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The Merger Doctrine—Avoiding Piecemeal Appeals in Multidistrict Litigation

Do individual plaintiffs in multidistrict litigation (MDL) involving thousands of individual claims against a multitude of different defendants have an automatic right to appeal when all their claims are dismissed with prejudice, but only as to a subset of defendants?

The issue appeared to be settled by the U.S. Supreme Court in its 2015 decision in Gelboim v. Bank of Am. Corp., 574 U.S. 405 (2015), but a footnote in that opinion turns out to have created a giant exception: the merger doctrine. While individual pleadings retain their separate character for purposes of appeals from MDL proceedings as held in Gelboim, the footnote in the opinion suggests that parties and the district courts managing MDLs can change the default separate-character rule through the use of master pleadings.

The issue created by the Gelboim footnote was recently before the district court for the Southern District of Florida in an MDL involving the drug Zantac and its generic counterpart ranitidine, In re Zantac (Ranitidine) Products Liability Litigation, MDL 2924. The issue was further complicated, however, by the wording of the stipulated pre-trial orders that blurred the line between individual pleadings and master pleadings.

In July 2021, U.S. District Court Judge Robin L. Rosenberg, presiding over the Zantac MDL in the Southern District of Florida, dismissed claims brought against dozens of defendants by more than 1,400 plaintiffs around the country and tens of thousands of plaintiffs registered with the court’s Census Registry. The essence of the plaintiffs’ claims was that the defendants had misbranded their drugs in connection with the drug’s alleged potential risk for causing cancer. Among its decisions on the motions to dismiss, the court agreed with the group of generic drug manufacturer defendants that federal law preempted all of the plaintiffs’ claims regardless of how the plaintiffs styled their claims. The court granted the generic defendants’ motion to dismiss and dismissed with prejudice all claims against generic manufacturers.

However, a vast majority of plaintiffs in the litigation had also named as defendants brand manufacturers, retailers, and distributors, in addition to the now-dismissed generic defendants. This meant that the court’s order dismissing the generic manufacturers was not “final” for purposes of appeal as to those plaintiffs naming other defendants.

The court’s order, the mix of parties in individual cases, and rules of appellate procedure created a conundrum for individual plaintiffs seeking to appeal the court’s dismissal orders, as well as for generic defendants who wanted to secure the finality of their MDL-wide win. The parties and the court were faced with an important question:

For those cases in which the court’s order dismissing the generic defendants was not final as to all claims and all parties (mixed cases), were defendants able to avoid the crush of piecemeal appeals following remand in individual actions, potentially over the course of many years and in circuit courts around the country?

At first blush, the right of individual plaintiffs to separately appeal appeared straightforward under the Supreme Court’s ruling in Gelboim v. Bank of America, 574 U.S. 405 (2015). There, the court held that individual actions consolidated in an MDL retain their separate identity for purposes of automatic appeal. Thus, the dismissal of an individual pleading asserting claims solely against defendants that were dismissed with prejudice (generic only cases) should qualify as an appealable final decision. But the circumstances of the Zantac MDL brought to the forefront a footnote in Gelboim. There, the court noted that the parties could change the default rule and “elect to file a ‘master complaint’ and a corresponding ‘consolidated answer,’ which supersede prior individual pleadings. In such a case, the transferee court may treat the master pleadings as merging the discrete actions for the duration of the MDL pretrial proceedings.”

The Zantac plaintiffs had agreed to file master complaints, with individual plaintiffs filing short form complaints. The defendants were permitted to move to dismiss the master complaints only, and the court’s decisions on those motions analyzed only the claims brought in the master complaints. Thus, the court’s Gelboim footnote exception appeared to squarely apply. Under the merger approach, the district court’s order dismissing only generic defendants was not final as to any plaintiff’s case, even those short form complaints naming just generic defendants, because all cases were merged for purposes of the pleadings and motions to dismiss. In this situation, the plaintiffs would need to seek a Rule 54(b) certification to perfect their right to appeal.

