Canaday v. Anthem Cos.

9 F.4th 392

Laura CANADAY, Individually and on Behalf of All Others Similarly Situated, Plaintiff-Appellant,

v.The ANTHEM COMPANIES, INC., Defendant-Appellee.

No. 20-5947

United States Court of Appeals, Sixth Circuit.

Argued: June 10, 2021

Decided and Filed: August 17, 2021

ARGUED: Adam W. Hansen, APOLLO LAW LLC, Minneapolis, Minnesota, for Appellant. Brett C. Bartlett, SEYFARTH SHAW LLP, Atlanta, Georgia, for Appellee. ON BRIEF: Adam W. Hansen, Colin R. Reeves, APOLLO LAW LLC, Minneapolis, Minnesota, Rachhana T. Srey, Caroline E. Bressman, NICHOLS KASTER, PLLP, Minneapolis, Minnesota, William B. Ryan, DONATI LAW FIRM, PLLC, Memphis, Tennessee, for Appellant. Brett C. Bartlett, Kevin M. Young, Lennon B. Haas, SEYFARTH SHAW LLP, Atlanta, Georgia, James M. Harris, SEYFARTH SHAW LLP, Los Angeles, California, for Appellee. Scott L. Nelson, PUBLIC CITIZEN LITIGATION GROUP, Washington, D.C., Nicole A. Saharsky, MAYER BROWN LLP, Washington, D.C., for Amici Curiae.

Before: SUTTON, Chief Judge; McKEAGUE and DONALD, Circuit Judges.

SUTTON, C.J., delivered the opinion of the court in which McKEAGUE, J., joined. DONALD, J. (pp. 404–16), delivered a separate dissenting opinion.

SUTTON, Chief Judge.

Anthem provides health insurance. To ensure that it pays only for medically necessary procedures, it hires nurses to review insurance claims. The company pays those nurses a salary but does not pay them overtime. Laura Canaday, an Anthem nurse who lives in Tennessee, filed a proposed collective action under the Fair Labor Standards Act in federal court in Tennessee, claiming that the company misclassified her and others as exempt from the Act's overtime pay provisions. A number of Anthem nurses in other States opted into the collective action. But the district court dismissed the out-of-state plaintiffs on personal jurisdiction grounds. We affirm.

I.

A.

Enacted in 1938, the Fair Labor Standards Act creates a federal minimum wage, child labor protections, and overtime compensation requirements. 29 U.S.C. §§ 206, 207, 212. The overtime provisions require an employer to pay employees at least 150% of their hourly pay rate when they work more than 40 hours in a week. Id. § 207(a)(1). The Act provides two key enforcement mechanisms. It authorizes the Secretary of Labor to initiate an FLSA action on behalf of employees "in any court of competent jurisdiction." Id. § 216(c). And it authorizes employees to sue "in any Federal or State court of competent jurisdiction" on "behalf of ... themselves and other employees similarly situated." Id. § 216(b).

Under the second option, the one in play here, "similarly situated" employees may join a collective action by filing a "consent in writing," after which they become "party plaintiff[s]." Id. Once they file a written consent, opt-in plaintiffs enjoy party status as if they had initiated the action. The Act says that each similarly situated employee who opts in amounts to an "individual claimant," whose lawsuit counts as "commenced" on the day the employee files her written consent to join the collective action. See id. § 256.

B.

From its headquarters in Indiana, Anthem offers a host of health-related insurance policies. To ensure that the insurance company pays only covered claims, Anthem subsidiaries pay nurses to conduct what have come to be called "utilization reviews." In conducting these reviews, nurses assess the necessity of medical procedures under each health plan. Anthem treats these nurses as exempt from the FLSA's overtime provisions.

Since 2017, Laura Canaday has worked for Anthem as a review nurse in Tennessee. Two years into her tenure, Canaday filed this proposed collective action in federal court in Tennessee, alleging that the company misclassified her and other review nurses as exempt from the federal overtime rules. Dozens of nurses opted into the action by filing written consent forms with the federal court. Some worked for Anthem in Tennessee. Others worked for the company in other States across the country.

Canaday moved to certify a collective action of all utilization review nurses that Anthem classified as exempt from overtime. Anthem moved to dismiss all out-of-state nurses for lack of personal jurisdiction. The district court dismissed the nonresident plaintiffs without prejudice, leaving a collective action of Tennessee-based nurses.

Canaday sought to certify this order for interlocutory appeal. See 28 U.S.C. § 1292(b). The district court granted Canaday her request, and so did we.

II.

