Preparing for Multidistrict Litigation: Lessons for the Defense Toolkit

When a company learns that it may wind up as a defendant in a multidistrict litigation (or MDL), it may initially feel like a disaster. Between expensive, drawn out, and complicated legal proceedings and the possibility of outsized damages and company-threatening liability, it is difficult to imagine the upside. However, MDLs may not be as unfavorable a forum for defendants as they initially seem.

In this article, we highlight a recent defense victory in In Re: Oral Phenylephrine Marketing and Sales Practices Litigation, an MDL with $14 billion in damages at stake. There, defendants defeated all claims on a motion to dismiss. By examining this MDL, in-house counsel can learn how to leverage the MDL framework to their advantage to achieve an early exit.

Background: What Is multidistrict litigation?

The Multidistrict Litigation Act of 1968^[1] authorizes the Judicial Panel on Multidistrict Litigation (JPML) to transfer cases “involving one or more common questions of fact” to any district court for coordinated or consolidated pretrial proceedings. Any party can petition the JPML to centralize a group of cases, or the JPML may do so of its own initiative. The number of cases transferred into the MDL court depends on the litigation, but the largest MDLs have tens of thousands to hundreds of thousands of cases transferred for pretrial proceedings.

Once centralized pretrial proceedings are complete, including discovery and dispositive motions, each individual action is remanded to the original district where the case was filed (unless the case settles, or the parties agree to conduct one or more trials in the MDL court).

While MDLs have their advantages – including preventing a sprawling docket of similar cases across the country that may end up with inconsistent rulings – they certainly have some disadvantages as well. From a defense perspective, MDLs attract weak or meritless claims, which plaintiffs like to include in the MDL to increase the overall value of the litigation and thus pressure the defendants to settle. The potential damages at stake, particularly in the largest MDLs, would give any defendant pause. As a result, MDL defendants often seek a swift exit – as did the successful defendants in our featured case.

Lessons from In Re: Oral Phenylephrine Marketing and Sales Practices Litigation (the “Phenylphrine MDL”)^[2]

Phenylphrine is a decongestant ingredient used in several household medications, including Sudafed PE, Tylenol Cold and Flu, and Vicks Nyquil and Dayquil. Following FDA statements in 2023 that phenylephrine is no more effective than a placebo, plaintiffs brought nearly 100 separate cases in federal courts across the country against manufacturers and retailers of these medications, alleging that phenylephrine is ineffective as a decongestant. Importantly, FDA did not revoke or modify its prior approval of phenylephrine. The cases were centralized in an MDL in the Eastern District of New York before Judge Brian M. Cogan.

Plaintiffs filed a bellwether class action complaint seeking approximately $14 billion in damages, alleging claims for mislabeling, false advertising, fraudulent concealment, breach of express warranty, and violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act.^[3]

Defendants Achieve Early Dismissal of All Claims. Despite the enormity of the damages sought, and the FDA’s statements regarding phenylephrine’s effectiveness (or lack thereof), the MDL defendants won an early exit from the litigation at the motion to dismiss stage. In his October 29, 2024 ruling, Judge Cogan agreed with defendants that all of the state law claims were preempted by federal law. The court found that only the FDA can determine if an over-the-counter drug like phenylephrine is effective, and FDA had not revoked or modified its approval of phenylephrine. Accordingly, it was not unlawful for defendants to manufacture or sell their decongestant products containing phenylephrine. The court also dismissed the RICO claim for lack of standing.^[4]

The MDL Framework Gives Defendants Sweeping Victory in Federal Court. This sweeping victory stands in contrast to what may have occurred without the MDL framework. While Judge Cogan correctly ruled in the Phenylphrine MDL that the plaintiffs’ state law claims were preempted by federal law, federal courts have not consistently applied the preemption doctrine, particularly in the context of other over-the-counter drugs. For example, in Gibson v. Albertsons Companies, Inc., the court found that state law mislabeling and warranty claims arising from the sale of over-the-counter cough medicine were not preempted.^[5] Thus, had the cases not been centralized in an MDL, the defendants in the Phenylphrine MDL may have been required to file nearly 100 separate motions to dismiss in different federal courts across the country, with no guarantee of consistent outcomes on the crucial threshold issue of preemption.

Selection of MDL Court is Critical for Defendants. The defendants in the Phenylphrine MDL were successful in large part due to the assigned judge and his correct application of preemption law. Had the JPML assigned the Phenylphrine MDL to a different court, that court may have reached a different conclusion on preemption. Accordingly, companies facing an MDL should leverage the lessons from the Phenylphrine MDL and urge the JPML to centralize the cases in a jurisdiction with a precedent of correctly applying the law on important threshold issues such as the preemption doctrine – which is easier said than done. The JPML has wide discretion in deciding where to centralize MDL proceedings, although the parties may submit briefing advocating for their choice of forum. In the Phenylphrine MDL, the defendants advocated for transfer to the Eastern District of New York where many of the actions were filed and the parties and witnesses were located.^[6] Luckily for these defendants, the JPML agreed with this choice of forum.

Defendants do not always land such a favorable draw and ending up in front of a judge who takes a less than favorable view on issues like preemption and other crucial issues is always a possibility. We will address potential strategies if you find yourself, or your client, in such a situation in a future article.