Opinion ID: 6329204
Heading Depth: 3
Heading Rank: 1

Heading: Joint Severance and Transfer

Text: To explain this conclusion, we remind that the Federal Rules of Civil Procedure were enacted to ensure “the just, speedy and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. To be more precise, Fed. R. Civ. P. 21, which authorizes severance of parties, and 28 USC § 1404(a), governing transfers among federal district courts, “are [both] designed to facilitate just, convenient, efficient and less expensive determination.” In re Nintendo of America, Inc., 756 F.3d 1363, 1365 (Fed. Cir. 2014). Although a district court has broad discretion to sever parties that were otherwise properly joined by a Plaintiff, 15 “[u]nder the Rules, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged.” United Mine Workers v Gibbs, 383 U.S. 715, 724, 86 S. Ct. 1130, 1138 (1966). On two occasions, this court has discussed standards for joint severance and transfer motions brought by a defendant or defendants, the effect of which would require a Plaintiff to split its case into two different federal courts. In a well-known opinion, this court noted that “our jurisprudence suggests that the severance inquiry is different—and more focused on judicial efficiency—when it is combined with a section 1404 motion to transfer than when the severed case would remain in the original judicial district.” In re Rolls Royce, 775 F.3d at 680. 16 The court quoted at 15 Brunet v. United Gas Pipeline Co., 15 F.3d 500, 505 (5th Cir. 1994). 16 Judge Higginbotham’s opinion in Rolls Royce has been cited frequently for its application of sever/transfer considerations when one of the parties has a forum selection 13 Case: 21-50327 Document: 00516263671 Page: 14 Date Filed: 04/01/2022 No. 21-50327 length Judge Alvin Rubin’s opinion explaining the problems that can arise in a case involving multiple defendants when claims against one or some defendants are severed and transferred while claims against the remaining defendant are retained in the original court. Id., (quoting Liaw Su Teng v. Skaarup Shipping Corp., 743 F.2d 1140, 1148-49 (5th Cir. 1984)). Judge Rubin’s list of parameters that should inform this type of proposed transfer bears repeating: But before thus putting asunder what the Plaintiff has joined, the court must weigh carefully whether the inconvenience of splitting the suit outweighs the advantages to be gained from the partial transfer. It should not sever if the defendant over whom jurisdiction is retained is so involved in the controversy to be transferred that partial transfer would require the same issues to be litigated in two places. [See Korbel, The Law of Federal Venue and Choice of the Most Convenient Forum, 15 Rutgers L.Rev. 607 (1961); Masington, Venue in the Federal Courts—The Problem of the Inconvenient Forum, 15 U.Miami L.Rev. 237 (1961); Note, 46 Cornell L.Q. 318 (1961)]. That being the situation here, the district court should not have severed the claims if there were any alternative. Manifestly, the Plaintiffs will suffer some inconvenience if they are forced to litigate their claims in two courts, half the world apart from each other, with not only the consequent added expense and inconvenience but also the possible detriment of inconsistent results. A single forum is also most suitable for determining possible counter- and cross-claims. The public also has an interest in facilitating a speedy and less-expensive determination in one forum of all of the issues arising out of one episode. clause. However, the court’s discussion about severance and transfer orders in multidefendant cases draws from Liaw Su Teng and other non-forum selection clause cases and is thus more broadly applicable here. 14 Case: 21-50327 Document: 00516263671 Page: 15 Date Filed: 04/01/2022 No. 21-50327 Liaw Su Teng v. Skaarup Shipping Corp., 743 F.2d 1140, 1148–49 (5th Cir. 1984), overruled on other grounds, In re Air Crash Disaster Near New Orleans, La., on July 9, 1982, 821 F.2d 1147 (5th Cir. 1987). Several points made in Judge Rubin’s opinion are common to this species of joint severance and transfer motions. A court must “weigh carefully” the comparative inconvenience of splitting the suit versus the advantages to be gained from a partial transfer. It should not sever if the defendant not transferred is “so involved” in the controversy transferred to another court that partial transfer would require the same issues to be litigated in two places. “Manifestly,” Plaintiffs are disadvantaged by the expense and inconvenience of having to litigate in two disparate fora and by the possibility of inconsistent results. And the public has an interest in the comparative speediness and cost-savings from utilizing a single forum for the issues arising out of one episode. See also 15 Wright & Miller, § 3845, at 86 (echoing these factors). Other courts have agreed with Liaw Su Teng, and specified that in analyzing severance and transfer motions, “[b]efore effecting such a severance, a judge should weigh the convenience to the parties requesting transfer against the potential inefficiency of litigating the same facts in two separate forums.” White