The Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court, 582 U.S. _____,137 S. Ct. 1773 (2017) (BMS), continues to make waves in Fair Labor Standards Act (FLSA) litigation. It offers many employers intriguing personal jurisdiction arguments to limit the scope of FLSA nationwide collective actions.
Background: BMS itself was not an FLSA action. Rather, the Supreme Court ruled 8-1 that a California state court did not have personal jurisdiction over the pharmaceutical manufacturer in a mass tort case filed by a group of almost 600 non-California residents claiming injuries allegedly caused by a BMS prescription drug called Plavix. The Court distinguished between the concept of general personal jurisdiction (i.e., jurisdiction for all purposes), which was not available on the facts of the case, and specific jurisdiction (i.e., jurisdiction for the specific dispute at issue), reasoning that the latter concept requires a plaintiff to show a “personal affiliation between the forum and the underlying controversy.” With reasoning that can be argued to apply to all types of litigation – including wage-hour cases – the Court concluded that there was insufficient evidence of such an affiliation, noting that the nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California. Accordingly, the Court held that the assertion of personal jurisdiction over the company would violate the Due Process Clause of the 14th Amendment.
Response by the Lower Courts: Large employers facing nationwide FLSA collective actions filed by forum-shopping plaintiffs have advanced the personal jurisdiction argument articulated by BMS. To date, district courts have taken divergent positions on this issue.
One line of cases, represented by decisions in California, New York, and Florida, rejects the application of BMS to wage-hour actions, holding that BMS does not extend to a “federal claim created by Congress specifically to address employment practices nationwide.” See, e.g., Swamy v. Title Sources, Inc., No. 17-cv- 01175 WHA, 2017 WL 5196780 (N.D. Cal. Nov. 10, 2017) at *2. See also Gibbs v. MLK Express Servs., LLC, No. 2:18-cv-00434, 29 W 190123 at * 14-16 (M.D. Fla. Mar. 28, 2019); Molock et al v. Whole Foods Market Inc., et al., 297 F. Supp. 3d 114 (D.D.C. 2018), appeal pending No. 18-7162 (D.C. Cir.) (adopting the reasoning of other courts distinguishing between plaintiffs in mass tort actions and members of a putative class action).
But a majority of district courts, led by rulings in Massachusetts, Ohio, and Tennessee, have reached the opposite result in decisions that are good news for employers. These courts have concluded that BMS properly is interpreted to apply to FLSA collective actions. These judges have reasoned that opt-in plaintiffs in FLSA actions are more like named plaintiffs and qualitatively different from members of a putative class action filed under Rule 23.
A Positive Illustration: Chavira v. OS Restaurant Servs.: A recent decision by Judge Allison Burroughs in Boston illustrates the line of cases favorable to employers. In Chavira et al v. OS Restaurant Services, LLC and Bloomin’ Brands, Inc. No. 18-cv-10029 ADB (D. Mass., Sept. 30, 2019), the court granted the employer’s motion to strike notices of consent filed by proposed out of state opt-in plaintiffs in a nationwide FLSA overtime pay case brought in Massachusetts against the Outback Steak House restaurant chain. Observing that nationwide service of process is not authorized by the text of the FLSA, the court applied the Massachusetts long-arm statute according to the Supreme Court’s directive in BSM. Judge Burroughs reviewed the competing lines of cases, and, consistent with the rationale and holding in Roy v. FedEx Ground Package Systems, Inc., 353 F.Supp. 3d 43 (D. Mass. 2018), concluded that the plaintiffs had insufficient minimum contacts with Massachusetts to support personal jurisdiction over the employer in that court. More specifically, the court distinguished Rule 23 class actions from the collective action procedure contained in the FLSA, referring to the latter as a “rule of joinder under which only the individual opt-in plaintiffs have legal status.” The court found that putative collective action members who had never worked at an Outback Steakhouse in Massachusetts lacked the necessary minimum contacts with Massachusetts. The court then denied the plaintiff’s motion for initial conditional certification of the FLSA collective, concluding there was insufficient basis for such a ruling after the allegations of the non-resident putative plaintiffs were stricken. Accord Turner et al v. Utiliquest, LLC, No. 3:18-cv-99284 (M.D. Tenn. July 16, 2019).
Next Steps for Employers: As of this writing, there is no definitive appellate court decision on this issue. But that will soon change, with cases pending before the Seventh Circuit, and the District of Columbia Circuit (see Molock v. Whole Foods, discussed above, where the trial court authorized an interlocutory appeal of its decision).
Until then, decisions like Chavira may give employers an additional tool to limit the scope of FLSA nationwide collective actions. When an employer faces such a complaint in a state in which it is not incorporated and does not have its principal place of business, it should consider a personal jurisdiction challenge, mindful that there may be valid reasons not to pursue this argument in a particular case. These reasons include the fact that the plaintiffs’ counsel might try to move the case to a state that has general personal jurisdiction over the employer, or decide to file separate collective actions in other jurisdictions where the employer has substantial operations and which may not be more favorable venues for the employer.