The shortest distance: direct filing and choice of law in multidistrict litigation.
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 without attention to choice of law replicates many of the federalism and litigant-autonomy-related problems of prioritizing efficiency over choice of law. The problem is both conceptual and currently causing confusion in some of the largest currently pending MDLs.
Most MDL courts have decided to apply the choice-of-law rules of their own state to direct-filed cases, applying the letter of the rule in Klaxon--that a federal court sitting in diversity must apply the choice-of-law rules of the state in which it sits. (24) This solution, however, is conceptually flawed in light of the justifications for Klaxon, namely, that choice-of-law rules reflect states' policies as to the scope of their own law when they have a regulatory interest, and that diversity should not change the law otherwise applicable in a plaintiff's case. (25) But recognizing that applying the Klaxon rule does not make sense does not solve the problem--it can and does create a vacuum, one which a court might be tempted to fill by selecting choice-o flaw rules after the fact that are unconnected with the forum that might otherwise have been selected by an individual plaintiff at the outset of a case. Doing so is potentially prejudicial to a plaintiff who chose to file directly into the MDL thinking that doing so would have no effect on choice of law, as promised in most direct-filing orders.
Ultimately, this paper argues that the appropriate solution to the choice-of-law problems created by direct filing is for courts to require that direct-filed cases be governed by the choice-of-law rules of an otherwise proper forum that the plaintiff selects at the outset of her case. (26) Such a solution would ensure that the existence of the MDL proceeding, and the location of the MDL court, do not change the law that would otherwise apply to an individual plaintiff's case. This solution would also achieve the other underlying goal of Klaxon, to more often vindicate states' policy choices regarding the scope of their own laws in cases where they have a regulatory interest. By ensuring that an MDL continues to respect the individual character of the cases within it, the process can best avoid many of the ultimately insuperable choice-of-law obstacles that faced the class action.
In Part I of the paper, I briefly review the development of the Supreme Court's policy regarding choice-of-law and diversity jurisdiction. Although this Part does not canvass the entire array of the Court's choice-of-law cases, it examines in detail the Court's approach in Klaxon and Van Dusen v. Barrack, (27) two cases that still constitute the foundation of this jurisprudence. In Part II of the paper, I discuss the shift from class actions in diversity-based mass torts to the MDL and explain why the traditional MDL framework is a better fit with the policies underlying Klaxon and Van Dusen than the class action. In Part III, I focus in detail on direct filing as an example of how, when MDL strays from its traditional framework, choice-of-law problems resurface. In that section, I will explain why application of the letter of Klaxon in these cases conflicts with its policy underpinnings and examine how departing from Klaxon creates problems of its own. To do so I will discuss in detail the currently pending MDL involving the birth-control drug Yaz, (28) which has adopted a direct-filing stipulation, and in which nearly 9,000 of the almost 10,000 pending cases have been directly filed. (29) The problems in the Yaz litigation illustrate well the problems created by direct filing. In Part IV of the paper, I will sketch out a potential solution to the direct-filing dilemma that seeks to comply better with the policies underlying the Supreme Court's choice-of-law-federalism jurisprudence.
Examining the complications direct filing creates, and presenting a solution that seeks to preserve otherwise rational choice-of-law analysis in individual cases, aims to shed some light more broadly on the interaction of federalism, choice of law, and efficiency in aggregate litigation, and present an example of a solution that provides an appropriate balance of these often conflicting considerations.
