Public Citizen Litigation Group
1600 20th Street, N.W.
Washington, D.C. 20009-1001
(202) 588-1000
TESTIMONY OF BRIAN WOLFMAN, ESQ.
STAFF ATTORNEY, PUBLIC CITIZEN LITIGATION GROUP
BEFORE THE HOUSE COMMITTEE ON THE JUDICIARY
SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
REGARDING H.R. 2112, THE MULTIDISTRICT, MULTIPARTY,
MULTIFORUM JURISDICTION ACT OF 1999
June 16, 1999
Mr. Chairman and members of the Committee: Thank you for the opportunity to appear today concerning H.R. 2112, the Multidistrict, Multiparty, Multiforum Jurisdiction Act of 1999. Before explaining our concerns about H.R. 2112, I want to describe the basis for our interest in the proposed legislation. I am a staff attorney with Public Citizen Litigation Group, a non-profit, national public interest law firm founded in 1972 as the litigating arm of Public Citizen, a consumer advocacy organization with approximately 150,000 members. The Litigation Group has a longstanding involvement in complex, multi-district litigation, particularly in class actions and mass-tort bankruptcies. Like other lawyers who represent consumers, we have used class actions in situations where litigation of individual claims would be economically impossible.
Because we value the potential for class actions and other litigation to bring justice to harmed consumers, in recent years, we have become involved in fighting improper class action settlements.(1) A large number of those cases -- such as the General Motors pick-up truck case and the John Hancock insurance fraud case -- have passed through the Panel on Multidistrict Litigation ("MDL") and were settled in the courts to which the Panel had transferred them (known as "transferee courts"). We have not been involved in litigating the mass accident cases that are the subject of section 3 of the bill, but we nevertheless have some concerns there as well, because of the interrelations between sections 2 and 3 of the bill and because some of section 3's provisions raise issues relevant to our class action and bankruptcy practice.
I want to make clear, before undertaking an analysis of the particular provisions of H.R. 2112, that Public Citizen is not opposed to some of the bill's concepts. For instance, we support a limited overruling of the Lexecon decision. But we believe that the bill goes much too far in limiting plaintiffs' choice of forum. The remainder of this testimony, therefore, focuses on the potential undesirable consequences of parts of H.R. 2112 and our suggestions to limit provisions that we believe are too expansive.
I. Section 2 -- Overruling Lexecon.
We support a narrowly tailored provision to overrule Lexecon v. Milberg Weiss Berhsad Hynes & Lerach, 118 S. Ct. 956 (1998), which held that 28 U.S.C. 1407 did not authorize "self-transfer," and therefore prohibited MDL transferee courts from conducting trials in cases that had been transferred to those courts for pre-trial purposes by the MDL Panel. There are certainly situations in which it makes sense for the transferee court, which has overseen discovery and related matters, to conduct a trial on liability and, in rare instances, even damages.
The problem with section 2 is that it goes far beyond simply permitting a MDL transferee court to conduct a liability trial in certain circumstances. Section 2 (i) fails to distinguish between liability and damages (and, therefore, between compensatory and punitive damages); (ii) permits self-transfer, or transfer to any other district, under vague "interest of justice"/"convenience of the parties" criteria, without even requiring that the court conducting the trial be one in which the case could have been brought in the first instance; and (iii) fails to differentiate among the different types of actions that come before the MDL Panel, although that has a profound effect on where those cases should be tried and on what issues a joint trial is appropriate. We now take up these issues in more detail and suggest some solutions.
(a) Limiting Self-Transfer To Those Cases In Which It Is Fair To Plaintiffs.
The problem: The kinds of cases transferred by the MDL panel fall into different categories. At one end of the spectrum are massive cases brought against large business concerns, such as those under the federal antitrust or securities laws. The defendants are subject to suit in many locations and most, and often all, of the applicable law is federal law. Often, as in the antitrust cases, the plaintiff is a large business. Sometimes the plaintiffs have all been harmed in much the same manner, as with investors in federal securities cases. In most of these cases, the liability phase of the trial will focus mainly, if not exclusively, on the conduct of the defendant(s). In such circumstances, self-transfer (or transfer to some other forum) for a liability trial will often make sense. It is even possible, in these circumstances, that the damages phase of a consolidated trial could sensibly be conducted in one court, either because of common issues or because the limited role of the plaintiffs does not make the inconvenience to them so great as to override the efficiencies that are achieved.
