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Archive for December, 2008

Shannon P. Duffy of The Legal Intelligencer has authored an article summarizing the Third Circuit Court of Appeals’ decision in In re Hydrogen Peroxide Antitrust Litigation, No. 07-1689 (3d Cir., Dec. 30, 2008), which the article calls a “ruling that is sure to be required reading for antitrust lawyers.”  The decision also addresses more general class certification issues that are sure to be of interest to lawyers to practice in other areas. 

In particular, the Court has an interesting analysis of how a trial court must weigh conflicting expert testimony on class certification issues in carrying out the “rigorous analysis” required of a federal court in evaluating whether a class should be certified under FRCP 23.  The trial court had considered only whether the plaintiff had offered expert testimony that could be considered admissible under a Daubert analysis in finding that the plaintiff had established that the issue of antitrust injury was susceptible to common, class wide proof.  The trial court refused to weigh this evidence against the conflicting expert testimony offered by the Defendant that the antitrust injury could not be determined on a class wide basis.  The Third Circuit reversed, holding that the trial court was required to also consider conflicting expert testimony and then make a decision whether the issue was truly susceptible to class wide proof.   The court was clear that on remand, the trial court did not have to accept the defendant’s expert’s view, it merely had to demonstrate that the expert’s testimony had been considered in making an actual determination.

The decision reaffirms the idea that in carrying out the “rigorous analysis”, a district court must not shy away from making an actual determination of each of the issues necessary for class certification, even if that determination involves weighing conflicting testimony or involves deciding an issue that also happens to be a disputed issue on the merits of the plaintiff’s claims.  A court must not simply give the plaintiff the benefit of the doubt or view the evidence in the light most favorable to the plaintiff, as in ruling a motion to dismiss under FRCP 12(b)(6).

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As the new year approaches, everyone seems to be doing a “top ten” list for 2008, so of course, ClassActionBlawg has to have one too.  However, this “top ten” list has two improvements.  First, the rankings will be decided by reader vote.  Second, and even better, it goes to 11!

So, here are some key class action decisions and trends from the year that was, in no particular order.  See the poll below to vote for the one you like best.  Feel free to submit comments with other suggestions, and maybe together we can make a top ten list so good that it will go higher than 11.  Best wishes to all in 2009.

  • RICO fraud class actions show promise after Supreme Court’s decision in Bridge v. Phoenix Bond & Indemnity Co., 553 U.S.. —. , 128 S.Ct. 2131 (U.S. June 9, 2008) (holding that a plaintiff need not show first-party reliance in order to assert a claim under the federal RICO statute).
  • “Foreign Cubed” class actions show promise, then sputter a bit.  See Morrison v. National Australia Bank Ltd., 2008 WL 4660742 (2d Cir. Oct. 23, 2008) (discussing federal jurisdiction over “foreign cubed” securities class actions).
  • Fraud on the market theories are tested in consumer fraud cases.  See McLaughlin v. Philip Morris USA, Inc., 522 F.3d 215 (2d Cir. 2008) (rejecting class certification on various consumer fraud theories, including the “fraud on the market theory”).
  • Courts reject certification of FACTA Class Actions on superiority grounds based on reasoning that class exposure would be grossly disproportionate to the alleged harm to consumers.  See, e.g., this recent California federal court decision summarized at Class Action Defense Blog.
  • California courts address certification of wage and hour class actions involving unpaid wages for time worked during meal and rest breaksSee Brinker Restaurant Corp. v. Superior Court (2008), 165 Cal. App. 4th 25, review granted (Oct. 22, 2008).
  • Truth in Lending Act (TILA) actions seeking rescission of mortgages due to alleged predatory lending deemed unsuitable for class treatment.  See Andrews v. Chevy Chase Bank, No. 07-1327 (7th Cir., Sept. 24, 2008)
  • Class actions for damages caused by pollution where defendant has complied with applicable regulations see mixed results in the U.S. and Canada.
  • The Second Circuit Court of Appeals holds that a preponderance of the evidence standard of proof applies in determining whether the elements of class certification have been satisfied in Teamsters Local 445 Freight Division Pension Fund v. Bombardier, Inc., Case No. 06-3794-cv (2d Cir. Oct. 14, 2008).
  • Italy’s new class action law takes effect, while other European countries consider class action reforms.
  • Class action scandals involving illegal kickback and bribery schemes result in prison sentences for class action lawyers Melvin Weiss, William Lerach, Dickie Scruggs and others.
  • The Supreme Court rejects “scheme liability” in securities fraud cases in Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 128 S. Ct. 761 (2008)

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I’ve decided to take a week away from the blogosphere while I focus on family obligations during Christmas.  ClassActionBlawg will be back with more class action-related content next week.

In the meantime, my very best wishes to everyone during this holiday season.  May your 2009 be filled with joy, peace, and prosperity.