I. CHOICE-OF-LAW FEDERALISM IN THE SUPREME COURT
A. The Supreme Court's Choice-of-Law Jurisprudence Prior to Klaxon
The years prior to the 1941 decision in Klaxon were ones of significant change with respect to the Court's approach to choice of law. In the early part of the twentieth century, the Court weighed in often on choice-of-law questions, (30) reviewing decisions by both federal and state courts under the Due Process and Full Faith and Credit Clauses. (31) The Court's view--that choices between conflicting states' laws were narrowly cabined by the Constitution--was consistent with the then-prevailing dogma. At the time, adherence to the territorially based "vested rights" view of choice of law, most often associated with Professor Joseph H. Beale and his First Restatement of Conflict of Laws, was near universal. The "vested rights" theory held that a plaintiffs legal rights "vested" at a particular moment under the law of a state in which a single connecting event occurred, such as the place of the injury in tort, or the place of the making of a contract. (32) Under this theory, departing from the law of the state where such a key event occurred implicated significant concerns about both the parties' due-process rights and the legislative jurisdiction of the state whose law seemingly undoubtedly applied to a particular dispute. (33) The key purported virtue of this framework was uniformity--under it, there was supposedly only one "correct" answer to every conflicts problem. (34)
But by the 1930s, according to the now-familiar story of the "choice-of-law revolution," the territorial underpinnings of the vested-rights doctrine began to crumble. (35) Thanks to trenchant criticism by numerous academics, most forcefully Walter Wheeler Cook and David Cavers, (36) it became clear that the vested-rights approach had significant theoretical and practical problems. Strict application of the doctrine often led to arbitrary and unfair results, (37) and for that reason, courts regularly refused to apply it, instead using a variety of "escape devices," such as the public-policy exception to applying foreign law, to avoid harsh application of the rules. (38) These critiques generated widespread dissatisfaction with traditional choice-of-law doctrine, and prompted rethinking. The so-called "revolution" had begun. (39) Although the new "modern" approaches to choice of law differed from one another in significant ways, they shared the position that several states' laws could rationally apply to a multistate dispute. Choosing among possibly applicable laws required examination of the policies underlying those laws and the relation of those policies to the facts of individual cases. (40) Instead of there being one unassailable answer to every choice-of-law question, the prevailing view became, as Paul Freund described it, that "there are at least two possibly applicable rules or systems of law in a multistate problem. Choice is inescapable and must be explicit." (41) This shift reflected the realization that the purpose of choice of law was not to seek uniformity alone, but to "understand, harmonize, and weigh competing interests in multistate events." (42)
By the late 1930s, the Court, too, was more often wavering from traditional conflicts doctrine. (43) In several opinions by Justice Stone, the Court turned away from the vested-rights approach in favor of the position that multiple laws might apply in a given case. Given that there were admittedly multiple plausible answers to most choice-of-law questions, the scope of the Supreme Court's review of state courts' choice-of-law decisions would be much more limited. (44) Perhaps most indicative of this shift was Justice Stone's opinion for the Court in Alaska Packers Association v. Industrial Accident Commission of California. (45) In that case, rather than looking for a dispositive factual connection to a particular state, or the exclusive legislative jurisdiction of one state over torts or contracts occurring within its borders, the Court, strikingly, stated that "the conflict is to be resolved ... by appraising the governmental interests of each jurisdiction, and turning the scale of decision according to their weight." (46)
In short, the Court's approach in Alaska Packers and other contemporaneous cases, (47) in Professor Freund's words, established that, "[w]ithin limits, there is room for assertiveness as well as reticence in the family of our states. What those limits are must be determined by appraising the interests of the states." (48) The Court's more flexible approach to constitutional limits on choice of law therefore signaled two key developments: the acknowledgement that the strict rules of the vested-rights doctrine were not constitutionally mandated, and that the Supreme Court would not rigidly police states' choices with regard to the application of their own law in cases in which they had a regulatory interest. (49) As a result, the Court exhibited a high degree of tolerance for different decisions by state courts in choice of law, a move which made sense given the changes in the choice-of-law field generally. (50)
B. Erie and Klaxon
Not to reverse the two in order of importance, but prior to Klaxon came Erie Railroad Co. v. Tompkins, (51) which, as Richard Marcus describes it, "looms over all federal adjudication." (52) I will dispense with the familiar story of Erie, except to note two aspects of the case: that, first, Erie emphasizes the unfairness of different results in the federal and state courts of the same state based on the accident of diversity, and, second, that Erie, even on its most conservative reading, prohibits the federal courts from making law beyond the lawmaking power of the Congress. (53)
Prior to Erie, choice of law was considered a matter of federal common law in diversity cases. (54) After Erie, it was an open question whether federal courts sitting in diversity would be required to apply state choice-of-law rules. (55) Eventually, the circuits split, (56) and the Supreme Court took up the matter in 1941 in Klaxon Co. v. Stentor Electric Manufacturing Co. (57)
