Tuesday, January 22, 2008

Minnesota - Still On The Road To Recovery

This guest post was written by Sean Costello. Mr. Costello is an associate resident in the Atlanta office of Jones Day. This post is entirely his work. It, of course, represents only his views, and not the views of his clients or firm:


A few weeks ago, this blog posted a short piece on an ABA Journal article discussing Minnesota’s allure to out-of-state products liability plaintiffs. The ABA Journal article, entitled “Lawsuits Travel Up North,” identified three things that, combined, attract out-of-state products liability plaintiffs: (1) a generous statute of limitations for products liability claims; (2) a choice-of-law rule that treats statutes of limitation as “procedural” rather than “substantive,” which means that Minnesota’s statutes of limitations almost always apply; and (3) liberal forum rules that allow non-resident plaintiffs with zero connection to Minnesota to sue out-of-state defendants who have minimum contacts with Minnesota (e.g., their products are sold there).

That post caught my eye, because I had guest posted a few months ago about some positive signs in the North Star state, suggesting there that Minnesota was “on the road to recovery.” My guest post discussed recent state-court decisions that had rejected the notion that Minnesota’s statute of limitations applies to any case brought in its courts, no matter how attenuated the Minnesota connection. These decisions, adopting the modern approach, analyzed the statute of limitations under modern choice-of-law rules instead of treating it as Minnesota’s courts traditionally had—i.e., as a “procedural” matter governed automatically by Minnesota law. In addition, in 2004, Minnesota’s lawmakers passed Minn. Stat. § 541.31 to give the judges a little help. (Well, actually, the Minnesota legislature didn’t come up with it. The National Conference of Commissioners on Uniform State Laws drafted it back in 1983. Minnesota’s statute is basically the Conference’s Uniform Conflict of Laws—Limitations Act, with a few tweaks. The Uniform Act, along with comments, can be found here.)

The gist of the “new” rule is this. If an out-of-state plaintiff brings a claim based on the substantive law of another state, the other state’s statute of limitations applies, not Minnesota’s. If the plaintiff asserts claims under more than one state’s law, then the court performs a conflict-of-laws analysis to figure out which state’s statute of limitations applies. In other words, Minnesota’s statute of limitations no longer has a monopoly on the claims of out-of-state plaintiffs. There’s a catch: the statute applies only to “claims arising from incidents occurring on or after August 1, 2004.” Minn. Stat. § 541.34. And there’s an exception: “If the court determines that the limitation period of another state . . . is substantially different from the limitations period of this state and has not afforded a fair opportunity to sue upon, or imposes an unfair burden in defendant against, the claim, the limitations period of this state applies.” Minn. Stat. § 541.33. Some fear that the exception may swallow the rule, but that fear is probably overblown. The comments to the Uniform Conflict of Laws—Limitations Act explain that this “escape clause” “should rarely be employed.” Uniform Conflict of Laws-Limitations Act, Comment to §4. Let’s hope the Minnesota courts heed the comments.

With all of these positive developments, it looked like Minnesota was on the road to recovery with a full tank of gas. Hence the title of my guest post. But along comes this ABA Journal article suggesting that Minnesota has gotten underway. Since 2004, Minnesota has become to out-of-state plaintiffs what a light bulb is to flying bugs. Like all good articles, the ABA Journal piece combined anecdotal stories with hard facts. On the anecdotal side, the article discussed a case where the plaintiff pleaded in the complaint (!) that she was filing in Minnesota because she was too late to file anywhere else.

That a plaintiff would cop to filing in Minnesota because she couldn’t file anywhere else certainly suggests a dysfunction in Minnesota’s system. But the numbers expose the real extent of the problem. According to the author, “out-of-state plaintiffs make up about 93 percent of drug and medical device cases filed in Minnesota’s state and federal courts,” at least since May 2004. The numbers flabbergast. In 2004, there were just 500 such filings. By 2005, that number had nearly doubled, reaching 951. And in 2006, there were nearly 7,000 filings. Minnesota’s light shone bright.

I scoured the publicly available statistics but couldn’t find anything that approached these numbers. In fact, everything I came across seemed to tell a different story. According to the statistical charts on the federal judiciary’s website, both “other personal injury” (i.e., something other than marine or motor vehicle) and “other tort actions” declined precipitously between March 31, 2004 and March 31, 2006. Between 2004 and 2006, “other personal injury” cases free fell from 2,894 to 1,409; and the number of “other tort” cases skidded from 466 to 208. That’s just the Minnesota federal court; these figures don’t include Minnesota’s state courts. Still, this was a far cry from the ABA Journal article’s numbers. Besides, if we’re talking out-of-state plaintiffs and out-of-state defendants, you’d expect that most of those cases would wind up in federal court.

