• This February 6 post from John Lewis discussing the impacts, both on employment cases and otherwise, of the Second Circuit’s recent Amex III decision.
• This February 6 Post from Greg Mersol discussing a recent federal court decision holding that the pleading standards articulated in Iqbal and Twombly do not apply to affirmative defenses in class actions.
• This January 20 post from John Lewis discussing the U.S. Supreme Court’s most recent pro-arbitration opinion in CompuCredit Corp v. Greenwood.

Even if you aren’t an employment lawyer, I would strongly suggest adding www.employmentclassactionreport.com to your list of favorites!

My gripe is this: Redish may be right, and he may be wrong; I’m not taking sides here. I haven’t read the cases, and I don’t exactly have any firmly-held beliefs about the nuances of the Presentment Clause (whatever the heck that is). But Redish is a smart guy. His ideas are surely plausible, and no law firm would be sanctioned for making these arguments in a brief. So where are the law firms? Why isn’t every class action defense firm in America mentioning to clients that these arguments exist?

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.

Session 3: Managing the Mass: Judicial Case Management

As the title suggests, this presentation focused on strategies for judges in managing class and mass actions in different jurisdictions.  Professor Axel Halfmeier, Frankfurt School of Finance and Management presented the case study.  Professor Ianika Tzankova moderated the panel, which consisted of three highly esteemed judges from three very different jurisdictions: The Honorable Lee Rosenthal, U.S. District Court, S.D. Texas, Sir David Steel, High Court of Justice, England & Wales (ret.), The Honorable Ivan Verougstraete, Former President of the Belgian Court of Cassation and Visiting Professor of Law Georgetown University.

Professor Halfmeier’s case study focused on ongoing mass litigation in Germany involving Deutsche Telekom arising out of alleged acts of securities fraud in the late 1990s and in 2000.    The thousands of individual shareholder claims brought by investors in Germany led to the enactment of a new law, roughly translated as the Capital Investors Model Proceedings Act, that provides for the creation of a test case that will be binding on all other similar claims.  Proceedings even under the new law have been slow, due in large part to bureaucratic court procedures in Germany, such as the requirement that the documents in each of the thousands of individual cases have to be hand marked by court clerks.  The last hearing in Telekom case was held in 2010, and the next hearing is not scheduled to occur until 2012. Meanwhile, securities class action litigation involving the same alleged acts had been brought on behalf of U.S. investors in the early 2000s and was resolved in a global settlement in 2005.

Sir David Steel did not pull any punches with his blunt criticism of the German system, commenting in summary that the “German courts need to join the modern world.”  He pointed out that the prospectus fraud claims in the Telekom case are not very complicated and that it should be possible for the courts to deal with them in a much shorter period of time.  He pointed to a number of simple procedural reforms that might have sped up the Telekom litigation, including reform of cumbersome clerical requirements, the imposition of a time bar for claims (he pointed out that the German proceedings had not even been commenced until 2005, roughly 5 years after the event), and rules relating to case assignments (by the time the case was ready for a ruling, the initial judge assigned to the case had reached retirement age), and discretion to impose reasonable pleading deadlines (the plaintiffs were allowed to introduce new claims as recently as 2010). He concluded by likening the Telekom case to the fictitious decades-long Jarndyce v. Jarndyce will contest in the Dickens novel Bleak House, which had spurred judicial reforms in the UK in the Nineteenth Century.  It should be noted (although not discussed specifically during his remarks) that Justice Steel himself has a proven track record of efficient management of mass litigation in a jurisdiction that does not permit class actions.  As an example, he presided over the Buncefield case, a mass tort action arising out of gas pipeline explosions in December 2005.  The case reached a judgment in March 2009, only three years and three months after the explosions giving rise to the claims. 

Judge Verougstraete offered a counterpoint to Justice Steel’s criticisms by pointing out the significant cultural differences between the common law system in the UK and the civil law jurisdictions in Continental Europe.  He went on to point out various constitutional, cultural, and practical barriers to significant judicial case management reforms in European civil law jurisdictions, including: 1) the individual’s right to his day in court is of paramount importance in European jurisdictions and cannot be discarded in the interest of judicial efficiency; 2) discovery reforms are not a solution in Europe because most European jurisdictions do not allow parties to engage in discovery anyway (he noted, however, that judges do have some level of control over the speed with which court-appointed experts and masters complete their investigations and findings); 3) while settlement and alternative dispute resolution procedures are theoretically possible, they haven’t worked yet in speeding the resolution of many mass actions.  Judge Verougstraete also pointed to two possible alternatives to collective litigation in civil law countries: 1) use of the criminal law complaint, which places the financial cost of redress on the State but also cedes control over the litigation; and 2) bundled litigation, although even in bundled litigation, the requirement to provide individual notice to litigants often minimizes the judicial efficiencies created by joining claims together, as was seen in the Telekom matter.  In closing, although he agreed with Justice Steel that civil law jurisdictions in Europe could benefit from legislative reforms streamlining judicial procedure in mass litigation, he warned that there was still the problem of legal tradition and culture, which cannot be changed overnight.