Klaxon was a breach-of-contract case brought in the District of Delaware. Stentor, a New York corporation, sued Klaxon, a Delaware corporation, on a contract made in New York. Stentor won at trial, and then moved for prejudgment interest. (58) Stentor had not, prior to that point, requested interest, nor had it asked the court to charge the jury on that question. Instead, Stentor argued that it was entitled to interest under a New York statute which made the addition of interest mandatory in breach-of-contract actions. (59) The district court agreed, holding that New York law governed the contract as a matter of federal conflicts law. (60) Klaxon appealed, arguing that the New York interest statute should not apply. Instead, Klaxon contended that federal law should apply to the question because the case was in federal court, and that as a matter of federal procedural law, Stentor was not entitled to interest because it had not moved for it before the case went to the jury. (61)
The Third Circuit affirmed, also apparently following federal common law of choice of law. (62) Citing only treatises, the court held that under "the better view of the law," in a breach-of-contract case the availability of prejudgment interest should be decided according to the law of the place of a contract's performance. (63) Applying that choice-of-law rule, the court decided that New York's interest statute applied to Stentor's claim. (64)
The Supreme Court unanimously reversed. (65) Although Klaxon continued to argue that the question of prejudgment interest was a matter of federal procedural law, (66) the Court framed the case exclusively as a choice between the Delaware and New York laws governing prejudgment interest. The Court found that the Third Circuit's decision, made "without regard to Delaware law," ran afoul of Erie. (67) Justice Reed, writing for the Court, stated that "the prohibition declared in Erie, against any such independent determinations by the federal courts, extends to the field of conflict of laws." (68) As a result, "[t]he conflict of laws rules to be applied by the federal court in Delaware must conform to those prevailing in Delaware's state courts." (69) A different conclusion would "do violence to the principle of uniformity within a state, upon which the Tompkins decision is based." (70) If a federal court could craft its own choice-of-law rules, "the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side." (71)
Justice Reed also responded to the argument that requiring federal courts to abide by state choice-of-law rules would create intolerable disuniformity among federal courts:
Whatever lack of uniformity this may produce between federal courts in different states is attributable to our federal system, which leaves to a state, within the limits permitted by the Constitution, the right to pursue local policies diverging from those of its neighbors. It is not for the federal courts to thwart such local policies by enforcing an independent "general law" of conflict of laws. (72)
As the Court ultimately concluded, "the proper function of the Delaware federal court is to ascertain what the state law is, not what it ought to be." (73) Citing its recent choice-of-law opinions, the Court held that Delaware was free to decide that its choice-of-law rules mandated application of Delaware law to a Delaware corporate defendant if the New York law "would interfere with its local policy." (74) As a result, the Court reversed and remanded to the lower courts to decide what Delaware's choice-of-law rules would dictate. (75)
The Supreme Court's brief opinion in Klaxon has its flaws. For one thing, the Court ignored the first step of the analysis on which Klaxon had based its case: the "vertical" choice-of-law question of whether the issue of prejudgment interest is substantive or procedural as a matter of federal law, a question like those that would demand the court's attention soon thereafter in other Erie-progeny cases. (76) Second, the Court never made clear whether Klaxon's rule is constitutionally based, statutorily based, or simply a rule of federal common law itself. (77)
Despite its flaws, however, the Klaxon opinion's holding and rationale were clear and consistent with both Erie and the Court's new choice-of-law jurisprudence. The Court promulgated a clear rule: a federal court sitting in diversity must follow the choice-of-law rules of the state in which it sits. And the justifications for this rule were also apparent. First, the Court recognized that choice-of-law rules significantly affect the results of the cases, and that it would be inconsistent with Erie for those rules to be different in federal and state court due to the "accident of diversity." (78) Second, in the new world where multiple states' laws could rationally govern in a single case, such questions were matters of state policy that federal courts were not to "thwart." (79) Klaxon, therefore, recognizes that states can and will differ on questions of choice of law as a matter of policy, and that federal courts must respect those differences. Klaxon's policy goes beyond diversity--it suggests that state choices on conflicts in cases where its regulatory interests are implicated are to be respected as part of our federal system.
Klaxon has never been very popular. In fact, despite the unanimity of the Supreme Court, numerous prominent scholars have criticized the opinion, including the likes of Charles E. Clark and Henry Hart, (80) among others, (81) Criticism of the opinion has not abated since 1941, (82) but the Supreme Court has remained steadfast in its support for Klaxon. (83) And Congress has never overruled it by statute, despite numerous opportunities. (84) It is not my purpose here to relitigate Klaxon; that debate has been well-ventilated. (85) That said, I agree with the result. In particular, I am persuaded by the Court's conclusion that a state's choice-of-law rules are part of a state's substantive law and represent policy decisions as to the scope of that state's laws, and federal courts should not change those rules in diversity cases, (86) To do so would contravene the underlying policy of Erie.