Unable to makes sense of the numbers on my own, I went straight to the horse’s mouth and contacted the author of the ABA Journal article. He promptly contacted the lawyer, Scott Smith, who had supplied the figures. They were more than happy to indulge my oddball questions and got back to me almost immediately. It turns out that the numbers are based on Mr. Smith’s personal research – everyone has a hobby – and represent numbers of plaintiffs, not numbers of cases. The numbers in the article, then, weren’t typos or the result of some other mistake. In just a little over two years – 2004 to 2006 – the number of products liability plaintiffs asserting claims against pharmaceutical and medical device makers had multiplied several times over!

Obviously, Minnesota is an attractive place for those plaintiffs who may have statute-of-limitations problems, thanks to it triple threat of a generous statute of limitations, anachronistic choice-of-law rule, and lax forum requirements. The state also has a fairly high lawyer-per-capita rate. There are more than 11 lawyers per 10,000 residents, which puts it just outside the top ten states in that respect. Yes, there’s a website that puts that sort of information at your fingertips. (For a Midwest City, that’s pretty high, but doesn’t seem so bad compared with Washington, D.C., which ranks number 1 with 276 lawyers per 10,000 residents.) And many of those lawyers are plaintiffs’ personal injury lawyers who must work to eat.

But those facts merely help to explain why out-of-state plaintiffs who have timeliness concerns might want to file in Minnesota. They don’t explain why there were so darn many of these plaintiffs in 2006 compared with 2004. After all, Minnesota’s been an attractive place for procrastinating plaintiffs for decades. It’s old news. Something else must explain why the number of out-of-state products liability plaintiffs spiked in 2006.

Maybe the reason is that there were a lot of MDL’s in Minnesota in 2006. That’s the theory offered by a plaintiffs’ lawyer in the ABA Journal article, and it certainly makes sense. Minnesota has become a real hot spot for MDL’s, particularly pharmaceutical and medical device MDL’s. The Baycol, Viagra, and Guidant and Medtronic Implantable Defibrillator MDL’s are (or were) all pending in the District of Minnesota. These MDL’s account for thousands of actions – the Baycol MDL alone consists of over 9,000 – so if they are responsible for the out-of-state plaintiffs, we might have our answer. We’ve all heard Herrmann’s joke that an MDL is like the ball field in Field of Dreams, because, if you build it, they will come. And “they” are certainly coming to Minnesota. By the thousands.

Moreover, if MDL’s are responsible, that would at least mean that the increase in plaintiffs can’t fairly be attributed to plaintiffs seeking to take advantage of Minnesota’s peculiar approach to the statute of limitations, choice of law and forum. It would mean, instead, that thousands of plaintiffs were swept up in an MDL that happened to be located in the state’s federal courts. After all, the transferee court applies the choice-of-law rules of the jurisdiction in which the transferor court sits. Van Dusen v. Barrack, 376 U.S. 612 (1964), basically says so. And, though parties might be able to stipulate otherwise, this generally is the rule even if a consolidated complaint is filed in the MDL proceeding. See Brown v. Hearst Corp., 54 F.3d 21, 24 (1st Cir.1995). In fact, the court handling the Guidant Implantable Defibrillator MDL made this very point just last year:

The transfer under § 1407 , even after the filing of an amended complaint, is only a change in courtrooms. Consolidation of a master complaint is merely a procedural device designed to promote judicial economy, and, as such, it does not affect the rights of the parties in separate suits. Just as transfers pursuant to §§ 1404 and 1407 do not affect the applicable choice-of-law rules, the Court concludes that the filing of a Master Complaint or an amended complaint-by-adoption or waiving Lexecon requirements do not impact the applicable choice-of-laws rules.

In re Guidant Corp. Implantable Defibrillators Products Liability Litigation, 489 F.Supp.2d 932, 935 (D. Minn. 2007). This is something for any defendant facing an MDL anywhere to keep in mind, lest it wind up unwittingly agreeing to Minnesota’s liberal choice of law and statute of limitations rules.) Problem is, Mr. Smith said his numbers don’t include MDL’s. So much for that hypothesis.

