We have repeatedly mentioned the long-awaited decision in Molock v. Whole Foods Market Group, Inc. from the District of Columbia Circuit. While we hoped this opinion would finally provide some circuit-level clarity about how the Supreme Court’s Bristol-Myers Squibb decision applies in the class action context, the court instead largely dodged this issue. There are good and useful aspects to the decision though, and it leaves open the door to applying Bristol-Myers to class action claims. However, the wait for a definitive ruling continues.
A quick refresher on the facts: Molock arose from Whole Foods’ alleged manipulation of its incentive-based bonus program. Current and former employees sued in the District Court for the District of Columbia and brought various state law claims. Importantly, the employees sought to represent a putative class of “past and present employees of Whole Foods” — regardless of where the employees lived. Whole Foods sought to dismiss on multiple grounds, including lack of personal jurisdiction, the denial of which was the subject of this interlocutory appeal.
In a 2-1 split opinion, the D.C. Circuit determined that deciding whether Bristol-Myers applies to class action claims would be premature because the putative class members are not yet parties to the action. As a decision to dismiss putative class members before class certification under Rule 23 would be, in its view, “purely advisory,” the court affirmed the district court’s denial of Whole Foods’ motion to dismiss and remanded the case for further proceedings.
Don’t miss the dissent. Senior Circuit Judge Laurence Silberman criticized the majority’s decision to avoid addressing the Bristol-Myers issue. As he points out, the challenge was not the court’s jurisdiction over the putative class members but was rather a challenge on the named plaintiffs’ entitlement to bring those claims on behalf of putative class members. Judge Silberman explained why Bristol-Myers should apply before class certification at the Rule 12 phase. Any impact on the plaintiffs’ ability to bring class action claims would not be so overwhelming because the claims could still be brought where corporations are subject to general jurisdiction (here, by “driving 110 miles down the road and filing this class action in Wilmington”).
Even though this is not the landmark circuit-level opinion we hoped it would be, there are still important takeaways from Molock.
First, waiting to apply Bristol-Myers until class certification is not our preferred result because it has the potential to impose expansive discovery costs. Judge Silberman pointed out the danger of the majority’s approach as it relates to extensive class discovery. To illustrate, the Molock plaintiffs intend to take discovery of payroll records from more than 200 Whole Foods stores, with the potential to expand the class and add nearly 300 other stores. Compared to the five D.C. stores that would be at issue otherwise, Judge Silberman acknowledged the extreme difference in scope and cost. The majority brushed off this concern because, in their view, “concerns about discovery costs must yield to Supreme Court precedent” and district courts have wide-ranging discretion to limit overly burdensome requests. We see no principled reason to impose the burden of class-wide discovery costs when there are no facts that could support subjecting the defendant to nationwide jurisdiction in a forum.
Second, while Molock is not all good for class defendants, neither is it all bad. If the D.C. Circuit thought that Bristol-Myers could not apply to class actions, it easily could have said so. By not addressing the question, the majority signaled a willingness to apply the same personal jurisdiction rules to class actions as apply in non-representative cases. Indeed, by deferring questions of personal jurisdiction to class certification, the court treated absent class members the same way it treats putative class representatives. If that result bears out, Bristol-Myers applies to class actions.
Finally, the dissent effectively outlines potential arguments for companies to make going forward. Beyond just the negative effects of expansive discovery, Judge Silberman repeatedly pointed out the fallacies in many arguments against applying Bristol-Myers in the class action context. This dissent thus provided a roadmap for arguments that may convince other judges and justices in the future. For now, companies facing class exposure will almost certainly continue to assess the need to move to dismiss under Rule 12(b)(2) at the outset of a case and maintain that objection all the way through class certification.
Shortly, we will examine how the Seventh Circuit, in a decision released the same day as Molock, addressed the application of Bristol-Myers to class actions.