In this regard, I find most persuasive David Cavers's work in response to Henry Hart, perhaps Klaxon's harshest critic. As Edward Purcell has noted, Hart "despised Klaxon." (87) In essence, Hart's primary criticism was that the federal courts should be allowed to make choice-of-law rules in diversity cases because they "are in a peculiarly disinterested position to make a just determination as to which state's laws ought to apply where this is disputed." (88) Hart's position was that federal common law of choice of law in diversity cases would eventually lead to uniform rules and would prevent interstate forum shopping, a problem he deemed worse than intrastate forum shopping because of plaintiffs' ability to affect choice of law through the choice of forum, (89)
Cavers defended Klaxon primarily on the ground that a state's choice-of-law rules were an expression of state policy about the reach and strength of its law, and the state's conception of its relationship with other states. (90) The notion of needing the federal government as a disinterested umpire "places a low estimate on the importance of state autonomy in determining the reach of state law." (91) In Cavers's view, the federal-umpire approach granted federal courts under the diversity jurisdiction a "veto power over state assertions of interest in choice-of-law situations." (92)
This defense of Klaxon was consistent with the choice-of-law revolution:
[I]f the basic task of the courts in a choice-of-law case is not to apply broad jurisdiction-selecting rules that ignore the content of the state laws chosen but rather to identify state policies and to determine the significance for those policies of their application or nonapplication in interstate situations, then the most appropriate forum for the performance of this task is a court of a state whose policies are in issue. (93)
Ultimately, so long as a state's choices complied with the appropriately loose strictures of the Due Process and Full Faith and Credit Clauses, it was improper for the federal courts, under diversity jurisdiction, to override constitutional state decisions on such matters. Although states might differ as to the answer in a particular case, and such an answer might be parochial, Cavers concluded that these "chronic differences ... reflect genuine differences in values. Moreover, I doubt that there is any supra-state hierarchy of values which would justify the federal courts exercising diversity jurisdiction in overriding one state's strongly-held values in favor of another's as long as constitutional limits on state power were respected." (94) A state's decision about the scope of its laws are as much a part of that state's substantive law as standards of liability or requirements of a valid contract, and a federal court, under Erie, may no more depart from one than the other. (95)
Besides his defense of state choice-of-law rules, Cavers opposed federal choice-of-law rules on their own merits. Pre-Erie history, when choice of law was a matter of common law in the federal courts, had demonstrated that uniformity had not developed, and such uniformity was even less likely to develop in the current climate of upheaval in choice of law and a likely lack of appetite on the Supreme Court's part to resolve choice-of-law circuit splits. (96) Moreover, Cavers feared that if Congress or the courts sought to establish choice-of-law rules, the desire to reduce uncertainty would lead them toward the "lowest common denominator," enshrining the traditional rules of the First Restatement, rather than the policy-based techniques of modern approaches. (97) And, unless any federal choice-of-law rules were binding on the states, separate choice systems in the federal and state courts would expand opportunities for forum shopping, and replicate the pre-Erie problem of courts across the street from one another reaching different results. (98) Indeed, Cavers, like the Klaxon Court, was willing to accept "ample freedom" for interstate forum shopping, but refused on Erie grounds to accept intra-state forum shopping. (99)
C. Van Dusen v. Barrack
One dilemma for the Klaxon doctrine emerged in 1948 when Congress passed the federal transfer statute. (100) The statute, which effectively replaced the doctrine of forum non conveniens in the federal courts for domestic cases, allowed cases to be transferred to another district where the case might have been brought for the convenience of the parties and witnesses and in the interest of justice. Klaxon, of course, required that a federal court sitting in diversity must apply the choice-of-law rules of the state in which it sits. The passage of the transfer statute posed a problem: if a case is transferred from one federal district to another, what state's choice-of-law rules should the transferee court follow? (101)
The facts of 1964's Van Dusen v. Barrack (102) posed the problem starkly, and, importantly for this discussion, did so "against the backdrop of an alleged mass tort." (103) Van Dusen involved the crash of an airplane which had taken off in Boston and was bound for Philadelphia, but landed in Boston Harbor. The crash spawned over 150 actions for personal injury and wrongful death. (104) Some 100 of these actions were brought in the District of Massachusetts, where the flight took off and crashed, while 45 others were brought in the Eastern District of Pennsylvania, where the flight was supposed to land. (105) Venue and jurisdiction were appropriate in Pennsylvania, (106) but the defendants sought to have the Pennsylvania wrongful-death cases transferred to the District of Massachusetts, where most of the other cases were pending and more of the witnesses and evidence were located. (107)
