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Archive for July, 2008

As reported this morning on NPR’s Morning Edition, the New York Times, and the Wall Street Journal’s Deal Book blog, among other news sources, the firm of Coughlin Stoia Geller Rudman & Robbins, recently named as lead counsel in a securities class action against French bank Société Générale, has sent a group of lawyers across the pond to build publicity, recruit plaintiffs, and collect potential evidence in France.  The lawsuit arises out of the highly publicized trading scandal earlier this year involving unauthorized trades totaling billions of Euros by one of its traders, Jérôme Kerviel.  Coughlin Stoia is no stranger to scandal itself.  Formerly Lerach Coughlin Stoia, it is the former firm of the recently convicted William Lerach.

The PR campaign in France is part of a growing trend to increase the pool of potential plaintiffs in U.S. securities class actions against multinational companies.  As the WSJ article aptly describes the dynamic:

Lawyers have an incentive to maximize the number of plaintiffs because it increases their fee payments. And non-American plaintiffs are attracted by the potential of enormous damage payments in the United States and a common provision protecting them from paying legal fees even if they lose.

The incentives underlying this trend are not hard to understand.  These attempts to create transnational plaintiff classes, however, raise complex issues of due process, choice of law, preclusion or res judicata, and full faith and credit.  Last year, a federal judge in New York entered an order allowing investors in France, England, and the Netherlands to be included in a securities class action against French conglomerate Vivendi.  A copy of that order is available on the Milberg website.  In deciding whether to allow foreign investors to be included, Judge Richard J. Holwell analyzed whether courts in each country would recognize a final judgment in the U.S. lawsuit as preclusive and binding on its citizens.  The court, relying on expert testimony and scholarly works discussing the law of the recognition of foreign judgments and res judicata of the various countries, determined that the plaintiffs had shown that it was more likely than not that courts in those three countries would recognize a U.S. class action judgment as preclusive as to absent class members.  With respect to England, the court admitted that the applicable law was unclear, but stated (on page 54):

While the issue is hardly free from doubt, based on the affidavits before it, the Court concludes that English courts, when ultimately presented with the issue, are more likely than not to find that U.S. courts are competent to adjudicate with finality the claims of absent class members and, therefore, would recognize a judgment or settlement in this

The court went on to find that the plaintiffs had not shown by a preponderance standard that courts in Germany and Austria would not recognize a U.S. class action judgment as preclusive as to absent class members.  Therefore, the court allowed investors in England, France, and the Netherlands to be included in the class, but rejected certification as to investors in Germany and Austria.  The 68-page opinion addresses a whole host of related issues and is worth a careful read.

According to the New York Times and WSJ articles, the court in the Société Générale case is expected to address in 2009 the issue of whether absent French investors should be included in a shareholder class.

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For those of you interested in class action reform issues abroad, Jocelyn Kellam and Stuart Clark of the Australian firm Clayton Utz have a new article out today entitled Australia: Be Alarmed Be Very Alarmed: Class Action Reforms Mooted, available at www.Mondaq.com (free registration may be required).  The article is critical of several pro-plaintiff reforms being considered by the State of Victoria that the authors say would “make even more plaintiff-friendly than the United States.”

Some of the proposed reforms described in the article may raise a few eybrows even for the most jaded class action defense lawyers here in the U.S.  They include a measure to give judges discretion to award cy pres remedies (for example, an award requiring a defendant pay money to charity when absent class members cannot be located), the addition of a legal assistance fund that would, among other things, help defray adverse cost awards, giving absent class members the right to be included in the class only if they consent (it is not clear to me whether this is an opt-in provision or something different), and a provision allowing for the joinder of plaintiffs who have claims against different defendants, as long as each plaintiff has a claim against one defendant.

The article notes that the reforms have been criticized as “read[ing] like a wish list for plaintiff lawyers” and “would make Victoria a veritable nirvana for plaintiff lawyers.”

The Clayton Utz website has various articles, papers, and brochures discussing Australian class action issues.  Here is a link.

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

 

Class Action Decisions

 

The UCL Practitioner comments on a California Court of Appeal decision discussing, in dicta, the viability of defendant classes in California…

 

http://www.uclpractitioner.com/2008/07/court-of-appeal.html

 

… and as The Complex Litigator notes with regard to the same decision, the court “penned a brief gem of a comment that will be of interest to class action practitioners (and nobody else on the planet),” which makes it perfect for the CABWR!

