In re Cmty. Health Sys., Inc.
| Decision Date | 12 September 2016 |
| Docket Number | MASTER FILE NO. 15-CV-222-KOB |
| Parties | IN RE: COMMUNITY HEALTH SYSTEMS, INC., CUSTOMER SECURITY DATA BREACH LITIGATION (MDL 2595) |
| Court | U.S. District Court — Northern District of Alabama |
This document relates to all cases.
The Consolidated Amended Class Action Complaint ("Consolidated Amended Complaint" doc. 53 as amended by doc. 130) in this Multi-District Litigation lists forty Named Plaintiffs hailing from twenty-four different states. Plaintiffs seek to represent a class comprised of millions of people whose personal information was affected by a data breach in 2014 involving the computer network for Community Health Systems.
Two dispositive motions are pending before this court: (1) "Community Health Systems, Inc. [CHSI]'s Motion to Dismiss for Lack of Personal Jurisdiction, Lack of Subject Matter Jurisdiction, and Failure to State a Claim" (doc. 67); and (2) Community Health Systems Professional Services Corporation [PSC]'s "Motion to Dismiss" (doc. 69). The court held two extended hearings on these motions, one on February 10, 2016 and a second on April 15, 2016. After the first hearing, the court entered its "Partial Order on Motions to Dismiss" (doc. 125) to state, confirm, and clarify the oral rulings the court had made prior to the second hearing.
The instant Memorandum Opinion is meant to be a comprehensive compendium and clarification of rulings on the two motions to dismiss, including not only those rulings already stated in the Partial Order but also those addressed at the second hearing; the instant document also includes a summary of the reasons for those rulings. The transcripts of the two hearings contain a more extensive discussion of those reasons.
The court WILL GRANT IN PART and DENY IN PART both motions to dismiss, as more specifically stated below and for the reasons explained on the record and summarized below.
Defendant CHSI challenges the court's exercise of personal jurisdiction over it. The Due Process Clause of the Fourteenth Amendment requires that a court have personal jurisdiction over a defendant before it may render a judgment against it. See World-Wide Volkswagen v. Woodson, 444 U.S. 286, 291 (1980). To obtain personal jurisdiction over a nonresident defendant in a diversity action, plaintiffs must show that jurisdiction exists under the laws of the forum state where the case was filed and also that"sufficient minimum contacts [exist] between the forum state and the defendant[ ] such that satisfy the Fourteenth Amendment Due Process Clause's notions of fair play and substantial justice." Lockard v. Equifax, Inc., 163 F.3d 1259, 1265 (11th Cir. 1998).
Some of the claims in this case were originally filed in this court and in other federal courts in Alabama, but many of the claims were transferred to this court from other fora to be consolidated into this MDL. The undersigned, as the transferee judge in an MDL, possesses "'all the jurisdiction and powers over pretrial proceedings in the actions transferred to [her] that the transferor judge would have had in the absence of transfer.'" See In re Agent Orange Prod. Liab. Litig MDL No. 381, 818 F.2d 145, 163 (2d Cir. 1987) (quoting In re FMC Corp Patent Litig., 422 F. Supp. 1163, 1165 (J.P.M.D.L. 1976)).
The long-arm statutes of the transferor jurisdictions in this MDL vary; however, findingsufficient minimum contacts provides a necessary step in any personal jurisdiction analysis, and CHSI argued that Plaintiffs are unable to establish such minimum contacts in any transferor forum except Tennessee. To determine whether the Plaintiffs had in fact done so, the court analyzed whether Plaintiffs had established this court's general and/or specific personal jurisdiction over CHSI in each transferor forum and in Alabama.
