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Archive for May, 2008

Last night we held our first official event of the newly formed Class Actions, Derivative Suits, and Mass Torts Subsection of the Colorado Bar Association’s Litigation Section.  A dozen or so class action and mass tort lawyers from around the Denver metro area attended our cocktail function, and by all accounts the event was a success.  It was nice to meet other area lawyers with similar interests to talk about class action trends and issues.  We hope to hold our first CLE lunch program either in late June or in September, depending on the availabilty of speakers.  We are also working on content for our first newsletter.

The subsection website will be finalized soon.  We currently have space set aside at http://www.cobar.org/index.cfm/ID/20833/LITIG/Class-Action-Subsection/, but there is not any content on the site quite yet.

If you are a CBA member (or a prospective CBA member) interested in joining our group, please contact me at pkarlsgodt@bakerlaw.com.

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I came across this article today from Australian news outlet The Age regarding proposed class action reforms being considered in the Australian Federal Court.  Among the possible reforms reportedly being considered is a measure “restricting an appeal on an interlocutory issue until the entire case is heard.”

The quoted statement is admittedly lacking in detail, but the article appears to be saying that interlocutory appeals are now allowed Australian class actions but would be prohibited if the reforms are adopted.  That would be an interesting change of direction considering that the trend in American class action reform has been to go from a prohibition on interlocutory (meaning before a final verdict or judgment) appeals in class actions to allowing them under some circumstances.

Rule 23(f), Federal Rules of Civil Procedure, for example, was amended in 1998 to allow interlocutory appeal of class action certification decisions.   (See my early entry here).  Changes to various U.S. state rules and statutes, including Colorado, regarding interlocutory appeal of class certification decisions have come even more recently.   For a summary of various states’ class action reforms, see this handy guide from the American Tort Reform Association.

For previous news and commentary on ClassActionBlawg.com regarding class action reforms being considered by the EU and several of its member countries, as well as Canada, see herehere, and here.

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Here are some blog entries of interest to class action practitioners from the week that was.

It’s been a big week for blog postings on CAFA removal decisions…

… after a bit of a hiatus, CAFA Law Blog is back with a rollicking review of the latest in CAFA removal decisions from the Seventh Circuit Court of Appeals (relation back of amendment) …

http://www.cafalawblog.com/-case-summaries-the-plaintiff-files-his-complaint-adds-donald-duck-as-a-party-yadda-yadda-yadda-and-cafa-prevails-youve-come-a-long-way-baby.html

… while Class Action Defense Blog provides a somewhat more serious summary of the latest in CAFA removal decisions from the U.S. District Court for the Eastern District of California (proof of amount in controversy) …

http://classactiondefense.jmbm.com/2008/05/cafa_class_action_defense_case_18.html

… and Carlton Fields’ class action blog Classified outlines an opinion by the U.S. District Court for the Middle District of Alabama applying CAFA removal precedent in analyzing a remand motion under traditional amount-in-controversy principles (burden of proof where complaint does not specify the amount of damages sought):

http://www.carltonfields.com/classactionblog/blog.aspx?entry=214

(My apologies for the illiteration.  I’ve been reading too many stories for toddlers recently.)

The Complex Litigator provides breaking news on the United States Supreme Court’s denial of a Petition for Cert to review preemption issues surrounding state law bans on class action arbitration waivers in consumer contracts …

http://www.thecomplexlitigator.com/2008/05/breaking-news-u.html

… and more on the same case from Consumer Law and Policy Blog:

http://pubcit.typepad.com/clpblog/2008/05/supreme-court-r.html

The UCL Practitioner provides useful notes of a California State Bar presentation by San Francisco Superior Court Judge Richard A. Kramer with practice tips regarding case organization and discovery (including e-discovery issues) in class action litigation under the Unfair Competition Law (UCL):

http://www.uclpractitioner.com/2008/05/state-bars-annu.html

The D&O Diary surveys international trends in securities class action litigation:

http://www.dandodiary.com/2008/05/articles/securities-litigation/securities-lawsuits-a-global-phenomenon/

Drug and Device Law blog has an analysis of the arguments for and against an interesting proposal by the American Law Institute that would permit individual clients to agree in advance to be bound by the collective decisionmaking of an aggregate group of mass tort plaintiffs who are represented by a common group of lawyers.

http://druganddevicelaw.blogspot.com/2008/05/race-in-which-we-have-no-horse.html

Wage Law blog comments on a recent Eleventh Circuit Court of Appeals decision addressing whether refusal to sign an arbitration agreement during a pending wage and hour class action litigation can constitute protected activity sufficient to support a retaliation claim:

http://wagelaw.typepad.com/wage_law/2008/05/wrongful-termin.html

Overlawyered criticizes the attorney’s fees requested in a class action settlement involving video game purchasers.

http://overlawyered.com/2008/05/grand-theft-auto-class-action-settlement-26505-for-the-unrepresented-class-1-million-fee-request/