The problem was created by diverging state law and choice-of-law rules. Under Massachusetts law, these plaintiffs could not maintain their wrongful-death suits because they had not complied with Massachusetts law requiring that foreign wrongful-death plaintiffs acquire an appointment as a personal representative before filing suit. Pennsylvania law did not require such an appointment, (108) As the Court framed the problem, if Massachusetts law applied, these plaintiffs were out of court, but if Pennsylvania law applied, the cases could proceed. (109) Moreover, Massachusetts law sharply limited the damages available to plaintiffs in wrongful-death suits, compared to Pennsylvania laws. (110) Observing that changing the applicable law due to a transfer might render the transfer motion "tantamount to a motion to dismiss," that Court found that "the potential prejudice to the plaintiffs is so substantial as to require review of the assumption that a change of state law would be a permissible result of transfer." (111)
The Court, therefore, dealt squarely with the question whether, in a mass tort, the convenience of consolidating proceedings in a single federal court could work to deprive plaintiffs of the state-law benefits of their choice of forum. To this question, the Court answered, plainly, no: so long as plaintiffs' original choice was a proper venue, the mechanics of aggregation could not work to defeat a plaintiff's choice of forum. (112) So, the Court held, the transfer statute should be regarded as a "housekeeping measure," resulting in a "change of courtrooms," but not a change of law. (113)
Importantly, the Court also recognized the tension between its decision in Van Dusen and the rule of Klaxon: under the Van Dusen rule, a transferee court would be applying the choice-of-law rules of the transferor court, not the transferee court's home state. In the Court's view, however, the policy underlying Klaxon and Erie warranted an exception from the letter of the Klaxon rule. Applying the Klaxon rule strictly to a transferee court would "enable a party to utilize a transfer to achieve a result in federal court which could not have been achieved in the courts of the State where the action was filed" and therefore change the result of the case based on the 'accident' of federal diversity jurisdiction." (114)
In sum, Van Dusen reaffirmed the Klaxon principle that state choice-of-law rules are to be respected, and also established that a plaintiff's inclusion in mass-tort litigation should not deprive that plaintiff of the benefits of his choice of a proper forum. (115) Although Van Dusen did not formally involve an aggregation tool, and the decision was several years before the passage of the MDL statute, the result of the transfers would have been to consolidate the litigation in a single federal district. Van Dusen suggests that mass-tort litigation does not warrant a change in state choice-of-law rules, particularly when doing so would prejudice the plaintiff--a view that prizes litigant autonomy at the expense of aggregation. (116) Indeed, Van Dusen anticipated the persuasive view of numerous modern scholars, most prominently Larry Kramer and Linda Silberman, who would argue the same thing, on the ground that choice-of-law rules define a plaintiff's right to recovery, and there is nothing about inclusion in a mass-tort proceeding that ought to prejudice those underlying rights. (117) The ALI has also come around to this view in its recent Principles of Aggregate Litigation. (118)
In sum, Klaxon and Van Dusen together represent a coherent policy, that states' choice-of-law rules represent a state's substantive decision on the scope of its law, and diversity jurisdiction does not warrant departure from those rules. Moreover, the invocation of a state's choice-of-law rules is linked to a plaintiffs' selection of a proper venue. Transfer within the federal system--even in the case of a mass tort, where transfer would create increased efficiency--does not deprive a plaintiff of the benefits of that choice. With this backdrop in mind, I will turn to the complications that the Klaxon/Van Dusen policy represents for federal aggregate litigation.
II. MASS TORT MULTIDISTRICT LITIGATION AND CHOICE OF LAW
In this section, I briefly describe how the policies underlying Klaxon and Van Dusen present a thorn in the side of aggregate litigation of mass torts. While aggregation seeks to make the claims of individual plaintiffs throughout the country more alike--so as to facilitate better litigating their cases as a group--the policies respecting differences in state laws and plaintiffs forum choices pull the other way, inhibiting aggregation by emphasizing the differences among plaintiffs' cases. Ultimately, one way to explain the problems choice of law has presented for class actions, leading to the resulting shift to multi-district litigation, is to note that the class action overemphasized aggregation at the expense of federalism and litigant autonomy. MDL, for its part, still provides a high degree of aggregation--and some would argue too high--but also is more compatible with respecting differences in state law and litigant autonomy, at least with respect to choice of law.