United States District Court Judge Lee Rosenthal focused her remarks on what jurisdictions with developing complex litigation procedures can learn from the experience of the United States.  While the United States has a well-developed body of rules governing case management of complex litigation, U.S. Courts still have problems in managing complex litigation, and we “haven’t gotten there” in terms of perfecting efficient management of complex litigation.   Judge Rosenthal agreed that there is a divide between civil and common law jurisdictions but argued that there are a lot of things that a judge can do in either type of jurisdiction manage cases.  She provided examples of key areas where courts and policymakers need to focus in evaluating effective case management techniques: 1) early and effective court supervision; 2) cooperation by counsel; 3) development of a case management plan cooperatively between the court and counsel; 4) communication between counsel, the court, and both representative and absent parties; 5) effective management of electronic discovery issues (notably, Judge Rosenthal is one of the foremost thought leaders on e-discovery issues in the United States); 6) management of attorney’s fees awards (this is a topic addressed by Judge Vaughn Miller in Session 2); 7) effective trial planning; 8) if there is a settlement, an effective plan for assessing and administering the settlement.  She went on to point out that although many judges are much more comfortable in a passive role (decision maker) rather than active role (manager), effective case management requires a judge to carry out both of these roles at appropriate times.  In other words, a judge must be both a neutral decider and an effective case manager.  An effective case manager also has to be both flexible and pragmatic.  Despite having the tools for effective case management, Judge Rosenthal admitted that many judges in the United States are still viewed as being ineffective case managers.  In summarizing the experience of the U.S. judiciary, Judge Rosenthal opined that the United States has the tools in place for effective case management, but U.S. courts are still far from institutionalizing effective case management techniques.

As one member of the audience observed during the question and answer portion of the presentation, the three panelists represent the cream of the crop in their respective judicial systems, both as case managers and as jurists.  Judges from around the world have a lot to learn from their pearls of wisdom.

Who’s Paying? New Developments in Funding

Professor Christopher Hodges, Centre for Socio-Legal Studies, University of Oxford/Erasmus University (and a co-sponsor and co-founder of the conference) chaired this panel.  Professor Camille Cameron, University of Windsor/University of Melbourne presented the case study.  The other panelists were The Honorable Vaughn Walker, Chief Judge (ret.) U.S. District Court for the Northern District of California, Dr. Gerrit Meincke, Foris AG, Mr. Till Schreiber, Cartel Damage Claims, and Mr. Wieger Wielinga, Omni Bridgeway.

This session examined an intriguing issue in international class and mass litigation: the emergence of private litigation funders who finance litigation in exchange for a share of the recovery. This is a development that may be unfamiliar to many U.S. practitioners, who are used to a system where class actions are mainly funded by well-financed law firms who can recover a contingent fee in a successful case.  In other parts of the world, however, ethical prohibitions on contingent fees, loser pays fee-shifting rules, and the lack of an organized plaintiffs’ bar have led to the emergence of alternative methods of funding litigation.

Professor Cameron opened the session by introducing three themes relevant to the study of litigation funding: 1) access to justice; 2) the impact of private litigation funding on public regulation; and 3) ethics.  Litigation funders do provide access to justice for litigants who would otherwise not be able to afford to bring their claims.  In Australia, for example, most law firms do not have the resources necessary to fund class action litigation, so the existence of private litigation funders expands access to justice.  On the other hand, Cameron pointed out, the existence of litigation funding institutions has turned law firms away from funding cases that they used to take, and the pool of cases that litigation funders will take on is very small and includes most only securities cases, so cases that used to be brought are now falling through the cracks.  On the regulatory front, the question arises whether the cases that are being brought by private litigation funders would be better left to government regulators.  On the one hand, remedying or deterring wrongful conduct is traditionally a public rather than private function in many parts of the world.  On the other hand, increasing globalization is causing cases involving mass wrongs to become larger and more common, and government regulators are becoming increasingly underfunded and ill-equipped to keep up.  The ethical issues implicated by private litigation funding are somewhat apparent.  Because they have a financial stake in the outcome, there is a strong incentive for funders to take on an active role in the management and strategic decision making in a case.  This can, although it does not necessarily have to, lead to potential conflicts of interest and questions about improper influence over the professional judgment of counsel.  These concerns may be decreased in jurisdictions where the funder can receive outright assignments of claims than in jurisdictions where they merely assist other litigants with financing in exchange for a fee.