Points of Law summarizes a Kentucky Enquirer report on the testimony of Retired Circuit Court Judge Joseph “Jay” Bamberger regarding his actions in presiding over a now infamous fen-phen diet drug lawsuit that has led to the indictment and trial of several plaintiffs’ class action lawyers.

http://www.pointoflaw.com/archives/2008/05/fenphen-judge-i-didnt-know-wha.php

Health Plan Law addresses the futility exception to exhaustion of admininstrative remedies in ERISA class action litigation brought on behalf of HMO participants:

http://healthplanlaw.com/?p=634

FP Legal Post addresses a recent decision’s impact on Quebec, Canada’s reputation as a “class action haven”:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/05/23/quebec-no-longer-class-action-haven.aspx

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A panel of the Texas Court of Appeals today vacated a lower court’s order granting temporary custody to the state over hundreds of children seized in in a recent raid on a polygamist sect in a ranch near El Dorado, Texas.  USA Today blog On Deadline has posted a link to a copy of the court’s opinion.

The appellate court found an abuse of discretion by the lower court in holding that the Texas Department of Family and Protective Services had met its burden of proving that there was a “continuing danger to the physical health or safety” children of the 38 relators, mothers of some of the children who had been taken into custody.  There was no direct evidence, according to the court of appeals, that any of the relators’ children had been subjected to direct sexual or other physical abuse.  Instead, the Department had argued that all of the children were threatened by a “pervasive system of belief” within the group that condones polygamist marriage and underage females having children.

Listening to news reports about the decision today, I couldn’t help think about the parallels between the state’s arguments in the case and arguments often raised by plaintiffs in consumer class action cases.  Theories of liability in consumer fraud class actions often attempt to focus on an over-generalization of a defendant’s conduct as being “systemic” or “pervasive” and attempt to gloss over the lack of any evidence of injury to any particular member of the would-be class.  This focus on “pervasive” bad acts that might (or perhaps are even likely) to cause injuries within a group of people without proof of any actual injury as to any particular members of that group is a strategy that is often successful.  It is often successful notwithstanding that the individual claims of would-be class members require both proof of the bad act and an injury to the plaintiff.  Thus, the class action device is used to try to establish a defendant’s liability to hundreds, thousands, or even millions of individuals using proof that would not support liability in favor of any one of them individually.  The lesson of the Texas polygamist case is that where individual injury (or in the Texas case, a specific danger of injury), is a required element of proof, overgeneralized evidence of acts, policies, or beliefs that simply could cause the injury, without evidence that they actually did cause injury, should not be enough to carry the day.

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A National Law Journal Article published today (available at Law.com) entitled Tough Year for Class Action Attorneys Continues provides an analysis of the latest round of prosecutions of alleged class action kickback schemes.  As the article points out, the news provides more ammunition for those calling for a Congressional investigation into the scandals and those proposing new class action reform legislation.  For previous entries on these topics, click here and here.

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The Class Action Blogosphere Weekly Review is back on its regularly scheduled day this week.  As always, here are some blog entries that might be of interest to class action practitioners…

See Carlton Fields’ class action blog Classified for links to various news tidbits relating to class actions, including a summary of a bill recently passed in the United States House of Representatives that would amend the Fair and Accurate Transaction Act (FACTA) to, among other things, “ensure that it is not abused by frivolous class-action lawsuits against businesses.”

http://www.carltonfields.com/classactionblog/blog.aspx?entry=213

Class Action Defense Blog summarizes and provides a link to a transfer of venue decision by the U.S. District Court for the Southern District of New York noting that the deference to be given to a plaintiff’s choice of forum is “diminished” in a class action:

http://classactiondefense.jmbm.com/2008/05/venue_class_action_defense_cas.html

The Complex Litigator comments on a recent entry in California Punitive Damages regarding an appeal that may affect punitive damages claims in wage and hour class actions:

http://www.thecomplexlitigator.com/2008/05/are-punitive-da.html

http://calpunitives.blogspot.com/2008/05/pending-appeal-will-affect-punitive.html

Drug and Device Law Blog provides an in-depth analysis of and a link to the Second Circuit Court of Appeals’ recent decision in Pew v. Cardarelli, No. 06-5703-mv, slip op. (2d Cir. May 13, 2008), which addresses the procedures for appellate review of remand orders in cases removed under the Class Action Fairness Act…

http://druganddevicelaw.blogspot.com/2008/05/cafa-intrigue.html

… and see more on the same decision from the Consumer Law & Policy Blog

http://pubcit.typepad.com/clpblog/2008/05/new-cafa-decisi.html

The D&O Diary continues to be the leading source of information on litigation arising out of the subprime mortgage crisis:

http://www.dandodiary.com/2008/05/articles/subprime-litigation/yes-but-the-subprime-litigation-wave-rolls-on/

How Appealing discusses a recent Sixth Circuit Court of Appeals decision upholding a large verdict in an antitrust class action:

http://howappealing.law.com/051508.html#033744

Federal Civil Practice Bulletin discusses a recent First Circuit Court of Appeals decision discussing the level of merits evaluation required (as opposed to allowed) at the class certification stage:

http://federalcivilpracticebulletin.blogspot.com/2008/05/first-circuit-discusses-degree-of.html

