Blurred Boundaries
The second edition: the latest developments in class actions, multi-claimant actions, and cross-border litigation in the EU and U.S.
Contents
Introduction3
EU update
The build-up for collective redress mechanisms in Europe
4
In the pipeline: An EU-wide representative action blurring the boundaries
5
A first for over 5 million claimants in the UK, with no end in sight 6
Class actions now have a general framework in France
7
The Netherlands, experimenting with "US-style" class actions
8
2018, a year of change for litigation in Germany
9
Speeding up actions in Poland
10
Actions for financial and banking services contracts on the rise in Spain
11
Reform in Italy could reverse current lack of interest in class actions
12
Anti-trust follow-on litigation in the EU
13
Data-related class actions in the EU
14
U.S. update
Multidistrict litigation in the US
15
The far-reaching implications of the U.S. Supreme Court's opinion in Bristol-Myers Squibb Co. V Superior Court
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Blurred boundaries May 2018
Introduction
When it comes to collective actions, legal boundaries in Europe have been blurring for years: now they are blurred. Collective actions across the European Union have evolved and are still doing so. Lawmakers are paying attention to what is happening or not happening around them, both on the continent and all around it.
Most recently, the European Commission's Proposal for a Directive on representative actions for the protection of the collective interests of consumers is another attempt at a litigation instrument with cross-border capacity. And, the EU General Data Protection Regulation already provides for a European right to collective action. At the same time, anti-trust follow-on actions are moving to preferred jurisdictions, taking advantage of the different legal instruments available. In order to understand the relevance of these movements, it is important to have a jurisdictional overview of the collective actions happening in the EU Member States, and an overview of one of the most recent class action cases in the United States, with a focus on jurisdictional issues. This document captures the most essential collective action developments across the EU Member States and the US.
Matthias M. Schweiger Partner, Munich T +49 89 290 12 0 [email protected]
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EU update
The build-up for collective redress mechanisms in Europe
Hogan Lovells
For nearly twenty years the development of collective redress mechanisms has been contemplated by the EU and, with every passing year, gaining momentum. The Recommendation on common principles for injunctive and compensatory collective redress mechanisms in the EU Member States, adopted by the European Commission in 2013, was an important milestone in this regard. Four years later, the European Commission initiated a public consultation to assess the implementation of the Recommendation in Member States1.
The European Commission published its report on the consultation in January 2018. It concluded that the Recommendation made a valuable contribution by inspiring discussions on collective redress mechanisms; however, it also concluded that the practical impact was not as strong as expected due to limited effectiveness and uneven availability of collective redress mechanisms across the EU.
Moreover, according to the European Commission's report, the analysis of the current implementation of the Recommendation leads to believe that further development of collective actions might not come without risks for businesses:
Designated representatives being able to file their claim before the courts of other EU Member States could incite Forum shopping. This may also result in double compensation or conflicting decisions;
Contingency fees and performance fees may encourage unnecessary claims for unrealistic amounts;
A claimant must be able to disseminate information on planned/ongoing collective action. This may, however, potentially have an adverse effect on the economic situation of the defendant whose liability has not yet been established. A balance needs to be found between the right to information and the right to protect a company's reputation;
Without a specific legal framework, unregulated third party funding could proliferate, which may result in potential conflicts of interest.
In the end, the report recommends to keep promoting the principles of the Recommendation. In order to improve access to justice while providing the necessary safeguards against abusive litigation, collective redress actions should become available or in some cases more comprehensive, in all the Member States.
Ccile Derycke Partner, Paris
Charles-Henri Caron Senior Associate, Paris
1 Building on our experience on mass tort and cross border cases, Hogan Lovells actively participated in the consultation process, providing input for France, Germany, Italy, Spain, the Netherlands and the UK.
Blurred boundaries May 2018
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In the pipeline: An EU-wide representative action blurring the boundaries
The European Commission followed up on its analysis and recently published a Proposal for a Directive on representative actions for the protection of the collective interests of consumers.
The Proposed Directive is set to repeal the Injunctions Directive 2009/22/EC and could oblige EU Member States to uniformly introduce representative actions for the protection of the collective interests of consumers in their national laws. The Proposal grew out of the initiative "A New Deal for Consumers revision of the Injunctions Directive", exploring several options for EU-spanning collective consumer redress and possibilities of actions against traders.
