In win for Home Depot, appeals court instructs multidistrict litigation judges on ‘law of the case’

The logo of U.S. home improvement chain Home Depot is seen in Mexico City
The logo of U.S. home improvement chain Home Depot is seen after the Mexican trade union Revolutionary Confederation of Laborers and Farmworkers (CROC) accused Home Depot of blocking union activity, in Mexico City, Mexico January 15, 2020. REUTERS/Luis Cortes

(Reuters) - Presiding over complex multidistrict litigation is hard – and the last thing you want, if you’ve overseen an MDL for a decade, is to revisit old determinations you’ve already reached about defendants in the case.

But MDL judges, the 3rd U.S. Circuit Court of Appeals said this week in Home Depot USA, Inc. v. Lafarge North America, Inc., can’t disregard the bedrock principle that every plaintiff -- even if it is enmeshed in an MDL -- is entitled to make its own case. If a plaintiff was not a party to the case when the MDL judge made determinations about particular defendants, the appeals court said, the plaintiff cannot be bound by those determinations.

“The law of the case doctrine cannot be applied across distinct actions in [a] multidistrict proceeding,” wrote Judge Anthony Scirica for a panel that also included Judges Michael Chagares and Patty Shwartz.

“The district court has broad authority to structure and manage the MDL proceeding to promote efficiency and avoid unfairness. But it does ‘not have the authority to create special rules’ to ‘bind plaintiffs by the finding of previous proceedings in which they were not parties, even by a proceeding as thorough as the multidistrict common issues trial,’” the 3rd Circuit said, quoting its own precedent from a 1990 case arising from consolidated litigation over the drug Bendectin.

The ruling is a win for Home Depot and its lawyers at Latham & Watkins, who argued that U.S. District Judge Michael Baylson erred when he excluded Home Depot’s expert report in the retailer’s antitrust suit against drywall maker Lafarge, which had previously reached a class action settlement with drywall purchasers in the antitrust MDL Baylson has overseen since 2013.

Home Depot opted out of the Lafarge class action settlement and eventually filed its own suit against Lafarge. At Lafarge’s request – and despite Home Depot’s opposition – the U.S. Judicial Panel on Multidistrict Litigation sent the case to Baylson, citing the Philadelphia judge’s familiarity with the issues.

Baylson, as the 3rd Circuit noted, was well aware of Home Depot’s right to bring its own claims against Lafarge. What complicated the case, though, was Home Depot’s participation as a class member in three class settlements with six other defendants in the MDL. All of those settlements were approved by Baylson in the confines of the MDL.

Home Depot’s expert economics witness posited a price-fixing conspiracy between Lafarge and several other drywall makers that had been defendants in the MDL. Baylson struck the report, concluding that Home Depot’s expert had disregarded developments from the long history of the case, including the judge’s granting of summary judgment to a onetime MDL defendant that the expert named as a participant in the alleged conspiracy.

The MDL judge said that because Home Depot had participated in the MDL as a class member, it was bound by his previous determinations. The company, Baylson said, was “acting as if by opting out and proceeding against Lafarge, it is privileged to proceed on a clean slate. To countenance this strategy would be to basically ignore the many rulings that this court has made over the prior 10 years of this litigation. No way.”

Even the trial judge, though, recognized that he and other MDL judges could benefit from appellate guidance on issue preclusion and law of the case doctrine. When Baylson granted Home Depot’s motion for interlocutory appeal of his decision to exclude the expert report, he said there did not seem to be any precedent on whether an MDL judge’s decisions were binding on “tag-along plaintiffs,” particularly when those same plaintiffs previously participated in the MDL.

“Judges would find it very valuable to have an appellate court ruling deciding whether prior proceedings and judicial holdings in an MDL, issued before the receipt of a late ‘tag-along’ case, may be binding on the new arrival,” Baylson wrote.

Lafarge counsel Jennifer Greenblatt of Goldman Ismail Tomaselli, Brennan & Baum did not respond to my email. In its appellate brief, the company argued that issue preclusion was a “misdirection.” The expert witness report, it said, was inadmissible for a host of reasons aside from Baylson’s previous decisions in the MDL.

The 3rd Circuit rejected that reframing of the appeal, noting that even Baylson agreed his decision to toss the report was based on the expert’s disregard for previous developments in the MDL. Lafarge may ultimately be right about the inadmissibility of the report, Scirica wrote, but Baylson must re-evaluate the report “without reference to issue preclusion and law of the case.”

The MDL judge, the appeals court said, “may only apply its prior reasoning after it has allowed Home Depot to put forth new legal theories and to raise new arguments based on newly developed or preexisting evidence.”

In response to Baylson’s call for clarity in balancing judicial efficiency with the rights of individual plaintiffs, the 3rd Circuit encouraged MDL judges to use pretrial orders specifying that they will regard their previous decisions as “persuasive,” so that plaintiffs seeking a different outcome must offer the court a good reason to change its mind. The appeals court also suggested that judges “make use of consolidated complaints to simplify the litigation,” creating subgroupings based on geography, variations in applicable state laws, filing dates or other characteristics the subgroups share.

“We commend the creativity of transferee judges in devising these groups and other methods to manage litigation -- bounded, of course, by the Federal Rules and the Constitution,” the 3rd Circuit said.

Those tips won’t help Baylson decide whether to exclude Home Depot’s expert, but maybe they’ll help a future MDL judge specify which MDL plaintiffs are subject to particular rulings.

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.