Drug and Medical Device Removal Tactics Make a Federal Case By Paul E. Wojcicki and Joseph F. Kampherstein III Requesting that courts sever and remand claims against unnecessary and dispensable parties under Federal Rule 21 warrants increased consideration in favorable federal jurisdictions. A product liability plaintiff can foreclose removal of a case from a state to a federal court simply by including a viable claim against a nondiverse party defendant, right? Not so fast. Under the Federal Rules of Civil Procedure, the federal courts at all levels have the power to sever or drop a party at any point in the litigation, including after the court Paul E. Wojcicki (Chicago) is a Segal McCambridge Singer & Mahoney Ltd. shareholder. Joseph F. Kampherstein, III (Philadelphia) is a senior associate with the firm. Both DRI members, the authors represent and counsel medical device and other product manufacturers in products liability actions across the county. Mr. Wojcicki is also the secretary of the Global Warranty and Service Contract Association. Mr. Kampherstein is member of DRI s Drug and Medical Device and Product Liability Committees. 16 For The Defense December 2012 2012 DRI. All rights reserved.
Out of It clerk enters the judgment. A federal court may exercise its power to sever a claim or drop a party when that party is neither a necessary party, now referred to as a required party, nor an indispensable party. That is, a court may drop a nondiverse party when a just and fair adjudication of the claims may be achieved without that party. This means that when a product liability case involves a nondiverse party, removing the case from a state to a federal court may be an option for a defendant manufacturer. Drug, medical device, and other manufacturers and the attorneys who represent them know well the plethora of potential benefits associated with litigating product liability claims in a federal rather than a state court. It is equally true that plaintiffs attorneys who handle drug or medical device litigation will do almost anything to avoid litigating and trying their cases in a federal court. This is because, generally speaking, legal standards are more rigorous and defendants more likely to have a receptive hearing in a federal forum. But the reported decisional law shows that product liability defendants rarely seek to invoke a federal court s power to sever a claim or drop a party, a power that permits the federal judiciary to hear a substantially greater number of product liability actions when the courts invoke it, which can dramatically improve the likelihood of positive outcomes and almost certainly reduce defendants financial exposure should they lose, in the right cases. This article explains how companies may avail themselves of this ostensibly underused procedural tactic and how to identify the occasional case for which a state court makes more sense. How Diversity Jurisdiction and Removal Generally Work Where a party invokes the federal court s diversity of citizenship jurisdiction under 28 U.S.C. 1332(a), each plaintiff must be diverse from each defendant to have what is known as complete diversity. Ravenswood Inv. Co., L.P. v. Avalon Corr. Services, 651 F.3d 1219, 1223 (10th Cir. 2011) (citing Newman- Green, Inc. v. Alfonzo- Larrain, 490 U.S. 826, 829 & n.1 (1989)). Generally, a federal court determines whether it has jurisdiction based on the facts as they existed at the point at which the complaint was filed. Id. (citing Smith v. Sperling, 354 U.S. 91, 93 n. 1, 77 S. Ct. 1112, 1 L. Ed. 2d 1205 (1957)). With removed actions the federal courts have disagreed about the point at which they should determine if diversity jurisdiction exists. 13E Fed. Prac. & Proc. Juris. 3608 (3d ed.). While most courts hold that complete diversity must exist when the notice of removal is filed, some require that it exist when the action is filed in the state court. 13E Fed. Prac. & Proc. Juris. 3608 n.15 (3d ed.) (collecting cases). Importantly in Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), the Supreme Court held that a lower court s erroneous finding that diversity jurisdiction existed at the time of removal did not require reversing or vacating the subsequent judgment because by that time the diversity- destroying defendant had been dismissed. As noted in the preceding paragraph, most courts follow the time- of- filing rule. This rule, however, does have one wellestablished exception that arises under Federal Rule of Civil Procedure 21. Under Federal Rule 21, a district court may dismiss a dispensable nondiverse party to cure a jurisdictional defect at any point in the litigation, including after judgment has entered. Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 572 (2004); Newman- Green, Inc., 490 U.S. at 832; United States ex rel. Gen. Rock & Sand Corp. v. Chuska Dev. Corp., 55 F.3d 1491, 1495 (10th Cir. 1995). How Federal Rule of Civil Procedure 21 Confers Power to Courts Federal Rule of Civil Procedure 21 provides that a district court [o]n motion or on its own, may at any time, on just terms, add or drop a party [or] sever any claim against a party. Fed. R. Civ. P. 21. The Supreme Court has interpreted the rule s provisions broadly, observing that it is well settled that Rule 21 invests District Courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered. Newman-Green, 490 U.S. at 832. In actions founded on diversity of citizenship jurisdiction, this unusually clear and simply worded provision has been held to provide the district courts with great latitude and discretion in deciding when and how to use their power to sever a claim or drop a party to cure jurisdictional deficiencies arising from claims against a nondiverse defendant. The courts have not used the rule to cure jurisdictional deficiencies in actions brought under the courts federal question jurisdiction. A couple of additional general points about Federal Rule of Civil Procedure 21 are worth noting. First, under the rule, dismissing an entire case is not warranted for misjoinder of claims or parties, but rather the proper procedure is to add or drop a party or sever the misjoined claims. E.g., Acevedo v. Allsup s Convenience Stores, Inc., 600 F.3d 516, 520 (5th Cir. 2010) (citing DirecTV, Inc. v. Leto, 467 F.3d 842, 845 (3d Cir. 2006). In Direct TV, the court observed that [t]o remedy misjoinder a For The Defense December 2012 17
Drug and Medical Device court may not simply dismiss a suit altogether. Instead, the court has two remedial options: (1) misjoined parties may be dropped on such terms as are just ; or (2) any claims against misjoined parties may be severed and proceeded with separately. Id. at 845. Second, a party does not need to raise the issue of misjoinder for a court to act: the rule expressly gives a A necessary party is one in whose absence the court cannot accord complete relief among existing parties. court the discretion to act of its own accord to sever misjoined claims or parties. E.g., Bhatla v. U.S. Capital Corp., 990 F.2d 780, 786 (3d Cir. 1993). How Rule 21 Can Preserve Jurisdiction In light of the power conferred upon the federal courts by Federal Rule of Civil Procedure 21, a defense attorney called upon to represent a drug or medical device manufacturer in a product liability action involving claims brought against both diverse and nondiverse defendants should not immediately assume that removal based on diversity of citizenship jurisdiction is unavailable. Courts in various circuits have used the broad discretionary power to drop a party or sever a claim conferred upon them by Federal Rule 21 to perfect their diversity jurisdiction and permit removed actions to remain before them. And the power conferred under Federal Rule of Civil Procedure 21 is not limited to the district courts; it may be exercised by the Supreme Court and circuit courts of appeals as well. Id. (citing Newman-Green, Inc. v. Alfonzo- Larrain, 490 U.S. 826, 837 (1989)). One example of a case in which a district court relied on Federal Rule of Civil Procedure 21 to preserve diversity jurisdiction is Safeco Ins. Co. v. City of White 18 For The Defense December 2012 House, 36 F.3d 540 (6th Cir. 1994). There, the court was presented with a declaratory judgment action in which Safeco Insurance Company, the issuer of a performance bond, sought a determination of its liability to the City of White House, Tennessee, after the bonded contractor, Eatherly Construction, withdrew its bid and the city demanded payment under the bond for anticipatory breach. Safeco brought its action in the federal court because it was a corporate resident of the state of Washington while the city and Eatherly, the contractor, were both citizens of Tennessee. The city counter- claimed against Safeco for payment and cross- claimed against Eatherly for breach of contract. Eatherly moved to realign the parties because its interests and Safeco s interests were aligned against the city. The district court, recognizing that this realignment would destroy diversity, dismissed Eatherly from the federal court action to retain jurisdiction. In doing so, it found that Federal Rule of Civil Procedure 21 provided it with the discretion to drop a dispensable, nondiverse party to maintain diversity and that Eatherly was a dispensable party to the city s claims. Safeco Ins. Co., 36 F.3d at 545. Following Safeco and several similar decisions, the court in Joseph v. Baxter Int l Inc., 614 F. Supp. 2d 868, 872 74 (N.D. Ohio 2009), severed medical malpractice claims against nondiverse medical provider defendants from product liability claims against the diverse pharmaceutical manufacturer to retain jurisdiction. The court found that the presence of the medical provider defendants was not necessary to resolve the claims against the manufacturer of allegedly tainted heparin. The claims for improper administration of a drug, lack of informed consent, and lack of procedures to safeguard against improper administration of a drug differed materially from and required different proofs than would claims in strict liability against the manufacturer for the design, manufacture, labeling, and failure to recall a drug. Moreover, the court also found that the plaintiff would still have a remedy in the state court against the medical provider defendants and would not be prejudiced unduly by having to pursue her different claims in two courts. Accordingly, the Joseph court severed and dismissed the claims against the medical providers to retain jurisdiction over the plaintiff s claims against the manufacturer. Joseph, 614 F. Supp. 2d at 874. Likewise, in Cooke-Bates v. Bayer Corporation, 2010 WL 3984830 (E.D. Va.), the district court relied upon Federal Rule of Civil Procedure 21 in severing medical malpractice and negligence claims against