Yao-Wen Chang v. Baxter Healthcare Corp.
599 F.3d 728, 2010 U.S. App. LEXIS 6257 (2010)
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Rule of Law:
In a diversity case transferred by an MDL panel, the transferee court applies the choice-of-law rules of the transferor court. Under California's borrowing statute and interest-balancing approach, tort claims by foreign plaintiffs injured abroad are subject to the foreign jurisdiction's statute of repose, overriding the discovery rule. Dismissal for forum non conveniens is appropriate for foreign plaintiffs when the foreign forum is clearly more convenient, even if the alternative forum's remedy might be less favorable or potentially time-barred, provided the foreign jurisdiction’s limitations period would also apply in the U.S. court.
Facts:
- Plaintiffs, or the decedents they represent, are residents of Taiwan and are hemophiliacs.
- Defendants manufactured clotting factors in California.
- Defendants allegedly failed to eliminate HIV from blood donors used for clotting factors, which could have been done through heat treatment.
- Defendants continued to distribute these HIV-contaminated clotting factors in foreign countries, including Taiwan, after discovering contamination, while withdrawing them from distribution in the United States.
- Plaintiffs acquired, injected, and became infected by the contaminated clotting factors in Taiwan in the 1980s.
- In 1998, plaintiffs entered into a settlement agreement with some defendants, receiving $60,000 each, and the agreement included a 'scale-up' clause for future compensation.
- Plaintiff Chen-Chen Huang claims to have been infected with HIV through sexual relations with her hemophiliac boyfriend (now deceased), who allegedly contracted HIV from defendants' clotting factors.
Procedural Posture:
- Plaintiffs (residents of Taiwan, representing hemophiliacs or their decedents) filed lawsuits, originally in California, against manufacturers of clotting factors (defendants).
- These cases were transferred by the multidistrict litigation (MDL) panel to the federal district court for the Northern District of Illinois in Chicago for pretrial proceedings, as part of In re Factor VIII or IX Concentrate Blood Products Litigation (MDL No. 986 JFG).
- The district court dismissed some of the plaintiffs' claims as untimely under California law and others on the ground of forum non conveniens.
- Plaintiffs appealed the district court's dismissals to the United States Court of Appeals for the Seventh Circuit.
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Issue:
Does a federal court sitting in diversity and applying state choice-of-law rules (from the transferor court) properly dismiss tort claims as time-barred under a foreign statute of repose and dismiss contract and other tort claims on the grounds of forum non conveniens when the plaintiffs are foreign nationals, the injury occurred abroad, and key evidence and witnesses are in the foreign country?
Opinions:
Majority - posner, circuit judge
Yes, the district court properly dismissed the tort claims as untimely and the contract and remaining tort claims on grounds of forum non conveniens. For diversity cases transferred by an MDL panel, the court applies the choice of law rules of the transferor jurisdiction, which in this case was California. Under California law, the plaintiffs' tort claims were untimely. While California has a discovery rule, plaintiffs had a reasonable basis to suspect a cause of action by 1998 when settlement negotiations began, more than five years before their 2004 suit. The defendants' denial of liability during settlement is not considered fraudulent concealment that would toll the statute of limitations. Furthermore, California's borrowing statute (§ 361) directs courts to apply a foreign jurisdiction's statute of repose when the cause of action 'arose' in that foreign country. A tort claim 'arises' where the injury occurs, not where the negligent act took place. Since plaintiffs were infected in Taiwan in the 1980s, their tort claims arose there and are time-barred by Taiwan's 10-year statute of repose, which overrides the discovery rule. Even without the borrowing statute, California courts would apply Taiwanese law under its 'balancing of interests approach,' as California has no interest in treating Taiwanese plaintiffs more generously than Taiwan treats its own citizens. The district court also correctly dismissed other claims on forum non conveniens grounds. The breach of contract claim related to the 'scale-up' clause in the 1998 settlement is ambiguous and requires evidence from Taiwanese witnesses (counsel, patient representatives, health officials, defendants' employees) to interpret. Obtaining this evidence for a U.S. trial is difficult because Taiwan is not a party to the Hague Evidence Convention. For foreign plaintiffs, the presumption in favor of their chosen forum is significantly weakened when they can litigate in their home country. Similarly, Chen-Chen Huang's products liability claim would require evidence of causation primarily located in Taiwan. While an alternative forum is inadequate if it provides 'no remedy at all,' Taiwan is not deemed inadequate here merely because the claims might be time-barred there. This is because California courts, applying their borrowing statute, would also apply Taiwan's statute of repose or other limitations periods to these claims. Dismissal for forum non conveniens is based on convenience, not to allow plaintiffs to avoid an unfavorable change in substantive law, especially when the domestic forum would apply the same substantive limitations period. The Taiwanese statute of repose reflects a substantive policy that the plaintiffs are attempting to circumvent.
Analysis:
This decision clarifies the application of choice-of-law rules in multidistrict litigation, particularly how borrowing statutes and statutes of repose intersect with the discovery rule for foreign plaintiffs. It firmly establishes that a tort claim 'arises' where the injury occurs, regardless of where the product was manufactured or the negligence took place, which is critical for determining the applicable statute of limitations. Moreover, the case reinforces the diminished deference given to foreign plaintiffs' forum choice in forum non conveniens analyses, especially when the alternative foreign forum is adequate and would apply the same substantive limitations principles as the U.S. court, thus preventing forum shopping to gain a procedural advantage.