At the other end of the spectrum are personal-injury cases, such as asbestos, breast implant, or pedicle screw cases, which present a very different set of issues from those discussed above. The applicable law is almost always state law, which can vary widely on virtually every issue in the case on both liability and damages. That fact alone makes it very difficult, if not impossible, for a single court to conduct proceedings (whether trial, summary judgment, or rulings on admissibility) in a manner that would treat plaintiffs from a wide variety of jurisdictions fairly. The transferee court might not be able to apply one substantive law to all plaintiffs on any, let alone all, issues, because that would deprive the plaintiffs of the law applicable in their home jurisdictions. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 814-23 (1985) (due process forbids application of forum state's law to class members in other states, unless out-of-state class members have significant contacts with forum state).
Moreover, as a factual matter, trying the case in the transferee (or some other) forum could be extremely inconvenient for plaintiffs. In virtually every case, plaintiffs would need to testify at the damages phase of the trial, and the proof of damages (regarding medical issues, lost wages, pain and suffering, loss of consortium, and the like) would generally be from witnesses who live or work where the transferor court is located. Moreover, even with respect to liability, some of the evidence -- for instance, evidence concerning medical causation and product identification -- would require the plaintiff's presence, and many witnesses would live in the vicinity of the transferor court.
In between the two poles are national consumer class actions involving such issues as insurance fraud, e.g., Duhaime v. John Hancock Mut. Life Ins. Co., 177 F.R.D. 54 (D. Mass. 1997), and defective automobiles that do not involve personal injury. E.g., In re General Motors Corp. Pick-up Truck Fuel Tank Litig., 55 F.3d 768 (3d Cir. 1995). Although these cases involve difficult choice-of-law issues, those issues remain in any forum, since the claims are asserted on a nationwide class basis. On questions of liability, many of these cases resemble the antitrust and securities cases discussed above, as the focus is on the conduct of the defendants. See General Motors, 55 F.3d at 811. Moreover, if there are individual issues at the liability phase of a class action -- such as whether the plaintiff relied on the defendant's misrepresentations in the insurance fraud context -- those issues will, if they can be maintained on a class basis, necessarily be decided in one forum.
The question of damages is different, however, because, in many cases, there will have to be individual damages determinations either through settlement, see In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283, 295-96 (3d Cir. 1998), or through mini-trials on damages. Again, for the reasons described with respect to the personal-injury cases, it would be unfair, if not unconstitutional, to force all plaintiffs to litigate their damages claims in a single transferee court.
Proposed Solution:
All transfers for trial, including self-transfers, should take place only if the transferee court (a) is in the forum where the plaintiff resides or another forum not inconvenient for the plaintiff, and (b) meets the requirements of the general transfer statute, 28 U.S.C. 1404, which permits a district court to transfer "any civil action to any other district or division where it might have been brought." Part (a) focuses the convenience inquiry on the plaintiff, rather than on the "parties," drawing special attention to the party whose traditional right to a choice of forum is being altered. Similarly, part (b) makes clear that a plaintiff should not be sent to a forum for trial in which she or he could not bring suit in the first place. Here, again, the issue is avoiding inconvenience to the plaintiff and eliminating any constitutional concerns. Cf. Shutts, 472 U.S. at 814-23.
In addition, any amendment to section 1407 should establish a presumption in favor of remand to the transferor court and provide that, when self-transfer (or some other transfer) takes place, the transferee court must specify the reasons why that forum is not inconvenient for the plaintiff.
Moreover, the statute should provide that, to the extent that a case subject to an MDL transfer order is tried outside of the transferor forum, it shall be solely for the purpose of "a consolidated trial on liability and, if appropriate, punitive damages," and that the case "must be remanded to the transferor court for the purposes of trial on compensatory damages, except in extraordinary circumstances specified by order of the transferee court."(2)
(b) Summary Judgment And Other Dispositive Motions.
The problem: The principal purpose of 28 U.S.C. 1407 is to allow a single court to conduct coordinated discovery, thus realizing greater efficiencies and narrowing the issues for trial. But the statute is broader than discovery -- referring to "coordinated or consolidated pretrial proceedings" -- and transferee courts rule on partial or complete summary judgment and other dispositive motions. This practice gives us serious concern because it deprives plaintiffs of the opportunity to have the legal issues in their cases decided under their own state laws in the forum of their choice. Again, the principal problem is that the cases that fall into the personal-injury category often involve the state law of the transferor forum and, thus, the transferee court should not, and in many circumstances, constitutionally may not, see Shutts, 472 U.S. at 814-23, make one-size-fits-all legal determinations for all plaintiffs regardless of where they reside and where their injuries occurred.
Proposed Solution: The transferee court should be barred from deciding motions of substantive law, except where the underlying claim and the motion involve federal law, unless the case has been transferred for trial as well, absent the consent of the parties. If the case has been transferred for trial, the court should be authorized to rule on substantive motions, of course, but limited to motions presenting issues on which the matter has been transferred (e.g., liability vs. damages).
