The Girardi Keese Law Firm has asked the U.S. Supreme Court to decide “whether a federal court has subject-matter jurisdiction to force state court plaintiffs who have never appeared in federal court to surrender proceeds from their state court settlements to compensate counsel in federal court litigation.” Girardi Keese Law Firm v. Plaintiff Advisory Committee, No. 15-704.
 
The issue arises in multi-district litigation against GlaxoSmithKline LLC concerning its diabetes drug Avandia. According to the petition, which was filed by Paul Clement of Bancroft PLLC, Girardi Keese litigated thousands of suits in California state court, 25 of which were removed to federal court and subsequently consolidated pursuant to 28 U.S.C. § 1407. After years of litigation, the firm negotiated a global settlement for about 4,000 state court and 25 federal court clients. The steering committee in the coordinated actions in federal court then asked the district court to order GlaxoSmithKline “to deposit 7% of the settlement proceeds for each of petitioner’s state court clients into a fund designed to benefit the federal court steering committee.” The district court issued the order, and the Third Circuit Court of Appeals affirmed.
 
The Third Circuit found that Girardi Keese had signed an attorney participation agreement, which obligated it to pay 7% of any recovery into the common benefit fund in exchange for access to work product developed by the steering committee. As described by the petition, the Third Circuit held that the district court had “ancillary jurisdiction” to enforce the terms of the Attorney Participation Agreement by directing GlaxoSmithKline to redirect a percentage of Girardi Keese’s settlement proceeds to the common benefit fund. 

According to the petition, the district court lacked federal jurisdiction to issue this order, notwithstanding the attorney participation agreement: “A federal court cannot leverage its authority over a lawyer who represents clients in both federal and state courts to create jurisdiction over the state court case of a state court plaintiff who has never stepped foot in federal court.” 

The petition suggests the Third Circuit’s ruling conflicts with rulings in other circuits, but we are unaware of any ruling by a federal court endorsing petitioner’s view that a federal court would lack jurisdiction to enforce the terms of such an attorney participation agreement. The petition also insists, drawing on federalism principles, that state and federal proceedings may be coordinated by “comity and cooperation, not a federal court order.” But if federal courts lacked jurisdiction to enforce such agreements, there could very well be less coordinated exchange of MDL work product.

A response to the petition is due in January.