DC CircuitSince the U.S. Supreme Court’s landmark decision in Bristol-Myers Squibb v. Superior Court (BMS), litigants and courts have struggled to determine its impact on future cases.  The Court held in BMS that courts may not exercise jurisdiction over nonresident defendants with respect to nonresident plaintiffs’ claims arising from conduct that occurred outside the State. This limits defendants’ exposure to nationwide mass-tort actions to States where they are “at home” and subject to that forum’s general personal jurisdiction.

Class actions are now at the forefront of the fight to define BMS. To date, no federal circuit court has considered whether BMS applies equally to class actions as it does to mass-tort actions. But several circuit courts will have the opportunity to resolve this question in 2019, quite possibly with differing results. A WLF Working Paper published in March 2018 framed the question these courts will have to answer as follows: If joinder of plaintiffs does not establish specific jurisdiction over the defendant for nonresident plaintiffs’ claims (as in BMS), can the result be any different when the nonresident plaintiffs are instead absent members of a class?

Whether BMS extends to class actions is currently before the U.S. Court of Appeals for the D.C. Circuit and the Ninth Circuit. The Seventh Circuit also has the opportunity to consider this issue on interlocutory appeal in the coming months.

District Courts Opposing BMS Expansion

While no appellate courts have addressed the BMS class-action question, numerous district courts have issued rulings with conflicting results.

Courts that have refused to extend BMS to class actions emphasize the differences between class actions and mass-tort actions. In a case before the Central District of California, Feller v. Transamerica Life Insurance Company, Transamerica life-insurance policy holders alleged that a monthly deduction rate increase breached the insurance contract. The plaintiffs sought to certify a nationwide class. Relying on a decision from the Northern District of California, Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., the court found that the mass tort at issue in BMS is “meaningfully distinguishable” from the class action mechanism. The Fitzhenry-Russell court concluded that as compared to a mass-tort action, where each plaintiff is a real party in interest to the complaints, in class actions, plaintiffs represent the rest of the similarly situated, unnamed plaintiffs. Because of these differences, Fitzhenry held that BMS does not extend to bar the claims of nonresident plaintiffs’ in class actions, and certified the class. Based on this reasoning, the Ninth Circuit granted Transamerica’s motion to appeal the class certification. The briefing in that appeal is on hold pending mediation in January 2019.

Molock v. Whole Foods, decided by the District Court for the District of Columbia, followed the approach taken in Fitzhenry-Russell and Feller. Whole Foods employees alleged that the upscale grocery chain abused a “gainsharing program” that awarded bonuses to employees whose departments came in under budget. The nationwide class action posited that Whole Foods “‘shift[ed] labor costs’ to store departments that were underperforming, thus reducing or negating the bonuses that would have been owed to employees in an over-performing department.”

The district court rejected Whole Foods’ personal jurisdiction argument, asserting that Rule 23 of the Federal Rules of Civil Procedure provides adequate due process safeguards for defendants.

The court, however, acknowledged the lack of controlling or persuasive precedent from any circuit on the question of BMS’s application to class actions, and certified under 28 U.S.C. § 1292(b) that an immediate appeal “may materially advance the ultimate determination of the issue.” The D.C. Circuit has directed the parties to file appellate briefs in early 2019 and will likely be the first circuit court to hear arguments on whether BMS applies to class actions.

Northern District of Illinois Favors Expansion

Unlike the district courts in D.C. and California, a group of judges in the Northern District of Illinois has looked more favorably upon defendants’ arguments on extending BMS’s rationale to class actions. One example is Mussat v. IQVIA Inc., which involves a claim under the Telephone Consumer Protection Act, alleging that IQVIA sent “junk faxes” to Mussat and numerous other persons. Mussat brought suit in the Northern District of Illinois, where the corporation is headquartered and received the alleged junk faxes. Mussat sought to represent a nationwide class including anyone who had received similar faxes.

The district court granted IQVIA’s motion to strike class allegations for unnamed plaintiffs living outside Illinois. Its decision discussed the views of various federal district courts around the country that have decided similar cases and reached differing outcomes.

The Mussat court determined that the general principles underlying BMS apply equally to class actions and mass actions. Under BMS, for a court to exercise specific jurisdiction, “the suit must arise out of or relate to the defendant’s contacts with the forum.” BMS, 137 S. Ct. at 1780. In granting the motion to strike the class definition, the court ruled that BMS does apply in the class action context, and that due process protects a nonresident defendant from all claims that do not arise out of the defendant’s contacts with the forum—regardless whether the claims are asserted by a named plaintiff or absent class members. The court noted that due process is an “instrument of interstate federalism” and requires a connection between the forum and the specific claims at issue. Because of this, nationwide class actions are barred in states where the defendant is not subject to general jurisdiction. Mussat’s petition for interlocutory appeal is currently pending in the Seventh Circuit.

Application of BMS to Class Actions is Legally Sound

WLF urges courts to extend BMS to class actions and to ensure that a defendant may only face a nationwide class action in the state(s) where the defendant is subject to general personal jurisdiction. According to U.S. Supreme Court precedent, the primary focus of the personal jurisdiction inquiry is the defendant’s relationship to the forum State and the burden on the defendant of defending in a forum where it is not at home. The claims must arise from the defendant’s contacts with the forum. If the courts rule that BMS does not apply to class actions, attorneys may engage in forum shopping and bring these nationwide class actions in favorable jurisdictions, winning substantial judgments or extracting large settlements. Perhaps as early as 2019, multiple appeals courts will have to rule on BMS’s application to class actions. Unless those decisions are unanimous, Supreme Court review of the issue cannot be far behind.

Also published by Forbes.com at WLF’s contributor site.