Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach

523 U.S. 26, 118 S. Ct. 956 (1998)



The Judicial Panel on Multidistrict Litigation instruction that each transferred action shall be remanded by the panel at or before the conclusion of pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated, 28 U.S.C.S. § 1407(a), comes in terms of the mandatory "shall," which normally creates an obligation impervious to judicial discretion. 


A law and economics consulting firm and one of its principals (Lexecon), were defendants in a class action brought against Charles Keating and the American Continental Corporation in connection with the failure of Lincoln Savings and Loan. It and other actions arising out of that failure were transferred for pretrial proceedings to the District of Arizona under 28 U.S.C. § 1407(a), which authorizes the Judicial Panel on Multidistrict Litigation to transfer civil actions with common issues of fact "to any district for coordinated or consolidated pretrial proceedings," but provides that the Panel "shall" remand any such action to the original district "at or before the conclusion of such pretrial proceedings." Before the pretrial proceedings ended, the plaintiffs and Lexecon reached a "resolution," and the claims against Lexecon were dismissed. Subsequently, Lexecon brought this diversity action in the Northern District of Illinois against respondent law firms (Milberg and Cotchett), claiming several torts, including defamation, arising from the firms' conduct as counsel for the class action plaintiffs. Milberg and Cotchett moved for, and the Panel ordered, a § 1407(a) transfer to the District of Arizona. After the remaining parties to the Lincoln Savings litigation reached a final settlement, Lexecon moved the Arizona District Court to refer the case back to the Panel for remand to the Northern District of Illinois. The law firms filed a countermotion requesting the Arizona District Court to invoke § 1404(a) to "transfer" the case to itself for trial. With only the defamation claim against Milberg remaining after a summary judgment ruling, the court assigned the case to itself for trial and denied Lexecon's motion to request the Panel to remand. On appeal, the Ninth Circuit denied Lexecon's petition for mandamus, refusing to vacate the self-assignment order and require remand because Lexecon would have the opportunity to obtain relief from the transfer order on direct appeal. It also noted that denial was consistent with the statutory language of the law and conducive to efficiency because the transferee court had already completed its pretrial work. Lexecon elevated the case to the Supreme Court of the United States through a writ of certiorari.


Does 28 U.S.C.S. § 1407(a) permit a transferee court to entertain a 28 U.S.C.S. § 1404(a) transfer motion to keep the case for trial?




The court held that a transferee court did not have such authority. The requirement that a transferee court conduct coordinated or consolidated proceedings did not preclude the transferee state court from ruling on a motion that affected only one of the cases before it. Self-assignment was beyond the scope of the transferee court's authority. The panel's responsibility to remand barred recognizing any self-assignment power in a transferee court and consequently entailed the invalidity of J.P.M.L.R.P. 14(b). The remand requirement contained in 28 U.S.C.S. § 1407 sufficed to establish the substantial significance of any denial of a plaintiff's right to a remand once the pretrial stage had been completed.

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