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

• Author: Bradt, Andrew D.
• Position: III. Direct Filing and Choice of Law through Conclusion, with footnotes, p. 794-824

3. DIRECT FILING AND CHOICE OF LAW

   Although the Klaxon/Van Dusen framework fits well with multidistrict litigation, one recent trend creates new tension. The practice is called direct filing, and it has been adopted often in MDLs over the last five years. I will discuss the mechanics in more detail below, but, essentially, the process allows plaintiffs in the potentially thousands of tag-along cases filed after the establishment of the MDL to bypass the transfer process and file their cases directly into the MDL court, as defendants waive any objections to personal jurisdiction or venue. Although defendants formally waive defenses to facilitate the practice, the process purports to achieve significant efficiencies for all parties, the courts, and the JPML. Direct filing allows the parties to bypass the administratively burdensome transfer process, and the court, in many cases, is allowed to retain complete jurisdiction over the cases to better facilitate a bellwether trial plan.

   Although the process does create significant efficiencies--efficiencies that make the cases comprising the MDL look more like a coherent mass--it creates a knotty choice-of-law problem that cuts to the root of the federalism policies underlying Klaxon and Van Dusen: what law ought to apply to the direct-filed cases? Courts are currently struggling with that question, and no court has yet reached a satisfactory answer. In this section, I will highlight how direct filing works, the various approaches courts have taken, and discuss how no current solution to the problem is consistent with the policies underlying Klaxon and Van Dusen--policies which are better accommodated by the traditional MDL transfer system.

   In particular, I will examine the decision regarding choice of law and direct filing in the MDL involving the birth control drug, Yaz. The decision in this case, which is among the first to grapple with the problems created by direct filing, highlights the distortions the practice creates and the significance of the issue, as the MDL currently comprises over 9,000 individual cases and counting.

   Whatever one thinks about the benefits or drawbacks of Klaxon, the growth of direct filing in MDL demonstrates that the current framework is being stretched to its limits. After examining courts' current approaches to the problem, I suggest a solution. In my view, there is no need for the advent of direct filing to threaten the federalism benefits of the MDL framework or create additional unpredictability for litigants. By requiring direct-filing plaintiffs to select a home district where venue and personal jurisdiction would be appropriate, we can preserve the choice-of-law-related benefits of the MDL while also retaining the efficiency benefits of direct filing. Ultimately, direct filing demonstrates how innovations in aggregate litigation that do not pay attention to choice of law create serious problems, and how such innovations may be maintained without undermining the benefits of the Klaxon choice-of-law regime.

   1. The Mechanics of Direct Filing

      Direct filing works a significant procedural change in the MDL process. As noted above, typically, after the JPML has established the MDL, future cases sharing a common question of fact with the MDL, called "tag-alongs," are filed in federal district courts where venue and personal jurisdiction are appropriate, and those courts maintain dockets for those cases. (201) Then, a party seeking transfer--or a non-party involved in the MDL--must make the JPML aware of the existence of the case, and the JPML clerk will conditionally transfer the case unless a party objects. If no party objects within seven days, the case is transferred. If there is an objection, the JPML will set a briefing schedule, but such objections rarely succeed. (202)

      Illustrating the adage that the shortest distance between two points is a straight line, courts and parties have devised a way around this process: direct filing. Under a direct-filing regime, plaintiffs in tag-along cases filed after the establishment of the MDL can bypass transfer and file their cases directly into the MDL court, regardless of whether personal jurisdiction and venue would be appropriate in the MDL district. (203) As a result, no action is required on the part of the JPML, the parties avoid the hassle of the transfer process, and the MDL court has complete jurisdiction over the case and may try it. (204) The MDL court is also not bound by Lexecon to remand direct-filed cases at the close of pretrial proceedings (though some courts provide for remand to some to-be-agreed-upon venue if pretrial proceedings conclude), facilitating easier administration of the entire litigation, and, potentially, a global settlement. (205) In addition, the MDL court has a more representative pool from which it can draw bellwether cases for trial, both in terms of geographical connection and state substantive law. (206)

