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.
This article is presented for informational purposes only and is not intended to constitute legal advice.
