Power of federal courts in multi-district litigations.

• Author: Hummer, Paul M.

IN A FEW short pages, the U.S. Supreme Court significantly altered the landscape in multidistrict litigation in Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 118 S.Ct. 956 (1998). The question was whether a district court conducting pretrial proceedings in multidistrict litigation pursuant to 28 U.S.C. [sections] 1407(a) may invoke Section 1404(a) to assign a transferred case to itself for trial.

Reversing the Ninth Circuit, and putting an end to what had been a common practice in courts assigned to coordinate pretrial proceedings in multidistrict litigation, the Court ruled that a transferee court has no authority to transfer a case to itself for trial following the conclusion of the coordinated pretrial proceedings. It held further that reversal was the only appropriate remedy when a transferee court erroneously transfers a case to itself for trial.

The decision thus raises the specter of appeals in MDL cases recently tried in the transferee court and the prospect of multiple trials in different forums in future multidistrict litigation.

Lincoln Savings shadow

Lexecon emerged from the Lincoln Savings litigation. Milberg Weiss and another law firm representing plaintiffs in that litigation also sued Lexecon, a consulting firm, alleging that Lexecon had violated federal securities and racketeering laws by submitting false and misleading statements to federal regulators. The suit against Lexecon was transferred to Arizona along with the rest of the Lincoln Savings litigation for coordinated pretrial proceedings pursuant to Section 1407(a).

Later the claims against Lexecon were dismissed as a result of "resolution" between the class action plaintiffs and Lexecon. Following the dismissal, Lexecon filed suit in federal district court in Illinois against the law firms representing the class action plaintiffs for malicious prosecution, abuse of process and other alleged torts. The Judicial Panel on Multidistrict Litigation granted a motion filed by the defendant law firms seeking to have the Lexecon litigation transferred to Arizona and consolidated for pretrial proceedings with the Lincoln Savings litigation.

Following the completion of discovery, the district court in Arizona transferred the case to itself for trial, over Lexecon's objection, and granted summary judgment against Lexecon on all but one count. Lexecon's appeal of the transfer back to Illinois for trial was denied as premature. 884...