The case study for this presentation was an examination two private litigation funders that had funded securities class actions.  The two funders, IMF and ILF used different models.  IMF took a hands-on approach in which it was actively involved both with the selection of counsel and the day-to-day management of the litigation itself.  ILF’s approach was to choose its counsel carefully and let the attorneys handle the management of the lawsuit.  Several litigation funders were asked to compare and contrast their firms’ approach with these two models.

Garrit Meincke is a litigation funder with Foris AG, a small firm that has been involved in litigation funding in Germany for more than 13 years.  It is the oldest and leading litigation funding firm in Germany and has historically had very few competitors.  Recently, three new companies have formed and have generally copied Foris’s approach.  Foris has modified its fee structure over time.  Initially, it charged a 50% fee, but its average fee has been adjusted over time and is now between 20 to 30%.  The firm is very selective about the cases it will fund, funding only about 5% of the total cases it reviews.  Foris is more of a passive rather than an active funder.  It leaves it to the lawyers to run the case.  However, it remains involved in monitoring a case throughout all proceedings.  Litigation funding is not regulated in Germany.  Germans are distrustful of U.S.-style class action litigation and do not have a representative action procedure.  Claims can be bundled by assignment, but there is a risk that bundled claims will be unbundled because German judges are evaluated in part based on the number of cases, which creates a disincentive to allow claims to be joined together.  Litigation costs are relatively low in Germany, attorney’s fees are regulated by a structure of tariffs which increase based on the amount at stake, and private litigation insurance is prevalent.  Hodges commented that these factors make litigation funding a natural development there.

Till Schreiber’s firm, Cartel Damage Claims, funds cartel litigation in Belgium.  It is an active litigation funder that buys assignments in cases rather than financing litigation for a fee.  Obtaining an outright assignment allows the firm to actively manage the litigation and outside counsel without creating conflicts of interest.  Buying cases and aggregating them for litigation also creates economies of scale that allows the firm to be profitable despite the risks of loss and having to pay an opponent’s litigation expenses in unsuccessful litigation.  Schreiber pointed out that aggregating cartel litigation in Belgium has a benefit for defendants as well as plaintiffs.  Because defendants who commit anti-competitive violations can be held jointly and severally liable for damages, aggregation of claims decreases the risk of inconsistent rulings and duplicate recoveries.  Schreiber also pointed out that firms are looking at the possibility of funding end-consumer claims, but the viability of funding mass consumer claims is dependent on the technology available in the judicial system, such as the ability to handle electronic access to files and signatures.

Weiger Weilinga’s firm, Omni Bridgeway, started in the litigation funding business as a recovery specialist in the mid-1980s.  It did not become involved in funding litigation on the merits until recently.  As a recovery agent, the firm handles the recovery of money judgments from defendants in high-risk jurisdictions, such as in war zones or countries with unfriendly or unstable governments.  The firm still handles mostly political risk claims, but has recently branched out into providing litigation funding for cartel cases.  It has not yet taken on any consumer cases.  Omni Bridgway is active in both hiring lawyers and in managing the litigation.  Case management is usually a cooperative effort between the firm, the client, and outside counsel, but Omni Bridgeway gets a full power of attorney from the client and therefore has ultimate decisionmaking authority.  The firm takes only cases with a minimum value and is selective about what it will fund.  The percentage fee ranges from case to case.  It is typically around 30% but has been as high as 60% in a case involving recovery from a North Korean defendant.

Retired U.S. District Court Judge Vaughn Walker talked about the primary method of class action litigation funding in the United States, namely contingent fees.  In particular, he discussed the problem of deciding between competing groups of lawyers vying to represent a class of plaintiffs in order to earn the contingent fees that can be recovered in the event of a settlement or favorable judgment.  During the first 25 years of the modern class action era in the United States, the decision was made using two approaches: 1) the first group to file a class action; or 2) nomination of lead counsel from a group of plaintiffs.  Fees themselves were historically determined by the lodestar method, which involved the court determining an appropriate hourly rate, multiplied by the reasonable number of hours expended by the firm on behalf of the class.  However, the lodestar method had drawn criticisms, including that 1) it encourages firms to churn hours that might not be reasonably necessary for the prosecution of the claim; 2) it created an incentive to generate sub-optimal recoveries because it gave the firm an incentive to wait until late in the case to engage in settlement discussions; and 3) there was no adversarial presentation of the fees requested, as fees were usually requested by agreement in the context of a settlement.  In 1985, the Third Circuit Court of Appeals created a task force on attorney’s fees, which recommended that a percentage fee be used rather than the lodestar method, and many courts adopted this approach in the years that followed.  However, percentage fee awards created other problems, including that the optimal recovery for the client or class occurs after the marginal cost of litigation meets the marginal recovery for the lawyer, which it the point at which the lawyer is incentivized to settle.  Judge Walker was one of several judges to adopt an innovative approach to selecting lead counsel in class actions that both resolved the dispute over who should be lead counsel and encouraged more favorable fee structures.  He asked competing class action firms to submit competing proposals on the fee that they would request in the event of a successful outcome.  Ultimately, this resulted in the winning firm agreeing to a fee that was half the customary rate.

