Seyfarth Synopsis: In the wake of the U.S. Supreme Court's decision in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773, 1780 (2017), numerous district courts across the country have ruled that they cannot exercise specific personal jurisdiction over defendant corporations to resolve the claims of out-of-state class members, leaving Plaintiffs with the option of limiting their classes to state residents or filing suit in courts that can exercise general personal jurisdiction – typically only courts in the state of incorporation or corporate headquarters. Whereas some California district courts have attempted to tread a path around this precedent, on March 2, 2020, Judge Bencivengo of the U.S. District Court for the Southern District of California offered a well-reasoned reality check in Carpenter v. PetSmart, Inc., No. 3:19-CV-01731 (S.D. Cal.), holding that the procedural requirements for a class action do not supply any reasoned basis for distinguishing Bristol-Myers and striking claims related to a nationwide class action. In this respect, it is a good read for employers facing nationwide class actions where jurisdictional defenses may be part of their defense strategies.
Plaintiff brought suit against PetSmart claiming that he purchased four defective pet habitats (artificial cages for pet hamsters, gerbils, and mice) that allowed rodents to chew through connectors and escape. Id. at 1-2. He asserted claims on behalf of a nationwide class of pet habitat purchasers defined as "all citizens of the United States who, within the relevant statute of limitations periods, purchased Defendant's Tiny Tales Homes." He also defined a California sub-class consisting of "all citizens of California who, within four years prior to filing of this Complaint, purchased Defendant's Tiny Tales Homes." Id. at 2.
Plaintiff asserted three claims under California consumer protection laws on behalf of the California sub-class, three common law claims for fraud by omission, breach of implied warranty, and unjust enrichment on behalf of both the nationwide class and California sub-class, and a claim under the Magnuson-Moss Warranty Act, on behalf of the nationwide class and California sub-class. Plaintiff sought damages as well as injunctive relief, punitive damages, and attorneys' fees.
Based on Bristol-Myers Squibb, PetSmart moved to strike the nationwide class claims arguing, among other things, that the Court lacked personal jurisdiction over PetSmart to adjudicate the claims of non-California class members. The Court agreed.
The Court's Analysis:
Although framed as a motion to strike under Rule 12(f), the Court noted that the motion was akin to a motion to dismiss claims asserted on behalf of the non-California class members for lack of personal jurisdiction under Rule 12(b)(2) and it analyzed the motion as such. Id. at 3-4. The Court explained that, under the Due Process Clause of the Fourteenth Amendment, to exercise personal jurisdiction over an out-of-state defendant, the defendant must have "certain minimum contacts with [the State]," such as to form a basis for general (or "all purpose") jurisdiction or specific (or "case linked") jurisdiction. Id. at 4-5.
As to general jurisdiction, a corporation typically is subject to general jurisdiction in the locations of its incorporation and principle place of business. In this case, those locations included Delaware and Arizona; therefore, the Court held that it could not exercise general jurisdiction over PetSmart and "the only issue is whether the Court can exercise specific personal jurisdiction over PetSmart for the claims of unnamed putative class members arising out of sales of Tiny Tales Homes that occurred outside of California." Id. at 5.
As to specific jurisdiction, the Court noted that, in Bristol-Myers Squibb, 137 S. Ct. 1773, 1780, the U.S. Supreme Court rejected the "sliding scale" approach and held that a California court could not exercise specific jurisdiction over Bristol-Myers relative to the claims of non-California plaintiffs who were not injured in California; the mere fact that they allegedly suffered the same injuries as individuals who were prescribed, obtained, and ingested Plavix in California "does not allow the State to assert specific jurisdiction over the nonresidents' claims." Id. at 6. The U.S. Supreme Court, however, did not decide whether its holding applied to class claims, and no federal Circuit has yet decided that issue.
The Court recognized that case law authorities have taken different approaches. First, some courts in the Ninth Circuit have distinguished Bristol-Myers because it involved a "mass action" rather than a "class action," but many of those opinions lack "any analysis of why a class action is so materially different that it warrants a different result than a mass action." Id. at 6-7. Second, courts in other jurisdictions, including the Northern District of Illinois and the Northern District of New York, have held that the same due process concerns that animated Bristol-Myers necessarily apply to nationwide class actions in federal courts. Id. at 6-8.
The Court agreed with the latter cases and concluded that Bristol-Myers Squib applies in the nationwide class action context. It opined that ". . . the Supreme Court did not consider whether its holding . . . would apply to class actions is hardly supportive of a holding that it does not apply to class actions. On the other hand, the rationale for the holding in Bristol-Myers Squibb indicates that if and when the Supreme Court is presented with the question, it will also hold that a state cannot assert specific personal jurisdiction over a defendant for the claims of unnamed class members that would not be subject to specific personal jurisdiction if asserted as individual claims." Id. at 8.
The Court reasoned the specific personal jurisdiction inquiry is "defendant-focused, with an emphasis 'on the relationship among the defendant, the forum, and the litigation" and "must arise out of contacts that the defendant himself creates with the forum State." Id. at 9 (quoting Walden v. Fiore, 571 U.S. 277, 284 (2014)). The "claims in question" here are those related to purchases that occurred outside of California. "That PetSmart sold some Tiny Tales Homes in California does not create a sufficient relationship between PetSmart and California such that it should be subject to specific personal jurisdiction in California for the claims of a nationwide class with no connection to California." Id.
The Court rejected plaintiff's argument that the "procedural requirements for a class action" warrant a different analysis, reasoning that Rule 23 does not provide a basis for distinguishing the rationale set forth in Bristol-Myers. Id. at 10. "The procedural safeguards of Rule 23 are meant primarily to protect the absent class members and create criteria for binding the absent class members to whatever settlement or judgment results from a class action." Thus, whether the individuals who made out-of-state purchases are named plaintiffs as part of a mass action, named as representatives for out-of-state class members, or unnamed members of a putative nationwide class "is a distinction without a difference." Id. at 11.
Finally, the Court rejected plaintiff's argument that its ruling might alter the "landscape of class action jurisprudence," noting that it would be more accurate to say that other courts' holdings that a court has personal jurisdiction over claims where there would not be personal jurisdiction if the claims were brought individually, for no other reason that that those same claims were brought as part of a class action "would fundamentally alter the existing landscape of personal jurisdiction jurisprudence." Id. at 12.
The Supreme Court's Bristol-Myers Squib ruling continues to have far reaching implications on class action litigation as courts around the country continue to stake out ground and mold the landscape of personal jurisdiction in the class action context. Judge Bencivengo's well-reasoned and thorough opinion is the latest addition to a series of rulings restricting plaintiffs' ability to file nationwide class actions in the forum of their choosing irrespective of their targets' contacts. This issue will continue to percolate through courts around the country as three Circuits are poised to render rulings on this issue in 2020. Stay tuned.
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