United States: No Take Backs For Lexecon Waivers

Last Updated: August 20 2018
Article by Michelle Yeary

Remember the days when saying things like no cutting, no backsies, no do-overs were the laws you lived by. Or when "calling" something actually gave you priority. When invoked, these rules of the playground were difficult to challenge. And if challenged, the rule-maker always had the option of the comeback position "times infinity." Now you could try the "times infinity plus one," but you risked being called out for shenanigans on that. Simpler times? Perhaps. But debates over hierarchy and convention did occur. Take for example, the classic case of Harry v. Lloyd and the question of whether you are permitted to triple stamp and double stamp. While that dispute may have gone unresolved, the judge in In re Bair Hugger Forced Air Warning Devices Prods. Liab. Litig., 2018 U.S. Dist. LEXIS 133061 (D. Minn. Jul. 25, 2018) had no problem relying on the no take backs rule when it came to plaintiffs' Lexecon waivers.

In case anyone needs a quick reminder, Lexecon refers to the decision in Lexecon v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) in which the Supreme Court held that an MDL court could not hold the trial of a transferred case without the consent of the parties. Leading to the birth of the Lexecon waiver.

As we often do when reviewing a new case, we take a look back on the blog to see if we've dealt with the topic before. Certainly we've shared our thoughts on Lexecon waivers several times. See here, here, and here. But, we think the issue of retracting a Lexecon waiver is an issue of first impression for us. In fact, the Bair Hugger opinion notes that there is not much precedent on the issue. So, we decided to look at the case law ourselves.

It appears that the first time the question of retracting a Lexecon waiver was addressed was in In re Fosamax Prods. Liab. Litig., 815 F. Supp. 2d 649 (S.D.N.Y. 2011), upholding on reconsideration 2011 WL 1584584 (S.D.N.Y. Apr. 27, 2011). In that MDL, the court ordered the parties to select 25 cases that would be worked up and create the pool from which bellwether trial cases would be selected. One of the conditions of selection was that the parties would execute Lexecon waivers. Id. at 650. After bellwether trials had started, one plaintiff sought to withdraw her waiver on the grounds that her husband was too ill to attend trial in New York (they resided in Alabama) and citing the Americans with Disabilities Act ("ADA").

In deciding what standard to apply to a request to retract a Lexecon waiver, the court found

The Lexecon waivers at issue here, on which both parties have relied during the discovery and bellwether selection phases of the Fosamax MDL, reflect plaintiffs' and defendant's consent to trial before this Court, and are analogous to a stipulation of fact or a stipulation to proceed for trial before the court without a jury.

In re Fosamax, 2011 WL 1584584 at *2. Because one party cannot unilaterally dissolve a stipulation supported by sufficient consideration, the waiver could only be retracted "upon a showing of good cause such as fraud, collusion, mistake or duress" or if the waiver was unconscionable, contrary to public policy, or ambiguous. In re Fosamax, 815 F. Supp. 2d at 653. The court concluded that the waivers were valid stipulations because they were given in exchange for permission to conduct discovery before remand and they were unambiguous. Id. at 654. Plaintiff failed to demonstrate good cause because her case was filed in the Middle District of Tennessee which is where it would be remanded for trial if she was relieved of her Lexecon waiver. Plaintiff's argument that her husband couldn't travel for trial didn't hold up since plaintiffs had since moved to Alabama. Both the transferee and transferor courts were not near her home.

The next court to address the issue was In re Zimmer Durom Hip Cup Prods. Liab. Litig., 2015 WL 5164772 (D.N.J. Sept. 1, 2015). Here, 8 cases were selected as bellwethers and 2 were selected as the initial trial cases. Id. at *1. Counsel for plaintiffs in the first 2 trial cases agreed to waive Lexecon. Shortly after that, a Joint Case Management Order was entered stating that "Plaintiffs and Defendants waive their respective rights under [Lexecon]" and "consent to trial of the cases in the MDL by this Court." Id. Over 4 months later, Plaintiffs' Liaison Counsel raised for the first time their position that the language in the order did not cover all plaintiffs in the MDL. Id. at *2. Another 4 months passed before plaintiffs sought to formally retract the waivers.

The court found the language in the joint order was unambiguous and applied to all plaintiffs in the MDL. Id. at *3. Having found a valid waiver, the court had to consider whether it could be rescinded and whether Plaintiffs' Liaison counsel's agreement bound all plaintiffs in the MDL. The court examined both the standard utilized in In re Fosamax and the Third Circuit standard for modifying stipulations – the avoidance of manifest injustice. Id. at *4. Plaintiffs argued that the waiver on behalf of all plaintiffs was a mistake. The court found plaintiffs' failure to take any steps to correct the mistake for months after the order was entered undermined their argument. Moreover, carelessness is not good cause. Id. And, the parties had relied on the waiver in the bellwether selection process. While the waiver could not be retracted and extended beyond the 2 initial trial cases, the court held that it only applied to plaintiffs represented by Plaintiffs' Liaison Counsel, not every plaintiff in the MDL. Id. at *5 (acknowledging the liaison counsel had authority to enter into stipulations for all MDL plaintiffs, but that "such action would necessitate additional documentation and discussion with" individual plaintiffs' counsel that did not occur in this instance).

That sets the stage of Bair Hugger and application of the good cause standard to requests to retract Lexecon waivers. Like in the prior cases, the litigation was at the bellwether discovery and trial phase. Eight plaintiffs waived and became the bellwether pool. After the first bellwether trial, which resulted in a defense verdict, the remaining 7 cases moved to retract their Lexecon waivers. In re Bair Hugger, 2018 U.S. Dist. LEXIS 133061 at *9. Resorting to playground rules – shenanigans. The reasons given by plaintiffs were (i) the court's ruling applying the law of plaintiff's state of residence rather than Minnesota law which plaintiffs contended made a "material difference in the posture of the case," (ii) lack of consideration, (iii) no inconvenience to the parties or the court, and (iv) defendants never waived. Id. at *11.

The court quickly dismissed each argument. As to choice of law, plaintiffs provided no grounds for reasonably expecting a contrary ruling and

[r]egardless, it is unlikely that a "material difference in the posture of the case" even amounts to "good cause" for retraction. If it did, any MDL party who disliked a court's rulings could simply issue a Lexecon retraction and undo months of work performed in reliance on the Lexecon waiver. The prospect of these unilateral retractions would undermine the bellwether trial process.

Id. at *11-12. So much for plaintiffs' poor loser, I'm taking my toys and going home argument.

As to plaintiffs' remaining arguments: There was consideration for the waiver. Plaintiffs got to move "to the front of the line to try their cases." Id. at *12. The parties and the court would be inconvenienced as "changing course now would waste the resources expended in advancing the current list of Bellwethers and would delay the more than 4,500 cases in this MDL by many months." Id. at *12-13. And, it was unclear whether defendants even needed to waive Lexecon as they reside in Minnesota, but if they did, their agreement to try the cases in Minnesota was a waiver. Id.

So, the Lexecon waivers hold up in Bair Hugger. It is not a robust body of law, but the cases at least seem in agreement on treating Lexecon waivers as pre-trial stipulations bound by the jurisdiction's applicable law on rescinding or modifying such agreements. Whether that be good cause or manifest injustice, it's safe to say "I take it back" is as valid an argument as "I'm rubber and your glue. . ."

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

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