N.D. Ohio Rejects Amendment that Would Have Destroyed Federal Jurisdiction in MDL Remand Case

Some personal injury plaintiffs will do almost anything to avoid federal court. And by “some,” we mean pretty much all. We freely subscribe to the idea that the plaintiffs’ bar is replete with bad motives on this issue. We are from the Dorothy Parker school of, “If you can’t find something nice to say about someone, come sit by me.” Plaintiff terpsichorean evasions of federal jurisdiction have long been excoriated by this blog. Another subject of excoriation has been that too many MDL judges are content – nay, determined – to issue slow or no rulings. It is as if they think judicial inactivity will goad the parties to settle. Sometimes they are even right about that. Mostly, not.

What if these two issues collide? Well, “collide” might not be the right word. What if they mingle in some delightful way, like gin and tonic, flotsam and jetsam, or Spongebob and Patrick?

In Hall v. OrthoMidwest, Inc., 2023 U.S. Dist. LEXIS 132542 (N.D. Ohio July 31, 2923), MDL torpor torpedoed a plaintiff’s effort to clamber back to state court. The plaintiff had brought a lawsuit in Ohio state court alleging injuries from a hip replacement medical device. The plaintiff sued the manufacturers for the usual things (manufacturing defect, design defect, failure to warn) and also sued the distributors for failure to warn and distribution of a nonconforming product. The distributors were local and, therefore, blocked diversity. The manufacturers removed the case to the Northern District of Ohio federal court on the basis of diversity jurisdiction, arguing that thedistributors were fraudulently joined. The plaintiff moved to remand, but failed because the district court agreed that the distributors were fraudulently joined. Then the case got transferred to the MDL court in the NorthernDistrict of Texas.

Now picture calendar pages flying across your screen. Summer turns into Fall turns into Winter, turns into Spring, and turns back into Summer, then Fall, then Winter. Babies are born, then learn to walk, and then start taking control of the iPad. The Eagles came ever so close, the Sixers disappointed, and the Phillies pleasantly surprised. Meanwhile, the plaintiff in Hall moved to amend the complaint to resurrect the claims against the distributors. The manufacturers objected. The distributors remained ingloriously mute. The court was equally mute. More than a year went by without the MDL court ruling on the motion to amend. The plaintiff later moved to remand the case to the good old Northern District of Ohio. Then the MDL court issued a scheduling order, including a deadline for amending complaints. The plaintiff filed a Second Amended Complaint, adding back the distributors as well as allegations establishing a more active role for the distributors. Then the plaintiff again sought remand to the Northern District of Ohio – “this time under the guise of a motion to amend the MDL Court’s scheduling order.” Then the MDL court finally denied as moot the plaintiff’s motion for leave to amend the complaint, noting that the plaintiff had filed an amended complaint. The parties agreed on a schedule for case-specific discovery. Then the MDL special master recommended denial of the plaintiff’s motion for remand, since the MDL court had entered the scheduling order. Normal stuff, so far, right? Kind of? Then the MDL court adopted the special master’s recommendation. Still normal, okay? But, but, but: “Somehow, for reasons that the record does not make clear, within the span of two weeks the MDL Court entered a conditional remand order, remanding Hall and 21 other cases to their respective transferor courts.” MDLs sometimes offer efficiencies, sometimes offer inanities, and sometimes offer insanities.

As The Pretenders sang, the Hall case went “back to Ohio.” The distributors wanted out of the case, argued that the earlier dismissal of them for fraudulent joinder was law of the case, and argued that the plaintiff’s filing of the Second Amended Complaint bringing the distributors back into the case was “an end-run around the fraudulent joinder ruling that used an administrative housekeeping order in the MDL as cover for an improper amendment.” The plaintiff argued that he had played fair, had complied with the MDL court’s scheduling order, that the pleadings were now closed, and that, in any event, Fed. R. Civ. P. 15’s “liberal amendment standard” saved the amendment and kept the distributors in the case. Did inclusion of the distributors destroy federal jurisdiction? Yes, of course it did. That was the point all along.

We cannot decide whether this scenario would make for a really good or really bad law school exam.

The remand court, the Northern District of Ohio, cut to the heart of the matter by identifying the controlling rule/statute as not Rule 15, but, instead, the MDL statute, 28 U.S.C. §1447. Specifically, section 1447(e) governs procedure in federal courts after removal of a case from state court. It provides as follows: “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.” Thus, the MDL statute gave MDL judges broader discretion to deny such amendments, replacing the usual Rule 15 “freely granted” standard. In exercising its discretion under section 1447(e), courts consider: (1) whether the amendment intends to destroy federal jurisdiction, (2) prejudice, (3) timeliness in seeking amendment, and (4) any other equitable factors.

To apply those factors, let’s remind ourselves of the thorny history of the Hall case. The plaintiff had joined a couple of non-diverse distributors, which the court held were fraudulently joined before the case went to the MDL in the first place. In the MDL the plaintiff had taken advantage of a scheduling order allowing certain amendments to re-join these distributor defendants. This prompted motion practice that was ignored and never decided in the MDL for an extended period before the case was remanded. Where does this mess leave us?

First, it is clear from the case’s tortured history that “through his amendment, Plaintiff intends to destroy federal jurisdiction.” Second, “allowing litigation to proceed in federal court will not prejudice Plaintiff.” In fact, the plaintiff would benefit from discovery and motion ruling efficiencies. Maybe the plaintiff might need to pursue separate federal and state litigation to tackle both the manufacturers and distributors, but what’s so tough about that? Meanwhile, the amendment would visit real prejudice to the manufacturers, which had proceeded in reliance on the distributors being dismissed. Third, as to timeliness, while the plaintiff was not responsible for the MDL delay, he never commenced a state action against the distributor, and by now the Ohio one-year saving statute for without prejudice dismissals has run, as has the statute of limitations. While the court did not decide the limitations issue, the existence of that issue did reduce any reason to grant a belated amendment. Fourth, the equitable factors cut against the amendment. The MDL court’s inaction did not support granting the amendment, and to allow it with no reasoning at all would create an abuse of discretion. The amended complaint provided no basis to reconsider the earlier ruling that the distributors were fraudulently joined.That ruling was based on substantive law, not inadequacy of the earlier complaint.

The plaintiff relied on an MDL ruling in another case finding distributors not fraudulently joined. But that case involved another state’s law, rather than the Ohio product liability statute. Nor did that decision preclude the earlier ruling here from being law of the case. That law of the case, along with the clear intent by the plaintiff to destroy federal jurisdiction and the absence of any equitable factors supporting the amendment, made it relatively easy for the court in Hall to decline to exercise its discretion to permit the second amended complaint. The distributors stay out, and the case stays in federal court.