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Archive for October, 2010

This article is about defending against class certification based on illogical, circular arguments in support of an oversimplified “one-size-fits all” legal theory based on an amalgam of facts that don’t describe any one class member’s actual experience.  (In other words, many defense lawyers would say, it’s about what you face in all class actions.)  Most class action defense lawyers are aware of numerous procedural devices that can be used challenge–and keep challenging–class certification, from the moment the case is filed until after the verdict is rendered.  A well-versed defense lawyer can also see all the fallacies in the plaintiff’s argument and the manageability nightmare posed by the prospect of trying the would-be class claims from the vary first reading of the complaint.  Armed with this knowledge, the defense lawyer knows the science of how to challenge certification.  But there is also an art to defending class actions, and part of the art is in knowing whether to challenge class certification at each available opportunity.  Of course, because this is about the art and not the science, there is no single answer to this question, but below I have tried to sketch out some of the possible considerations in making the decision to use various different procedural devices at different phases of the litigation. 

Motion to “Strike” Class Allegations

A motion to “strike” class allegations can refer to any preemptive motion challenging the viability of the case as a class certification even before a motion for class certification is filed.  One consideration in deciding whether to file a motion to strike class allegations is the standard of review that will be applied by the court.  Depending on the jurisdiction, how the motion is raised, and the predilections of the judge, a motion to strike class allegations may be reviewed under a variety of standards ranging from the “rigorous analysis” standard applicable to class certification motions, the “well-pleaded complaint” rule applicable to FRCP 12(b)(6) motions, or the “immaterial, impertinent, or scandalous” standard applicable to a motion under FRCP 12(f).  

As a practical matter, it is important to consider whether the record is sufficiently developed to permit a decision that class treatment is inappropriate.  Although failure on a motion to strike class allegations does not foreclose the ability to challenge certification in later proceedings, filing the motion too early in the case can backfire.  An undeveloped record can help the plaintiffs because it allows them to rely on supposition or speculation about what the common facts and legal issues might be.  If the judge denies the motion to strike class allegations because the issue is not sufficiently developed, he or she may then develop a preconception that class certification is appropriate.  For that reason, it is sometimes better to keep one’s powder dry and wait until class certification except in cases where the barriers to certification are obvious from the face of the complaint itself.  A motion to strike class allegations can be useful, however, when a plaintiff drags his feet in seeking class certification.

Response to a motion for class certification 

There are not many situations in which a class action defendant will not want to object to the motion for class certification when it is filed.  However, there are few strategies short of a complete objection that might be appropriate in certain cases.  One is to consent to class treatment on limited issues.  Issue certification, although not often applied in practice, is expressly permitted under FRCP 23(c)(4) (“When appropriate, an action may be brought or maintained as a class action with respect to particular issues.”).  This strategy may be useful when there are certain common threshold legal or factual questions that, if resolved in the defendant’s favor, can end the litigation short of a full trial on the merits.  Certification of issues can allow the defendant to obtain a collateral estoppel effect of a favorable decision on those issues, as to the entire class.  FRCP 23(c)(4) can also be a useful tool to combat a common plaintiff’s strategy in which the plaintiff relies on a few legal or factual issues that are indisputably common in an attempt to justify class treatment of an entire claim that would require resolution of facts or issues that are clearly not common.

Motion to reconsider class certification

Many of the considerations in deciding to move to reconsider a class certification order are the same as in moving to reconsider any other trial court order.  However, class certification orders are inherently preliminary and subject to change.  Given the court’s on-going obligation to assess the appropriateness of certification, the court should at least theoretically give the motion more thoughtful reconsideration than it might other motions.  Arguments that go beyond a mere claim of unfairness to the defendant in having to defend against class claims, such as the argument that the certification order will lead to manageability problems, may have a greater likelihood of success than a run-of-the-mill motion to reconsider.  Other factors to consider in deciding whether to move to reconsider a class certification order may include:

1) What are the prospects for appeal?  Will moving to reconsider simply give the judge a chance to correct any obvious errors in the class certification analysis but still reach the same outcome?

2) Is the judge someone who is ever apt to reconsider his or her orders?  A big part of the strategy at this phase or any other phase is to know the judge’s tendencies and disposition as well as possible.  Some judges will deny motions to reconsider out of hand.  Some will give every motion careful consideration regardless of how many times the same issue comes before them.  (I have had judges who seemingly reversed course multiple times on the same issue in the same case).  Still other judges are so unpredictable that every motion seems like a roll of the dice. 

3) Are there clear logical, legal, or factual errors in the court’s analysis that might be outcome-determinative?  By “clear” error here, I’m not referring to any particular standard of appellate review.  I mean, as a practical matter, is the error clear enough that a judge is likely to admit it herself.

