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Archive for September, 2009

In another I must be living under a rock moment, for the first time this evening I came across Octagon Publishing’s Class Action Attorney Fee Digest Blawg.  The Blawg, which supplements Octagon’s subscription service, Class Action Attorney Fee Digest, focuses exclusively on orders, decisions, and trends in attorneys’  fee awards in class actions.  The publication’s key contributor is Harvard Law Professor William B. Rubenstein, who does expert witness work on class action fee issues.  If you’re about to submit a fee petition or are working on a class action settlement, you’d be wise to check out this great class action resource.

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While doing some research today on another issue, I came across this news clipping from the May 3, 1973 issue of the St. Petersberg Times discussing a federal court of appeals decision in a class action decided a few days before. 

The article begins:

NEW YORK – A three-judge panel of the U.S. Court of Appeals ruled here Monday that a person who files a class-action suit must pay the cost of notifying each person on behalf of whom the suit was brought – even if that means notifying millions of people.

The decision, handed down by Judges Harold R. Medina, J. Edward Lumbard and Paul R. Hays, could, if it stands, bring an end to mass class-action lawsuits.

The decision, Eisen v. Carlisle & Jaquelin, 479 F.2d 1005 (2d Cir. 1973), ultimately did stand.  The United States Supreme Court, in Eisen v. Carlisle & Jaquelin, 417 U.S. 156 (1974), agreed with the Second Circuit panel’s holding that the plaintiff must be required to bear the cost of class notice.  However, in reaching that conclusion the Court created a rule that would for decades become a key argument by plaintiffs in support of certification in class actions: that it is improper for a trial court to consider the merits of the plaintiff’s claims in evaluating class certification.  See Generally Geoffrey P. Miller, Review of the Merits in Class Action Certification, 33 Hofstra L. Rev. 51 (2004).  In this way, the decision, in an odd way, actually contributed to the explosion of class actions between the late 1970s and early 2000s.  Several key recent federal decisions, including In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006) and In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305  (3d Cir. 2008), reflect an erosion of what was previously considered by many authorities to be a hard-and-fast rule preventing any consideration of the merits at the class certification stage.  This interpretation had caused many courts to gloss over practical problems posed by certification of cases in which certification was only arguably appropriate if one accepted the plaintiff’s bare allegations on issues of fact.

So, aside from perhaps marking the end of the use of a hyphen between “class” and “action,” the Second Circuit’s decision in 1973 did not mark the end of anything.

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Levick Strategic Communications’ Bulletproof Blog has an interesting interview with Ohio attorney D. Brian Hufford, who offers a plaintiffs’ class action attorney’s perspective on the latest trend in class actions against healthcare insurers.  Whether you’re plaintiffs’ attorney looking for the next wave of litigation, a defense attorney looking to keep up with what the other side is thinking, an insurer looking to assess future risk or exposure, or just someone interested in matters relating to the ongoing healthcare reform debate, you should check out the article:

http://www.bulletproofblog.com/2009/09/16/whats-next-the-plaintiffs-perspective-healthcare-insurers-face-explosive-new-cause-of-action/

Be sure to visit Bulletproof Blog‘s main page for other articles discussing the latest trends in class action and related litigation.

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In an article today entitled “Unscrewing Shareholders,” Daniel Fisher of Forbes reviews a decision by U.S. District Judge for the Southern District of New York Jed Rakoff rejecting a settlement between the Securities and Exchange Commission and Bank of America.  The case involves allegations that Bank of America committed securities fraud by paying bonuses to Merrill Lynch executives in acquiring the company last year, without telling its policyholders.

Judge Rakoff was troubled by, among other things, the fact that the settlement called for a $33M payment to the government, a cost that would be born by the same shareholders who were supposedly victimized by the settlement, stating, “[t]o have the victims of the violation pay an additional penalty for their own victimization was enough to give the Court pause.”  Although the opinion comes in a regulatory enforcement case and not a class action, Fisher observes that this same phenomenon occurs in many securities class actions:

The ironic part is this is exactly what happens in most securities fraud cases. A company’s stock price falls, the class-action lawyers file a complaint, and after months of expensive pretrial jousting, the parties settle with the company’s shareholders picking up the tab. The fact that insurance is often the source of the money doesn’t change things: Insurance companies aren’t charities–they collect those payouts by increasing rates.

