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.
Archive for the ‘Supreme Court Decisions’ Category
Posted in Class Action Decisions, Class Action News, class action reform, Class Action Trends, Supreme Court Decisions, tagged amgen, class action, class certification, comcast, commonality, dukes, issue certificeation, moldy, moldy washer, moldy washing machine, posner, predominance, sears, whirlpool on February 24, 2014 | Leave a Comment »
Posted in CAFA Requirements, Class Action Decisions, Class Action Fairness Act, Supreme Court Decisions, tagged au optronics, CAFA, Class Action Fairness Act, mass action, mississippi, parens patriae, removal, scotus, Supreme Court on January 14, 2014 | Leave a Comment »
The U.S. Supreme Court issued its first class-action-related decision of the 2013-14 term today, or more precisely, its first non-mass-action-related decision of the term. In Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), the Court held that a parens patriae action brought by the Mississippi attorney general on behalf of Missouri citizens was not a “mass action” subject to the Class Action Fairness Act of 2005. My partner Casie Collignon has a more detailed write-up on the decision at the BakerHostetler blog Class Action Lawsuit Defense.
Posted in Class Action Decisions, Supreme Court Decisions, tagged 2013, 6th circuit, 7th circuit, alien tort, amex III, amgen, behrend, CAFA, clapper, class action, comcast, daubert, diversity, erica p. john fund, extraterritorial, genesis healthcare, halliburton, italian colors, kiobel, moldy, oxford health, posner, royal dutch shell, scotus, sears, standard fire, Supreme Court, symczyk, top ten, whirlpool on January 7, 2014 | Leave a Comment »
2013 was a memorable year for class actions. I’ve assembled my top 10 most significant developments below. There were almost enough U.S. Supreme Court decisions to fill up the entire list, but my number 1 development was still a pair of lower court decisions that may also become the story of the year in 2014.
10. Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013) – Not a class action decision per se, but likely to have significant repercussions on the development of international class action law. Extraterritorial effect of the Alien Tort Statute is significantly limited.
9. Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138 (2013) - Another non-class action decision already having a significant impact on the question of standing in data privacy class actions.
8. Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) - Class Arbitration is not completely dead, but there’s a blueprint for how to kill it.
7. American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)- Arbitration continues to reign supreme, even under the “federal law of arbitrability”
6. Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) – Can class actions be defeated simply by picking off the representatives one at a time? That’s for the circuits to decide.
5. Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184 (2013) – Supreme Court holds that materiality is a common question and that proof of materiality is not a prerequisite to class certification, but raises questions about the continued viability of the Basic fraud on the market presumption in securities cases.
4. Certiorari granted in Halliburton v. Erica P. John Fund, No 13-317 - That didn’t take long. On the heels of , Supreme Court agrees to revisit the Basic fraud on the market presumption.
3. Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013) – Limited holding = damages theory has to match theory of liability. Expansive holding = no class certification unless the question of damages is susceptible to common, classwide proof. Which holding will be embraced by the lower courts?
2. Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013) – First ever CAFA decision limits representative plaintiffs’ ability to bind class prior to class certification. Can’t avoid federal jurisdiction by stipulating to no more than $4,999,999.99 in damages on behalf of a putative class.
1. Moldy Washing Machine Decisions – Limited Comcast holding prevails so far. Two lower courts reaffirm class certification orders after remand in light of Comcast. Issue certification is alive and well, for the moment, but stay tuned to see if the Court takes up these cases in 2014.
