District courts “must do more than take the plaintiff’s word that no material differences exist.”  As you would expect, both parties had submitted “complicated and conflicting summaries of the state consumer protection laws in eighteen states” to the district court.  The district court’s resolution of this dispute wasn’t merely, er, concise (Cursory? Dismissive?).  Worse, in the view of the Second Circuit, the district court did not “sufficiently engage” with the defendant’s “arguments about reliance, instead concluding that ‘it appears’ that none of the states’ high courts have insisted on reliance.  The other identified differences – including whether intent to deceive is required, and whether causation can be presumed – were not discussed.”  The district court’s  opinion was not a “close look.”  It was more like a no look.    

 

Accordingly, the Second Circuit remanded the case to the district court “to conduct a more thorough analysis” and “to carefully analyze the relevant state laws, decide whether subclasses are appropriate, reconsider the predominance questions, and explain in greater detail its conclusion on that question.”  That is no small effort, and perhaps it will force the district court to confront the complexities of the variations among the state consumer laws, and realize that class certification would be a messy mistake. 

 

Just as we finished this post, the summer issue of the ABA section of Litigation publication, Litigation News, plopped on our desk.  There is an article in that issue that is pertinent to today’s post:  S. Carr, “Slamming the Brakes on Nationwide Class Actions,” 43 Litigation News No. 4, pp. 4-5  (Summer 2018).  More beach reading.      

 

The other day Law 360 published a piece, “Bristol-Myers Unlikely To Shake Up Class Action Landscape,” which opined that, “in the end, the effect of Bristol-Myers on the national class action landscape is likely to be minimal.”  One basis for that conclusion was “[I]t is unlikely that a majority of federal appellate courts will find that Bristol-Myers applies in class action cases.”  To support that proposition, the article states:

To date, an apparent majority of district courts, including in the Eleventh, Fifth, Ninth and District of Columbia Circuits, have held that Bristol-Myers has no application to a class action, as opposed to a mass tort action.

The article cites: Becker v. HBN Media Inc., ___ F. Supp.3d ___, 2018 WL 3007922, at *2 (S.D. Fla. June 6, 2018) (“The Court is persuaded [that] . . . Bristol-Myers does not apply to class actions”); Sanchez v. Launch Technical Workforce Solutions LLC, 297 F. Supp.3d 1360, 1369 (N.D. Ga. 2018) (“Bristol-Myers simply reaffirms controlling due-process law and does not apply to federal class actions”); Molock v. Whole Foods Market, Inc., 297 F.Supp.3d 114, 126 (D.D.C. 2018) (“the court agrees with Plaintiffs and concludes that Bristol-Myers does not apply to class actions”); In re Morning Song Bird Food Litigation, 2018 WL 1382746, at *5 (S.D. Cal. March 19, 2018) (“the Court finds Bristol-Myers inapplicable to this suit which involves a class action”); Casso’s Wellness Store & Gym LLC v. Spectrum Laboratory Products Inc., 2018 WL 1377608, at *5 (E.D. La. March 19, 2018) (“the Court does not construe Bristol-Myers as barring its exercise of jurisdiction over the purported nonresident plaintiffs’ claims in the instant putative class action”).

As contrary authority, the article cites two cases: DeBernardis v. NBTY Inc., 2018 WL 461228, at *2 (N.D. Ill. Jan. 18, 2018) (“it is more likely than not based on the Supreme Court’s comments about federalism that the courts will apply BMS to outlaw nationwide class actions . . . where there is no general jurisdiction over the Defendants”), and Wenokur v. AXA Equitable Life Insurance Co., 2017 WL 4357916, at *4 n.4 (D. Ariz. Oct. 2, 2017) (“The Court . . . lacks personal jurisdiction over the claims of putative class members with no connection to Arizona”).

We found that sort of odd, as in our last look at this issue – way back on January 26, 2018 – found the caselaw to stand at 12-2 in favor of applying Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), to curtail multi-jurisdictional class actions where the effect of certification would be a class of non-resident plaintiffs suing a non-resident corporate defendant.  None of the cases cited in the 360 article as restricting BMS due process principles was decided at that point, whereas both of the cases extending BMS due process to all state-law litigation had been and therefore were cited in our prior post.

Could the law really have shifted so drastically over the last few months?

The answer is no.

The first thing we need to do is not compare apples and oranges.  This blog is concerned, first and foremost, with product liability litigation.  That means we’re interested mostly in litigation that has its roots in state – not federal – law and is in federal court due to diversity jurisdiction.  Thus, our most recent post was about “the issue of BMS and nationwide class actions under state law.”  Our previous post likewise examined “our prediction . . . that personal jurisdiction would become a major obstacle to nationwide class actions based on state laws.”  The emphasis added in both instances is to underscore that we’re not concerned with class action litigation brought under federal statutes.  We have a separate post examining the caveat in BMS about federal Due Process under the Fifth Amendment.  Our main takeaway from that post is that due process in diversity cases is analyzed under the Fourteenth Amendment as construed in BMS.

Of the six cases cited in the 360 article, 3½ involved federal statutory claims:  Becker, 2018 WL 3007922 (Telephone Consumer Protection Act), Sanchez, 297 F. Supp.3d 1360 (Fair Credit Reporting Act), Casso, 2018 WL 1377608 (Telephone Consumer Protection Act), and Morning Song Bird, 2018 WL 1382746 (RICO & state consumer protection statutes).  So right there, we subtract three of the six from the article’s list because they don’t involve what we care about.  We also chide the court in Morning Song Bird for failing to distinguish between the state and federal claims in its analysis.

By contrast, almost all (but two) of the cases we cited in our prior posts involve state-law causes of action:

In favor of applying BMS to state-law class actions:

DeBernardis v. NBTY, Inc., 2018 WL 461228 (N.D. Ill. Jan. 18, 2018) (consumer protection); LDGP, LLC v. Cynosure, Inc., 2018 WL 439122 (N.D. Ill. Jan. 16, 2018) (consumer protection and common law); McDonnell v. Nature’s Way Products, LLC, 2017 WL 4864910 (N.D. Ill. Oct. 26, 2017) (consumer protection); Wenokur, 2017 WL 4357916 (D. Ariz. Oct. 2, 2017) (insurance); Spratley v. FCA US LLC, 2017 WL 4023348 (N.D.N.Y. Sept. 12, 2017) (economic loss product liability); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147 (E.D. Pa. July 24, 2017) (consumer fraud); Famular v. Whirlpool Corp., 2017 WL 2470844 (S.D.N.Y. June 7, 2017) (consumer protection and warranty); Demedicis v. CVS Health Corp., 2017 WL 569157 (N.D. Ill. Feb. 13, 2017) (consumer fraud); Bauer v. Nortek Global HVAC LLC, 2016 WL 5724232 (M.D. Tenn. Sept. 30, 2016) (economic loss product liability); Matus v. Premium Nutraceuticals, LLC, 2016 WL 3078745 (C.D. Cal. May 31, 2016) (consumer protection); Demaria v. Nissan N.A., Inc., 2016 WL 374145 (N.D. Ill. Feb. 1, 2016) (consumer protection).

Opposed to applying BMS to class actions:

In re Chinese-Manufactured Drywall Products Liability Litigation, 2017 WL 5971622 (E.D. La. Nov. 30, 2017) (product liability); Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017) (consumer protection).

So, before we commence any new research of our own, the tally is 11 (2d, 3d 6th, 7th, & 9th Circuits) to 4 (5th, 9th & DC Circuits) in favor of applying a single due process standard to personal jurisdiction questions to all courts applying state law.

The research isn’t hard to do.  Look at all cases that cite BMS and mention “class action,” and separate the wheat (state-law claims) from the chaff (everything else).

We found six additional cases supporting application of BMS due process principles to state-laws class actions not cited in the 360 article.  In an OTC drug case, the court declared:

Nothing in Bristol-Myers suggests that it does not apply to named plaintiffs in a putative class action; rather, the Court reaffirmed a generally applicable principle − that due process requires a “connection between the forum and the specific claims at issue.”  That principle applies whether or not the plaintiff is a putative class representative.

Al Haj v. Pfizer Inc., 2018 WL 1784126, at *6 (N.D. Ill. April 13, 2018).  In Chavez v. Church & Dwight Co., 2018 WL 2238191 (N.D. Ill. May 16, 2018), a food-related, consumer fraud action, the court determined that “[n]othing in Bristol-Myers suggests that its basic holding is inapplicable to class actions; rather, the Court announced a general principle − that due process requires a ‘connection between the forum and the specific claims at issue.”  Id. at *10 (citation and quotation marks omitted).  Chavez also rejected the notion that absent class members should simply be ignored:

Further, the Court is unpersuaded by the reliance of some district courts on the fact that the citizenship of unnamed class members is disregarded for purposes of determining diversity − that is, subject matter − jurisdiction.  The question here is not whether this Court has subject matter jurisdiction, but whether, consistent with due process, this Court may exercise specific personal jurisdiction over a defendant with regard to claims that have no connection with this state beyond their similarity to claims asserted by other plaintiffs who are residents of this state.