 4) Might further development of the factual record improve the likelihood of success later?  You may note that this is a recurring theme.  See the section below on motions to de-certify.

Rule 23(f) appeal 

Whether interlocutory appeal is available at all in state court class actions will vary from state to state.  These days, Rule 23(f) will apply to allow discretionary interlocutory appeal in most federal class actions, although the standards for accepting discretionary appeal differ from circuit to circuit.

When it is available, interlocutory appeal of a class certification order is never mandatory, so there are still a few factors to consider before deciding to appeal.  Many are the same as those discussed above with respect to motions to reconsdier.  In particular, the defendant should consider whether the odds of decertification by the trial judge after the case is more developed might be greater than the odds of successfully appealing the initial order.  If so, it might be better to wait, since an unfavorable ruling by the appellate court will only serve to solidify the class certification order in the judge’s mind and further embolden class counsel.

Motion requiring class counsel to submit a trial plan

A trial plan is a document that may describe, among other things, the the claims and theories of liability, the witnesses and evidence that will be used to prove those claims, and how the presentation of evidence on behalf of the class will proceed.  For a defendant, it can be a useful tool in bringing to light practical manageability problems in adjudicating the claims on a classwide basis.  In some states, a trial plan is a requirement, but it most courts, it is simply something that a judge may order in his or her discretion as part of his or her inherent authority over management of the case.  However, in jurisdictions in which there is no express rule or precedent, it may be difficult to educate a judge about what a trial plan is or why it may be useful in ensuring that the case is manageable as a class action for trial.  Therefore, a defendant has two hurdles to overcome in getting the judge to order a trial plan; 1) explain what a trial plan is, why it is different than a scheduling or trial management order, and why it might be useful; and 2) then convincing the judge to exercise his or her discretion to order one.

Motion to decertify

A motion to decertify can be a powerful weapon if timed properly.  The court has the power and obligation to continue to reassess certification, and as trial approaches, the rubber starts to meet the road.  The plaintiffs’ theories have to solidify, and the factual record is complete.  Now that trial is approaching, presumably the plaintiffs have had to settle on one or more legal theories, and the factual record is finally developed.  It should be much easier at this point to articulate the fallacies in the plaintiff’s theories, and give specific examples showing why the trial is either going to be unmanageable or unfair to the defendant.

The big factor in filing a motion to decertify is timing.  The case has to be developed enough to convince the judge that it isn’t what the plaintiffs promised in the original class certification, but not so close to trial that the case has reached the point of no return in the judge’s mind.

The success or failure of a motion to decertify will also depend to some extent on the law of the jurisdiction on what types of changed facts or other circumstances are necessary to justify the motion.  In Colorado, the Supreme Court’s recent decision in Farmers Ins. Exchange v. Benzing, 206 P.3d 812 (Colo. 2009) addresses this issue.

“Halftime” motion at trial

For many practitioners, the idea of challenging certification at trial may be more of an academic discussion than anything, since it is so rare for a class action to reach the trial phase.  However, in the few cases that have reached the trial phase, it will finally be time for the plaintiffs to put their money where their mouths were at the certification phase and actually prove their claims by common evidence.  It may be that when the evidence is finally introduced, it only proves the individual class representatives’ claims, or is so general that it doesn’t prove one or more elements of the claims of anyone.  The same arguments that supported denial of class certification should now have come into clear focus, and there is no longer any room for debate about what the evidence “might” show in order to justify class treatment.  Thus, on issues of typicality, commonality, and predominance, where the judge may have given the plaintiffs the benefit of the doubt at the certification phase, after the evidence is presented, the judge may now be bound to conclude that these elements of class certification are not in fact satisfied.

However, there are a number of strategic reasons why a defendant would not want to file a halftime motion challenging the appropriateness of the class certification order, including a) the jury appears favorable to the defendant; or b) the plaintiffs’ presentation of their case-in-chief was weak.  These considerations may especially be important if there is a possibility of individual litigation if the class is decertified.  Instead of formally challenging certification at this phase, a better strategy may simply be to seek a judgment as a matter of law that the class failed to prove its claims because it did not prove them by common evidence.  In this way, the defendant may get a binding judgment precluding all future litigation on the issue rather than simply an end to the litigation at hand.

Post-trial motions and appeal of an adverse verdict in favor of a certified class

Thankfully, I’ve never been faced with this situation, so I can only offer this obvious guidance: You should probably challenge the certification order if you get this far!

