United States: BMS And Nationwide Class Actions

Last Updated: November 20 2017
Article by James Beck

We have not been shy in predicting that Bristol-Myers Squibb Co. v. Superior Court, 137 S.Ct. 1773 (2017) ("BMS"), and Daimler AG v. Bauman, 134 S. Ct. 746 (2014) ("Bauman"), should restrain certain abusive class action practices – specifically those involving attempts to bring multi-state class actions in any location other than where the defendant is "at home" and therefore subject to general personal jurisdiction under Bauman. Note use of "the." A nationwide class purporting to sue multiple defendants "at home" in different states shouldn't be possible at all, as BMS makes crystal clear that each defendant's personal jurisdiction must be determined separately.

For this reason, we have been careful to note the class action nature of any case that appears on our original post-Bauman and our current post-BMS cheat sheets. The first of these cases is Demaria v. Nissan N.A., Inc., 2016 WL 374145 (N.D. Ill. Feb. 1, 2016), an automotive consumer fraud case with eighteen class representatives from sixteen states. Id. at *1. Following Bauman, the court found no general jurisdiction, also rejecting a claim of consent to general jurisdiction by registering to do business in the forum state. Id. at *6. Specific jurisdiction failed as to every would-be class representative except the one resident of the forum state. Id. at *7. Plaintiffs also raised a "pendent personal jurisdiction" claim similar to that later rejected in BMS:

Under the circumstances of this case, where each plaintiff's claim is predicated on the law of the particular state where he or she purchased a car and the claims of the other plaintiffs as alleged remain unrelated to anything that transpired in [the forum state], imposing personal jurisdiction for all of the claims because specific jurisdiction may lie as to this one plaintiff's claims would run afoul of the traditional notions of fair play and substantial justice.

Id. at *8. The multi-state class action was no more. "The consumer protection claims for violation of the laws of states other than [the forum state] . . . are dismissed for lack of personal jurisdiction." Id. at *14.

Then came Matus v. Premium Nutraceuticals, LLC, 2016 WL 3078745 (C.D. Cal. May 31, 2016), which involved a California consumer fraud class action brought by an in-state resident. After finding no general jurisdiction under Bauman, id. at *2, the court also found no specific jurisdiction. The defendant's website was not oriented towards any particular state, nor did plaintiff claim to have used it to purchase anything from the defendant. Id. at *3. Simply "purchas[ing the product] through an unnamed reseller" – that is to say, stream of commerce − was insufficient, notwithstanding other product sales to other in-state residents. Id. at *4.

Back in Illinois, Bauman also did in a multi-state junk fax class action in Kincaid v. Synchrony Financial, 2016 WL 4245533 (N.D. Ill. Aug. 11, 2016). Anticipating BMS, the court refused to find specific jurisdiction based on forum contacts with the "putative class members" in the forum state counting as "suit-related contacts." Id. at *2. Plaintiffs' general jurisdiction claims fell far short of the "outsized proportion" of forum contacts required to establish an exceptional case under Bauman. Id. at *3. Nor did the defendant's initiation (as a plaintiff) of unrelated litigation in the forum state create general jurisdiction. Id.

Next, in Bauer v. Nortek Global HVAC LLC, 2016 WL 5724232 (M.D. Tenn. Sept. 30, 2016), "five Plaintiffs from four different states" brought a panoply of product liability-related claims against a non-resident defendant, purportedly as a class action. Id. at *1. Bauman killed the out-of-state class representative's claims, since there was nothing approaching exceptional case facts. Id. at *6. Specific jurisdiction failed because "units [that] were purchased and installed in [the class representatives'] respective . . . Home States" could not possibly "arise out of or relate to" any actions by the defendant in the forum state. Id. at *6. "[T]he Amended Complaint does not offer any factual allegations that the out-of-state Plaintiffs had any dealings with the Defendants in the" forum state. Id. Therefore, "those Plaintiffs and the classes they represent will be dismissed." Id.

A third Illinois multi-state class action likewise failed in Demedicis v. CVS Health Corp., 2017 WL 569157 (N.D. Ill. Feb. 13, 2017). This time, a forum plaintiff sought to assert "purely class-based claim[s] on behalf of others for violations of similar state consumer fraud statutes in other states." Id. at *3. While that claim could have been decided on the basis of non-extraterritoriality (see our post here), Demedicis disposed of them on personal jurisdiction grounds:

Because specific personal jurisdiction is based on claims arising out of a defendant's conduct within the forum state, this Court has no jurisdiction over claims based on out-of-state consumer fraud laws. . . . As Defendants argue, "[p]ersonal jurisdiction over the defendant must be established as to each claim asserted." Here, Plaintiff has not established personal jurisdiction over the out-of-state claims as he is the sole connection between Defendants and Illinois.