Id. at *11. See Hickman v. TL Transportation, LLC, 2018 WL 3388307, at *7 & n.2 (E.D. Pa. July 12, 2018) (“Plaintiffs have not presented any reason for distinguishing Bristol-Myers from this [state-law] action”; distinguishing federal-law class actions); In re Samsung Galaxy Smartphone Marketing & Sales Practices Litigation, 2018 WL 1576457, at *2 (N.D. Cal. March 30, 2018) (dismissing non-resident named plaintiffs under BMS); Anderson v. Logitech, Inc., 2018 WL 1184729, at *1 (N.D. Ill. March 7, 2018) (“[A] nationwide class action is not significantly different from a mass tort suit involving a multitude of individual claims.  The putative nationwide class action claims are stricken.”); Howe v. Samsung Electronics America, Inc., 2018 WL 2212982, at *4 (N.D. Fla. Jan. 5, 2018) (“Rule 23 does not expand a court’s personal jurisdiction over a defendant.  Absent a statute providing otherwise, a defendant who is not subject to personal jurisdiction on an individual claim also is not subject to jurisdiction on a class-action claim.”).

What about additional courts refusing to apply BMS to state-law class actions?

Zero, zilch, nada.

Beyond the 3½ cases in the 360 article, we found nothing – at most, plaintiffs managed to delay consideration of personal jurisdiction until some later time, such as class certification.  E.g., Blitz v. Monsanto Co., 2018 WL 1785499, at *2 (W.D. Wis. April 13, 2018).

So the tally now stands at 17 (from the 2d, 3d 6th, 7th (lots), 9th & 11th Circuits) to the same 4 (5th, 9th & DC Circuits).

Moreover, even as to federal statutory class actions, it’s breakeven, at best for class action plaintiffs seeking to evade BMS.  Our additional results are:

Pro-BMS:  Practice Management Support Services, Inc. v. Cirque du Soleil, Inc., 301 F. Supp.3d 840, 864-66 (N.D. Ill. 2018); Garcia v. Peterson, No. CV H-17-1601, 2018 WL 3496740, at *8 (S.D. Tex. July 20, 2018); America’s Health & Resource Center, Ltd. v. Promologics, Inc., 2018 WL 3474444, at *4 (N.D. Ill. July 19, 2018); Jackson v. Bank of America, N.A., 2018 WL 2381888, at *6-7 (W.D.N.Y. May 25, 2018); Horowitz v. AT&T, Inc., 2018 WL 1942525, at *15-16 (D.N.J. April 25, 2018).  That’s five additional cases.

Anti-BMSGarcia v. Peterson, ___ F. Supp.3d ___, 2018 WL 3496740, at *8 (S.D. Tex. July 20, 2018); Tickling Keys, Inc. v. Transamerica Financial Advisors, Inc., 305 F. Supp. 3d 1342, 1350-51 (M.D. Fla. 2018); Morgan v. U.S. Xpress, Inc., 2018 WL 3580775, at *5-6 (W.D. Va. July 25, 2018); Weisheit v. Rosenberg & Assocs., LLC, 2018 WL 1942196, at *5 (D. Md. April 25, 2018).  Four more cases.

We strongly agree, however, with the second premise of the 360 article, that BMS might not have much additional overall effect because it is already “extremely difficult” for plaintiffs to pursue multi-state class actions under the predominance criteria of Rule 23.  Indeed, the recent opinion in Langan v. Johnson & Johnson Consumer Cos., ___ F.3d ___, 2018 WL 3542624 (2d Cir. July 24, 2018), underscores precisely that point:

We are not convinced that the district court here undertook the requisite considered analysis of the variations in state law and the potential need for subclasses that might result from those variations. Although both parties submitted complicated and conflicting summaries of the state consumer protection laws in eighteen states, the district court’s analysis consisted of one paragraph.  In that paragraph, it is our view that the district court did not sufficiently engage with [defendant’s] arguments about reliance, instead concluding that “it appears” that none of the states’ high courts have insisted on reliance. The other identified differences − including whether intent to deceive is required, and whether causation can be presumed − were not discussed. . . .  We believe that more precise and greater depth of analysis is required to comport with the “close look” required by the precedent.  Accordingly, we remand the case to the district court to conduct a more thorough analysis.

Id. at *8 (citations omitted).

The practical difference is, however, significant.  Dismissal for lack of personal jurisdiction is a Rule 12 motion, which may be made before a defendant has to incur the time and expense of discovery.  Application of BMS to class actions is largely a legal question, so we on the defense side have an obligation to our clients to try to get rid of as much of a case as possible as early as possible.  So even if the net result wouldn’t be much different, we’d rather not have to wait until Rule 23 comes into play.

This post comes only from the Cozen O’Connor side of the blog.

 

Plaintiffs’ lawyers wanted to file a class action premised on the recovery of costs spent monitoring and replacing allegedly defective defibrillators manufactured by St. Jude Medical LLC. And they wanted to file it in Illinois. So they recruited a putative class representative, a union health benefits trust, and they filed their complaint, ASEA/AFSCME Local Health 52 Health Benefits Trust v. St. Jude Medical LLC, in Illinois federal court. But they then ran into a problem. St. Jude is not from Illinois. It is a Delaware LLC with Minnesota headquarters. In the post-Bauman personal jurisdiction world, St. Jude is considered to be at “home” only in those two states, not Illinois. So the Illinois court did not have general jurisdiction over St. Jude. Nor did it have specific jurisdiction. The health benefits trust plaintiff, ASEA, didn’t buy the St. Jude defibrillators in Illinois, nor did its beneficiaries have them implanted there. It didn’t matter that St. Jude marketed and sold defibrillators in Illinois. That fact doesn’t create the connection needed for specific jurisdiction. 2018 WL 3022670, at *4 (N.D. Ill. June 18, 2018). So the Illinois court could not exert personal jurisdiction over St. Jude.

But the plaintiffs’ lawyers thought they had a way around that. St. Jude had been recently acquired by Abbott Laboratories. And Abbott is at “home” in Illinois. It is incorporated and headquartered there. So the plaintiffs’ lawyers asked the court to look to St. Jude’s parent, not St. Jude itself, in determining personal jurisdiction. The problem with that approach, however, was that St. Jude is a limited liability company. The very name of that type of business entity—“limited liability company”—tells you how our legal system treats it. Holders of membership interests in a limited liability company are shielded from liability for the company’s debts and judgments. The only way around that general rule is to successfully assert an “alter ego” theory, generally known as piercing the corporate veil. If ASEA could do that, the court could then ignore St. Jude’s independent existence as a company and treat Abbott as the real defendant, thus presumably creating personal jurisdiction. And, while that approach might sound promising for the plaintiffs’ lawyers, the Illinois court very quickly reminded them of how hard—how very, very hard—it is to succeed on an “alter ego” claim.

Since St. Jude Medical LLC was formed in Delaware, Delaware law applied to the “alter ego” analysis. And Delaware law does not lightly lift the corporate veil. It requires an intensive inquiry into whether the company is in fact a sham that is rife with serious financial improprieties and management manipulation intended to defraud the people with which the company does business. It is only found in rare cases:

Under Delaware law, courts disregard the corporate form only in exceptional cases. Determining whether to do so requires an intensive inquiry which takes into consideration (1) whether the company was adequately capitalized for the undertaking; (2) whether the company was solvent; (3) whether corporate formalities were observed; (4) whether the controlling shareholder siphoned company funds; and (5) whether the company functioned as a façade for the controlling shareholder. In addition to these factors, Delaware’s courts have required an element of fraud or similar injustice in order to pierce the corporate veil.

Id. at *3 (citations omitted). And because an alter ego claim is generally based in fraud, courts often apply a heightened pleading standard.

So pleading an “alter ego” claim is extraordinarily difficult. ASEA did not come close. Rather than plead particulars of a sham financial structure and non-existent management, ASEA pointed to surface level actions and statements by St. Jude’s parent, Abbott, all of which are the types of actions ordinarily seen in the workaday world of a corporate holding structure.

For instance, plaintiff alleged that Abbott itself claimed responsibility for the recall of the defibrillators, issued updates on the recall using the Abbot name, communicated with the FDA using the Abbott name, took over the defibrillator manufacturing facility, advertised that “St. Jude Medical is now Abbott,” shared officers, managers and facilities with St. Jude, and even stated that St. Jude’s operations are controlled by Abbott. Id. These allegations are based on the faulty premise that Abbott’s “control” of St. Jude creates an alter ego claim. It does not. Abbott owns St. Jude. It is expected to control it. “Controlling shareholder” is presumed in the very Delaware test quoted above. And so exertion of control does not satisfy the alter ego inquiry. The real test is whether St. Jude was operated, or controlled, as a sham entity with inadequate capitalization and make-believe management for the purpose of defrauding others. And, as the court held, the plaintiff’s allegations addressed none of this:

These allegations do not call into question St. Jude’s capitalization, solvency, or recognition of corporate formalities. Cf. City of Greenville, Ill. v. Syngenta Crop Prot., Inc., 830 F. Supp. 2d 550, 563 (S.D. Ill. 2011) (piercing the corporate veil where evidence showed that the subsidiary company’s board unanimously rubber-stamped the parent company’s recommendations on a regular basis without discussion and where the subsidiaries employees were sometimes directly managed by employees of the parent company). Nor do they suggest that Abbott was siphoning or diverting funds from St. Jude. At most, the allegations in the complaint suggest that Abbott sometimes spoke on behalf of St. Jude or sometimes represented that it had succeeded St. Jude. See LaSalle Nat. Bank v. Vitro, Sociedad Anonima, 85 F. Supp. 2d 857, 865 (N.D. Ill. 2000) (Nordberg, J.) (“Personal jurisdiction is based on actual evidence of control … rather than on a corporation’s general descriptions. Promotional statements made on a public website do not precisely convey the operative corporate structure.”). Absent more, however, the allegations do not suggest that unfairness or injustice has resulted from the relationship between St. Jude and Abbott, as would be necessary to justify piercing the corporate veil under Delaware law. Doberstein v. G-P Indus., Inc., No. CV 9995-VCP, 2015 WL 6606484, at *4 (Del. Ch. 2015).

