By: Ryan Malone
Does a Minnesota federal district court sitting in diversity jurisdiction apply state law when deciding whether to allow a claim for punitive damages? Despite longstanding precedent, a series of recent decisions suggest the answer is “maybe.”
Minn. Stat. § 549.191 codifies the Minnesota rule on punitive damages, and acts as a “gatekeeping statute” by prohibiting a plaintiff from seeking punitive damages in his or her initial complaint.1 The statute provides that after filing suit, a party must make a motion to amend his or her complaint to add a claim for punitive damages. The motion must allege the legal basis under Minnesota law, namely Minn. Stat. § 549.20, which generally requires clear and convincing evidence that the defendant showed “deliberate disregard for the rights or safety of others.” The motion must be accompanied by one or more affidavits showing the factual basis for the claim.2
Fed. R. Civ. P. 15, on the other hand, allows a plaintiff in federal court to amend his or her complaint as a matter of course within 21 days of service, or with the consent of the other party or the court.3 Federal courts liberally construe this rule, and will only deny leave to amend in limited circumstances, such as bad faith or futility.4
The ostensible conflict between these two standards must be viewed in light of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). By virtue of Erie, state law supplies substantive law, whereas federal law supplies procedural law for cases with diversity jurisdiction.5 Since Minnesota’s gatekeeping statute on punitive damages was enacted in 1986, Minnesota’s federal district court has largely viewed the statute as substantive in nature, and therefore applicable in diversity cases.6 That consensus did not emerge immediately. In Jacobs v. Pickands Mather & Co.7, which was decided one year after the statute’s 1986 adoption, Judge Alsop opined that “the provisions of Minn. Stat. § 549.191 are procedural in nature, and do not affect the ultimate outcome of the plaintiffs’ claim for punitive damages.”8 Only three years later, after multiple District of Minnesota judges determined that section 549.191 must apply in diversity cases “to avoid forum shopping,” Judge Alsop reversed course and embraced this view as well.9 For the next two decades, District of Minnesota judges consistently held that Minnesota’s gatekeeping statute on punitive damages was substantive and, therefore, that section 549.191 applied in diversity cases.10
In 2010, the United States Supreme Court cast that consensus into doubt by amending the Erie standard, and with it, district courts’ interpretation of which statutes were potentially “substantive” thereunder. Justice Scalia, writing for the plurality in Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co,11 devised a two-part test to determine whether a state law is preempted. First, a district court must determine whether the federal law at issue “answers the question in dispute.”12 The second question is whether the federal rule is valid under the Rules Enabling Act.13 If both questions are answered in the affirmative, the federal law preempts the state law.14
In the wake of Shady Grove, federal judges within the District of Minnesota have had multiple opportunities to clarify whether Minnesota’s punitive damages rule is substantive or procedural, and consequently whether it should apply in federal court. Nonetheless, eight years after Shady Grove, that clarity remains elusive.
In July 2017, the District of Minnesota confronted this issue in In re Bair Hugger Forced Air Warming Devices Prod. Liab. Litig.15 There, plaintiffs throughout the nation alleged that blankets intended to keep patients warm during surgery caused infections.16 Their product liability actions were then consolidated into a Multi-District Litigation and transferred to the District of Minnesota. The plaintiffs then moved the court for leave to amend their complaints to assert claims for punitive damages against defendants 3M and Arizant Healthcare, Inc.17
Magistrate Judge Noel asked the parties to brief whether the Minnesota rule on amending complaints for punitive damages conflicted with the federal rule18, and whether the Minnesota rule was therefore preempted under Shady Grove.19 Acknowledging that Minnesota has “consistently applied the Minnesota punitive damage statute in diversity cases where state law supplies the rule of decision,”20 Judge Noel reasoned that “[t]he statutes conflict because the Minnesota procedural rule would not allow for the amendment absent affidavits establishing prima facie evidence of deliberate disregard for the rights and safety of others, where the federal rule has no such procedural requirement.”21 Put another way, both Fed. R. Civ. P. 15 and Minn. Stat. § 549.191 answer the question in dispute: what is the standard for amending a complaint to add a claim for punitive damages?22 Because the federal rule answered that question, and because Judge Noel determined Rule 15 was valid under the Rules Enabling Act by not abridging, enlarging or modifying any substantive right, Bair stands for the proposition that Rule 15 preempts Minnesota’s gatekeeping statute under the Shady Grove test. 23 Although the plaintiffs filed an objection to Judge Noel’s decision,24 District Court Judge Ericksen signed an order affirming Judge Noel’s order shortly thereafter.25
