This just in:

(Actually, it came in late yesterday, but we were first busy and then tired. Sorry.)

In April 2008, the FDA recalled all lots of the drug Digitek (distributed by Mylan and UDL Laboratories), because the tablets may have contained too much of the drug’s active ingredient, exposing certain patients to risk.

First the recall, then the MDL.

The defendants served requests for admission aimed at determining whether plaintiffs’ counsel had conducted an adequate prefiling investigation before filing certain complaints. The defendants asked plaintiffs in 39 individual cases to admit that they did not possess the plaintiff’s medical records either when they filed the respective complaints or served defendants with the plaintiff’s responses to the MDL-authorized plaintiff fact sheeet. In In re Digitek Prod. Liab. Litig., Pretrial Order #39, MDL No. 1968 (S.D.W.Va. Aug. 26, 2009) (link here), Magistrate Judge Mary Stanley held that this discovery was permissible.

Judge Stanley wrestled with four issues.

First, she had to decide whether earlier pretrial orders entered in the Digitek MDL barred defendants from serving discovery requests in individual cases before those cases had been assigned to trial groups. Id. at 4-5. That plainly matters to the parties in the Digitek litigation, but it’s not a recurring issue. The court held that defendants were permitted to serve the requests for admission. Id. at 7.

Second, plaintiffs asserted that the discovery was irrelevant, because “considerations factoring into the decision to file suit do not relate to issues of liability and damages.” Id. at 8. The court rejected this argument, holding that Mylan and UDL “would be able to use the information gathered from the requests to support a defense that the claims lack an evidentiary basis.” Id.

Third, plaintiffs asserted that the requested information was protected by the attorney-client privilege or the work product doctrine. Id. at 8. The court noted that Rule 11 discovery “may raise potential privilege and conflict issues,” but held that courts should be careful of gutting Rule 11 by barring parties “from discovering facts to support motions for sanctions.” Id. Moreover, plaintiffs hadn’t carried their burden of showing that the requested information was privileged, because plaintiffs had “failed to produce . . . a privilege log” or to “proffer any reason as to why the privileges might apply.” Id. at 9.

[We don’t usually offer advice to plaintiffs’ counsel on this blog, but here we just can’t resist: If you’re going to assert a claim of privilege, make sure you give a “reason why the privilege[] might apply.” That’ll improve your chance of winning. Good luck, guys.]

Finally, the most interesting part of this decision: “The Court must determine the extent to which discovery on Rule 11 issues is proper.” Id.

Rule 11 plainly require lawyers to conduct a reasonable investigation before filing a complaint. “To be reasonable, the prefiling investigation must uncover some information to support the allegations in the complaint.” Id. at 10-11. But “[w]hether a court may allow discovery on Rule 11 matters is an area of the law without much precedent.” Id. at 11.

Judge Stanley thus surveyed the relevant authorities. The Fourth and Seventh Circuits have expressed concern that “discovery on Rule 11 issues may invite protracted satellite litigation” (that is, discovery into the question of sanctions, rather than who should actually win the pending lawsuit). Id. at 12. That concern has generally arisen where the defendant tried to use Rule 11 to assert an independent cause of action in a counterclaim [why bother?] or where “the parties attempt to engage in discovery evaluating attorneys’ fees.” Id.

The Advisory Committe Notes to Rule 11 and several district courts have suggested that “discovery on a Rule 11 sanctions request is appropriate only upon a showing of extraordinary circumstances.” Id. Judge Stanley seems to have adopted this standard in her opinion, because she goes on to explain why “extraordinary circumstances” existed in the Digitek MDL: “First, the defendants have voiced serious concerns about whether certain counsel had sufficient evidentiary support to justify initiating suit.” Id. at 12-13. [Although Judge Stanley doesn’t say this, we assume that “voicing serious concerns” means something like “proved in a bunch of cases, based on later-collected medical records, that the plaintiff never took the defendants’ drug.” Merely “voicing concerns” — in the sense of “complaining loudly” — wouldn’t limit Rule 11 discovery in later cases, since defendants could always “voice concerns” in that sense; it’s easy to complain.]

Judge Stanley went on to note that “Rule 11 applies to the same extent in mass tort and multidistrict litigation as it does in more conventional disputes.” Id. at 13 (collecting cases). “Indeed, the Court has an interest in ensuring the effective operation of the pleading regime through Rule 11, particularly in the MDL context.” Id. Judge Stanley concluded that “limited discovery of the nature proposed by the defendants is necessary because the current record does not contain any information as to whether sanctionable conduct took place.” Id. at 14.

This is surely a welcome development. One of our main concerns with the judicial system — particularly in the context of mass torts — is its inability to separate the wheat from the chaff, to dismiss the bogus cases and ensure that any dollars paid in judgments or settlements go only to deserving plaintiffs. In the mass tort context, plaintiffs often seek to overwhelm defendants (and the judicial system) by filing an unmanageable number of cases in an attempt to extort a settlement. Many of the cases filed in this environment are completely frivolous. By putting counsel at risk that they may be held personally responsible for failing to conduct a reasonable prefiling inquiry, courts take a small first step in controlling the filing of frivolous complaints in the context of mass torts.

Nice work, Magistrate Judge Mary Stanley!