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'Involuntary Dismissal' of the 'Innocent Seller': Continuing Choice of Law Issues in Products Liability MDL Proceedings

By Daniel J. Herling and Thomas A. Lincoln

In multidistrict litigation ('MDL') proceedings involving product liability claims, the choice of what law to apply continues to be a thorny issue. For instance, in In re Ephedra Products Liability Litigation, No. 04-1598 (S.D.N.Y) (the 'Ephedra MDL'), Judge Jed S. Rakoff of the Southern District of New York raised the question of whether the Restatement of the Law Third of Torts could be applied as the universal law applicable to all claims in the proceeding. See Case Management Order ('CMO') No. 4 at '11, July 9, 2004. Judge Rakoff later concluded, at the Sept. 10, 2004 Status Conference, that application of such a 'universal law' would be inappropriate. Such choice-of-law issues, however, remain problematic. That is so not only with regard to substantive law, but with regard to procedural law as well.

Indeed, Judge Rakoff recently referred to 'controlling' Eighth Circuit law when deciding a question of whether a case that had been filed in Missouri state court could acquire diversity jurisdiction by the involuntary dismissal of a non-diverse defendant. See CMO No. 20 at '9, Dec. 23, 2005. The Eighth Circuit has a strict rule that the involuntary dismissal of a non-diverse party does not make a case eligible for removal. See In re Iowa Mfg. Co., 747 F.2d 462 (8th Cir. 1984) (per curiam) (citing Whitcomb v. Smithson, 175 U.S. 645, 638 (1900)). The reason for the rule is to contribute to judicial economy, 'because after an involuntary removal, the plaintiff may appeal the dismissal in state court, and success on appeal would lead to the reinstatement of the non-diverse party, destroying federal jurisdiction and compelling remand to the state court.' Pender v. Bell Asbestos Mines, Ltd., 46 F. Supp. 2d 937, 940-941 (E.D. Mo. 1999) ('Pender I'). Under this 'involuntary dismissal' rule, only when a plaintiff can be said to have voluntarily dismissed a non-diverse defendant can a case be removed appropriately on diversity jurisdiction grounds. Id.

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