Thus far, however, Bair appears to represent the exception, rather than the rule. Roughly four months after the order in Bair, the District of Minnesota reached the opposite conclusion. Rassier v. Sanner26 involved a plaintiff whose wrongful implication in Jacob Wetterling’s abduction became national news following American Public Media’s release of the widely popular Into the Dark podcast.27 The plaintiff’s claims against several Stearns County officials included federal law causes of action for unreasonable searches and seizures, First Amendment retaliation, and denial of procedural due process.28 The plaintiff also asserted state law claims for intentional infliction of emotional distress and defamation, and with respect those claims, the court held that the Minnesota gatekeeping statute necessitated a motion for leave to amend.29 As did the court in Bair, the court in Rassier observed that “[c]ourts in this district…have consistently applied [the Minnesota punitive damages statute] to state-law claims.”30 Because the plaintiff had not filed a motion to amend the pleadings consistent with Minnesota’s gatekeeping statute, the court dismissed the demand for punitive damages for the state law claims.31
Rassier is hardly unique. Indeed, several cases in the District of Minnesota, even in the wake of Shady Grove, have applied the state rule on punitive damages in diversity of jurisdiction cases.32 For instance, Healey v. I-Flow, LLC held that the state rule applies in diversity of jurisdiction cases.33 There, the court echoed the longstanding observation that the Minnesota gatekeeping statute “discourages forum shopping between state and federal court…[and] reduces the influence that a ‘plaintiff’s ability to brandish a claim for punitive damages as a tool for promoting an advantageous settlement or otherwise advancing his claims’ may have on his selection of a federal forum.”34
A decision issued earlier this month further suggests a return to the pre-Bair consensus. In Bhatia v. 3M Co.,35 the court observed “[i]n a diversity action such as this, punitive damages must be pled in conformity with Minnesota Statutes section 549.191, which requires a party seeking punitive damages to obtain the court’s leave based on a prima facie showing. Minn. Stat. § 549.191.”36 Rassier and Bhatia suggest that, even in the wake of Shady Grove, the applicability of Minnesota’s gatekeeping statute in federal court remains possible, if not likely. In fact, neither order even mentions Shady Grove. For the time being, it seems that federal court plaintiffs seeking punitive damages may still need to enter through the gates.
1 In Re: Bair Hugger Forced Air Warming Devices Prod. Liab. Litig., 2017 WL 5187832, at *3 (D. Minn. July 27, 2017); Target Corp. v. LCH Pavement Consultants, LLC, 960 F. Supp. 2d 999, 1010 (D. Minn. 2013); Merry v. Prestige Capital Markets, Ltd., 944 F. Supp. 2d 702, 711 n. 8 (D. Minn. 2013).
2 Minn. Stat. § 549.191.
3 Fed. R. Civ. P. 15.
4 Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008); Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005).
5 304 U.S. 64, 78 (1938).
6 See, e.g., Kuehn v. Shelcore, Inc., 686 F. Supp. 233, 234 (D. Minn. 1988) (“There is no Federal Rule which directly conflicts with Minnesota Statutes § 549.191.”); see also In re Baycol Prod. Litig., 218 F.R.D. 197 (D. Minn. 2003); In re Mirapex Prod. Liab. Litig., No. CV 06-1206 JMR/FLN, 2007 WL 9636345, at *1 (D. Minn. Nov. 27, 2007); In re Levaquin Prods. Liab. Litig. (Levaquin II), No. 08-cv-5743 (JRT), 2010 WL 4867588, at *2 (D. Minn. Nov. 23, 2010); Healey v. I-Flow, LLC, 853 F. Supp. 2d 868, 872 (D. Minn. 2012); Ulrich v. City of Crosby, 848 F. Supp. 861, 866 (D. Minn. 1994); Bunker v. Meshbesher, 147 F.3d 691, 696 (8th Cir.1998); Zeelan Indus., Inc. v. de Zeeuw, 706 F. Supp. 702, 705 (D. Minn. 1989).
7 No. 5-87-CIV 49, 1987 WL 47387 (D. Minn. Aug. 24, 1987).
8 Id. at *1.
9 Sec. Sav. Bank v. Green Tree Acceptance, Inc., 739 F. Supp. 1342, 1352-53 (D. Minn. 1990) (citing Kuehn v. Shelcore, Inc., 686 F. Supp. 233 (D. Minn. 1988)); Zeelan Indus., 706 F. Supp. at 705; Webster Truck & Caster Co. v. The Nutting Co., Civ. 3–88–662, 1989 WL 222673 (D. Minn. Feb. 6, 1989)); see also Fournier v. Marigold Foods, Inc., 678 F. Supp. 1420, 1422 (D. Minn. 1988).
