Molock v. Whole Foods Mkt. Grp., Inc.

952 F.3d 293

Michael MOLOCK, et al., Appellees

v.WHOLE FOODS MARKET GROUP, INC., Appellant

No. 18-7162

United States Court of Appeals, District of Columbia Circuit.

Argued September 25, 2019

Decided March 10, 2020

Gregory J. Casas argued the cause and filed the briefs for appellant.

Steven P. Lehotsky, Nicole A. Saharsky, and Andrew J. Pincus were on the brief for amici curiae the Chamber of Commerce of the United States of America, et al. in support of appellant.

Richard A. Samp was on the brief for amicus curiae Washington Legal Foundation in support of appellant.

Scott L. Nelson and Allison M. Zieve were on the brief for amicus curiae Public Citizen, Inc. in support of plaintiffs-appellees and affirmance.

Matthew W.H. Wessler argued the cause for appellees. With him on the briefs were Jonathan E. Taylor and Salvatore J. Zambri.

Before: Tatel and Garland, Circuit Judges, and Silberman, Senior Circuit Judge.

Tatel, Circuit Judge:

In this not yet certified class action, the defendant moved to dismiss all nonresident putative class members for lack of personal jurisdiction. The district court denied the motion on the merits. We affirm, but on alternative grounds. Absent class certification, putative class members are not parties before a court, rendering the defendant's motion premature.

I.

Whole Foods, a Delaware corporation headquartered in Texas, allegedly manipulated its incentive-based bonus program, resulting in employees losing wages otherwise owed to them. Current and former Whole Foods employees (the Employees) initiated this diversity action in the District Court for the District of Columbia to recover the purportedly lost wages. The Employees brought various state law claims and sought to represent a putative class of "past and present employees of Whole Foods." Second Am. Class Action Compl. 25.

Whole Foods moved to dismiss on several grounds, only one of which is relevant here: it argued that the district court lacked personal jurisdiction to entertain the claims of the nonresident putative class members. The district court denied the motion and certified its order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Whole Foods then filed a petition for leave to appeal, which this court granted.

We review the district court's denial of Whole Foods' motion to dismiss de novo. See Liff v. Office of Inspector General for U.S. Department of Labor , 881 F.3d 912, 918 (D.C. Cir. 2018) ("We review de novo the District Court's legal conclusions denying a motion to dismiss.").

II.

Here and in the district court, the parties debate an issue left unresolved by the Supreme Court's recent decision in Bristol-Myers Squibb Co. v. Superior Court of California , ––– U.S. ––––, 137 S. Ct. 1773, 198 L.Ed.2d 395 (2017). There, a group of six hundred plaintiffs brought a mass tort action in California state court against the pharmaceutical firm Bristol-Myers Squibb. Id . at 1778. All plaintiffs asserted California state law claims, but only eighty-six were California residents; the rest resided elsewhere. Id . The firm moved to quash service of summons on the nonresidents' claims, arguing that the California court lacked specific jurisdiction to hear those claims. Id . The Supreme Court agreed, explaining that "[i]n order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant's contacts with the forum," meaning "there must be an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation."

Id . at 1780 (internal citations, alterations, emphasis, and quotation marks omitted). Applying that standard, the Court found that the nonresidents' claims lacked an "adequate link" with California to justify the exercise of specific jurisdiction. Id . at 1781.

Significantly for our purpose, the Court carefully limited its holding: "since our decision concerns the due process limits on the exercise of specific jurisdiction by a State, we leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court." Id. at 1783–84 (citing Omni Capital International, Ltd. v. Rudolf Wolff & Co. , 484 U.S. 97, 102 n.5, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987) ). Justice Sotomayor, dissenting, further explained that "the Court today does not confront whether its opinion here would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there." Bristol-Myers , 137 S. Ct. at 1789 n.4 (Sotomayor, J., dissenting). These are the issues the parties address in their briefs.

