Federal Courts Diverge on Bristol-Myers and Class Actions

This article was originally published in Law360, September 26, 2018.

In Bristol-Myers Squibb Co. v. Superior Court of California, the U.S. Supreme Court held that the California forum court lacked specific jurisdiction over nonresident plaintiffs’ mass tort claims, because the defendant’s conduct giving rise to their claims did not occur in California.[1] Although the Bristol-Myers decision concerned a mass tort action in state court, federal courts across the country have been wrestling with the question of whether its holding extends to class actions in federal court.

To date, no federal appellate court has addressed the issue. This article examines the various factors that must be considered in determining whether Bristol-Myers applies to a class action in federal court.

Application of Bristol-Myers in Federal Courts

Several courts have questioned whether Bristol-Myers applies to any cases in federal court, because Bristol-Myers focused on whether the California state court’s exercise of personal jurisdiction over the claims of nonresident plaintiffs comported with the due process clause of the 14th Amendment.

Specifically, the Supreme Court was concerned that a California court may have overstepped its authority by applying its law to the claims of nonresident plaintiffs. Indeed, Justice Sonia Sotomayor stated that “[t]he majority’s animating concern, in the end, appears to be federalism: ‘[T]erritorial limitations on the power of the respective States. …”[2]

Given the unique federalism concerns involved in state courts exercising personal jurisdiction over claims of out-of-state residents, plaintiffs attempting to avoid the reach of Bristol-Myers have argued that the decision is irrelevant to lawsuits in federal courts. Federal courts in which subject matter jurisdiction is based on diversity of citizenship have held overwhelmingly that Bristol-Myers applies in federal courts.[3]

These courts generally conclude that the due process analysis under both the 14th and 5th Amendments is the same.[4] They also find that the concerns raised by Bristol-Myers are equally present when a federal court is applying state substantive law claims and the state long-arm statute is coextensive with federal law.[5]

Federal courts are split, however, over the issue of whether Bristol-Myers applies to federal cases where subject matter jurisdiction is based on a federal question. Federal courts in New Jersey, Illinois and Ohio have applied Bristol-Myers to federal claims.[6] Similar to several of the rulings by courts sitting in diversity, the Ohio federal court rejected the plaintiffs’ attempt to distinguish between the Fifth Amendment and 14th Amendment jurisdiction analyses.[7]

The Illinois federal court based its decision to apply Bristol-Myers on whether the relevant federal statute authorized nationwide service of process.[8] Thus, following the reasoning of the Illinois federal court, it is an open issue as to whether Bristol-Myers would apply to federal actions where subject matter jurisdiction is based on a federal claim that permits nationwide service of process, such as the Racketeer Influenced and Corrupt Organizations Act or the Sherman Act.

Federal courts in California and Georgia, however, have rejected the application of Bristol-Myers to claims in federal court based on violations of federal law. These courts find that the Supreme Court’s federalism concerns in Bristol-Myers (i.e., concerns about a state court applying its own laws to claims of nonresidents) are nonexistent in cases in federal courts applying federal law.[9]

Application of Bristol-Myers to Class Actions

Bristol-Myers was a mass tort action, not a class action. Federal courts analyzing whether Bristol-Myers applies to class actions have split into three distinct factions: (1) those that categorically reject the application of Bristol-Myers to class actions; (2) those that apply Bristol-Myers to the claims of the named plaintiffs, but not to the claims of absent class members; and (3) those that apply Bristol-Myers to the claims of all class members.

A few federal courts have held that Bristol-Myers is simply inapplicable to class actions.[10] One rationale for these decisions is that the Supreme Court in Bristol-Myers narrowly ruled in the context of the mass tort action before it.[11] In addition, some of these courts have reasoned that class actions, unlike mass tort actions, contain additional due process safeguards in the form of Federal Rule of Civil Procedure 23’s certification standards.[12]

Other federal courts, especially in California, have applied Bristol-Myers to the claims of the named plaintiffs, but not to the claims of absent class members. According to these courts, an important distinction between mass tort actions and class actions is that, in the former, all plaintiffs are named and considered real parties in interest to the complaint; while in the latter, select named plaintiffs represent unnamed, similarly situated persons.[13]

These courts reason that only the claims of the named plaintiffs are relevant for purposes of establishing specific jurisdiction because “individual members of a plaintiff class, aside from named representatives, need not satisfy the ‘minimal contacts’ test in order for the forum court to exercise personal jurisdiction over them.”[14] As such, these courts have applied Bristol-Myers to named plaintiffs — requiring that their claims arise out of defendant’s activity that occurred within the forum state — but not to absent class members.[15] These cases certainly are more persuasive than the minority of cases that categorically reject the application of Bristol-Myers in federal court or in class actions generally.

