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Archive for February, 2012

Last Friday, the Seventh Circuit Court of Appeals issued a significant employment class action decision that may challenge conventional wisdom about the impact of the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes.   The opinion, authored by respected Judge Richard Posner, is McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 11-3639 (7th Cir., Feb. 24, 2012).

The procedural history of McReynolds is interesting, because the plaintiffs had actually moved for reconsideration of an earlier denial of class certification after the decidedly pro-employer decision in Dukes was announced.  Although the trial court judge was unconvinced to change his earlier decision, he did agree that Dukes presented a good basis for reconsideration of the class action issue, and expressly stated in his decision that he believed the case was a good candidate for an interlocutory appeal under Rule 23(f).

The Seventh Circuit accepted the appeal, and reversed the denial of class certification.  The Seventh Circuit panel recognized that individualized issues would prevent certification of any claims for back pay or damages, but held that certification of the issue of whether the defendant’s challenged employment policies had an adverse impact on members of a protected class would still be appropriate under Rule 23(b)(2), which allows a class to be certified for the purpose of awarding injunctive relief, and Rule 23(c)(4), which allows certification of particular issues.  Essentially, the case would be certified for the purpose of deciding whether the defendant’s challenged policies created a disparate impact to members of a protected class and for the purpose of ruling on plaintiffs’ request to enjoin the practices.  Any claims for back pay, compensatory or punitive damages would then have to be brought as separate proceedings. 

In reaching its conclusion, the court drew a key factual distinction between the practices being challenged in the case before it and the practices that had been challenged in Dukes.  In McReynolds, the practice being challenged was the company-wide policy of “permitting brokers to form their own teams and prescribing criteria for account distributions that favor the already successfulthose who may owe heir success to having been invited to join a successful or promising team.”  The court distinguished this policy, which it characterized as a firm-wide policy of Merrill Lynch, from the allegations in Dukes, which were that the lack of a uniform corporate policy on discrimination created too much discretion in local managers to create locally discriminatory policies.

I’ll be posting more on this decision within the coming week, so stay tuned…

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Alison Frankel, whose On the Case blog is featured in the Thomson Reuters News and Insight section, posted this interesting article today discussing a novel alternative to the class action as a device to resolve mass disputes.  The procedural device in question is Article 77 of the New York State Code, which allows a trustee to seek court approval of decisions relating to a trust.  Frankel’s article today offers an update on proceedings brought under Article 77 seeking approval of an agreement between institutional investors and the trustee of hundreds of residential mortgage-securitization trusts, which had created in order to allow banks to raise funds in order to offer residential mortgages to consumers.  If approved, the settlement would resolve the claims of not only the institutional investors who reached the settlement with the trustee, but also potential claims of other investors in the trusts.  Thus, Article 77 essentially provides a means of creating a global settlement of all investor’s claims, without allowing the opportunity to opt out, which would have been available if the agreement had been presented as a proposed class action settlement. 

Frankel has done an excellent job of summarizing the issues in the case as well as today’s Second Circuit Court of Appeals decision holding that the federal courts lack jurisdiction over the case under the Class Action Fairness Act (CAFA) as a result of the securities exception in 28 U.S.C. §§ 1332(d)(9)(C) and 1453(d)(3), so I won’t re-summarize the article here but simply commend it to your reading.  The case is BlackRock Fin. Mgmt. Inc. v. The Segregated Account of Ambac Assur. Corp., 11-5309-cv(L), (2d Cir., Feb. 27, 2012).

Although the use of Article 77 to create a binding settlement that does not require an opportunity to opt out may be a novel strategy, the case highlights an often-overlooked option that may be available in any class action litigation involving a trust, benefits plan, or other fund with a custodian or trustee.  This would include certain banking and securities cases or class actions filed under the Employee Retirement Income Security Act (ERISA) against a party other than the trustee.  Rather than having to negotiate with class action lawyers, it may be possible in these contexts to come to a global resolution of a dispute by negotiating with the trustee and then seeking court approval of that agreement.  Even if a class action is pending, resolution of the dispute with the trustee may provide grounds to defeat class certification on superiority grounds, since a settlement with a party having a fiduciary responsibility to the beneficiaries of the fund can be an adequate and significantly more efficient means of resolving any dispute.

