A decision by a federal district court in Allen v. Bayer Healthcare Pharms., Inc., 2014 WL 655585 (E.D. Missouri Feb. 20, 2014), demonstrates key complexities in a common strategy used by device companies in product liability lawsuits — removing the case from state to federal court.  In the case, twenty-five plaintiffs from eleven states (including Delaware) filed a single products liability action in Missouri state court alleging that they were injured by the device Mirena®, an intrauterine contraceptive system.  The defendant manufacturer, a citizen of Delaware and New Jersey, removed the action to federal court based on diversity jurisdiction.  As we’ve discussed in previous posts, product liability plaintiffs usually prefer to have their claims heard in state courts, while the defendant manufacturers favor federal forums.

To remove a case to federal court, the federal court must have subject-matter jurisdiction, which (in medical device cases) typically requires diversity jurisdiction—in which (i) the parties are citizens of different states or are non-U.S. citizens, and (ii) the minimum amount in controversy of $75,000 is met.  In Allen, the defendant argued that complete diversity between the plaintiffs and defendants existed because, although the defendant and plaintiffs were both citizens of Delaware, the Delaware plaintiffs’ claims were time-barred under Delaware’s two-year statute of limitations.  Therefore, the defendant argued that those plaintiffs were fraudulently joined and should not be considered for purposes of diversity jurisdiction analysis.

In response, the plaintiffs argued that their claims should not be barred under Delaware’s statute of limitations because they were not on notice of the claim against the defendant until seeing a personal injury attorney’s advertisement for Mirena® IUD litigation in 2013. The court ruled, however, that the statute of limitations began to run in 2009 when the relevant plaintiff underwent a surgical removal of the Mirena® device as a result of pelvic pain. At that point, the claims against the defendant could have been discovered through diligence on the part of the patient.  Therefore, the Court agreed with the defendant that the Delaware plaintiffs were fraudulent joined and complete diversity existed.

Nevertheless, despite agreeing with the defendant on fraudulent joinder, in a strange twist, it remanded the case to state court because it concluded that the defendant had not come forward with any evidence showing that the amount in controversy exceeds $75,000.

As amended in 2011, the removal statute, 28 U.S.C. § 1446, states that when removal is based on diversity jurisdiction:

“[T]he sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy, except that—(A) the notice of removal may assert the amount in controversy if the initial pleading seeks—(i) nonmonetary relief; or (ii) a money judgment, but the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded; and (B) removal of the action is proper on the basis of an amount in controversy asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds [$75,000].”

In Allen, neither the original complaint nor any other pleading or paper stated an amount in controversy of at least $75,000. The Complaint stated that plaintiffs were seeking an excess of $25,000 in damages and the plaintiffs refused to admit or deny a Request for Admission that they were collectively seeking damages in excess of $75,000. The defendant argued that satisfaction of the minimum amount in controversy could be inferred by the fact that the lawsuit involved numerous plaintiffs, some of whom alleged serious bodily injury, seeking compensatory and punitive damages. The court rejected this argument and ruled that the defendant had “failed to establish federal jurisdiction by a preponderance of the evidence.”

Allen raises the question of what evidence a defendant can present to support the assertion of the necessary amount in controversy when the plaintiff does not allege it or otherwise admit it, for example, in response to discovery requests.