United States: MDL Direct Filing & Personal Jurisdiction

Last Updated: October 18 2017
Article by James Beck

Bexis gave a talk the other day at the Washington Legal Foundation on personal jurisdiction after last term's United States Supreme Court decisions in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) ("BMS"), and BNSF Railway Co. v. Tyrrell, 137 S. Ct. 1549 (2017) ("BNSF"). One of the highlighted areas of emerging jurisdictional issues was MDL practice – specifically the MDL practice of allowing plaintiffs anywhere in the country to "direct file" actions into the MDL after it has been established – thereby bypassing the provisions of the MDL statute, 28 U.S.C. §1407(a) that "transfers shall be made by the judicial panel on multidistrict litigation."

We thought we'd examine that a bit today.

Essentially, we don't think that there is any jurisdictional basis for direct filing – except the defendants' waiver of any jurisdictional challenge. Initially, the MDL statute itself does not confer such jurisdiction. The statute nowhere mentions direct filing, and in only one instance is an MDL judge (also called the "transferee court") clothed with extraordinary jurisdictional powers. That has to do with depositions. See 28 U.S.C. §1407(b) (MDL judge "may exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions").

Whether or not the legal maxim "expressio unius est exclusio alterius" (express mention of one item implies the exclusion of others of the same ilk) should apply here, we seriously doubt that Congress intended to hide any jurisdictional elephants in MDL statutory mouseholes. Cf. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 40-41 (1998) (refusing to imply MDL court jurisdiction to try transferred cases). It "may or may not" be more efficient to allow direct filings, but the MDL statute does not so state, so "the proper venue for resolving that issue remains the floor of Congress." Id. at 40 (citations omitted). We further note that the Judicial Panel on Multidistrict Litigation's rule that has been interpreted as allowing direct filing, J.P.M.D.L.R 7.2(a), likewise does not mention jurisdiction – providing only that "[p]otential tag-along actions filed in the transferee district do not require Panel action."

In BNSF (previously discussed here) the Supreme Court rejected an attempt to use a statute (the venue provision of the Federal Employees' Liability Act) to create personal jurisdiction where it did not otherwise exist. When Congress intends to expand jurisdiction (as opposed to venue) it "typical[ly]" does so by "authoriz[ing] service of process." 137 S. Ct. at 1555 (list of examples omitted). This statute did not expressly do so, and to the extent any prior precedent suggested otherwise, that precedent was obsolete:

[A]ll these cases . . . were decided before this Court's transformative decision on personal jurisdiction in International Shoe Co. v. Washington, 326 U.S. 310 (1945). See [Bauman], 134 S. Ct. [746], 761, n.18 (cautioning against reliance on cases "decided in the era dominated by" the "territorial thinking" of Pennoyer v. Neff, 95 U.S. 714 (1878)).

Id. at 1555-56 (citations modified). We've already raised this cautionary note with respect to century-old precedent in jurisdiction by consent cases, but it applies more broadly.

Demise of their statutory arguments left the plaintiffs in BNSF with nothing but state law to rely on. While the defendant "ha[d] over 2,000 miles of railroad track and more than 2,000 employees" in the state, that was insufficient to permit suit by non-resident plaintiffs under either general or specific jurisdictional principles:

[T]he business BNSF does in [the state] is sufficient to subject the railroad to specific personal jurisdiction in that State on claims related to the business it does in [the state]. But in-state business . . . does not suffice to permit the assertion of general jurisdiction over claims like [plaintiffs'] that are unrelated to any activity occurring in [the state].

Id. at 1559 (footnote omitted).

Turning to BMS, which was a mass tort worthy of a breaking news post, hundreds of plaintiffs filed in California to escape (among other things) an existing federal MDL. Non-resident plaintiffs could not establish specific personal jurisdiction over a non-resident defendant, even though (like BNSF) resident plaintiffs could, and the non-residents might be able to sue a different defendant that was "at home" in that state. "The primary focus of our personal jurisdiction inquiry is the defendant's relationship to the forum State." 137 S. Ct. at 1779. Jurisdiction is "a consequence of the territorial limitations" on state power; therefore even a 'convenient location for litigation' may, as a consequence 'of interstate federalism,' be "divest[ed]. . . of its power to render a valid judgment." Id. at 1781 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 294 (1980)).

Specific jurisdiction, as explained in BMS, requires "an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State." Id. "[U]nconnected activities," no matter how extensive, are irrelevant. Id. That "other," in-state plaintiffs could bring suit was "an insufficient basis for jurisdiction," as was the ability of the non-resident plaintiffs to sue other, in-state defendants. Id. at 1781, 1783. Jurisdictional requirements "must be met as to each defendant over whom a state court exercises jurisdiction." Id. at 1783 (citation and quotation marks omitted). Where:

[t]he relevant plaintiffs are not [in-state] residents and do not claim to have suffered harm in that State[, and] all the conduct giving rise to the nonresidents' claims occurred elsewhere[, i]t follows that the [state's] courts cannot claim specific jurisdiction.