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I’m taking a week or two off of blogging to work on the copy edited chapters for the World Class Actions book.  So far, most of the authors have been great at getting their chapters back to me with revisions, so I remain optimistic that we’ll be able to keep the publication schedule on track.  The publisher has set a tentative June 2012 publication date.  Check back here for more updates on the book’s progress as the summer approaches.  If you’re curious to learn more, here’s a link to the book’s page at the Oxford University Press website.

I hope to start posting riveting class action-related content again soon, so stay tuned…

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In this era of globalization, one key issues in international class and collective actions is the recognition of foreign judgments by countries who lack the same collective or class action procedures.  I was recently introduced to a lawyer and scholar, Leandro Perucchi, who published his PhD thesis on this topic.  Dr. Perucchi’s book, with the German title Anerkennung und Vollstrechung von US Class action-Urteilen und -Vergleichen in der Schweiz, concludes that class action judgments and settlements can be recognized in Switzerland and be given res judicata effect.  

Foreign enforceability of class action judgments is an important question facing any litigant or court involved in international or transnational class action litigation.  Even when it is permitted (see this CAB entry discussing the Supreme Court’s Morrison v. Australia National Bank decision addressing foreign-cubed class actions), obtaining a class action judgment against a foreign defendant in the United States may be a hollow victory if the defendant lacks sufficient US assets and is located in a country that does not recognize US class action judgments as enforceable.

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The Baker Hostetler Employment Class Action Blog is constantly putting out quality content, but they have two new recent posts that I would especially recommend to my readers.  They include:

  • This February 6 post from John Lewis discussing the impacts, both on employment cases and otherwise, of the Second Circuit’s recent Amex III decision.
  • This February 6 Post from Greg Mersol discussing a recent federal court decision holding that the pleading standards articulated in Iqbal and Twombly do not apply to affirmative defenses in class actions.
  • This January 20 post from John Lewis discussing the U.S. Supreme Court’s most recent pro-arbitration opinion in CompuCredit Corp v. Greenwood.

Even if you aren’t an employment lawyer, I would strongly suggest adding www.employmentclassactionreport.com to your list of favorites!

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As promised in my post late last week, the Baker Hostetler client alert on last week’s Second Circuit decision in In Re American Express Merchants’ Litigation, No. 06-1871 (2d Cir., Feb. 1, 2012) (Amex III) was released today.  Here is a link to the alert, authored by New York partner Deborah Renner and Columbus associate Jennifer Vessells, and titled Second Circuit Again Holds Class Action Waiver Unenforceable.

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Two readers sent me tips yesterday on important decisions from the Second and Third Circuit Courts of Appeals that will be of interest to class action practitioners:

First, John G. Papianou of the Philadelphia firm Montgomery, McCracken, Walker & Rhoads, LLP forwarded a copy of the Third Circuit’s decision in Long v. Tommy Hilfiger U.S.A., Inc., No. 11-1554 (3d Cir., Jan. 24, 2012).  The Third Circuit affirmed a lower court’s decision (summarized in this February 14, 2011 CAB Post) holding that 1) the Fair and Accurate Credit Transactions Act (FACTA) prohibits a merchant from printing a consumer’s expiration month (as opposed to the entire expiration date) on a credit card receipt but that 2) the standard for a willful violation of FAСTA is one of objective reasonableness, meaning that if a merchant acted in conformance with a reasonable, albeit erroneous, interpretation of the statute, it cannot be held liable for a willful violation, regardless of its subjective knowledge or intent.

Second, New York securities class action lawyer Noah L. Shube forwarded a copy of the Second Circuit’s highly anticipated decision in In Re American Express Merchants’ Litigation, No. 06-1871 (2d Cir., Feb. 1, 2012).  In that case, the Second Circuit reaffirmed its conclusion invalidating a class arbitration waiver on federal statutory grounds.  The case had been vacated and remanded by the U.S. Supreme Court to reconsider in light of its recent decision in  AT&T Mobility v. Concepcion.  Yesterday’s decision follows a previous ruling finding the clause unenforceable, which had previously been vacated, remanded for reconsideration in light of the Court’s decision in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), only to be reaffirmed by the Second Circuit in a March 8, 2011 ruling (discussed in this March 9, 2011 CAB entry).  In yesterday’s decision, the Second Circuit relied on the federal law of arbitrability, a concept not squarely addressed in either of the Supreme Court’s recent class arbitration decisions, in holding the class arbitration waiver unenforceable.

The Baker Hostetler class action team is putting together a more detailed alert discussing yesterday’s decision in In re American Express Merchants’ Litigation, and I’ll post a link to that alert as soon as it is available.

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