The Choice-of-Law Problem in Multidistrict Litigation

Posted on February 24, 2010 by Crystal Yagoobian

When civil actions involving one or more common questions of fact are pending in different districts, the Judicial Panel on Multidistrict Litigation (Panel) may transfer those actions to a single district for coordinated or consolidated pretrial proceedings under the Multidistrict Litigation (MDL) process. 28 U.S.C. § 1407. When this happens, a fundamental inquiry arises: Which circuit’s law will the transferee court apply to the class certification determination? District courts are divided into two camps on this issue: one group following the law of the courts from which they were transferred (transferor courts) while the other group applies its own circuit’s laws. The MDL assignment is technically for pretrial proceedings only, and unless the transferred cases are resolved during pretrial proceedings, the Panel must remand the cases back to the transferor courts. 28 U.S.C. § 1407(a).

The justification for the first approach (district courts following the law of the transferor court) has been that the Panel is obligated to remand any transferred cases back to the transferor courts for trial. In other words, class certification is not only a pre-trial issue: class certification requirements are entangled with trial considerations because the trial court will need to examine the facts and law raised by the class claims. Further, given that Section 1407 requires cases to remand to the transferor courts for trial, the transferee court’s authority ends once the pretrial proceedings are completed.  The case that best embodies this principle is In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 241 F.R.D. 435 (S.D.N.Y. 2007) wherein the court reasoned, “[i]t would be neither just nor efficient to apply the law of this Circuit in considering class certification, and then force the transferor court to try a class action that it might never have certified.”  Thus, the court applied the law of the transferor court in examining class certification.

The justification for the second approach (district courts applying their own circuit’s laws) is that there is only one body of federal law and there is ultimately a single proper interpretation of federal law. At its core, this approach has considerations of consistency and efficiency in mind. One of the more important current cases exemplifying this concept is the Central District of California’s decision in In re Live Concert Antitrust Litigation, 247 F.R.D. 98 (C.D. Cal. 2007).  The court in Live Concert held that the transferee court’s law applies to class certification determinations in the MDL context. The Live Concert court noted that “circuit and district courts, including the Ninth Circuit, have uniformly applied the law of the transferee circuit in MDL proceedings involving federal law.”

Unfortunately, so long as the current MDL remand procedure exists, both approaches have their inherent problems since the remand procedure leads to two highly flawed approaches to the choice-of-law issue.  Neither approach provides an adequate answer to the choice-of-law question: either the transferee district court abides by its own circuit’s law and faces the risk that the transferor district court or circuit will overturn the decision, or it makes a determination that may be incorrect under its own circuit’s precedent to avoid a problem upon remand.

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Can Class Certification Be "Preemptively" Denied?

Posted on January 18, 2010 by Abi Gnanadesigan

A recent decision in Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, (9th Cir. 2009) provides defendants an important tool in the battle for class certification; the ability to set the timeline in class cases and preemptively move to deny class certification. The general scheme in class action lawsuits is well-known: plaintiffs move for class certification, and in doing so, have the right to put the class certification issue before the court. Defendants, in turn, then oppose. The Ninth Circuit in Vinole turned this general practice upside down by deeming a preemptive motion to deny certification proper under Federal Rule of Civil Procedure 23.

Rule 23(c)(1)(A) discusses the time limitations for a court’s determination of class certification. Rule 23 specifically states, “Time to Issue: At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.” The Ninth Circuit held that the literal language of Rule 23 does not preclude defendants from seeking resolution of the class certification issue early in the case, and before plaintiffs have the opportunity to confront the issue. In Vinole, the motion to deny class certification was brought ten months after the filing of the lawsuit.

Plaintiffs, in opposing defendant’s tactics, attempted to argue that the preemptive motion to deny class certification was not only per se improper because it preceded the motion for class certification, but also because it was filed prior to discovery and pretrial motion cutoff dates. The court of appeals rejected plaintiffs argument, reasoning that plaintiffs had adequate time to conduct class related discovery and that the district court did not abuse its discretion by considering the issue of certification before the pretrial motion deadline. 

Although the court deemed defendant’s preemptive motion to deny class certification proper in Vinole, there are undoubtedly times when such motions should be denied. For example, and as the Ninth Circuit discusses, had plaintiffs shown the need for additional discovery, defendant’s motion would have been denied as premature. Plaintiffs should not make the mistake of relying on a “per se improper” argument as plaintiffs did in Vinole, and should instead be prepared to make a showing of why additional time is needed when confronting a motion to deny class certification. 

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