Editor’s Note – This article is a joint submission to CAB and the BakerHostetler Class Action Lawsuit Defense Blog. Please visit our firm’s blog for more riveting class action-related content.
A definitive ruling on whether courts may certify class actions to decide discrete issues, as opposed to cases or claims, will have to wait. Last Monday, the United States Supreme Court denied a writ of certiorari to review the Seventh Circuit Court of Appeals’ ruling in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012).
In McReynolds, which was decided after the Court’s ruling in Wal-Mart Stores, Inc. v. Dukes, the Seventh Circuit had reversed a denial of certification of a class in a disparate impact employment discrimination case, holding that a class could be certified for the limited purpose of resolving the issue of whether a specific policy of the Defendant created an unlawful disparate impact on black stock brokers. For a more detailed summary of Judge Posner’s decision in McReynolds, see Deborah Renner’s March 1, 2012 CALD post.
The issues that had been presented for review by the Supreme Court were as follows:
(1) Whether the Seventh Circuit’s certification of a disparate impact injunction class conflicts with this Court’s decision in Wal-Mart Stores, Inc. v. Dukes, which rejected certification of a nationwide class that, like this one, asserted disparate impact claims based on employment policies requiring the exercise of managerial discretion; and
(2) whether the Seventh Circuit erred in holding, in conflict with other circuits, that Federal Rule of Civil Procedure Rule 23(c)(4) permits class certification of a discrete sub-issue when the claim as a whole does not satisfy Rule 23(b) and hundreds of individual trials would be needed to determine liability.
The denial of certification means that the lower federal courts will be left to decide whether and under what circumstances “issue certification” is permitted. A procedural tool not often applied in practice until recently, issue certification, at least in some form, 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.”). However, a common question that arises in the interpretation of this language, and the one that had been presented for review in McReynolds, is whether issue certification is permitted when the resolution of the issue certified would not eliminate the need to resolve individualized issues before any claim could be resolved.
The federal circuits are split on whether issue certification is allowed to resolve discrete issues short of a full claim. The Fifth Circuit has not allowed issue certification in a class action for damages where predominance cannot otherwise be satisfied, and it has not allowed issue certification in a class action for injunctive or declaratory relief in cases when monetary relief is the predominant relief sought. Castano v. American Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir. 1996) (“[a] district court cannot manufacture predominance through the nimble use of subdivision (c)(4).”); Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998). [Ed. Note: just before the Supreme Court denied the petition for certiorari, in McReynolds, the 5th Circuit issued its decision in Rodriquez v. Countrywide Home Loans, Inc., No. 11-40056 (Sept. 14, 2012), a case that the McReynolds plaintiffs argued in supplemental briefing to the Supreme Court eliminated the Circuit split. In Rodriguez, the 5th Circuit approved of the use of Rule 23(c)(4) to certify a class for the purpose of resolving injunctive and equitable relief, leaving damages for a different proceeding]. The Second Circuit has been more open to issue certification. Robinson v. Metro North Commuter, R.R. Co., 267 F.3d 147 (2d Cir. 2001) (holding that “litigating the pattern-or-practice liability phase [of a disparate treatment discrimination case] for the class as a whole would both reduce the range of issues in dispute and promote judicial economy”); In re Nassau County Strip Search Cases, 461 F.3d 219 (2d Cir. 2006) (holding that “a court may employ Rule 23(c)(4) to certify a class on a particular issue even if the action as a whole does not satisfy Rule 23(b)(3)’s predominance requirement.”). The approach taken by Judge Posner in McReynolds generally follow the Second Circuit’s approach by allowing issue certification even where predominance would not be satisfied with respect to the claim as a whole.
An interesting feature of issue certification is that unlike full-blown class certification of a claim or case, issue certification does not necessarily put a defendant at risk of catastrophic liability in a single stroke, because any individualized defenses to liabilty on the claim as a whole may still be available even after the common issue is decided. On the other hand, it is this feature that often begs the question whether issue certification has any utility in materially advancing litigation that will inevitably require individualized proceedings before reaching finality. It also leaves the procedure vulnerable to a great risk of misinterpretation and abuse, which may explain the Fifth Circuit’s skepticism. Plaintiffs may seek and courts may grant issue certification on the mistaken impression that to certify part of a class will hasten the resolution of litigation. Defendants may fear issue certification based on a mistaken belief that certification of even part of a class action puts them at risk of aggregated liability.