(c) Settlement in the Transferee Court.
Problem: Another related problem under current practice is the undue pressures to settle in the transferee court. The prime example is the asbestos personal-injury litigation that was transferred many years ago to Judge Charles Weiner of the Eastern District of Pennsylvania. The asbestos litigation is very "mature," and no further liability discovery is necessary. And, yet, as we understand it, the Panel, with the concurrence of the transferee court, has been willing to remand only a small proportion of the cases (involving the most seriously injured plaintiffs) to their home jurisdictions, hoping instead to induce the parties to settle. Although we do not believe this practice is permitted under the statute as written, the problem would certainly be intensified by section 2 of H.R. 2112, which would allow the asbestos transferee court to self-transfer all the cases for "trial," placing the Panel under no obligation to remand the cases to their home jurisdictions at any time for any purpose.
Proposed Solution: There should be a presumption of remand to the transferor court after a specified period of time, for instance, 12 months, or some other time deemed generally sufficient to complete discovery. Another possibility is to require the MDL Panel, when it establishes a transferee court, to specify the period of time for coordinated proceedings not to exceed a specified period set forth in the statute (say, 24 months). The MDL Panel would have the authority to grant an extension for a limited period not to exceed six months (or some other reasonable, but short, period) "on the ground that pretrial discovery is ongoing, or for extraordinary circumstances." This solution would prevent courts from holding on to cases that ought to be remanded (or otherwise transferred) for trial.
II. Section 3 -- Jurisdiction And Choice Of Law In Mass Accident Cases.
With regard to section 3 of the bill, we are concerned as a general matter that cases ordinarily litigated in state courts would now be litigated in federal courts. Our concern is not about those cases where the plaintiff chooses to file suit in federal court under proposed 28 U.S.C. 1369 (although even there we are concerned about expanding the federal docket), but rather with those cases that now could be removed from state court to federal court because of the bill's adoption of minimal diversity. The state courts are competent to handle personal-injury and wrongful death cases, and, although there may be reasons to consolidate cases concerning the same accident in one forum, any incursion on the state courts' traditional jurisdiction should only be made if there is a compelling reason to do so. Moreover, absent consolidation of all mass accident cases by the MDL Panel in one federal court, we see no reason to allow removal of ordinary diversity cases to federal court, as section 3 would permit. In that circumstance, the question is simply whether an individual action ought to be litigated in state court as opposed to federal court, and we are unaware of any compelling justification to deprive plaintiffs of their choice of forum under traditional diversity principles.
We now turn to concerns about particular provisions of section 3.
(a) Remand for Determination of Damages. Section 3(c) of the bill (new 28 U.S.C. 1407(j)) provides that, in a mass accident case where jurisdiction is based, or could be based, on new 28 U.S.C. 1369, the transferee court may retain the case for purposes of trial on liability and punitive damages. Section 3(d) of the bill (new 28 U.S.C. 1441(e)(2)) has the same effect for cases removed from state court. These provisions properly maintain a distinction between liability and compensatory damages, stating that an action "shall be remanded to the district court from which the action was transferred, or to the State court from which the action was removed, for the determination of damages, other than punitive damages, unless the court finds, for the convenience of the parties and witnesses and in the interest of justice, that the action should be retained for the determination of damages." As noted earlier with respect to section 2 of the bill, generally it will be very inconvenient for plaintiffs to litigate compensatory damages in the transferee court. Thus, we support section 3's presumption in favor of remand.
Nonetheless, the bill's "convenience of the parties and witnesses" exception is vague and could require plaintiffs to litigate damages in the transferee court when that would be inconvenient. When it is convenient for the plaintiff to litigate damages in the transferee court, the plaintiff can always consent to do so. Absent consent, we fear that "convenience of the parties and witnesses" may, in some cases, be read to refer to only some of the parties (e.g., excluding the interests of some or all of the plaintiffs). As we suggested with respect to section 2 of the bill, the plaintiff's interest in trying damages in his or her home forum is strong and should be protected by statutory language stating that the case "must be remanded to the transferor court, or to the state court from which it was removed, for the purposes of trial on compensatory damages, except in extraordinary circumstances specified by order of the transferee court."
