Earlier this month, I wrote about the class-action provisions of the new Fairness in Class Action Litigation Act, which has passed out of the Judiciary Committee and is headed for a floor vote in the House.  At the end of that post, I promised a further explanation of the mass action provisions as well.  These provisions are aimed primarily at multi-district litigation (MDL), which is rapidly becoming a substitute for class proceedings when dealing with numerous personal-injury claims.

Section 4 – would amend the federal jurisdiction statute, allowing the court to sever claims made by an in-state plaintiff if there are two or more plaintiffs in a given personal injury or wrongful death case.  It’s designed to combat fraudulent misjoinder–the joining of only a few in-state plaintiffs in order to avoid federal jurisdiction over one’s larger, aggregated claim.  (“Fraudulent misjoinder” is a misnomer: it doesn’t matter if the plaintiffs were properly joined under federal or state rules; the concern is the attempt to destroy diversity jurisdiction over cases properly belonging in federal court.)  Since fraudulent misjoinder is usually employed to keep relevant claims of an MDL, this provision will likely receive support from experienced MDL plaintiffs’ counsel as well as the defense bar.

[NOTE – This discussion of Section 4 has been corrected: I originally conflated fraudulent misjoinder with the old practice of fraudulent joinder–joining a small in-state defendant to prevent diversity jurisdiction.  (There is another bill before the House that would address that practice.)  My thanks to Professor Arthur Hellman for pointing out the error.]

Section 5 amends 28 U.S.C. § 1407 to provide more guidance for judges overseeing MDLs.  In theory, its provisions would be uncontroversial (because more guidance is usually better). In practice, several of these provisions, while aimed at protecting individual litigants (much as good class-action reform protects absent class members), will rile some plaintiffs’ counsel.  How, specifically, would § 1407 change?

It requires early evidentiary support for claims.  MDLs are plagued by “junk inventory” claims, often brought by latecomers to the litigation, which do not have the same evidentiary support as other claims  The presence of this junk inventory makes settlement more difficult for both sides: defendants don’t want to settle claims worth little to nothing, and plaintiffs with valid claims don’t want to see their recovery diluted by the junk.  The proposed new subsection (i) would impose the equivalent of a “Lone Pine” order, requiring evidentiary support within 45 days for any claims, to help the court sort the wheat from the chaff.

It would prohibit bellwether trials without all parties’ consent.  MDLs are authorized to consolidate cases for pretrial proceedings.  As a result, “bellwether trials,” which the court holds to provide information to transferor courts after remand and to facilitate settlement, have often rested on a shaky legal foundation.  Defendants have often complained that bellwethers do not provide the utility they should; proposed subsection (j) would give a defendant a veto over “bad bellwethers.”  But, more importantly, it would provide a statutory basis for the procedure, which has so far been lacking.

It would facilitate appeals at critical stages of the case.  Because MDLs are primarily aimed at trial preparation, there are precious few final orders to appeal, even though there are motions and orders that have large effects on thousands of cases.  Proposed subsection (k) would allow appellate review if it would “materially advance the ultimate termination of one or more civil actions in the proceedings.”  It would also allow discretionary appeal of remand orders.

It would maximize the recovery for individual litigants.  This provision is likely to be the most controversial, since it’s another way of saying “it would cap attorneys’ fees at 20%.”  But it’s important to remember: these are cases large enough to take on individually (unlike claims in properly-certified consumer and other class actions), and yet counsel are still getting the cost savings that come from aggregating multiple, similar claims. At that point, doesn’t it make sense to pass on that savings to plaintiffs themselves?

The MDL provisions haven’t received the same public outcry as the class action provisions.  Whether that’s because MDL counsel recognize some reform is necessary or because it’s harder to wrap the freewheeling, common-law MDL procedures into easy soundbites, it’s hard to say. The proposed changes, however, will have a positive effect on aggregate litigation, and it’s definitely worth plaintiffs’ and defense counsel being as prepared as possible should they go into effect.