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With the help of Kevin O’Keefe’s LexBlog, Baker Hostetler’s employment group has come blazing into the world of 21st century social media with its new law blog, aptly named Employment Class Action Blog.

The quality entries submitted so far include case summaries, practice tips, legislative updates, and analysis covering a variety of employment class action-related topics.   If you want to keep abreast of developments in the unique area of employment class action law, I would recommend bookmarking http://www.employmentclassactionreport.com/

I have added a link to the Baker Hostetler Links list to the right of this page.

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The Eleventh Circuit Court of Appeals reversed itself just months after its widely reviled opinion in Cappuccitti v. DirecTV.  In a per curiam opinion issued October 15, 2010, a three judge panel concluded, on rehearing, that the earlier Cappuccitti decision was simply “incorrect.”  The key holding means that a plaintiffs’ class under CAFA does not have to meet a threshold requirement of having at least one plaintiff with a claim of $75,000 or more. 

“Subsequent reflection has led us to conclude that our interpretation was incorrect. Specifically, CAFA’s text does not require at least one plaintiff in a class action to meet the amount in controversy requirement of 28 U.S.C. § 1332(a). Accordingly, we construe both parties’ petitions for rehearing en banc to include petitions for panel rehearing, vacate our earlier opinion, and replace it with this one.” Cappuccitti v. DirecTV, — F.3d —, 2010 WL 4027719 (11th Cir. Oct. 15, 2010) (cites omitted).

 This decision should quiet the near universal criticism that has been clanging through the echo chamber of the class action bar since the appellate court’s July 19 ruling. The July opinion focused on the jurisdictional thresholds of the Class Action Fairness Act (CAFA).  The summer Cappuccitti decision was controversial because it seemingly invented a new requirement for federal courts to exercise original jurisdiction over class actions filed under CAFA.  The opinion set an unprecedented threshold that at least one plaintiff in a CAFA class action must allege an amount in controversy of at least $75,000.  Critics of the ruling observed that such a requirement would effectively end the filing of CAFA class actions in the Eleventh Circuit.  The CAFA law blog has extensively covered the potential impacts.  But never mind, that’s all in the past.  After the most recent ruling, the CAFA doors are now back open.

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According to this article from The Canadian Press and this one from the Ottawa Citizen, a lawyer in St. Johns, Newfoundland is considering suing the Province of Newfoundland and Labrador on behalf of a would-be class of people injured in collisions with moose.  The theory would apparently be that the government was negligent in introducing moose into the nearly area a century ago, and that it was foreseeable that the introduction of the animals would lead to collisions with Hummers and Silverados.  The human-to-moose ratio in the province is just over 4 to 1.

Not being an expert on the finer points of Newfoundlandian (Newfoundlandish?) law, I cannot comment on the strengths or weaknesses of this case if it does go forward.  However, if the obvious defense strategies, like sovereign immunity, lack of proximate cause, or “come on Judge, you’ve got to be kidding me” don’t work, here’s a more radical possible defense: blame the moose.  After all, if they would just stop procreating, stick to the marshes, or use the crosswalks, then none of this would be happening.

For a more serious comparative discussion of the differences between Canadian and U.S. law regarding governmental liability for tort claims, see this CAB entry dated October 6, 2008.

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Editor’s note: The following entry comes from my colleague, Raj Chohan, who has agreed to become a regular contributor to ClassActionBlawg.com.  Raj joined Baker Hostetler this fall after graduating from the DU Sturm College of Law in May and successfully completing the Colorado bar exam in July.  Law is Raj’s second career, following a successful first career in journalism.  I am very pleased to have Raj on board and look forward to many more informative and insightful posts-PK.

Earlier this summer, the Federal Circuit weighed-in on a matter of first impression concerning class action tolling.  For those who are new to this area of the law, tolling is a procedure that allows plaintiffs to stop the clock on the statute of limitations.  This gives plaintiffs’ counsel more time to organize their lawsuits and round up other plaintiffs.  Being able to toll a class action is a huge advantage for plaintiffs given how cumbersome it is to put a class together and get it certified.  In Bright v. United States, 603 F.3d 1273 (Fed. Cir. 2010), the appellate panel looked at the availability of tolling for opt-in classes in actions against the federal government (an opt-in class is one in which people who would otherwise qualify for the class are only included in the class if they affirmatively choose to be included). Taking sides in a long-running circuit split, the appellate panel concluded tolling was proper for putative class members seeking to opt-in after the limitations period had expired.  The decision was broadly written and will almost certainly give plaintiffs greater latitude to stop-the-clock in many kinds of class action suits against the federal government.

