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In recent years, academics outside of the United States have made some of the most valuable contributions to the development of legal theory of class actions and other collective litigation.  Here are two examples of recent works by thought leaders in this area:

INDIVIDUAL STANDING IN CLASS ACTIONS (A LEGITIMIDADE DO INDIVÍDUO NAS AÇÕES COLETIVAS)

Author: Larissa Clare Pochmann da Silva (Master in Law in UNESA, Doctorate in Law student at UNESA and Professor of Complex Litigation and Civil Procedure at UCAM – Rio de Janeiro, Brazil)

Abstract (translated from Portuguese):

Individual Standing in Class Actions offers an important and interesting approach to the question of standing, one of the most important themes relating to the development of Brazilian class actions.

The first part the book summarizes research on foreign law, inquiring into the state of the art of collective protection throughout Latin America (Brazil, Argentina, Chile and Mexico), in the United States and Canada, in the European Union (Germany, France, England and Italy) and in Australia.  Part two offers a comparative analysis of these jurisdictions’ various approaches to standing.

Part three organizes the main objections to representational standing and argues for laws recognizing the standing of individuals to sue in a representative capacity, demonstrating the reasons for its relevance, and the important role to be played by lawyers in class actions.

Finally, the book addresses the question of the participation of the individual from various perspectives, seeking to offer a systematic framework for the standing discussion and proposals for the improvement of collective protection in Brazil.

The result is a work that contributes to the development and strengthening of collective action law in Brazilian and brings a new perspective of modernization and improvement of tools for access to justice and the effectiveness of the process.

Pochmann da Silva’s book is available at http://www.editoragz.com.br/produto.asp?prodId=199.

 

AN ECONOMIC ANALYSIS OF RELIANCE IN MARKET FRAUD AND NEGLIGENT MISREPRESENTATION

Authors: Alon Klement and Yuval Procaccia (Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law, Israel)

Abstract:

A deeply entrenched principle in the law of fraud and negligent misrepresentation provides that damages can be recovered only upon a showing of reliance. To prevail, plaintiffs must not only establish the mere falsity of a statement, but also show that they had acted upon the statement and sustained injury as a consequence.

Despite the intuitive appeal of this principle, this paper argues that the reliance requirement ought to be abandoned. Harm can be caused by a misrepresentation without reliance, and recovery for such loss should not be barred. When a firm misrepresents an attribute of a product, its price in equilibrium typically rises. The inflated price is an injury caused to all consumers, relying and non-relying alike. A rule restricting recovery to only relying consumers results in inadequate deterrence of the firm, which in turn spurs a host of inefficient effects: it may distort allocative efficiency; encourage investments by firms in the production of fraud; induce investments by consumers in self-protection efforts and in detrimental reliance investments; and prompt competing firms to invest excessively in signaling. Furthermore, it undermines deterrence by erecting a substantial barrier to private enforcement through class actions.

While the discussion focuses on consumer markets, it applies more broadly to other markets and other market structures. We explicitly discuss its extension to security markets, in which the requirement has been famously revoked. While the analysis supports existing policy in the domain of primary security markets, it does not do so in the context of secondary markets.

Klement and Procaccia’s article is available for download at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2372922

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Gonzalo Zeballos and I recently authored an article for Commercial Dispute Resolution Magazine’s “Expert Views” series entitled America’s Closing Doors.  The article examines recent U.S. Supreme Court decisions on extraterritorial jurisdiction of the federal courts, and the potential future role of the U.S. courts in international class action litigation.  Click the title above for a link to the article, and be sure to check out the other insightful expert views on international litigation issues that CDR has to offer, including several on developments in international class action law.

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Editor’s Note: The following guest post was authored by Sara Collins, contributor to the consumer finance website, NerdWallet.  The views expressed in Sara’s article are her own.  Although those of us who tend to represent defendants in consumer class actions may not agree with all of Sara’s views on the benefits of class actions, we can certainly learn something from reading a consumer advocate’s views on the subject.  The article also provides an easy-to-follow primer on how class actions work.  Many thanks to Sara for her contribution. 

Class Actions – Do They Actually Help Consumers? 