This court FINDS that it has personal jurisdiction over Defendant CHSI, a publicly-traded Delaware holding company with its principal place of business in Tennessee, for the claims asserted in the Consolidated Amended Complaint by the Plaintiffs who filed one of the three cases transferred to and consolidated with this MDL from a district court sitting in Tennessee: Ellzey v. Cmty. Health Sys., Inc., No. 2:15-CV-1640 (N.D. Ala.) [No: 3:15-CV-00832 (M.D. Tenn.)]; Murphy v. Cmty. Health Sys., Inc., No: 2:15-CV-281 (N.D. Ala.) [ No. 3:15-CV-00031 (M.D. Tenn.)]; and McNutt v. Cmty. Health Sys., Inc., No. 2:16-CV-602 (N.D. Ala.) [ No. 3:16-CV-698 (M.D. Tenn.)].1
The parties had previously acknowledged in CHSI's motion to dismiss, in briefs supporting and opposing that motion, and at the hearings, that this court has general personal jurisdiction over the claims against CHSI originally brought in Tennessee transferor courts because CHSI's principal place of business and office are in Tennessee. No dispute exists on this issue, and CHSI's motion to dismiss excluded claims that were filed in a Tennessee transferor court. TheMcNutt II case was filed in Tennessee and transferred to this court after the court ruled that it had personal jurisdiction over CHSI only for Plaintiffs' claims that were originally filed in Tennessee; at the time of the partial order regarding challenges to personal jurisdiction over CHSI, the MDL encompassed only the Ellzey and Murphy cases. This court's finding that it has personal jurisdiction over the claims asserted against CHSI in cases originally filed in Tennessee courts applies to and encompasses the claims in McNutt II.
The Plaintiffs agreed through counsel, after the recent filing of the McNutt II action in Tennessee, that the Consolidated Amended Complaint (doc. 53) remains the operative Complaint in this MDL; and that the rulings regarding the Consolidated Amended Complaint remain in effect and apply to the McNutt II action, including the ruling that this court has personal jurisdiction over CHSI for the claims—such as those in McNutt II—filed in Tennessee and transferred to this court.2 (Doc. 126).
As to the claims against CHSI that were not originally brought in Tennessee, CHSI challenged this court's personal and subject matter jurisdiction over it via the declaration of Ben Fordham. (Doc. 68-1). In response to that challenge, Plaintiffs argued that the establishment of jurisdiction over CHSI in one transferor forum meant that this court has jurisdiction not only over the Tennessee claims transferred to it but also over all claims consolidated in this MDL with those Tennessee claims. However, the court FINDS that the establishment of personal jurisdiction over CHSI in one transferor forum of this MDL—here, Tennessee—does not confer to this transfereecourt personal jurisdiction over CHSI for all other claims asserted against CHSI by all other Plaintiffs in the MDL's Consolidated Amended Complaint where the other transferor jurisdictions could not establish jurisdiction over CHSI. See In re Showa Denko K.K. L-Tryptophan Prods. Liab. Litig.-II, 953 F.2d 162, 165 (4th Cir. 1992) (); see also In re Genetically Modified Rice Litig., 764 F.3d 864, 873-74 (8th Cir. 2014) (); In re Avandia Mktg., Sales Practices & Prod. Litig., 617 F. App'x 136, 141 (3d Cir. 2015) (same). The court further FINDS that the filing in this MDL of the Consolidated Amended Complaint, which supercedes other complaints for purposes of the pretrial proceedings in this MDL, does not expand the court's jurisdiction over CHSI.
Given this court's rulings that neither the MDL consolidation process nor the filing of a Consolidated Amended Complaint automatically expands this court's personal jurisdiction over CHSI beyond the Tennessee claims, the Plaintiffs attempted to establish jurisdiction over CHSI in transferor jurisdictions other than Tennessee by pointing to CHSI's affiliates and subsidiaries that do business in other states. The Plaintiffs alleged in the Consolidated Amended Complaint that "[t]hrough a network of affiliates, CHS[I] owns or leases 199 hospitals in 29 states . . . and provides outpatient and physician services through a variety of facilities . . . ." (Doc. 53, at 23 ¶ 54). The Plaintiffs argued in their briefs that CHSI is not legally distinct for purposes of personal jurisdiction from PSC and/or the affiliated facilities referenced in the Consolidated Amended Complaint that allegedly provided healthcare services to Plaintiffs.
However, CHSI presented evidence3 establishing that CHSI is a holding company with no employees, a corporate entity separate and distinct from PSC and the referenced affiliated facilities. Fordham's declaration stated that CHSI is a parent company that does not directly own PSC or any of those healthcare providers referenced in the Consolidated Amended Complaint whose acts in the relevant states allegedly confer jurisdiction over CHSI in this MDL. The general rule, which all relevant jurisdictions in this MDL follow,4 is that "[j]udicial jurisdiction over a subsidiarycorporation does not of itself give a state judicial jurisdiction over the parent corporation . . . even though the parent owns all of the subsidiary's stock." Restatement (Second) of Conflicts § 52 cmt. b (Am. Law Inst. 1971); see Cannon Mtg. Co. v. Cudahy Packing Co., 267 U.S. 333, 337 (1925) (). Therefore, the...
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