The case involved landowners who sued the United States seeking compensation for the alleged taking of their reversionary property interests.  The “taking” involved the conversion of miles of railroad easements into public recreational trails under the federal Trails Act.  Property owners argued they should have recovered their land after the railroad relinquished its use, rather than lose it yet again, this time to hikers and mountain bikers. 

One landowner, Ms. Fauvergue, filed a class action complaint against the United States, alleging a Fifth Amendment taking, and seeking compensation for the value of the land used in the rail-to-trail conversion.  The plaintiff sought certification within the applicable six-year statute of limitations.  After the limitations period had expired Ms. Fauvergue added twenty new plaintiffs to her amended complaint.  However, the Court of Federal Claims dismissed the additional plaintiffs because they had not filed within the statutory time limit.

On appeal, the Federal Circuit reversed the lower court and answered a question of first impression: Is class action tolling available for opt-in classes in the Court of Federal Claims?  The appellate panel answered yes, “we find ourselves in agreement with the courts holding that class action tolling is available under an opt-in scheme.  In our view, such a result is most consistent with the objectives which class action procedures are meant to achieve.”  Id. at 1285.  The “objectives” refer to the aim of class action procedures in discouraging multiple suits.  The Federal Circuit reasoned that prohibiting tolling would “eliminate class actions in the Court of Federal Claims in instances where suit was filed, and class certification was sought before expiration of [the limitations period], but [where the] the putative class was not certified before the period expired.”  Id. at 1287.  Under such a scenario, putative class members might be incentivized to file their own individual actions before the limitations period expired rather than risking a late class certification decision on the putative class.  Apparently, to discourage the plaintiffs’ incentive to file multiple suits, the Federal Circuit agreed tolling is appropriate in such cases.

In rendering its opinion, the court effectively took sides in an ongoing split between the third and eleventh circuits.  In Sperling v. Hoffman La-Roche, Inc., 24 F.3d 463 (3d Cir. 1994), the Third Circuit Court of Appeals permitted the application of tolling to opt-in class actions arising under the Age Discrimination and Employment Act (“ADEA”).  The reviewing court reasoned such an application is consistent with the purposes served by a statute of limitations, namely – to prevent stale claims, put defendants on notice, and prevent plaintiffs from “sleeping on their rights.”  Id. at 471-72. 
 
In contrast, the Eleventh Circuit Court of Appeals used different reasoning to achieve the opposite result in Grayson v. K Mart Corp., 79 F.3d 1086 (11th Cir. 1996).  In Grayson, the appellate panel refused to toll the limitations period for opt-in plaintiffs whose claims arose under the ADEA.  The court reasoned that opt-in plaintiffs begin their civil actions under the ADEA “not when the Complaint is filed, but when the putative plaintiff files a written consent to opt-in to the class action.”  Id. at 1105.

In light of the ongoing circuit split, the Federal Circuit’s decision in Bright provides another compelling argument in support of the Third Circuit’s tolling analysis.  Whereas the Third Circuit allowed tolling because it did not frustrate the purposes underlying statutes of limitations, the Federal Circuit further concluded that tolling also promotes the objectives of class action procedures by discouraging multiplicity of suits. Undoubtedly, it has also given plaintiffs the added benefit of extra time to organize and certify their putative classes.

Note: the Court of Federal Claims is a court of nation-wide jurisdiction empowered to adjudicate most suits for money claims against the federal government.  In the class action context, the Court of Federal Claims uses RCFC 23 (Rule of the United States Court of Federal Claims 23) which is modeled after Federal Rule of Civil Procedure 23.  However, they differ in several important ways.  For example, RCFC 23 addresses only opt-in classes, not opt-out, declaratory, or injunctive classes.  For more information on the Federal Court of Claims see here.

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I must have more readers than I thought, and some quality readers at that!  Andrew Oh-Willeke, Denver lawyer and author of the blog Wash Park Prophet, posted this question as a comment to one of my recent posts, and it seemed like a great topic deserving of its own post:

Do you know of any statistics on how many class action lawsuits are filed in state courts in Colorado?  The state judiciary doesn’t track Rule 23 motions in the statistics in its annual reports, so it is hard to track trends.  One can make some order of magnitude educated guess by ruling out non-class action eligible suits in District Court (e.g. Rule 120 motions and distaint warrant cases are not going to involve class actions, and presumably all Colorado class actions filed in state court would be filed in District Court, etc.), but, given the different procedural environment, reasoning by analogy from federal district court class action rates isn’t a very sound estimation method, and most places with reputations as class action meccas (e.g. Madison County, Illinois; California) are also unlikely to be representative of Colorado’s state court litigation situation.  Has the Class Action Fairness Act of 2005 shifted what class actions there are in Colorado almost entirely to federal court, or is there a steady stream of class action cases being brought under the radar in the state?