Judge Walker offered a framework for identifying cases in which a reverse-auction selection process works in assigning lead counsel in U.S. class action litigation, which he observed also provides lessens to litigation funders in assessing cases to fund: 1) there has to be a clear identification of both the claims and the defendants (securities and certain employment cases are good candidates); 2) the relief has to be quantifiable in monetary terms; 3) the selection methodology should be simple.  One example of a simple methodology that U.S. courts have adopted is the “X factor” methodology, where counsel is asked to propose an amount X that it will agree to recover for the class at no cost, and the percentage recovery at which the firm will do all additional work.

The Q&A portion of the presentation generated a list of interesting observations from both the panelists and members of the audience.  (Unfortunately, my notes do not allow me to give proper acknowledgement for the specific source for each of these comments.)

• In Australia, litigation funding has had the practical effect of turning an opt-out regime into an opt-in regime, as litigation funders are reluctant to represent the interests of litigants who do not share in the cost and risk of an unsuccessful lawsuit.  One issue currently being tested in Australia is whether a litigation funder can collect a percentage of all funds recovered on behalf of a class, including those claimants who have not contracted with the funder.  The answer to this question could impact whether class actions are brought as opt-in cases or opt-out cases in the future.
• The lack of contingency fees in Europe is an important factor in litigation funding, as is the loser-pays cost-shifting rule.
• There is a common mythology in Europe that litigation funding will lead to U.S.-style class action litigation, which is commonly perceived as synonymous with “ambulance chasing.”  Perhaps Europeans can learn a lot from U.S. litigation rather than being afraid of it.
• The European civil law system can be criticized for encouraging “book building” activity, because litigation funders and consumer associations are required to sign up claimants in order to create economies of scale that make pursuing mass claims worthwhile.
• Expect a ruling early next year from the Amsterdam Court of Appeal in a case involving objections to a collective settlement on the grounds that U.S. lawyers would be paid out of the settlement fund, something that would not be allowed for Dutch lawyers under Dutch law.

Finally, an observation of my own.  After listening to this panel presentation, it struck how much corporate, rather than consumer, interests have driven reforms and innovations in procedures allowing access to mass litigation in Europe.  Many of the parties seeking funding from third parties, and many of the parties pushing for access to collective action procedures, are institutional investors who are looking for an inexpensive vehicle for recovering funds on behalf of their clients.  This is a theme that came up in a later presentation titled Who Has Jurisdiction in a Global Market?  Stay tuned for a summary of that presentation…

The individual sessions all followed a similar general presentation format, which was very effective.  Each panel presentation was focused around a case study based on the facts of a real case or set of cases.  An academic would present the case study and generally introduce a set of issues flowing from that case study.  A panel of practitioners, judges, and industry or consumer experts would then discuss the application of the problem in different geographic regions, political or judicial frameworks, or other contexts.  The idea was focus the discussion on what is actually happening “on the ground” in the areas of class actions and mass litigation, which was a welcome perspective to those of us for whom what’s happening on the ground is what matters the most.  The panels were diverse enough to offer a variety of viewpoints, but the topics were well-matched to the experiences of the panelists so that the presentations had continuity and a clear focus. 

In the interest of not having to wait another week to post my thoughts on all of the sessions (and in not having a single post of such length that it will put some of you to sleep), I’ll be posting them separately over the next week or so.  Here are my notes of the first session:

Session 1: The Challenge of Mass Communications: Problem or Opportunity?

The case study for this session was presented by Professor Ianika Tzanokova of Tilburg University, who also hosted the conference.  The panel was chaired by Mr. Michael Seymour, International Director of Crisis & Issues Management, Edelman, and the panelists were Mr. Arnold Croiset van Uchelen, Senior Partner AllenOvery LLP, Mr. Ben Knüppe, Trustee of DSB Bank/Former CEO of Dexia Bank, Mr. Jan Maarten Slagter, Director Dutch Retail Shareholder Association (VEB) and Mr. Stephan Holzinger, Holzinger Associates Nederland.