Federal law empowers and constrains federal courts in two salient ways. One turns on subject matter jurisdiction, the types of cases federal courts may hear, whether by granting them power to resolve only "Cases" or "Controversies," U.S. Const. art. III, § 2, or enabling them to hear matters of federal law, 28 U.S.C. § 1331, or enabling them to hear matters of state law under certain circumstances, id. §§ 1332, 1367. The other turns on personal jurisdiction, the types of litigants the federal courts may bind with their judgments, whether they be plaintiffs or defendants.

This case concerns the second source of power and its constraints. How does a federal court obtain personal jurisdiction over a defendant in a civil lawsuit? At English common law, a writ of capias ad respondendum directed the sheriff to take the defendant into custody to secure his appearance before the court. See Murphy Bros. v. Michetti Pipe Stringing, Inc. , 526 U.S. 344, 350, 119 S.Ct. 1322, 143 L.Ed.2d 448 (1999). Service of process took the old writ's place in the mid-eighteenth century, making a summons rather than an arrest the tool lawyers used to commence a civil lawsuit. See Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Over time, service of process became a prerequisite for obtaining authority over a defendant, making it appropriate to say that "service of process conferred jurisdiction." Burnham v. Superior Ct. , 495 U.S. 604, 613, 110 S.Ct. 2105, 109 L.Ed.2d 631 (1990) ; see also Omni Cap. Int'l, Ltd. v. Rudolf Wolff & Co. , 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987) ; Robertson v. R.R. Lab. Bd. , 268 U.S. 619, 622–23, 45 S.Ct. 621, 69 L.Ed. 1119 (1925) ; Boswell's Lessee v. Otis , 50 U.S. (9 How.) 336, 348, 13 L.Ed. 164 (1850).

Today, a fork appears in the road over how Congress authorizes service of process on defendants and how it empowers federal courts to obtain personal jurisdiction over them. One path is for Congress to include a nationwide service of process provision in the regulatory statute itself, one that could permit claimants to sue a defendant in any of the 94 federal district courts in the country. Several statutes take this route. A few prominent examples include The Sherman Act, 15 U.S.C. § 5, The Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1965(d), and The False Claims Act, 31 U.S.C. § 3732(a). But that is the less frequently exercised option, and the FLSA does not use it. More often, plaintiffs must look for guidance in the Federal Rules of Civil Procedure, one of five sets of "general rules of practice and procedure" that the Rules Enabling Act authorizes the federal courts to create and that Congress may veto or override with rules of its own. 28 U.S.C. § 2072 (also permitting rules of appellate, bankruptcy, and criminal procedure, and rules of evidence).

Rule 4(k) of the Federal Rules of Civil Procedure, adopted in 1993 and entitled "Territorial Limits of Effective Service," contains the pertinent provision. It says:

Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant: (A) who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located; (B) who is a party joined under Rule 14 or 19 and is served within a judicial district of the United States and not more than 100 miles from where the summons was issued; or (C) when authorized by a federal statute.

Two of the options do not apply. Canaday did not join Anthem under Civil Rules 14 or 19. And the FLSA does not contain a nationwide service provision. That leaves the question whether Anthem is subject to jurisdiction in the host State. Tennessee's long-arm statute authorizes its courts to exercise personal jurisdiction "[o]n any basis not inconsistent with the constitution of ... the United States." Tenn. Code Ann. § 20-2-225.

The Due Process Clause of the Fourteenth Amendment sets the key limit, constraining a state court's "power to exercise jurisdiction" over an out-of-state defendant. Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct. , ––– U.S. ––––, 141 S. Ct. 1017, 1024, 209 L.Ed.2d 225 (2021). Before 1945, that power was limited to the territory of the State. But that year, the Supreme Court extended the authority to exercise power over an out-of-state defendant so long as the defendant had such "contacts" with the forum State that "the maintenance of the suit" is "reasonable" and "does not offend traditional notions of fair play and substantial justice." Int'l Shoe , 326 U.S. at 316–317, 66 S.Ct. 154 (quotation omitted). Whether a court has personal jurisdiction over a defendant depends on the defendant's contacts with the State in which the plaintiff filed the lawsuit.

Two types of personal jurisdiction exist for corporations. A court may assert "general," or "all-purpose," jurisdiction over a defendant in its home State, where the defendant is incorporated or headquartered. BNSF Ry. Co. v. Tyrrell , ––– U.S. ––––, 137 S. Ct. 1549, 1558, 198 L.Ed.2d 36 (2017). Or a court may exercise "specific," or case-based, jurisdiction over a defendant if the plaintiff's claims "arise[ ] out of or relate[ ] to" the defendant's forum State activities. Daimler AG v. Bauman , 571 U.S. 117, 127, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) (quotation omitted).

Anthem is based in Indiana, not Tennessee. General jurisdiction is not an option. That leaves specific jurisdiction. "What is needed ......