(b) Appellate Review of Refusals to Remand. Under new 28 U.S.C. 1407(j)(4) and new 28 U.S.C. 1441(e)(4), "[a]ny decision ... concerning remand for the determination of damages shall not be reviewable by appeal or otherwise." These provisions would apply not only to decisions to remand, for which there is analogous precedent, see 28 U.S.C. 1447(d) (remand orders generally not reviewable), but to decisions not to remand, for which there is no precedent of which we are aware. Because of the overriding need in most cases for plaintiffs to try compensatory damages in their home forums, depriving plaintiffs of any appellate review of no-remand determinations is fundamentally unfair. Moreover, because many of these cases will have been removed from state court, there are federalism concerns that also counsel against these provisions. We urge that these provisions be deleted or amended to apply only to decisions to remand.
(c) Choice of Law.
Section 3 of the bill imposes a five-factor choice-of-law test. These factors differ in some respects from those set forth in the Restatement (Second) of Conflict of Laws, § 6, which have been adopted in many states, and those set forth in the American Law Institute's Complex Litigation Project proposal. See Fred I. Williams, The Complex Litigation Project's Choice of Law Rules for Mass Torts and How to Escape Them, 1995 B.Y.U.L. Rev. 1081, 1089-90 (1995). We do not have a view at this time about which set of factors is preferable (assuming that Congress may act in this area), but we do believe that the Committee should obtain information about how choice-of-law determinations operate in practice, including the experience in mass accident cases under different choice-of-law formulations, before recommending taking the unprecedented step of imposing one test for all purposes.
In addition, we have the following specific concerns about the bill's choice-of-law provisions:
(i) It is arguable that, at least in some applications, imposing a federal choice-of-law rule is unconstitutional. In a case involving an accident occurring in one state, where all applicable substantive law is state law, it is possible that Erie RR Co. v. Tompkins, 304 U.S. 64 (1938), requires that a federal court sitting in diversity apply a state choice-of-law rule. That is tenor of the decision in Van Dusen v. Barrack, 376 U.S. 612 (1964), which would be effectively overruled by section 3 of H.R. 2112. In a mass accident action transferred under the general transfer statute, 28 U.S.C. 1404(a), Van Dusen held that the choice-of-law rule of the transferor forum stays with the case when it moves to the transferee court. In so holding, Van Dusen relied in part on Erie's discussion about the proper apportionment of power between the state and federal spheres in diversity cases, id. at 637-39, and noted that applying the transferee forum's choice-of-law rule (much like applying a federal rule) "might conceivably prejudice the claim of a plaintiff who had initially selected a permissible forum." Id. at 636 (footnote omitted).
(ii) Section 3's choice-of-law provision would enact a very strong presumption (except in "exceptional cases") in favor of applying the substantive law of only one state, and that state's law would apply even after the case is remanded to the plaintiff's home jurisdiction for determination of damages. Although this provision could provide some efficiency, it would also override important distinctions among different issues in mass accident cases to the potential detriment of the plaintiffs. Although one state's law might sensibly be applied to issues relating primarily to the defendant's conduct in all cases, other issues, such as statutes of limitations, contributory or comparative negligence, various forms of damages, and other topics bearing a closer relationship to the circumstances of the individual plaintiffs, would not fall into the one-size-fits-all category. We urge the Committee to take a close look at this problem before approving section 3.
* * *
In closing, we wish to reiterate that Public Citizen does not oppose some of the basic concepts in this legislation. Nonetheless, we believe that, in significant respects, H.R. 2112 will improperly deprive plaintiffs of the opportunity to try their cases in the forum of their choice. In this regard, the legislation should be narrowed along the lines suggested above. In other instances, further study is needed before Congressional action is taken. I would be happy to answer any questions you may have, and thank you again for the opportunity to appear.
1. 0 See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), aff'g Georgine v. Amchem Prods., Inc., 83 F.3d 610 (3d Cir. 1996); In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998); Bowling v. Pfizer, Inc., 102 F.3d 777 (6th Cir. Dec. 12, 1996), aff'g, 922 F. Supp. 1261 (S.D. Ohio 1996), recon. denied, 927 F. Supp. 1036 (S.D. Ohio 1996); In re General Motors Corp. Pick-up Truck Fuel Tank Litig., 55 F.3d 768 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995); In re Orthopedic Bone Screw Prod. Liab. Litig., 176 F.R.D. 158 (E.D. Pa. 1997); Clement v. American Honda Finance Corp., 176 F.R.D. 15 (D. Conn. 1997); Duhaime v. John Hancock Mut. Life Ins. Co., 989 F. Supp. 375 (D. Mass. 1997); In re Ford Motor Co. Bronco II Products Liability Litig., 1995 U.S. Dist. Lexis 3507 (E.D. La. 1995).
2. 0 Note that section 3 of the bill discussed below -- concerning federal jurisdiction in mass accident cases -- provides that liability may be tried in the transferee court, but that damages issues will generally be tried in the transferor federal court or in the state court from which the action was removed.