By Lennon Haas and Noah Finkel

Seyfarth Synopsis:  Since the Supreme Court’s 2017 decision in Bristol-Myers Squibb Co. v. Superior Court, federal district courts around the country have wrestled with whether they may exercise personal jurisdiction over employers as to FLSA claims brought by people who worked and were paid outside of the forum state.  On August 17 and 18, the Sixth and Eighth Circuits said no.  The result is that, at least within those circuits, an employer cannot be subject to a multi-state FLSA collective action unless it is brought in a court in the employer’s home state.

The FLSA allows individuals to bring claims for minimum wage or overtime violations “for and in behalf of” themselves and other “similarly situated” employees.  These “collective actions” often involve relatively few resident plaintiffs and a multitude of out-of-state employees.  Where their claims may be brought became an open question after the Supreme Court’s 2017 decision in Bristol-Myers.

That case involved 678 individual product liability claims joined together in a California state court based mass action.  Nearly 600 of those claims belonged to nonresidents.  To establish personal jurisdiction, the nonresidents relied on the similarity of their claims to those of the California plaintiffs.

The Supreme Court rejected that conception, holding that resident/nonresident claim similarity “is an insufficient basis for jurisdiction.”  Despite having incurred the “same injuries” as the California plaintiffs in the same manner and from the same cause, the nonresidents, reasoned the Court, had failed to show “a connection between the forum and the[ir] specific claims.”  That essential element of due process lacking, the Supreme Court held that no specific jurisdiction existed over Bristol-Myers as to the claims of out-of-state plaintiffs when those claims did not arise from the company’s California contacts.

Recognizing the similarity between mass actions and FLSA collective actions, employers have argued ever since that Bristol-Myers required all FLSA plaintiffs—both resident and nonresident named and opt-in plaintiffs—to establish specific personal jurisdiction.  Almost 50 district courts weighed in, with plaintiffs and defendants each prevailing about half the time.

On August 17, 2021, the Sixth Circuit became the first court of appeals to decide the issue, holding in Canaday v. The Anthem Companies, Inc. that courts may not exercise specific jurisdiction over FLSA claims “unrelated to the defendant’s conduct in the forum state.”  The very next day the Eighth Circuit reached the same conclusion in largely the same way in Vallone v. CJS Solutions Group, LLC.

Both courts began by determining the proper analytical framework under which to proceed.  And both, although considering federal questions in federal court, concluded that due process limits on state court authority constrained their power.

Service of process, they observed, is a prerequisite for obtaining authority over a defendant and must be congressionally authorized.  A statute can authorize nationwide service, and many do.  But not the FLSA.

More often, and as is the case for FLSA litigation, Federal Rule of Civil Procedure 4(k) constrains effective service within the limits prescribed by a forum state’s long-arm statute and by extension the Fourteenth Amendment’s Due Process Clause.

As Canaday and Vallone recognized, the power to exercise jurisdiction under that amendment is finite.  Courts may assert general, or “all purpose,” jurisdiction over a defendant in its home state (for a corporation, where it is incorporated and headquartered).  Or, they may assert specific or “case-based,” jurisdiction if a claim “arises out of or relates” to the defendant’s forum conduct.  Because neither Canaday nor Vallone chose to litigate in their employer’s homes, only specific jurisdiction could provide the authority needed.

Both plaintiffs contended that even so, the FLSA’s collective mechanism negated the need for individual nonresident plaintiffs to show a connection between the forum and their specific claims.  The circuits disagreed.  “The principles animating Bristol-Myers,” they concluded, dictated that even collective action opt-ins individually establish that their claims connected to the defendant’s forum conduct.  That was so because collective actions are “more accurately described as a kind of mass action,” with “each opt-in plaintiff . . . a real party in interest[] who must meet her burden for obtaining relief,” including by establishing that personal jurisdiction exists.

The question became, then, whether nonresident FLSA plaintiffs could show a connection between their claims and the defendants’ in-forum conduct.  Both Vallone and Canaday held that they cannot.  Nonresident plaintiffs were not employed in the forum.  They were not paid in the forum.  And they were not “shortchanged” overtime compensation in the forum.  “Taken together,” said Canaday, nonresident FLSA opt-in claims “look just like the claims in Bristol-Myers.”

That similarity led Canaday and Vallone to conclude that where “nonresident plaintiffs opt in to a putative collective action under the FLSA, a court may not exercise specific personal jurisdiction over claims unrelated to the defendant’s conduct in the forum state.”

For employers with multi-state operations, the decisions in Vallone and Canaday offer an important avenue for potentially limiting the size and reach of individual collective actions.  A pending decision in Waters v. Day & Zimmerman, No. 20-1997 (1st Cir.), will further clarify this important personal jurisdiction issue.  Should that case split from Canaday and Vallone, the applicability of Bristol-Myers to collective actions may well command attention from the Supreme Court.