Clashing Circuit Court Opinions Bring Viability of Nationwide Class Actions into Question

Clashing Circuit Court Opinions Bring Viability of Nationwide Class Actions into Question

Perhaps the most consequential debate being waged over the future of class action litigation is whether nationwide class-action lawsuits will continue to be permitted against defendants who are neither based nor incorporated in the state in which a suit is brought. The battle is on the verge of a circuit split.

In Bristol-Meyers Squibb v. Superior Court (2017), the U.S. Supreme Court faced a situation where several plaintiffs had sued Bristol-Meyers in one case (although not as a class action) in a California state court. However, Bristol-Meyers was neither headquartered nor incorporated in California.  All the plaintiffs’ claims were similar, but only some of the claims arose in California, while others lacked any connection to that State.

Although the Court ruled that California lacked “specific personal jurisdiction” over Bristol-Meyers for claims that had no connections to the State, it declined to opine on the issue of whether this same jurisdictional limitation applied to the claims of unnamed class members in a class action.

Since Bristol-Meyers, courts have split. Some have concluded that its reasoning applies to class actions. However, a majority have taken the position that Bristol-Meyers does not apply to class actions, at least in federal court. The debate has been further spurred by dispute related to the proper timing and procedure for a challenge. Some courts even take the severe position that the challenge is waived if it is not raised at the very beginning of the litigation – even though the class members are not yet known. Until very recently, the federal courts of appeals had remained silent about these jurisdictional issues. In March, three different federal circuits weighed in.

In a 2-1 split in Molock v. Whole Foods, the D.C. Circuit declined to address the fundamental question of whether a nationwide class action against an out-of-state defendant was proper. The majority avoided the question by concluding that the defendant raised its objection either prematurely or through the wrong type of motion. But, in a scathing dissent, Senior Circuit Judge Silberman criticized the Court for failing to decide the core issue, explaining that the nationwide class claims should eventually fail due to lack of specific personal jurisdiction.

Then, the very next day, in Mussat v. IQVIA, the Seventh Circuit ruled on the issue directly. In reversing the Northern District of Illinois, the Court held that Bristol-Meyers did not apply to class action litigation. However, the defendant, citing heavily to Judge Silberman’s dissent in Molock, has already filed a motion to reconsider, laying out a convincing argument that the initial opinion erred.

Four days after Mussat, in Cruson v. Jackson Nat’l Life Ins. Co., the Fifth Circuit spoke. The Court did not directly address whether Bristol-Meyers negates national class actions against out-of-state defendants, but it did address the question of whether that argument is waived if not raised at the very beginning of litigation. Cruson (like Molock) held that unnamed class members are not parties before the court. Thus, the defendant did not have to bring a motion to dismiss their claims at the very beginning of the litigation, and instead could raise the argument as late as the class certification phase. Although the Cruson decision did not reach the fundamental question, it may have tipped the Fifth Circuit’s hand about a favorable attitude toward applying Bristol-Meyers in federal class actions once the question is properly before it.

It is worth noting that Judge Silberman’s dissent in Molock cites heavily to a recent influential academic article intended as a road map for courts facing the challenge of how to analyze specific personal jurisdiction over class action claims in the wake of Bristol-Meyers. Author A. Benjamin Spencer’s “Out of the Quandary: Personal Jurisdiction Over Absent Class Member Claims Explained” sets forth a compelling path out of the analytical quagmire in which early court decisions have toiled. It explains why the reasoning of Bristol-Meyers should apply to prohibit nationwide class actions against out-of-state defendants, and that those defendants should be permitted to raise their objections either at the beginning of litigation, or at the class certification phase. Its reasoning and conclusions may gain further traction with appellate judges that confront these questions in the future.

The larger debate seems destined for eventual resolution by the United States Supreme Court. The outcome could end the practice of hauling out-of-state defendants into distant and cherry-picked courts, often with unfavorable legal precedent, for class actions. Instead, plaintiffs who wish to prosecute nationwide class actions would be left to sue a defendant where the defendant is based or incorporated.

Clearly, the stakes are extremely high as this debate works its way through appellate courts. It is important that your class-action counsel are on top of these cutting-edge issues, and are poised to ensure that objections based on Bristol-Meyers are timely raised and properly preserved based on the latest court opinions.

Mac Murray & Shuster is a nationally recognized firm focused on consumer protection and privacy regulatory compliance and litigation. With a team led by former state regulators, we provide comprehensive counsel to businesses of all sizes in highly regulated industries, including financial services, healthcare, teleservices, automotive, insurance, and consumer marketing.

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