SCOTUS asserts that the CA lacked jurisdiction over Bristol-Myers Squibb Co.

In the latest court ruling regarding personal jurisdiction over out-of-state opt-in plaintiffs in Fair Labor Standards Act class actions, a federal district court in North Carolina ruled that it does not did not have jurisdiction over persons who did not work for the defendant employer in the state, were not hired in the state, or whose employment with the defendant was not otherwise connected with the State. In this decision, the court determined that the decision of the Supreme Court of the United States in Bristol-Myers Squibb Co. vs. Superior Ct. of Cal, 137 S.Ct. 1773 (2017), applies to FLSA class actions. Speight v Labor Source, LLC, No. 4:21-CV-112. (EDNC April 19, 2022).

In Bristol-Myers Squibb Co., the Supreme Court ruled that a federal court in California did not have jurisdiction over out-of-state plaintiffs in a mass tort action. Since that decision, federal courts have had to consider whether the decision applies to class actions brought under s. 216(b) of the Fair Labor Standards Act (FLSA) and class actions brought under Rule 23 of the Federal Rules of Civil Procedure. Several federal circuit courts of appeals weighed in – offering conflicting precedents – but the United States Court of Appeals for the Fourth Circuit (which includes Maryland, North Carolina, South Carolina, Virginia and West Virginia) has not yet addressed Bristol Myerseither under the FLSA or in class action lawsuits under Rule 23.

The trial

Billy Speight has filed a putative class action lawsuit against Labor Source, LLC, a recruitment agency that supplies laborers for project work, which has offices in several states and a main office in Kansas. Speight, a North Carolina resident, was hired at the agency’s office in Goldsboro, North Carolina, and worked on projects in North Carolina and other states during the brief period of his tenure. job. Speight filed an FLSA complaint and sought to conditionally certify a nationwide collective of current and former staffing agency employees. Arguing that the court lacked jurisdiction over claims filed on behalf of potential opt-in plaintiffs outside of North Carolina, Labor Source filed a partial motion to dismiss.

The district court granted the employer’s motion regarding the claims of potential opt-in plaintiffs whose claims did not arise out of state activities, finding that Bristol Myers applies to FLSA class actions.

Unsuccessful arguments of plaintiffs

The plaintiffs argued that Bristol Myers requires the court to focus on the “suit” as a whole rather than the individual “claim” in assessing personal jurisdiction and that in FLSA class actions there is no need for independent bases to exercise personal jurisdiction over a defendant as to option- in plaintiffs. The court rejected this reasoning.

The court also rejected plaintiffs’ argument that the Fourteenth Amendment’s “minimum contact” standard (the animating legal issue in Bristol Myers) only applies to states. Bristol Myers had left open the question of whether the Fifth Amendment, which applies to the jurisdiction of federal courts, contains the same jurisdictional restrictions that the Fourteenth Amendment imposes on state courts. The district court, however, observed that “the Fourth Circuit has always advised that the constraints of the Fourteenth Amendment on the exercise of personal jurisdiction by the courts of the forum state are relevant to the inquiry into the personal jurisdiction of a federal court in this state[.]”

Also rejected: plaintiffs’ assertion that the FLSA’s remedial purpose justifies the court’s exercise of jurisdiction over out-of-state opt-in plaintiffs.

Fourth Circuit Courts Divided

Although the District Court of Speight found that Bristol Myers applies to FLSA class actions, the same court held that Bristol Myers hold on do not apply in class actions Rule 23 (Hicks v. Houston Baptist University, NDCS 2019). (Several other circuit district courts have found Bristol Myers also inapplicable in the context of Rule 23.) However, the court of Speight explained that the FLSA class actions are “instructively distinguishable from the nature of a class action under Rule 23.” The court observed the “separate statutory scheme” of the FLSA’s membership requirement and saw the distinction as a reason to require that opt-in applicants “must present independent and sufficient grounds for the exercise of the specific personal jurisdiction of the court over this claim with reference to the defendant.”

As the question of whether federal courts can exercise jurisdiction over out-of-state parties in class and class actions has taken on increasing importance, it is likely that the Fourth Circuit will be pushed to resolve the issues and solve the internal circuit split.