As reported by various news sources today and summarized in this entry from Ben Hallman at The Am Law Litigation Daily, a Dutch court has approved a settlement of claims of a class of institutional investors against Royal Dutch Shell. The settlement was approved under a 2005 Dutch law that allows collective settlements on an opt-out basis, although it doesn’t allow class action suits outside the settlement context. For more detail on the law, the Dutch Act on Collective Settlement of Mass Damages, see this 2008 American Lawyer article by Michael Goldhaber, also cited in Hallman’s post. The settlement resolved claims of European investors who originally had been included in a would-be international class of investors in a New Jersey federal court in a ”foreign cubed” class action–a class action filed on behalf of foreign investors who bought a foreign company’s stock on a foreign exchange. Rather than settle with the plaintiffs’ attorneys who had filed the U.S. case, however, the company agreed with a separate firm to settle the European investor’s claims in a European forum.
Goldhaber’s article describes the facts and history of the case and legislation in a fair amount of detail, so I will simply refer anyone interested in the details to that article. As described in the article, however, the Dutch settlement came about as a result of a series of events that may or may not continue to be repeated into the future: 1) a class action filed in the U.S. that included European investors; 2) the Dutch company’s agreement to settle in Dutch court with attorneys representing non-U.S. investors; 3) a decision by the U.S. court to decline to exercise jurisdiction over the claims of the non-U.S. investors; and, finally, 4) approval of the European settlement by the Dutch courts.
It would seem that whether the Dutch Act on Collective Settlement of Mass Damages becomes a common vehicle for resolving potential liability for European companies is contingent, at least in part, on how long the viability of “foreign cubed” class actions remains unsettled in the U.S. The Second Circuit Court of Appeals’ recent Morrison decision (discussed in this October 2008 ClassActionBlawg entry) was a setback for plaintiffs seeking to pursue foreign-cubed claims in U.S. courts, but did not foreclose the possibility of foreign-cubed claims entirely. If it became widely established that foreign-cubed cases have little or no likelihood of success in U.S. courts, then plaintiffs’ lawyers would be less likely to pursue those claims in the U.S. in the first place and defendants would presumably face less pressure to settle under the Dutch law, which does not support class liability in a contested case. However, until the law surrounding U.S. federal court jurisdiction in foreign-cubed cases does become more well-defined, Royal Dutch Shell’s strategy could signify a trend.
Supreme Court Appointee Sotomayor’s Judicial Record in Class Actions
May 26, 2009 by Paul Karlsgodt
After hearing and reading countless media reports today about how Supreme Court Appointee Sonia Sotomayor’s judicial record will be scrutinized between now and her confirmation, I got to wondering about her judicial record in class actions. My research turned up a few key cases on class action issues, which I have summarized below.
In Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2d Cir. 2005), Judge Sotomayor authored an opinion affirming in part and reversing in part the dismissal of a putative securities class action, holding that the Securities Litigation Uniform Standards Act (”SLUSA”) did not preempt certain state law claims alleging damages relating to securities transactions brought by plaintiffs who were not buyers or sellers of the securities. The portion of the decision that limited the reach of SLUSA preemption was overruled by the United States Supreme Court, in a 8-0 decision authored by Justice Stevens in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 126 S. Ct. 1503 (2006). The case turned primarily on an issue of statutory interpretation, the meaning of the phrase, “in connection with the purchase or sale of a covered security” as used in the portion of the statute that expressly preempts class actions based on state law, with the Supreme Court adopting a broad interpretation of that phrase in contrast to the narrow interpretation given by the Second Circuit.
In Moore v. PaineWebber, Inc., 306 F.3d 1247 (2d Cir. 2002), Judge Sotomayor wrote an opinion upholding a denial of class certification in a RICO fraud case after recognizing that common proof of misrepresentations could be made in a form other than a written, standardized sales script, finding that the district court had not abused its discretion in holding that there was no evidence of a centralized scheme in which common misrepresentations were made to all class members.
Martens v. Thomann, 273 F.3d 159 (2d Cir. 2001) may be an example of the type of decision that reflects a trait highlighted by the President’s comments and media reports, a respect for the impact of judicial decisions on lives of real people. In this case, the court reversed and remanded, primarily on due process and other procedural grounds, the district court’s imposition of sanctions against two class representatives and their individual attorneys who sought to pursue a motion to “enforce” a previously approved settlement in a Title VII employement class action.
From a class action defense perspective, In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124 (2d Cir. 2001) would be the most troubling of Judge Sotomayor’s class action decisions, were it not for her participation on the panel in In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. 2006). The In re Visa Check opinion, issued prior to the 2003 amendments to FRCP 23, suggested a standard that prohibited a district court from weighing any disputed evidence that might overlap with the merits of the plaintiffs’ claim as long as the plaintiff could provide some expert testimony that, if believed, would support the conclusion that one or more issues could be decided on a classwide basis. However, in In re IPO Securities Litigation, decided post-2003, the court held that a court must weigh conflicting evidence in determining whether each element necessarily for class certification had been certified even though that decision may also overlap with the merits. In reaching that conclusion, the court stated that:
In re IPO Securities Litigation, 471 F.3d at 24.
Judge Sotomayor has issued published decisions in a few other class action lawsuits during her tenure as a judge on both the appellate and trial court levels. These decisions appear fairly case-specific and do not reflect a particular judicial philosophy on class action issues.
Overall, her decisions on class action issues do not suggest a pro-plaintiff or pro-defense bias. Rather, they seem to reflect a willingness to consider each case on its own merits and to either admit when she has made a mistake or at least be guided by changing circumstances rather than any ridged adherence to a predetermined philosophy or idealogy.
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