Id. at 4-5 (citations omitted).

In Famular v. Whirlpool Corp., 2017 WL 2470844 (S.D.N.Y. June 7, 2017), nine would-be class representatives from nine states brought consumer protection claims against non-resident defendants. Decided less than two weeks before BMS, Famular threw out all of the claims by non-resident class representatives against the non-resident defendants for lack of personal jurisdiction. Anticipating BMS, Famular held that "the Court must determine whether there is general personal jurisdiction over each defendant" individually. Id. at *3. By then plaintiffs had given up arguing "exceptional case" general jurisdiction, and the court rejected their consent by virtue of registration to do business argument. "[T]he Court agrees with defendants that . . . a foreign defendant is not subject to the general personal jurisdiction of the forum state merely by registering to do business with the state, whether that be through a theory of consent by registration or otherwise." Id. at *4. Famular also rejected specific jurisdiction under a "pendent personal jurisdiction" rationale. Relying in part on Demaria, Famular recognized that "neither specific personal jurisdiction nor pendent personal jurisdiction allow[s a court] to hear plaintiffs' claims against the foreign defendant based on defendant's actions occurring solely outside the forum state. Id. at *7. Good by non-forum-state class action allegations.

BMS, of course expressly held that specific personal jurisdiction must be decided as to each plaintiff and each defendant separately, so that neither the presence of other, in-state plaintiffs making similar claims, nor the presence of an in-state defendant against which personal jurisdiction could properly be asserted permitted the assertion of personal jurisdiction by non-resident plaintiffs against non-resident defendants. 137 S. Ct. at 1781 (lack of specific jurisdiction "remains true even when third parties (here, the plaintiffs who reside in California) can bring claims similar to those brought by the nonresidents"), 1783 (personal jurisdiction requirements "must be met as to each defendant over whom a state court exercises jurisdiction"; the "bare fact" of a "contract[] with" an in-state resident "is not enough"). We discussed BMS at length here.

After BMS, a consumer protection class action alleging "violations of the consumer protection laws of forty-eight additional [to the forum] states and two territories" was trimmed to just the forum state. Plumbers' Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147, at *1 (E.D. Pa. July 24, 2017). There was no general jurisdiction against defendants not "at home" in the forum. Id. at *4. Nor could defendants that did not sell in the forum be subject to specific jurisdiction. Id. at *7-8 (even if stream of commerce jurisdiction is viable, it cannot lie without in-state sales). All of the claims asserted under the laws of the 50 non-forum jurisdictions likewise bit the dust.

Only [plaintiffs'] Pennsylvania Claims arise out of or relate to Selling Defendants' sales of generic drugs in Pennsylvania. . . . [T]he Non-Pennsylvania Claims do not arise out of or relate to any of Selling Defendants' conduct within the forum state. Accordingly, the Court cannot exercise specific jurisdiction over the Non-Pennsylvania Claims brought against Jurisdiction Defendants.

Id. at *9 (following Demaria and Demedicis).

Another multi-state (four non-forum jurisdictions) consumer class action was trimmed in Spratley v. FCA US LLC, 2017 WL 4023348, at *1 (N.D.N.Y. Sept. 12, 2017). General jurisdiction by consent based the non-forum defendant's registration to do business was rejected. Id. at *3-4. BMS precluded adjudication of claims asserted by the non-resident classes. "[T]he out-of-state Plaintiffs have shown no connection between their claims and [defendant's] contacts with the forum state. Therefore, the Court lacks specific jurisdiction over the out-of-state Plaintiffs' claims." Id. at *7. For similar reasons, plaintiffs' "different" assertion of "pendent jurisdiction" was also rejected. Id. (following Famular and Demaria).

In an anti-trust case, In re Dental Supplies Antitrust Litigation, 2017 WL 4217115 (S.D.N.Y. Sept. 20, 2017), non-forum class action allegations based on sales made by a defendant's independent intermediate sellers were dismissed under Bauman and BMS. General jurisdiction, by this time was not even argued. Id. at *3. The would-be class representatives did not buy any of the defendant's products in the forum state. Id. at *6. BMS precluded assertion of personal jurisdiction based merely on the defendant's contract with an independent distributor, which in turn sold into the forum state. Id. at *9. Most significantly, Dental Supplies firmly rejected plaintiffs' argument that personal jurisdiction requirements should be loosened in the class action context. "A putative class representative seeking to hale a defendant into court to answer to the class must have personal jurisdiction over that defendant just like any individual litigant must." Id. at *6 (quoting Newberg on Class Actions §6:25 (5th ed. 2011)).

