Part two of our series on competing class actions will address strategies intended to “corral” multiple cases: venue transfer under the federal forum non conveniens statute, and seeking multidistrict litigation (MDL) consolidation. Such strategies, while not necessarily eliminating competing cases, can be useful in lodging such cases in fewer forums, often resulting in discovery and other efficiencies for the defendant. Such strategies, in particular MDL consolidation, are not without downside, however.
Transfer of Venue
Complementing the first-filed rule and similar state court principles (addressed in our last post) are the transfer of venue tools available both in the federal system and in most state systems. Transfer of venue pursuant to 28 U.S.C. § 1404(a) is at the discretion of the court, considering all relevant factors to determine whether or not on balance the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum. The factors normally considered under this discretionary venue transfer statute include a number of private and public interest factors, none of which is given dispositive weight.
While the plaintiff’s choice of forum is also normally accorded some weight, numerous courts have said that it is accorded less weight when the suit is brought as a class action, partly because the interests and convenience of the class as a whole are at stake. Moreover, courts have frequently found that the pendency of a prior similar action in the proposed transferee forum strongly militates in favor of a 1404(a) transfer. A recent amendment to 28 U.S.C. allows a court to transfer even to a venue where the action could not have been filed originally if all parties consent. Otherwise, transfer is only available under 1404(a) if the proposed transferee forum is one in which venue would have been proper. Most states, by statute or rule of civil procedure, have transfer or dismissal options under principles similar to those of § 1404(a).
Venue transfers of class actions can be an effective response to competing or overlapping actions, particularly if transfer to a district in which one or more cases are already pending can be obtained. Often the next step in such a strategy will be to seek consolidation of all cases pending in that district, which again can result in significant efficiencies in the litigation, as well as the avoidance of inconsistent rulings.
Another option available to a defendant facing competing class actions with overlapping issues is to seek a transfer and pretrial consolidation of all cases into multidistrict litigation (MDL) pursuant to 28 U.S.C. § 1407. Unlike the first-filed rule of comity, substantial identity of parties is not required. The mere presence of one or more common issues is enough. Also, unlike a motion under the first-filed rule, a motion for transfer to MDL is not ruled upon by any of the judges assigned to any of the pending class actions. In contrast with a 1404(a) transfer motion, whether the forum chosen for pretrial MDL consolidation is a venue in which each of the actions could have been filed originally is not an issue. And unlike the “race-to-judgment” strategy, the object of MDL treatment is to bring all cases together for coordinated discovery and pretrial proceedings, including determination of class certification issues.
28 U.S.C. §1407 provides that, “[w]hen civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings.” The decision on whether to order MDL treatment with respect to overlapping actions is made by the Judicial Panel on Multidistrict Litigation (JPML), based upon considerations of public and private convenience and efficiency. Cases transferred for MDL treatment are transferred and consolidated for pretrial purposes only, and must each be remanded to the original forum for any trial.
Whether the JPML will grant MDL treatment depends in large part on the number of overlapping actions facing the defendant. In general, the fewer the number of overlapping cases, the more complex the common issues will have to be to justify MDL treatment. MDL transfer is also more likely when cases are young than when they are nearing trial.
There is no way for a defendant to know for certain what judge will end up with the MDL if multidistrict transfer and consolidation are granted. Where cases are pending and which are further along are certainly factors, as are the preferences of the parties, but factors such as relative court congestion, the experience of potential judges with MDLs generally and the subject matter at issue in particular, and the geographic proximity of the potential forum to key evidence and witnesses are all considered as well. Although the forum chosen does not have to be a forum where any of the actions was originally filed, over 90 percent of the time it is. Daniel A. Richards, An Analysis of the Judicial Panel on Multidistrict Litigation’s Selection of Transferee District and Judge, 78 Fordham L. Rev. 311, 331 (2009).
MDL treatment affords several advantages for the defendant:
- It has the potential to lessen the overall costs of defense of a multiplicity of litigation.
- It avoids inconsistent rulings on pretrial matters, discovery, dismissal and summary judgment motions, and class certification.
- It brings all relevant players to the same bargaining table for purposes of settlement, and thereby enhances the prospects for an effective global resolution of the controversy.
- Counsel for all plaintiffs are forced to coordinate their discovery efforts, so that the defendant does not have to deal with an endless series of different but overlapping discovery requests in each case, nor tender the same witnesses for deposition multiple times. This can substantially reduce the disruption of the defendant’s business.
At the same time, MDL treatment also carries disadvantages:
- Plaintiffs’ counsel forced to pool their resources often become a much more formidable collective adversary than the individual counsel would be if left to fend for themselves.
- Collectively, the combined mass of a large number of plaintiffs tends to enhance the leverage exerted, even by claims with relatively questionable merit.
- Among the consequences of this are that discovery often proceeds at a much faster pace, and discovery battles often become more difficult for the defendant to win, because any given discovery request is more likely to be relevant in some respect when several different cases are at issue than when there is only one. Consequently, the promise of overall cost savings that led the defendant to seek MDL treatment in the first place can often vanish in an ever-expanding quagmire of broadened discovery.
- MDLs also tend to generate publicity and a large amount of “copycat” or “tagalong” litigation that might not otherwise have been filed.
- Finally, cases not originally filed in the MDL court must be tried in the transferor courts in which they were originally filed, rather than in the MDL transferee court.
- All of these factors combine to result in an increased likelihood that the end result of the litigation in an MDL setting will be a class action settlement.