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The AAJ hasn’t published a “generous dispensers of recompense” list to compete with the ATRA’s list of “judicial hellholes,” as I very seriously suggested yesterday.  But the AAJ did send an email response to Robert J. Ambrogi of Legal Blog Watch in response to his well-publicized post yesterday discussing the ATRA report.   Ambrogi has summarized the AAJ response in this follow-up entry.  Not surprisingly, they don’t think too much of the report, although I’d be surprised if they didn’t at least take a few notes.

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

Top Stories that Are Hopefully Not Indicative of Class Action Trends

Overlawyered reports on a courtroom fistfight between two lawyers pursuing rival class action suits against the same defendant:

http://overlawyered.com/2008/12/new-orleans-brawl-between-class-action-lawyers/

Class Action Decisions

How Appealing summarizes and links to an opinion by the Fourth Circuit Court of Appeals decision holding that a class action counterclaim defendant could not remove to federal court under the Class Action Fairness Act (CAFA) (as an aside, yours truly was on the losing end of the Ninth Circuit decision relied upon by the majority.  Sorry Mayer Brown et al. for helping to create bad precedent):

http://howappealing.law.com/121708.html#031686

Securities Docket offers a synopsis of a Fourth Circuit Court of Appeals decision upholding the dismissal of a securities fraud class action under the “strong inference” of wrongful intent standard required by the Supreme Court’s decision in Tellabs:

http://www.securitiesdocket.com/2008/12/15/fourth-circuit-affirms-dismissal-of-securities-class-action-against-inspire-pharmaceuticals/

Online Dating Newsletter reports on a federal court’s decision denying a motion for summary judgment filed by an online dating service defending claims that it continued to charge fees after members had canceled their service:

http://www.onlinedatingnewsletter.com/datingnews/truecomclassactionlawsuit/

Corporate Legal Times has a story about an an Iowa federal court’s class certification decision, with the self-explanatory headline “Class Action Status Doesn’t Stick to Teflon Lawsuits” …

http://www.cltmag.com/class-action-status-doesnt-stick-to-teflon-lawsuits.html

… and more on the same case from InjuryBoard.com and South Florida Lawyers:

http://www.injuryboard.com/national-news/teflon-lawsuits-won39t-become-class-action.aspx?googleid=253196

http://southfloridalawyers.blogspot.com/2008/12/teflon-class-action-up-in-flames.html

Wage Law reviews a recent California appellate decision addressing the standards for what evidence a trial court must consider in evaluating the fairness of a class action settlement: 

http://www.californiawagelaw.com/wage_law/2008/12/kullar-v-foot-locker—reversal-of-class-action-settlement-approval.html

The Race to the Bottom analyzes a New York court’s grant of summary judgment in a shareholder class action alleging that a forced bank merger constituted a breach of fiduciary duty:

http://www.theracetothebottom.org/home/bear-stearns-the-shotgun-merger-and-fiduciary-duties.html

Class Action Trends

As always, for the latest developments in subprime crisis litigation, see the D&O Diary

http://www.dandodiary.com/2008/12/articles/subprime-litigation/subprime-securities-suit-against-bank-dismissed-without-prejudice/

… and for more commentary and analysis on trends in subprime mortgage litigation, see this December 3 entry from Mortgage Meltdown:

http://mortgagemeltdown.typepad.com/my_weblog/2008/12/securities-fraud-lawsuit-against-countrywide.html

Class Action News

The Complex Litigatorreports on upcoming administrative changes in the Los Angeles County Complex Litigation Court (Btw, congrats to Scott Leviant on his new position with Initiative Legal Group LLP):

http://www.thecomplexlitigator.com/2008/12/management-changes-coming-to-complex-litigation-court-in-los-angeles-county.html

The Memphis Daily Newsreports on developments in a potential class action lawsuit being considered by the City of Memphis and Shelby County, Tennessee against lenders for alleged predatory lending practices leading to mass foreclosures in connection with subprime mortgages:

http://memphisdailynews.com/editorial/Article.aspx?id=39942

Spam Notes has an update on procedings on appeal to the Ninth Circuit Court of Appeals in a class action involving federal preemption of claims brought under the California anti-spam statute and other state laws:

http://spamnotes.com/2008/12/16/kleffman-v-vonage–no-oral-argument.aspx

Drug and Device Law provides an update on amendments to Financial Accounting Standards Advisory Counsel guidelines on what a company must disclose about securities class action and other litigation:

http://druganddevicelaw.blogspot.com/2008/12/amending-fas-5-update.html

Class Action Conferences

Class Action Defense Blog and CAFA Law Blog comment on an upcoming conference sponsored by the American Finance Institute on consumer finance class actions and litigation to be held in New York in late January:

http://classactiondefense.jmbm.com/2008/12/mark_your_calendars_class_acti_6.html

http://www.cafalawblog.com/-events-making-your-list-checking-it-twice-if-so-make-sure-this-outstanding-seminar-is-on-it.html

