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Posts Tagged ‘23(b)(3)’

This is the third 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 31 and November 5 CAB posts.

Session 3 examined the conceptual issues and practical challenges that litigants and courts face in cases seeking certification under the different subparts of Rule 23(b), a question that took on increased importance following the Supreme Court’s Decision in Wal-Mart Stores, Inc. v. Dukes.   The panel presentation was titled “Don’t Blame Mrs. O’Leary’s Cow!” Rule 23(b)(3) Classes Under Fire and Rule 23(b)(2)’s Emerging Importance.  Jeffrey A. Leon moderated the panel, which consisted of Robert J. Axelrod, E.K. Cottrell, Professor Francis McGovern, and David S. Stellings.  

Unfortunately, due to a computer crash, I lost some of my notes from this presentation, but I have summarized some of the highlights below:

  • The courts are facing an ever-increasing tension between principle and pragmatism in deciding whether to certify class actions and under what procedure they should be certified.
  • Despite significant hurdles to class certification that have been imposed by the Supreme Court and other federal courts in recent years, the plaintiffs’ bar has a creative “gene” that keeps them pushing the envelope and experimenting on new methods of seeking aggregate redress.  This can be seen in many of the decisions in the lower courts over the past year, and is likely to continue into the future.
  • In the near future, we are likely to see mixed results, as some courts become more restrictive in granting class certification, while others are more receptive to creative ways of certifying classes.
  • Discovery and resolution of substantive issues and Daubert challenges are likely to come at an earlier stage in the process, regardless of the procedural vehicle under which certification is sought.
  • There is likely to be much more of a mixture of the subsections of Rule 23 used to certify classes, including combinations of classes in the same trial.
  • ERISA class actions are an area where the Rule 23(b)(2) class actions for monetary relief remain viable after Dukes.  Pennsylvania Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C 5619 (N.D. Ill. Dec. 28, 2011) provides a textbook list of reasons why courts may continue to refuse to certify ERISA claims for monetary relief after Dukes under Rules 23(b)(1), (2) and (3). 
  • But the Supreme Court’s decision in Cigna Corp. v. Amara, No. 09-804 (S. Ct. May 16, 2011) may have breathed new life into the argument that monetary relief may be available to plan members as part of the equitable relief that courts can provide, especially when a trustee is involved.  Among the equitable remedies  that may be available in a particular case is the “surcharge remedy”, which allows plan members to recover money as an equitable remedy for a trustee’s breach of fiduciary duty.  Amara may pave the way to arguments by plaintiffs that claims against a trustee for payment may be characterized as injunctions, for which certification under Rule 23(b)(2) may be appropriate notwithstanding the Supreme Court’s ruling in Dukes.   However, in February, the Second Circuit rejected the argument that claims for disgorgement made on behalf of a putative class of trustees of thousands of ERISA plans, holding that the necessity to determine how to divide any disgorged amount among the plaintiffs meant that the monetary relief was not “incidental” to any equitable relief as required under Dukes.  Nationwide Life Ins. Co. v. Haddock, 10-4237-cv, 2012 WL 360633 (2d Cir. Feb. 6, 2012).

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This is the first in what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last Thursday in Chicago.  The National Institute sets the gold standard for class action conferences, and this year was no exception.  Program Chair Daniel Karon and the rest of the organizing committee did an excellent job selecting six of the most timely and relevant topics facing class action practitioners today.  As always, the list of panelists was a veritable who’s who in the class action field.  If you ever have the opportunity to attend this annual conference, I highly recommend it.

As has become the custom at the National Institute, Columbia Law Professor John C. Coffee, Jr. kicked off this year’s program with a comprehensive and insightful summary of the year’s key developments in class action law.  This year’s presentation saw what has been a hit solo act turn into an even better duet, as Professor Coffee shared the stage with Connecticut Law Professor Alexandra Lahav.  The session was titled “Holy Cow!  This Year the Courts Said What?!” A Brief History of this Year’s Developments in Class Action Jurisprudence.  Attendees were also treated to a comprehensive, 179-page summary of the year in class actions by Professors Coffee and Lahav entitled The New Class Action Landscape: Trends and Developments in Class Certification and Related Topics.

The first part of Professor Coffee’s presentation covered each of the class action-related cases on the U.S. Supreme Court’s docket this term.  Here is a list of those cases with some of Professor Coffee’s insights:

  • Connecticut Retirement Plans & Trust Funds v. Amgen, Inc., 660 F.3d 1170 (9th Cir. 2011) – Amgen raises the question whether the plaintiff must establish the materiality of an alleged false statement at the class certification stage of a securities fraud class action.  Professor Coffee believes that this case is a close call, but whichever way it comes out, it does not threaten to end securities class action litigation as we know it.
  • Behrend v. Comcast Corporation, 655 F.3d 182 (3d Cir. 2011) – In Behrend, the Court could decide whether a trial court must perform a full Daubert analysis of expert testimony offered in support of or in opposition to class certification.  The case raises the question, at least in the antitrust context, whether the plaintiff must present a  formal damages model or whether the mere possibility of common proof is enough.
  • Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011) – This is a wage and hour case under the FLSA, which has a different procedure than Rule 23.  FLSA claims are more accurately characterized as collective actions, rather than class action.  The issue is whether a settlement offer for the full amount of the named plaintiff’s FLSA claim can moot the claim and prevent the case from proceeding on a collective basis, a concept also known as “picking off.”   One of the arguments that has been raised is that the writ of certiorari should be dismissed as improvident granted, so it is unclear whether the Court will actually enter a substantive ruling.
  • Knowles v. The Standard Fire Insurance Company, 2011 U.S. Dist. LEXIS 130077 (W.D. Ark. December 2, 2011) – This case raises the question whether a plaintiff can plead around CAFA removal jurisdiction by stipulating to less than $5 million in damages on behalf of the putative class.  Professor Coffee felt confident in making the prediction that the defendant will win.  He points to dicta in the Court’s recent decision in Smith v. Bayer Corporation calling into question whether a plaintiff can do anything to bind the members of a putative class before it is certified.

