On February 20, 2015, the US Court of Appeals for the Sixth Circuit held in Sutherland v. DCC Litig. Facility, Inc. that when a case is transferred under 28 U.S.C. § 157(b)(5) as a "related to" bankruptcy case, the original jurisdiction's choice-of-law rules still apply (No. 13-1497, (6th Cir. Feb. 20, 2015)).

The plaintiff filed suit in the Middle District of North Carolina in 1993, alleging that the silicone in her breast implants had caused a wide range of serious health problems. A multidistrict litigation panel transferred Sutherland's suit to the Northern District of Alabama, where a class settlement was reached in 1994. Sutherland opted out of the class settlement, and her case was transferred to the Eastern District of Michigan, where the manufacturer of her implants had filed for bankruptcy. The transfer was made because the plaintiff's action was "related to" the bankruptcy under 28 U.S.C. § 157(b)(5). Defendant moved for summary judgment, arguing in part that plaintiff's claim was barred by the relevant statute of limitations. The district court concluded that no choice-of-law analysis was necessary, applied Michigan law and granted summary judgment to the defendant on statute-of-limitations grounds.

On appeal, the Sixth Circuit considered whether the district court erred in applying Michigan law to plaintiff's claims. The Sixth Circuit noted that if this were a diversity case that was transferred under the multidistrict litigation statute (28 U.S.C. § 1407) or general change-of-venue statute (28 U.S.C. § 1404), the court would be bound to apply the choice of law rules of the state in which the case was originally filed.

But in this case, although the the plaintiff's claims were filed in federal court under diversity jurisdiction, they were transferred to the Eastern District of Michigan under 28 U.S.C. § 157(b)(5), which permits the transfer of personal injury tort claims to the district court in which the bankruptcy case is pending. That distinction mattered, the court observed, because it raised a narrow question of first impression for the court: whether the change of venue under section 157(b)(5) altered which state's law governs.

The court nevertheless held that a venue transfer under section 157(b)(5) does not impact the state choice of law rules to be applied. The Sixth Circuit relied on the US Supreme Court's decision in Van Dusen v. Barrack, which held that the law of the state of filing attaches when the plaintiff files her complaint and travels with the case (376 U.S. 612 (1964)).

In so holding, the Sixth Circuit reasoned that a change of venue should not:

The court limited its holding to cases transferred under 28 U.S.C. § 157(b)(5), and did not address the broader question of whether to apply the choice of law rules of the state in which the case was originally filed to all state disputes arising under the bankruptcy power.

Judge Sutton dissented from the majority's opinion, stating that the plaintiff had waived any argument that North Carolina law applies, and that in any event, her claims would be time-barred regardless of which state's law applied.

Counsel representing parties in cases transferred under section 157(b)(5) in the Sixth Circuit should be aware that the transferee court likely will apply the choice-of-law rules of the state in which the claim was originally filed.