By Gerald L. Maatman, Jr. and Alex W. Karasik
Seyfarth Synopsis: In a nationwide consumer fraud class action involving false labeling claims under various state laws, a federal district court in Illinois granted the company’s motion to dismiss claims relative to a putative national class of plaintiffs, holding it did not have jurisdiction over the claims of the non-resident class of plaintiffs based on the recent U.S. Supreme Court opinion in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S.Ct. 1773 (2017). For businesses and employers facing nationwide class action lawsuits, this ruling is instructive in regards to strategies to fracture and minimize the class size, and limit potential liability.
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In DeBernardis v. NBTY, Inc., Case No. 17-CV-6125, 2018 U.S. Dist. LEXIS 7947 (N.D. Ill. Jan. 18, 2018), Plaintiff alleged that Defendants made false and misleading claims concerning the beneficial effects of a dietary supplement. The four-count complaint alleged violations of state consumer fraud acts on behalf of a multi-state class, as well as a class of Illinois-based purchasers. Defendants moved to dismiss on a variety of grounds, including their assertion that the Court did not have jurisdiction to hear the case involving the non-resident class of plaintiffs based on the recent U.S. Supreme Court opinion in Bristol-Myers Squibb. Judge Harry D. Leinenweber of the U.S. District Court for the Northern District of Illinois granted Defendants’ motion to dismiss Counts I, III, and IV as to the putative national class of Plaintiffs.
Businesses and employers can use this ruling to attack and limit nationwide class actions involving the state law claims of non-resident plaintiffs, following the Bristol-Myers Squibb decision.
Case Background
Plaintiff brought a nationwide class action seeking monetary damages and injunctive relief against the distributor of a dietary supplements. The four-count complaint alleged that Defendants made false and misleading claims concerning the beneficial effects of the product. Id. at *1. Count I alleged violations of state consumer fraud acts on behalf of a multi-state class; Count II alleged violation of the Illinois Consumer Fraud Act on behalf of Illinois purchasers; Count III alleged violations of express warranty on behalf of the nationwide class, and Count IV alleged unjust enrichment on behalf of the nationwide class.
Defendants moved to dismiss, arguing: (i) that as to Counts I, III, and IV, the Court did not have jurisdiction to hear the case involving non-resident classes of plaintiffs based on Bristol-Myers Squibb; (ii) that as to Count III, Plaintiff lacked Article III standing to claim injunctive relief; (iii) Plaintiff failed to allege that he gave pre-suit notice to Defendants of his breach of warranty claim; and (iv) Plaintiff’s claim for unjust enrichment failed for the national class for the same reason as his nationwide consumer fraud claim as alleged in Count I failed. Id. at *2.
The District Court’s Decision
The Court granted the Defendants’ motion to dismiss Counts I, III, and IV relative to the allegations concerning the putative national class of Plaintiffs. The Court explained that the main issue to be decided was the applicability of Bristol-Myers Squibb to the putative nationwide class action. In analyzing Bristol-Myers Squibb, the Court explained how the U.S. Supreme Court pointed out that a variety of interests must be considered in determining whether personal jurisdiction is present, including those of the forum state, the defendant, and the plaintiff. Id. at *3-4. However, the primary concern is the burden on the defendant. Id. at *4. Further, the Court opined that in addition to the practical problems of litigating in the out-of-state forum, it must consider “the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question.” Id. (internal quotation marks and citation omitted).
In response to Defendants’ citation of Bristol-Myers Squibb, Plaintiff argued that his case was distinguishable since Bristol-Myers Squibb involved mass tort actions and not putative class actions, a point that was raised by U.S. Supreme Court Justice Sonia Sotomayor in her dissenting opinion in Bristol-Myers Squibb. Id. Acknowledging that the applicability of Bristol-Myers Squibb to this case was a “close question,” the Court rejected Plaintiff’s argument and held that “it is more likely than not based on the Supreme Court’s comments about federalism that the courts will apply Bristol-Myers Squibb to outlaw nationwide class actions in a form, such as in this case, where there is no general jurisdiction over the Defendants.” Id. at *5. Further, the Court cautioned that the issue of forum shopping is just as present in multi-state class actions as it is in mass torts actions. Id. Accordingly, to the extent that Counts I, III and IV sought to recover on behalf of out-of-state Plaintiff classes, the Court granted Defendants’ motion to dismiss.
Implications For Employers
Although this case is outside of the workplace class action arena, its implications are highly relevant for employers facing nationwide workplace class action lawsuits that include state law claims. As one of the early cases to interpret the U.S. Supreme Court’s Bristol-Myers Squibb decision from June 2017, the opinion in DeBernardis is instructive for businesses in terms of how they can argue that courts do not have jurisdiction to hear class actions involving state law claims of non-resident classes of plaintiffs. The fracturing of nationwide class actions minimizes the impact of these bet-the-company cases for employers, and allows them to attack and defend against such claims in a more manageable fashion.