In re Briscoe: MDL (Multidistrict Litigation) And Class Action Defense Cases

May 16, 2006 | By: Michael J. Hassen

District Court Denial of Motion to Remand MDL Actions Involving Opt-Out Class Members Following Class Action Settlement Agreement Does Not Warrant Writ of Mandamus (Mandate) Because Appellate Review Will Provide Adequate Relief, and District Court Ruling on Fraudulent Joinder Upheld Because Statute of Limitations Had Run on Non-diverse Defendants, Third Circuit Holds

Fraudulent joinder is discussed in separate articles which explain a plaintiff may not join a party-defendant for purposes of defeating federal court jurisdiction. MDL (Multidistrict Litigation) topics also are discussed in separate articles which explain that the Judicial Panel for Multidistrict Litigation may transfer litigation pending in multiple courts to a single district court for pretrial proceedings. The MDL cases must be remanded prior to trial, and it is incumbent upon a party to the MDL litigation to file a motion for such remand. On May 15, 2006, in a case brought by individuals who had opted out of a class action settlement agreement, the Third Circuit refused to grant a petition for writ of mandamus to review a district court order denying remand on the grounds that appellate review would be adequate, and the Third Circuit affirmed the district court’s ruling that non-diverse parties had been fraudulently joined to defeat federal court jurisdiction. In re Briscoe, 448 F.3d 201 (3d Cir. 2006).

The underlying has a tortured background. In 1997, Wyeth withdrew two diet drugs from the market – and 18,000 lawsuits followed. The Judicial Panel for Multidistrict Litigation consolidated the actions and transferred them to the Eastern District of Pennsylvania (MDL-1203). After four separate trips to the Third Circuit that “set forth various facets of the background to MDL-1203 and its class action settlement agreement,” the class action settlement was consummated. Briscoe, at 206. More than 14,000 additional lawsuits followed, brought by 30,000-35,000 individuals who had opted out of the class action settlement. The group of 127 lawsuits at issue in Briscoe had been filed in Texas state court between November 2002 and August 2003, had included as named defendants the individual doctors that had prescribed the diet drugs, and had not alleged any federal law claims. Id., at 208-09. Wyeth removed the cases to federal court and the MDL Judicial Panel transferred the cases to the docket of MDL-1203. Id., at 209.

Petitioners then filed a motion to remand the cases to state court, asserting that there were “colorable claims” against the doctors under Texas state law; Wyeth argued that the fraudulent joinder doctrine applied because the two-year statute of limitation had run against the doctors The Third Circuit found this the central issue: “Absent the physicians, it is undisputed that complete diversity of citizenship exists for purposes of 28 U.S.C. § 1332 jurisdiction.” Briscoe, at 209 (footnote omitted). The district court found that the drugs had been taken off the market in September 1997, but that petitioners had not filed suit until mid-2003, and “that diet-drug-related injury occurs at or near the end of the last use, with no latency period before the emergence of detectable injury.” Id., at 209, 210. The Third Circuit agreed that the doctors had been fraudulently joined, explaining at page 219:

If a district court can discern, as a matter of law, that a cause of action is time-barred under state law, it follows that the cause fails to present even a colorable claim against the non-diverse defendant. [Citation.] Courts have thus recognized that a statute of limitations defense is properly considered in connection with a fraudulent joinder inquiry. [Citation.] (Italics added.)

The district court necessarily had relied upon evidence from the prior proceedings, and the Third Circuit found that “Such a limited look outside the pleadings does not risk crossing the line between a proper threshold jurisdictional inquiry and an improper decision on the merits.” Briscoe, at 220. The Circuit Court disagreed that a district court should be confined “strictly to the pleading allegations” when considering a “fraudulent joinder/statute of limitations question,” explaining at page 220:

To hold otherwise would run the risk that we condone the practice of asserting baseless, stale claims against non-diverse defendants for the sole purpose of thwarting a defendant’s right to remove a case that falls within the original jurisdiction of a federal court.

The Third Circuit also concluded that petitioners had not shown that writ relief was warranted, that is, “that there is no other adequate means to attain the desired relief.” Briscoe, at 212. Specifically, if petitioners lost on the merits in the MDL proceedings, then the denial of the motions to remand could be reviewed in conjunction with the appeal from that judgment. Id., at 213. The Court found “nothing extraordinary” in petitioners’ case “to justify intervention on the remand question via mandamus.” Id., at 214. Because appellate review would be adequate and because the district court finding of fraudulent joinder was not clearly in error, the petition was denied. Id., at 226.

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