Why Bristol-Myers Applies To Federal Class Actions
Law360 (March 30, 2018, 11:29 AM EDT) -- On June 19, 2017, the U.S. Supreme Court issued a ruling with major implications for the ability of plaintiffs to band together to sue foreign corporations who are not "at home" in the state in which the lawsuit is brought. In Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), a group of plaintiffs — some California residents, some not — brought a mass tort action against the pharmaceutical manufacturer Bristol-Myers Squibb (BMS) for injuries allegedly caused by the drug Plavix. Lacking general personal jurisdiction over BMS, which is incorporated in Delaware and headquartered in New York, the plaintiffs argued that the California Superior Court could nevertheless exercise specific personal jurisdiction because of BMS's wide-ranging business contacts within the state of California.
There was only one catch, as the Supreme Court held: The non-California residents' alleged injuries did not "arise out of or relate to" BMS's contacts with California — they arose out of BMS's contacts with their respective home states. The Supreme Court held that it wasn't enough that BMS had substantial wide-ranging contacts with California, and it wasn't enough that the plaintiffs all alleged similar injuries: Absent general personal jurisdiction, the suit was improper as to those non-California residents.
The case has caught on like wildfire for defendants seeking to shake multistate or nationwide class actions brought outside their "home" states, and many federal district courts (for example, in the Seventh Circuit) have already applied Bristol-Myers in this context. But other district courts, including certain courts in the Ninth Circuit, have been reluctant to do so based on a reading that Bristol-Myers left open two major questions about its applicability in a federal class action context.
First, the Bristol-Myers majority rather cryptically stated that its decision "le[ft] open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court."[1] Second, the dissent stated in a footnote that "[t]he Court today does not confront the question whether its opinion here would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there."[2] So, does Bristol-Myers apply in federal courts, and does it apply to class actions? No circuit court has yet addressed either question, but the answer should be yes (generally), and yes.
The key to the Fifth-versus-Fourteenth Amendment question is to remember, à la Pennoyer v. Neff, that personal jurisdiction is a function of service of process. Where a state's long-arm statute provides the basis for service, the Fourteenth Amendment governs the exercise of personal jurisdiction irrespective of whether the matter is pending in state or federal court. Only when a federal statute authorizes nationwide service of process, or when an entity is not properly subject to general personal jurisdiction in any forum state, does the Fifth Amendment govern the due process analysis.
This is laid out in Federal Rule of Civil Procedure Rule 4(k), under the heading "Territorial Limits of Effective Service." Rule 4(k)(1)'s subparts (A) and (C) provide that "[s]erving a summons or filing a waiver of service establishes personal jurisdiction over a defendant: (A) who is subject to the jurisdiction of a court of general jurisdiction in the state where a district court is located" or "(C) when authorized by a federal statute."[3]
When a federal court exercises personal jurisdiction under a borrowed long-arm statute under subpart (A), the court borrows the Fourteenth Amendment right along with it.[4] To effect service through subpart (C), a federal statute must authorize service of process on a defendant nationwide (which a handful of statutes do — including RICO (18 U.S.C. § 1965), the Clayton Act (15 U.S.C. § 22), ERISA (29 U.S.C. § 1132(e)(2)), the Securities Exchange Act of 1934 (15 U.S.C. § 78aa) and Federal Bankruptcy Rule 7004(a)(1)). In that case, a Fifth Amendment analysis applies — and Bristol-Myers may not.
What about international entities who do business with the United States but do not have sufficient contacts with any one state to be subject to personal jurisdiction there — one of the concerns of the Bristol-Myers dissent? The 1993 amendments to Rule 4 filled this "gap" with Rule 4(k)(2), which establishes personal jurisdiction for an entity "not subject to jurisdiction in any state's courts of general jurisdiction" if "consistent with the United States Constitution and laws." For an international entity falling into this category, therefore, service of process and the exercise of personal jurisdiction comes under a Fifth Amendment analysis — also potentially outside Bristol-Myers' reach.
The Bristol-Myers majority referenced this "gap" in its rather oblique citation to Omni Capital International Ltd. v. Rudolf Wolff & Co., 484 U.S. 97 (1987). Omni Capital is the case where the Supreme Court identified the gap for international entities that the 1993 amendments filled. In that case, plaintiffs Omni Capital International Ltd. and Omni Capital Corporation attempted to bring suit against a British corporation under the Commodity Exchange Act. The district and circuit courts had concluded the requirements of the Louisiana long-arm statute (i.e., comporting with the Fourteenth Amendment) were not met, and that because the CEA did not authorize nationwide service of process, there was no personal jurisdiction.[5]
The plaintiffs argued before the Supreme Court that exercise of personal jurisdiction was nevertheless proper because the only limits on a federal court were those of the Fifth Amendment. The Supreme Court rejected this argument because the defendants were not amenable to service under any provision of the old Rule 4.[6] Now, under the post-1993 Rule 4(k)(2), such defendants are amenable to service and personal jurisdiction if it comports with the Fifth Amendment.