v. ABCO Eng'g Corp., 199 F.3d 140, 144 (3d Cir. 1999). Previously, the Third Circuit, explicitly endorsing Judge Rubin’s view, denied severance and transfer where the defendant not transferred was more than “indirectly connected” to the Plaintiff’s dispute with the defendant seeking transfer. Sunbelt Corp. v. Noble, Denton and Assoc., Inc., 5 F.3d 28, 34 (3d Cir. 1993). The Second Circuit, which pioneered using severance and transfer as a permissible strategy of case management, nonetheless held it appropriate only “where the administration of justice would be materially advanced….” and where a defendant in one district is 15 Case: 21-50327 Document: 00516263671 Page: 16 Date Filed: 04/01/2022 No. 21-50327 only “indirectly connected” to the claims that will be transferred to the other district. Wyndham Assoc. v. Bintliff, 398 F.2d 614, 618-19 (2d Cir. 1968). 17 The district court here quoted Rolls Royce, but it misperceived and thus misapplied this court’s explanation about “judicial efficiency.” In the above cases, courts were not deciding ordinary Rule 21 severance motions, in which parties or claims may be split while the disputes are maintained before the same court. Severance and transfer requires two courts to engage in the work of one, prompting serious concerns about duplication of judicial resources, the consistency of rulings, and litigation costs. The circuit courts that discussed severance and transfer motions in this context have uniformly indicated an aversion to granting such motions at the expense of needless duplication of judicial effort. The rule emanating from Rolls Royce and Liaw Su Teng is that in most multidefendant cases—other than those involving forum selection clauses—severance and transfer makes sense only where the administration of justice would be materially advanced and a defendant in one district is not “so involved” in the transferred controversy that the same issues would have to be litigated twice. 18 Consequently, the district court erred legally in finding that the State Department is only indirectly connected 17 Wright & Miller explains that severance and transfer of claims or parties enabled courts to avoid the rule that “[i]n suits against multiple defendants, transfer is proper only to a district in which all of them are subject to personal jurisdiction and in which venue is proper for an action against all of them.” Wright & Miller § 3845, at 85. The treatise also endorses the cautious use of such orders. Id. at 86-87. 18 See also Continental Grain Co. v. The FBL-585, 364 U.S. 19, 26, 80 S. Ct. 1470, 1474 (1960)(“To permit a situation in which two cases involving precisely the same issues are simultaneously pending in different District Courts leads to the wastefulness of time, energy and money that Sec. 1404(a) was designed to prevent. Moreover, such a situation is conducive to a race of diligence among litigants for a trial in the District Court each prefers”). 16 Case: 21-50327 Document: 00516263671 Page: 17 Date Filed: 04/01/2022 No. 21-50327 to claims pled against the NJAG 19 and in failing to find that the administration of justice would not be materially advanced by transfer. The direct connection between the Plaintiffs’ claims against these two defendants contradicts the district court’s artful dissection of Defense Distributed’s Second Amended Complaint. The court ignored the major components of the lawsuit and the overarching connection alleged between the State Department and the NJAG. Both government entities have suppressed legal speech by prohibiting the publication of the company’s digital firearms files on the internet and into New Jersey. That the First Amendment protects all of the Plaintiffs’ publications underlies all of their other claims. 20 The Plaintiffs’ assertion of seventeen separate claims reflects the consequences of that suppression and the tortuous path they have been forced to pursue for redress. Yet, contrary to common sense and heedless of a potential for disparate constitutional rulings if the case against the NJAG remains transferred, the court belittled the First Amendment issues. According to the district court, not all of Plaintiffs’ claims involve the First Amendment. The court overlooked Plaintiffs’ claims that directly involve both Defendants in the settlement agreement breach and in censorship under the Second Amendment and Due Process clause. And the larger point is that none of Plaintiffs’ claims would exist if they had been allowed to publish the various digital firearms files continuously since 2013. The First Amendment is the sine qua non of this case. 19 The district court found the factual overlap between the claims pled against each defendant is “minuscule;” and that the claims have no “logical connection” because the defendants’ actions occurred “in different places and at different times.” 20 The First Amendment claims, moreover, are complex factually and legally, as they involve questions about compelling interest, narrow tailoring, and numerous types of digital firearms information that Defense Distributed has created. 