Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach

523 U.S. 26 (1998)

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Nature of the Case

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Facts

P, a law and economics consulting firm, brought this diversity action against respondents, the law firms of Milberg Weiss Bershad Hynes & Lerach (D) and Cotchett, Illston & Pitre (Cotchett), claiming malicious prosecution, abuse of process, tortious interference, commercial disparagement, and defamation. The suit arose from conduct in a prior class action brought against Charles Keating and the American Continental Corporation for violations of the securities and racketeering laws. P also was a defendant in that suit, was charged with giving federal and state banking regulators inaccurate and misleading reports about the financial condition of the American Continental Corporation and its subsidiary Lincoln Savings and Loan. The case against P was transferred under § 1407(a) for pretrial proceedings before Judge Bilby in the District of Arizona, where the matters so consolidated were known as the Lincoln Savings litigation. Before those proceedings were over, the class action plaintiffs and P reached what they termed a 'resolution,' under which the claims against P were dismissed in August of 1992. P then filed this case charging that the prior class action terminated in its favor when D's clients voluntarily dismissed their claims against P as meritless, amounting to nothing more than a vendetta. When these allegations came to the attention of Judge Bilby, he issued an order stating his understanding of the terms of the resolution agreement between P and the class action plaintiffs. Judge Bilby's characterization of the agreement being markedly at odds with the allegations in the instant action, P appealed his order to the Ninth Circuit. Ds then filed a motion under §1407(a) with the Judicial Panel on Multidistrict Litigation seeking transfer of this case to Judge Bilby for consolidation with the Lincoln Savings litigation. The Panel ordered a transfer in early June of 1993 and assigned the case to Judge Roll, noting that P's claims 'share questions of fact with an as-yet unapproved settlement involving Touche Ross, P and the investor plaintiffs in the Lincoln Savings investor class actions. In November 1993, Judge Roll dismissed P's state law malicious prosecution and abuse of process claims, applying a 'heightened pleading standard.' In August 1994, P moved that the district court refer the case back to the Panel for remand to the Northern District of Illinois, thus heeding the point of Multidistrict Litigation Rule 14(d), which provides that 'the Panel is reluctant to order remand absent a suggestion of remand from the transferee district court.' Ds filed a countermotion under §1404(a) requesting the District of Arizona to 'transfer' the case to itself for trial. Judge Roll deferred decision on these motions as well. P again asked the District Court to request the Panel to remand the case to the Northern District of Illinois. D objected and requested a §1404 transfer, and Judge Roll deferred ruling once more. Eventually, the judge granted summary judgment in favor of the law firms on all remaining claims except one in defamation brought against D, and at the same time, he dismissed the law firms' counterclaims. In the meantime, the Arizona court had granted the law firms' §1404(a) motions to assign the case to itself for trial and simultaneously had denied P's motions to request the Panel to remand under §1407(a). P sought immediate review of these last two rulings by filing a petition for mandamus in the Ninth Circuit. A majority of the Circuit panel denied P's requests to vacate the self-assignment order and require remand to the Northern District of Illinois. The trial went forward ending in judgment for D. P appealed to the Ninth Circuit. It again appealed the denial of its motion for a suggestion that the Panel remand the matter to the Northern District of Illinois, and it challenged the dismissal of its claims for malicious prosecution and abuse of process and the entry of final judgment in favor of Cotchett. A divided panel affirmed under the Panel's Rule 14 and appellate and district court decisions in support of the District Court's refusal to support remand under §1407(a) and its decision to assign the case to itself under §1404(a). Judge Kozinski dissented, based on the texts of §§ 1407(a) and 1404(a) and a presumption in favor of a plaintiff's choice of forum. The Supreme Court granted certiorari.