      Ultimately, direct filing creates numerous efficiencies for all parties. The JPML is not burdened with transferring cases to and from home districts. Home district judges and clerks' offices need not undertake administrative burdens associated with cases destined for transfer and which will likely not return. The MDL court retains complete control over a greater portion of the overall pool of cases for trial and facilitation of global settlement, which is likely why MDL judges encourage the practice. These benefits extend to the parties as well, particularly defendants and firms representing a significant number of plaintiffs. Lodging all of the cases in a single court in the first instance more seamlessly aggregates the litigation. (207)

      Despite these efficiencies, direct filing is not automatically available because defendants must agree to the practice. The MDL statute, as interpreted by the Supreme Court in Lexecon, does not allow the MDL court to override personal-jurisdiction and venue requirements to achieve complete jurisdiction over a case. (208) As a result, the defendants must waive these defenses in order to allow for direct filing. (209) Moreover, MDL courts have been unwilling to allow plaintiffs to direct file when it is clear that other courts would be more convenient and appropriate forums, and the MDL forum has no connection to the underlying dispute. (210) Case-wide direct filing stipulations, therefore, are most often utilized in cases where the MDL is located in a jurisdiction without general personal jurisdiction over all of the defendants in the litigation, most likely a jurisdiction other than the primary defendants' places of incorporation or principal places of business. (211)

      Such case-wide stipulations are necessary because obtaining defendants' permission to directly file tag-along-case-by-tag-along-case is both inefficient and fraught with potential problems. (212) Moreover, as noted above, MDL courts have been hostile to the practice because it departs from the usual operation of the MDL statute. (213) As a result, for the last several years courts have begun experimenting with direct-filing stipulations in case management orders that apply to the MDL as a whole. (214) In essence, at the outset of the MDL, the court encourages the primary defendants to agree to allow future plaintiffs in all tag-along cases to file directly, regardless of potential personal-jurisdiction and venue problems. As a result, the MDL becomes more seamlessly integrated and amenable to global settlement. Judge Fallon of the Eastern District of Louisiana embraced this practice in the MDLs involving the drugs Vioxx and Propulsid. This procedure proved exceedingly effective in the Vioxx MDL, which included over 6,000 cases, 2,000 of which were direct-filed. (215)

   2. Direct Filing and Choice of Law

      Since Vioxx, direct filing has proven increasingly popular, and courts have instituted similar orders in numerous large diversity-based MDLs. (216) But it is becoming clear that this procedure, which appears so simple on its face, is fraught with potential problems. (217) Foremost among these issues is how to decide what substantive law should apply to direct-filed cases in an MDL, but courts have also been concerned about where cases ought to go if pretrial proceedings conclude. (218) These problems cut to the core of the MDL's hybrid character as an aggregated litigation that purports to respect, and not disturb, each individual case's identity, and recreates the tensions between aggregation and choice of law that plagued the class action.

      To see how the problem plays out, it is necessary to look at the specifics of direct-filing stipulations. The stipulations crafted by the pioneering Vioxx and Propulsid courts, and nearly every court since, say nothing about the effect of direct filing on choice of law. Rather, the stipulations state only that defendants waive their venue and jurisdiction-related defenses to allow for direct filing, and that, if pretrial proceedings are ever concluded, the cases will be transferred to a proper venue. For instance, the Vioxx stipulation provided that:

      In order to eliminate the delays associated with transfer of cases filed in or removed to other federal district courts to this Court, and to promote judicial efficiency, defendant Merck ... has stipulated and agreed that it will not assert any objection of improper venue ... as to any VIOXX(R)-related cases filed directly in the Eastern District of Louisiana that emanate from districts outside the Eastern District of Louisiana and that would appropriately be included in this multidistrict litigation proceeding. Accordingly, a plaintiff may now file any such complaint against Merck directly in the Eastern District of Louisiana, rather than in a federal district court affording proper venue. (219) Some courts issuing direct-filing stipulations have followed this basic template, which says nothing about how direct filing will affect choice of law, or simply...