Id.

With the plaintiff unable to pierce the corporate (really, LLC) veil, the Illinois court was back to where it started, which is with no personal jurisdiction over St. Jude: “Accordingly, this Court does not have general jurisdiction over St. Jude because it is not “at home” in the state of Illinois. Id. It dismissed the action for lack of personal jurisdiction.

We expect this to be the ordinary outcome in attempts by plaintiffs’ lawyers to establish personal jurisdiction through an alter ego theory in drug and device cases. Not only is such a claim extraordinarily hard to plead and harder to prove, but drug and device cases usually involve large pharmaceutical and medical device companies with well-established, well-advised corporate structures. Under those circumstances, it will be rare that plaintiffs’ lawyers will be able to piece together the type of extraordinary facts necessary to successfully plead and prove an alter ego claim.

This DDL blogger happens to have a relatively new teenager in the house. And said teen has been working on an assignment related to the novel by Lois Lowry, “The Giver.” If you are unfamiliar with the book or the more recent movie adaptation (and if you only know the movie, we recommend the book as the former doesn’t dig deep enough into the source material’s thought-provoking ideas), it is about a seemingly utopian society without war, poverty, pain, or suffering. This state of perfection is achieved through sameness. Everyone dresses the same, speaks the same, acts the same. The goal is to eliminate all conflict and for no one to feel uncomfortable. And to achieve this, free will and freedom of choice are non-existent.

The book’s themes have made for some very interesting dinner table debates about the benefits and drawbacks of sameness. While we’ve managed to identify the obvious benefits, we also always find the benefit comes at a price that we are typically not willing to pay. Sacrificing the ability to feel love to also not have to endure feeling pain. Sacrificing human life so that there is no hunger. So, in this DDL household, sameness has come under considerable attack and it is no surprise that individuality is being championed by the teen (and parent too, with some limitations).

And as we transition from home life to work life, we couldn’t help but acknowledge the parallel as we again find ourselves the advocates of individuality over sameness. This time it’s about a flawed class rather than a dystopian society.

In Andre v. Alere, 2018 U.S. Dist. LEXIS 69045, *3 (S.D. Cal. Apr. 24, 2018), putative class representatives allege that defendants’ marketing of its INRatio products was deceptive and misleading and that defendants are therefore liable under various state’s consumer protection laws. The INRatio products are handheld devices used to monitor blood clotting time in people taking warfarin. Class certification was originally denied back in December as to both a nationwide class and as to alleged state-specific sub-classes. Id. at *4-5. Plaintiffs sought reconsideration as to the six sub-class states (Colorado, Florida, Georgia, Maryland, New York, and Pennsylvania). They allege that based on new facts they can satisfy Federal Rule of Civil Procedure 23(b)(3)’s predominance requirement as to the learned intermediary doctrine, statute of limitations, and damages. The court disagreed.

For a class to be certified, Rule 23(b)(3) requires that “the question of law or fact common to class members predominate over any questions affecting only individual members.” And the court’s analysis is a “rigorous” one that can extend beyond the pleadings. Id. at *6.

Plaintiffs, for the first time in their reply brief, argued that the learned intermediary doctrine did not apply to their claims for several reasons. First, they alleged it does not apply because they are alleging a design defect claim not a failure to warn claim. But, that argument didn’t align with the allegations of their complaint which were about omissions and representations – i.e. failure to warn. Id. at *14. Nor did plaintiffs’ cite any authority for learned intermediary not applying to design defect claims. Id. Next plaintiff argued that the learned intermediary doctrine doesn’t apply where only economic injuries are sought. But again, they offered no legal support for their contention. Id. Finally, plaintiffs argued that because the INRatio product is user-operated, the doctrine doesn’t apply. On this point, it appears plaintiffs and defendants submitted competing examples of how prescribed medical devices that involve some patient operation are treated and concluded plaintiff’s argument was not persuasive. Id. at *15. Regardless of whether the patient has to be the one to use the device daily, it still had to be prescribed by his/her physician warranting application of the learned intermediary doctrine.

So, since the learned intermediary doctrine is applicable, Plaintiffs had to argue that it is subject to “common proof.” They did this by alleging that defendants “failed to warn any physicians.” Id. at *7-8 (emphasis added). But, as defendants argued, the inadequacy of the warning is only part of the equation. Plaintiffs must also show that “the inadequate or lack of warnings were the proximate cause of Plaintiffs’ injuries.” Id. at *8. The court cites at least one case from each of the six states at issue to support the proximate cause arm of the learned intermediary rule. Id. at *10-11. What all of those cases have in common is the conclusion that “proximate cause determination will ultimately lead to individual inquiries into each doctor’s experience with the product.” Id. at *12. Inquiries such as the extent of the physician’s knowledge of the risks and side effects and the source of that knowledge; and whether the physician stands by his/her prescribing decision; and the physician’s individualized medical decision based both on his/her knowledge of the product and of the patient. Id. at *12-13. While warning adequacy might be subject to common proof, individuality predominates on the issue of specific, proximate causation. Also, plaintiffs couldn’t point to a single case where class certification was granted involving the learned intermediary doctrine.

Class certification was also denied due to the lack of predominance as to damages and the statute of limitations. Again, individuality can’t be ignored.

On damages, plaintiffs put forth a full-refund model under California law and argued that it satisfied predominance and that a state-by-state analysis was not necessary. Id. at *16-17. The court, however, found that the cases plaintiffs relied on were not that black and white. See id. at *17-19 (analyzing plaintiff’s cases).      It was not enough to summarily conclude that predominance was satisfied as to all because it was satisfied as to some. The required “rigorous analysis”

is not satisfied by merely arguing that courts in some of the six states allow for a full refund model. Plaintiffs have failed to specifically demonstrate that each of the six sub-class states’ consumer protection statute and claims for implied breach of warranty in four sub-class states are connected to their theory of damages or that these state law causes of action damages provide for a full refund recovery.

Id. at *21. Plaintiffs had to show sameness among the six states, which it failed to do.

As to statute of limitations, plaintiffs argued that because each of the six states recognizes equitable tolling and/or the discovery rule, “then necessarily common proof will prevail over individualized questions” because no plaintiff knew until the product was recalled that the product was defective. Id. at *22-23. But plaintiffs ignore that both equitable tolling and the discovery rule require consideration of whether the plaintiff acted with due diligence – an individualized inquiry. Id. at *23. The court gives an example from the complaint of one of the putative class representative’s experiences with the device that should have alerted him to an issue before recall and points out that plaintiffs have not addressed how equitable tolling or the discovery rule would apply in that situation. Id. at *24. Since it cannot be determined if the statute would be tolled for all plaintiffs from the date of recall, individual issues predominate over common ones.

In “The Giver” sameness is a metaphor for the lack of truth and diversity. The destroyer of creativity, free will, joy, happiness, and love. The things that make life worth living. In DDL world individuality may not be the meaning of life, but it’s enough to ward off class actions which certainly makes us happy.

Last September, we criticized a 2-1 decision out of the Ninth Circuit, In re Google Referrer Header Privacy Litigation, 869 F.3d 737 (9th Cir. 2017), calling it a “poster child” for cy pres abuse in class actions.  Read the entire post for all the gory details, but briefly, the class action settlement in Google Referrer:

  • Let counsel have a whopping 38% of the settlement as fees.
  • Declared the entire settlement “non-distributable” because, even without opposition, neither the class members nor their damages could be determined.
  • Gave 100% of the settlement funds as cy pres to six uninjured charities, and 0% to the 129 million estimated supposedly injured class members.
  • All three of the law school cy pres recipients had ties to counsel in the case.
  • The cy pres recipients were to educate and publicize supposed internet privacy issues – in other words, to act as a breeding ground for further litigation of this sort.

We closed that post by recommending, “[w]e think this is a case that should go to the United States Supreme Court.”  We don’t say that often (only about DesianoNeurontinBartlett, Bristol Myers-Squibb, and Fosamax, that we can recall offhand) – six times in eleven years.

Well, we’re pleased to report that yesterday the United States Supreme Court accepted a certiorari petition in the case, rechristened as Frank v. Gaos, No. 17-961, 2018 WL 324121 (U.S. Apr. 30, 2018).  The SCOTUSBlog story is here.  The order granting certiorari is here.  The question presented is:

Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be “fair, reasonable, and adequate.”

See Certiorari petition.  We are cautiously optimistic that the result in Frank will be the disavowal or severe limitation of cy pres distributions in class actions.

We’ve always been against the concept of class action tolling:  that merely by filing a class action – the class action does not have to have any merit – a class action lawyer magically stops the running of the statute of limitations for everybody in the class.  To us, this gives Fed. R. Civ. P. 23 a substantive effect, which violates the Rules Enabling Act (you can read more about that, here, and here, in other contexts).  It also confers an automatic one-way benefit on putative class members, although in other circumstances the class action lawyers perpetrating this sleight of hand will cheerfully tell courts that “no class exists before certification.”

The Supreme Court first allowed class action tolling in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), an antitrust case, ostensibly to “further[] the purposes of litigative efficiency and economy,” so that no “protective litigation” (by plaintiffs fearing their own claims would be time barred) would clog up the federal courts.  Id. at 553-54.  The impact on defendants would be minimal, suggested the majority, because “[d]uring the pendency of the [certification] determination . . ., which is to be made ‘as soon as practicable after the commencement of an action,’ potential class members are mere passive beneficiaries.”  Id. at 552 (quoting former Rule 23(c)(1)).