Professor Coffee then went on to highlight some of the big developments in the lower courts from over the past year, which include:

The proper burden of proof to be applied at class certification.  The circuits are split on this issue, with some applying a preponderance of the evidence standard and others simply requiring a rigorous analysis with no particular evidentiary standard.

Treatment of expert testimony.  The federal district courts continue to resist resolving a battle of the experts at the class certification stage, but dicta from the Supreme Court in Dukes, as well as holdings by several of the circuits, are putting increasing pressure on the federal courts to perform a Daubert analysis (and the Court could resolve this issue for good in Behrend).

Class Arbitration Waivers.  Some lower courts, especially the Second Circuit, continue to carve out exceptions to the Supreme Court’s ruling favoring arbitration agreements in Concepcion.   One key issue is whether a class arbitration waiver may still be held unconscionable as a matter of federal law.  Professor Coffee quipped that the Second Circuit will only change if the Supreme Court “stuffs it down their throat.”  While unconscionability under state law is no longer a viable argument against enforcing an arbitration clause, clauses with fee-shifting provisions continue to be susceptible to attack.

Settlement Only and Limited Fund Classes.  There is a lower court trend in permitting certification in settlement classes in cases that could not be certified as class actions in contested cases, notwithstanding the Supreme Court’s opinion in Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997).  The primary justification tends to be that any individualized issues of fact in the case went to manageability, which is no longer an issue in the settlement context.   In cases where courts have found that individualized issues impact both predominance and manageability, settlement classes have continued to be rejected.

Partial Certification.   The question of issue certification has been one of the hottest trends in the federal courts in the wake of Dukes.  Professor Coffee pointed out that the resolution of whether courts allow partial certification tends to be determined whether the fact of certification creates an extortionate threat to settle the case.

Class Action Settlements.  If you read just one class certification decision this year, Professor Coffee recommends Judge Rosenthal’s memorandum opinion in In re: Heartland Payment Systems, Inc. Customer Data Security Breach Litigation, MDL No. 09-2046 (S.D. Tex. March 20, 2012), which has a well-organized, step-by-step analysis of the approval of a class action settlement.

Professor Lahav focused her remarks on what has been happening in the lower courts in response to the three key aspects of the Court’s decision in Dukes: 1) the “new commonality” requirement; 2) the rejection of the use of Rule 23(b)(2) to recover individualized money damages; and 3) the rejection of “trial by formula,” of the use of statistical sampling to solve individualized damages problems.

The “new commonality”.  Among Professor Lahav’s key observations was that in the Title VII context, there must be a policy, but if there is an identifiable policy, the courts will allow discretionary elements of that policy to be attacked.  This trend is best exemplified by Judge Posner’s decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc.  As many commentators predicted, Plaintiffs have had better success after Dukes by narrowing the geographic scope of discrimination claims.  This has also been true in the consumer context.  In the civil rights context, allegations of systemic constitutional violations have had success when the courts have focused on the systemic nature of the practice, but not when courts have focused on the effects of a systemic practice on the prospective class members.  In general, there has been an increasing reliance on issues classes to overcome individualized issues that might destroy commonality or predominance.

Rule 23(b)(2) and monetary damages.  The majority opinion in Dukes raised the question whether there can ever be a class with monetary damages.  None of the circuit courts have provided further guidance on when damages might be sufficiently “incidental” to still allow relief.  One area that has seen mixed results since Dukes is the area of medical monitoring class actions, where the remedy sought is medical monitoring of the possible health effects of a toxic exposure but the cost of monitoring can vary from person to person.  Professor Lahav pointed to the Third Circuit’s decision in Gates v. Rohm & Haas Co., No. 10-2108 (3d Cir., Aug. 25, 2011), as potentially supporting arguments on both sides.  Hybrid class actions, where classes are certified based on both Rule 23(b)(2) and 23(b)(3), are becoming increasingly common, especially in the Title VII context.  One unanswered question is whether damages claims are precluded if a Rule 23(b)(2) class is certified but not successful.

Statistical evidence and “trial by formula.”   Statistical evidence is still accepted in contexts where it has been accepted traditionally, e.g. civil rights, disparate impact, and antitrust cases.  It is not allowed in cases where the defendant can raise individualized defenses.  One proposed solution is, again, issues classes, but this creates a class action funding problem – How do lawyers get paid?

Professor Lahav also revisited statistical trends in class actions, focusing primarily on data compiled by the Federal Judicial Center in 2008 which analyzed the impact of the Class Action Fairness Act (“CAFA”).  She made the key point that statistical data on class action trends has been severely lacking since the FJC study, making updated empirical analysis of class action trends difficult.

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