Lexecon

Venue in Mass Tort Cases

Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998), fundamentally altered the dynamics of multidistrict litigation in the United States. The Supreme Court’s decision solidified the rule that federal judges could not self-assign “tag-along” cases in their districts, effectively curbing a practice that had become commonplace in large-scale, complex litigation scenarios.

The roots of this seminal case can be traced back to Charles Keating’s infamous Lincoln Savings and Loan scandal, a high-profile case of corporate fraud that played out in the 1980s. Lexecon, an economic consultancy, was sued by class-action firm Milberg Weiss, which claimed that Lexecon was involved in fraudulent dealings with Lincoln Savings. The case was part of a larger multidistrict litigation filed in an Arizona court but was transferred to the Northern District of Illinois for pretrial proceedings.

Once pretrial proceedings were concluded, the Illinois transferee judge decided to keep the case in his court rather than sending it back to Arizona, citing 28 U.S.C. §§ 1404(a) and 1407. Lexecon objected to this decision, arguing it contradicted the MDL statute’s clear language.

In a unanimous decision, the Supreme Court upheld Lexecon’s view, ruling that federal judges handling pretrial proceedings in MDL cases have no authority to self-assign related cases for trial. The Court held that the explicit language of the statute, which states “[e]ach action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred,” provided no room for judicial discretion to retain the cases.

This Supreme Court verdict introduced significant ripple effects across the legal landscape, impacting the strategies of both plaintiffs and defendants in complex, multidistrict cases.

For plaintiffs, especially those in class actions or mass torts, this decision made it more challenging to consolidate their cases in favorable jurisdictions. It restricted the forum shopping phenomenon, a practice wherein attorneys deliberately file suits in districts known for their sympathy towards certain kinds of claims or their speed in reaching a verdict.

Conversely, defendants found some relief in the Lexecon ruling, as it offered them a level of predictability concerning the jurisdiction in which their trials would take place. With a reduced risk of facing trial in a hostile jurisdiction, defendants could strategize their defenses more effectively.

However, the Lexecon decision also brought some unintended consequences. The inability to consolidate related cases for trial in one court led to inconsistent rulings and legal uncertainty, especially when dealing with complex issues that span across multiple jurisdictions. It also increased the cost and complexity of litigation, as parties had to prepare for trials in several different jurisdictions.