 

http://www.thecomplexlitigator.com/2008/07/the-little-used.html

 

CAFA Law Blog offers the latest in a series of CAFA musical revues, summarizing a recent South Carolina federal court decision on CAFA removal to the tune of a Rolling Stones medley:

 

http://www.cafalawblog.com/-case-summaries-plaintiffs-ask-the-court-to-gimme-shelter-and-avoid-cafa-removal.html

 

Class Action Defense Blog provides a synopsis of a recent decision by the Judicial Panel for Multidistrict Litigation (MDL) addressing the appropriate venue for consolidation of 37 antitrust class actions pending in federal courts in 8 different federal courts where the parties, including different groups of plaintiffs, could not agree on a venue:

 

http://classactiondefense.jmbm.com/2008/07/class_action_defense_casesin_r_105.html

 

Legal Pad summarizes a recent Ninth Circuit Court of Appeals decision addressing the interplay between the removal bar imposed on state securities law claims imposed by section 22(a) of the Securities Act of 1933 and the removal provisions of the Class Action Fairness Act:

 

http://www.lalegalpad.com/2008/07/class-action-pr.html

 

Pension Risk Matters discusses and provides links to a July 17 decision by the U.S. District Court for the Northern District of Illinois certifying a class for the purpose of adjudicating an ERISA claim for breach of fiduciary duty against fiduciaries of a 401(K) plan.  The entry also discusses new Department of Labor standards for disclosures of fees and expenses by fiduciaries of participant-directed individual account plans:

 

http://www.pensionriskmatters.com/2008/07/articles/litigation/class-action-certification-and-401k-fees/

 

California Blog of Appeal comments on the outcome of the “first ever habeas class-action in California”:

 

http://www.calblogofappeal.com/2008/07/23/a-habeas-class-action/

 

Drug and Device Law Blog highlights the case of a class action defendant down on its luck in a nationwide products liability class action in Oklahoma:

 

http://druganddevicelaw.blogspot.com/2008/07/do-bad-things-come-in-threes-masquat-v.html

 

Classified highlights a recent Eleventh Circuit Court of Appeals decision criticizing various aspects of a district court’s attorneys fee award in a successful class action brought under 28 U.S.C. 1983 on behalf of foster children in Georgia:

 

If you think Canadian class certification standards are lax (see below), check out this entry from Mass Tort Litigation Blog noting a recent Ninth Circuit Court of Appeals decision overturning a sua sponte class certification by the district court (the Ninth Circuit ordered a reassignment to a new judge on remand):

 

http://lawprofessors.typepad.com/mass_tort_litigation/2008/07/ninth-circuit-o.html

 

Class Action Commentary

 

In his blog, Michael’s Insight, Insight Communications CEO Michael Wilner provides  a public response to comments made by a reader, Robb Topolski (see his blog here), who serves as plaintiff in putative class action litigation against a competitor regarding ISP network management practices:

 

http://www.michaelsinsight.com/2008/07/line-up-lawyers.html

 

Michael Alan Miller provides a brief commentary on which side is the lesser of evils in the rash of class action lawsuits he predicts will follow recent reports about a link between cell phones and brain cancer risk:

 

http://www.michaelalanmiller.com/?p=390

 

Class Action News

 

HeadwatersNews reports on a class certification motion filed by the Nez Perce Tribe and 11 other named plaintiffs seeking certification of a class of tribes for the purpose of pursuing claims for a complete and historical accounting by the United States Department of Interior of lands held in trust for the tribes:

 

http://www.headwatersnews.org/stories/view_story.phtml?id=53757

 

… and here is a more detailed commentary on the same case from Indianz.com:

 

http://www.indianz.com/News/2008/009961.asp

 

Wage Law Blog offers news on actions by the California Division of Labor Standards Enforcement in response to the recent California Court of Appeal decision in Brinker Restaurant Corp. v. Superior Court.  (See ClassActionBlog entry here):

 

http://wagelaw.typepad.com/wage_law/2008/07/dlse-memo-instructs-enforcement-of-brinker-holding.html

 

Class Action Trends

 

The D&O Diary provides a summary and links to a NERA Economic Consulting report entitled “2008 Trends: Subprime and Auction Rate Cases Continue to Drive Filings, and Large Settlements Keep Averages High”:

 

http://www.dandodiary.com/2008/07/articles/securities-litigation/nera-releases-midyear-2008-securities-litigation-report/

 