a physician defendant while retaining jurisdiction over the product liability claims that the plaintiff brought against the manufacturer for the allegedly defective design, manufacture, and advertisement of a prescription drug. In the holding the district court found the defendant physician dispensable because the claims against the physician for medical negligence had no bearing on the strict liability claims brought against the defendant drug manufacturer. Further, the district court found that while requiring the plaintiff to pursue two separate lawsuits might present an inconvenience, it did not prejudice the plaintiff at all. On the appellate level, in Bhatla, the Third Circuit sua sponte invoked Federal Rule of Civil Procedure 21 to dismiss one of two consolidated cases involved in the appeal and brought against nondiverse dispensable parties to perfect its jurisdiction and permit the remainder of the appeal to continue. Bhatla, 990 F.2d at 786. It must be stressed that a court may properly apply Federal Rule of Civil Procedure 21 to sever and remand claims against a nondiverse defendant only when the nondiverse defendant is not indispensable to the action. For example, in Soberay Mach. & Equip. Co. v. MFR Ltd, Inc., 181 F.3d 759 (6th Cir. 1999), the Sixth Circuit Court of Appeals was presented with a case arising from an alleged breach of contract between a plaintiff buyer of a product and the defendants, the foreign manufacturer and the nondiverse distributor agent. After the distributor, against which the plaintiff had originally instituted the lawsuit, had filed for bankruptcy, the plaintiff filed an amended complaint dropping the bankrupt distributor and pursued claims against the foreign manufacturer only. The plaintiff appealed a verdict rendered for the foreign defendant; the foreign defendant cross- appealed the trial court s failure to dismiss the case for the plaintiff s failure to join the distributor as an indispensable
party. The appellate court, as required, first analyzed the basis for jurisdiction before proceeding to the merits of the appeal. The court recognized that it may be appropriate to drop a nondiverse and dispensable party from litigation in order to achieve diversity. However, the Sixth Circuit went on to find that the nondiverse distributor defendant was a real party in interest and an indispensable party to the action, foreclosing use of Federal Rule of Civil Procedure 21 to retain jurisdiction. As the original defendant distributor was indispensable, the Sixth Circuit also reversed the trial court s failure to consider and implicit denial of the foreign defendant s motion to dismiss under Federal Rule of Civil Procedure 19. Id. at 770. The point to take away from these and other related cases is that Federal Rule of Civil Procedure 19 requires courts to examine, analyze, and compare closely the claims against diverse and nondiverse parties when determining whether a basis exists for severance and remand of claims. How to Identify Required and Dispensable Parties Federal Rules of Civil Procedure 19(a) and 19(b) set out the factors that courts must consider when determining whether a party is necessary or required and indispensable. A necessary party is one in whose absence the court cannot accord complete relief among existing parties. Fed. R. Civ. P. 19(a)(1)(A). When a court finds that a party is not necessary, then that party cannot be indispensable because indispensable parties are a subset of necessary parties. DeGidio v. Centocor, Inc., No. 3:09-CV-721, 2009 WL 1867676, at *3 4 (N.D. Ohio 2009). Additionally, a plaintiff s ability to pursue claims against a defendant in a state court that is, that the plaintiff has another viable remedy should preclude a finding that the defendant is indispensable. Sugar v. Abbott Labs., 2007 WL 1560284, at *4 (N.D. Ohio 2007). In conjunction with Federal Rule of Civil Procedure 21, Federal Rule 19, therefore, provides defense counsel with a particularly useful tool when seeking to remove a case to or keep an action in a federal court. Whether a nondiverse defendant is not a necessary or indispensable party and therefore a court can sever the defendant and remand the case arises frequently in prescription drug and medical device cases. Whenever possible, a plaintiff s attorney invariably will include a nondiverse drugor medical device- prescribing medical provider as a defendant in such an action to try to defeat diversity jurisdiction. However, many courts believe that under Federal Rule of Civil Procedure 19(a), a treating surgeon is not a necessary party to a product liability action against a medical device s manufacturer. E.g., Temple v. Synthes Corp., 498 U.S. 5, 7, 111 S. Ct. 315, 112 L. Ed. 2d 263 (1990); Joseph, 614 F. Supp. 2d at 872 (expressly relying on Temple v. Synthes Corp., 498 U.S. 5, 7 (1990), as precedent). In Temple, the district court dismissed a product liability action brought against a medical device manufacturer based on the plaintiff s refusal to add the implanting surgeon and hospital as defendants. The Fifth Circuit affirmed the dismissal, but the Supreme Court reversed. Observing that [i]t has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit, the Court held that [a]s potential joint tortfeasors [the surgeon] and the hospital were merely permissive parties. Temple, 498 U.S. at 8 (citations omitted). Also, several courts have