By Martina Barash
A recent U.S. Supreme Court decision limiting where people can sue companies could dramatically limit the location and scope of class litigation across the U.S.
Or it may not.
It’s too early to tell how lower and intermediate appeals courts will apply Bristol-Myers Squibb Co. v. Superior Court to class actions, practitioners tell Bloomberg Law.
One thing, however, is perfectly clear: Class action litigators are preparing to go to war over where class suits, particularly nationwide suits, can now be filed.
Many defense attorneys are expected to argue that Bristol-Myers, known as BMS, forecloses all such suits, except for those filed in the defendants’ home states.
Plaintiffs’ attorneys, on the other hand, will push the opposing view, arguing that nothing in the top court’s latest jurisdictional ruling applies to class litigation, especially in federal court where the bulk of the suits are litigated.
“How are you supposed to manage these complex, large national cases if you can’t do it in a single court?” plaintiffs’ attorney Jonathan Selbin of Lieff Cabraser Heimann & Bernstein LLP in New York asked. “I would hope the answer is you can still do that.” “But clearly, that’s what’s at risk here,” he said.
Legal experts in the middle, meanwhile, say myriad factors, all of which will be intensely fought over, may enter into the complicated jurisdictional analysis in BMS‘s wake. These factors include whether the suits were brought in state or federal court and, if they are federal, how they got there.
“There’s a general pattern in complex litigation that the minute there’s a new opinion, it’s like a new toy in the sandbox,” Professor Samuel Issacharoff of the New York University School of Law told Bloomberg Law. “Everybody’s got to play with it.”
Ultimately, the Supreme Court may need to spell out how personal jurisdiction operates in the class action context.
“For me, this was the sleeper case of the last term, because it impacts so many potential cases,” said Professor Adam Zimmerman of Loyola Law School in Los Angeles.
Connection to Company’s Activities in State
Personal jurisdiction—a court’s power to hear a case against a defendant—comes in two kinds: general and specific. Specific, or case-linked, jurisdiction can be asserted when the suit “arises from or is related to” the defendant’s activities in the state.
The Supreme Court considered specific jurisdiction when it examined whether non-Californians who alleged a Bristol-Myers drug harmed them could consolidate their claims alongside California residents’ claims in a California state court.
The California courts had said there was specific jurisdiction over Bristol-Myers based on a combination of the company’s contacts with the state and the similarity of the residents’ and nonresidents’ claims.
That version of specific jurisdiction was too “relaxed,” the Supreme Court said in an 8–1 decision June 19.
Since then, attorneys have fought over what the opinion means for class actions.
Two distinctions are important, in Issacharoff’s view: the difference between mass tort actions like the consolidated cases against Bristol-Myers and class actions, and the difference between state and federal courts.
“The main activity nowadays is all these class actions get pulled into federal court, and I don’t think it’s going to have much effect there,” he told Bloomberg Law. Issacharoff has represented class action plaintiffs in numerous cases.
But Jonah Knobler, a defense attorney at Patterson Belknap Webb & Tyler LLP in New York, doesn’t see a difference between state and federal court under BMS.
The decision would effectively wipe out nationwide class actions except where the defendant is headquartered or incorporated, he said. “That is the inevitable result of Bristol-Myers and I also think it’s the correct result,” he said.
Although defendants have been busy filing motions, just a handful of courts so far have considered the Supreme Court opinion’s impact in class action cases.
The rulings in those suits are mixed, and Zimmerman, who has filed friend-of-the-court briefs in support of class action plaintiffs, said the outlook for how courts will view the ruling in the days ahead is unsettled.
“The Bristol-Myers Squibb court has opened up the door for all these new questions about mass litigation in the federal courts,” he said.
“It may be that the differences between class action litigation and mass consolidations like what was at issue in Bristol-Myers Squibb might win the day, because the idea behind the class action is it’s a representative form of litigation. One person is representing the interests of many,” he said. But “I’m not optimistic,” he said.
Selbin, too, said there’s cause for concern on the plaintiffs’ side, looking at both BMS and prior decisions involving general jurisdiction.
Two Supreme Court opinions, Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler AG v. Bauman, clarified that general jurisdiction, also called all-purpose jurisdiction, applies when a defendant is incorporated or headquartered in the state where the court is located. General jurisdiction allows any suit to be filed against the defendant in that court, regardless where the act complained of occurred.
Many attorneys viewed those opinions as restricting general jurisdiction, compared with previous practice in the lower courts.
Restricting class actions “would take an additional leap in logic,” Selbin said. But “it’s not that big a step from where they are after Bauman and Bristol-Myers Squibb to saying, ‘You cannot do nationwide class actions except out of the defendant’s home state.’ That would be my fear.” “It’s not at all clear to me how they’ll resolve this,” he said.
Categories of Class Actions
Class actions in a defendant’s “home” state—where it’s headquartered or incorporated—could proceed on the basis of general jurisdiction, the attorneys and professors seemed to agree.
But their opinions beyond that were at odds, and may indicate some of the many jurisdictional fights ahead.
Take a multi-state class action with a plaintiff for each state, for example: If some of the individual named plaintiffs “don’t have a connection to the forum, so there’s nothing transactional between what they claim and what the defendant did that occurred in the forum,” that’s clearly not allowed under BMS , Issacharoff said. Zimmerman agreed.
But to Selbin, “it’s an open question whether anything in Bristol-Myers Squibb even applies to a class action filed in federal court, as opposed to one filed in a state court.”
As a threshold matter, “Bristol-Myers Squibb was discussing all this in the context of the Fourteenth Amendment Due Process clause, not the Fifth Amendment, and expressly said it wasn’t saying anything about cases proceeding in federal court.”
