The Seventh Circuit yesterday answered an interesting procedural question often implicating nationwide securities cases: whether a multidistrict case assigned to one judge may be reassigned by that judge to another judge of the same court. The Seventh Circuit answered no. See In the Matter of IKO Roofing Shingle Prods. Liability Lit., No. 14-1532 (7th Cir. July 2, 2014).
Lawsuits which are pending in different federal district courts, but which involve common questions of fact, can be transferred to a single district for coordinated or consolidated pre-trial proceedings. See
28 U.S.C. § 1407(a). Nationwide securities litigation cases are often transferred under § 1407. Transferred proceedings “shall be conducted by a judge or judges to whom such actions are assigned by the judicial panel on multidistrict litigation.” See 28 U.S.C. § 1407(b). The Judicial Panel on Multidistrict Litigation consists of seven federal judges, selected by the Chief Justice. See 28 U.S.C. § 1407(d). The Panel decides all motions to transfer cases to a single district under § 1407(a).
In IKO, the Panel in 2009 transferred multiple cases involving a shingle manufacturer to one judge in the Central District of Illinois. That judge agreed to accept them; but as the district’s chief judge, he later reassigned all the cases to another judge. That judge handled the cases for almost four years before the Panel “caught wind of the situation” and transferred the cases to him. By that time, though, he had made significant rulings in the case—including denying class certification.
The class-seeking plaintiffs appealed the class certification denial to the Seventh Circuit. There, Judge Easterbrook, writing for the court, held that the reassignment to the second judge was improper and the judge’s decisions were “ultra vires”—beyond his power. According to the court, Panel assignments are personal to the judge assigned, and a district court’s ordinary rules for reassigning cases do not apply. If the Panel-designated judge can no longer serve, the only proper procedure is to return to the Panel for “reassignment of a new transferee judge.” Rules of Procedure of the United States Panel on Multidistrict Litigation 2.1(e). The originally assigned judge cannot reassign the case on her own; nor, apparently, do the district court’s ordinary reassignment procedures (for example, when a new judge is appointed) apply either.
Did the Seventh Circuit undo four years of work by the ultra vires second judge? No. The Court held that the problem was not jurisdictional, and that the parties had waived the issue by not objecting to the reassignment. The Court expressly refused to say what would happen if a party did object in like circumstances.
Multidistrict proceedings can be tricky, as this case shows, because familiar rules might not apply. Companies involved in such proceedings should be sure to consult counsel familiar with them.