The shortest distance: direct filing and choice of law in multidistrict litigation.

AuthorBradt, Andrew D.
PositionIntroduction through II. Mass Tort Multidistrict Litigation and Choice of Law, p. 759-794

The amount of multidistrict litigation (MDL) in the federal courts is skyrocketing, particularly in the areas of mass torts and products liability. One significant reason for the explosion of MDL has been the difficulty of maintaining nationwide or multistate class actions in these areas, due in large part to the choice-of-law problems created by operation of many different states' laws to plaintiffs' claims. One comparative benefit of MDL is that individual cases within the consolidated pretrial proceedings retain their "choice-of-law identity "--that is, that transfer of a case into a pending MDL does not change the choice-of-law rules that would otherwise apply to a plaintiffs case had it proceeded in its original home forum. In other words, the case carries the choice-of-law rules of the original forum state with it into the MDL. Because MDL is purportedly a consolidation only for pretrial proceedings, unlike a class action, the application of different choice-of-law rules to different plaintiffs' claims does not render the MDL proceeding itself infeasible. This framework, however, is in disarray due to the advent and increasing popularity of a practice called "direct filing." In direct filing, plaintiffs bypass the transfer process and file their cases directly into an MDL court. Amid the growing popularity of this practice, the question of what choice-of law rules ought to apply to direct-filed cases has been left unaddressed. This paper seeks to expose and resolve the problem by permitting direct filing, but requiring plaintiffs to declare a proper home district whose choice-of-law rules would apply to their claims. Such an approach would both preserve the efficiency benefits of direct filing, and be consistent with the values of federalism and litigant autonomy underlying the choice-of-law framework in diversity cases.

INTRODUCTION

Aggregate litigation and choice of law are poor bedfellows. Aggregate litigation is driven by the need to resolve many cases efficiently in a single consolidated proceeding by emphasizing the commonalities of cases. (1) Choice of law demands attention to the uniqueness of individual cases, requiring analysis of potentially conflicting state policies and interests in light of the particular circumstances of cases. (2) Aggregation seeks sameness, while choice of law focuses on particularity. When aggregation of cases based on state law proceeds in a federal court under diversity jurisdiction, the complexity increases. Federal courts sitting in diversity must respect states' choice-of-law rules because those rules represent states' choices about the scope of their laws in cases in which they have regulatory interests, (3) and in order to ensure that diversity jurisdiction does not change the substantive law that would otherwise apply to a plaintiffs case. (4) As numerous commentators have observed, choice of law matters to the outcomes and values of cases, but it also represents differences in states' approaches to regulating disputes in which they have interests. (5) For aggregation and choice of law to coexist peacefully, and to avoid running afoul of these federalism considerations, the aggregation mechanism must accommodate the individual nature of cases within the collective. In other words, federal aggregation structures should seek choice-of-law neutrality for the cases within in the aggregate.

Given these issues, it should come as no surprise, then, that choice of law has presented a seemingly intractable problem for the nationwide, diversity-based, mass-tort class action. (6) Indeed, the federal courts, where most large class actions are now litigated due to the Class Action Fairness Act of 2005 (CAFA), (7) have come to a consensus that the operation of choice-of-law rules demands that different state laws apply to different plaintiffs within the class, and that those differences render the classes insufficiently cohesive for class certification. (8) Calls for federal choice-of-law rules that ensure that a single state's law can apply in a nationwide mass-tort case have fallen on deaf ears, in part because Congress has little interest in facilitating class actions, (9) but also because any such rule would raise serious potential federalism and due-process-related objections. (10) Further, in light of the Supreme Court's recognition in Klaxon Co. v. Stentor Electric Manufacturing Co. that a state's choice-of-law rules are part of its substantive law, (11) applying one set of choice-of-law rules to a nationwide set of cases raises similar federalism problems. (12)