By Sara Collins

Consumers in the United States are sometimes victims of bad business behavior. These behaviors cover a huge range of bad acts, particularly in the field of securities. Class actions allow consumers to band together and fight against bad business. As such, they have a number of benefits for consumers and are quite helpful in evening the corporation versus consumer playing field.

What are Consumer Class Actions?

A consumer class action is simply a lawsuit which takes place in a federal or state court. The case is brought by one or a small handful of individuals, acting as representatives for a larger group of consumers, known as the class. Typically the case is seeking damages on behalf of the named individuals in addition to the entire class.

Why is a Consumer Class Action Necessary?

Traditionally, class actions are used to combine small-dollar claims for a large number of people. One small claim is generally too small for a cost-effective suit. Consumer class actions offer a helpful alternative, justifying the litigation expenses and immensely improving the consumer’s odds of success, particularly when it comes to larger corporations.

How do Consumer Class Actions Work?

When a class action is first brought, the court initially decides whether it is a proper class action. This is a process known as class certification. The parties then work towards a trial, though settlement negotiations can take place at any point.  If the parties decide to settle the case, the court must approve the settlement and then order notice given to class action members.

Do Class Actions Work?

They definitely do. Billions of dollars are given back to the public every year which come from consumer class actions. In most cases, the money is given directly to the victims of the suit, rather than going into the hands of the government, lawyers or other non-consumers.

What Long-Term Effects do Consumer Class Actions Cause?

Class actions help to make bad business practices unprofitable. Class actions aggregate the power of isolated consumers, allowing class actions to compete against corporate behemoths. It levels the playing field, forcing businesses to operate in honest and trustworthy ways.  Markets in other countries where class actions are not allowed often suffer from corporate abuses like stock manipulation, insider trading and other problems.

Do Lawyers Benefit Excessively From Consumer Class Actions?

One argument used by businesses to protest the prevalence of consumer class actions is to claim that the lawyers benefit excessively from the cases. In fact, attorney fees in class action cases average just between 20 and 30 percent of the amount recovered. In stark comparison, personal injury lawyers typically reap 35 to 50 percent of their case winnings. Clearly businesses are using false arguments in an attempt to eliminate class actions and thus damages sought against them.

What is the Class Action Fairness Act of 2005?

The Class Action Fairness Act of 2005 (CAFA) was enacted by Congress in order to curb abuse of class action suits in state courts. Evidence showed that many class actions were being filed which benefited the counsel, rather than the consumers. Additionally, many cases were filed in courts which showed prejudice against business defendants, a problematic issue.

CAFA was enacted to extend federal jurisdiction to these state courts in order to diminish such abuses. CAFA has had a mild success and while most benefits are for businesses, some benefits are extended to consumers. Primarily, the legislation limits the monetary benefits for the attorneys. This ensures that money won in settlements goes to the members of the class, rather than the plaintiff counsel.

Consumer class actions are needed to ensure the financial safety of consumers, particularly in the realm of securities. Class actions allow consumers to band together, combining resources in order to sue a corporation as a singular entity. In turn, all consumers reap the benefits of the settlement, helping to prevent future bad behavior from the corporation in question. Class actions undoubtedly have a positive effect on the world of consumers and it is vital they stay legal for the foreseeable future.

Sara Collins is a writer for NerdWallet, a personal finance site dedicated to helping consumers learn about new ways to save money.

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Editor’s note: Guest contributor David Williamson authored the following commentary on recent developments in the availability of legal aid in the UK.  Mr. Williamson is an experienced legal content writer and works for Coles Solicitors.  Although the article does not touch on litigation funding in representative actions specifically, the availability of legal aid and other sources of litigation funding is an important topic related to ongoing debate on the need for development of class actions and other representative and multi-party dispute resolution mechanisms in jurisdictions outside of the US.  Many thanks to Mr. Williamson for his contribution.

Post Legal Aid Reform: Observations since its Passing

As of the beginning of April this year, the UK ushered in sweeping changes to the sixty-year-old Legal Aid legislation; implementing heavy cut-backs and making eligibility stricter. However, how has the UK legal climate changed since its passing?  Heated dialogue seemed to circulate the issue for many months, with many claiming the changes will cripple the courts, and others arguing that they will do wonders for the British economic deficit. However, now the issue has settled down it is prime time to look at what exactly has occurred and what legacy this may leave on the broader UK legal climate.