Maybe there was some other pro-plaintiff change in Minnesota law that beckoned out-of-state plaintiffs. That’s not it, either. The American Tort Reform Association’s list of 2007’s “Judicial Hellholes” came out at around the same time as the ABA Journal article. Minnesota wasn’t on the list, and, given the outrageous numbers of out-of-state plaintiffs, you’d expect it to make an appearance, or at least be flagged as a place to watch. Minnesota’s never made the list. Not in 2006. Not in 2005. Never. Defendants in particular cases – or particular industries – might have reason to disagree, but Minnesota’s courts have not generally been held in low esteem by corporate defendants in recent years, in contrast to some of the courts that regularly make ATRA’s list. In fact, a couple of months ago, this blog posted about a favorable Minnesota state court decision in a Wyeth case (Zandi), half-joking that results like that might be a reason to reconsider removal to federal court. And a review of 2006 decisions reveals no bombshell case that would explain why out-of-state plaintiffs began to grow on Minnesota’s courts like Kudzu on Georgia pines. Thus, to wrest a positive out of what’s happened in Minnesota, plaintiffs might be able to file in Minnesota without having their claims bounced for being late, but they won’t necessarily get a good result once there.

What explains the proliferation of out-of-state products plaintiffs, then? Here’s a hypothesis: The reason 2006 saw a spike in out-of-state products liability plaintiffs is due, at least in part, to the very 2004 “borrowing statute” intended to reduce their number.

Ironic? Not really. Not even in a loose Alanis Morissette sense. It’s a matter of timing. Minnesota’s borrowing statute applies only to “claims arising from incidents occurring on or after August 1, 2004.” Minn. Stat. § 541.34. The statute was a kick in the rear to some plaintiffs’ lawyers. Many probably found themselves with portfolios of aging claims by out-of-state plaintiffs that they hadn’t filed yet. They were staring down the barrel of a statute-of-limitations defense unless they filed quickly. Many probably didn’t even know that the statute had been passed until shortly before they filed. Imagine thinking that you had until 2010 to file until you attended a CLE and found out your time was running out at the end of the day. Yikes! More than a few lawyers probably found themselves in that position. Moreover, some of the pre-borrowing statute claims were probably coming due. Those, for instance, that had accrued in 2000 or 2002, depending on the nature of the claim, would have been approaching their expiration dates. The increase would certainly explain why things got so busy in 2006 compared with 2004. These cases would have been filed at some point; they were just filed sooner than they might otherwise have been filed.

This wouldn’t be the first time a legal reform intended to reduce litigation had the opposite effect, at least temporarily. The 2005 Class Action Fairness Act provides a good recent example. As Overlawyered.com reported at the time, the week before CAFA was passed, class action filings in state court shot up. Way up. In Madison County, Illinois, for example, lawyers filed 34 class actions the week before CAFA became law. And in neighboring St. Clair County, Illinois, lawyers filed 51 class actions. In the years since CAFA, of course, the number of state court class action filings took a nosedive. Indeed, according to some widely circulated reports, only nine putative class actions were filed in Madison County, Illinois in the year after CAFA took effect.

The effect, then, is only temporary. That’s cold comfort to the defendants facing these sorts of cases. But let’s not forget that the statute is not the only salvation. Cases like Hernandez, discussed in my guest post, suggest that courts may be willing to find some of these claims time-barred, even those that arose before the statute’s August 1, 2004 date. (Minnesota’s state courts seem more willing to do so than the federal courts, moreover, another reason to contemplate carefully whether federal court would be an improvement.) While plaintiffs’ lawyers might argue that the statute’s August 1, 2004 date controls, there are plenty of good arguments why it does not preclude a court from applying a substantive choice-of-law analysis and finding even pre-August 1, 2004 claims time-barred now. After all, according to the ABA Journal article, the Minnesota legislature apparently repealed the earlier borrowing statute because it thought that doing so would “free the courts to apply” a substantive choice-of-law analysis. Since most of Minnesota’s courts seemed oblivious to this, the legislature in 2004 passed the current statute to make that intent clear. Like almost all statutes, it has an effective date. But since the precedential basis for applying a substantive choice-of-law analysis predate even that statute, and is a judicial doctrine, rather than a legislative one, there’s no reason the courts should be hamstrung by the statute’s effective date. Indeed, maybe a further reason so many plaintiffs filed suit in 2006 is that they (or their lawyers) didn’t want to take that chance.

Just as there was a leap in state court class actions in the year before CAFA because of CAFA, there’s been a big jump in out-of-state personal injury plaintiffs in Minnesota because of the borrowing statute. Minnesota has hit some bumps on the road to recovery, but its destination remains the same.

Still, one can’t help but do some backseat driving here. Minnesota could have taken a much shorter and more direct route to recovery. It could have changed its forum rules to make it harder for out-of-state plaintiffs to sue non-Minnesota defendants in the state. If you can’t sue in the state, then you can’t take advantage of its obscenely long statute of limitations or anachronistic choice-of-law approach. (That would be a positive regardless of the statute-of-limitations issue, as there’s no good reason residents of other states should be able to sue in Minnesota for injuries they suffered in places other than Minnesota.) Problem solved. Now. Not years later. Maybe the legislature should put reforming the state’s forum rules on its agenda.

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