North Carolina federal court holds it lacks jurisdiction over claims of out-of-state opt-ins
In the latest court ruling to address personal jurisdiction over out-of-state opt-in plaintiffs in Fair Labor Standards Act collective actions, a federal district court in North Carolina held that it lacked jurisdiction over individuals who did not work for the defendant employer within the state, were not hired in the state, or whose employment with the defendant was not otherwise related to the state. In so ruling, the court determined that the U.S. Supreme court’s decision in Bristol-Myers Squibb Co. v Superior Ct. of Cal, 137 S. Ct. 1773 (2017), applies to FLSA collective actions. Speight v. Labor Source, LLC, No. 4:21-CV-112. (E.D.N.C. Apr. 19, 2022).
In Bristol-Myers Squibb Co., the Supreme Court held that a federal court in California lacked jurisdiction over out-of-state plaintiffs in a mass tort action. Since that decision, federal courts have had to grapple with whether the holding applies to collective actions brought under Sec. 216(b) of the Fair Labor Standards Act (FLSA), and to class action suits brought under Rule 23 of the Federal Rules of Civil Procedure. Several federal circuit courts of appeal have weighed in—offering conflicting precedents—but the U.S. Court of Appeals for the Fourth Circuit (which includes Maryland, North Carolina, South Carolina, Virginia, and West Virginia) has yet to address Bristol-Myers, either under the FLSA or in the context of Rule 23 class actions.
Billy Speight brought a putative collective action against Labor Source, LLC, a staffing agency that provides laborers for project work, which has offices in several states and a principal office in Kansas. Speight, a North Carolina resident, was hired in the agency’s Goldsboro, North Carolina office and worked on projects in North Carolina and other states over the brief course of his employment. Speight filed an FLSA suit and sought to conditionally certify a nationwide collective of current and former staffing agency employees. Arguing that the court did not have jurisdiction over the claims brought on behalf of potential opt-in plaintiffs outside North Carolina, Labor Source filed a partial motion to dismiss.
The district court granted the employer’s motion as to the claims of potential opt-in plaintiffs whose claims did not arise out of activities within the state, concluding that Bristol-Myers applies to FLSA collective actions.
Plaintiffs’ unsuccessful arguments
The plaintiffs contended that Bristol-Myers requires the court to focus on the “suit” as a whole rather than the individual “claim” in evaluating personal jurisdiction and that in FLSA collective actions, there is no need for an independent bases to exercise personal jurisdiction over a defendant as to opt-in plaintiffs. The court rejected this reasoning.
The court also rejected the plaintiffs’ argument that the Fourteenth Amendment’s “minimum-contacts” standard (the animating legal question in Bristol-Myers) applies only to states. Bristol-Myers had left open the question whether the Fifth Amendment, which applies to federal court jurisdiction, contains the same jurisdictional restrictions that the Fourteenth Amendment imposes on state courts. The district court, however, observed that “the Fourth Circuit has consistently counseled that the Fourteenth Amendment’s constraints on the forum state’s courts’ exercise of personal jurisdiction are pertinent to the personal jurisdiction inquiry for a federal court in that state[.]”
Also rejected: the plaintiffs’ assertion that the FLSA’s remedial purpose warrants the court’s exercise of jurisdiction over out-of-state opt-in plaintiffs.
Fourth Circuit courts are divided
Although the district court in Speight found that Bristol-Myers applies to FLSA collective actions, the same court has held that the Bristol-Myers holding does not apply in Rule 23 class actions (Hicks v. Houston Baptist University, E.D.N.C. 2019). (Several other district courts within the circuit have found Bristol-Myers inapplicable in the Rule 23 context as well.) However, the court in Speight explained that FLSA collective actions are “instructively distinguishable from the nature of a Rule 23 class action.” The court observed the “distinct statutory scheme” of the FLSA’s opt-in requirement and saw the distinction as a reason to require that opt-in plaintiffs “must present independent, sufficient bases for exercise of the court’s specific personal jurisdiction over that claim in reference to the defendant.”
Because the question of whether federal courts can exercise jurisdiction over out-of-state parties in class and collective actions has taken on growing significance, it’s likely the Fourth Circuit will be pressed into addressing the issues and resolving the internal circuit split.