The real question with issue certification tends to be whether formally certifying an issue for class-wide treatment creates any practical efficiency that materially advances litigation.
In many cases, there are legal issues, the answer to which indisputably have class-wide implications, but the question arises whether formal certification of these issues is even necessary. For example, common legal issues are often resolved in a preliminary motion. Even if these issues are not resolved on a class-wide basis after a formal order of certification, their resolution has a practical class-wide effect. Examples would be decisions on the interpretation of a particular statutory provision. For example, does the statute confer a private right of action? Is proof of injury required as an essential element of a statutory claim? Whatever the initial court’s decision on this type of issue is likely to have a practical impact on any later litigation, so the resolution of the issue in the first case to address it tends to have a practical impact on any other affected litigants that usually avoids the need for duplicate litigation on the same issue.
In other cases, resolution of issue, however indisputably common, can often bring the litigation no further to conclusion. For example, in products liability case against a tobacco company, resolution of the factual issue whether cigarettes cause cancer probably does not move most cases closer to resolution because the primary issue in the case is going to be whether cigarettes caused the plaintiff’s cancer.
A big problem with issue certification is that resolution of important issue in a vacuum, without proper context, can have disastrous and unfair consequences later in a case. Answering the question whether the defendant was “negligent” is a problem in most cases becuase the question of “negligence usually depends not simply on whether the defendant breached an applicable standard of care, but also whether that breach caused injury to the plaintiff. So, certifying the question of “negligence” is usually inappropriate due to the necessity to resolve individualized questions of fact. Unless the question on which the class is to be certified is very well defined, certification in these types of case can create serious problems. Certification of whether the defendant breached an applicable standard of care may be a more appropriate question for certification, but only if resolution of that question could materially advance the litigation to a resolution. In many cases, as in the tobacco example noted above, certifying a preliminary question of “breach of the standard of care” does not create any real efficiencies in the litigation as a practical matter.
Thus, there are serious questions whether issue certification has any social utility in many cases. However, not only are there situations in which issue certification is not only beneficial from the perspective of judicial economy, but there are also situations in which issue certification can be used by a defendant to its own advantage. They include:
1) a case in which certification appears imminent, despite the presence of individualized issues; in these cases, issue certification provides a an alternative to full blown certification in a way that may preserve the defendant’s ability to avoid having a determination of mass liability in a single case or the defendant’s ability to raise important individualized defenses.
2) to illustrate the analytical and manageability flaws in certification of an entire case or claim. In some cases, pointing out issue certification as an option may serve not only to provide an option short of full-blown certification, but also to show to the court how certification of merely the issues that are truly common may not create any real efficiency in resolving the litigation. In these cases, pointing out that issue certification is an option may serve to avoid class certification in its entirety.
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Demanding More from Outside Counsel
Posted in Commentary, Other class action blogs, rule 23, tagged class action, constitutional law, constitutionality, herrmann, legal theory, outside counsel, redish, rule 23, trends on January 14, 2012 | Leave a Comment »
Mark Herrmann, former contributor to Drug and Device Law Blog and Vice President and Chief Counsel for Litigation at Aon, Inc., recently authored and entertaining and enlightening post in the legal industry blog, Above The Law. In Inside Straight, Torpedoing Class Actions, Herrmann highlighted a 2009 book by Northwestern Law’s Martin Redish entitled Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit, in which Redish argues that as applied in current practice, class actions undermine the foundations of American constitutional law. Rather than exploring the nuances of Redish’s constitutional analysis, Herrmann uses the book to make a deeper point about the state of class action defense practice:
This post is not intended to be a response to or criticism of Herrman’s commentary, as I don’t disagree with a word of it. Think of it instead as a supplement, intended to address the related topic of how clients can select outside counsel who will keep them abreast of arguments like the ones discussed in Professor Redish’s book. I have two simple suggestions, each of which I will expand upon below: 1) Hire bloggers, and 2) Ask for competing litigation strategy proposals before selecting outside counsel.
