United States: Unsound, Ongoing MDL Choice of Law Fiasco

Last Updated: September 24 2019
Article by James Beck

This post is solely the product of the Reed Smith side of the Blog.

Readers may recall that a couple years ago we proposed reworking the federal multi-district litigation statute, 28 U.S.C.A. §1407, in a variety of ways. Simultaneously, some of us have been working with Lawyers for Civil Justice to attempt MDL change through possible changes to the Federal Rules of Civil and Appellate Procedure. One of the critical problems LCJ has identified is lack of timely and meaningful appellate review in MDL proceedings. Basically, the non-final nature of most MDL rulings that disfavor defendants means that they don't get appealed for years, until after an adverse verdict in an ironically nicknamed "bellwether" trial (nothing is a "bellwether" after both sides pour many times more resources into a case than it's really worth) – at which point the pressure is on the appellate court to find some way to affirm lest "years of MDL efforts be wasted."

As LCJ pointed out in 2018, in the absence of meaningful and timely appellate review, parties – particularly defendants – "are increasingly turning to mandamus, which is an imperfect substitute for the right to appellate review on the merits." LCJ 1/14/2018 submission at 5. However, we're realists, the rules process is controlled by the federal judiciary itself, and how many judges are likely to support something that would simultaneously reduce the discretion enjoyed by district judges managing MDLs, while also adding to the appellate docket?

Federal-court mandamus standards are extremely difficult to meet. Along these lines, we followed – indeed called for – the mandamus appeal in the Pinnacle Hip MDL. Ultimately, as the blog discussed at the time, even though a majority of the appellate panel concluded that the MDL judge had committed "grave error" in the challenged rulings, the court nonetheless denied mandamus. In re Depuy Orthopaedics, Inc., 870 F.3d 345, 351, 353 (5th Cir. 2017). Nonetheless, something was better than nothing, and after the Fifth Circuit's decision, plaintiffs settled rather than submit the verdicts that resulted from MDL judge's erroneous proceedings to normal appellate review.

So we would add one more thing to our legislative wish list for §1407. If the judiciary proves incapable of providing some form of meaningful appellate review of MDL decisions, Congress should step in and either make MDL denials of summary judgment immediately appealable (as is true of New York state procedure), or it should increase the availability of mandamus review in MDL situations to something akin to how analogous writs are treated in California.

As it was in Pinnacle Hip, the issue of mandamus is again on our minds due to another episode of repeated MDL abuse – this time in the In re Atrium Medical Corp. C-QUR Mesh Products Liability Litigation. It seems that the MDL judge – contrary to Supreme Court precedent – is bound and determined to apply New Hampshire law to every transferred case, in order to deprive the defendants of any number of state-specific defenses to various claims. We first commented on the issue in August, in this post, about Shumaker v. Atrium Medical Corp., 2019 WL 3802468 (D.N.H. Aug. 13, 2019), a case involving a plaintiff transplanted with the product in Kansas, and three defendants located in New Hampshire, New Jersey, and overseas. Id. at *1. Kansas, like many states, has enacted a product liability statute that displaces the common law.

Shumaker decided to displace the law of the place where the device was implanted in the plaintiff (and where the plaintiff lived at the time) in favor of forum law, based primarily on the fifth of five factors (that is, the least important) in New Hampshire choice of law analysis − "the court's preference for what it regards as the sounder rule of law." Id. at *5. Why was the law of the residence of just one of the three defendants "sounder" than the law of the plaintiff's residence/implantation?

The Kansas Product Liability Act is more than thirty-five years old and, as set out in [plaintiff's] objection, appears to restrict a plaintiff's opportunity to redress injuries caused by defective products. By contrast, New Hampshire common law continues to evolve in response to "the socio-economic facts of life" through the development of case law and provides plaintiffs a fair opportunity to seek redress for their injuries in product liability cases.

2019 WL 3802468, at *6 (citation omitted) (emphasis added). In other words, something that increases liability is necessarily "sounder" than than something that doesn't.

That's a pretty glaring admission of pro-plaintiff bias by a judge chosen by the MDL judicial panel to handle a mass tort. Still, it wasn't clear then how pervasive this bias would be, since the facts in Shumaker were odd, in that the plaintiff had moved after the surgery and (we think) filed suit in Alabama, which nobody claimed had any interest in the suit. Id. at *1. Indeed, plaintiff expressly invoked the Kansas statute that the court avoided. Id. at *2.