Legal Aid Reform: In a Nutshell:

If you’re not from the UK, the chances are you are not entirely familiar the Legal Aid reforms that are holding the spotlight during this discussion. The reforms, which cut public spending by up to £350m, meant that to be eligible to claim Legal Aid, one had to prove a disposable income of around £1,000, whereas before the figure stood at a much more generous £8,000. Therefore, with such a massive decrease in the amount one needs to have saved to be eligible, the reforms are sure to have affected thousands of claimants. In fact, the government’s own figures stated up to 623,000 people could miss out on financial assistance in court, with the less well-off, working class families being the hardest hit. The areas of law targeted by the reforms were mainly clinical negligence claims, educational and employment law, immigration, private family law, divorce and custody battles and debt/housing issues.

Increase in Self Representation?

Now, though – 2 or so weeks after the cuts, what seems to have occurred as a result? Well, recently a report into legal trends and how the court process is operating since the reforms found out a curiously novel result. The answer: an increase in people representing themselves in court.

In fact, this study comes hand in hand with a release of an ‘idiots guide’ to legal representation, issued by the Bar Council. Within, the guide stipulates when one should speak, when one should stand, correct salutations and a rough guide to how to address the court. In fact, in the rather tongue in cheek guide, specific attention was paid on people not behaving like court-room lawyers they may have seen on TV. Perhaps it’s a little early to analyse the statistics thus far as to whether there has been any real rise in this sort of self-representation, however, it is certainly something to keep an eye on as it is a very real (and for many people – the only real) alternative to Legal Aid.

Pro Bono:

An alternative model of the British Legal Aid bill has been in effect in the USA for a long time now, and it is proving to be highly successful. Pro Bono legal help, especially in places like New York, ensure that solicitors pledge at least 50 hours per year to Pro Bono legal cases. With this in mind, could it not be obvious to apply this same model to the UK legal climate now there exists this apparent vacuum for Legal Aid? 

Of course, this seems like the most sensible solution but, unfortunately, it doesn’t seem like the UK legal climate has properly taken hold on this front as of yet. It is only early days so perhaps this will soon change, but thus far there have been little developments on this front. However, that being said, there is – and have been for some time – many highly qualified solicitors in the UK willing to carry out Pro Bono work, but it would seem they are greatly understaffed and rather poorly spread out across the country. A quick poll revealed that London benefits from a reassuring 59 free legal advice clinics, where as there are only 29 in the whole of the North of England, and only 3 in all of Wales.

A rather novel argument has recently been made for the case of law students and those currently in training or entry-level positions. This argument lays an obligation on these young solicitors to carry out an as-yet undetermined amount of Pro Bono work in their spare time, giving help to the reported 650,000 cases that the current system cannot support. This also raises moral questions, though; such as is it fair to make it compulsory for student who are perhaps under qualified and inexperienced take on cases which can have dire consequences on those in party to the case? And, is it fair to force these already pressured individuals to give up their free time to work for no money?

Overall, it would seem the UK legal climate has not crippled under the changes to Legal Aid legislation. The assumptions of many nay-Sayers seem to have been premature and instead of the poorest being denied all forms of legal representation, a new dialogue has emerged prompting creative changes to age-old problems. Of course, those who can afford pricey legal representation still win a much greater number of cases than those who can only afford cheaper or subsidised help. This has always been the case and the results thus far seem to suggest the Legal Aid reform in the UK hasn’t altered this as drastically as once thought.

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My article for the University of Denver Law Review’s Online Edition entitled Statutory Penalties and Class Actions: Social Justice or Legalized Extortion?  was posted today.  The article discusses potential reforms to address the problem of class actions for statutory penalties giving rise to potentially annihilating liability in cases involving little or no actual harm.  Please check it out.  While you’re there, check out some of the other excellent content on a wide variety of legal topics that the DU Law Review has to offer in its online supplement to its regular print publication.

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There have been some significant developments in class actions in South Africa since the publication of World Class Actions this past August. South African contributor Neil Kirby of Werksmans send an update, summarizing in detail the class certification requirements outlined by the South African Supreme Court of Appeal in a seminal cartel (antitrust) case titled Children’s Resource Centre Trust vs Pioneer Food Proprietary Limited (50/2012) [2012] ZASCA 182 (29 November 2012). Click here for Kirby’s excellent summary of the decision.