One of the key features of the Proposed Directive is its aim to have an overarching effect on final decisions in a representative action: when implementing the actions, EU Member States shall ensure that an infringement harming collective interests of consumers established in a final decision of an administrative authority or a court, including a final injunction order, is deemed as irrefutably establishing the existence of that infringement for the purposes of any other actions seeking redress before their national courts against the same trader for the same infringement. EU Member States shall further ensure that a final decision taken in another Member State is considered by their national courts or administrative authorities as a rebuttable presumption that an infringement has occurred.
Cross-border actions are possible. The scope of the representative action concerns infringements by traders of certain provisions of the Union law and it shall apply to domestic and cross-border infringements. Under the Proposed Directive, plaintiffs are entitled to bring representative actions seeking measures eliminating the continuing effects of the infringement, i.e. to bring representative actions seeking a redress order, which obligates the trader to provide for, inter alia, compensation, repair, replacement, price reduction, contract termination, or reimbursement of the price paid, as appropriate.
It is not yet clear when the Proposed Directive will come into effect. The upcoming European elections in 2019 may interfere with the legislative process. Nevertheless, it is to be expected that the European Commission will push this project within the remaining sixteen months of the current legislative period.
Matthias M. Schweiger Partner, Munich
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A first for over 5 million claimants in the UK, with no end in sight
In the UK, claimants are using both existing mechanisms and new routes to court like the recently introduced competition class action regime discussed [later] to seek collective redress.
In 2017, the first representative action was brought for alleged misuse of personal data against a leading tech company on behalf of a group estimated at over 5 million potentially affected claimants. In the coming years, with new mechanisms imminent, and ever increasing threats to cyber security, collective actions for data breaches are likely to be a focus for claimant lawyers in the UK.
It is not only people in the UK who are bringing group actions in the English courts. Claimants from as far away as Zambia, Kenya, and Nigeria are using the English procedural rules to sue multinationals headquartered in the UK for alleged environmental and human rights breaches by local subsidiaries. In October 2017, the Court of Appeal ruled that Zambian farmers were entitled to sue a UK parent company in respect of pollution from a Zambian subsidiary's mines. While the decision is being appealed to the Supreme Court, these cases highlight the borderless nature of litigation risk in today's world.
Shareholder collective actions are also on the rise, with high-profile claims like RBS's 2008 rights issue litigation dominating headlines. The 2012 US Supreme Court decision limiting the extraterritorial application of US securities laws sent aggrieved shareholders to other jurisdictions including the UK. With increasing regulator activity and shareholder awareness of the venues open to them, we expect to see more such actions in future.
Finally, the availability of finance from a booming litigation funding market is a significant factor driving collective actions in the UK. Litigation funders have supported major group actions against some of the biggest names in the finance, automotive, technology, and life sciences sectors. This trend is set to continue as investors seek non-cyclical assets unaffected by wider economic volatility where attractive returns can be generated in a relatively short timeframe.
Matthew Felwick Partner, London
Neil Mirchandani Partner, London
Blurred boundaries May 2018
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Class actions now have a general framework in France
In 2014, class actions (called "action de groupe" in French) were introduced in France. The French class action allows a group of consumers in an identical or similar situation to obtain compensation for a breach of legal or contractual duties by one or a group of professionals, on the ground of Consumer Law, as well as some aspects of Competition Law.
The standing to bring the action is limited to a dozen authorized consumer associations. Individual consumers may then join the group on the basis of an `opt-in' model.
Similarly, class actions in health-related matters were introduced in 2016, despite the difficulty of addressing individual bodily injury claims through a collective action. These health-related class action matters can be initiated by associations representing "users of the health system" against manufacturers, suppliers, or service providers of medicines, medical devices and cosmetic products, or their insurers. A few hundred of these associations exist in France.
In addition, following the entry into force of a new law in November 2017, France now has a general framework applicable to class actions. A common set of rules applies to the existing types of class actions, except for consumer class actions. Among the main rules making up this common set, class actions can
only be exercised by authorized associations. This new law also created three additional class actions: data privacy class actions, environmental class actions, and discrimination class actions, the latter most notably applicable to discrimination in the workplace. Practice will show whether this general framework will meet the objectives laid out by the lawmaker. So far, only a few consumer and health-related class actions have been initiated. In terms of simplicity and length of proceedings, there is room for improvement.