Since then, however, we have seen repeated decisions, all doing the same thing – relying on a "preference for what it regards as the sounder rule of law" to avoid various aspects of state laws favoring defendants. Specifically:

In Petersen v. Atrium Medical Corp., 2019 WL 4261822 (D.N.H. Sept. 9, 2019), the plaintiff both resided in and had her surgery in Maine. Maine's warranty law conflicted with New Hampshire's because it required reliance whereas New Hampshire did not. The court applied its view of the "sounder rule of law" to increase warranty liability for a device never sold in New Hampshire:

New Hampshire law does not impose a reliance requirement for such claims. . . . [E]liminating the requirement supports the underlying purpose of the law of warranty, which is to determine what it is the seller has agreed to sell, thereby making reliance irrelevant. [Defendant] makes no argument that Maine's warranty law, requiring reliance, provides the sounder rule of law. . . . [T]he fifth factor weighs in favor of New Hampshire law and tips the balance in that direction. The court will therefore apply New Hampshire law. . . .

Id. at *5 (citation and quotation marks omitted). Again, Petersen does not state for certain where plaintiff originally filed suit. We suspect Maine.

In Barron v. Atrium Medical Corp., 2019 WL 4221412 (D.N.H. Sept. 5, 2019), a Pennsylvania resident was suing over a device implanted in Pennsylvania. Pennsylvania does not recognize strict liability in prescription medical product cases, and that rule includes implied warranty claims. Id. at *2. Barron rejected the defendant's "most significant relationship" choice-of-law argument" because "it is not used in New Hampshire." Id. at *5. The court applied its view of the "sounder rule of law" to allow strict liability under New Hampshire law:

The sounder rule of law . . . applies even when the injury occurs out of State. Defendants gloss over the fifth factor. . . . Pennsylvania restricts the availability of strict product liability and breach of implied warranty claims in the context of the manufacture and sale of medical devices, which is the product at issue here. In contrast, New Hampshire has chosen to put the risk of liability for injury caused by products, without excluding medical devices, on product manufacturers and sellers . . . .

It is believed that if today's products are capable of causing illness or physical injury, the risk of liability is best borne by the companies that profited from their sale, rather than by the unfortunate individual consumers.

In the absence of any showing by defendants that Pennsylvania provides the sounder rule of law, the fifth factor weighs in favor of New Hampshire law and tips the balance in that direction. The court will therefore apply New Hampshire law to the liability portion of all claims in this case.

Id. at *5-6 (citations and quotation marks omitted). Once again, the sounder rule of law is whatever will increase liability.

Newell v. Atrium Medical Corp., 2019 WL 4060067 (D.N.H. Aug. 28, 2019), was another case where a Maine plaintiff had the allegedly injurious device implanted in Maine. Id. at *1. In addition to the warranty question in Petersen, the defendant also argued that the Maine consumer protection statute was more restrictive, and thus in conflict with, New Hampshire law. Nonetheless, the court's conception of the "sounder rule of law" led to the extraterritorial application of the New Hampshire statute to a transaction that occurred entirely in Maine:

Defendants gloss over the fifth factor . . .[and] mak[e] no argument as to which law is sounder with respect to breach of warranty or consumer protection law claims. . . . The New Hampshire legislature enacted [the consumer protection act] in 1970 to ensure an equitable relationship between consumers and persons engaged in business. The purpose of the CPA is to provide broad protection for consumers. . . .

Defendants make no argument that . . . Maine's Unfair Trade Practices Act, limited to consumer transactions, provide the sounder rules of law. . . . In the absence of any theory to show that Maine provides the sounder rule of law, the fifth factor weighs in favor of New Hampshire law and tips the balance in that direction. The court will therefore apply New Hampshire law.

Id. at *5-6. As always, the default position is whatever increases liability must be the "sounder" rule, so New Hampshire's statute applies extrateritorially, in the absence of any New Hampshire precedent for doing so.

In Luna v. Atrium Medical Corp., 2019 WL 4016158 (D.N.H. Aug. 26, 2019), the plaintiff, a California resident, was implanted with the device in California. California law does not allow strict liability design defect claims against prescription medical products. Id. at *3. So under the court's conception of the "sounder rule of law," California law cannot apply:

In contrast to the restrictions on a plaintiff's right to recover for product liability under California law, New Hampshire has chosen to put the risk of liability for injury caused by products, without excluding medical devices, on product manufacturers and sellers:

The reasons for the evolution of the law in the area of products liability are many. We live in an era of national advertising and of nationwide distribution which can add or remove a product from our store shelves in a matter of days. Many of those nationally sold products contain chemical compounds and synthetics the side effects of which clearly cannot be anticipated. It is believed that if today's products are capable of causing illness or physical injury, the risk of liability is best borne by the companies that profited from their sale, rather than by the unfortunate individual consumers.

In the absence of any showing by defendants that California provides the sounder rule of law, the fifth factor weighs in favor of New Hampshire law and tips the balance in that direction. The court will therefore apply New Hampshire law to the liability portion of all claims in this case.

Id. at *5-6 (citations and quotation marks omitted).