Elizabeth Cabraser submits entry as a guest blogger on ACSBlog regarding the use of class actions as a tool for change and social justice:

http://www.acsblog.org/guest-bloggers-class-actions-and-justice.html

Law and More comments on the Deutsche Telekom trial and the possibility that Germany may adopt an American-style class action model (see my earlier entry here)

http://lawandmore.typepad.com/law_and_more/2008/05/will-germany-wind-up-importing-american-style-class-action-lawsuits.html

Canadian blog FP Legal Post comments on recent competition class action decisions in the Canadian courts:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/05/20/divisional-court-upholds-competition-class-action-certification.aspx

Startup Company Lawyer provides some practice tips for directors and officers on ways to minimize potential class action exposure resulting from the sale of a company:

http://www.startupcompanylawyer.com/2008/05/15/what-are-directors-duties-and-what-can-they-do-to-protect-themselves-in-a-sale-of-company/

Too Old to Know Better discusses a website allowing users to submit grievances for review by a consortium of plaintiffs’ class action lawyers (see my commentary on related topics here and here):

http://too-old-to-know-better.blogspot.com/2008/05/class-action-connect.html

A franchise lawyer provides his views on the use of the class action device in franchisee’s rights’ cases on Blue Maumau:

http://www.bluemaumau.org/my_personal_bias_foragainst_using_class_action_lawsuits

Sabal Insurance Group‘s blog summarizes a seminar addressing trends in shareholder class actions in the insurance industry:

http://sabalinsurance.blogspot.com/2008/05/insurers-told-to-monitor-class-action.html

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This site got a huge spike in page views today, thanks to a citation from a great website that I was not familiar with, www.LLRX.com.  A feature article published today on the site lists ClassActionBlawg.com among many online resources available for information regarding class action law.  Many thanks to LLRX.com for the link, and thanks also for tipping me off to the great online legal resource!

http://www.llrx.com/features/classactions.htm

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According to an AP story published today, Texas Senator John Cornyn has introduced a bill “aimed at protecting shareholders from rogue attorneys” in securities class actions.  Senator Cornyn’s bill, not coincidentally, was introduced on the same day that class action attorney William Lerach reported to prison for a 2-year term for paying illegal kickbacks to securities class action plaintiffs.  See here for Senator Cornyn’s official statement regarding the proposed legislation.  According to Senator Cornyn, the bill would 1) require sworn disclosures regarding the existence of direct or indirect payments by counsel to plaintiffs; 2) create a competitive bidding process for the selection of lead plaintiffs’ counsel; and 3) commission a GAO study regarding the appropriate “hourly rate for lead counsel.”

I previously commented on a proposal to initiate a Congressional investigation into systematic abuses in class action litigation.  (See my earlier entry here.)  Having not read the text of Senator Cornyn’s bill, I can’t say with confidence that it is another example of an unnecessarily rash solution to a perceived problem that can be remedied simply by enforcing existing law.  However, Mr. Lerach was prosecuted under existing law, pleaded guilty, and is now serving time in prison for his illegal acts.  Reforms requiring more “transparency,” such as requiring the submission of a sworn statement, would not appear to be a significant deterrent to a clever lawyer bent on breaking the law.  As for the other proposed reforms, judges are already very well equipped to make determinations about the appropriateness of an attorney’s fee in a particular jurisdiction without having a government study to rely on.  The proposal to create a competitive bidding process for the appointment of class counsel is a concern because it may have the unintended consequence of encouraging, not reducing, unprofessional conduct, and because it has serious implications for the very nature of the attorney/client relationship.  Rule 23 already give judges the power to scrutinize relationships and potential conflicts of interests between lawyers and their clients in deciding whether to certify proposed class actions.  I am skeptical that reforms of the type proposed by Senator Cornyn are necessary or even likely to reduce potential lawsuit abuse in ways not already covered existing laws.

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Law.com published an interesting article Friday by Scott Balber of Chadbourne and Parke.  Mr. Balber provides statistics on securities class action filings in 2007 and comments on reasons for recent pro-business trends in securities class actions, including the resolution of several key legal issues on grounds favorable to defendants, a jury verdict for the defense in an investor fraud case, and scandals involving high-profile plaintiffs’ lawyers.  Here is a link ot the article:

http://www.law.com/jsp/article.jsp?id=1202421425201

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A Reuters.com article published today summarizes a NERA Economic Consulting study on litigation involving stock options backdating allegations.  The study found that settlements in shareholder class actions filed for alleged backdating have been lower than “comparable shareholder class action settlements” and that settlement amounts have been less than half on average of what the firm had previously predicted.  The article goes on to discuss possible reasons for the lower settlement amounts, including the possibility that the weakest cases were settled first and the possibility that difficulties in proving direct injuries resulting from backdating might limit settlement values.  Here is a link to the article:

http://www.reuters.com/article/marketsNews/idUSN1553623620080515

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