Other courts, especially in Illinois, have held that Bristol-Myers applies both to the named plaintiffs and to all members of the putative class(es).[16] These courts have reasoned that a defendant’s due process protection should not vary depending on the type of plaintiff bringing the claim.[17] According to these courts, the federalism concerns remain the same, regardless of whether the action is a mass tort action or a class action.[18]

Exercise of “Pendent Personal Jurisdiction” to Circumvent Bristol-Myers

Some nonresident named plaintiffs have argued that, although Bristol-Myers prevents the court from exercising specific jurisdiction over their claims, personal jurisdiction can be established under the doctrine of “pendent personal jurisdiction” if there is at least one resident named plaintiff.

Pendent jurisdiction traditionally refers to the joinder of a state law claim by a party already presenting a federal claim against the same defendant. The doctrine of pendent personal jurisdiction is a discretionary variant on pendent jurisdiction that is recognized in some jurisdictions.[19]

According to the doctrine of pendent personal jurisdiction, where a federal statute authorizes nationwide service of process, and the federal and nonfederal claims arise from a common nucleus of operative fact, the court may assert personal jurisdiction over the parties to the nonfederal claims even if personal jurisdiction would not otherwise lie if the nonfederal claims were filed separately.[20]

Some class action plaintiffs have argued for a variation of the doctrine of pendent personal jurisdiction, in which a court that possesses personal jurisdiction over a resident plaintiff’s state law claims may exercise pendent personal jurisdiction over claims of nonresident plaintiffs against the same defendant arising under their own states’ laws.[21]

The majority of courts encountering this argument have flatly rejected it.[22] However, at least one court has accepted this argument, holding that Bristol-Myers does not bar the exercise of pendent personal jurisdiction over these types of claims.[23] The Sloan court reasoned that application of the doctrine would avoid piecemeal litigation, and there was a minimal burden to the defendant from joining five nonresident plaintiffs asserting claims under two states’ laws because the court likely had personal jurisdiction over the nonresident absent class members anyway.[24] It remains to be seen whether any other courts follow Sloan to circumvent Bristol-Myers.

Timing of Challenges to Personal Jurisdiction Under Bristol-Myers

Because objections to personal jurisdiction may be waived, defendants are encouraged to move to dismiss the nonresident named plaintiffs and nonresident absent class members under Bristol-Myers in response to the filing of the complaint.[25]

Some courts, however, have concluded that a personal jurisdiction challenge to the claims of absent class members is not ripe at the pleading stage. For example, in Chernus v. Logitech Inc., the court held that while personal jurisdiction over named plaintiffs’ claims can be resolved at the pleading stage, personal jurisdiction as to the absent class members is better decided at the class certification stage.[26]

The court explained that it need not yet analyze whether specific jurisdiction is properly exercised over the claims of the absent class members because they are not yet parties to the case.[27] Regardless, it is highly unlikely that a defendant would await the class certification stage to challenge whether the court has personal jurisdiction over the claims of absent class members because of the risk that the court will find a waiver.

Conclusion

A clear majority of courts holds that Bristol-Myers applies to the claims of nonresident named plaintiffs. It is less clear whether Bristol-Myers applies to the claims of nonresident absent class members. Regardless, defendants certainly will be encouraged to move to dismiss all nonresident named plaintiffs, with the hope that the court will later not allow the remaining resident named plaintiffs to represent a national class or statewide classes of nonresidents.

The consequences of such successful motions remain to be seen. If defendants are successful in knocking out the nonresident named plaintiffs (or both the nonresident named plaintiffs and nonresident absent class members), then the plaintiffs might respond by filing multiple separate statewide class actions in various states with a class representative from each state, or by filing a single national or multistate class action in a state with general jurisdiction over the defendant.

Multiple statewide class actions in separate states would create costly piecemeal litigation for the defendant. But a single class action in the defendant’s principal place of business or state of incorporation (i.e., where there is general jurisdiction) may be preferred to an unfavorable jurisdiction selected by the plaintiff. A class action defendant moving to dismiss claims of named plaintiffs or absent class members based on Bristol-Myers will need to analyze how the forum court currently interprets Bristol-Myers in the context of class actions, and consider the potential ramifications of a successful motion.