This string of decisions may well be the most blatant display of pro-plaintiff, and pro-liability, bias that we've ever seen in an MDL, since the it is explicitly based on "the court's preference for what it regards as the sounder rule of law." All five opinions dismiss the more important factors of New Hampshire's choice of law analysis, such as "predictability of results," and "maintenance of reasonable orderliness and good relationship among the states as of "little or no relevance."

Really?

These results are only "predictable" given the court's five-times-demonstrated pro-liability bias. Otherwise, New Hampshire law is only in play because the JPMDL decided to send the MDL to that state. None of the opinions state that the plaintiffs filed suit in New Hampshire, so we assume they didn't. Nor is it likely that a "good relationship among the states" is fostered by having their product liability principles denigrated as less "sound" and ignored in favor of blanket application of forum state law to residents of those other states injured in those states.

Further, the application of forum law because the judge likes it better is unconstitutional. In Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), a Kansas state court had applied Kansas law "to every claim" even though most of the "plaintiffs in the case had no apparent connection" to that state. Id. at 815-16. The Supreme Court reversed, holding that this approach was incompatible with both Due Process and Full Faith and Credit. The Kansas courts "erred in deciding on the basis that it did that the application of its laws to all claims would be constitutional." Id. at 818.

[T]he Due Process Clause and the Full Faith and Credit Clause . . . require[s] that for a State's substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair . . . . [T]he Due Process Clause prohibit[s] the application of law which was only casually or slightly related to the litigation, while the Full Faith and Credit Clause require[s] the forum to respect the laws and judgments of other States. . . .

Id. at 818-19 (citations and quotation marks omitted) (emphasis added).

In the absence of "contacts creating state interests" a state cannot constitutionally prefer its own law and apply it globally to cases arising in numerous other states:

[W]hile a State may . . . assume jurisdiction over the claims of plaintiffs whose principal contacts are with other States, it may not use this assumption of jurisdiction as an added weight in the scale when considering the permissible constitutional limits on choice of substantive law. It may not take a transaction with little or no relationship to the forum and apply the law of the forum. . . . The issue of personal jurisdiction over plaintiffs in a class action is entirely distinct from the question of the constitutional limitations on choice of law; the latter calculus is not altered by the fact that it may be more difficult or more burdensome to comply with the constitutional limitations because of the large number of transactions which the State proposes to adjudicate and which have little connection with the forum.

[The forum] must have a significant contact or significant aggregation of contacts to the claims asserted by each member of the plaintiff class, contacts creating state interests, in order to ensure that the choice of [forum] law is not arbitrary or unfair. Given [the forum's] lack of "interest" in claims unrelated to that State, and the substantive conflict with [other states], we conclude that application of [forum] law to every claim in this case is sufficiently arbitrary and unfair as to exceed constitutional limits.

Id. at 821-22 (citations and quotation marks omitted) (emphasis added). Since the constitution requires that the forum "must have a significant contact or significant aggregation of contacts" to justify application of forum law, it's no answer that this type of analysis "is not used in New Hampshire."

Thus, as to the "constitutional limitations on choice of law," "practical reasons" – in which we would include a court's personal view of which state's law is "sounder" – are not particularly relevant, let alone controlling, as the string of recent decisions in C-QUR Mesh would have it:

Whatever practical reasons may have commended this rule to the [state courts], for the reasons already stated we do not believe that it is consistent with the decisions of this Court. . . . [A] state court may be free to apply one of several choices of law. But the constitutional limitations . . . must be respected.

Shutts, 472 U.S. at 823 (citations omitted) (emphasis added).

One of the so-called "Moscow Rules" in spy novels is "Once is happenstance. Twice is coincidence. Three times is a pattern" (or in some versions, "enemy action"). In the C-QUR Mesh MDL we now have five consecutive erroneous decisions all refusing to follow interest analysis, and instead having choice of law depend simply judicial preference for legal rules that increase liability over those that do not. That is, as Shutts put it, "arbitrary and unfair." These are all interlocutory orders, but ones that, by selecting the applicable body of law, will affect every aspect of these cases going forward. In short, this is the kind of situation where, if interlocutory appellate review is not available, the mandamus option should be considered.

Finally, we are reminded of the "shot across the bow" footnote from Pinnacle Hip MDL:

As the court confirmed by questions at oral argument, the defendants, despite their serious critiques of the district judge's actions in this case and related MDL proceedings, have not asked us to require these cases to be reassigned to a different judge. . . . We express no view on the issue but note that reassignment is both extraordinary and rarely invoked.

In re DePuy Orthopaedics, Inc., Pinnacle Hip Implant Products Liability Litigation, 888 F.3d 753, 792 n.83 (5th Cir. 2018) (citations and quotation marks omitted). In these five cases, we have an MDL transferee judge on record applying a subjective "court's preference" standard always in favor of more liability. Such an overt display of pro-plaintiff bias by an MDL judge is both "extraordinary" and "rare," so that the MDL Panel should at least consider a reassignment.

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

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