A. The "Choice-of-Law Problem" in Class Actions
The so-called "choice-of-law problem" has become a silver bullet for nationwide class actions based on state-law claims, (119) In brief, this is the problem: in order to certify a damages class under Rule 23(b) (3) of the Federal Rules of Civil Procedure, the court must find (among a series of other prerequisites) that the questions of law and fact common to the class "predominate" over individualized questions, (120) Klaxon requires a federal court sitting in diversity to apply the choice-of-law rules of the state in which it sits. (121) Most such choice-of-law rules require application of different states' substantive laws to different class members. As a result, the class claims are potentially governed by all fifty states' laws. Courts have reached a near-consensus that this renders the class uncertifiable under Rule 23(b)(3) for two reasons: first, the fact that different groups of plaintiffs' claims are governed by different laws means that the legal questions common to the class do not predominate over questions individual to each class member, and second, that the class is too difficult to manage through a trial, particularly when one considers the problem of instructing a jury. (122) Federal courts now generally agree that, unless a class is governed by a single state's law, it cannot be certified under Rule 23. (123)
From the period when Rule 23 was amended in 1966 until the 1990s, choice of law was not considered such an insurmountable obstacle to class certification. (124) Although the Supreme Court held that a court could not go beyond the loose constitutional restrictions on legislative jurisdiction to apply an otherwise inapplicable single law to an entire class, (125) courts would sometimes discount or smooth out the differences in state law in order to ensure sufficient commonality of the legal questions to certify the class. (126) By the mid-1990s, however, tolerance for these tactics diminished. After influential opinions by numerous circuit courts decertifying classes based on the choice-of-law problem, (127) the Third, Fifth, and Seventh in particular, (128) a consensus emerged that classes requiring the application of multiple states' laws were not certifiable. (129) That consensus has only grown stronger, leading Linda Silberman to refer recently to the choice-of-law problem as a "monumental barrier to class certification." (130)
As this trend developed in the federal courts, plaintiffs' lawyers turned increasingly to some state courts that were friendlier to class actions and willing to apply their choice-of-law rules in such a way as to facilitate the application of a single state's law to every class member, thus avoiding the problem altogether. (131) Although plaintiffs' success in this enterprise was arguably overstated--particularly with respect to the notion that states were willing to change their choice-of-law rules to facilitate application of a single state's law (132)--Congress in large part overrode this strategy in 2005 when it passed the Class Action Fairness Act (CAFA), which has the effect of placing most class actions in federal court. (133)
Both before and after CAFA, some scholars have called for a federal choice-of-law rule that would allow a single state's law to apply to nationwide class actions, typically the law of the defendant's principal place of business. (134) But these proposals have not been enacted. The Supreme Court has shown no willingness to overrule Klaxon, and the Congress has declined to enact federal choice-of-law rules despite several opportunities. And neither Congress, nor the Court, has shown any desire to make class certification easier--indeed, for Congress to do so would fly in the face of the purpose of CAFA. (135)
Moreover, such a proposal presents significant other possible problems, such as the potential that it would create an incentive for defendants to relocate to states with the lowest liability standards, knowing they would likely apply to a nationwide class--particularly in light of the view that class-action plaintiffs would have to seek application of this state's law in order to achieve certification. (136) Moreover, as Larry Kramer and Robert Sedler have noted, applying a single state's law to plaintiffs dispersed nationwide is problematic as a matter of federalism because different states, with different tort policies, have regulatory interests in governing disputes with which they are connected. (137) Ultimately, then, the persistence of Klaxon, combined with CAFA, has presented a major practical obstacle to nationwide mass-tort class actions in federal court.
B. The Shift to Multidistrict Litigation
As class actions have become harder to certify, plaintiffs have shifted in droves to multidistrict litigation as the next-best alternative. (138) The numbers are striking. Recent empirical work by the Federal Judicial Center reveals that one third of all civil cases in the federal courts right now are part of a pending MDL. (139) Moreover, as the troubles with the choice-of-law problem might indicate, ninety percent of these cases are products-liability cases. (140) And many of these MDLs are massive, comprising thousands of cases. (141) For example, the MDL involving the product-liability claims from use of the drug Vioxx included over 25,000 claimants. (142) It is no wonder, then, that one leading commentator and judge now refers to MDL as the "primary vehicle for the resolution of complex civil cases." (143)
MDL was not always so prominent, particularly with respect to products-liability cases. Although the original supporters of the statute envisioned that products cases would be viable MDL candidates, there were few products-liability MDLs until the 1990s. (144) Now, however, products cases make up the vast majority of the MDL docket. (145) As a result of the difficulties of class certification, MDL should continue to be ascendant, and the attentions of civil-procedure scholars should shift accordingly. (146) Before turning to the choice-of-law implications of the shift to MDL, it makes sense to describe briefly the mechanics of the MDL process.