We had hopes that this rule, being “specifically grounded in policies of judicial administration,” Smith v. Bayer Corp., 564 U.S. 299, 314 n.10 (2011), would be abolished after its encouragement of inequitable gamesmanship became clear, and once other, less prejudicial methods of judicial administration to address protective filings – such as the inactive dockets widely used in asbestos litigation – were invented.  However, the Court dodged abolition in California Public Employees’ Retirement System v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017), holding only that American Pipe did not apply to statutes of repose . Id. at 2052-53.  The Court did, however, point out that concern about protective filings was much “overstated.”  Id. at 2054 (“courts, furthermore, have ample means and methods to administer their dockets and to ensure that any additional filings proceed in an orderly fashion”).

In any event, all of the Supreme Court’s class action tolling cases, American Pipe, supra, Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), and Chardon v. Soto, 462 U.S. 650 (1983), involved successive suits in the same jurisdiction – federal-question cases brought in federal court.  So-called “cross-jurisdictional” class action tolling, is much worse, and has intruded at times directly into our sandbox (although thankfully, class action have largely gone extinct in personal injury cases).  As we said in an earlier post:

“Cross-jurisdictional” tolling, on the other hand, refers to allowing a failed class action filed in jurisdiction “A” to toll the statute of limitations on an individual action later filed by a putative class member in jurisdiction “B.”  In a lot of cases that means a state court action filed after a failed federal court class action.  In other cases it means filing an individual action in one state after class certification is denied in a different state.  In either case, the policy of avoidance of protective filings doesn’t work.  In fact, the opposite is true.  A liberal tolling rule only invites more suits to be filed in the jurisdiction that has it.  Thus, even on its own terms, cross-jurisdictional tolling based upon meritless class actions doesn’t make sense.

Thus, going back to the Bone Screw litigation, we have vehemently criticized cross-jurisdictional class action tolling.  Back then plaintiffs asserted that statutes of limitations all over the country were tolled by a baseless class action, In re Orthopedic Bone Screw Products Liability Litigation, 1995 WL 273597 (E.D. Pa. Feb. 22, 1995), in which certification was denied and no appeal even attempted.  Even this relatively quick adjudication took almost 14 months (from 12/30/93, when the class action was filed until denial of certification on 2/22/95).  We litigated cross-jurisdictional tolling to favorable results in Maestas v. Sofamor Danek Group, 33 S.W.3d 805, 808-09 (Tenn. 2000), and Wade v. Danek Medical, Inc., 182 F.3d 281, 287-88 (4th Cir. 1999), while also appearing as amicus curiae in Portwood v. Ford Motor Co., 701 N.E.2d 1102, 1104 (Ill. 1998).  Given that cross-jurisdictional class action tolling inherently involves litigation in one state attempting to toll the statute of limitations in another state, this issue can also be framed as one implicating states-rights, and where one of the courts is federal, federalism.

Over time most states have recoiled from cross-jurisdictional class action tolling.  Largely because of our Bone Screw experience, we maintain a scorecard on the issue.  According to our list, 35 jurisdictions (Alabama, Alaska, Arizona, Arkansas, California, Colorado, DC, Florida, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wyoming) reject cross-jurisdictional class action tolling; one state (Michigan) allows it where the original class was certified; and six or seven states (Delaware, Hawaii, Montana, New Jersey, Ohio, West Virginia, and maybe Connecticut) allow tolling even for meritless, out-of-state class actions.  We do not credit a couple of LIBOR decisions in which that court blatantly ignored state law.

One of the states that does recognize cross-jurisdictional class action tolling is Delaware.  See Blanco v. AMVAC Chemical Corp., 67 A.3d 392, 398-398 (Del. 2013).  A recent Delaware Supreme Court decision throws into sharp relief why such tolling is a bad idea, and offensive not only to the statute of limitations, but also to the very judicial efficiency considerations that such tolling purports to further.  See Marquinez v. Dow Chemical Co., ___ A.3d ___, 2018 WL 1324178 (Del. March 15, 2018).  Marquinez is a poster child for delay – the very sort of stale and desultory litigation that is why statutes of limitations exist in the first place.  “The plaintiff-appellants (“the plaintiffs”) worked on banana plantations in Costa Rica, Ecuador and Panama at various times in the 1970s and 1980s.”  The first purported class action wasn’t filed until 1993, in Texas.  Marquinez, 2018 WL 1324178, at *2.  Then the following things happened:

  • Removal to federal court on the basis of the Foreign Sovereign Immunities Act (one defendant was owned by a foreign government).
  • MDL consolidation in federal court.
  • Dismissal on forum non conveniens in 1995, with a “return jurisdiction” caveat – if any foreign country ruled no jurisdiction, then plaintiffs could come back to Texas.
  • The forum non conveniens ruling denied as moot all pending motions, including class certification.

Id. at *1-2.  That’s two years of post-litigation delay – between 1993 and 1995 class certification was never ruled upon.  Don’t forget that the “1970s and 1980s” claims were already at least 13 years old before the initial suit was filed.

Plaintiffs really didn’t want to be in federal court – a sure sign of substantively weak litigation.  They appealed the exercise of Foreign Sovereign Immunities jurisdiction all the way to the United States Supreme Court.  Id. at *2.  that appeal took until 2001.  Id.   Then the plaintiffs, accompanied by their lawyers, reluctantly went home.  “[T]hey were unable to prosecute their claims in other countries” so they returned to Texas, where they sought to resurrect their claims under the “return jurisdiction” caveat.  Id.  While that was going on, the Supreme Court rejected Foreign Sovereign Immunities jurisdiction in another case involving identical litigation in another state.  See Dole Food Co. v. Patrickson, 538 U.S. 468 (2003).

So in 2003 – ten years after the original class action was filed, and between 23 and 33 years after the actual events claimed in the suit, the case was remanded to Texas state court.  Then the following things happened:

  • Defendants sought to have the case thrown out due to plaintiffs’ failure to comply with prerequisites to their exercise of “return jurisdiction” rights.
  • The “return jurisdiction” provision, along with the entire forum non conveniens ruling, was declared void for want of subject matter jurisdiction.
  • Plaintiffs again moved for class certification, this time under Texas state law.
  • Defendants removed to federal court a second time, under CAFA.
  • CAFA removal failed because the litigation pre-dated CAFA.

Marquinez, 2018 WL 1324178, at *2-3.  Finally, “[o]n June 3, 2010, class certification was denied in Texas state court.” Id. at *3.

At this point plaintiffs had had enough of Texas.  They started creating satellite litigation.  In mid 2011 one plaintiff filed an individual action in Delaware state court and others filed a class action in federal court in Louisiana.  Id.

Finally, less than a week before two years elapsed after the Texas denial of class certification – on May 31, and June 2, 2012 – two new class actions were filed in Delaware federal court.  Id.

But….

Plaintiffs had screwed up, or so it appeared.  The identical suit being already pending for a year in Louisiana, the Delaware federal court dismissed the Delaware action under the “first filed rule.”  Id.  That was appealed, and eventually reversed by the Third Circuit sitting en banc.  See Chavez v. Dole Food Co., 836 F.3d 205 (3d Cir. 2016) (en banc).

While that was going on, the remaining plaintiffs (those not already litigating in Louisiana (after fleeing Texas)) were dismissed on the statute of limitations.  The District Court in Delaware “h[e]ld[] that class action tolling stopped in July 1995 when [the original court] dismissed the case for forum non conveniens.”  Id. That was in 2014.  Those plaintiffs appealed.  The Third Circuit punted the matter, on certification, to the Delaware Supreme Court.

As in Blanco, the Delaware Supreme Court seemed unduly frightened by the prospect of “placeholder” suits:

If members of a putative class cannot rely on the class action tolling exception to toll the statute of limitations, they will be forced to file “placeholder” lawsuits to preserve their claims. This would result in wasteful and duplicative litigation.

Marquinez, 2018 WL 1324178, at *4 (quoting Blanco, 67 A.3d at 395).

Did the court not look at its own description of this litigation’s ridiculously long procedural history?  Between 1993 when the action was first filed, and denial of class certification in mid-2010 not a single “placeholder” suit was filed in Delaware state or federal court.  That was despite plaintiffs’ extended lack of success in advancing the litigation.

Although nowhere mentioned in Marquinez, the Delaware statute of limitations for tort cases is two years.  10 Del. C. §8119.  Making a mockery of that legislative judgment, Marquinez held that the pendency of a meritless class action can toll the statute of limitations for many multiples of that two-year period – here 17 years, or 8½ times the statutory period – because a “clear and unambiguous” rule is necessary:

[A] clear and unambiguous rule avoids uncertainty over the starting and ending dates for statutes of limitation in cross-jurisdictional class action tolling cases.  Thus, we adopt a rule that furthers the certainty interest − cross-jurisdictional class action tolling ends only when a sister trial court has clearly, unambiguously, and finally denied class action status.

Marquinez, 2018 WL 1324178, at *5.

The mind boggles.  Seventeen years hardly corresponds to the assumption in American Pipe that class certification will be decided “as soon as practicable after the commencement of an action,” and indeed those words don’t even appear in Rule 23 any longer.  Justice Stewart, who wrote American Pipe, would no doubt be appalled.  Seventeen years is more than half the time of Justice Stewart’s tenure on the Supreme Court.