Ccile Derycke Partner, Paris
Christine Gateau Partner, Paris
Charles-Henri Caron Senior Associate, Paris
Hogan Lovells
The Netherlands, experimenting with "US-style" class actions
The Netherlands has a longstanding practice of collective redress with two statutory collective redress mechanisms. The first is a representative collective action, which can be used by a foundation or association on behalf of interested parties to obtain a declaratory judgment against a third party.
The second statutory mechanism enables a collective settlement of mass damages claims on an opt-out basis with a potential worldwide class, i.e. the class would not be limited to Dutch members. Driven by foreign plaintiff firms and often funded by foreign litigation funders, the Dutch mechanisms are often used as a supplement to US class actions for similar matters.
A key development in the Netherlands is a legislative proposal submitted to parliament in November 2016, aimed at introducing a US-style `class action' in the Netherlands. This legislative proposal introduces the option to claim monetary damages in a collective action on an opt-out basis.
at first the Dutch lawmakers had very international ambitions, they recently decided in an important amendment from January 2018 to limit the class to Dutch class members, providing foreign class members the opportunity to opt-in. As there often is no rule without an exception, upon request by one of the parties, the court may also apply the opt-out regime to those foreign class members, in case they are easily identifiable.
The respective scope of existing and proposed collective redress mechanisms in the Netherlands is not restricted to certain types of claims; this is what makes these mechanisms unique within the European Union.
The legislative proposal introduces enhanced standing and admissibility requirements. These admissibility requirements will be assessed at an early stage of the proceedings, comparable to the `motion to dismiss' in the United States. One of the new requirements the so called `scope rule' is the action must have sufficiently close connection with the Dutch jurisdiction. Though
Manon Cordewener Partner, Amsterdam
Sanne Bouwers Associate, Amsterdam
Blurred boundaries May 2018
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2018, a year of change for litigation in Germany
The discussion around implementing a collective action mechanism in consumer matters has been dragging for over two years and has recently become a sprint: the German government is now committed to implementing a collective action mechanism before 1 November 2018.
Collective actions in Germany are still limited to certain matters regarding the capital market and actions by consumer centers, and other publicly subsidized consumer associations, who are collecting consumer claims in the context of their scope of responsibilities, including but not limited to consumer contracts, aviation passenger rights, and prohibited advertisement. As the German government is pushing for a new law, things will most likely change.
The concept for a German collective action in consumer matters is the Musterfeststellungsklage. This concept differs from traditional class actions or group actions: it is not a collective action with consumers in the driver's seat. Instead, Germany has opted for the representative action model: only qualified entities such as registered consumer associations in Germany and the EU will get the standing to sue companies for a declaratory judgment. The action aims at establishing whether legal or factual prerequisites for civil claims by consumers exist. The subject matter of the action must be relevant for the claims of at least ten consumers, a fact to be credibly shown by the plaintiff. Consumers will not be party to the action but can benefit by registering for the lawsuit in a litigation register. The Musterfeststellungsklage is only admissible if at least 50 consumers register. Registration to the
litigation register will suspend the period of limitation for the consumer's claim. The declaratory judgment in the representative action shall be binding in a followon lawsuit between the consumer who has registered to the Musterfeststellungsklage and its defendant. If a settlement proposal is approved by the court, registered consumers may opt-in or opt-out of the settlement. The settlement will become binding for those who opt-in, if less than 30 percent of the registered consumers opt-out of the settlement. Technical details may change in the legislative process which is expected to move at a fast pace.
The litigation reality in Germany is that the bundling of cases is currently based on either a multitude of individual actions being tried together, or an assignment of claims to specialized entities or vehicles for the purpose of litigation. The German government is looking into the question whether it is necessary to amend the law and prohibit clauses in general terms and conditions that rule out the assignment of claims. Cross-border matters are also on the rise. German courts recently accepted jurisdiction for claims concerning environmental impact abroad allegedly caused by greenhouse gas emissions.
Matthias M. Schweiger Partner, Munich
Ina Brock Partner, Munich
Alexander Meissner Associate, Munich
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Speeding up actions in Poland
In June 2017, a major amendment of the Polish Act on Pursuing Claims in Group Proceedings came into force.