Under Federal Rule of Civil Procedure 54(b), the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties if the court expressly determines that there is no just reason for delay. Upon entry of a Rule 54(b) partial final judgment, all of the plaintiffs’ claims against the dismissed generic defendants become immediately appealable, even for those plaintiffs whose actions against other defendants proceed in the MDL. The benefit of this approach was the obvious efficiency to the parties and the courts to have one Circuit Court of Appeals address, at the earliest practicable time and in a consolidated fashion, the identical claims of all plaintiffs consolidated in an MDL.

In determining how to enter judgment, the Zantac court closely analyzed Gelboim and two circuit court decisions on the merger approach: In re Refrigerant Compressors Antitrust Litigation, 731 F. 3d 586 (6th Cir. 2013), and Bell v. Publix Super Markets, 982 F. 3d 468 (7th Cir. 2020). The court noted that all deadlines in the case were set to the master pleadings; the court heard three rounds of motions to dismiss—a total of twenty motions—all directed to the master pleadings; and the parties and the court looked solely to the claims advanced in the master pleadings when arguing and ultimately deciding the motions to dismiss. The court also noted that the pretrial order setting forth the process for master pleadings stated that all claims in the master pleadings would supersede and replace all claims pleaded in any complaint previously filed or transferred to the MDL.

But the district court’s pretrial order setting forth the master pleading procedure was arguably ambiguous as to whether the individual short form complaints retained some minor legal effect notwithstanding the filing of master complaints. The plaintiffs seized on the language in the court’s pretrial order to argue that the Gelboim footnote did not preclude some plaintiffs from appealing immediately and leaving other plaintiffs to wait for their cases to eventually be remanded to their originating courts to appeal the same order later in a different court. While the court found unpersuasive the plaintiffs’ contention that their short form complaints, standing alone, were operative pleadings, the court was concerned by plaintiffs’ argument that their subjective intent was to preserve their individual appellate rights, which the plaintiffs attempted to unilaterally memorialize in their master pleadings.

The court acknowledged that the language in the master pleadings could not be squared with the court’s pretrial order or how the parties and the court had conducted this litigation, and admonished the notion that the plaintiffs could simply run from the pretrial order—to which the plaintiffs consented—by unilaterally inserting language that the master pleadings were not intended to consolidate “for any purpose” the various claims of the individual plaintiffs.

Given the specific circumstances of the pretrial orders and pleadings in this case, however, the court ultimately found that the Gelboim footnote could not squarely control. But the court noted that “in perfect hindsight [the court] wishes that it had a better appreciation of the significance of the language in its pretrial order and the governing law as to the merger doctrine at the time the pretrial order was entered,” clearly expressing a preference for resolving the appellate issues in one uniform, MDL-efficient manner. Ultimately, Rosenberg adopted a remedy with largely the same effect as a finding of merger. The district court entered a single Rule 54(b) partial judgment with respect to all but a handful of claims and entered that order on the main MDL docket, applicable to all mixed cases. The generic defendants were thus protected from the real risk of burdensome piecemeal appeals and inconsistent rulings, and the plaintiffs’ appellate rights were fixed.

This issue is one that future MDL district judges and all parties should be aware of as they fashion pretrial orders that seek to streamline the pleadings for purposes of pretrial dispositive motions in large MDLs. The merger doctrine, endorsed by the Supreme Court, the U.S. Courts of Appeal for the Sixth and Seventh Circuits, and now the Southern District of Florida, “holds the court and the parties to their actions to prevent them from springing traps by treating a consolidated complaint as the real complaint in the district court but then denying its importance and effect once a party tries to appeal.” As a takeaway from the Zantac MDL, all involved must be careful to fashion pretrial orders and pleadings clearly and unambiguously so as to avoid those traps.

Editor’s note: Blank Rome attorneys represent a party that was a defendant in the generic drug manufacturing group mentioned in this article.

“The Merger Doctrine—Avoiding Piecemeal Appeals in Multidistrict Litigation,” by Terry M. Henry and Melissa F. Murphy was published in The Legal Intelligencer on January 17, 2022.

Reprinted with permission from the January 17, 2022, edition of The Legal Intelligencer © 2022 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.