We love the choice-of-law issues that arise in multidistrict litigation.

Are we weird, or what?

The most recent judge to wrestle with MDL choice-of-law issues is Judge Eldon Fallon in In re Vioxx Products Liability Litigation, MDL No. 1657, slip op. (E.D. La. Mar. 22, 2007). In typical mass tort multidistrict litigation, diversity cases are filed in federal courts across America. The MDL Panel then transfers the cases to the MDL transferee district. The transferee court then, quite logically, applies the choice-of-law rules of the original forum to decide the substantive law applicable to the case.

That’s easy enough. But, once a centralized MDL proceeding is in place, why jump through the hoop of having additional cases filed in their home courts, knowing that the MDL Panel will transfer them, as night follows day, to the MDL transferee court? It doesn’t make much sense to have scores of cases filed in, say, New Jersey, knowing full well that the MDL Panel will be shipping them to an MDL transferee court in, say, Louisiana. Why not just stipulate that the cases can all be filed directly in Louisiana, with the defendant waiving objections to venue and the parties agreeing that the cases will ultimately be transferred to an appropriate venue for trial?

That’s precisely what happened in the Vioxx litigation. The parties agreed, and Judge Fallon ordered, that cases could be filed directly in the Eastern District of Louisiana, that the defendant (Merck) would not object to venue, and that, at the completion of pretrial proceedings, the court would transfer those cases to proper venues for trial “based on the recommendations of the parties to that case.” (That last provision strikes us as a little optimistic. As sure as we’re sitting here, the parties will disagree over the proper venue for some of these cases; future litigants might want to anticipate those disputes and provide a more explicit mechanism for resolving them.)

As Judge Fallon’s direct filing order allowed, three plaintiffs — one from Alabama, whose case technically belonged in an Alabama court; one from Tennessee, whose case belonged in Tennessee; and one from Kentucky — filed their complaints in the Eastern District of Louisiana. Then the fun starts.

First, choice of law in a federal diversity case is governed by the law of the state in which the federal court sits. So a federal judge sitting in Louisiana should ordinarily apply Louisiana choice-of-law rules to diversity cases pending before it. But what happens when the diversity case was (and could only be) brought in Louisiana because the parties stipulated to the temporary propriety of a Louisiana forum for reasons of administrative convenience? These cases should have been brought in Alabama, Tennessee, and Kentucky, and everyone knew it. Shouldn’t the choice-of-law rules of Alabama, Tennessee, and Kentucky govern those cases?

Judge Fallon didn’t have to resolve that issue: “Louisiana’s choice-of-law rules ensure that the plaintiffs do not ultimately realize this potentially significant benefit of direct filing, rendering this a non-issue in these cases.” Id. at 8. But later litigants may not be so lucky. In your next MDL, the stipulation allowing for direct filing should (1) permit filing in the MDL transferee district, (2) cause the defendant to waive objections to venue in those cases, and (3) provide that the MDL transferee court should apply the choice-of-law rules of the state where the plaintiff was prescribed, bought, used, and was injured (if at all) by the drug (or, if those factors don’t all point in the same direction, according to some other specified set of rules).

The fun doesn’t stop there. Judge Fallon also noted (slip op. at page 8, note 2) another peculiarity caused by the direct filing order in the Vioxx litigation. In a typical mass tort MDL, the case is filed in, say, New Jersey, and the MDL Panel then ships the case to, say, Louisiana. That makes New Jersey the “transferor” court and Louisiana the “transferee” court. Under Ferens v. John Deere Co, 494 U.S. 516 (1990), the Louisiana court would apply New Jersey choice-of-law rules.

When a complaint has been directly filed in Louisiana, however, the roles are reversed. When pretrial proceedings are concluded and the case is shipped to New Jersey for trial, Louisiana is technically the “transferor” court. A litigant might assert that the New Jersey “transferee” court should therefore apply Louisiana choice-of-law rules. That result is crazy, of course, but a litigant might say that it’s compelled by Ferens.

That possibility suggests that stipulations that allow for direct filings in future MDLs should have a provision to cover this situation, too. Future litigants should stipulate, and MDL courts should order, that, after the transfer for trial of cases directly filed in the MDL court, the choice-of-law rules of the trial court — not the MDL court — govern the proceedings.

At that point, you’re covered.

Well, you’re probably not covered. More issues will surely arise as litigants confront even thornier choice-of-law questions in future MDLs. But you’re as covered as you can be. Our proposed terms are the current state-of-the-art for stipulations governing direct filings in MDLs.