Whole Foods argues that because the district court is sitting in diversity, its personal jurisdiction is conterminous with that of a District of Columbia court. See Helmer v. Doletskaya , 393 F.3d 201, 205 (D.C. Cir. 2004) ("In a diversity case, the federal district court's personal jurisdiction over the defendant is coextensive with that of a District of Columbia court."). So, Whole Foods contends, the district court should have dismissed the nonresident putative class members because a District of Columbia court would lack both general and specific personal jurisdiction over their claims. It would lack general jurisdiction because Whole Foods, a Delaware corporation headquartered in Texas, is not "at home" in the District of Columbia. Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 929, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011). And it would lack specific jurisdiction because the claims of the nonresident putative class members do not "arise out of or relate to" Whole Foods' contacts with the District, Bristol-Myers , 137 S. Ct. at 1780 (internal quotation marks and alterations omitted); rather, they stem from Whole Foods' conduct at out-of-District stores.

The Employees take a different view. Acknowledging that a federal court sitting in diversity typically exercises personal jurisdiction conterminously with that of the state in which it sits, they argue that class actions present an exception to this general rule. According to them, Federal Rule of Civil Procedure 23 permits a federal court sitting in diversity to exercise personal jurisdiction over unnamed, nonresident class members' claims, even if a state court could not.

In the alternative, the Employees argue that the district court should have denied Whole Foods' motion to dismiss, not on the merits, but on the ground that it was premature because prior to class certification putative class members are not parties to the action. On this point, we agree. See United States v. Lawson , 410 F.3d 735, 740 n.4 (D.C. Cir. 2005) ("[W]e may affirm on grounds other than those presented and relied on below."); United States v. Garrett , 720 F.2d 705, 710 (D.C. Cir. 1983) ("It is well settled that in reviewing the decision of a lower court, that decision must be affirmed if the result is correct although the lower court relied upon a wrong ground or gave a wrong reason." (internal quotation marks and alterations omitted)).

In Smith v. Bayer Corp. , 564 U.S. 299, 131 S.Ct. 2368, 180 L.Ed.2d 341 (2011), the Supreme Court explained that "[i]n general, a party to litigation is one by or against whom a lawsuit is brought or one who becomes a party by intervention, substitution, or third-party practice." Id . at 313, 131 S.Ct. 2368 (internal quotation marks, citations, and alterations omitted). "[T]he label ‘party,’ " the Court observed in Devlin v. Scardelletti , 536 U.S. 1, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002), "does not indicate an absolute characteristic, but rather a conclusion about the applicability of various procedural rules that may differ based on context." Id . at 10, 122 S.Ct. 2005.

For example, in certified class actions, "[n]onnamed class members ... may be parties for some purposes and not for others." Id . at 9–10, 122 S.Ct. 2005. In Devlin , the Court held that unnamed class members are "considered ... ‘part[ies]’ for the purposes of appealing the approval of [a] settlement." Id . at 7, 122 S.Ct. 2005. Unnamed class members are also parties for purposes of claim preclusion: "a judgment in a properly entertained class action is binding on class members in any subsequent litigation." Cooper v. Federal Reserve Bank of Richmond , 467 U.S. 867, 874, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984). But unnamed class members are treated as nonparties for other purposes, including jurisdictional ones. In diversity suits, for example, unnamed class members are nonparties for the complete diversity requirement of 28 U.S.C. § 1332. See Devlin , 536 U.S. at 10, 122 S.Ct. 2005 ("The rule that nonnamed class members cannot defeat complete diversity is ... justified by the goals of class action litigation."). Lower courts also generally agree that unnamed class members are not parties for purposes of consenting to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c). See Koby v. ARS National Services, Inc. , 846 F.3d 1071, 1076 (9th Cir. 2017) (collecting cases).

By contrast, putative class members—at issue in this case—are always treated as nonparties. The Supreme Court made this clear in Smith . There, a federal district court enjoined a state court from hearing a class certification motion because the federal court "had earlier denied a motion to certify a class in a related case, brought by a different plaintiff against the same defendant alleging similar claims." Smith , 564 U.S. at 302, 131 S.Ct. 2368. The injunction was proper, the district court reasoned, because Smith—the party seeking class certification in state court—was an unnamed member of the putative federal class action and thus barred by claim preclusion from seeking class certification in the similar state action. Id . at 313, 131 S.Ct. 2368. The Supreme Court disagreed, holding that "the mere proposal of a...