The Delaware statute itself imposed a “clear and unambiguous” rule – two years.  Is the Delaware Supreme Court going to abolish the discovery rule, fraudulent concealment and all the other factbound doctrines that toll the statute of limitations in certain situations, and thus have created uncertainty?  Defendants argue for “clear and unambiguous” rules all the time (e.g., product identification, affirmative prescriber warning causation testimony, relative risk of two).  Why here, in a situation that is certain to make Delaware the dumping ground for Latin American toxic tort litigation.

And is this rule even “clear and unambiguous”?  The Texas plaintiffs never appealed the 2010 class certification denial.  What if they had?  Does “sister trial court” then morph into an further need for certainty, tolling the statute of limitations until the first state’s denial has been “clearly, unambiguously, and finally” been affirmed on appeal?

Marquinez demonstrates why courts should never start down the slippery slope of cross-jurisdictional class action tolling.  Right after proclaiming its “clear and unambiguous” rule, the decision plunges into the minutiae of the Texas litigation, spending seven paragraphs parsing through what the Texas court’s “return jurisdiction” language – in an order void for lack of subject matter jurisdiction – must have meant.  Marquinez, 2018 WL 1324178, at *6-7.  In so doing Marquinez ended up disagreeing with two other courts also forced into that exercise by plaintiffs’ satellite litigation.  Id. at *8-9 (“respectfully disagree[ing] with the Fifth Circuit’s and the Hawai’i Supreme Court’s application of class action tolling”).  If Delaware had rejected cross-jurisdictional class action tolling in the first place, none of that Talmudic exercise would have been necessary.

Judicial efficiency is hardly furthered by forcing the courts of one state to comb through the proceedings of litigation filed elsewhere in an effort to figure out when exactly plaintiffs should not be required to rely on an arguably meritless class action filing for fear that it won’t be certified.  As Marquinez demonstrates, that exercise itself can lead to disparate results.  And now what happens?  The litigants get to engage in the costly, and probably impossible, task of piecing together what happened in the forests and fields of Latin America 40-some years ago when Nixon was president and we though Watergate was as bad as things could get.  There are some cases where no litigation is the correct answer.  If the courts of these plaintiffs’ home countries weren’t willing to entertain this litigation, there is no good reason for Delaware, or any other state, to become the dumping ground for the Third World’s unwanted lawsuits.  Like Justice Stewart, we know a bad result when we see it.

Maybe it doesn’t matter.  Maybe, between Bauman and BMS, would-be non-resident class-action plaintiffs won’t be able obtain personal jurisdiction to file the same lawsuit over and over again in different jurisdictions (here, at least Texas, Louisiana, and Hawai’i before Delaware).  Maybe courts will resort to forum non conveniens to throw these Latin American cases out for good.  See Aranada v. Philip Morris, USA, Inc., ___ A.3d ___, 2018 WL 1415215 (Del. March 22, 2018) (similar overseas chemical exposure case pitched for inconvenience, even though another forum not available).  Maybe the Supreme Court will again re-examine American Pipe, and at least do away with piling meritless class actions on top of other meritless class actions.

But conversely, Bauman and BMS also mean that Delaware, as the “home” of many large corporations, will be assuming outsized importance in the litigation landscape.  Delaware courts are going to have enough to do without being required to sift through the detritus of other jurisdictions’ failed class action litigation.

Finally, there’s a message here for any other jurisdiction considering cross-jurisdictional class action tolling – don’t go there.  Don’t go anywhere near there.

 

 

We have written a lot about personal jurisdiction and class actions, and we have particularly questioned how, after BMS, anyone could proceed with a nationwide class action applying state law in a forum where there is no general personal jurisdiction over the defendant.  We are not the only ones posing this question, but as has so often been the case, Bexis has led the way with two extraordinarily useful posts surveying the cases.  You can review these must-read posts here and here.  You can also get Bexis’ Washington Legal Foundation white paper on the topic here.

The issue is whether a court can exercise specific personal jurisdiction over claims asserted on behalf of out-of-state class members.  Take for example a putative nationwide class action in which a California class representative sues a New York defendant in California in connection with goods purchased in California.  Can this class representative purport to represent absent class members who reside and purchased goods outside California?  We think the answer clearly is no, since those non-Californians cannot establish specific personal jurisdiction over the New York defendant in California.

Most courts agree with us, and judging from our prior posts, the issue is often decided on a motion to dismiss. But is a motion to dismiss the only way to invoke BMS and its limitations on specific personal jurisdiction in a nationwide class action?  If you move fast, you can probably use BMS to oppose class certification, which is what happened last week in another Illinois case, Practice Management Support Services, Inc. v. Cirque du Soleil, Inc., No. 14 C 2032, 2018 WL 1255021 (N.D. Ill. Mar. 12, 2018).  In Practice Management, an Illinois company filed a nationwide class action in Illinois under the Telephone Consumer Protection Act (“TCPA”) against a Canadian company after received a fax advertising a circus performance in Illinois.

The case had been proceeding in federal court for several years, apparently including briefing on the plaintiffs’ motion for class certification, when the Supreme Court decided BMS.  The defendants therefore filed a supplemental brief asserting that BMS “prevents this Court from asserting personal jurisdiction over the Defendants with respect to the claims of putative class members located outside of Illinois” and that the case was therefore relevant to class certification. Id. at *15.

The district court agreed with the defendants, and its marquee holding is that BMS’s limitations on specific personal jurisdiction apply to class actions in federal court.  After citing other district judges who had so found, the district court made this broad ruling:

This Court agrees with these courts. Indeed, it [is] not clear how [Plaintiff] can distinguish the Supreme Court’s basic holding in Bristol-Myers simply because this is a class action.  The Supreme Court has emphasized that “Rule 23’s [class action] requirements must be interpreted in keeping with Article III constraints, and with the Rules Enabling Act, which instructs that the [federal court] rules of procedure ‘shall not abridge, enlarge, or modify any substantive right.’” Amchem Prods. v. Windsor, 521 U.S. 591, 592 (1997) . . .  The Supreme Court held in Bristol-Myers that the Fourteenth Amendment’s due process clause precludes nonresident plaintiffs injured outside the forum from aggregating their claims with an in-forum resident. Bristol-Myers, 137 S. Ct. at 1781.  Under the Rules Enabling Act, a defendant’s due process interest should be the same in the class context.

Id. at *16. This reasoning is essentially bulletproof, and the district court’s holding is bookended by another significant ruling—that the defendants did not waive their personal jurisdiction challenge. Id. at *17.  Remember, the defendants litigated this case in the Illinois federal court for years, and they did not raise personal jurisdiction in their answers.  But here, BMS was a game changer.  The district ruled that a personal jurisdiction challenge would have been futile before BMS and that the defendants “timely raise[d] their personal jurisdiction defense in a motion that timely followed the Supreme Court’s decision.” Id. Because other defendants sued before BMS are surely in a similar position, the district court’s no-waiver holding should not be overlooked.

If you stopped reading here, you would have the gist of Practice Management.  But the plaintiffs made other arguments, too.  They argued that the district court could exercise jurisdiction over a nationwide class under Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), where the Supreme Court held that courts could exercise personal jurisdiction over absent class member’s claims without violating the class members’ due process rights. Id. at *16.  But that is apples and oranges.  The issue in Practice Management was the defendants’ due process rights.  An absent class member has the right to notice and opt out before being bound to a class judgment.  A defendant whose objection to jurisdiction is overruled is being compelled to answer the out-of-staters’ claims and has no choice.  That’s a big due process difference.

The plaintiffs also argued that BMS left open the question of whether the Fifth Amendment’s due process clause imposed the same restrictions on the exercise of personal jurisdiction by a federal court.  We are aware of a handful of district judges who have bought this argument, and suffice it to say that we do not agree that due process under the Fifth Amendment is fundamentally different from due process under the Fourteenth Amendment when it comes to personal jurisdiction.  In Practice Management, it did not matter:  The TCPA does not authorize nationwide service of process and looks to state law for limitations on personal jurisdiction in any event. Id. at *16.  Thus, BMS applies.

The district court therefore followed BMS and ruled that it did not have jurisdiction over nonresidents’ claims:  “Because these nonresidents’ claims do not relate to defendants’ contacts with Illinois, exercising specific personal jurisdiction over defendants with respect to them would violate defendants’ due process rights.” Id. at *18.

The practical impact of this ruling is that this class action is now limited to Illinois only. In the portion of the order that we have not discussed, the district court granted class certification.  But instead of a class of fax recipients from anywhere, the district court redefined the class to include Illinois residents who received faxes in Illinois.  Maybe that is small consolation, but it is consolation nonetheless, and by raising their challenge when they did, the defendants created a published order on personal jurisdiction that will help us all.  We will be sure to thank them when the circus is over.

Class actions hold our interest, even though we do not see them all that often anymore in the drug and medical device space. Maybe we are the rubbernecking motorists who can’t resist slowing down to gaze at someone else’s fender bender.  Maybe we are the children at the zoo who rush to the reptile house to gawk at creatures charitably described as unsightly.  Or maybe it’s because class actions are such odd ducks.  Our civil litigation system is conceived around concepts of due process.  Yet, a class action defendant can be compelled under threat of state authority to pay money to people who have never proved a claim or an injury, and an absent class member can be bound to the result of a proceeding in which he or she has never appeared.  What could possibly go wrong?