The principle aim of the amendment was to shorten the duration of class action proceedings, opening up the possibility of pursuing class actions for more categories of matters and claimants, as well as to facilitate the pursuit of claims by clarifying any unclear provisions and modernizing the method for publishing the information concerning class actions.
The amended Polish law introduces new categories of matters that can be pursued in class actions: claims for the non-performance or inappropriate performance of a contract, or for unjust enrichment. It also allows entrepreneurs to be part of a group in certain categories of matters. At the same time, claims that aim at the protection of consumers are no longer limited to listed categories.
The press is no longer the only method for publishing information about the initiation of group proceedings. Now, the information about a class action can be published in a manner that is the most appropriate for a given case, such as over the Internet. Moreover, the Polish Minister of Justice maintains a public online register of class action proceedings.
Of particular importance among the amendments the aim of which is to facilitate and simplify class actions is the revision of the rules concerning claims for the establishment of a defendant's liability. These claims are now strictly limited to declaring a defendant's responsibility for a given act, whilst the remaining conditions necessary to assess individual claims are left to be established in individual proceedings. Another significant revision concerns the manner of unifying the value of pecuniary claims pursued by each member of a class or sub-group. Therefore, it is no longer necessary for the common circumstances of a case to be taken into account when unifying the value of a claim.
Agnieszka Majka Senior Associate, Warsaw
Celina Bujalska Lawyer, Warsaw
Blurred boundaries May 2018
Actions for financial and banking services contracts on the rise in Spain
Class actions were introduced in Spain upon the entry into force of the Spanish Procedural Act of 2000, enabling legally incorporated entities, consumer associations, and defined groups of affected individuals to pursue the rights and interests of their corresponding members, as well as the general interests of consumers and users as a whole.
Although there is no specific Spanish collective redress mechanism, said Act does provide two types of optin actions to bring on collective claims: collective class actions and representative class actions. The former refer to actions available to easily identifiable groups of affected members. The latter were set for cases of "diffused interests" in relation with groups of indeterminate members, and can be brought solely by representative consumer associations. The use of said actions is permitted in all areas of law involving consumer or user rights or interests, including mainly product liability, damages resulting from unfair practices, consumer redress for financial services, unfair or abusive contract terms, and competition law. In practice so far, class actions in Spain have mostly been used in the consumer and user rights field for matters such as product liability, unfair financial terms, wrongful billing, and travel contracts. Such actions have recently increased with regards to financial and banking services contracts. Their use seems to be more limited in this area, as many complaints have yet to be addressed on a case-to-case basis. No alteration is expected to be made either now or in the near future with regards to the rules on collective actions in Spain, as no measures have been adopted or proposed.
Joaqun Ruiz Echauri Partner, Madrid
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Reform in Italy could reverse current lack of interest in class actions
In 2009, class actions were introduced in Italy, which allowed consumers and users to seek protection of collective or individual interests, directly or through a representative body, in relation to contractual rights (as with standard term agreements), product liability, and unfair commercial practices.
Class action claims are subject to an admissibility test, which is met if there is commonality (`homogeneity' of the rights at issue), no manifest groundlessness, no conflict of interest, and adequate class representation by the lead plaintiff. The claim can be heard on the merits only after it has been declared admissible. Members of the class can opt-in prior or after the declaration of admissibility.
So far, class actions have not proven successful in Italy. In a 2015 survey, 50 actions had been brought nationwide and in only one case were plaintiffs ultimately granted redress. These claims were brought in product liability matters, instances of unfair commercial practices, and in relation to standard terms of contract. Class claims were also filed against financial institutions imposing overdraft fees. However, most claims were dismissed, leaving only a few that led to actual compensation.
Italian consumer associations seem to have progressively lost interest in class actions, though recent developments hint at a change in course. In February 2018, the Italian Supreme Court confirmed the admissibility of a class action for unfair commercial practices. Additionally, the process for approval of a reform bill presented under the past legislature is now likely to move at a faster pace: the reform is aimed at enhancing class actions by distributing costs among plaintiffs and opters-in, introducing success fees for plaintiff's counsel and allowing members of the class to opt-in even after issuance of the class action ruling. No longer limited to violations of consumers' rights, class actions would extend to any party seeking protection of individual homogeneous rights and to liability assessment, damage redress, and precautionary measures against businesses and public service providers. Companies may soon be facing collective action issues in this new context.