Infectious Greed remarks on statistics from the Stanford Securities Clearinghouse showing a 400% increase in subprime-related class action filings:

 

http://paul.kedrosky.com/archives/2008/07/29/first_thing_we.html

 

Class Action Reform

The Am Law Daily reports on a conference on securities class action reform co-sponsored by the Manhattan Institute for Public Policy and the U.S. Chamber Institute for Litigation Reform (ILR) to discuss an ILR report on securities class action trends and proposed reforms.  (See related ClassActionBlog.com entry here):

 

http://amlawdaily.typepad.com/amlawdaily/2008/07/us-chamber-of-c.html

 

International Class Action Law

 

Point of Law offers a review of an article entitled “Canadian Class Action Law: A Flawed Model for European Class Actions” by John Beisner, Allison Orr Larsen, and Karl Thompson, available at The Federalist Society Website.  The article argues that liberal class certification standards applicable in various Canadian provinces lead to unintended consequences and create a potential for abuse that should give European policymakers pause in looking to Canadian class action standards as a model for their own reforms…

 

http://www.fed-soc.org/publications/pubid.1100/pub_detail.asp

 

Point of Law observes that the loser pays rule may temper the possibility of abuse…

 

http://www.pointoflaw.com/archives/2008/07/canadian-class.php

 

… but Canadian blog The Bizop News points to a recent Ontario Court of Appeal decision in arguing that the threshold for  class certification is only getting lower:

 

http://www.bizop.ca/blog2/lawsuits/pointoflawcom-pointoflaw-forum.html

 

Pom Talk addresses issues relating to whether non-U.S. investors may serve as lead plaintiffs or participate as class members in U.S. securities class actions:

 

http://www.pomtalk.com/pomtalk/2008/07/from-the-page-2.html

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Two news sources reported today on a forum sponsored by the Manhattan Institute to discuss a research paper releaseed by the U.S. Chamber of Commerce Institute of Legal Reform (ILR).  See the Wall Street Journal’s Market Watch section and an American Lawyer article by Brian Baxter posted on Law.com.  The report and press release is available for viewing at the IRL website: www.InstituteforLegalReform.com

Among numerous other statistics provided in the report, the report states that securities class action filings increased by 58% in 2007 over 2006 and that $51.8 billion was paid out in securities class action settlements over the last decade.  The report also states that the average dollar amount per settlement increased by 43%, not taking into account “billion dollar plus settlements,” and contends that “[b]etween 1995 and 2005, securities class action litigation caused the destruction of nearly $25 billion of shareholder wealth.”  The report offers various proposals for securities class action reform, including the adoption of the “Securities Litigation Attorney Accountability and Transparency Act,” (S.3033, H.R. 5463), or SLAATA, a bill being championed by Texas Senator John Cornyn.  (See this previous ClassActionBlawg.com entry).

The ILR has an unapologetically pro-business slant, but whether you agree or disagree with the organization’s views, the statistics provided and issues raised in the report are important ones to consider in the ongoing debate over securities and other class action reform.

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I recently came across Stanford Law School’s Global Class Actions Exchange, a fantastic resource for anyone interested in trends in class, group, mass and other collective actions outside the U.S.  The site offers a collection of papers presented by legal scholars from various countries on group action issues at a symposium held at Oxford University last December.  It also provides a collection of links to related class action statutes, proposed legislation and rules from various countries in South America, Europe, and Asia.  I have added a permanent link to this great online resource to the Lawyers’ Resources section on ClassActionBlawg.com.

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Yesterday, the California Court of Appeal issued an important class certification opinion in a wage and hour case, Brinker Restaurant Corp. v. Superior Court (2008 WL 2806613).  This decision was highlighted in an entry yesterday on The Complex Litigator (see yesterday’s CABWR).

The Baker Hostetler Employment and Labor Practice Team has issued an Executive Alert summarizing the decision and its possible implications for employers.  Here is an excerpt:

Employers should pay particular attention to their existing company policy on meal and rest periods and whether there is a policy discouraging off-the-clock work and time-shaving procedures. Employers also should be aware that this decision may be appealed to the California Supreme Court.

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

 

Class Action Decisions

 

The Complex Litigator has breaking news on a significant decision issued today by the California Court of Appeal reversing, on predominance grounds, a class certification order in a wage and hour class action involving claims for unpaid wages for hours worked during meal breaks.