We expect many of you are like us, so we have gathered here a trio of significant class action opinions that caught our eye over the last few weeks. All hail from California.  All are important for unique reasons.  None involves drugs or medical devices, but the opinions are relevant generally to class settlements, expert opinion, and standing to appeal—topics that readily cross over.  So, without further delay, here we go.

Nationwide Class Settlements and Choice of Law: In re Hyundai and Kia Fuel Economy Litig., No. 15-56014, 2018 WL 505343 (9th. Cir. Jan. 23, 2018).  We will start with the opinion that has received the most attention and is probably the most important—the Ninth Circuit’s opinion reversing a nationwide class settlement because the district court did not consider the impact of varying state law. Id. at **12-13.  The procedural history for these multiple class actions resulting in a nationwide settlement is long and dizzying.  The important point is that the district court certified a settlement class that offered benefits to class members (automobile purchasers allegedly defrauded by representations regarding fuel mileage) and substantial fees to class counsel.

However, in certifying the class, the district court overly relied on a well-worn principle—that the inquiry on whether common issues of law predominate is relaxed with a settlement class.  Because the district court was certifying a class for settlement only, it ruled that a choice-of-law analysis was unnecessary. Id. at *11.

That was the district court’s mistake. As the Ninth Circuit explained:

Because the Rule 23(b)(3) predominance inquiry focuses on “questions that preexist any settlement,” namely, “the legal or factual questions that qualify each class member’s case as a genuine controversy,” a district court may not relax its “rigorous” predominance inquiry when it considers certification of a settlement class.  To be sure, when “[c]onfronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, for the proposal is that there be no trial.” But “other specifications of the Rule—those designed to protect absentees by blocking unwarranted or overbroad class definitions—demand undiluted, even heightened, attention in the settlement context.

Id. at *5 (emphasis added, citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997)).  The district court’s error therefore was threefold.  First, it failed to conduct a choice-of-law analysis to determine the controlling substantive law. Id. at *12.  Second, the district court failed to acknowledge that laws in various states materially differed from California law.  Third, the district court did not consider whether material variations in state law defeated predominance under Rule 23(b)(3).

This is not to say that the district court lacks discretion on remand to certify another nationwide settlement class. We do know, however, that the district court will have to subject any newly proposed nationwide settlement to choice-of-law analysis and will have to decide whether state laws differ and whether any differences defeat the predominance of common legal issues.

Class Certification and Admissibility of Expert Opinions: Apple, Inc. v. Superior Court, No. D072287, 2018 WL 579858 (Cal. Ct. App. Jan. 29, 2018). Our second case held that a trial court can consider only admissible expert opinion evidence submitted in connection with a class certification motion and that California has only one standard for admissibility of expert opinion, Sargon Enterprises, Inc. v. University of So. Cal., 55 Cal. 4th 747 (2012).  In other words, Sargon applies at the class certification stage, a point about which we have often wondered, but for which we never had a clear answer.

Until now.  We wrote about Sargon here when it came out in 2012.  The opinion moved California away from its unique “Kelly/Leahy” test and toward a more Daubert-like standard.  In the new California Court of Appeal case, the trial court certified a class of consumers, but expressly refused to apply Sargon to the declarations of the plaintiffs’ experts. Id. at *1.  You will not be surprised to learn that the experts in question were damages experts who offered the opinions that damages could be calculated on a classwide basis.  Id. at **2-5.  Over multiple rounds of briefing, the defendant objected to the opinions and urged the trial court to apply Sargon.  The plaintiffs resisted.

In the end, the trial court ruled that “[t]he issues [the defendant] raises with respect to the materials Plaintiffs’ experts will rely upon in forming their opinions and whether Plaintiffs’ experts’ analyses rely on accepted methodologies and whether the analyses are correct are issues for trial.” Id. at *6.  The court therefore certified the class. Id.

In reversing, the California Court of Appeal issued a very straightforward holding:

[T]he court may consider only admissible expert opinion evidence at class certification.  The reasons for such a limitation are obvious.  A trial court cannot make an informed or reliable determination on the basis of inadmissible expert opinion evidence.  And certifying a proposed class based on inadmissible expert opinion evidence would merely lead to its exclusion at trial, imperiling continued certification of the class and wasting the time and resources of the parties and the court.

Id. at *8 (internal citations omitted). The Sargon case involved expert opinion presented at trial, but the Court of Appeal saw “no reason why Sargon should not apply equally in the context of class certification motions.” Id. at *9.

Moreover, although the plaintiffs argued that the result would have been the same even if the trial court had applied Sargon, the Court of Appeal disagreed.  The experts’ opinions were crucial to the trial court’s order, and there were significant individual issues for each consumer that the experts attempted to brush over. Id. at *11.  The Court of Appeal found that if the trial court had applied Sargon to these opinions, “there is a reasonable chance it would have excluded these declarations and found plaintiffs’ showing to be lacking.” Id. The Court of Appeal found similar deficiencies with the experts’ estimate of the size of the class, making it “difficult to see on the current record how plaintiffs’ formula could be found reliable.” Id. at *12.

Class Actions and Standing to Appeal: Hernandez v. Restoration Hardware, Inc., No. S233983, 2018 WL 577716 (Cal. Jan. 29, 2018). Our final class action opinion for today is Hernandez v. Restoration Hardware, where the issue was whether an unnamed class member has standing to appeal from a class action judgment under California procedure.  The California Supreme Court decided that an unnamed class member does not have standing to appeal without first intervening as a party in the trial court.  In Hernandez, the plaintiff sued a retailer for violating credit card laws, and after several years of litigation, the trial court certified a class and held a bench trial resulting in a substantial award.  An unnamed class member received notice of the class action, but she neither intervened as a party nor opted out.  Instead, her attorney filed a notice of appearance on her behalf. Id. at *1.

The controversy began when class counsel requested a 25 percent fee. Again the absent class member did not formally intervene, but instead appeared through counsel at the fairness hearing and argued mainly procedural points. Id. at *2.  The trial court nonetheless granted the fee request, and the unnamed class member appealed. Id. at *3.

In holding that the unnamed class member was not a “party aggrieved” and had no standing to appeal, a unanimous California Supreme Court followed Justice Traynor’s 75-year-old decision in Eggert v. Pacific Sales S&L Co., 20 Cal. 2d 199 (1942).  The Court’s main point was that absent class members have ample opportunity to become parties of record in class actions, either by filing a complaint in intervention or by filing an appealable motion to set aside and vacate a class judgment. Id. at *4.  This appellant did neither, making her neither a “party” nor “aggrieved.”  The Supreme Court also rejected the invitation to follow Rule 23 of the Federal Rules of Civil Procedure, which gives class members who informally object to settlement the right to appeal. Id. at *5.  The federal approach does not address California’s statutory requirement for appeal, and it cannot be reconciled with the controlling authority, Eggert.  As the California Supreme Court concluded,

Following Eggert and requiring intervention does not discourage unnamed class members from filing a meritorious appeal.  Rather, it continues a manageable process under a bright-line rule that promotes judicial economy by providing clear notice of a timely intent to challenge the class representative’s settlement action.  Formal intervention also enables the trial court to review the motion to intervene in a timely manner. . . .  By filing an appeal without first intervening in the action however, [the appellant] never became an “aggrieved party” of record to the action as our law requires.

Id. at *7. According to the California Supreme Court, this absent class member made the strategic decision to wait and see if she agreed with the result in the trial court, and that was not sufficient to perfect the right to appeal. Id. The Court also reasoned that the prevailing rule protects against wasteful and meritless objections, recognizes the fiduciary duties of class representatives and their counsel, and respects the doctrine of stare decisis. Id. at **7-8.

There you have it—all you need to know about three important decisions. Someday you might need them.

Speed. Some things move faster than others.  When we viewed last August’s solar eclipse, in Tennessee, the Moon’s shadow was moving along the Earth at a rate of about 1,450 miles per hour.  Depending mostly on latitude, your speed may be greater or less.  Indeed, totality was sufficiently exhilarating that we wondered when the would the next eclipse occur in Philadelphia.  These days, one can find practically any information on the Internet, and eclipse locations was no exception.  We found this page and simply typed in a date range, the type of eclipse we were interested in (total), and the decimalized GPS coordinates for Philadelphia (39.94 and -75.10).  Unfortunately, a reasonable date range (± 100 years) showed nothing.  So we used the maximum range available – the entire 5000 years between 1999 BCE and 3000 CE.  That produced 14 Philadelphia total eclipses, but again unfortunately, the last one took place fourteen years before Columbus’ first voyage.  Even more unfortunately, totality will not be visiting Philadelphia until October 26, 2144.  It’s a cool site, since the same page looks like it would work for anywhere in the world.  But for us in Philly, that means we have to keep going to totality; totality isn’t coming to us anytime soon.

Anyway, getting back to speed.  Some legal issues are evolving at breakneck speed right now.  A little over two months ago (11/20/2017) we published a post entitled, “BMS & Nationwide Class Actions” about – you guessed it the probable impact that the personal jurisdiction rulings in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”), and Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (“Bauman”), on attempts to bring multi-state class actions in fora other than where the targeted defendant was “at home” and therefore subject to general personal jurisdiction under Bauman.

