We have long thought that “direct filing” procedures in multidistrict litigation were a solution in search of a problem.  We also think direct filing procedures in MDLs pose significant waiver risks without a corresponding upside.  Alas, our inclinations were confirmed recently when the Seventh Circuit ruled that a mass tort defendant’s acquiescence to complaints filed directly in an MDL constituted a waiver of the usual choice-of-law rules.  That waiver resulting in summary judgment being denied where it otherwise would have been granted.  See Looper v. Cook Inc., No. 20-3103, 2021 WL 5964709 (7th Cir. Dec. 16, 2021).

What happened?  In the world envisioned by the drafters of the MDL statute (28 U.S.C. § 1407), an MDL is a procedural device only—one of a few ways under the U.S. Code to transfer venue.  “When civil actions involving one or more common questions of fact are pending in different districts,” the Judicial Panel on Multidistrict Litigation can transfer the cases to a single district court for coordinated pretrial proceedings.  The process is pretty straightforward, owing largely to the very professional and helpful clerks who work for the JPML.

The choice-of-law rules are pretty straightforward, too.  When a case is transferred from one district court to another, the substantive law goes with it—including the rules governing choice of law.  See Van Dusen v. Barrack, 376 U.S. 612, 639 (1964).  So if a plaintiff files in the Northern District of California and the JPML then transfers the case to an MDL in the District of New Jersey, the MDL judge in New Jersey will apply California’s choice-of-law rules.  Those rules might predict the application of California law, or they might not.  Either way, one thing is clear—California’s choice-of-law rules apply.  Easy.

Somewhere along the way, the exponential growth of MDLs led to procedures allowing plaintiffs to file their complaints directly in the MDL district—so-called “direct filing.”  We admit that we have gone along with direct filing procedures in a number of MDLs, and we probably will again sometime in the future.  But we have always wondered whether direct MDL filing is really the best way to go.  The plaintiffs get an express lane to building large inventories of cases (the primary objective in modern MDL practice), and in return the defendants get . . . ?  Well, not very much.

We have read the commentary about the convenience of direct filing and how direct filing avoids the trouble of filing in a proper venue and going through the transfer process.  But we have never found the process of transferring cases to an MDL to be all that inconvenient.  Indeed, as every mass tort defense lawyer knows, the time-consuming work at the front end is in cases where the plaintiffs resist MDL transfer, usually because they want to be remanded to state court.  Direct MDL filing does nothing to alleviate that burden because those plaintiffs have already chosen to file in another place.

What about the risks of direct filing procedures?  There are three that we can think of—jurisdiction, venue, and choice of law.  As Bexis has noted, there is no jurisdictional basis for direct filing.  That is to say, a judge who otherwise lacks personal jurisdiction over claims and defendants cannot assume jurisdiction merely because he or she presides over an MDL.  Thus, a defendant who agrees that plaintiffs from everywhere can file their complaints directly in an MDL risks acquiescing to the MDL court’s jurisdiction and thus waiving defenses based on personal jurisdiction.  That may not be a big deal when the MDL is in the defendant’s home state, but it is a very big deal when the MDL is located somewhere else.

A defendant might place its Lexecon venue rights at risk, too.  As the Supreme Court held in Lexecon Inc. v. Milberg Weiss, 523 U.S. 26 (1998), because an MDL transfer is for pretrial purposes only, an MDL judge cannot preside over the trial without the parties’ consent.  Instead, he or she has to remand the case for trial in the original transferor district.  The Lexecon right to re-transfer can be waived, and that is partly what happened in Looper v. Cook, the case that started this blogpost.  The parties in an IVC filter MDL “agreed in practice” that new plaintiffs could initiate their cases by filing short-form complaints directly in the MDL rather than in their “home districts.”  The court, however, never entered an order formally adopting that procedure.  Looper, 2021 WL 5964709, at *1.  When the plaintiffs later objected to trials in the MDL, the MDL judge ruled that they had not preserved their Lexecon rights in direct-filed cases.  Id. at *8 n.3.  But for the “agreement in practice” to allow direct filing, the direct-filed cases may have been filed somewhere else, in which case the parties would have had the right to object to the MDL as a trial venue.  According to the district court, direct filing wiped that right away.

Finally, there is choice of law—the marquee issue in Looper v. Cook.  Again, direct filing muddied the water, and again the defendant came out holding the short end of the stick (please forgive the mixed metaphor).  Under the normal rules, this would have been easy:  Because the cases were filed directly in the MDL court, the choice-of-law rules for the state in which the court sat (Indiana) should have applied.  That would have resulted in application of a shorter statute of limitations and summary judgment, which is what the defendant argued.  Id. at *1.

The MDL judge agreed and granted summary judgment, but the Seventh Circuit reversed.  Following its own opinion in Dobbs v. DePuy Orthopedics, Inc., 842 F.3d 1045 (7th Cir. 2016), the Seventh Circuit held that all the issues affected by direct filing—jurisdiction, venue, and choice of law—are waivable.  Looper, 2021 WL 5964709, at *3.  It held further that the defendant in Looper had implicitly consented to the choice-of-law rules of the “originating jurisdictions,” i.e., the jurisdictions in which the plaintiffs would have filed had they not filed directly in the MDL.  The choice-of-law rules made a difference because the rules of the originating jurisdictions (South Carolina and Mississippi) pointed to longer statutes of limitations.  Looper, at *1.

According to the Seventh Circuit, applying the choice-of-law rules of jurisdictions where the cases had never been was a pragmatic accommodation to the bureaucratic state know as multidistrict litigation.  As the court stated, “In the alternative, ‘every district court receiving a direct-filed MDL suit would be bound to apply the choice of law principles of the MDL forum.  In effect, the accident of bureaucratic convenience would elevate the law of the MDL forum.’”  Id. at *4.

The problem with this statement is that there was no accident.  The direct-filed plaintiffs chose to file directly in the MDL.  It was not mandatory.  A plaintiff enjoys the advantage of deciding where to file his or her lawsuit in the first instance, and if one byproduct of that decision is the application of that forum’s choice-of-law rules, then so be it.  Moreover, we are talking here about choice-of-law rules, which very well could predict application of another state’s substantive law.  There is no wholesale “elevation” of any particular state’s laws.

Another problem with the Seventh Circuit’s analysis is that the court imposed another jurisdiction’s choice-of-law rules over the defendant’s objection and against Supreme Court authority.  Even if venue is waivable, the Seventh Circuit had to resort to the defendant’s “implicit consent,” without acknowledging any standard for consent, let alone a standard recognizing that consent must be knowing and voluntary.  Instead, the Seventh Circuit repeatedly criticized the defendant for applying the law of the “originating jurisdiction” in multiple prior filings.  Id. at *6-*7.  But that was before the MDL judge held that the defendant had waived its Lexecon rights (observed only in a footnote), which was a game changer.

In the end, the defendant got the worst of two worlds.  When it came to Lexecon rights, the district court treated the cases as though they had been filed directly in the MDL district, per the usual rules.  But on choice of law, the Seventh Circuit reversed course and treated the cases as though they were filed somewhere else.  The usual, clear-cut rules did not apply.  Summary judgment denied.  Go figure.

Note:  This blogpost was revised on January 13, 2022, to correct the discussion of Lexecon to reflect that the plaintiffs objected to trials in the MDL, not the defendants.