17 Case: 21-50327 Document: 00516263671 Page: 18 Date Filed: 04/01/2022 No. 21-50327 The other larger point ignored by the district court is that the principal claims against both defendants are temporally and factually intertwined to the extent that litigation in separate courts would largely overlap. A paraphrase of the facts alleged in the Second Amended Complaint is demonstrative. Just when the Plaintiffs, after several years of litigation, thought they had obtained relief from a signed settlement agreement with the State Department, the NJAG loudly led a bevy of states in opposition. Within a span of about six months, he filed suit in Washington state, even more remote from New Jersey than Texas, and forced the joinder of Defense Distributed as a defendant there. He evidently thought the parties’ fates were legally and factually connected when he sought and obtained an injunction expressly to prevent the State Department from completing the settlement with Plaintiffs. The NJAG kept up public pressure against the settlement with threats of civil and criminal punishment against Plaintiffs’ president Cody Wilson personally. At this time, the State Department opted not to complete the settlement. Accordingly, the State Department did not modify relevant federal regulations, disavowed the license and exemption from regulations it had promised Defense Distributed, and refused to appeal adverse decisions by the Washington federal court. The extent to which the NJAG’s campaign influenced the State Department’s alleged breaches is relevant to the claims against both defendants. At the same time, the NJAG’s seminal place in the litigation is a major, though far from the only facet of his conduct that was designed to derail the settlement and independently to restrain Plaintiffs’ exercise of free speech. Plaintiffs’ essential claims for First Amendment violations, breach of the settlement agreement, and the NJAG’s interferences cannot be understood by a factfinder without 18 Case: 21-50327 Document: 00516263671 Page: 19 Date Filed: 04/01/2022 No. 21-50327 investigating and telling the whole story. Similarly, having to tell the same story in two courts would abuse Plaintiffs and the judicial process. 21 Also plain from the complaint is that the subsidiary claims are dependent upon the primary claims identified above. To cite one instance, Defense Distributed pleads that the State Department violated the Administrative Procedure Act in various aspects of its settlement agreement breach. The Washington State litigation was also based on alleged violations of the Administrative Procedure Act. The State Department’s noncompliance may have been caused by the mere fact of the Washington State litigation or by the imperative of complying with that court’s injunctive decrees or by the NJAG’s public campaign against the settlement. Sorting out cause and effect for these claims demands a single factfinder and judicial resolution. The district court also erred legally by failing to conclude that the administration of justice would not be materially advanced by transfer of the case against the NJAG to New Jersey. See Rolls Royce, 775 F.3d at 680. The burden rests on the NJAG as the movant to demonstrate that proposition, and he did not succeed. First, the public interest in achieving a single court’s ruling on Plaintiffs’ First Amendment claims cannot be overstated. Government instigated censorship of constitutionally protected speech is abhorrent to self-government; courts have a duty to prevent illegal censorship. But severance and transfer enhances the risk of conflicting rulings, which would seriously injure the Plaintiffs and throw the law in this important constitutional area into national disarray for several years. 21 The NJAG interjects that a sovereign immunity defense precludes any tortious interference claim asserted by Plaintiffs. Plaintiffs dispute the assertion. This merits defense has no place in our analysis. 19 Case: 21-50327 Document: 00516263671 Page: 20 Date Filed: 04/01/2022 No. 21-50327 Second, because of the complex factual interactions among Plaintiffs and these Defendants, discovery and trial for the principal claims will require many of the same witnesses. No efficiency exists from conducting two factbased litigations half a continent apart. On the other hand, no efficiency is gained by having two courts decide the separate subsidiary claims against each Defendant. Such claims are largely legal in nature, overlapping in several instances, and best resolved on briefing to a single court that has gained familiarity with the intricacies of Plaintiffs’ dozens of digital firearms files and background materials that could be published to the internet and in New Jersey. There is no obvious efficiency advantage, much less materially enhanced judicial economy from forcing Defense Distributed’s case into two separate cases. The necessity of denying severance conjoined with transfer is confirmed by proper application of Rolls Royce and Liaw Su Teng. In addition, the district court’s separate and independent Rule 21 severance and Section 1404 transfer analyses are plagued with error and therefore alone justify the rebuke of mandamus. We turn first to severance.