Posted in Class Action Decisions, Securities Class Actions, Supreme Court Decisions, tagged amgen, basic, class action, class certification, common proof, efficient market, erica p. john, fraud on the market, halliburton, levinson, presumption, reliance on November 20, 2013 | 1 Comment »
The Supreme Court granted certiorari earlier this week in Halliburton Co. v. Erica P. John Fund, 13-317, a second trip to the high Court for the same case. At issue is whether the Court should overrule holding of Basic Inc. v. Levinson, which recognized the “fraud-on-the-market” theory of class wide reliance in securities fraud cases. The Court foreshadowed its willingness to consider this issue last term when it decided Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 132 S. Ct. 2742 (2012). Both Amgen and the Court’s earlier decision in Erica P. John Fund v. Halliburton Co., 131 S. Ct. 2179 (2011) were victories for plaintiffs, with the Court holding in both cases that plaintiffs were not required to prove questions on the merits as a prerequisite to class certification. However, in Amgen, Justice Alito’s concurrence as well as dissenting opinions by Justices Scalia and Thomas (joined by Justice Kennedy) all raised questions about the continued viability of the Basic decision.
At the risk of oversimplification, the “fraud-on-the market” theory is that a material misrepresentation made in connection with the sale of a publicly traded security can have an effect on the entire market, so that investors may be harmed (or benefitted) by the misrepresentation even if they did not directly rely on it, because enough investors in the market did rely on it to the point where the price was affected. A decision by the Court that this presumption is no longer viable could seriously limit or eliminate securities fraud class actions, because without the “fraud-on-the-market” presumption, a required element of a securities fraud claim, reliance, becomes an individualized question of fact. As a result, Halliburton becomes the first case on the Court’s 2013-14 docket that has a potential for a truly significant impact on class actions.
Posted in Class Action News, Supreme Court Decisions, tagged class action, class certification, front-loading, mold, moldy, posner, sears, seventh circuit, sixth circuit, washing machine, whirlpool on October 7, 2013 | Leave a Comment »
Today, Whirlpool and Sears filed petitions for a writ of certiorari with the U.S. Supreme Court asking seeking review of decisions by the Sixth and Seventh Circuits upholding certification orders in class actions alleging that design defects create a tendency for mold to develop in front-loading washing machines manufactured by the defendants. The two lower court decisions, which were discussed in this August 23, 2013 CAB Post, are Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013). Earlier decisions in both cases had previously been vacated and remanded for reconsideration in light of the Court’s decision in Comcast Corp. v. Behrend, and both the Sixth and Seventh Circuits reached the same conclusion on remand: that class certification was proper even though most potential class members were not actually affected by mold in their washing machines.
The issues presented for review in Sears, Roebuck & Co. v. Butler are as follows:
1. Whether the predominance requirement of Rule 23(b)(3) is satisfied by the purported “efficiency” of a class trial on one abstract issue, without considering the host of individual issues that would need to be tried to resolve liability and damages and without determining whether the aggregate of common issues predominates over the aggregate of individual issues.
2. Whether a product liability class may be certified where it is undisputed that most members did not experience the alleged defect or harm.
In Whirlpool Corp. v. Glazer the cert petition requests review of the following issues:
1. Whether the Rule 23(b)(3) predominance requirement can be satisfied when the court has not found that the aggregate of common liability issues predominates over the aggregate of individualized issues at trial and when neither injury nor damages can be proven on a classwide basis.
2. Whether a class may be certified when most members have never experienced the alleged defect and both fact of injury and damages would have to be litigated on a member-by-member basis.
Posted in Class Action Decisions, Consumer Class Actions, rule 23, Supreme Court Decisions, tagged butler, causation, class action, class certification, class-wide, classwide, damages, injury, liability, moldy, posner, predominance, rule 23, scalia, sears, washing machine, whirlpool on August 23, 2013 | 2 Comments »
One of the key questions in the aftermath of the Supreme Court’s recent decision in Comcast Corp. v. Behrend is the extent to which damages must be susceptible to classwide calculation in order to justify class certification. In particular, the question is as follows: When the Comcast Court held that class certification was improper because the plaintiff had failed to demonstrate that “damages are capable of measurement on a classwide basis,” did it mean that Rule 23(b)(3) certification is never proper if damages cannot be determined on a classwide basis? If the answer to this question is yes, then consumer class actions are in trouble because it’s a rare case where classwide determination of damages is possible. But if the answer to this question is no, then as the Comcast dissent suggested, “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).”
