November 07, 2014 Top Story

Lawyer Travel for Work Enough for Personal Jurisdiction

Employer retaliation—not employee resignation—triggers constructive discharge claim

Robert T. Denn

An attorney traveling out-of-state for her clients to participate in settlement negotiations is subject to personal jurisdiction in the state where the negotiations occur. Downing v. Goldman Phipps, PLLC. The United States Court of Appeals for the Eighth Circuit has held that voluntary travel into Missouri for settlement negotiations is sufficient to establish personal jurisdiction where, as a result, the attorneys received compensation that was the subject of an unjust enrichment claim. The court reasoned that the attorneys’ actions constituted the transaction of business, and while the attorneys may have been acting for the benefit of their client, ABA Section of Litigation leaders suggest that attorneys should not expect special treatment in such situations, especially when their own financial gain is at issue.

MDL Giving Rise to the Subject Claims

The Downing case arose from multidistrict litigation (MDL) involving claims by rice producers against Bayer for damages resulting from contamination of the U.S. rice supply. The MDL was ultimately consolidated and transferred to the United States District Court for the Eastern District of Missouri for oversight and administration. To assist in administering the MDL, lead counsel sought to establish a common benefit fund for attorney compensation. The proposed fund would require contribution from all MDL recoveries “as well as from non MDL recoveries whose counsel had access to the MDL work product.” While the district court held it did not have jurisdiction over non-MDL cases, it approved the fund for MDL cases and encouraged non-MDL attorneys to participate in the fund.

Over the course of the MDL, contributing attorneys spent 107,000 hours and approximately $5.5 million contributing to and prosecuting the MDL. Before final settlement of MDL claims, several attorneys with state law cases outside of Missouri, who also did not join the fund, allegedly used MDL materials for their non-MDL cases (the Phipps group).

Specifically, the Phipps group traveled to Missouri for various hearings, depositions, and bellwether trials, and to attend settlement negotiations. Moreover, the plaintiff alleged that the Phipps group made extensive use of MDL generated materials in their state law trial where they ultimately prevailed.

After final settlement of the MDL cases, the district court approved a fee award for contributing MDL attorneys. The Phipps group also sought an award, but the court rejected their motion concluding they had been unjustly enriched by their use of MDL materials.

The Personal Jurisdiction Question

Following the unjust enrichment ruling, MDL lead counsel brought a class action suit in the same court against the Phipps group under theories of unjust enrichment and quantum meruit. The suit alleged that by failing to contribute to the fund, the Phipps group was unjustly enriched by their use of MDL materials, “which they used to obtain recoveries in their state law cases.” The district court dismissed the case on personal jurisdiction grounds, however, reasoning that although the Phipps group’s contacts with Missouri were “frequent and substantial,” they were not “purposeful or voluntary.”

The Eighth Circuit reversed the district court’s decision and remanded the case for further proceedings. The appellate court concluded Missouri’s long-arm statute was satisfied because the Phipps group’s participation in settlement negotiations qualified as the “transaction of any business” within the state. The court explained that the Phipps group’s entry into Missouri was a “purposeful choice” and that “when a party ‘invades a state for pecuniary gain it should be prepared to defend any suit arising out of that invasion.’”

The appellate court also found that exercising personal jurisdiction over the Phipps group comported with due process because of their physical presence in Missouri for settlement negotiations and their own financial gain, their “frequent and substantial” contact with the state, and the clear interest of Missouri in providing a forum for Missouri residents. It also determined that there was a sufficient nexus between the claims for unjust enrichment and quantum meruit based on the Phipps group’s actions that took place in Missouri.

Voluntary Travel

“Although the Phipps group did not choose where the multidistrict litigation was based, they did volunteer to go to different hearings and settlement negotiations in Missouri,” suggests Erika L. Glenn, Houston, TX, cochair of the ABA Section of Litigation’s Pretrial Practice & Discovery Committee’s Membership & Diversity Subcommittee. “While attendance at settlement negotiations is often critical for MDL attorneys to recover costs and fees, it is not surprising that the court exercised personal jurisdiction over the defendants in this situation,” adds Glenn.

“I think the court's reasoning was based in part on the perception that they could have independently developed their own work product, but instead they took advantage of a process that was designed to streamline big ticket litigation while not contributing anything to it themselves,” suggests Betsy P. Collins, Mobile, AL, chair of the Section’s Pretrial Practice & Discovery Committee’s Books Subcommittee. “As the court explained, this is a matter of specific jurisdiction where the law firm’s activities were directed at the state and where they ended up being sued as a result of alleged injuries resulting from those actions,” she concludes.

“Although the Phipps group was traveling to represent their clients, the court’s pivotal consideration was that they were seeking their own financial gain,” adds Collins “In this context, it is important to recognize that there is not anything special about attorneys,” notes Collins. “If attorneys are seeking financial gain in a state, they should not be surprised if a court in that state exercises personal jurisdiction over them as a result of their actions,” she concludes.

Robert T. Denny is a contributing editor for Litigation News.

Keywords: personal jurisdiction, long arm, class action, MDL, civil procedure

Related Resources

Copyright © 2014, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).