December 22, 2009

Of Product Liability, Patents, and Forum shopping

Forum shopping is the practice of filing claims in “friendly” courts. This has been adopted by attorneys in an effort to get a case heard in the court which will provide a more favorable judgment. It has been long known that some courts are more plaintiff-friendly, and thus have become litigation magnets even when there is slim connection between the issue and the jurisdiction.

Lawyers seek courts where there is a track record of bias against defendants; often defendants located outside of the state or even the country. These courts have established records of providing rich awards. Personal injury lawyers seek out these jurisdictions and file cases there because they know they will receive a large reward, a favorable precedent, or both.

Former Virginia Supreme Court Justice Richard Neely described one of the reasons behind this phenomenon in his recent book The Product Liability Mess: How Business Can Be Rescued From the Politics of State Courts: "As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so. Not only is my sleep enhanced when I give someone else's money away, but so is my job security, because the in-state plaintiffs, their families, and their friends will reelect me.... It should be obvious that the in-state local plaintiff, his witnesses and his friends, can all vote for the judge, while the out-of-state defendants can't even be relied upon to send a campaign donation."

Drug maker liability

Nueces County, Texas was known as a plaintiff-friendly court, and it was in that court in February of 2003 that personal injury lawyer Mikal Watts filed the now infamous Baycol class action lawsuit. The case was tried more in the press than in the courtroom, but in the end the defense prevailed and there was a great brouhaha regarding the actions and inactions of attorney Mikal Watts.

In a May 03, 2004 interview with Wall Street Journal reporter Monica Langley, Watts stated, "I was feeding a lot of information to European and U.S. papers. ... It was part of my strategy to affect the stock price, which I was very successful at."

Watts was seeking $550 million, and refused to consider any other unless the defendant settled all 1,400 of his Baycol cases. Watts' efforts failed and judgment went to defendant, German drug maker Bayer. After learning that he could have settled early and received $250,000, 82-year-old plaintiff Hollis Haltom was stunned. “Watts thought he could make a killing,” but “I got nothing, not a penny.” As for the settlement, Haltom said: “The lawyer never told us. We might have taken it.”

At the time this was a rare instance of forum shopping failing to meet plaintiff’s expectations.

Applying forum shopping to gun laws

Multiple gun-related cases have been shopped to Judge Jack Bertrand Weinstein of New York’s Eastern District. Judge Weinstein is known to be very plaintiff-friendly in regard to firearms litigation, having been rather creative in his interpretations of liability laws. It was for this reason that the City of New York, in an effort to place blame for the city’s violence, unsuccessfully attempted to use public nuisance laws against gun manufacturers by filing in Weinstein’s court.

In City of New York v. Beretta, filed first in 2000 by the Rudy Giuliani administration, Weinstein ruled in favor of the City. Beretta appealed to the 2nd Circuit and in March of this year, dealing another blow to forum shopping, SCOTUS refused to reconsider the case.

Falling out of favor

Recently the clamor against the practice has reached a fever pitch, and the higher courts are listening. The 5th Circuit ruled earlier this month that chief judge David Folsom of the Eastern District of Texas abused his discretion in refusing to transfer Novartis's patent infringement case against Hoffmann-La Roche out of his jurisdiction. This is the third time since October 2008 en banc ruling in re Volkswagen that the 5th Circuit has granted a writ of mandamus and booted a patent case out of Folsom’s court.

Less than two weeks later it happened again. Another patent infringement case, Motiva LLC v. Nintendo Co Ltd et al, was filed in the Texas Eastern District by Texas lawyer Mark Lanier. Nintendo asked the court to transfer the case to the Western District of Washington, claiming the dispute had no connection to Texas. Nintendo is a Japanese company with an affiliate in Redmond, WA. Motiva is an Ohio company and no witness had any Texas connection. None of this mattered, as in June Eastern District Judge Leonard Davis denied Nintendo's request. Davis was overturned by the 5th Circuit.

In the mandamus order, the Circuit panel found Davis had "clearly abused his discretion" by refusing Nintendo’s request for change of venue, explaining that "this case features a stark contrast in relevance, convenience, and fairness between the two venues. ... No parties, witnesses, or evidence have any material connection to the venue chosen by the plaintiff."

Texas lawyer Edward Reines, of Weil, Gotshal & Manges has been following this issue closely, and told American Lawyer that the law governing venue change requests in the Eastern District of Texas has been transformed. "It's safe to say over the last two to three years that there has been nothing less than a sea change in the law on transfers," noting that the turning point was the 5th Circuit's 2008 en banc ruling in re Volkswagen.



willson said...
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