In a split decision issued late last week, the Sixth Circuit overturned a Michigan district court’s disposition of a tort suit from North Carolina arising out of allegedly faulty breast implants. In noting that “a venue transfer is not alchemy,” the court also construed complex choice-of-law issues in light of the Bankruptcy Code.
Over 20 years ago, the plaintiff in the case, Pamela Sutherland, received silicone breast implants—manufactured by Dow Corning Corporation—in North Carolina, and then sued Dow when she developed health problems after the surgery. Subsequently, Sutherland opted out of the multidistrict litigation class that was eventually created based on similar claims against Dow Corning. Finally, after Dow declared bankruptcy in Michigan (the location of its headquarters), Sutherland’s claim was transferred to the Eastern District of Michigan under 28 U.S.C. § 157(b)(5) as “related to the bankruptcy.” The district court held that Sutherland’s claim was time-barred under Michigan’s statute of limitations, and granted summary judgment to Dow.
Judge Stranch, writing for the majority, engaged in an examination of the complex interplay between choice-of-law rules and the Bankruptcy Code, eventually concluding that because North Carolina law applied to Sutherland’s claim in the Michigan district court, factual issues regarding the tolling of the statute of limitations precluded summary judgment.
The court started with a narrow question of first impression for the Circuit: Whether a change of venue under § 157(b)(5) alters the state substantive law applied to the lawsuit. Moving to the observation that Congress did not intend to alter substantive law with § 157(b)(5), the court reasoned that, were the case simply a “traditional” change of venue under 28 U.S.C. § 1404, the transferee court’s (North Carolina’s) choice-of-law rules would apply. Finding support both in a recent decision by the Second Circuit in a similar case and in the underlying policy rationale of preventing forum-shopping, the court held: that § 157(b)(5) did not operate to displace North Carolina’s choice-of-law rules, that North Carolina’s choice-of-law rules would apply North Carolina law, and that sufficient factual disputes about the application of the state’s statute of limitations precluded summary judgment.
Judge Sutton dissented from the court’s opinion, and would have held that Sutherland’s claim failed on two grounds. First, Judge Sutton argued that the majority “leapt over” the fact that Sutherland did not preserve her choice-of-law argument in the district court because she inadequately discussed it in opposing summary judgment. Second, he would not have even reached the issue of the Bankruptcy Code’s effect on the choice-of-law issues. This is because, in his view, under the “discovery rule” of either North Carolina or Michigan law, the clock started to tick on her claim in 1989 when she should have discovered her injuries from the implants, making her 1993 filing too late.