Consensus on MDL Problems, But Not on Solutions

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By Perry Cooper

The legal landscape has changed dramatically since the birth of federal multidistrict litigation in 1968.

Parties on both sides of the bar can agree that those changes have created problems with the MDL system including bad incentives for plaintiffs’ attorneys, little investigation of individual claims, and lack of appellate review.But MDL watchers at a recent U.S. Senate briefing diverged on whether a proposed legislative solution will remedy these issues.

Most of the provisions of the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017 ( H.R. 985)—FICALA—would make changes to class actions.

But there are also several provisions in the U.S. Chamber of Commerce-backed bill aimed at problems defendants see with the MDL process.

The Senate has yet to take any action on the bill which passed the House in March.

How Did We Get Here?

Multidistrict litigation was created in 1968 to consolidate cases with common fact questions. The idea is to streamline pretrial proceedings and avoid duplication of discovery.

But the MDL processes created in 1968 don’t work as well in 2017, according to Emery G. Lee III, senior research associate at the Federal Judicial Center in Washington. The FJC is the research and education agency of the judicial branch of the U.S. government.

He pointed to three major differences. First, multidistrict litigation has become increasingly dominated by very large pharmaceutical and medical device cases.

As of December 2015, product liability actions made up a quarter of the 287 MDLs pending, and 92 percent of all the individual cases pending, according to data compiled by Samuel Issacharoff of New York University School of Law.

The rise of these product liability suits started with litigation over silicone breast implants and diet drugs in the 1990s, Lee said. Now the largest MDLs involve pelvic mesh claims.

“What we talk about when we’re talking about MDLs are often the big products liability suits, not a little intellectual property case with three plaintiffs,” Lee said.

Second, a specialized MDL plaintiffs’ bar has developed, consisting of a fairly concentrated set of lawyers, he said.

Third, the class action device has declined, especially because personal injury claims can no longer be certified as class actions, Lee said. Instead those cases are pushed into MDLs, where judges have less authority to review settlements and attorneys’ fees.

The MDL process wasn’t designed with the current reality in mind. FICALA purports to address issues arising from the changes, which pleases defendants. But the bill’s solutions might create further problems, according to critics.

Problem 1: Magnet Jurisdictions

The first issue that FICALA is meant to address is that of magnet jurisdictions, which are courts that draw filings because they have a reputation of favoring plaintiffs, defense attorney Stephen J. Harburg said.

Plaintiffs file multiple cases in one favorable jurisdiction, usually in state court, and include at least one plaintiff from the same state as the defendant so the case can’t be moved to federal court, he said.

In the class action context, this problem is addressed by the Class Action Fairness Act. But it hasn’t been addressed in the mass tort context, Harburg said. Harburg is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in Washington who specializes in complex consumer cases.

To create a CAFA corollary for mass actions, FICALA §104 would consider each plaintiff individually for the purposes of determining jurisdiction. Diverse plaintiffs would be moved to federal court, and those who aren’t would be sent back to state court.

But Professor J. Maria Glover, who specializes in complex litigation at the Georgetown University Law Center in Washington, likened this provision to aiming a bazooka at an ant.

“If the worry is tactical joinder to obtain shelter in a ‘magnet jurisdiction,’ the appropriate response is a provision tailored to that problem, not a massive expansion of federal court diversity jurisdiction. " Glover told Bloomberg BNA in an email.

Problem 2: No Investigation of Individual Claims

Harburg, the defense lawyer, called the next issue the “warehousing problem"—the tendency of plaintiffs’ attorneys to seek out plaintiffs to fill out an MDL after it is created. The more plaintiffs they find, the higher their potential attorneys’ fees.

That leads to late-night TV ads promising, “If you took this drug, you could have a lawsuit!”

Attorneys throw in cases “without doing their homework” until there are so many thousands of cases that the merits of any single case are unlikely to get evaluated, Harburg said. An eventual settlement could include plaintiffs who didn’t use the product or weren’t injured by it, he said.

