Sixth Circuit Limits Exercise of Personal Jurisdiction in FLSA Collective Actions

On August 17, 2021, the Sixth Circuit Court of Appeals became the first federal appellate court to expressly rule on the application of the Supreme Court of the United States’ decision in Bristol-Myers Squibb Co. v. Superior Court of California to Fair Labor Standards Act (FLSA) collective actions. In Canaday v. The Anthem Companies, Inc., No. 20-5947, the Sixth Circuit held that a federal court cannot exercise personal jurisdiction over a corporate defendant with respect to the claims of nonresident opt-in plaintiffs who join an FLSA collective action when the claims are not connected to the defendant’s activities in the forum state. The decision is dispositive of the scope of FLSA collective actions in the Sixth Circuit, and it will likely have sweeping ramifications for FLSA collective actions nationwide.

Background

The Anthem Companies, Inc. is headquartered in Indiana and offers a variety of health insurance policies. To ensure that it pays only for “covered claims,” the company hires nurses to review insurance claims for medical necessity. Anthem pays the review nurses a salary and classifies them as exempt, such that they do not receive overtime pay. Laura Canaday worked as an Anthem review nurse in Tennessee. She filed a proposed collective action under the FLSA in federal district court in Tennessee, alleging that Anthem had misclassified her and other similarly situated Anthem nurses as exempt. Due to that alleged misclassification, Canaday claimed that Anthem had wrongfully denied her overtime pay under the FLSA.

Canaday moved to certify a nationwide collective action of review nurses that Anthem had classified as exempt. Dozens of nurses opted into the action. Some of the nurses worked in Tennessee and others worked in a number of other states. Anthem moved for dismissal of all out-of-state nurses based upon a lack of personal jurisdiction. The district court granted the dismissal without prejudice as to the nonresident nurses, “leaving a collective action of Tennessee-based nurses.”

The Significance of Bristol-Myers

The Supreme Court’s decision in Bristol-Myers, 137 S. Ct. 1773 (2017), provided the basis for the Sixth Circuit’s decision in Canaday. Bristol-Myers “involved a ‘mass action’ under state law … for alleged defects in Plavix, a blood thinner drug,” which the company manufactured. Residents and nonresidents of California sued Bristol-Myers in California state court, alleging injuries related to Plavix. “The nonresident plaintiffs did not claim any relationship with the forum [s]tate. They did not purchase Plavix in California or suffer any harm from Plavix in California.” (Internal citations omitted.) The Supreme Court “reasoned that any similarity between the resident and nonresident plaintiffs’ claims offered an ‘insufficient basis’ for exercising specific jurisdiction. Unless nonresident plaintiffs could demonstrate that their claims arose out of the defendant’s contacts with the forum [s]tate, personal jurisdiction over the company did not exist, no matter ‘the extent of a defendant’s unconnected activities in the [s]tate.’” (Internal citations omitted.)

In ruling that the California state court lacked jurisdiction over the claims of nonresident plaintiffs, the Supreme Court acknowledged that its holding might ultimately generate more litigation in the form of separate actions by nonresident plaintiffs in their respective states. But the Supreme Court also noted that all plaintiffs to the action could have brought a mass tort action against Bristol-Myers in New York (the company’s headquarters) or Delaware (its place of incorporation) because courts in those states would have had general personal jurisdiction over the company. Instead, the California state court could exercise only specific personal jurisdiction over the company based on its activities in the state.

The Sixth Circuit’s Analysis

In Canaday, the Sixth Circuit reiterated the basic tenet that, pursuant to the Due Process Clause of the Fourteenth Amendment, the question of “[w]hether a court has personal jurisdiction over a defendant depends on the defendant’s contacts with the [s]tate in which the plaintiff filed the lawsuit. Two types of personal jurisdiction exist for corporations. A court may assert ‘general’ … jurisdiction over a defendant in its home [s]tate, where the defendant is incorporated or headquartered. Or a court may exercise ‘specific’ … jurisdiction over a defendant if the plaintiff’s claims ‘arise[] out of or relate[] to’ the defendant’s forum [s]tate activities.” (Internal citations omitted.)

Because Anthem is both incorporated and headquartered in Indiana and was not otherwise “at home” in the state of Tennessee, the district court in Tennessee could not exercise general jurisdiction over Anthem as a defendant. At issue, therefore, was whether the Tennessee district court had specific personal jurisdiction over Anthem and whether there was a “claim-specific and Anthem-specific relationship” between the nonresidents’ FLSA claims and Tennessee[.]”

Applying Bristol-Myers, the Sixth Circuit held there was not such a relationship. The court found that the nonresident nurses did not bring claims arising out of or relating to Anthem’s conduct in Tennessee, because Anthem neither employed nor paid the nonresident nurses within the state. The Sixth Circuit went on to explain that adherence to this approach should not change the way FLSA collective actions are filed because the named plaintiffs traditionally file their actions where courts have general jurisdiction over the defendants, or where the conduct occurred.

In addition, the Sixth Circuit addressed an argument that plaintiffs’ counsel have routinely raised when litigating the jurisdictional issue in question—specifically, that FLSA collective actions are more appropriately analogized to Rule 23 class actions, under which nationwide service of process is permitted, than to mass tort actions such as Bristol-Myers. The court rejected that argument, observing that Congress had legislated nationwide service of process where it had intended to do so. “While the FLSA shows no reticence in setting nationwide labor standards,” the Court stated, “it does not establish nationwide service of process. That silence rings loudly when juxtaposed with many other instances in which Congress included nationwide service of process provisions in laws enacted before and after the FLSA’s passage in 1938.”

Circuit Judge Bernice Donald dissented, contending that Bristol-Myers did not apply to FLSA collective actions because the Supreme Court in that case addressed only the limitations of state courts, not federal courts, in their exercise of personal jurisdiction over nonresidents.

Key Takeaways

Canaday may significantly limit the size and geographic scope of FLSA collective actions in the Sixth Circuit, absent a district court’s exercise of general jurisdiction over a corporate defendant. Nevertheless, with that potential benefit to employers that are sued outside their home states comes the potential for piecemeal litigation in the various jurisdictions in which employers operate. The extent to which other federal appellate courts (including the First Circuit, where the issue is currently pending) adopt the reasoning of Canaday remains to be seen.