This criticism about the social utility of class actions as a means of remedying corporate misconduct is not limited to the context of securities fraud class actions.  Much like the cost of a securities class action settlement is borne by the company’s shareholders, the cost of settling a class action against an insurance company may be borne by the company’s policyholders in the form of higher premiums, while much of the cost of a consumer fraud class action against a provider of goods and services will be borne by consumers themselves in the form of higher prices for those products.  One can argue that class actions offer a deterrent effect against future corporate wrongdoing, but in many cases, it is often difficult to argue that they result in meaningful net compensation for the true victims of past misconduct.

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A pair of recent letters to the editor of the Yuma, Arizona online newspaper the Yuma Sun debate the impact of class action lawsuits on the success of national healthcare reform in Canada.

The first letter, from David P. Bossler, argues that the success of universal health care in Canada can be attributed in part to restrictions on contingent fee awards and a loser pays rule:

In Canada, the lawyers in class action suits gets paid by the plaintiff for their efforts, win or lose. The plaintiffs get the entire monetary reward and the loser pays court costs.

This eliminates the spurious extremely costly class action suits that bankrupt companies, pay peanuts to the plaintiffs and make billionaires out of the lawyers.

The response, from Canadian lawyer Mark Mounteer, counters that fee agreements and fee-shifting rules in many parts of Canada are quite similar to those in the U.S. and that class actions involving medical malpractice issues are uncommon in both countries:

It would be unusual in either Canada or the U.S. for a class action to be brought for a doctor’s negligence. A class action is brought where a large number of persons are injured by a common cause. A doctor’s error is likely to cause damage to only one person.

As Mounteer intimates, class actions in many parts of Canada are becoming more and more similar to those common in the U.S.  One important thing to consider in thinking about Canadian class actions is that jurisdiction in the federal court system in Canada is much more limited than that of the U.S. federal courts.  So, class action practice is limited almost exclusively to superior courts in individual provinces.  Procedures governing class actions and other aspects of civil procedure can vary significantly from province to province. 

A good source for information on class actions in Canada is Ward Branch’s blog, Class Actions in Canada.

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I must have been living under a rock, but today for the first time I came across The Learned Lawyer, a great Colorado-centric law blog published by the Colorado Bar Association’s nonprofit education affiliate, CLE in Colorado, Inc.

The Learned Lawyer offers a variety of articles of interest to practitioners of all ilks.  Recent entries include an interview with Colorado Supreme Court Justice Gregory Hobbs on water law, advice columns for young lawyers, a video series for solo practitioners, and highlights of upcoming CLE offerings.

For those, like me, who are always on the lookout for good law blogs, The Learned Lawyer also maintains a blogroll of Colorado law blogs.

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The ABA’s 13th Annual National Institute on Class Actions, the gold standard in class action CLE conferences, is coming up this fall.  This year’s format is a little different.  They will be holding two sessions, one on each coast.  The dates and locations are:

Friday, October 30, 2009
San Francisco, CA
8:00 AM – 5:00 PM PT

Friday, November 20, 2009
Washington, DC
8:00 AM – 5:00 PM ET   
       
According to program founder and chair, John Isbister:

Each session will begin with the popular presentation by Professor John C. Coffee on new developments in class action litigation.  Also, on the agenda are programs that examine issues concerning arbitration and class action waivers, recent developments in the standards for certifying a class, and advice for both plaintiffs and defense counsel on settling class actions.  The session in San Francisco will include a program on the class action landscape in California courts, while the Washington, DC session will feature a roundtable discussion on current issues in class actions with three federal judges moderated by Professor Arthur R. Miller.

It sounds like you can’t go wrong with either option, so start making your reservations now.  A full description of the programs and the speakers is in the program brochure, which is also available on the web registration site:  http://www.abanet.org/cle/programs/n09cac1.html

I’ll have some comments on each of the topics and sessions over the coming weeks.  Stay tuned…

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Conventional wisdom says that for a defendant, class certification is to be avoided at all costs, and many defendants may assume that the best strategy for dealing with a certified class, short of settlement, is to find a way to get the class decertified.  But it’s important to remember that a class action judgment has a preclusive effect on all class members if the defendant wins. 

As a result, a defendant should always at least consider whether filing a dispositive motion or simply defending the case on the merits at trial may be a better strategy than seeking decertification.  This may especially be true where there is a risk that individual plaintiffs will pursue their own suits even if the class action is not successful.  If so, a successful defense of the class action may prevent even greater exposure, or at least the significant defense costs associated with defending numerous individual cases.

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