This post is from the non-Reed Smith side of the blog only.
We often struggle for a clever title or catchy phrase on which to hang our posts. Hence, the frequent sidebars into pop culture, sports, history, and music. But today, the court handed us our opening on a silver platter – permitted gamesmanship v. prohibited conduct. We’ve been watching a lot of soccer getting ready for the World Cup, so the first thing that came to mind was “diving.” All sports have their version of drawing a foul, but soccer raises it to a whole different level. If you aren’t familiar, diving in soccer is where a player throws himself to the ground, sometimes feigning injury, to exaggerate the amount of contact by his opponent. If successful, the “diver” could earn a free kick or penalty kick. To some extent, dives are part of the game or at least the gamesmanship. But, if the acting isn’t quite up to snuff, the diver could find himself with a yellow card for prohibited conduct.
Well, lawyers are people too after all. We are all looking for that extra advantage; that edge in our favor. No one is immune from trying to the game system at some time. The question is when do you cross the line? That was precisely the way the court conducted its analysis on removal in a recent decision from the Avandia MDL. In re Avandia Marketing, Sales Practices and Prods. Liab. Litig., 2104 U.S. Dist. LEXIS 67675 (E.D. Pa. May 15, 2014).
At issue were motions to remand 53 multi-plaintiff cases originally filed in state court in California. Here is what else you need to know about these cases:
- The 53 complaints are on behalf of over 3000 plaintiffs;
- No single complaint has more than 100 plaintiffs;
- Each case was brought against GSK (a Delaware corporation) and McKesson, a distributor and California corporation;
- Plaintiffs reside all over the country, but at least one plaintiff in each case is a resident of California; and
- In eight cases, at least one plaintiff is a resident of Delaware.
Id. at *1-3. Permitted gamesmanship or prohibited conduct?
Plaintiffs’ first argument was that the lack of diversity defeats removal because McKesson and at least one plaintiff in each case are residents of California. Defendants raised the fraudulent joinder of McKesson in 2008 in response to earlier filed remand motions and at that time the court ruled that it “could not find that McKesson had been fraudulently joined.” Id. at *7. The court also noted in its prior decision that “to survive a motion for summary judgment, plaintiffs would need to conduct sufficient discovery to establish that individual plaintiffs had used Avandia distributed by McKesson.” Id. at *10. However, in the ensuing 5 years, no plaintiff sought any discovery of or any recovery from McKesson. Id. at *7. So, defendants renewed their argument that McKesson was fraudulently joined because plaintiffs had “no real intention in good faith to prosecute the action” against McKesson. Id. This time the court agreed. There were some last minute attempts by some plaintiff’s counsel to serve discovery in response to defendants’ argument, but upon review the court concluded that
the discovery sought will not generate any information about the Avandia distribution process, from which [plaintiffs’ counsel] could attempt to establish that McKesson distributed the Avandia used by its clients. . . . Although these cases are not at the summary judgment stage yet, they are mature enough for the Court to find a lack of genuine intent to proceed with claims against McKesson. The Court may thus disregard McKesson for purposes of determining whether the Court has jurisdiction. Accordingly, the Court holds that the forum defendant rule does not bar removal of these actions, and there is complete diversity between the California plaintiffs and the properly joined defendant, GSK.
Id. at *10-11. So, for the 45 cases without a Delaware plaintiff, the court’s decision was – prohibited conduct. It may be enough to name a non-diverse defendant initially, but if you don’t pursue them, fraudulent joinder may be resurrected. In mass torts where discovery can go on for years, this is a not insignificant opportunity for defendants to keep an eye on.
The court then turned to the 8 cases which involved at least one Delaware plaintiff. Because GSK is a Delaware corporation, diversity does not exist in those cases unless plaintiffs were found misjoined. Here the court concluded that it must apply California’s joinder rules which have been “interpreted liberally.” Id. at * 13. And while the court felt it was a “close call,” it wasn’t willing to say plaintiffs were misjoined under California law. On this question then, the decision was – permitted gamesmanship. So, unless these cases qualified as a “mass action” under CAFA, they were going back to state court.
CAFA (the Class Action Fairness Act) allows mass actions to be removed when “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” Id. at *17. This isn’t the first court to be faced with an attempt to “game” the CAFA system (see our posts here), but their assessment of what is really going on is too good not to share:
Plaintiffs' counsel very much would like their clients' cases to remain in the California courts, and the question of whether this Court has jurisdiction is close precisely because counsel have vigorously and skillfully sought to evade CAFA through strategic pleading and filing. Here, guided by the plain language of the statute, plaintiffs deliberately filed multiple, similar suits, each on behalf of fewer than one hundred plaintiffs, and they do not explicitly propose to try the claims set forth in the separate complaints jointly. No one can seriously doubt that the plaintiffs' lawyers structured these cases to avoid federal jurisdiction. There is no sensible, case-management reason that, for example, [plaintiffs’ counsel] filed 33 cases on behalf of 2,008 plaintiffs. It would be a remarkable coincidence if there really were 33 distinguishable categories of cases, none of which happened to have as many as 100 plaintiffs. But the Court need not feign naïveté: plaintiffs' counsel candidly admitted that they followed "the road map that Congress gave us when they enacted CAFA. Basically, they said if you [want] to deal with the hassle of filing multiple complaints, as long as there are fewer than 100 claimants, then you can avoid federal jurisdiction under CAFA. So we did that."
Id. at *17-18.
The question for the court is whether despite plaintiffs’ counsel’s evasive pleading tactics, the separate lawsuits should be combined for purposes of satisfying CAFA's numerosity requirement. The linchpin for this and other courts that have considered the issue is whether plaintiffs proposed a joint trial of the individual cases. Defendants argued that plaintiffs implicitly proposed a joint trial by filing the cases in California where Avandia cases are consolidated and “coordinated through bellwether trials.” Id. at *19. The coordination through trial as opposed to only through pre-trial proceedings has been decisive in other courts. Distinguishing those cases where it was found joint trials had been proposed so as to satisfy CAFA, however, the Avandia court found potential coordination wasn’t quite enough:
In the abstract, this Court accepts the basic logic of the argument that by filing these cases in California with knowledge that there was a pending [coordinated proceeding], the plaintiffs impliedly proposed a joint trial, but GSK has failed to demonstrate that these cases will necessarily by operation of law be swept into the [coordinated proceeding]. Plaintiffs have not proposed that their cases be tried together, nor given any assent (implied or explicit) to an action by the [coordination] court that would consolidate these cases for trial. Therefore, at this juncture, the Court cannot find that plaintiffs' lawyers have proposed a joint trial with more than 100 plaintiffs.
Id. at *28. We can’t help but read between the lines. How this reads to us is: the contact was close, the acting was pretty good and while we are pretty sure this is a dive, plaintiffs are going to get a free kick anyway. On CAFA removal, the decision is – permitted gamesmanship.
And it’s not really reading between the lines when the court ends its decision like this:
Strict rules can be gamed. Jurisdictional rules are strict. It is no surprise that litigants seek to game jurisdictional rules. Here, plaintiffs are gaming the rules and winning in part. This Court cannot rewrite jurisdictional rules, and if it is unjust that artful pleading puts certain cases out of this Court's reach, the remedy is for Congress to amend CAFA.
Id. at *31. A yellow card for Congress.