Yesterday, in the second of two moldy washing machine class actions that had been vacated and remanded for further consideration in light of Comcast, the Seventh Circuit Court of Appeals joined the Sixth Circuit in answering “no” to this question. In Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.), the court reaffirmed its earlier decision that if common issues predominate over individualized issues in resolving the question of liability, then a class can be certified even if the question damages would require individual determinations. As usual, Judge Posner’s decision is colorful and an interesting read, even for those who disagree with the outcome. The Sixth Circuit’s decision, which was issued last month, is In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013).
In evaluating the potential broader impact of the Sixth and Seventh Circuit’s decisions, it is important to maintain a clear distinction between the question of damages and the related questions of injury and causation of damages. Courts have long accepted that individualized damages questions do not prevent class certification, and the moldy washer decisions themselves break little new ground other than to interpret Comcast as not having altered that longstanding principle. However, saying that individualized questions of damages can be left for a later proceeding is very different than saying that there is a good reason to certify a class when the elements necessary to prove liability itself (which typically include both the existence of injury and causation) cannot all be resolved on a classwide basis. Individualized questions of whether a given class member has suffered any compensable injury at all or whether the allegedly wrongful conduct caused any alleged injury should still defeat predominance, and neither Sears nor Whirlpool should be read to suggest differently. In those cases, because the plaintiffs had advanced what these courts concluded was a viable theory of common injury, the only individualized questions related to the amount of, and not the existence of, damages. See In re Whirlpool Corp., slip op. at 22 (“Because all Duet owners were injured at the point of sale upon paying a premium price for the Duets as designed, even those owners who have not experienced a mold problem are properly included within the certified class.)
Posted in Class Action Decisions, Supreme Court Decisions, tagged amex, amex III, arbitration waiver, AT&T Mobility, class action, class arbitration, concepcion, effective vindication, FAA, federal law of arbitrability, italian colors, oxford health, scalia, sutter on June 20, 2013 | Leave a Comment »
Those of us who have been following the Supreme Court’s decisions on class actions and arbitration over the past few years may have been a bit surprised when the Court recently upheld an arbitrator’s decision to compel class arbitration in Oxford Health Plans LLC v. Sutter. Oxford Health bucked a trend of decidedly defendant-friendly decisions on issues relating to the interplay between class actions and arbitration. Today, the Court moved back into more familiar territory in deciding American Express Co. v. Italian Colors Restaurant (“Amex III“).
The holding in Amex III, as summarized in the syllabus, is that “[t]he FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.” Thus, just is it had held that state law of unconscionability could not be used to invalidate a class arbitration waiver in AT&T Mobility LLC v. Concepcion, the Court’s holding today limits the use of federal law to invalidate arbitration provisions that preclude class actions.
Will Amex III finally be the case to end class actions as we know them? Concepcion hasn’t, so I doubt Amex III will either.
Posted in Class Action Decisions, Supreme Court Decisions, tagged alito, american pipe, arbitrability, arbitration, class action, class arbitration, class arbitration waiver, FAA, kagan, oxford health, scotus, stolt-nielsen, stolt-nielson, Supreme Court, sutter on June 10, 2013 | 1 Comment »
The Supreme Court issued its decision today in the first of two arbitration-related class action cases on the 2012-13 docket. Today’s decision bucks what had been a trend in the Court’s decisions in recent years strongly favoring individual arbitration and limiting the situations in which class arbitration (private arbitration in which the plaintiffs proceed in a representative capacity on behalf of a class) can occur.
In a unanimous ruling, the Court in Oxford Health Plans LLC v. Sutter upheld an arbitrator’s decision to interpret an arbitration agreement as allowing for class arbitration, despite express reference to class arbitration in the parties’ written agreement. Writing for the Court, Justice Kagan reasoned that applicable standard of review prevents the courts from second-guessing whether the arbitrator’s interpretation of the party’s contract was the correct one and only permits review of whether the decision was based on an interpretation of the parties’ agreement. Because the arbitrator’s decision was clearly based on an analysis of contractual intent, the arbitrator’s decision could not be overturned. The fact that the arbitrator had interpreted the parties’ agreement as providing for class arbitration and the deferential standard applicable to the arbitrator’s decision distinguished Oxford Health Plans from Stolt-Nielsen S.A. v. AnimalFeeds International Corp., in which the Court had held that class arbitration cannot be compelled absent express agreement by the parties.
