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Thursday, May 28, 2015

Sixth Circuit Becomes First Appellate Court to Address Choice-of-Law Problem in Direct-File MDLs

Last week, the Sixth Circuit issued an opinion only a civil-procedure geek like me could love.  The court held that in MDL cases, the trial court should apply the choice-of-law rules of the state in which the case would have normally been filed, rather than the rules of the state in which the MDL court sits, even if the plaintiff chose to file directly in the MDL court. See Wahl v. Gen. Elec. Co., No. 13-6622 (6th Cir. May 22, 2015).

This blend of MDL procedure and application of the Erie doctrine arises because some MDL courts permit plaintiffs to file directly in the MDL court, rather than file initially in a proper venue and then await MDL transfer.  (For background on the MDL process, see Andrew S. Pollis, The Need for Non-Discretionary Interlocutory Appellate Review in Multidistrict Litigation79 Fordham L. Rev. 1643, 1663-67 (2011).) The direct-filing option is unusual; in most MDLs, the plaintiff initially files in a proper forum, and the Judicial Panel on Multidistrict Litigation then transfers the case to the court vested with MDL jurisdiction. See id. at 1664. These MDL transfers are for pretrial proceedings only; eventually, the MDL court must return the case to the original forum for trial. Lexecon Inc. v. Milberg Weiss Bershad & Lerach, 523 U.S. 26 (1998).  And, outside the MDL context, the Supreme Court requires trial courts to respect the choice-of-law rules of the plaintiff's originally chosen forum, even when the case is subsequently transferred to a more-convenient forum under 28 U.S.C. § 1404(a). See Van Dusen v. Barrack, 376 U.S. 612 (1964). Thus, MDL courts traditionally apply the choice-of-law rules of the state in which the transferor court sits. But when an MDL permits the plaintiff to file directly in the MDL court, the court in which the plaintiff would have filed (but for the MDL) is technically not a "transferor court."  



The plaintiff in Wahl sued General Electric for injuries sustained by a defective drug. She filed directly in the MDL court (in Ohio), rather than in her native Tennessee. But the case was transferred to Tennessee after pretrial proceedings. And,seeking to avoid Tennessee's statute of repose, the plaintiff argued that Ohio choice-of-law rules should apply, because she had initially filed in Ohio.

The Sixth Circuit rejected that argument. The decision appears to be premised primarily on the fact that Ohio was not a proper venue; the plaintiff had filed directly in Ohio because the MDL was situated there, which was purely fortuitous. See Wahl, slip op. at 10 ("she took advantage of the procedural mechanism the MDL made available to increase efficiency of filings"). Absent the MDL proceedings, the plaintiff could not have filed in Ohio--and if she had done so, the case could have been transferred because of the improper venue. See 28 U.S.C. § 1406(a). Noting that courts tend not to follow the Van Dusen rule for § 1406(a) transfers (confining that rule instead to convenience transfers under § 1404(a)), the Sixth Circuit likened the transfer from Ohio to Tennessee in the direct-file MDL context as a § 1406(a) transfer. And, in a § 1406(a) transfer, the applicable choice-of-law rules are those of the state of the transferee court.

The policy behind the Wahl ruling makes sense. But its application could be more complicated in future cases. In Wahl, for example, there appears to have been no disagreement that Tennessee was both a proper forum and the forum where the plaintiff would have filed but for the MDL. But an MDL plaintiff may have a choice among multiple venues. If she has that choice--but nevertheless chooses to file directly in the MDL court--determining which state's choice-of-law rules to follow may be much more complicated.


Posted by Andrew S. Pollis on May 28, 2015 at 11:33 AM in Civil Procedure | Permalink

Comments

My colleague Andrew Bradt has written an article on this issue that might be of interest to readers: The Shortest Distance: Direct Filing and Choice of Law in Multidistrict Litigation, 88 Notre Dame L. Rev. 759 (2012).

Posted by: Anne Joseph O'Connell | May 28, 2015 5:52:15 PM

Thanks for the kind words, Glenn.

I think the direct-file option is of only marginal benefit to a plaintiff, in that it speeds the case up a bit (because the plaintiff does not have to wait for the JPML to transfer the case as a tag-along). But it's not just the plaintiff who benefits; it's also more efficient for the judicial system, because the case gets consolidated into the MDL without the JPML's having to get involved. So it strikes me both as unfair to apply a penalty-default rule and unwise, as it would destroy the systemic benefits of direct filing.

Other possible alternatives might include: (1) having the plaintiff designate, at the time of the direct filing in the MDL, the forum in which the plaintiff would otherwise have filed, and having that designation "count" as the place of filing for choice-of-law purposes; or (2) some sort of most-significant-contacts test (which would potentially deprive the plaintiff of the most-favorable forum).

Posted by: Andrew S. Pollis | May 28, 2015 2:57:01 PM

Great post Andrew. In terms of the last line "But an MDL plaintiff may have a choice among multiple venues. If she has that choice--but nevertheless chooses to file directly in the MDL court--determining which state's choice-of-law rules to follow may be much more complicated." I am curious what you think, as an academic since I think it is unlikely a court would ever go there, of using penalty default rule theory from contracts law, or an analogy to it, as a solution. If direct file in MDL is problematic since it raises this problem, apply the choice of law possibility of the ones on the table least favorable to filer (or the one Def might prefer, for example) to incentivize them not to do this? Or do you think there is something good about direct file to the MDL? I also wonder whether any of the week constitutional limits on choice of law (Shutts, Allstate) may dictate some of the possible answers to this question. Again, great post!

Posted by: I. Glenn Cohen | May 28, 2015 2:07:22 PM

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