found that a prescribing physician or implanting surgeon does not qualify as a necessary party because resolving the claim against the doctor would not necessarily resolve the product liability claims against the defendant manufacturer. E.g., Joseph, 614 F. Supp. 2d at 872; DeGidio, 2009 WL 1867676, at *3. For example, under Ohio law, a medical malpractice plaintiff must establish the following three elements: (1) the standard of care within the medical community; (2) the defendant s breach of that standard of care; and (3) proximate cause between the breach and the plaintiff s injuries. Korreckt v. Ohio Health, 2011 WL 2519198, at *3 (Ohio Ct. App. 2011). Under Ohio law, for example, to establish medical malpractice, a preponderance of evidence must show that the injury (1) was caused by the doing of some particular thing or things that a physician or surgeon of ordinary skill, care and diligence would not have done under like or similar conditions or circumstances, or by the failure or omission to do some particular thing or things that such a physician or surgeon would have done under like or similar conditions and circumstances, and (2) that the injury was the direct and proximate result of such doing or failing to do some one or more of such particular things. Whenever possible, a plaintiff s attorney invariably will include a nondiverse drug- or medical deviceprescribing medical provider as a defendant in such an action to try to defeat diversity jurisdiction. Korreckt, 2011 WL 2519198, at *3 (quoting Bruni v. Tatsumi, 46 Ohio St.2d 127, 346 N.E.2d 673 (Ohio 1976)). So while a plaintiff s malpractice claim focuses on the treating physician s conduct according to the applicable professional standard of care, a plaintiff s product liability claims focus on the condition of the drug or device and the actions or conduct surrounding its design, manufacture, distribution, and sale, and whether the drug or device complied with the federal and state regulations governing them. In the Joseph and Cooke-Bates cases discussed above, both courts severed and remanded claims for medical negligence against the prescribing physicians while maintaining jurisdiction over the claims against the defendant drug manufacturers for defective design, manufacture, and advertising of their products. Likewise, in Phillips v. Knoll Pharm. Co., No. 03-8044, slip op. at 2 3 (N.D. Ohio Sept. 4, 2003), the district court dropped physician defendants in a product liability action against a drug maker to retain diversity jurisdiction. In Todd by Todd v. Merrell Dow Pharms., For The Defense December 2012 19
Drug and Medical Device Procedural rules governing discovery and how those rules are applied also merit consideration when deciding whether to pursue removal to a federal court. Inc., 942 F.2d 1173, 1176 (7th Cir. 1991), the Seventh Circuit found that a physician who ordered the injection of a drug that allegedly harmed a plaintiff was not an indispensable party to a product liability case against the manufacturer of the drug. Defense counsel should know that not all jurisdictions look upon claims against a treating physician or implanting surgeon for medical negligence as unrelated to product liability claims against a drug or medical device manufacturer, and they have found medical providers to be indispensable parties or otherwise declined to sever the claims against them. For example, in Echols v. OMNI Medical Group, Inc., 751 F. Supp. 2d 1214, 1216 17 (N.D. Okla. 2010), the district court found that the prejudice to the plaintiff presented by the need to prosecute separate cases against a pharmaceutical manufacturer and a prescribing physician precluded severing the product liability claims from the medical malpractice claims. Similarly, in Selman v. Pfizer, Inc., 2011 WL 6655354, at *12 (D. Or. 2011), and Robinson v. Swedish Health Servs., 2010 WL 816818, at *2 (W.D. Wash. 2010), the district courts refused to sever claims against drug prescribers from claims against the drug manufacturers. In the holdings, the district court in each case found that the plaintiff had not misjoined the claims because they involved common issues of law and fact. While drug and medical device litigation frequently includes unrelated claims against nondiverse defendants, these claims also arise in other types of cases. Courts 20 For The Defense December 2012 have applied Federal Rule of Civil Procedure in a variety of cases to sever and remand claims against nondiverse parties to preserve diversity. In Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 533 (5th Cir. 2006), the court severed negligence claims against medical providers from those claims against nonmedical product manufacturers in a wrongful death case. The Eleventh Circuit, in Ingram v. CSX Transp., Inc., 146 F.3d 858, 862 63 (11th Cir. 1998), a personal injury case against a railroad company, exercised the authority set forth by the U.S. Supreme Court in Newman- Green to drop a nondiverse, dispensable defendant municipality under Federal Rule 21 of Civil Procedure to preserve diversity jurisdiction, postjudgment, on the appeal. The Second Circuit Court severed and dismissed claims on the appeal in a breach of contract action in Highland Capital Mgmt., LP v. Schneider, 198 F. App x 41, 45 (2d Cir. 2006), against nondiverse, joint tortfeasors to maintain diversity. In Archway Ins. Services, LLC v. Harris, 2011 