 

http://www.thecomplexlitigator.com/2008/07/breaking-news-m.html

 

CAFA Law Blog finds comparisons to Jeff Spicoli and Mr. Hand from Fast Times at Ridgemont High in a California federal court decision allowing discovery prior to a ruling on a motion to remand a class action removed under CAFA.

 

http://www.cafalawblog.com/-case-summaries-well-show-you-ours-if-you-show-us-yours-court-allows-preremand-discovery-to-support-amount-in-controversy-dispute.html

 

For a review of several recent federal decisions addressing CAFA issues, see this entry from The UCL Practitioner:

 

http://www.uclpractitioner.com/2008/07/four-new-cafa-o.html

 

Class Action Defense Blog provides a thorough review of a recent Fifth Circuit Court of Appeals Decision discussing the applicability of the excusable neglect standard in assessing a class member’s request to opt out of a class action settlement after the opt-out deadline.

 

http://classactiondefense.jmbm.com/2008/07/class_action_defense_issuessil.html

 

North Carolina Appellate Blog reviews a recent North Carolina Court of Appeals decision addressing the full faith and credit to be given the class certification decision of another state’s court (See last week’s CABWR for more on this decision from North Carolina Business Litigation Report).

 

http://womblencappellate.blogspot.com/2008/07/coa-holds-that-full-faith-and-credit.html

 

Mass Tort Litigation Blog discusses Pennsylvania Supreme Court’s decision to grant review of class certification issues and due process issues relating to class certification of a breach of express warranty claim in a case filed against an automobile manufacturer for allegedly defective brakes…

 

http://lawprofessors.typepad.com/mass_tort_litigation/2008/07/kia-class-actio.html

 

…and more on the same decision from Point of Law

 

http://www.pointoflaw.com/archives/2008/07/pennsylvania-high-court-to-hea.php

 

Overlawyered summarizes an opinion highlighted in a New York Law Journal article published last week in which United States District Judge Jed Rakoff refused to appoint one of two named plaintiffs as a class representative on inadequacy grounds, stating that the would-be representative was merely a “pawn of counsel” and that he would “not be party to a sham.”  (But note that Judge Rakoff did grant certification as to the other class representative).

 

http://overlawyered.com/2008/07/mere-pawn-of-counsel/ 

http://overlawyered.com/2008/07/labaton-sucharow-rebuffed-again/

 

Class Action Trends

 

D&O Diary discusses the impact of the economic downturn as a cause of increased securities class action filings…

 

http://www.dandodiary.com/2008/07/articles/securities-litigation/bad-economic-vibe-means-more-securities-litigation/

 

… and recent developments in issues relating to federal jurisdiction, removal, and remand of certain securities class actions.

 

http://www.dandodiary.com/2008/07/articles/securities-litigation/section-11-lawsuits-coming-soon-to-a-state-court-near-you/

 

IP Finance comments on a recent Law.com article discussing potential trends in shareholder class actions spawned by patent disputes (see my commentary on this case here).

 

http://ipfinance.blogspot.com/2008/07/magma-security-class-action.html

 

Commentary

 

Class Reactions comments on a New York Times article discussing a class action filed on behalf of cruise ship passengers who purchased art at onboard auctions:

 

http://classreactions.com/?p=49

 

Wage Law offers commentary on another New York Times article about reports from the Government Accountability Office critical of the Department of Labor’s Wage and Hour Division’s performance and suggests that this poor performance in ensuring compliance has led workers to look to private attorneys for redress for wage and hour violations.

 

http://wagelaw.typepad.com/wage_law/2008/07/gao-sharply-criticizes-wage-and-hour-division.html

 

Central La. Politics responds to criticisms from a local radio personality on class actions against drug manufacturers:

 

http://centrallapolitics.blogspot.com/2008/07/more-ignorant-rant-from-ksyls-dave.html

 

Class Action Scandals

 

Point of Law provides an update on continuing fallout from the Dickie Scruggs bribery scandal:

 

http://www.pointoflaw.com/archives/2008/07/more-scruggs-trouble-rigsby-br.php

 

Class Action Legislation and Reform

 

The Weekly Standard Blog addresses the highly publicized scandal involving Milberg Weiss attorney William Lerach and securities class action reform legislation proposed by Texas Senator John Cornyn entitled the Securities Litigation Attorney Accountability and Transparency Act (SLAATA).  (See my earlier commentary on the proposed bill here)

 

http://www.weeklystandard.com/weblogs/TWSFP/2008/07/cornyn_takes_on_class_action_m.asp

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