United States: District Court Dismisses Out-Of-State Class Members Under Bristol-Myers Squibb; Is This The New Version Of Spokeo For Class Action Defendants?

In recent years, defendants have been attempting to curtail class actions in federal court by arguing that the named plaintiff lacked standing under the Supreme Court's holding in Spokeo, Inc. v. Robins.  Although defendants have had success in asserting Spokeo in "no injury" class actions, this success has not been without a price.  Often, a successful Spokeo challenge results in defendants litigating in state court instead of the federal side of the ledger.  As the upside of Spokeo has waned in certain scenarios, however, a new avenue of dismissal for certain class claims is gaining traction in federal courts, specifically, the theory that a court does not have personal jurisdiction to render a judgment on behalf of a class of non-resident plaintiffs against an out-of-state defendant.

In DeBernardis v. NBTY, Inc., the District Court for the Northern District of Illinois became the most recent district court to dismiss class claims based on the Supreme Court's ruling in Bristol-Myers Squibb Co. v. Superior Court of California.  In DeBernardis, the plaintiff brought a nationwide class action in Illinois federal court alleging various fraud and warranty claims under state law.  The defendants moved to dismiss the case as to the class of plaintiffs that were not Illinois residents.  The defendants argued, based on Bristol-Myers, that the court did not have personal jurisdiction over the claims of the non-resident plaintiff class against the out-of-state defendants.  The Court agreed.

The opinion stated that when assessing whether a court has personal jurisdiction, the court must look at the burden a defendant faces in having to litigate in a foreign court against a class or mass of non-residents.  The court must also look at the fairness of forcing an out-of-state defendant to submit "to the coercive power of a State that may have little legitimate interest in the claims in question."  Indeed, the court in Bristol Myers noted that the Constitution's Due Process Clause may sometimes "divest the state of its power to render a valid judgment" with respect to a mass action of non-resident plaintiffs.  Although the court in DeBernardis found the issue to be a "close question," it ultimately dismissed the portion of the claims brought on behalf of the "out-of-state plaintiff classes" for lack of personal jurisdiction.

The Bristol-Myers decision could become a powerful tool in dismissing certain classes of plaintiffs in nationwide class actions.  There are risks, however, in deploying this tool.  It may ultimately result in plaintiffs' counsel bringing multiple state-specific class actions instead of one nationwide class action.  It may also lead to more lawsuits in a defendant's home state, where it may be subject to general jurisdiction.  We will continue to track developments related to Bristol-Myers as they unfold.

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