Plaintiffs attempt to side-step the due process holdings in [BMS] by arguing that the case has no effect on the law in class actions because the case before the Supreme Court was not a class action. This argument is flawed. The constitutional requirements of due process does not wax and wane when the complaint is individual or on behalf of a class. Personal jurisdiction in class actions must comport with due process just the same as any other case.

Id. at *9 (citation omitted).

Most recently, in McDonnell v. Nature's Way Products, LLC, 2017 WL 4864910 (N.D. Ill. Oct. 26, 2017), the plaintiffs brought class action claims under "seven states' consumer fraud laws" in addition to the forum state, against a non-resident defendant. Id. at *1. Bauman and BMS killed the non-forum claims:

[A]ny injury [that non-resident plaintiffs] suffered occurred in the state where they purchased the products. Because the only connection to [the forum] is that provided by [resident plaintiff's] purchase . . ., which cannot provide a basis for the Court to exercise personal jurisdiction over the claims of nonresidents where [defendant] has no other connection to this forum, the Court dismisses all claims . . . brought on behalf of non-[forum]residents or for violations of [other states' consumer protection] law without prejudice.

Id. at *4.

Thus, we are now running out of fingers for the cases that have refused, on post-Bauman personal jurisdictional grounds to allow class actions where the effect would be to allow non-resident class members to sue a non-resident corporate defendant. There is good reason for this. The Federal Rules of Civil Procedure, and in particular Rule 23, being "rules" are prohibited by the Rules Enabling Act from "abridg[ing], enlarg[ing] or modify[ing] any substantive right." 28 U.S.C. §2072(b). See, e.g., Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 367 (2011) ("[b]ecause the Rules Enabling Act forbids interpreting Rule 23 to 'abridge, enlarge or modify any substantive right,' a class cannot be certified on the premise that [a defendant] will not be entitled to litigate its statutory defenses to individual claims") (citations omitted). Jurisdiction is, if anything, even more "substantive" than the defenses in Dukes. Without jurisdiction, a plaintiff cannot litigate anything at all. Nothing could be more "substantive" than to create jurisdiction where none would otherwise exist.

Fundamentally, this is why we disagree with the one decision, Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017) that goes the other way. Plaintiffs in Fitzhenry-Russell purported to bring a "nationwide" class action, even though all of them were California residents and all the causes of action were under California law . Id. at *1, 5. The court held that because "citizenship of the unnamed plaintiffs is not taken into account for personal jurisdiction purposes," it was perfectly all right for the action to adjudicate claims by non-resident class members – who made up a "lopsided" 88% of the class – against a non-resident corporation. Id. at *5. Fitzhenry-Russell refused an "extension of [BMS] to class actions" by supposing that "this may be one of the those contexts" in which "[n]onnamed class members . . . may be parties for some purposes and not for others" to jurisdiction. Id. That's all there is – a "may be." Moreover, the case quoted for that proposition, Devlin v. Scardelletti, 536 U.S. 1, 9-10 (2002), dealt with intervention, not any form of jurisdiction.

Fitzhenry-Russell cited no class action case – let alone one since Bauman (cf. In re Chinese Manufactured Drywall Products Liability Litigation, 894 F. Supp. 2d 819, 858 (E.D. La. 2012) (severing non-resident class member claims in identical situation pre-Bauman), aff'd, 742 F.3d 576 & 753 F.3d 521 (5th Cir. 2014)) – that had permitted personal jurisdiction in a litigation tourist situation, where non-resident absent class members were suing a non-resident corporation. It found Plumbers' Local. 690 "unpersuasive" because it supposedly contained "no analysis" of BMS. 2017 WL 4224723, at *5 n.4. That is a misleading characterization because Plumbers' Local. 690 devotes four full paragraphs to the issue, although discussing Demaria and Demedicis rather than BMS. 2017 WL 3129147, at *9. Moreover, other than the footnote reference to Plumbers' Local. 690, Fitzhenry-Russell addresses neither the other class action personal jurisdiction cases we have discussed in this post (although it must have been aware of at least Demaria and Demedicis) nor the Rules Enabling Act. We think that the adjective "unpersuasive" more properly applies to Fitzhenry-Russell itself.

Thus, based on what our research has found, we think that our prediction, made shortly after Bauman, that personal jurisdiction would become a major obstacle to nationwide class actions based on state laws is accurate and has even more force after BMS. Whenever faced with a state-law class action that is structured so that a non-resident (that is, not "at home" under Bauman) corporate defendant would be facing claims brought by non-resident class members (whether named or unnamed), the defendant should strongly consider moving to dismiss that non-resident claims for lack of personal jurisdiction.

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

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