That post discussed not quite a dozen cases, all decided since Bauman in 2014: McDonnell v. Nature’s Way Products, LLC, 2017 WL 4864910 (N.D. Ill. Oct. 26, 2017); Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017); In re Dental Supplies Antitrust Litigation, 2017 WL 4217115 (S.D.N.Y. Sept. 20, 2017); Spratley v. FCA US LLC, 2017 WL 4023348 (N.D.N.Y. Sept. 12, 2017); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147 (E.D. Pa. July 24, 2017); Famular v. Whirlpool Corp., 2017 WL 2470844 (S.D.N.Y. June 7, 2017); Demedicis v. CVS Health Corp., 2017 WL 569157 (N.D. Ill. Feb. 13, 2017); Bauer v. Nortek Global HVAC LLC, 2016 WL 5724232 (M.D. Tenn. Sept. 30, 2016); Kincaid v. Synchrony Financial, 2016 WL 4245533 (N.D. Ill. Aug. 11, 2016); Matus v. Premium Nutraceuticals, LLC, 2016 WL 3078745 (C.D. Cal. May 31, 2016); Demaria v. Nissan N.A., Inc., 2016 WL 374145 (N.D. Ill. Feb. 1, 2016).  See also Wenokur v. AXA Equitable Life Insurance Co., 2017 WL 4357916, at *4 n.4 (D. Ariz. Oct. 2, 2017).  Of the eleven only one, Fitzhenry-Russell, allowed a nationwide class action to survive a post-BMS/Bauman personal jurisdiction challenge.

Well, the pace is picking up.  In little over two months, three more cases have been decided, addressing the issue whether class actions defined to include forum non-residents can be brought against non-resident defendants after BMS: DeBernardis v. NBTY, Inc., 2018 WL 461228 (N.D. Ill. Jan. 18, 2018); LDGP, LLC v. Cynosure, Inc., 2018 WL 439122 (N.D. Ill. Jan. 16, 2018); and In re Chinese-Manufactured Drywall Products Liability Litigation, 2017 WL 5971622 (E.D. La. Nov. 30, 2017).  We’ll address these new cases today.

The most recent decision, DeBernardis, involved a putative nationwide class action under a consumer protection statute.  The defendants moved to dismiss, inter alia, “claim[ing] that this Court does not have jurisdiction to hear the case involving non-resident class of plaintiffs” under BMS.  The court agreed.  The plaintiffs relied on the Fitzhenry-Russell decision we critiqued in our prior post, and the Chinese Drywall decision we’ll be examining below, to claim that personal jurisdiction in class actions was somehow exempt from the Due Process limits recognized in BMS.  2018 WL 461228, at *2.  The court in DeBernardis, however, found the reasoning in McDonnell and other decisions from the Northern District of Illinois more persuasive.  Id.  Although calling it a “close question,” the court in DeBernardis refused to distinguish class actions from mass torts for due process purposes.  It did not believe that the Supreme Court would do so:

The Court believes that it is more likely than not based on the Supreme Court’s comments about federalism that the courts will apply BMS to outlaw nationwide class actions in a form, such as in this case, where there is no general jurisdiction over the Defendants.  There is also the issue of forum shopping, which was mentioned in the Chinese DryWall case as a basis for distinguishing mass torts from class actions, but possible forum shopping is just as present in multi-state class actions.

DeBernardis, at 2018 WL 461228, at *2.  Consequently, those portions of the class action that sought to represent “out-of-state plaintiff classes” was dismissed.  Id.

The LDGP decision reached a similar result, but was somewhat less emphatic in its holdings.  Class action plaintiffs in LDGP sought to add new representative plaintiffs, including non-residents, who would serve as representatives of non-resident classes.  2018 WL 439122, at *1 n.1.  Since the amendment would create a situation of non-resident plaintiffs suing non-resident defendants, the defense opposed on BMS jurisdictional grounds.  LDGP held that, since the suit asserted state-law claims under diversity of citizenship, there was no occasion to consider the caveat (137 S. Ct. at 1784) in BMS concerning the Fifth Amendment and federal causes of action.  Id. at *2 n.2 (“the court is exercising diversity jurisdiction and looking to Illinois law”).  Plaintiffs’ other argument, “that because the claims of at least one plaintiff . . . arose out of events taking place in [the forum], defendant is also subject to personal jurisdiction for similar claims brought by other plaintiffs that have no other connection to [the forum],” id. at 3, ran straight into the BMS buzzsaw:

Plaintiffs’ arguments are unconvincing.  Though the nonresidents’ claims are similar to those of resident plaintiffs, the difference that plaintiffs point out is fundamental: the events that lead to the nonresidents’ claims took place outside of [the forum].  The number of would-be nonresident plaintiffs has no bearing on whether those plaintiffs’ claims arise from or relate to the defendant’s activity in the forum.  [quotations from BMS omitted]  Consequently, this court does not have personal jurisdiction over defendant with regard to the claims brought against it by the nonresident plaintiffs.

Id.

As already indicated, the Chinese Drywall decision goes the other way.  The defendants against whom a nationwide class action was asserted were not sympathetic – they had defaulted, thumbed their collective noses at the court, and were essentially daring the plaintiffs to try to come after them in China.  2017 WL 5971622, at *4.  The plaintiffs wanted the biggest cudgel they could get – a money judgment on behalf of a nationwide class action − and only weeks before BMS was decided, the MDL court had given it to them.  Id. at *5.  It was not inclined to let BMS take it away, so Chinese Drywall, held:

BMS would not affect the jurisdictional holding in the present case.  BMS was not a class action; it was a “mass tort action” in state court.  This factor materially distinguishes this action from [BMS] because in class actions, the citizenship of the unnamed plaintiffs is not taken into account for personal jurisdiction purposes.

2017 WL 5971622, at *12 (citations and quotation marks omitted).  For this proposition, the decision cited the Fitzhenry-Russell decision discussed in our prior post, and the same two cases that Fitzhenry-Russell had relied upon, AM Trust v. UBS AG, 78 F. Supp.3d 977, 986 (N.D. Cal. 2015), aff’d on other grounds, 681 Fed. Appx. 587 (9th Cir. 2017)); and Senne v. Kansas City Royals Baseball Corp., 105 F. Supp. 3d 981, 1022 (N.D. Cal. 2015).

Just as they were inadequate in Fitzhenry-Russell, these two district court citations, simply don’t suffice to limit a subsequent Supreme Court decision based on Due Process principles.  AM Trust involved the reverse situation – an attempt to assert the residence of class members in favor of personal jurisdiction.  78 F. Supp. at 986. AM Trust dismissed for lack of personal jurisdiction, which hardly supports the massive extension of personal jurisdiction to a nationwide class that Chinese Drywall permitted.  Moreover, the only support AM Trust cited for the proposition, Ambriz v. Coca Cola Co., 2014 WL 296159 at *46 (N.D. Cal. Jan. 27, 2014), was a venue, not a jurisdiction, case.  The same thing is true of Senne:  the court granted a motion to dismiss for lack of personal jurisdiction and relied solely on AM Trust.  105 F. Supp. at 1022.

In short, Chinese Drywall, like Fitzhenry-Russell, could not find any precedent that actually allowed personal jurisdiction based on totally ignoring the “citizenship of the unnamed plaintiffs” in whose favor judgment would eventually be entered.  Ignoring the non-resident class members seems like an extremely slender reed for holding that a brand-new 8-1 United States Supreme Court “straightforward application . . . of settled principles of personal jurisdiction,” BMS, 137 S. Ct. at 1783, does not apply to class actions.

Conscious of its weak precedential basis, Chinese Drywall, 2017 WL 5971622, at *14 (“This Court is cognizant of the superficial similarities between mass tort actions (like in BMS) and a class action”), the opinion seeks to buttress its jurisdiction-expanding result in several ways.  Id. at *14-21.

First – class actions and mass torts are different, the chief basis being that “a class action has different due process safeguards” arising from Fed. R. Civ. P. 23.  Id. at *14 (citing “numerosity, commonality, typicality, adequacy of representation, predominance and superiority”).  Sorry, but those Rule 23 requirements are almost solely to protect the absent plaintiffs’ Due Process rights.  Personal jurisdiction is different.  As BMS concisely put it, “the primary concern is the burden on the defendant.”  137 S. Ct. at 1780.  It is a fallacy to justify denigration of a class action defendant’s Due Process rights by citing Due Process protections intended to protect plaintiffs.  Unfortunately, in MDLs and class actions, it still seems to be a radical proposition that defendants have Due Process rights, too.

Second – “fairness” is “the fundamental purpose of due process.” Chinese Drywall, 2017 WL 5971622, at *15.  In a word, no – not in personal jurisdiction.  Once again, BMS answers this question:

[R]estrictions on personal jurisdiction are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. . . .  The sovereignty of each State implies a limitation on the sovereignty of all its sister States. . . .  [E]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

137 S. Ct. 1780-81 (numerous citations and quotation marks omitted).  Fairness may play a role, but fundamentally Due Process restrictions on personal jurisdiction exist because the Constitution created a federal system of government.  Chinese Drywall involved plaintiffs from three states – Louisiana, Florida, and Virginia, 2017 WL 5971622, at *9-11 – and defendants from China.  There is simply no Due Process basis for adjudicating in Louisiana claims involving harm to persons in California, Texas, or New York.  BMS declared the era of that kind of big litigation to be over.

ThirdPhillips Petroleum Co. v. Shutts.  Like plaintiffs in BMS, Chinese Drywall invokes Shutts.  2017 WL 5971622, at *15-16.  Once again, BMS supplies the answer.  “Shutts, which concerned the due process rights of plaintiffs, has no bearing on the question presented here.”  137 S. Ct. at 1777 (citing Id. at 1783-84).  “[T]he [Shutts] Court stated specifically that its ‘discussion of personal jurisdiction [did not] address class actions where the jurisdiction is asserted against a defendant class.’”  Id. at 1783 (quoting Shutts, 472 U.S. at 812 n.3.