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The new ABA CADS Fall Newsletter is out, and it contains a variety of excellent articles all falling under the common theme “Class Actions 3.0: What’s Next for Class Actions?”  I’m proud to say that the Class Actions 101 piece this issue is an article coauthored by my partner, Casie Collignon, and me entitled A New “Viral” Class Action?  The article introduces the concept of “viral” or “virtual” class actions, where litigants use social media to build support for and to aggregate individual claims, as an alternative to using the class action procedural device.  It’s a novel idea made possible by 21st Century technology, but will it last?  You’ll have to read the article to find out.

Be sure to check out the quarterly CADS Newsletter for other excellent articles on cutting-edge class action issues.  The Newsletter is one of the many benefits of CADS (Class Actions and Derivative Suits) membership.  If you aren’t a member of the CADS Committee, please consider joining.  Membership is free to all ABA Section of Litigation members.

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The latest issue of the ABA Section of Litigation magazine Litigation News has a very useful article for class action practitioners entitled Mooting the Class.  The article is authored by Litigation News Associate Editor John W. Joyce. 

The article discusses the various approaches taken in different federal circuits in determining whether settlement with the named class representative renders a class action moot.  The article also includes some helpful practice tips on the subject from seasoned class action practitioners on both sides of the bar.  If you are a defendant considering this tactic, or a plaintiff trying to prevent it, you’d be wise to read this article.

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In a recent post entitled Concepcion a Year Later, Are Consumer Class Actions Dead Yet?, I invited readers to offer their perspectives on trends in the enforceability of class arbitration waivers now that a year after the Concepcion decision.  In response, Jessie Kokrda Kamens at the Bloomberg BNA Class Action Litigation Report send me a copy of her recent article, Post-Concepcion, Plaintiffs Chalk Up Few Victories, Look to Government for Relief.  Kamens offers the perspectives of several leading class action practitioners on how the law on class arbitration waivers has developed in the lower courts since Concepcion, as well as their predictions on how the law will develop into the future.  Among the observations made in the article:

  • Although class arbitration waivers were upheld in 76 cases, plaintiffs were successful in invalidating arbitration clauses in several key cases, mostly on various federal law grounds.
  • Use of “consumer-friendly” provisions, such as the one at issue in Concepcion that provided for monetary incentives for individuals to pursue arbitration, makes it much more likely that an arbitration clause will be upheld.
  • Observers are eagerly awaiting several federal and state regulatory and legislative developments that may impact the enforceability of class arbitration waivers, including the results of a study being conducted by the federal Bureau of Consumer Financial Protection (CFPB) pursuant to Dodd-Frank about the impact of arbitration clauses on consumer financial products, several bills being considered by Congress, and a bill being considered in the California legislature that would render void contracts that contain class action waivers.

Thanks to Bloomberg BNA (www.bna.com) for granting permission to post a copy of the article on this site.  For those of you who are not subscribers, I highly recommend the Bloomberg BNA Class Action Litigation Report.  It is one of the most comprehensive and reliable sources of class action cases and trends available.

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I’m embarrassingly late in posting a link to a terrific article from Steptoe & Johnson Partner Jennifer Quinn-Barabanov entitled Has Dukes Killed Medical Monitoring?  The article, published in the November 2011 Issue of DRI’s For the Defense Magazine, explores the potential impact of the Supreme Court’s decision Dukes in defending against class certification of product liability claims that seek as a remedy medical monitoring of class members who were exposed to an allegedly harmful product.

I highly recommend Quinn-Barabanov’s article for those of you who may have missed it when it came out in November.  The article is a must-read for anyone facing (or prosecuting) a medical monitoring class action.

It also makes at least two key contributions that are independent of the medical monitoring context.  First, it offers an analysis of the potential application of various aspects of the Wal-mart Stores Inc. v. Dukes decision outside of the employment discrimination context, including the arguably heightened commonality analysis and the admissibility of expert testimony in support of class certification.  Second, it is a good primer on the possible distinctions between truly injunctive relief, which still may be the basis for a Rule 23(b)(2) class action, and merely equitable relief incidental to a claim for monetary relief, which the Dukes Court held cannot support class certification under Rule 23(b)(2).

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