Important to the Court’s decision was the fact that the defendant had conceded that the arbitrator should decide the question of whether the parties had agreed to class arbitration. It was this concession that let Justice Alito to agree with the Court’s decision. However, in a concurring opinion joined by Justice Thomas, Justice Alito expressed doubt that any ruling in the class arbitration proceeding would have any preclusive effect as to absent class members, an observation that raises a serious question about whether the Oxford Health decision will be of any practical impact in other cases. He noted:
Class arbitrations that are vulnerable to collateral attack allow absent class members to unfairly claim the “benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one,” American Pipe & Constr. Co. v. Utah, 414 U. S. 538, 546– 547 (1974). In the absence of concessions like Oxford’s, this possibility should give courts pause before concluding that the availability of class arbitration is a question the arbitrator should decide.
Defendants will likely see the concurrence as a roadmap for asking the question to be addressed by a court in the first instance, as opposed to simply conceding that the arbitrator should decide the issue whether class arbitration is allowed.
There are two clear takeaways from the Oxford Health decision: 1) in drafting an arbitration provision, make sure to address the issue of whether arbitration on a class-wide basis will be allowed. Under Stolt-Nielsen, agreements that bar class arbitration will be enforced; 2) think carefully before conceding that an arbitrator, rather than a court, should make decisions about how an arbitration agreement should be interpreted.
Posted in Class Action Decisions, Class Action News, Supreme Court Decisions, tagged attorney general, attorneys general, behrend, CAFA, class action, comcast, diversity, federal jurisdiction, glazer, moldy, parens patriae, posner, predominance, remand, removal, Supreme Court, whirlpool on June 4, 2013 | Leave a Comment »
My sincere apologies to the loyal ClassActionBlawg reader for the scarcity of new content lately. I’m on the road this week, but thought I should at least drop a note about two interesting class-action-related developments in the U.S. Supreme Court over the past week:
1) the Court granted cert in State of Mississippi v. AU Optronics Corp., to address the issue whether parens patriae actions filed by state attorneys general seeking restitution on behalf of state citizens are “mass” actions, permitting removal under the Class Action Fairness Act (CAFA). For more on the case, see Deborah Renner’s post on the BakerHostetler Class Action Lawsuit Defense Blog. If it were up to me, I’d go further and say that parens patriae cases are actually “class” actions under CAFA, but apparently the Court has its own idea about the scope of the issue.
2) The Court vacated Judge Richard Posner’s decision in Butler v. Sears Roebuck & Co. and remanded for reconsideration in light of its recent decision in Comcast Corp. v. Behrend. This follows the Court’s earlier decision to vacate the Sixth Circuit’s decision in In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation for the same reason. Given the many questions left unanswered by the Comcast decision, it will be interesting to see what the Sixth and Seventh Circuits do with the moldy washer cases on remand.