Francesca Rolla Partner, Milan
Filippo Chiaves Partner, Milan
Blurred boundaries May 2018
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Anti-trust follow-on litigation in the EU
Anti-trust damages claims often concern an entire market that has been disrupted by anti-competitive conduct. These anti-trust claims should be the textbook example for class actions as they have proved to be in the US. In the EU, it is still early days for such anti-trust collective actions, with the first few steps being taken in this direction.
There are currently two active models for bringing mass claims in the EU: the first is the fairly new true class action regime in the United Kingdom, the second is the assignment model used for actions in Germany and the Netherlands.
The UK has had their fair share of huge anti-trust litigation cases. This includes claims on behalf of some 65,000 business claimants in the Air Cargo Litigation, in which individual claims were consolidated. More recently, the UK introduced the first European attempt at real optout class actions for anti-trust claims. To date, two opt-out class actions have been brought under this new regime. While there may have been some growing pains, as the court refused to certify both cases, it ultimately decided the main point of principle in favour of the claimants using Canadian case law as guidance. A new class action is expected to be launched soon following the truck cartel.
Germany and the Netherlands adopted the claim assignment model via Special Purpose Vehicles (SPVs). SPVs are easy to set up, currently not regulated, and may only face requirements for minimum capitalization. The Dutch assignment model recently gained further foothold due to an Amsterdam District Court decision declaring numerous assignments to SPVs valid1.
The claim assignment model can only rival the reach of an opt-in class action; it will never go as far as its big brother, the opt-out class action. However, the political mood is catching up spurred on not least by the truck cartel and the immense number of potentially affected customers. There is potential for opt-out class actions on the Continent sooner than anticipated, specifically with the legislative proposal aimed at introducing a US-style class action in the Netherlands. For the time being, the SPV-method does however seem to provide the preferred solution for trying cases in jurisdictions where opt-out actions are currently still lacking.
While Europe may not yet have an up-and-running class action system, there is some drive behind mass anti-trust damages actions in the EU. There is an ever-strengthening political will to make such claims happen. Two additional contributing factors are funders and discovery.
Litigation funders are increasingly active in this area. Mass antitrust claims can be immensely lucrative for funders given the amounts at stake. For instance, in the UK opt-out case against MasterCard, the court approved arrangements that could have seen funders getting returns of several hundred million. The same is true for bundled claims in Germany against the truck cartel, as a dedicated PR campaign aimed at collecting claims was launched with the help of litigation funders. With the funders having discovered the European antitrust damages market, claimants corporate as well as individual will find themselves with more and more viable options for realizing their claims. While the UK is already well versed with disclosure, the Continent may now catch up. A new discovery regime across the EU was introduced through implementation of the European Commission's directive on competition damages claims. This was set to further promote antitrust damages class actions across the EU.
Detlef Hass Partner, Munich
Nicholas Heaton Partner, London
Carolin Stadtaus Senior Associate, Munich
Sanne Bouwers Associate, Amsterdam
1 The decision is under appeal at the time of publication.
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Data-related class actions in the EU
More than 15 years after the adoption of the Data Protection Directive 95/46/EC, the European Commission noticed the current legislative framework did not manage to provide sufficient legal certainty as regards to the risks associated with online activity.
Acknowledging this, the European Parliament on 14 April 2016 adopted the General Data Protection Regulation which will become directly applicable in all EU Member States on 25 May 2018.
The GDPR targets the data controller or its processor, provides a set of standardized rules relating to personal data processing, supplies the means to enforce these provisions, and introduces individual and class action mechanisms.
The GPDR created three different rights to actions:
A representative joint action: data subjects can mandate an authorised entity, i.e. a not-for-profit body, organisation or association which has been properly constituted in accordance with the law of a Member State, has statutory objectives which are in the public interest, and is active in the field of the protection of data subjects' rights and freedoms with regard to the protection of their personal data, to bring an action on their behalf, in order to exercise certain rights provided for in the GDPR.
A limited compensatory representative joint action: data subjects can mandate authorised entities to exercise their right to compensation.
A limited class action: authorised entities can act on behalf of data subjects without having obtained a mandate from such data subjects in case of a violation of rights under the GDPR, but only if the EU Member State law provides for such possibility. Claims for compensation are however excluded from this mechanism.