The best source that I’m aware of for tracking filings is a fee-based subscription service called CNS (for Courthouse News Service), which you can find online at http://www.courthousenews.com.   They have a database that tracks filings in the federal courts and some, although not all, state courts.  Below is what I found out from a series of searches on their filings database for U.S. District Court for the District of Colorado, as well as most of the counties along the Front Range.  Because CNS does not include all state courts in Colorado, these numbers are not a complete, but given that the majority of the state population is in the counties whose district courts are included in the CNS database, they should give you a rough idea.
2007
  • 32 total filings described as “class actions”
  • 23 federal court
  • 9 state court filings (Denver 7, Douglas 1, Weld 1)
  •  

2008
  • 25 total filings
  • 19 federal
  • 6 state (Denver 4, Arapahoe 4, Boulder 1)
2009
  • 70 total filings
  • 60 federal court
  • 10 state court (Denver 7, Boulder 3)
2010 (through yesterday)
  • 37 total filings
  • 21 federal court
  • 16 state court (Denver 13, Arapahoe 1, Boulder 2)
So, it appears that while a majority of class action filings have been made in federal court (assuming that there aren’t significant numbers of additional state court filings in counties that aren’t in the CNS database), the percentage of federal filings has not necessarily been increasing in the years following the passage of CAFA in 2005.  In fact, the year with the highest percentage of state court filings is 2010, in which 43% of the total class actions have been filed in state court. 
 
These statistics have to be taken with some huge grains of salt.  They do not reflect removals of cases filed originally in state court.  That analysis could be done using the CNS data because CNS tracks removals, but it would be fairly time consuming.  Moreover, the data also doesn’t provide any qualitative information about the cases included in the statistics.  A pro se filing that uses the words “class action” in the civil cover sheet description would be treated the same as a real class action filed by a reputable firm.  Finally, many of the federal class action filings are employment cases, where federal question jurisdiction provides a jurisdictional basis independent of CAFA.
 
There are a couple of other factors to consider in assessing the potential impact of CAFA on choice of forum.  First, many of the active class actions being litigated in the state were filed before CAFA, so CAFA’s expanded removal jurisdiction does not apply to them.  I am currently defending 3 Colorado class actions in various stages of proceedings, and all three were filed pre-CAFA.  Second, at least in the consumer area, plaintiffs seem to be concentrating less on nationwide class actions and more on individual statewide class actions.  This trend is probably in part due to CAFA but also in part due to a series of decisions over the past decade holding that variations in state consumer protection acts and other laws can preclude class treatment of a would-be nationwide class (see, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012 (7th Cir. 2002)).  CAFA jurisdiction does not apply in a diversity case where the defendant is a citizen of the forum state and more than 2/3 of the class members are also citizens of the forum state.  28 U.S.C. § 1332(d)(4).  A federal court may decline to exercise jurisdiction when the primary defendants and at least 1/3 of the class members are citizens of the forum state.  Id. § 1332(d)(3).    So, there are still many situations where a class action can be brought in state court and not removed by the defendant.

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I have returned to the world of blogging to find a veritable hurricane of blawg-related activities going on in Denver.  Here are some upcoming events of note:

Guru of social media and the law, Kevin O’Keefe of LexBlog, will be in Denver this weekend.  You can meet him at one of the following events:

  • Beer for Bloggers Event sponsored by the LexBlog and CBA CLE Thursday evening, 5:30-7:30 p.m. at Katie Mullen’s (16th St. Mall at Court Place). 
  • Social media roundables at various locations, including one starting at 10:00 a.m. at Baker Hostetler, 303 E. 17th Ave., Suite 1100, Denver CO 80203 (please email me at pkarlsgodt@bakerlaw.com if you’d like to attend).
  • CLE presentation for the DU Sturm College of Law All Alumni Weekend, 3:30 p.m. DU College of Law, Room 165 (the program is free for DU Law Alumni). 

In addition, on December 9, beginning at 8:30 a.m. I will be one of the speakers in a CBA CLE program entitled Legal and Ethical Implications of Social Media.  My presentation will be entitled “The Ethics of Using Social Media in Law Firm Marketing.”  The other speakers and their topics are:

  • “The Ethical Geek: Ethics Issues for a Digital Practice,” Paul Chan, General Counsel, University of Denver
  • “Electronic Discovery Ethics for Lawyers:  How to Find What You Should and Ignore What You Must,” David K. Isom, Corporate Trial Lawyer and Electronic Discovery Consultant

For more information about this program, please contact Priscila Fulmer pfulmer@cobar.org.

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