Class Action CLE Recap – Insights on the 2012-13 Supreme Court Term from the Bench and Both Sides of the Bar
Posted in Class Action Trends, CLE Programs, Supreme Court Decisions, Uncategorized, tagged amgen, antitrust, basic, behrend, CAFA, class action, class certification, classwide proof, colorado, comcast, daubert, efficient market, eisen, expert, federal judge, fitzpatrick, fraud on the market, hellhole, katz, knowles, kreiger, levinson, merits, securities fraud, standard fire, stipulation on May 14, 2013 | Leave a Comment »
The Class Actions, Mass Torts and Derivative Suits Subcommittee of the Colorado Bar Association, now ably chaired by my BakerHostetler partner, Casie Collignon, held its first CLE luncheon of the year this past Friday. The program, United States Supreme Court vs. Class Actions in 2013, featured excellent commentary about the Supreme Court’s 2013 class action decisions by The Honorable Marcia Krieger, Chief Judge, U.S. District Court for the District of Colorado, Seth Katz of Burg Simpson, and John Fitzpatrick of Wheeler Trigg O’Donnell. Here are just a few of the many insightful observations made by each of the speakers:
Judge Krieger opened by observing that none of the cases this term have been a surprise from the standpoint of what a trial court judge would have expected given existing law. Amgen was predictable because the question of materiality in a securities fraud case is unquestionably a common issue, so it is not surprising that it is a question for trial, not a prerequisite for class certification. Standard Fire can be viewed as a straightforward application of agency law: a plaintiff cannot bind a class of people that he or she doesn’t yet represent. Comcast exemplifies the importance of examining the plaintiffs’ theory of liability and the relationship to the theory of loss. Damages are not the same as loss. The theory by which the plaintiff establishes loss determines the measure of damages.
When asked to identify any trends that she has been seeing in class actions recently, Judge Krieger identified issue certification as a key trend. She has been seeing more situations where the factual issues may be individualized but there are common legal issues that can be resolved classwide. She noted that she has been inclined to grant partial certification limited to the common legal issue(s) in that situation.
From the plaintiffs’ perspective, Katz agreed that the outcome of Standard Fire was not surprising, and he went as far as to say that the outcome was correct, noting that plaintiffs’ attorneys shouldn’t be afraid of the federal courts. Although the holding of Amgen was favorable to plaintiffs, Katz noted an issue that should be of great concern to plaintiffs, and that is the commentary from the conservative wing of the court suggesting that they might be willing to revisit the fraud-on-the-market presumption adopted in Basic Inc. v. Levinson. Katz sees the potential of a 4-4 split on that issue, with Chief Justice Roberts being the deciding vote. He predicts market studies being commissioned by both sides over the coming years to demonstrate or disprove the continued efficiency of the markets.
Comcast, Katz noted, caused a collective sigh of relief in the plaintiffs’ bar because it does not go as far as many would have feared by requiring Daubert hearings at the class certification phase. He noted that one positive impact for plaintiffs arising from the “death of Eisen” (the rejection in decisions like Wal-Mart and Comcast of the idea that merits questions were off-limits at the class certification phase) is that it gives plaintiffs’ counsel an opportunity to obtain merits discovery much earlier in a case than was allowed previously. On the other hand, Katz expressed fear about the possibility that the Court is trying to raise the bar for plaintiffs with a subtle change in the language about what common proof is necessary on the issue of damages. Where earlier decisions required that damages be “susceptible to classwide proof,” the Comcast majority phrased the standard as requiring the plaintiff to ”prove classwide damages.” Katz predicts that defendants will argue that this means damages must be uniform, as opposed to simply being susceptible to formulaic calculation. He noted, however, that the few lower courts that have interpreted Comcast so far have rejected a broad application of the decision.
Fitzpatrick combined philosophical commentary about the evolution of class actions with some practical tips for defense lawyers. Standard Fire, he argued, is proof that judicial hellholes still exist. He pointed to Amgen as an example of the dangers of accepting conventional wisdom, pointing out that the outcome in that case might well have been different if the defendants had stipulated to the existence of an efficient market.
Comcast, Fitzpatrick said, provides an opportunity for defendants to prevail at the class certification stage by discrediting a plaintiffs’ expert. Focus not just on the opinions themselves, he suggested, but also on 1) the existence of bias; 2) the expert’s credentials, and 3) flaws in the methodology. Scour the country for transcripts about the plaintiffs’ experts. Look at misstatements and exaggerations in the expert’s CV. Make sure you find and read all of their prior statements in books, media, and transcripts. Just as important, Fitzpatrick reminded defense practitioners, is the make sure to prepare your own experts for class certification.