Although the class-action structure seems increasingly untenable, the stresses on the system that create the need to aggregate have not disappeared. Given all this, it should also come as no surprise that multidistrict litigation, or "MDL," has stepped in to fill the void. (13) The federal MDL statute allows for consolidation of tort cases individually filed around the country for pretrial proceedings in a single district court chosen by a panel of judges. Most cases are ultimately resolved by the MDL court, but, at least in theory, at the close of pretrial proceedings the individual cases are remanded to the district courts whence they came. (14) Although the MDL statute has been on the books for over four decades, it has never been as prominent as it is now. According to recent statistics by the Federal Judicial Center, a third of all pending federal civil cases are part of an MDL, and over ninety percent of those cases are products-liability cases--exactly the sorts of cases that might have been nationwide class actions had choice-of-law issues not emerged as such a central obstacle. (15)

Structurally, MDL is a much better fit with choice of law, because in MDL a high degree of aggregation can be achieved while allowing cases to retain their individual character. In other words, the MDL structure fosters aggregation without creating pressure to change the substantive law that would otherwise apply to cases. (16) Cases are filed around the country in proper venues and transferred into the MDL, carrying with them the law, and choice-of-law rules, that would have applied in the districts where the cases were filed. (17) Plaintiffs' substantive rights are formally unchanged due to the existence of a federal mass-tort proceeding, and states' interests in resolving disputes their laws might rationally regulate are vindicated. (18) As a result, MDL more comfortably accommodates the individualized nature of choice-of-law inquiries and the values those inquiries seek to enforce: the accommodation of interested states' policies in light of the relevant interests of the states and of the parties involved in the particular case.

Of course, every case in an MDL does not undergo a rigorous choice-of-law analysis. Although MDL structurally accommodates individualized choice-of-law analyses better than does the class action, most MDLs eventually conclude with a global settlement, (19) That said, choice-of-law analyses still matter because MDL courts often apply state law when deciding dispositive motions and trying bellwether cases that push the litigation toward settlement. (20) Moreover, the applicable law matters significantly to the value of individual cases and the group as a whole, particularly in products-liability cases, where state laws differ significantly. (21) The growth of MDL in diversity-based mass-tort cases is a significant improvement when it comes to animating choice-of-law values in aggregate litigation.

But the growth of MDL is not a panacea for those concerned with choice of law--rather, it presents problems of its own. The more the MDL emphasizes the group nature of the litigation over the individual character of the component cases, the more the conflict between choice of law and efficiency will resurface. This paper examines in detail one example of this problem currently causing significant confusion in some of the largest MDLs in the country: the practice of direct filing. In direct filing, at courts' encouragement, defendants agree to allow plaintiffs to file their cases directly into the MDL court, skipping the steps of filing their cases in an otherwise proper venue and having the case transferred to the consolidated MDL proceeding. In most such cases, the MDL court, or the state in which it sits, would not otherwise be a proper venue for many of these cases, usually due to lack of jurisdiction over all defendants in all component cases. Courts encourage these stipulations and enshrine them in case-management orders applicable throughout the entire litigation. Ultimately, this procedure achieves significant efficiencies for all parties and the system: it reduces costs and delays, eliminates the administrative burdens of transfer on both the parties and the courts, and it provides the MDL court the ability to try to settle the cases without ever having the obligation to remand them to their home districts. (22) Defendants prefer centralizing all of the cases, and plaintiffs prefer skipping the transfer step, while preserving their prerogative to return to a more convenient forum if and when pretrial proceedings conclude. In a sense, direct filing deeply embraces the notion of the MDL as a single aggregated litigation, as opposed to a temporarily consolidated collection of individual cases.

Despite these efficiencies, direct filing presents a knotty choice-of-law problem: what state's choice-of-law rules, and therefore substantive laws, apply to the direct-filed cases? The orders courts have adopted often say nothing about the choice-of-law implications of direct filing, and when they do, they usually say that direct filing will have "no effect" on the applicable law. (23) Such stipulations are meaningless because, without an antecedent choice of forum by the plaintiff, it is impossible to determine what choice-of-law rules would have applied absent direct filing. Direct filing...

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