Id. at 1782 (citation omitted). Mass tort plaintiffs have two choices after BMS: they can all sue "in the States that have general jurisdiction" over a particular defendant, or "plaintiffs who are residents of a particular state . . . could probably sue together in their home States." Id. at 1873.

Returning to MDLs, as in BNSF, there is no "typical" jurisdictional provision anywhere in the MDL statute. Unless a particular MDL happens to be located in a forum with "general jurisdiction" over a defendant, there is no constitutional basis for allowing plaintiffs anywhere in the country to file directly into the MDL and thereby bypass statutory procedures. Further, since jurisdiction must exist "as to each defendant" individually, in MDLs with more than one major defendant (most MDLs), it is unlikely (albeit not impossible) for there to be any jurisdiction where all such defendants are "at home" so as to permit direct filing as a matter of constitutional Due Process.

Thus, the only jurisdictional basis for MDL direct filing is the acquiescence – and thus the waiver – of the defendant(s) being sued. That is particularly dangerous in an MDL setting, as the recent decision in the Pinnacle Hip MDL litigation (discussed here) exemplifies. See In re Depuy Orthopaedics, Inc., 870 F.3d 345 (5th Cir. 2017). The defendants' agreement to a direct filing order was – wrongly, a majority of the Court of Appeals held – interpreted as a waiver of jurisdictional objections. Id. at 351-52. As for the propriety of direct filing, there was no majority. The lead opinion viewed direct filed cases as being "treated 'as if they were transferred from a judicial district sitting in the state where the case originated.'" Id. at 348 (quoting In re Yasmin & Yaz (Drospirenone) Marketing, Sales Practices & Products Liability Litigation, 2011 WL 1375011, at *6 (S.D. Ill. April 12, 2011)). The first concurrence declined to reach the issue. Id. at 356-57. The second, concurring and dissenting, opinion would find direct filing invalid:

But for the possibility of a "global waiver" of personal jurisdiction, the [MDL court] had no claim to personal jurisdiction over the cases: none of the plaintiffs' surgeries occurred in [the state]; the plaintiffs aren't [in-state] residents; and neither general nor specific jurisdiction exists over the [defendants] for purposes of these disputes. For that reason, the district court relied solely on the "global waiver". . . . Petitioners are being forced to trial over their objections to personal jurisdiction.

By comparison, a scholarly opinion . . . in an MDL case resulted in dismissal of a nonresident defendant against which there was a "direct filed" case by a nonresident plaintiff. In re Heartland Payment Systems, Inc. Customer Data Security Breach Litigation, 2011 WL 1232352 (S.D. Tex. March 31, 2011). The court first noted that the defendant's agreement to transfer for purposes of pretrial proceedings was not inconsistent with and did not waive its personal jurisdiction challenge. 2011 WL 1232352 at *5–6. Finding no waiver, the court then decided that it lacked personal jurisdiction over the non-consenting defendant based on [its] lack of minimum or relevant contacts with the [state in question]. 2011 WL 1232352 at *6–10.

Depuy Orthopaedics, 870 F.3d at 357.

This is a good place to start, so we examined the decisions cited by both sides. Looking at Yasmin/Yaz, we were disappointed. That decision doesn't even discuss the jurisdictional ramifications of MDL direct filing. Rather, as the first sentence of the opinion makes clear, "[t]his matter is before the Court for the purpose of resolving choice of law considerations." 2011 WL 1375011, at *1. The direct filing order at issue specified that direct filing would have no effect on choice of law. Id. at *4 n.2, so the reference in Yasmin/Yaz to how direct filings were "treated" occurred in the context of deciding what "no effect" on choice of law meant:

As to the foreign direct filed cases, the choice of law decision is not as clear. Foreign direct filed cases are filed in this Court pursuant to a direct filing order . . . [that] expressly provides that the parties' direct filing agreement will not impact the choice of law that otherwise would apply to the direct filed actions.

In general, direct filing orders are beneficial to both parties because they streamline the litigation and help to eliminate the judicial inefficiency. . . . However, direct filing orders also present difficult choice of law issues. . . . The Court concludes that the better approach is to treat foreign direct filed cases as if they were transferred from a judicial district sitting in the state where the case originated. For purposes of this analysis, the Court considers the originating state to be the state where the plaintiff purchased and was prescribed the subject drug.

Id. at *5-6 (citations omitted). There is not one mention of personal jurisdiction in the entire Yasmin/Yaz opinion.

