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Archive for the ‘class action reform’ Category

After years of debate, France has finally passed its first “class action” law. Act No. 2014-344 of 17 March 2014 (relatif à la Consommation) went into effect on March 18. Chapter One of the new law introduces a new collective action procedure to adjudicate claims arising out of anti-competitive behavior and certain other consumer protection claims. Like the group action laws of many other civil law countries in Europe, the new procedure is very different from consumer class actions as they are known in the United States and other common law countries. The law creates a simplified opt-in collective action procedure that can only be enforced by an approved consumer association, not by individual litigants.  However, it is a significant development for a jurisdiction that has long resisted implementing collective action procedures of any kind.

Here is a link to the google translation of the Act in English.

Thanks to friend of ClassActionBlawg Larissa Clare Pochmann da Silva for tipping us off to this new development.

For a more detailed summary of the various aspects of the new law, see this Lexology article authored by Jérôme Philippe, Maria Trabucchi, Stephane Benouville, Dimitri Lecat and Alexandra Szekely of Freshfields Bruckhaus Deringer LLP.

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Earlier today, the Supreme Court denied certiorari in two highly anticipated appeals of decisions by the Sixth and Seventh Circuit Courts of Appeals to grant class certification over breach of warranty claims involving allegedly defective washing machines.  The denial of cert in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013) was a surprise to many commentators who had seen the moldy washer cases as providing the perfect opportunity for the Court to continue its trend clarifying the boundaries of class certification in cases like Wal-Mart Stores, Inc. v. Dukes,  Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, and Comcast Corp. v. Behrend.  The denial of cert means that the Court will not be addressing the question of whether it is appropriate for a federal court to order class certification of discrete, common issues in a case without analyzing whether those issues predominate more generally over the individualized questions, like injury or damages.  That question will be left to the lower courts for the time being.

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On Monday, I summarized proposed Arizona class action reform legislation forwarded to me by Shawn Aiken of Aiken Schenk Hawkins & Ricciardi P.C.  Yesterday, Aiken forwarded the final version of the class action bill as introduced before the Arizona Senate.

Click here for a copy of SB 1452.

Aiken also noted that there could be challenges to the legislative power to enact a new class action rule:

Our state constitution has many unique provisions. The one that will be invoked here is this: “The supreme court shall have . . . [the] [p]ower to make rules relative to all procedural matters in any court.”  Arizona Constitution, Article 6, Section 5.  The question will be what is more procedural than judicial certification of class actions?

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Phoenix Attorney Shawn Aiken sent me an advance copy of a draft class action bill set to be introduced in the Arizona legislature this week.  The bill sets forth some specific requirements for class certification that are much more exacting than those required under federal Rule 23 and most state class action rules.  Some of the highlights are summarized below.  Click this link for a complete copy of the bill.

  • clear and convincing evidence would be required to justify a grant of class certification
  • orders granting class certification would have to be supported by a detailed written statement of the reasons and evidence justifying the decision
  • in assessing superiority, the court would be required to consider, among other things, “whether it is probable that the amount which may be recovered by individual class members will be large enough in relation to the expense and effort of administering the action to justify maintaining the case as a class action”
  • there would be a rebuttable presumption against class certification in cases involving claims where individual knowledge, causation, and  reliance are required elements
  • certification of a case as a class action would not relieve any class member of the requirement of proving individual injury or damages
  • class notice must include a statement of “the possible financial consequences for the class”
  • the law would expressly provide that the plaintiff would bear the initial cost of distributing notice to the class
  • appeals from orders granting or denying class certification could be taken as a matter of right the same as a final judgment, and trial court proceedings would be automatically stayed pending the appeal

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This is the fourth of what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last month in Chicago.  For more on this excellent conference, see my October 31November 5, and November 6 CAB posts.

The fourth session was entitled “Sifting Through All the Big Shoulders,” Litigating Class Actions Alongside Opt-Outs – Free-Riding or Riding Shotgun.  Vincent J. Esades moderated another distinguished panel, which included Professor Geoffrey Parsons Miller, The Honorable Lee H. Rosenthal, and attorneys Joseph R. Saveri and David C. Eddy.

Managing parallel class and opt out cases in multidistrict litigation is an increasingly common and complicated venture, especially in antitrust litigation, where individual institutional plaintiffs may have a sufficient enough individual stake to justify hiring their own counsel and pursue their own claims.  A potential free-rider problem arises in this context because individual plaintiffs have a right under Rule 23(b)(3) to opt out of any class, at least for the purpose of pursuing damages claims.  This means that individual plaintiffs and their lawyers can take advantage of the time and effort expended by the named plaintiffs and their counsel early on in the case, only to opt out later and pursue their own litigation without having to share the benefits of any recovery with class counsel.

