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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

JPML Remands Mass Actions to their Original Federal Courts after Transferee Court’s Finding that Removal Was Proper Solely on CAFA Grounds

Posted in Case Summaries

In re Darvocet, 106 F.Supp.3d 849 (E.D. Ky. May 15, 2015).

In this pharmaceutical multi-district litigation (“MDL”), the plaintiffs sued several drug manufacturers, alleging that the now-withdrawn prescription pain drug Darvon, its generic version propoxyphene, and Darvocet, a combination of Darvon and acetaminophen, caused heat injury. The cases were consolidated and were centralized in an MDL.  In each case, the plaintiffs argued that CAFA entitles them to remand to the United States District Courts in California from which they were transferred.

The cases were originally filed in the California Superior Court and were removed to federal court on CAFA’s mass action grounds, as well as diversity and federal question grounds. Under the MDL statute, civil actions, involving one or more common questions of fact, may be transferred to any district for coordination or consolidated pretrial proceedings.  The cases were consolidated in the MDL to serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation.

Because the transferor courts in California stayed consideration of the plaintiffs’ motions for remand to the state court pending the Judicial Panel for Multi-district Litigation’s (“JPML”) decision to transfer the cases, the Kentucky District Court inherited the issue. Initially, the District Court found the federal jurisdiction lacking and remanded the action to the state court.  However, in light of the Ninth Circuit’s decision in Corber v. Xanodyne Pharm., Inc., 771 F.3d 1218 (9th Cir. 2014), finding that a request for coordination and consolidation for all purposes created federal jurisdiction under the CAFA’s mass action provision, the Sixth Circuit vacated the District Court’s order remanding the action.  The District Court then found that the plaintiffs proposed a joint trial, which created federal jurisdiction under CAFA’s mass action provision.  As a result, the only issue before the court was whether the action should be transferred to California.

The plaintiffs challenged the JPML’s authority to transfer actions from the various United States District Courts in California to the federal court in Kentucky. Although, CAFA expanded access to the federal courts for a new category of cases called mass actions, it limited the JPML’s authority to transfer those cases.  Specifically, CAFA prohibits transfer under § 1407–the multidistrict litigation statute–of an action removed on mass action grounds, absent consent by a majority of the plaintiffs.  However, the District Court noted that this prohibition was not an impediment to transfer where other grounds for federal jurisdiction were also asserted.

The District Court noted that these cases were originally filed in the California Superior Court in eleven different California counties. Each involved multiple plaintiffs, and at least one of whom was a citizen of California, although the complaints did not specifically allege the citizenship of the remaining plaintiffs.  All but one of the named defendants were citizens of the states other than California.  The exception was defendant McKesson Corporation, which has its principal place of business in San Francisco.  Thus, it was a California citizen for the purposes of diversity jurisdiction.

The plaintiffs generally asserted claims against all defendants of design defect, failure to warn, strict liability, negligent design, negligence, negligent failure to warn, false advertising of the California Business and Professions Code, violation of the California Consumers Legal Remedies Act, wrongful death, and survival.

Under 28 U.S.C. § 1332, federal courts have original jurisdiction between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interests and costs. Although McKesson was a California citizen, the defendants argued that it was fraudulently joined, and that its citizenship should be disregarded for diversity purposes.  In the alternative, the defendants asked the District Court to find that the California plaintiffs’ claims were fraudulently misjoined.

As to fraudulent joinder argument, the defendants argued that the claims against McKesson were preempted under PLIVA, Inc. v. Mensing, 131 S.Ct. 3567 (2011), resulting in fraudulent joinder.  The District Court noted that in Hunder v. Phillip Morris USA, 582 F.3d 1039 (9th Cir. 2009), the Ninth Circuit held that a preemption question requires an inquiry into the merits of the plaintiffs’ claims against all defendants and an analysis of federal law.  Accordingly, the District Court ruled that it would be inappropriate for the Court to analyze whether the claims against McKesson were preempted by federal law at this stage of the proceedings.

As to the misjoinder argument, the District Court remarked that it had already refused to apply the fraudulent misjoinder doctrine in the cases at hand, due to the unsettled law surrounding the doctrine. The District Court, however, noted that because the plaintiffs’ claims have suffered similar injuries arising out of the defendants’ manufacture, marketing, or sale of propoxyphene products as In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 624 F.Supp. 2d 396 (E.D. Pa. 2009), the California joinder rule was satisfied in this action.  Accordingly, the District Court concluded that the defendants failed to establish complete diversity, and that it lacked diversity jurisdiction.

At the same time, the District Court remarked that the plaintiffs’ claims did not depend necessarily upon a question of federal law, therefore, it did not have federal-question jurisdiction over this action.

Having found that CAFA’s mass action provision was the only basis of removal to the federal court, the District Court next discussed whether it should retain the cases or recommend remand to transferor courts. The District Court remarked that at the time of transfer, the JPML found that the assertion of alternative grounds for removal were sufficient to avoid the CAFA’s mass action transfer provision and authorize transfer to an MDL court.  The defendants argued that, under the JPML’s prior decision, they need only assert other grounds for transfer to be appropriate.

The District Court remarked that while the assertion of additional grounds for removal suffices to allow MDL transfer by the JPML, nothing precluded the transferee court from evaluating the additional grounds and–when those grounds fail–suggesting that the transfer be undone.  Without the benefit of the precedent, the District Court stated that it must determine the better of two potential outcomes.

The first outcome is that the cases remain in the transferee court, despite being removed solely on the basis of CAFA’s mass action provision. Although, more efficient for pretrial proceedings, this cannot be the correct result, as it would allow parties to bypass § 1332(d)(11)(C)(1) simply by asserting meritless grounds for removal. Just as cases are not transferrable merely because the defendant has cited to the mass action provision as an additional ground in its notice of removal, cases are not bound to adjudication in a transferee court merely because the defendant has cited to additional grounds that later prove insufficient.

The second potential outcome is JPML remand of mass actions to their original federal courts following a transferee court’s finding that removal was proper solely on CAFA grounds. This result, although less efficient, preserves the effect of CAFA’s prohibition on transfers. It does not require the JPML panel to impermissibly consider the validity of jurisdictional grounds asserted, but merely affords the transferee court an opportunity to determine jurisdiction and, where appropriate, relinquish cases that are not subject to transfer under CAFA. The District Court observed that nothing in the JPML’s decision in In re Darvocet suggested that a case that would otherwise have been precluded from MDL transfer under CAFA must be retained by a transferee court merely because the defendant has cited additional, meritless grounds in its notice of removal. Moreover, if the grounds for removal had originally been determined by the transferor courts, § 1332(d)(11)(C)(1) would have precluded transfer to this Court. The District Court found no reason to reach a different result simply because of the cases’ procedural posture at the time of transfer.

Accordingly, the District Court granted the plaintiffs’ motion to remand.