Fourth – Congress, in creating Rule 23 (and secondarily Rule 4), permitted nationwide class actions.  2017 WL 5971622, at *17, *18.  Maybe Congress could, under the cited U.S. Const. art. III §2, but it hasn’t.  Rule 23 (and Rule 4) is not a statute, it is only a rule of civil procedure.  As we discussed at length in our prior post, rules of civil procedure are enacted under the Rules Enabling Act, which prohibits any federal rule, even Rule 23, from “abridg[ing], enlarg[ing] or modify[ing] any substantive right.”  28 U.S.C. §2072(b).  The mass creation of personal jurisdiction – personal jurisdiction that the Supreme Court just reiterated was unconstitutional under the Due Process Clause − where none otherwise exists, can only be substantive.  Look at the federal rules.  They don’t even impose pre- or post-judgment interest.  Why?  Because “[p]rejudgment interest in a diversity action is . . . a substantive matter governed by state law.”  In re Exxon Valdez, 484 F.3d 1098, 1101 (9th Cir. 2007).  The federal rules can’t even add interest to a judgment.  They certainly cannot create the personal jurisdiction needed to enter the judgment itself.

Fifth −  The Multidistrict Litigation Act.  Chinese Drywall claims that 28 U.S.C. §1407 is “another example” of the “principle” that congressional action can create personal jurisdiction.  However, §1407 expressly addressed personal jurisdiction in only one provision.  An MDL judge “may exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions in such coordinated or consolidated pretrial proceedings.”  §1407(b) (emphasis added).  Thus the only expansion of jurisdictional power that Congress chose to confer on MDL judges is explicitly limited to facilitating depositions.  The express terms of the MDL Act thus affirmatively refute the jurisdiction asserted in Chinese Drywall.  An MDL judge simply does not “ha[ve] the same pre-trial jurisdiction as the transferor courts where the cases were initially filed.”  2017 WL 5971622, at *20.  The statute confers no additional personal jurisdiction over anyone save with respect to depositions.  The statute “speaks not in terms of imbuing transferred [MDL] actions with some new and distinctive venue character.”  Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 37 (1998); cf. Gelboim v. Bank of America Corp., 135 S. Ct. 897, 904 (2015) (removing “venue” limitation from Lexecon quotation).

Sixth – The Class Action Fairness Act.  2017 WL 5971622, at *18.  CAFA expanded the scope of federal diversity jurisdiction.  It has nothing to do with personal jurisdiction.  CAFA did not purport to create nationwide personal jurisdiction over persons sued by classes subject to its provisions.  E.g., Burgess v. Religious Technology Center, Inc., 600 Fed. Appx. 657, 660-61 (11th Cir. 2015) (affirming dismissal of defendant in CAFA case for lack of personal jurisdiction).  Perhaps Congress could have expanded personal jurisdiction, too, or perhaps not.  Either way, nothing in CAFA purports to grant federal courts personal jurisdiction over non-resident defendants being sued by non-resident plaintiffs, as with the absent class members in Chinese Drywall.

Seventh – Settlement classes.  Chinese Drywall states, accurately, that “courts have often approved national classes in mass tort cases in the settlement context.”  2017 WL 5971622, at *18.  That fact is neither here nor there.  Settlement is consensual, and personal jurisdiction is waivable.  If a non-resident defendant is agreeable to a nationwide settlement, encompassing non-resident plaintiffs, and so are the plaintiffs, personal jurisdiction is not a stumbling block, not even after BMS.

Eighth − Lack of federalism concerns.  Relying primarily on the dissent in BMS, Chinese Drywall denies that these concerns exist in class actions.  2017 WL 5971622, at *19-20 (this case “involves Defendants that have made enough contacts to the forum states to hold them liable there in nationwide class actions”).  This final proposition stuffs the rabbit way down in the hat.  Yes, the defendants have sufficient jurisdictional contacts with the three “forum states” because each one has a resident plaintiff, also a class representative, claiming damages.  But if BMS means anything, it means that the existence of personal jurisdiction over claims by other resident plaintiffs (three transferred plaintiffs from three states) does not support personal jurisdiction over similar claims by non-residents (everybody from everywhere else):

The mere fact that other plaintiffs were prescribed, obtained, and ingested [the product] in [the forum state] − and allegedly sustained the same injuries as did the nonresidents − does not allow the State to assert specific jurisdiction over the nonresidents’ claims.

137 S. Ct. at 1781. This last rationale is, to us, the worst, because it simply tells the world that Supreme Court precedent be damned, these obnoxious defendants are going to get theirs.

Thus, right now the scorecard stands at 12-2 in favor of the proposition that BMS precludes nationwide class actions to the extent that they result in non-resident plaintiffs suing non-resident defendants.  While Chinese Drywall certainly threw against the drywall all the mud it could find, ultimately we don’t think anything sticks.  Fittingly, the critical passage – “an MDL transferee court . . . has personal jurisdiction over nonresident class members and has the power to . . . approve a nationwide class,” 2017 WL 5971622, at *14, has no citation at all.  Moreover, as the steady decisional drumbeat described in this and our prior post indicates, the issue of BMS and nationwide class actions under state law is surely headed for the appellate courts, and we expect the first decisions by the end of 2018.

We like our chances.

You don’t see class actions going to trial very often, but that is what happened in Patricia A. Murray Dental Corp. v. Dentsply International, Inc., and the defendant device manufacturer came away with a defense verdict that binds the class.  The California Court of Appeal’s opinion affirming that result is the topic of today’s post, and it is a nice bookend to a Pennsylvania case we wrote on just a few months ago, Center City Periodontists v. Dentsply International, Inc. Both are class actions alleging that Cavitron ultrasonic dental scalers are not worth what dentists paid for them.

Same devices. Similar allegations.  Somewhat different outcomes.  The Pennsylvania class action bit the dust when the court denied class certification, a result we lauded here.  The California plaintiffs met a similar fate on their first try, but the California Court of Appeal reversed the order denying class certification and remanded for further proceedings.  So the plaintiffs returned to the trial court and got their class certified.  They probably wish now that they had ended it there, or at least accepted whatever class settlement the defendant might have offered.

Why? Because they took their certified class action to trial and lost.

Here is what happened. The class representatives alleged that the Cavitron’s directions say it can be used in “[p]eriodontal debridement for all types of periodontal diseases,” but in fact they cannot because the devices accumulate biofilm in their waterlines and are incapable of delivering sterile water during surgical procedures.  According to the plaintiffs, this was a deceptive business practice under a California consumer statute and a breach of express warranty. Patricia A. Murray Dental Corp. v. Dentsply International, Inc., No. A141377, 2018 WL 345049, at *1 (Cal. Ct. App. Jan. 10, 2018).

Let’s focus on these allegations. Dentists have widely used Cavitron ultrasonic scalers for more than 40 years, and the statement that they can be used in “debridement for all types of periodontal diseases” is likely to deceive consumers only if dentists do not already know that biofilms can accumulate and that the systems cannot dispense sterile water.  That is one of the reasons why the certification of this class was questionable in the first place:  Surely each dentist’s knowledge regarding biofilms and his or her clinical judgment on when to use sterile versus nonsterile water is unique to each class member.

But plaintiffs also surely argued on class certification that all dentists are the same, so the trial court and Court of Appeal hoisted plaintiffs on their own petard. If dentists are all the same, they are the same in that they are all highly trained and already understand that biofilms and related water quality issues are dental facts of life.  For the Court of Appeal, the dentists’ knowledge base was a critical consideration.  That is to say, the Cavitron’s directions as presented “to the general public, could be viewed as representing that the Cavitron is suitable for surgical use. However, the fatal flaw in this reasoning is that the targeted consumers of this product are licensed dental professionals.Id. at *8.

As the Court further explained, the “knowledge base of the targeted consumer” is relevant in determining whether the allegedly deceptive conduct or advertising is “likely to deceive,” which is the standard under California’s statute. Id. On that score, the evidence was overwhelming that the Cavitron’s directions were not likely to deceive a significant portion of licensed dentists because they already knew about biofilms and water quality.  Biofilm contamination of dental unit waterlines was first documented in the 1960s, and as early as 1978 the American Dental Association was suggesting countermeasures. Id. at *3.  The ADA has issued publications on the topic, including a “Statement on Dental Unit Waterlines” in 1995 (and don’t you wish you had that scintillating article to read over a cup of coffee).  California dentists are required to take continuing education classes on infection control every two years.  The plaintiffs’ expert admitted that water quality was a “hot subject” starting in the mid-1990s.  The CDC released recommendations, and then updated them.  The Dental Board of California adopted minimum standards. Id. at **4-6.

You can read the opinion to get the details, but the gist is clear—dentists knew about this stuff and were not “likely to be deceived.” As the California Court of Appeal put it:

Plaintiffs already knew the facts they contend should have been disclosed. They know all dental waterlines contain biofilm and that Cavitrons do not deliver sterile water. [¶]  In sum, plaintiffs failed to carry their burden of proof.

Id. at *10 (emphasis added). This disposed of the deceptive practices claim and also breach of warranty because “[u]nlike the state of the evidence during class certification, the record on appeal establishes substantial evidence that plaintiffs were aware of the biofilm risk posed by Cavitron usage, but they purchased and used it anyway.” Id. (emphasis added).  That’s what it came down to:  The dentists knew, but purchased and used the devices anyway.  They got what they paid for, with their eyes wide open.