Danger Lurking for Direct Filing in Multidistrict Litigation

The Seventh Circuit issued a warning to litigants who plan to avail themselves of the right to “direct file” in multidistrict litigation (MDL): In the absence of a clear order, MDL courts may not treat the lawsuit as if it were filed in the plaintiff’s home state.

In Looper v. Cook Inc., 20 F. 4th 387 (7th Cir. 2021), the Seventh Circuit affirmed the so-called Dobbs Rule, which provides that cases filed by foreign litigants as part of an ongoing MDL are considered to have been filed in another jurisdiction—to have originated outside of the MDL—and are subject to the law of the foreign, “home state” jurisdiction. However, the Seventh Circuit refused to apply the Dobbs Rule mechanically to direct-file cases.

The plaintiffs in Looper “directly filed” complaints in a pending MDL in the Southern District of Illinois rather than filing complaints in their home states and allowing the cases to be administratively transferred to the MDL. For those unfamiliar with MDL practice, “direct filing” is an administrative procedure that allows a plaintiff to file a complaint directly in an MDL court to avoid delays associated with filing in the plaintiff’s home jurisdiction and then transferring the matter to the MDL court. The defendant in Looper moved to dismiss the plaintiffs’ claims because they were untimely under Illinois law, and the district court agreed. On appeal, the Seventh Circuit reversed and held that the defendant was estopped from arguing that Illinois law applied because the defendant had taken the opposite position in several earlier cases within the same MDL. Specifically, the defendant previously argued that each complaint that was direct-filed in the MDL was governed by the law of the foreign state. Applying this same rationale to the plaintiffs’ filings in Looper, the Seventh Circuit held that the law of South Carolina and Mississippi applied to the plaintiffs’ claims, and the statute of limitations had not expired.

The court took great pains to limit its holding to the specific facts of the case, and the court expressed doubt that the application of foreign law would apply in every case. In dicta, the Seventh Circuit questioned whether it would reach the same conclusion in several situations, including when plaintiffs could file their lawsuits in the MDL venue in the absence of the MDL. This question is particularly noteworthy because many MDLs are coordinated in the same jurisdiction as a corporate defendant’s residence, making venue potentially viable in both a plaintiff’s home state and the MDL jurisdiction. The Seventh Circuit noted that “[w]ithout clear advance guidance from a transferee judge and consent from the parties about how the MDL court should decide choice-of-law issues in directly filed cases, there are substantial risks of confusion and unfairness.” Looper 20 F. 4th at 394.

MDL plaintiffs should take note of the Seventh Circuit’s warning and carefully examine direct- filing orders as well as all prior orders regarding direct-filed claims in the MDL before taking advantage of this useful device.