Thus, the Supreme Court in Bristol-Myers did leave open a door, but it does not track along state versus federal, or even diversity versus federal question jurisdiction lines. It tracks whether authorization for service of process is provided by borrowing a state's long-arm statute (through Rule 4(k)(1)(A)), on the one hand, which in turn borrows a Fourteenth Amendment analysis, versus whether authorization for service of process is provided nationwide through a federal statute (through Rule 4(k)(1)(C)) or through Rule 4(k)(2)'s international-entity gap filler, which require a Fifth Amendment analysis. In these two latter cases, Bristol-Myers may not apply — but apart from those limited instances, Bristol-Myers will apply to federal courts to disallow nonresidents from asserting specific personal jurisdiction over a defendant over whom general jurisdiction can be had in another state.
The second question is whether Bristol-Myers's ruling can be distinguished based on the form of the action brought — a mass action versus a class action under Rule 23. The dissent hoped to keep this door open to avoid, as it stated, "hand[ing] one more tool to corporate defendants determined to prevent the aggregation of individual claims, and forc[ing] injured plaintiffs to bear the burden of bringing suit in what will often be far-flung jurisdictions."[7]
The form of the action brought, however, cannot affect the substantive constitutional requirements of due process. The Rules Enabling Act allows the Supreme Court the power to pass procedural rules governing litigation, subject to the limitation that "[s]uch rules shall not abridge, enlarge or modify any substantive right."[8] Put more eloquently, one district court applying Bristol-Myers to class actions has noted, "The constitutional requirements of due process do[] 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."[9] This outcome has recently been spelled out in a district court case out of the Seventh Circuit, Practice Management Support Services Inc. v. Cirque du Soleil Inc., holding Bristol-Myers applies to class actions because "[u]nder the Rules Enabling Act, a defendant's due process interest should be the same in the class context."[10]
Thus, the proposed distinction between a mass tort and a class action is not a true one when it affects a substantive right like a defendant's due process rights under the Fourteenth Amendment. The dissent's authority that nonnamed class members may be "parties for some purposes and not for others" generally refers to administrative or procedural rights, such as the fact that nonnamed class members may be considered nonparties for the purposes of complete diversity, or (as established by the authority cited) may bring an appeal after objecting to approval at a class action settlement.[11] The dissent's other authority in fact forecasts the very issue presented in Bristol-Myers, concluding that "[i]n litigation against a class, it will often not be enough to find specific jurisdictional contacts between a defendant and the forum, if those contacts relate only to the claims of some class members."[12]
The dissent is correct that the majority opinion in Bristol-Myers imposes substantial curbs on the ability of plaintiffs to bring nationwide or multistate class actions in the fora of their choice. These curbs apply equally in federal court when service is achieved through a state's long-arm statute, as well as to class actions.
William A. Delgado is a partner and Amelia L.B. Sargent is an associate at Willenken Wilson Loh & Delgado LLP in Los Angeles.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773, 1784 (2017)
[2] Id. at 1798, note 4.
[3] Rule 4(k)(1) subpart (B) deals with interpleader and joinder, which this article does not address.
[4] For an example of a court exercising federal question jurisdiction and applying a Fourteenth Amendment due process analysis pursuant to a state's long-arm statute, see Acorda Therapeutics Inc. v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016).
[5] Omni Capital International Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 101-102 (1987).
[6] Id. at 107-108.
[7] Bristol-Myers Squibb Co., 137 S. Ct. at 1789 (J. Sotomayor, dissenting).
[8] 28 U.S.C. § 2072(b). Given this constraint, one might question why the 1993 Amendment of Rule 4(k)(2) to fill the "gap" in service for international entities was not barred by the Rules Enabling Act as well, since — compared with the outcome in Omni Capital — it now allows international entities to be haled into U.S. courts. The committee was aware of this potential limitation, adding a "Special Note" to the 1993 amendments that begins, "Mindful of the constraints of the Rules Enabling Act, the Committee calls the attention of the Supreme Court and Congress to new subdivision (k)(2)," and suggests that if the new subdivision is not approved, the committee would revise Rule 4 without it.
[9] In re Dental Supplies Antitrust Litigation, No. 16 Civ. 696 (E.D.N.Y. Sept. 20, 2017).
[10] Practice Management Support Services Inc. v. Cirque du Soleil Inc., No. 14 C 2032, 2018 WL 1255021, at *16 (N.D. Ill. Mar. 12, 2018).
[11] See Devlin v. Scardelletti, 536 U.S. 1 (2002).
[12] Diane P. Wood, Adjudicatory Jurisdiction and Class Actions, 62 Ind. L. J. 597, 617 (1987).
