Seyfarth Synopsis: Recent activity within the federal Courts of Appeals this spring may prompt Supreme Court resolution of a central and unsettled issue concerning personal jurisdiction in the class-action context causing defendants to re-think pleading stage strategies when forced to litigate in forums where they have minimal contacts.
Generally, out-of-state defendants (not subject to general jurisdiction) may only be sued in a forum within that state when the suit arises out of or relates to the defendant’s in-state conduct—that is, where the defendant’s minimum contacts with the forum state are sufficient to exercise specific jurisdiction. Assessments of whether specific jurisdiction exists become problematic in mass-tort or class-action litigation involving both resident and nonresident plaintiffs. In such cases, is it sufficient that one or some of the plaintiffs reside or were injured in the forum state, so as to allow out-of-state plaintiffs to aggregate or “bootstrap” their claims?
In 2017, the Supreme Court answered in the negative, at least in the mass-tort context. 137 S. Ct. 1773 (2017). There, more than six hundred plaintiffs brought suit in California state court against a drug manufacturer. Only eighty-six of the plaintiffs were California residents, and the remaining plaintiffs were residents of over thirty other states. Id. at 1778. The nonresident plaintiffs did not argue that they obtained the allegedly defective drug in California or that they sustained injuries or received treatment in California. Id. The Supreme Court held that the California court lacked specific jurisdiction over the nonresident plaintiffs’ claims, reasoning that “[t]he mere fact that other plaintiffs . . . sustained the same injuries as did the nonresidents . . . does not allow the State to assert specific jurisdiction over the nonresidents’ claims.” Id. at 1781 (emphasis in original). The Supreme Court confirmed that a defendant’s relationship with a resident plaintiff “standing alone” is insufficient to confer personal jurisdiction over nonresidents’ claims, even where the claims are similar to those brought by the resident plaintiff. Id. at 1783.
Although the SCOTUS decision involved a mass-tort action, defendants have successfully argued that its holding extends to class actions to preclude, on personal jurisdiction grounds, nationwide claims when only one or some of the plaintiffs are residents of the forum state. Decisions issued this spring by the Seventh, Fifth, and D.C. Circuits, however, question or foreclose the viability of this strategy.
In its March 11 opinion in Mussat, 953 F.3d 441 (7th Cir. 2020), the Seventh Circuit held that SCOTUS ruling could not be applied to strike the claims of out-of-state plaintiffs in a Telephone Consumer Protection Act (TCPA) putative class action. The named plaintiff, an Illinois resident, alleged he received junk faxes from the defendant and brought TCPA claims on behalf of himself and persons throughout the country similarly situated. Id. at 443. The Northern District of Illinois granted the defendant’s motion to strike the class definition for lack of personal jurisdiction over non-Illinois class members, and the Seventh Circuit reversed. Id.
In its opinion, the Seventh Circuit distinguished the Supreme Court’s ruling on the issue, highlighting that it did not involve a Rule 23 class action and instead was brought under a California procedural tool, similar to federal multidistrict litigation, used to aggregate claims. Id. at 446. The court stressed that this difference in procedural devices mattered in many ways, including that absent class members in Rule 23 putative class actions are typically regarded as “nonparties,” not considered for purposes of determining whether diversity of citizenship exists under 28 U.S.C. § 1332 or whether venue is proper. Id. at 447. The Seventh Circuit found “no reason why personal jurisdiction should be treated any differently from subject-matter jurisdiction and venue.” Id. The court also noted that the language and Committee Notes informing Rule 23 indicate a focus on the named plaintiff for determining personal jurisdiction. Id. at 448. For these reasons, the Mussat court declined to accept the “major change in the law of personal jurisdiction and class actions” that an extension of the SCOTUS ruling would effect. Id.
The D.C. Circuit’s March 10 opinion in Molock, 952 F.3d 293 (D.C. Cir. 2020), a wage dispute, did not reach a decision on whether the SCOTUS opinion applied to class actions but left the door open to the jurisdictional argument being made later in the litigation. In Molock, the court affirmed the lower court’s denial of the defendant’s motion to dismiss nonresident class members on personal jurisdiction grounds, reasoning that disposition was premature before class certification. Id. at 295. Notably, though, the Molock court relied on the principle invoked in Mussat that putative, unnamed class members are typically considered “nonparties,” such that a ruling on personal jurisdiction would be inappropriate, as those class members are “not yet before the court.” Id. at 298. While this alignment with Mussat’s analysis may prove significant if and when the D.C. Circuit confronts head-on the issue of whether the personal jurisdiction limitation extends to class actions, the Molock court’s decision to defer the jurisdictional ruling until after class certification makes the issue an additional pre-certification discovery topic left to be explored.
