Disclaiming Physician Patient Relationship Leads to Fraudulent Joinder in Texas

The plaintiffs’ bar rallies around the cry that they are the only ones fighting for justice. Evil insurance companies further victimize already injured parties, blah, blah, blah. It’s unfortunate that so many plaintiffs’ lawyers seem unwilling or incapable of acknowledging that their lawsuits are involuntary transactions and legal strategies are, for the most part, economic choices.

Take for example, McCall v. Genentech, No. 3:10-CV-1747-B, 2011 WL 111440 (N.D. Tex. Jan. 12, 2011). In that suit, the Plaintiff claimed she was injured by the prescription drug Raptiva. In attempting to treat her psoriasis, she purportedly took the drug and then spent 25 days in a hospital and experienced continuing injuries. She filed a lawsuit in Texas state court naming Genentech (not Initech) and XOMA, who aided in the manufacture of Raptiva, as well as her physician, who prescribed the drug (who happened to be a clinical researcher of Raptiva), and two entities for which her physician worked. The latter three defendants were non-manufacturing defendants who just happened to be nondiverse from the Plaintiff. Accordingly, the defendants removed the suit to federal court, alleging improper joinder, and the Plaintiff predictably responded with her own motion to remand the case back to state court.

Perhaps the suit was originally filed in state court, rather than federal, because there is no mandatory scheduling order, no early disclosure of experts (meaning less upfront costs in expert reports), and all those things that can make litigation expensive. However, the Plaintiff has a problem because Texas has a limitation on damages as well as some mandatory expert disclosures in medical malpractice actions that make litigating in state court a lot like litigating in federal court. Since the plaintiff’s attorney’s job is (apparently) to maximize the return on an investment, the Plaintiff’s lawyer decided to disclaim any causes of action based on the physician-patient relationship in the original state court petition. Thus, the Plaintiff could still hope to squeeze some settlement value out of the case without costly expert discovery.

The strategy failed. By disclaiming the physician-patient relationship, the Plaintiff had no relationship on which to base a cause of action against the non-manufacturing defendants because a clinical researcher owes no duty to the public. Without viable causes of action against those defendants, the Plaintiff lost on the motion to remand and remained in federal court.

We’re glad that the federal rules monetize “justice” in the way that they do. Plaintiffs and their lawyers should bear some meaningful cost of the litigation up front as a means of speeding the litigation towards its end. There’s nothing wrong with trying to level the playing field as far as fees and costs go, as there should be economic pressures on both sides to resolve cases. Shouldn’t all sides be able to say that the Plaintiff’s case should be resolved quickly so that she can move forward with her life? Too many times, cases languish because there is no pressure to move the case forward. Whatever the case, it’s always nice for defense counsel to prevail because an opponent cannot or did not properly strategize.

Offensive Permissive Joinder

In a recent case, the Eighth Circuit illustrated the power that plaintiffs wield in a putative class action through Rule 20 of the Federal Rules of Civil Procedure. In In re Prempro Products Liability Litigation, No. 09-1205, 2010 WL 21090 (8th Cir. Jan. 6, 2010) [PDF], the Eighth Circuit reversed the district court’s denial of the plaintiffs’ motion to remand. The central issue in the case was a thorny issue of misjoinder, i.e., whether plaintiffs’ filing of omnibus-type cases can defeat a removal based on diversity jurisdiction.

Without getting into the intricacies of the procedural history, the crux of the problem is as follows: Unrelated plaintiffs in a group of hormone replacement therapy cases banded together to defeat diversity jurisdiction by combining their claims against multiple defendants in one case, ensuring that at least one plaintiff asserted a claim against a defendant with the same state citizenship. This approach differs from the “traditional” method of diversity destruction, fraudulent joinder, where a plaintiff joins a non-diverse defendant on a meritless claim.

Although the Eighth Circuit did not adopt a position on “fraudulent misjoinder,” its ultimate disposition was not sympathetic towards the defendants. It did not dispute the district court’s findings that the plaintiffs had taken different HRT drugs, made by different manufacturers, prescribed by different doctors in different states, for varying amounts of time causing various injuries. Instead, the Eighth Circuit noted that “[p]laintiffs‘ claims arise from a series of transactions between HRT pharmaceutical manufacturers and individuals that have used HRT drugs.” Id. “Furthermore, given the nature of the plaintiffs’ claims, this litigation is likely to contain common questions of law and fact.” Id. Note that even if there was a misjoinder, there is apparently some level of misjoinder that would still defeat diversity but would not approach the type of “egregious misjoinder” necessary to sustain federal subject matter jurisdiction.

Plaintiffs are structuring suits in the products liability realm to defeat complete diversity but are stopping short of reaching removal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA“). Perhaps the defense bar should remain satisfied with CAFA for the time being. Cases go both ways, but a straight-forward reading of 28 U.S.C. 1446(b) seems to suggest that a court’s analysis of removal should be more akin to a Rule 12(b) motion as opposed to a summary judgment motion. The defense bar may need to balance the need to move its cases forward with the possibility of asking a federal court to gaze into the future, review discovery, define what a transaction or “series of transactions” is in the context of the particular matter, and determine whether any misjoinder is so egregious that federal jurisdiction is proper.