Turning instead to Heartland Payment, that case did involve a dispute over personal jurisdiction in a directly filed action. See 2011 WL 1232352, at *4 (observing that "direct filings may present jurisdictional, venue, or related issues"). The defendant moved to dismiss a direct filed action under Fed. R. Civ. P. 12(b)(2) on the ground that the state in which the MDL was situated had no personal jurisdiction over it. Id. at *5. March, 2011 was, of course, three years before Bauman was decided and even several months before the Supreme Court's "at home" test debuted in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011). But even under the more lax standards of that time, personal jurisdiction did not lie simply because an MDL against the defendant happened to exist in the state in question.

As in Depuy Orthopaedics, the MDL plaintiffs in Heartland Payment first attempted to use the defendant's agreement to direct filing as a waiver of personal jurisdiction. 2011 WL 1232352, at *7. Unlike Depuy Orthopaedics, the MDL court in Heartland Payment rejected that argument. Id. As for specific jurisdiction, neither the defendant's use of an in-state processing center nor its agreements with national credit card networks sufficed. "[M]erely contracting with a resident of the forum state is insufficient to subject the nonresident defendant to personal jurisdiction in that state." Id. at *8. Plaintiff did not even try to argue that the fortuitous, after-the-fact creation of an MDL in the jurisdiction could be a "minimum contact" justifying jurisdiction. Without a basis for jurisdiction, the directly filed case had to be either transferred or, if the parties could not agree, dismissed. Id. at *12, 14.

On the basis of these two cases, we'd have to give the edge to the dissent on the jurisdictional issue, since Heartland Payment decided the question at issue – the jurisdictional impact of MDL direct filing – while Yasmin/Yaz did not. But is there anything else out there, other than these two opinions, decided two weeks apart, in 2011?

We took a look, but most of what we found were either MDL orders creating negotiated direct filing regimes, or cases, like Yasmin/Yaz, that dealt with the impact of direct filing on substantive choice of law issues. See, e.g., In re Incretin Mimetics Products Liability Litigation, 2013 WL 12171761 (S.D. Cal. Nov. 13, 2013) (an example of the former); Wahl v. General Electric Co., 786 F.3d 491, 498-99 (6th Cir. 2015) (an example of the latter). Other than that, it appears that the two 2011 precedents are pretty much all there is. The issue was raised in In re New England Compounding Pharmacy, Inc. Products Liability Litigation, 2015 WL 178130 (D. Mass. Jan. 13, 2015), but mooted by plaintiffs refiling in their home jurisdiction and getting a JPMDL "tag along" order before it could be decided. Id. at *1 n.3. The court in In re Vioxx Products Liability Litigation, 478 F. Supp.2d 897, 904 n. 2 (E.D. La. 2007), noted the possibility that "the MDL forum" might not be able to "exercise personal jurisdiction over the defendant" in discussing direct-filed complaints, but that was an aside in another choice of law decision. A direct-filed case was dismissed for lack of subject matter jurisdiction in In re Pradaxa (Dabigatran Etexilate Products Liability Litigation, 2014 WL 7145470, at *3 (S.D. Ill. Dec. 15, 2014), where the plaintiffs were from a foreign country – but personal jurisdiction was not discussed. Thus, it appears that Depuy Orthopaedics and Heartland Payment are the only cases actually addressing personal jurisdiction in the context of direct-filed MDL actions.

In the context of an ordinary (non-MDL) transfer, the Supreme Court has sought to "ensure that the 'accident' of federal diversity jurisdiction does not 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." Van Dusen v. Barrack, 376 U.S. 612, 638 (1964). We think that this principle logically extends to personal jurisdiction – and to direct filed actions.

In MDLs that rest – as product liability litigation does – on state law and diversity of citizenship, there is no jurisdictional basis for direct filing of MDL actions other than the defendant's waiver of their rights to assert lack of personal jurisdiction. The Supreme Court's recent jurisdictional decisions, culminating (so far; there will be more) with BMS and BNSF, have put the other side's mass tort business model in significant jeopardy. Thus, we see plaintiffs making extreme and exorbitant waiver arguments based on MDL direct filing agreements, not only in Depuy Orthopaedics, but also in the earlier Heartland Payment case, which also involved an aggressive waiver claim. Our best advice is "don't do it anymore." There is no statutory basis for personal jurisdiction in a direct filed MDL case, and Lexecon indicates that the Supreme Court won't be inclined to create one. Except for the rare MDL located in a place where every defendant is "at home," there is no constitutional basis for direct filing creating personal jurisdiction either.

Weighing all these considerations, and given how the jurisdictional law is evolving, it is not a good idea for a defendant to waive any personal jurisdiction defense at this time. Thus, we believe that there is no constitutional basis for personal jurisdiction in direct-filed MDL cases, and defendants should not do plaintiffs any favors by voluntarily agreeing to such procedures.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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