Class Action Commentary

www.InvestmentFraudPRO argues that FINRA securities fraud arbitration can often be a better approach for victims of investment fraud to recoup their losses than class action lawsuits:

http://investmentfraudpro.blogspot.com/2008/12/finra-securities-arbitration-or-class.html

FP Legal Post predicts that class actions against cell phone companies based on concealment of studies linking cell technology to brain cancer may be the next wave of litigation in Canada:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/12/15/cellphones-newest-bonanza-for-class-action-bar.aspx

Mass Tort Litigation Blog discusses a recent BNA Reports commentary on CAFA’s Local Class Action Exception:

http://lawprofessors.typepad.com/mass_tort_litigation/2008/12/cafas-local-cla.html

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Legal Blog Watch has a new post from Robert J. Ambrogi up today summarizing the latest edition of the American Tort Reform Association‘s annual “Judicial Hellholes” rankings for 2008-09 (see the link on the executive summary page for the full report).  Class action lawyers won’t be too surprised by the “honorees” on this year’s list.  One item of note was that Madison County, Illinois, once the standardbearer for “judicial hellholes” has stayed off the list for the second year in a row, although it’s still on the organization’s “watch list.”

I found the comments to Ambrogi’s post interesting.  One commenter questioned whether it was appropriate for Law.com to be endorsing the views of such a “radical corporate propaganda machine” as the ATRA (Legal Blog Watch is part of the Law.com Legal Blog Network).  This prompted a response from another reader that the article was appropriate in the spirit of fostering healthy debate and that the American Association for Justice (formerly ATLA) is viewed by some as being just as radical as the ATRA.  I’m not going to weigh in on that dispute, but I will be checking back to see whether Legal Blog Watch ever publishes an AAJ “generous dispensers of recompense” list.

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If you’re a Colorado attorney who didn’t make it to the quarterly CLE luncheon sponsored by the CBA class actions subsection, you missed out.  Dirk W. de Roos and O. Russel Murray gave excellent presentations on developments in class arbitration.  If you’d still like to hear the entire presentation, you’re in luck.  CLE Colorado recorded the audio of the presentation and will include it among its home-study materials.  We’ll have a link on the class action subsection website as soon as it is available.  In the meantime, here are some of the key points:

  • Class arbitration waivers, contracts requiring arbitration but specifying that arbitration proceed on an individual, not class, basis, have been used in a variety of contracts, including employment, executive compensation, consumer, franchise, and settlement agreements.
  • Outside the consumer context, class arbitration waivers have mostly been upheld.
  • Where class arbitration waivers are invalidated, courts most often do so based on traditional contract principles.
  • Class arbitration waivers are increasingly being struck down in consumer agreements, especially in “shrink-wrap” type agreements where the consumer is agreeing simply by using the product.
  • The key U.S. Supreme Court case recognizing the viability of class arbitration (not waivers) is Green Tree Financial Corp. v. Bazzle, 539 U.S., 444 (2003).
  • Class arbitration rules generally track FRCP 23, the main difference being that the decision maker is a private neutral instead of a judge.
  • Class arbitration rules differ from traditional arbitration because they lack the key element of privacy and confidentiality.

Each of the speakers had insights that I thought were interesting:

Dirk de Roos noted that a split among jurisdictions on the enforceability of class arbitration waivers may impact whether a nationwide class can be certified in court over a particular issue given the need to apply different standards to decide whether the action can proceed in court as a class action in the first place.

Russel Murray commented that class arbitration involves a convergence of two more general, controversial issues: 1) many people have an animosity toward class actions and favor ways to limit their application and effectiveness, but, on the other hand  2) many other people have deep concerns about the use of arbitration provisions in consumer agreements and are opposed to agreements that potentially limit the ability of consumers to enforce their rights.

Finally, here is one other item worthy of note.  Russel Murray noted that the National Arbitration Forum rules allow collective resolution of claims only on an opt-in basis, as opposed to the opt-out scheme contemplated by Rule 23 and most other class arbitration rules.  This means that only those plaintiffs who affirmatively opt in to the class after notice. 

The possibility of class arbitration agreements that involve restrictions on class actions less than a complete waiver of the right to bring the case on a collective basis is intriguing.  Imagine a cell phone company including a standard term in its agreements that every claim is subject to class arbitration but that the action would proceed under the National Arbitration Forum rules.  This provision would not be a class arbitration waiver in the strict sense, but it would involve a significant limitation on the ability of a plaintiff to seek collective redress as compared to a class action in court.   As far as I know, the enforceability of this type of class arbitration “reduction” provision has not been tested in court.

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