Key Points

  • The First Circuit held that a federal court may not dismiss a case on the merits without first resolving a pending challenge to personal jurisdiction.
  • The panel concluded that Supreme Court decisions in Steel Co. and Sinochem undermined earlier First Circuit precedent, including North American Catholic Educational Programming Foundation v. Cardinale and McBee v. Delica Co., that allowed courts to bypass hard jurisdictional questions and decide easy merits questions.
  • The court vacated the dismissal of Temu's fraud and contract suit against lawyer Jeffrey Gluck, his firm, Cookies SF and Alec Monopoly, along with the attorney-fee award and the denial of Rule 11 sanctions.
  • On remand, the district judge must decide personal jurisdiction over Gluck and Cookies SF first, then either reassess the merits, fees and sanctions or dismiss those defendants without prejudice and decide next steps for Alec Monopoly.
  • The circuit retains a narrow exception allowing courts to assume jurisdiction when the sidestepped jurisdictional question is statutory.

The First Circuit revived a lawsuit by the operator of the Temu shopping platform accusing an intellectual-property lawyer of lying to secure two settlements, holding that the trial judge should not have thrown out the case before deciding whether the court had authority over the defendants at all.

Circuit Judge Thompson, writing for a panel that also included Judges Montecalvo and Aframe, held that U.S. District Judge Richard G. Stearns of the District of Massachusetts erred by dismissing Whaleco Inc.'s claims without first ruling on motions challenging personal jurisdiction, the requirement that a court have power over a particular defendant and not just over the type of case. The panel vacated the dismissals, an award of attorney fees to two of the lawyer's clients and the denial of sanctions the lawyer had sought against Temu.

The decision, in an opinion dated Oct. 19, retires a shortcut that older First Circuit precedent had allowed, under which a court facing a difficult jurisdictional question could skip it and dismiss plainly weak claims on the merits. Pointing to "intervening directives from our judicial bosses," a reference to a series of U.S. Supreme Court decisions, Thompson wrote that "we can no longer let courts leapfrog personal jurisdiction problems and just decide the merits."

Whaleco, which does business as Temu, alleged that Jeffrey Gluck and his firm, Gluck Law Firm P.C., "lied" to get Temu to settle claims brought by two of Gluck's clients, Cookies SF LLC and the Alec Monopoly companies. In each settlement agreement, Gluck personally signed a provision representing that he and his firm "currently have no clients who intend to sue TEMU and have no present intention of advertising or marketing for additional clients." The same provision said nothing in it would limit Gluck's right to represent clients against Temu or to market for new ones.

According to the complaint, which the panel accepted as true at this stage, Gluck "advertised on social media for new clients to sue Temu" days after signing the agreements but before they took effect. Shortly after they took effect, the complaint says, he "threatened Temu with a new lawsuit on behalf of additional clients with which [he] had long and tight relationships." Temu sued for fraudulent inducement, misrepresentation, breach of contract and other claims, seeking to undo the settlements and recover the money paid or, alternatively, damages.

All of the defendants moved to dismiss for failure to state a claim. Gluck and Cookies SF also argued that a Massachusetts court lacked personal jurisdiction over them. Gluck said he and his firm are California citizens who neither did business with Boston-based Temu in Massachusetts nor committed a tort against it there, and Cookies SF said it is a California company that signed its agreement in California.

Judge Stearns granted the merits dismissals and, "given [that] conclusion," chose "not [to] decide" the jurisdictional questions. The judge then found Cookies SF and Alec Monopoly entitled to attorney fees under the agreements and denied Gluck's request for sanctions against Temu and its lawyers under Rule 11 of the Federal Rules of Civil Procedure, which Gluck sought on the ground that the suit was "frivolous." Temu appealed, and Gluck cross-appealed the sanctions ruling.

On appeal, Gluck defended the trial court's approach while still contesting jurisdiction. He cited a 2009 First Circuit decision, North American Catholic Educational Programming Foundation v. Cardinale, which said that "where an appeal presents a difficult jurisdictional issue, yet the substantive merits underlying the issue are [easily] resolved in favor of the party challenging jurisdiction, the jurisdictional inquiry may be avoided." The panel's own research turned up a 2005 decision, McBee v. Delica Co., that read the Supreme Court's bar on what courts call hypothetical jurisdiction, the practice of assuming jurisdiction in order to reach the merits, as limited to the constitutional limits on what kinds of cases federal courts may hear.

Under the First Circuit's law-of-the-circuit doctrine, one panel's ruling ordinarily binds later panels. Thompson wrote that the doctrine "gives way here" because of later Supreme Court rulings. Steel Co. v. Citizens for a Better Environment, decided after the 1990 case on which Cardinale relied, held that "[h]ypothetical jurisdiction produces nothing more than a hypothetical judgment," which the justices equated with an advisory opinion. Steel Co. concerned subject-matter jurisdiction, the panel acknowledged, but Sinochem International Co. v. Malaysia International Shipping Corp., decided after McBee, explained that a court must also confirm personal jurisdiction before reaching the merits.

Thompson wrote that the change was smaller than it might appear, pointing to a 2022 First Circuit decision, Rodríguez-Rivera v. Allscripts Healthcare Solutions, that the panel said signaled a shift away from the older reasoning. The circuit will still assume jurisdiction in one narrow situation, "where" — unlike here — "the sidestepped jurisdictional question is statutory," the panel noted.

Thompson wrote that a court "has no power (as in none) to issue a merits ruling" without ensuring it has both kinds of jurisdiction. If the appeals court itself reversed the dismissal on the merits while skipping the jurisdictional question, the panel said, it would be "making a judicial power grab."

The panel kept Alec Monopoly in the case even though those companies did not contest jurisdiction, noting that Temu's complaint alleges Gluck acted as his clients' "agent" and that Temu argues all the defendants are necessary parties to a suit to rescind the settlements. Resolving Alec Monopoly's motion may turn on the outcome of Gluck's jurisdictional challenge, the panel said, so deciding that part of the appeal now would be "premature."

Felicia H. Ellsworth of Wilmer Cutler Pickering Hale and Dorr LLP represented Temu. Kenneth B. Walton of Lewis Brisbois Bisgaard & Smith LLP represented Gluck and his firm. Steven T. Lowe of Lowe & Associates filed an amicus brief for the National Society of Entertainment and Arts Lawyers supporting the defendants.

On remand, Judge Stearns must first rule on the jurisdictional motions filed by Gluck and Cookies SF, and may order more briefing and develop facts on the question. If jurisdiction exists, the judge must reassess whether Temu stated a claim against each defendant and, depending on that ruling, whether anyone is owed attorney fees under the settlements and whether Gluck should get sanctions. If it does not, the judge must dismiss Gluck and Cookies SF without prejudice and, with the lawyers' help, decide what happens to the claims against Alec Monopoly. Each side will bear its own appellate costs.