In his dissenting opinion in Molock, Judge Silberman found the majority’s position that putative class members are “not parties” is misplaced, as the real issue was claims-based: whether named plaintiffs in class actions are entitled to bring claims on behalf of absent, out-of-state class members. Id. at 302-03. On this point, Judge Silberman opined, “logic dictates” that the SCOTUS ruling applies to class actions, noting that a plaintiff should not be permitted to bring claims on behalf of absent class members where a court could not otherwise exercise personal jurisdiction: “[P]rocedural tools like class actions and mass actions are not an exception to ordinary principles of personal jurisdiction.” Id. at 310. Justice Silberman’s dissent also pointed out the practical and likely onerous effect that allowing aggregation of nonresident plaintiffs’ claims may have — absent an application in the class-action context— since the named plaintiff would be permitted to conduct “extensive,” pre-certification discovery on nationwide class claims. Id. at 304.
The Fifth Circuit’s decision in Cruson, 954 F.3d 240 (5th Cir. 2020), issued on March 25, echoed many of the principles of the Molock opinion in holding that the defendant did not waive its personal jurisdiction challenge to non-Texas class members’ claims by not asserting the defense prior to class certification. Id. at 246. The Fifth Circuit, like the D.C. Circuit, maintained that before class certification, the putative, nonresident plaintiffs were not properly before the court, such that a personal jurisdiction defense did not have to be raised in the defendant’s earlier Rule 12 motions. Id. at 250. Like Molock, the Fifth Circuit in Cruson did not directly decide whether the Supreme Court ruling applied in the class-action context, leaving the door open for jurisdictional arguments about out-of-state class members post-certification. The opinion similarly recognizes that defendants may be tasked with significant pre-certification discovery on out-of-state plaintiffs’ claims.
These circuit court opinions have important implications for parties and practitioners defending class actions in the early stages of litigation. The Seventh Circuit decision in Mussat is of particular importance, as defendants faced with nationwide class claims in the Northern District of Illinois have often prevailed in asserting jurisdictional challenges based on the SCOTUS decision. Courts in these instances regularly found “that the logic underlying [the Supreme Court’s ruling] applies with equal force to the class action context” and declined to exercise specific jurisdiction over nonresident plaintiffs’ claims. Miszczyszyn, No. 18-cv-3633, 2019 WL 1254912, at *3 (N.D. Ill. Mar. 19, 2019) (collecting cases). The Mussat ruling now renders this argument a largely failing one in the Seventh Circuit.
Other Courts of Appeals have not conclusively opined as to whether the personal jurisdiction limitation applies to class actions, and judicial inconsistency—promoting Supreme Court resolution—continues. For example, while a majority of cases within the Ninth Circuit have reasoned that the SCOTUS ruling cannot be imported into the class-action context, a recent case from the Southern District of California held otherwise and forecasted that the Supreme Court would likely rule the same: “if and when the Supreme Court is presented with [this] question, it will also hold that a state cannot assert specific personal jurisdiction over a defendant for claims of unnamed class members that would not be subject to specific personal jurisdiction if asserted as individual claims.” Carpenter, No. 19-cv-1731, 2020 WL 996947, at *6 (S.D. Cal. Mar. 2, 2020).
As the trio of recent circuit court decisions makes clear, the contours of specific jurisdiction—including its construction in the class-action context—continue to be developed and defined, and the Supreme Court is primed to provide further guidance soon. In January, the Court granted certiorari in a case aimed to address when an action sufficiently relates to a defendant’s conduct within the forum to exercise specific jurisdiction, an issue not considered in previous SCOTUS rulings. In the lower court opinion, 443 P.3d 407 (Mont. 2019), appeal pending, No. 19-368 (filed Sept. 18, 2019), the Supreme Court of Montana held that specific jurisdiction existed in a product liability suit against a car manufacturer where the accident occurred in Montana, but the manufacturer neither assembled nor sold the allegedly defective vehicle in the forum state. Id. at 482, 494. The court found the manufacturer’s general advertising, sales, and service of vehicles in Montana sufficient, without a direct causal nexus between the manufacturer’s in-forum conduct and the accident. See Petitioner’s Br. at 23. This case, set for hearing on the Court’s October 2020 term, will likely address a split among courts about whether the “arise out of or relate to” requirement is satisfied even when the defendant’s forum contacts were not the cause of the plaintiff’s claims, but there “is some general relationship” between the defendant’s in-state activity and the suit. Id. at 11.
The Montana case, along with the recent activity in the circuit courts, signal an opportunity for the Supreme Court to further define personal jurisdiction law in the class-action context and—importantly—to provide defendants greater clarity as to what degree and in which forums they may be subject to nationwide claims involving out-of-state plaintiffs.