1. How MDL Works
Multidistrict litigation has been part of the federal procedural system for over four decades now. MDL's roots extend to the early 1960s, when the federal courts were flooded with lawsuits alleging antitrust violations in the electrical-equipment industry. (147) This unprecedented state of affairs led the Judicial Conference to create the "Coordinating Committee for Multiple Litigation of the United States District Courts," which consisted of nine federal judges who coordinated discovery and other pretrial matters in the electrical equipment cases. (148) Although these efforts were effective at streamlining the electrical-equipment litigation, the Committee found the tools at its disposal inadequate and the Judicial Conference proposed a new federal procedural statute. (149) Rather than rely on voluntary participation by the various district judges handling individual cases, the new statute proposed "centralized management under court supervision of pretrial proceedings of multidistrict litigation to assure the just and efficient conduct' of such actions." (150)
The statute passed in 1968 with little resistance and created the Judicial Panel on Multidistrict Litigation (JPML). (151) The JPML is authorized to transfer civil actions pending in multiple districts "involving one or more common questions of fact" to "any district for coordinated or consolidated pretrial proceedings." (152) The "common questions of fact" requirement is lenient, and unlike in class actions, there is no requirement that such common questions predominate in order to achieve aggregation. (153) The panel must find only that transfer will "be for the convenience of parties and witnesses and will promote the just and efficient conduct of such actions." (154)
Unlike the general federal transfer statute, which provides that a case may be transferred only to a district court where it "might have been brought or to any district to which all parties have consented," (155) the MDL statute provides no such restriction and the JPML can transfer a case to any district. (156) Indeed, most of the action in the briefing and argument before the panel involves not whether the cases will be consolidated but where, as the parties vie for their preferred venue and even district judge. (157) The JPML considers a variety of factors in deciding where to consolidate a pending litigation, from the experience of the particular judge in prior MDLs, the location of the relevant evidence, and the willingness and motivation of the transferee judge. (158) The panel may, however, choose to establish the MDL in any federal district, regardless of any preexisting territorial connection to the already-pending cases. (159)
After the JPML has selected a transferee court and therefore established the MDL, future cases involving the same subject matter, called "tag-along[s]," (160) are filed in federal district courts where venue and personal jurisdiction are appropriate. (161) Requiring full-blown briefing and argument before the JPML for every tag-along case, of which there may be thousands, (162) would be extremely inefficient, so the JPML has adopted a streamlined procedure for transferring these cases to the MDL. (163) Unless the tag-along case clearly does not belong in the MDL, these cases are rather seamlessly transferred to the MDL court. (164)
Once a case is transferred, the control of the case is out of the JPML's hands and in the control of the transferee judge, to whom I will refer as the "MDL judge." (165) The MDL judge has the full measure of power over "pretrial proceedings" that the transferor court would have had if the transfer had not occurred. (166) The MDL court's powers are consequently quite broad, ranging from coordinating and resolving discovery-related matters, (167) to deciding evidentiary motions such as Daubert motions, (168) and ruling on motions for class certification, (169) motions to remand, (170) and dispositive motions. (171) Moreover, the MDL court has the power to govern settlement of cases before it, so long as they are reached prior to trial. (172) Shortly after the cases are transferred, the MDL court will also appoint counsel on each side to leadership roles on committees to organize the litigation. (173)
The MDL court, therefore, possesses significant powers, but its jurisdiction is incomplete because it cannot try transferred actions without the parties' consent. (174) Nor can the MDL court transfer a case to itself on a permanent basis in order to try it. Until the Supreme Court's decision in Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, (175) MDL courts commonly transferred cases to themselves in order to try them. (176) The Supreme Court unanimously ended that practice, holding that, despite longstanding contrary practice, the plain language of [section] 1407(a) dictates that the JPML "shall" remand cases at the close of pretrial proceedings. (177) There have been numerous attempts to persuade Congress to reverse Lexecon by statute, but none have come to fruition. (178) As a result, an MDL court may not try a case transferred to it for pretrial proceedings unless the parties consent to trial. (179)
Despite Lexecon, the use of "bellwether trials," or test cases from the pool of component cases, has become an important part of MDL practice. Securing parties' consent for these trials is now an important aspect of the MDL courts' management of cases. (180) The idea is that if the court can try a representative sample of cases, it will yield important information to the participants about the strengths and weaknesses of the sides' respective cases. (181) Even though the results of these bellwether trials are not binding on parties who are not participants in the trials, they provide important data about the value of the claims, perhaps leading to settlement discussions. (182) The process has the advantage of working out the litigation using real cases before actual juries, making the process appealing to those who value the participatory aspects of jury trials. (183)