10 Baycol Prod. Litig., 218 F.R.D. at 207; In re Mirapex Prod. Liab. Litig., 2007 WL 9636345, at *1; In re Levaquin Prods. Liab. Litig. (Levaquin II), 2010 WL 4867588, at *2. In federal question cases, unsurprisingly, the Minnesota District Court has generally held that Minn. Stat. § 549.191 does not apply. See Aviva Sports, Inc. v. Fingerhut Direct Mktg., Inc., No. CIV. 09-1091 JNE JSM, 2010 WL 4193076, at *6 (D. Minn. Oct. 7, 2010) (“If claims arise under both federal and state laws, then Rule 15 applies to federal claims and Minn. Stat. 549.191 and 549.20 apply to state claims.”) (citing Gamma-10 Plastics, Inc. v. Am. President Lines, Ltd., 32 F.3d 1244, 1254–55 (8th Cir. 1994)).
11 559 U.S. 393 (2010).
12 Id. at 398.
13 Id. (citing 28 U.S.C. § 2072, which provides that “[t]he Supreme Court shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts (including proceedings before magistrate judges thereof) and courts of appeals,” and that “[s]uch rules shall not abridge, enlarge or modify any substantive right.”).
14 Shady Grove, 559 U.S at 398.
15 No. MDL152666JNEFLN, 2017 WL 5187832, at *2 (D. Minn. July 27, 2017).
16 Id. at *1
18 Two years before Bair, the Minnesota District Court had also requested supplemental briefing on this issue. See Sorin Grp. USA, Inc. v. St. Jude Med., S.C., Inc., No. CV 14-4023 (RHK/JJK), 2015 WL 12803583, (D. Minn. Sept. 28, 2015). In that case, however, “[t]he parties submitted a joint letter brief indicating that they agreed the pleading of punitive damages should conform to the gatekeeping statute.” Id. at *1 n.1. In light of that agreement, the court “assume[d] that the gatekeeping statute applie[d] and expresse[d] no opinion on the issue presented in the order for supplemental briefing.” Id.
19 Bair, 2017 WL 5187832 at *1.
20 Id. at *1 n.1.
21 Id. at *4.
22 Id. at *3-4.
23 Id. at *4.
24 Sealed Appeal/Objection of Magistrate Judge Decision on Order on Motion to Alter/Amend/Supplement Pleadings, In Re Bair Hugger Forced Air Warming Devices Prod. Liab. Litig., No. 15-MD-2666 (D. Minn. Aug. 10, 2017), ECF No. 663.
25 Order Denying Plaintiff’s Objection to and Affirming Magistrate Judge Decision on Order on Motion to Alter/Amend/Supplement Pleadings, In Re Bair Hugger Forced Air Warming Devices Prod. Liab. Litig., No. 15-MD-2666 (D. Minn. Oct. 19, 2017), ECF No. 985.
26 No. 17–938 (DWF/LIB), 2017 WL 5956909 (D. Minn. Nov. 30, 2017).
27 Id. at *1.
28 Id. at *2.
29 Id. at *7.
30 Id.; see also Bair, 2017 WL 5187832 at *4.
31 Rassier, 2017 WL 5956909 at *7.
32 See, e.g., Healey v. I-Flow, LLC, 853 F. Supp. 2d 868, 876 (D. Minn. 2012); Njema v. Wells Fargo Bank, N.A., No. CV 13-519 (PJS/JSM), 2014 WL 12648466, at *13 (D. Minn. Nov. 4, 2014); Select Comfort Corp. v. Tempur Sealy Int'l, Inc., No. 13-CV-2451 (DWF/SER), 2015 WL 12803582, at *2 (D. Minn. Nov. 6, 2015),
Coy v. No Limits Educ., No. CV 15-93 (BRT), 2016 WL 7888047, at *2 (D. Minn. Apr. 1, 2016); Sorin Grp. USA, Inc. v. St. Jude Med., S.C., Inc., 176 F. Supp. 3d 814, 828 (D. Minn. 2016).
33 Healey, 853 F. Supp. 2d at 873; see also Fournier v. Marigo ld Foods, Inc., 678 F. Supp. 1420, 1422 (D. Minn. 1988) (“Permitting plaintiff to allege punitive damages in the initial complaint consistent with the federal rule would encourage forum-shopping.”).
34 Healy v. I-Flow, LLC, 853 F. Supp. 2d at 873 (citing Zeelan Indus., 706 F. Supp. at 705).
35 No. CV 16-1304 (DWF/BRT), 2018 WL 1122374 (D. Minn. Mar. 1, 2018).
36 Id. at *13.