Hire Bloggers as Outside Counsel
Reacting to Herrmann’s post gives me an opportunity to engage in the blatant self-promotion that this blog was created for, if a bit less subtly than usual.
There is no better way to ensure that your outside counsel is up to speed on possible arguments than to hire blogger. Bloggers are constantly doing their own research and tracking in current issues, theories, and litigation trends from many different sources, including law reviews, trade journals, other blogs, news feeds, and court decisions. Those arguments that they don’t become aware of through their own study are often brought to their attention by their readers.
Blogging also reflects several other traits that are favorable in any outside lawyer. It shows a strong work ethic (after all, most of us do this in our spare time), and demonstrates intellectual curiosity. A blog also serves as a permanent public resource that any potential client can consult to get insights into a lawyer’s writing style, creativity, and analytical abilities.
Of course, none of this would be news to Herrmann, who was one of the premier Biglaw bloggers before moving in-house a few years ago. If I were looking for outside counsel in a class action, among the first lawyers I would consider would be my fellow Biglaw bloggers Andrew Trask and Russell Jackson, as well as Herrmann’s former blogging partner, Jim Beck.
For obviously selfish reasons, I’m highlighting bloggers here, but these same arguments apply to any lawyer who writes, lectures, or teaches in any medium. A frequent contributor to law reviews or trade journals an adjunct professor at a law school, a frequent CLE panelist, or even a lawyer who takes the time to actually read law reviews and trade journals (rather than simply let them pile up on the corner of a desk) can also have many of these same desirable traits. And, there are plenty of lawyers who can walk and chew gum at the same time (in other words, lawyers who are both able to keep up with academic trends and who know their way around a courtroom).
Seek Competitive Litigation Proposals
Especially in the current market, class action defendants have their pick of whom to select as outside counsel. Discounts and alternative fee arrangements are understandably a focus of outside counsel selection in today’s market, but the is no reason that cost considerations have to be considered at the expense of counsel’s ideas, arguments, and litigation approaches. If you are dissatisfied with the initiative or creativity of your current lawyer, why not ask multiple firms to submit competitive proposals for their litigation strategies before you hire them?
This approach has many advantages: it allows you to synthesize the ideas of attorneys with different perspectives and take advantage of all of their ideas regardless of whom you ultimately choose to represent you; it ensures that the attorneys that you ultimately select will have thought through potential arguments, and their litigation strategy more generally; it encourages creativity and discourages complacency. Attorneys should have the self-confidence in their abilities and ideas necessary to show a willingness to pit them against those of the competition before you start paying them. And, the willingness to put together a litigation proposal also demonstrates a capacity to give your matter the attention that it deserves. If you give them a fair shot, attorneys should always be happy to share their ideas on any given case even if they aren’t ultimately selected in every case. The benefits of a competitive selection of outside counsel in class action litigation seem obvious, and certainly the trend is in this direction, but too often I still see these decisions being made based on longstanding relationships or on who is the lowest bidder.
Asking for prospective counsel to share their ideas doesn’t just let you collect good ideas for the eventual defense in the litigation. It also gives you a chance to evaluate the thoughtfulness and completeness of a particular firm’s approach to the litigation. Take Redish’s book as an example. Herrmann’s thesis is certainly not necessarily that constitutional arguments can or should be raised haphazardly in every case, costs be damned. It is merely that clients should expect their counsel to be up to speed on all the possible arguments, however esoteric. So, knowing that Professor Redish’s book exists and then mastering his arguments are good first steps, but then there are a host of nuances to consider. For example, For every academic argument there is an equally compelling (at least to some) argument on the other side. What arguments could the plaintiff make in response to the constitutional arguments, and which set of arguments is more likely to be persuasive to the judge assigned to the case? What about the appellate courts? Also, what if the case strategy includes retention of a class action expert, a role that Professor Redish has had in past cases? Certainly, Redish’s arguments about the constitutionality of Rule 23 are a factor that any client would want to consider before retaining him as an expert witness.
In summary, while I agree wholeheartedly with Herrmann’s point that clients should be able to expect their outside counsel to keep abreast of academic trends, I would add there are some simple things that clients can do to better ensure that they have outside counsel who will do so.
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