The GDPR missed the mark in providing a consistent class action or procedural framework to materialize an efficient representative joint action. The representative joint action could however shed some light on the data protection issues in Europe. This action could remove the usual hurdle to the development of representative actions, the limited exposure and publicity of the action before it is brought, as well as the difficulty obtaining a sufficient number of mandates so that the collective action reaches a critical size. Though the GDPR may have eluded certain expectations, if it combines with the new methods of disseminating information relating to collective actions through Internet, its media impact could put personal data collective actions at the heart of public awareness.
Currently, the European right to 28 national collective actions is optional; its implementation will depend on the EU Member States' position, and the right could thus be limited. The GDPR does not create a European class action but rather a European right to collective action.
The combination of the large applicability of the GDPR and the choice of forum it provides to the data subject could, in theory, give birth to pan-European data protection collective actions, which could include non-EU data subjects under certain conditions. In any case, the European data protection collective action regime remains unclear at this stage. Its procedural framework and its applicability need to be specified and improved. In this respect, some answers may come from the European Data Protection Board, which was officially given the mission to issue guidelines, recommendations, and best practice procedures.
Christine Gateau Partner, Paris
U.S. update
Multidistrict litigation in the US
The U.S. procedural laws provide for a specific instrument to handle civil cases from varying jurisdictions called Multidistrict Litigation ("MDL"). This is a special legal procedure in which similar federal civil cases, involving one or more common questions of fact, from varying jurisdictions are transferred to a single district for the purpose of streamlining pre-trial proceedings and avoiding the duplication of discovery.
The coordinated and consolidated pre-trial proceedings are conducted by a judge to whom such actions are assigned by the judicial panel on multidistrict litigation. This process is intended to benefit the convenience of the parties and witnesses and promote the just and efficient disposition of the actions. There is, however, an important distinction between traditional class action lawsuits and MDLs i.e. that consolidation into an MDL does not join the suits into a single action, or effect the rights of the parties, or make those who are parties in one suit parties in the other.
Procedurally, an MDL is initiated by either party filing a petition with the judicial panel on multidistrict litigation for consolidation. The seven judge panel convenes a hearing, evaluates several factors, and makes the determination as to whether the cases will
be transferred to one federal court for consolidated pretrial multidistrict litigation. After transfer and at the conclusion of the consolidated pretrial proceedings, the individual actions are transferred back to the district from which they came for a jury trial. However, in practice very few cases actually go to trial in their original forum.
In recent years, a bellwether approach has been implemented in the MDL context. In this regard, bellwether jury trials are conducted for informational purposes in the district in which the MDL is consolidated. They are not intended to resolve the numerous consolidated cases, but rather to provide meaningful information, knowledge, and experience such that global settlement negotiations take into consideration real-world evaluations of the litigation by multiple juries.
While the MDL process leads to coordinated discovery and related efficiencies, there is the concern that the creation of an MDL allows individuals to file claims that would not otherwise be filed as individual actions because in the MDL, cases can exist without being independently litigated/worked-up as would be required if filed as a standalone action.
Lauren Colton Partner, Baltimore
Sydney Fitch Senior Associate, Baltimore
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The far-reaching implications of the U.S. Supreme Court's opinion in Bristol-Myers Squibb Co. V Superior Court
The United States Supreme Court recently decided a personal jurisdiction case with broad-reaching implications for foreign corporations and other parties named as defendants in US litigation.
In Bristol-Myers Squibb Co. v. Superior Court ("BMS"), 137 S. Ct. 1773 (2017), hundreds of individuals from 33 states banded together with some California residents to sue Bristol-Myers Squibb, the manufacturer of a drug called Plavix, in California state court. The US Supreme Court held that Bristol-Myers Squibb was not subject to personal jurisdiction with respect to the claims of the plaintiffs from outside California.