WL 2415168 (E.D. Pa. 2011), the district court severed claims against bank defendants from claims for fraud against insurance broker defendants to perfect its diversity jurisdiction. And in Davis v. Cassidy, 2011 WL 6180054 (E.D. La. 2011), the district court severed personal injury claims arising from an automobile accident from claims arising from a separate, unrelated vehicular accident, finding that different issues of liability were involved in each, despite the plaintiff s claims of aggravation of injuries. How to Decide to Remove or Not to Remove While the means exist to move a case with a nondiverse defendant from a state court into a federal court, an astute defense attorney must also analyze whether to take advantage of these tools. In most instances, the decision to remove is a proverbial no brainer. Most product liability defense attorneys and company general counsel would agree that, by and large, a federal forum is the preferred forum in which to litigate and try a product liability case. But in some regions, the state court venue may be the better choice for any number of reasons. For example, the state court judges in an area may be perceived as more legally conservative than their federal counterparts. Likewise, the makeup of the potential jury pool is a factor to consider. Because a state court judicial district often draws potential jurors from a single county or a smaller geographic area than the federal district in which it is located, a jury in the state court may be more apt not to find liability, or to award less in a damages award than a jury in the federal court. Additionally, a defendant company s ties to a community may make a state court venue more attractive. When a company is well-known and well regarded by the members of the jury pool, they may be less likely to find that the company engaged in willful and wanton misconduct or other actions that warrant imposing punitive or exemplary damages. Procedural rules governing discovery and how those rules are applied also merit consideration when deciding whether to pursue removal to a federal court. Questions to ask in this area include: How does the state court approach discovery? Does the state court provide a product liability plaintiff with more or less latitude in the breadth and scope of permissible discovery? Does the state court have rules in place permitting and regulating e- discovery? If so, how do those rules compare with the federal e- discovery rules? Are the state rules as broad and encompassing as the federal rules? Are the state court judges more or less likely to impose sanctions for discovery violations? Are the sanctions doled out in the state court more or less severe than those imposed in the federal court? What is the state s position on involving C-level executives in the discovery process in terms of depositions or other things? Does the state distinguish between a discovery deposition and an evidence deposition? Illinois, for example, makes this distinction and places limits on the purposes for which a plaintiff may use a discovery deposition. Does the state court impose limits on expert discovery that the Federal Rules of Civil Procedure do not? In Pennsylvania state courts do not routinely permit discovery depositions of expert witnesses. The state and federal tribunal also may conduct trials differently. Most, if not all, federal courts frequently empanel a jury trial of less than 12 persons to hear a civil case. Many states permit a defendant to Federal Case, continued on page 89
Federal Case, from page 20 mandate a 12- person jury. The two venues may also have different rules concerning whether a jury must reach a unanimous verdict. Additionally, some states have adopted rules that make it easier for a plaintiff to require a corporate witness to attend the trial. Under an Illinois rule, for example, a plaintiff may compel an officer, director, or employee of a corporation defendant to appear and testify during a trial simply by serving a notice. And while the Illinois rule permits a trial judge to require a plaintiff to pay the witnesses costs associated with the trial appearance, a trial judge seldom does this. Finally, the makeup of the appellate bench should inform the removal decision. A hard-won trial victory upset on an appeal can be a particularly difficult pill to swallow. While defense counsel can seldom if ever know or forecast the issues that an appeal will present with any degree of confidence when removing a case the appellate process should to some degree inform the decision to remove. Conclusion Federal Rule of Civil Procedure 21, in conjunction with Federal Rule of Civil Procedure 19, provides the defense bar with a powerful tool with which to move a case to a more advantageous forum despite an apparent lack of complete diversity among the parties. As plaintiffs attorneys pursue claims against nondiverse parties to keep cases in a state court with more frequency, requesting that courts sever and remand claims against unnecessary and dispensable parties under Federal Rule 21 warrants increased consideration in favorable federal jurisdictions. Closely scrutinizing the claims against each party and thoroughly analyzing whether a nondiverse party is necessary and indispensable to those claims may present options for removal to a federal court that might not seem immediately apparent. For The Defense December 2012 89