FICALA §105(a) would give plaintiffs 45 days to provide the court with evidence that they were injured and the defendant caused the injury. The court would have 90 days to either deem the evidence “sufficient” or dismiss the case.

But Glover, at Georgetown, called the components of this provision a “greatest hits” album of how not to achieve the goals of the MDL process.

It would introduce serious inefficiencies, generate enormous costs, deter judges from voluntarily taking on MDLs, and would “extinguish countless meritorious claims,” she said.

Many plaintiffs can’t provide evidence of their claims until after discovery, which couldn’t be completed within 45 days, she said.

Instead parties should use existing screening tools like pleading requirements, motions to dismiss, and motions for summary judgment to weed out meritless claims, Glover said.

Problem 3: Misuse of Bellwether Trials

Next Harburg addressed the pressure some judges allegedly feel to create global settlements after bellwether trials. Cases are only supposed to stay in an MDL for pretrial proceedings, then be sent back to the originating court for trial.

Judges will “often use bellwether trials as a bludgeon to get parties to settle,” Harburg said.

FICALA §105(j) would require both sides to agree before a case could be tried as a bellwether.

This concern is based on anecdotes that judges are biased towards plaintiffs, Georgetown’s Glover said. But “no data demonstrates that MDL judges have shown any systematic bias one way or another toward either plaintiffs or defendants,” she said.

A better solution would be a new method for selecting bellwethers, she said. Selecting cases at random could ensure greater fairness to the parties.

Problem 4: Lack of Appellate Review

Most pretrial rulings in an MDL aren’t subject to immediate review, even though they apply to a wide swath of cases, Harburg said.

FICALA §105(k) would allow appellate courts to evaluate appeals from pretrial rulings, including removal and remand motions.

Class action practice gives appellate courts the option of immediately reviewing class certifications under Federal Rule of Civil Procedure 23(f). Section §105(k) would make such review mandatory in the MDL context.

But the U.S. Supreme Court said recently it disfavors the sort of piecemeal appeals this provision would create, Glover said. She referred to Microsoft Corp. v. Baker, where the court held that allowing a plaintiffs’ tactic to get immediate review would create unnecessary litigation.

Immediate appeals would create unnecessary delay, generate unwarranted costs, and cause cases to “get ping-ponged back and forth between the lower courts and the courts of appeals,” Glover said.

Instead she proposed importing the Rule 23(f) discretionary appeal from class action practice into the MDL system to allow for review when the appeals court deems it necessary.

Problem 5: Outsized Attorneys’ Fees

Finally, Harburg, of Skadden, took up the issue of attorneys’ fees, which has been a constant gripe of defendants in the class action sphere.

In class practice, class counsel usually gets a quarter to a third of the settlement value in fees, and a judge must approve the amount. But MDLs have no similar fee-vetting process.

When lawyers “move from trying cases on a retail basis to a wholesale basis” when hundreds or thousands of claims are aggregated in MDLs, that fee breakdown doesn’t make as much sense, he said.

FICALA would mandate that plaintiffs receive at least 80 percent of the monetary recovery from a settlement or judgment, limiting attorneys to 20 percent.

Georgetown’s Glover said if the bill passes there would be improper incentives for plaintiffs’ attorneys to package as many plaintiffs together as possible like cattle for settlement.

FICALA would make it riskier financially for attorneys to take on cases, even if they have merit, she said.

The bill “imposes a price regulation that blatantly interferes with the free market for legal services and goes a long way toward ensuring plaintiffs will NOT obtain a proper recovery,” Glover said.

Instead, Glover would import a provision from the class action section of the bill that ties attorneys’ fees to a “reasonable percentage of any payments directly distributed to and received by class members.”

The answer is aligning the amount attorneys are paid with the plaintiffs’ actual recovery, she said.

The June 16 event in Washington was organized by the Law & Economics Center at George Mason University’s Antonin Scalia Law School.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

For More Information

Full text of the current version of the bill at http://src.bna.com/qfr.

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