A court in the US can exercise personal jurisdiction of two types: general and specific. Bristol-Myers Squibb was not subject to general jurisdiction: it was neither incorporated nor headquartered in California. The US Supreme Court held that specific jurisdiction was also absent. According to the Court, "[w]hat is needed and what is missing here--is a connection between the forum and the specific claims at issue.1" The nonresident plaintiffs did not allege that they were prescribed, had ingested, or were injured by Plavix in California, or that Plavix was developed and manufactured there.2 Bristol-Myers' other connections to the forum were insufficient to support jurisdiction as they were unrelated to the plaintiffs' claims.3 The Court also held that the exercise of specific jurisdiction over the nonresident plaintiffs' claims could not be justified merely because the state court had jurisdiction over the related claims of California plaintiffs.4 Going forward, this means that, in order to demonstrate that a court has specific personal jurisdiction over a defendant, a plaintiff asserting a state law claim must demonstrate that (1) the defendant has the requisite contacts with the jurisdiction where the lawsuit is filed and (2) the specific state law claim has a nexus to the defendant's contacts with that particular jurisdiction.
courts have grappled with the implications of the US Supreme Court's decision for other forms of litigation, in particular multistate and nationwide class actions. Courts have reached conflicting results on whether the reasoning from Bristol-Myers extends to class actions, where a few named plaintiffs litigate claims behalf of many absent class members.5
Another outstanding question is how Bristol-Myers affects the doctrine of pendent personal jurisdiction, which some courts recognize. According to the Ninth Circuit, "a court may assert pendent personal jurisdiction over a defendant with respect to a claim for which there is no independent basis of personal jurisdiction so long as it arises out of a common nucleus of operative facts with a claim in the same suit over which the court does have personal jurisdiction."6 Courts have reached opposite conclusions regarding whether this doctrine allows for the exercise of pendent personal jurisdiction in the situation that was before the US Supreme Court in Bristol-Myers -- i.e., an independent basis for personal jurisdiction exists for the claims of instate plaintiffs, but not out-of-state plaintiffs.7
Despite the uncertainty of how Bristol-Myers will affect multistate class actions, defendants have the opportunity to use its holding to mount new jurisdictional challenges. When successful, these challenges may present plaintiffs with a difficult choice: (1) file smaller class actions in which the putative class includes only the residents of the forum states or (2) file nationwide class actions in the jurisdiction where the defendant is incorporated or has its principal place of business.
Although Bristol-Myers involved a mass tort action, in which many plaintiffs assert their individual claims in a single complaint, a number of federal and state trial
1 d. at 1781. 2 See id. at 1782. 3 See id. at 1781. 4 See id.
5 Compare Practice Mgmt. Support Servs., Inc. v. Cirque du Soleil, Inc., No. 14 C 2032, 2018 WL 1255021, at *15-16 (N.D. Ill. Mar. 12, 2018) (recognizing the split of authority, but dismissing the claims of out-of-state class members based on Bristol-Myers), with Fitzhenry-Russell v. Dr. Pepper Snapple Grp., Inc., No. 17-CV-00564 NC, 2017 WL 4224723, at *5 (N.D. Cal. Sept. 22, 2017) (declining to extend Bristol-Myers where the named plaintiffs were all in-state residents because "the citizenship of the unnamed plaintiffs is not taken into account for personal jurisdiction purposes").
6 Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004) (citations omitted).
7 Compare Sloan v. Gen. Motors LLC, No. 16-CV-07244-EMC, 2018 WL 784049, at *8-9 (N.D. Cal. Feb. 7, 2018) (applying the doctrine), with Greene v. Mizuho Bank, Ltd., No. 14 C 1437, 2017 WL 7410565, at *4-5 (N.D. Ill. Dec. 11, 2017) (concluding it "no longer" applies in these circumstances "in light of BristolMyers").
Blurred boundaries May 2018
Jessica Ellsworth Partner, Washington, D.C. Michael Kidney Partner, Washington, D.C. Jim Clayton Senior Associate,Washington, D.C.
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Contact the author
Sanne Bouwers [email protected]
Ina Brock [email protected]
Celina Bujalska [email protected]
Charles-Henri Caron [email protected]
Jim Clayton [email protected]
Lauren Colton [email protected]
Manon Cordewener [email protected]
Ccile Derycke [email protected]
Jessica Ellsworth [email protected]
Matthew Felwick [email protected]
Sydney Fitch [email protected]
Christine Gateau [email protected]
Detlef Hass [email protected]
Nicholas Heaton [email protected]
Hogan Lovells
Michael Kidney [email protected] Agnieszka Majka [email protected] Alexander Meissner [email protected] Neil Mirchandani [email protected] Francesca Rolla [email protected] Joaqun Ruiz Echauri [email protected] Matthias M. Schweiger [email protected] Carolin Stadtaus [email protected]
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