The traditional model for MDL, reflected in its legislative history (184) and the Supreme Court's reading of the MDL statute in Lexecon, (185) provides that pretrial proceedings will at some point conclude, and, on the recommendation of the MDL judge, the JPML will remand the cases to the districts whence they came. (186) The persistence of this vision notwithstanding, remand rarely happens. (187) Few cases are remanded, (188) and scholars and courts have recognized that MDL's primary feature is to provide an efficient means of consolidating the cases for an eventual global settlement. As Judge Fallon, who presided over the massive Vioxx MDL, has noted,
By virtue of the temporary national jurisdiction conferred upon it by the MDL Panel, the transferee court is uniquely situated to preside over global settlement negotiations. Indeed, the centralized forum created by the MDL Panel truly provides a "once-in-a-lifetime" opportunity for the resolution of mass disputes by bringing similarly situated litigants from around the country, and their lawyers, before one judge in one place at one time. (189)
2. Choice of Law in MDL
MDL's primary difference from the class action is that the cases within it retain their individual identities. In other words, instead of the case being formally litigated by a representative on behalf of a group of absentee plaintiffs, the cases in an MDL keep their individual character. That said, one must be careful not to overstate the difference. An MDL is still an aggregate proceeding. Once the MDL is established, the litigation is run in many ways by a relatively small number of counsel appointed to the case-management committees established by the court. And, as several scholars have noted, like the class action, the key virtue of the MDL is that is collects most parties in a single organized proceeding in order to facilitate a global settlement. (190) As a result, many authors have emphasized that the due process concerns of class actions are present in MDL, and may be even more pronounced since the MDL structure has fewer formal procedural protections than the class action, (191)
There is no doubt that the MDL structure presents many of the same concerns as the class action structure--such concerns are inherent in any massive aggregated litigation. (192) Numerous commentators have noted the almost "quasi-class action" nature of MDL. (193) And, as many scholars in favor of aggregate litigation have suggested, the costs of aggregate litigation also come with benefits. (194) Aggregate litigation offers important efficiencies and opportunities to pool resources that make it possible for plaintiffs to take on more powerful corporate defendants on a level playing field, and prevent the court system from being overwhelmed by massive controversies. (195)
All that understood, it is important to note the ways in which an MDL is different from a class action. Indeed, although MDL resembles in important ways a representative suit, it is not quite the same, because the cases retain their individual character. (196) Unlike a class action, there are no absentee plaintiffs, and the cases are separately filed and prosecuted. And there will not be a single jury trial to decide the entirety of the case. As a result, the MDL has something of a hybrid character--not quite as aggregated as a class action, but consolidated to a significant degree. (197) Paramount among these differences is choice of law. Unlike a class action, which requires such a high degree of cohesion to warrant representative litigation, MDL allows for consolidation without the same degree of similarity. Because cases need not be grouped and tried together in all respects, differences among the cases are allowed to persist.
As a result, MDL accommodates well both the Klaxon/Van Dusen framework and its underlying policies. Indeed, courts have unanimously held that Klaxon and Van Dusen apply to cases transferred to MDLs. That is, a case filed in a proper venue and transferred to the MDL carries with it the choice-of-law rules of the transferor court. (198) If the MDL court handles a dispositive motion or tries a case by consent, it applies the choice-of-law rules of the transferor court. AS a result, the policies of Klaxon and Van Dusen are not as threatened by the aggregation process: the choice-of-law rules of the state where the case was filed are vindicated, and the inclusion of the case in the federal mass-tort proceeding neither changes the choice-of-law rules, nor the substantive law. (199) Moreover, aggregation can be achieved without crafting a choice-of-law rule that would require the application of a single state's law to a nationwide, dispersed tort, avoiding the due-process and federalism concerns associated with that strategy--even assuming such a rule were in the offing from a recalcitrant Congress. Although it is undoubtedly true that these choice-of-law determinations do not play out in each case, each case retains its choice-of-law identity, and plaintiffs are not faced with the choice of trading the law to which they would otherwise be entitled for the benefits of aggregation. (200)
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|Title Annotation:||Introduction through 2. Choice of Law in MDL, p. 759-794|
|Author:||Bradt, Andrew D.|
|Publication:||Notre Dame Law Review|
|Date:||Dec 1, 2012|
|Previous Article:||The malleability of collective litigation.|
|Next Article:||The shortest distance: direct filing and choice of law in multidistrict litigation.|