The panelists seemed to agree that there is an inherent tension between the opt out rights embodied in Rule 23 and the burdens on the courts of managing both class and individual litigation over the same issue.   They also seemed to agree that, short of re-writing Rule 23, there is no simple solution to ensure that the parties and attorneys who come late to litigation are not free riders on the efforts of others.  Professor Miller raised the question whether these problems suggest a fundamental change is needed in how mass litigation occurs, including a convergence of mass tort and class actions or a recognition that those labels don’t mean anything in the context of certain multidistrict litigation.  Alternatively, can existing rules of civil procedure could be used to solve the problem?  Whether the solution to this problem is litigation reform, a change in judicial philosophy, or creative solutions already within existing rules, much of the discussion surrounded a very pragmatic question, “What’s the blueprint?”

The allocation of fees and costs between a class and individual plaintiffs raises a host of difficult questions, including 1) can a court force an opt-out to pay a portion of the fees of class counsel? 2) does a court have jurisdiction to require the defendant to pay any portion of any individual settlement with one or more plaintiffs into an escrow account, where a portion of any fee award can be claimed by the counsel for other plaintiffs, depending on the work performed? and 3) if allocation between counsel is somehow permitted, how should non-monetary aspects of settlements be valued, such as agreements to provide a guaranteed source of supply of a particular product?

The judge does, of course, have express case management authority under Rule 16 as well as more general inherent discretionary case management authority.  However, the problem in using these case managemnt tools tends to be a lack of information about the precise problems that need to be resolved.  Judge Rosenthal pointed out that the judge is typically not in a good position to make that decision without the help of the lawyers because there is usually very little information the economic incentives driving different groups of lawyers.   (In what might have been the most quotable quip of the entire program, she implored the three lawyers on the panel, “How do I get you guys to lift up your skirts?”)  If there is more transparency by the parties and their attorneys, she argued, a judge would be a better able to allocate costs fairly.  Once the problems and incentives are identified, there are case management tools available to incentivize conduct properly, even if a judge does not have direct authority to order one party to pay another’s fees.  For example, the judge can help parties to understand the benefits of coordination of efforts voluntarily.

One key question debated by the panelists was whether procedures used in mass tort litigation can be applied to the class action context.  On one hand, as one panelist pointed out, the management of class and individual actions in a single MDL raises different challenges than the management of mass tort cases in an MDL.  In the mass tort context, one panelist pointed out, all the parties and their attorneys have to be involved in the proceedings from the beginning because of the nature of mass torts as a collection of individual actions.  In the class action context, by contrast, individual plaintiffs can wait and see how the class action proceedings develop before having to get involved individually through their own counsel.  On the other hand, as with any complex litigation, there are models and protocols that both parties and judges to look to in order to bring efficiencies to the litigation even when not every problem can be solved.  While mass tort litigation is not completely analogous it can provide a source of ideas for judicial management of certain problems.

In the end, the point was made that this is not so much an issue of jurisprudence as it is a problem of judicial management.  As with any issue with case management, the solutions will develop over time through experience, trial, and error.

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Tiger Joyce, President of the American Tort Reform Association, authored an impassioned op-ed for the Washington Times yesterday entitled A Class-action Blow to U.S. Manufacturing.  Joyce argues that the entire manufacturing industry is at risk if the United States Supreme Court declines to grant certiorari of the Sixth Circuit’s decision in the case of Whirlpool v. Glazer, No. 12-322, in which the court upheld class certification of claims that washing machines were defectively designed, causing chronic mold problems.  Whether Joyce’s warning is hyperbole or prescience remains to be seen, but the case does raise some interesting issues of note to class action practitioners.  The issues presented for review are as follows:

1. Whether a class may be certified under Rule 23(b)(3) even though most class members have not been harmed and could not sue on their own behalf.

2. Whether a class may be certified without resolving factual disputes that bear directly on the requirements of Rule 23.

3. Whether a class may be certified without determining whether factual dissimilarities among putative class members give rise to individualized issues that predominate over any common issues.

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Reuters contributor Alison Frankel authored an insightful column published August 20, 2012 entitled Foretelling the End of Money-for-Nothing Class Actions, that touches on issues similar to those raised by Brian Wolfman in two recent articles summarized in this August 15 CAB post.  In her column, Frankel comments on a recent trend, particularly in data privacy class actions, where large fee awards are requested in settlements for which no meaningful relief is provided to class members.  Oftentimes, the fee awards are justified by the value of prospective injunctive relief or by the fact of a large cash payment to charity in the form of a cy pres award, but not by any direct benefits to the class members themselves.

Frankel predicts that we have seen the “high point” in what she terms “money-for-nothing” class action settlements, pointing to a growing skepticism among judges who are asked to approve them.  While it remains to be seen if this prediction will come true, Frankel’s article, like Wolfman’s articles, should at least give pause to class action attorneys who are willing to sell out a class for personal gain: you may be getting away with this now, but at some point the courts will begin to look beyond the desire to clear their dockets and begin to question the societal value of these settlements.

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