Further, Congress has authorized federal courts to hear cases involving multistate classes through some of the federal procedure rules and the Class Action Fairness Act, he said.
But the most common reading of BMS that he hears is that if you’re not in the defendant’s home state, “you’d better be sure all of your named plaintiffs have a connection to the forum that allows them to be there.”
What about class actions in federal court that have been collected in multidistrict litigations for pretrial purposes, such as the cases in the Chinese-Manufactured Drywall MDL?
“My read of Bristol-Myers is it has nothing to say about that,” Issacharoff said. “Your due process rights as a defendant have been addressed because Congress has created this mechanism for centralization of pretrial procedures.”
“We’ve never had a problem when Congress has acted to create a forum,” he said.
Zimmerman pointed to long-established lower-court principles that an MDL court is “unburdened by personal jurisdiction.” But there are two “hiccups,” he said.
“Technically they only have power to certify a class action—they’re only allowed to handle a case up to the point of trial,” he said.
“The second is that some people are increasingly raising due process concerns with” multidistrict litigation. “They’re all centralized before the same judge, it creates this incredible pressure to settle, and so they claim its sort of like a legal fiction that they’ll be sent back whence they came.”
“Maybe they should be burdened by questions of personal jurisdiction, that’s the argument,” he said.
But Selbin said it’s mostly defendants who seek to centralize claims in MDLs. So it’s hard to understand how a defendant could then say the cases have to be dismissed on personal jurisdiction grounds, he said.
“One way of reading it is that the MDL statute trumps, or at least must coexist with, the personal jurisdiction issue,” he said. “You could also think of it as effectively a waiver. Since personal jurisdiction can be waived, the waiver argument might go a long way.”
Knobler, on the other hand, said: “The due process rules that apply to an MDL are the rules of the state in which the constituent case was originally filed because the MDL court is just superintending pretrial practice. The way I read Bristol-Myers, the fact that a case is an MDL adds nothing because all the MDL statute says” is that cases are transferred to the MDL for a limited purpose and transferred back.
“I don’t view the MDL statute as overriding Bristol-Myers and to that extent I do disagree with the Drywall opinion,” he said.
Other Nationwide Class Actions
Then there’s the question of in-state plaintiffs representing a proposed multi-state or nationwide class—in state or federal court. That was the situation in the state-court case that went to the high court in Phillips Petroleum Co. v. Shutts, which the BMS opinion said wasn’t overruled.
“There’s a real tension there with the Shutts line of cases,” Selbin said. Those cases “are about choice of law and certainly seem to suggest you can bring multistate class actions against a defendant in a single court that involves absent class members from a whole bunch of different states, and maybe even plaintiffs from a whole bunch of different states.” Issacharoff said that “will be the subject of some amount of litigation, whether you can have a nationwide class on the ground that the defendant has contact with the forum.”
“There may be some rethinking of that issue,” he said.
Federal court is different, however, he said. “CAFA really has transformed class action practice in the last 10 years. Basically everything moves in federal court, except in a few states,” he said.
Congress’s role matters, he said. “Once again, you have the congressional intermediary that you had with the MDL statute.”
“Under Bristol-Myers, that’s a different case than if you had this in state court,” Issacharoff said. “What Bristol-Myers may ultimately end up being about is the different powers between federal courts acting pursuant to a congressional mandate and state courts, without that federal mandate, reaching beyond state boundaries.”
But Knobler said CAFA doesn’t come to the aid of plaintiffs.
“It’s a stretch to take this statute, passed at the behest of defendants to protect the rights of defendants, and say that Congress silently intended to subject defendants to nationwide class actions when they couldn’t be otherwise,” he said.
And Issacharoff noted that CAFA provides subject matter jurisdiction, whereas the issue in Bristol-Myers is personal jurisdiction.
“But I would not get excessively worked up about that,” he said. “The reality is that the court’s concern is about any particular situs becoming a magnet forum, and when Congress has created centralization in one court, that concern drops out.”
Zimmerman, on the other hand, said, “That’s a big problem—CAFA doesn’t really talk about personal jurisdiction.” If the Supreme Court clamps down on class actions, the end result will likely be that parties find their own ways to handle large litigation, Zimmerman said.
“What this ultimately does is it shifts the way in which we aggregate and group together large groups of claims outside the court,” he said. “The practical effect will be that when parties are trying to reach nationwide settlements, they won’t necessarily have the court doing it.”
“Because we’re adopting these increasingly formalistic ways of thinking about personal jurisdiction, as we go down this path, what will it mean for the role the court plays in these mass settlements and their ability to supervise them?”
Handful of Rulings So Far
Court opinions applying BMS to class actions so far include:
• Plumbers Local Union No. 690 Health Plan v. Apotex Corp. (E.D. Pa.): The court said it didn’t have jurisdiction over the pharmaceutical defendants for the health insurance provider’s claims under state laws other than Pennsylvania’s;
• Spratley v. FCA US LLC (N.D.N.Y.): The court threw out non-New York named plaintiffs in a proposed four-state class action over parts in FCA US LLC vehicles;
• In re Dental Supplies Antitrust Litig. (E.D.N.Y.): The court concluded it lacked jurisdiction over a dental supply company in a suit by dentists;
• Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc. (N.D. Cal.): The court distinguished a national consumer class action over ginger ale from the mass action at issue in Bristol-Myers, and said it had jurisdiction over the beverage maker;
• McDonnell v. Nature’s Way Prods., LLC (N.D. Ill.): The court threw out claims on behalf of residents of seven states other than Illinois in a proposed class suit by a purchaser of dietary supplements; and
• In re Chinese-Manufactured Drywall Prods. Liab. Litig. (E.D. La.): The MDL court distinguished class actions from mass torts and concluded it could exercise jurisdiction over a Chinese drywall maker.