The case study was of the Dexia investment products litigation in The Netherlands, mass litigation that was influenced greatly by media exposure.  The litigation involved financial products called securities lease products, in which customers of Dexia’s predecessors in interest would loan money to consumers to fund investments, a scheme that worked well until the market downturn of the late 1990s.  Dexia had been the subject of a TV program in Holland that resulted in tens of thousands of angry customer calls to the station that broadcast the program. Ultimately multiple special purpose consumer associations were set up for the purpose of aggregating, and ultimately settling, claims.  Throughout the course of the litigation, both the defendant and the competing plaintiffs’ groups had to deal with complex and challenging public relations issues.

Understanding the panel’s discussion requires a basic review of how mass or collective actions are litigated in The Netherlands (and other European civil law jurisdictions).  Dutch law allows consumer associations to represent the interests of consumers, but only to the extent that individual consumers affirmatively consent to the representation.  Essentially, as Arnold Croiset van Uchelen explained, the system is one that relies on assignments and powers of attorney.   When mass claims arise, as they did in the Dexia case, this means that consumer or plaintiff groups compete to round up members, and then compete for the court’s and the defendant’s attention based on the number of claimants that they purport to represent.  One of the practical problems tends to be that victim’s advocates make claims to the media about how many of the claimants that they represent, in the interest of attracting attention to their cause.  Certainly, many of these claims are legitimate, but the opportunity exist for a particular advocacy group to exaggerate the number of claimants that it represents in the hopes of gaining media attention and, ultimately, negotiating leverage.

Speaking from the industry perspective, former CEO of Dexia, Ben Knüppe presented a simple and direct argument about how to deal with the problem of media communications in European mass actions.  The media is always looking for the simple message.  The most radical position tends to get the most press, and as a result, the media often presents the view of fringe groups rather than the more reasonable views of the majority (as an aside, it stuck me how apt this commentary is in describing American politics).  However, it is impossible to regulate how the media will portray the litigants’ competing messages.  So, in Mr. Knüppe’s view, the system is in need of reform to regulate who should be permitted to represent plaintiffs’ interests in mass litigation.

Jan Maarten Slagter offered the unique perspective of someone who represents consumer interests but who has also been a member of the media.  He defended the media by saying that the media always tries to get to “a truth” but pointed out that there are always multiple truths to a story due to differing perspectives.  He then offered some specific guidance to organizations representing plaintiffs’ interests:  A plaintiff’s organization has to play a difficult and subtle game.  It’s important to be the first out of the gate in getting media exposure.  You must show strength in the position of your argument, but you have to be careful to manage expectations.  And when a consumer group achieves a settlement with the defendant, it often has to deal with competing groups and objectors.  In this context, he noted that it is important to take the “wind out of the sails” of these competing interests by showing to the media, and ultimately the public, that you have negotiated the best deal.

Arnold Croiset van Uchelen talked about the roles of different types of media in mass litigation.  Commenting on the role of social media, he noted that it plays an important role in modern litigation because unlike traditional media, it allows for two-way conversations between the media and the public.  However, echoing one of Ben Knüppe’s points, he cautioned that it also tends to allow the most radical elements to come to the forefront.  After commenting that the media tends to side with the plaintiffs in mass litigation because the media “loves misery,” he focused on the potential positive role of traditional media in mass litigation.  He argued that the traditional media could play a stronger role in pointing out distinctions between competing plaintiffs’ groups in order to better serve the public about their choices in obtaining representation.  Later in the presentation, one of the panelists gave an example of a TV station asking consumer groups to provide information about their organization and financing.

Stephan Holzinger had some good advice for those who represent defendants in mass litigation.  Most fundamentally, he remarked on something that should be obvious but that may not be the first instinct for many defendants, “you run best with the truth.”  He also counseled for the need for defendants to engage the media proactively in high-profile litigation as a way to head off problems with other interests, such as employees, suppliers, shareholders, and competitors.  As a specific example, he pointed to Taco Bell’s successful public relations campaign in response to a would-be class action suit accusing it of consumer fraud for not using 100% beef in its tacos.  Ultimately, Taco Bell was able to turn the lawsuit into a successful advertising campaign.

Public relations expert Michael Seymour anchored the panel with some comments about the dynamics of media impact on public perception.  He found it interesting that several of the other panelists had commented about “using” the media in the context of litigation.  He noted that in understanding traditional media, you have to consider that it must always move fast and that it always has only the partial attention of its audience.  He added that social media tends to be effective because people have the most trust in “someone like myself” and that social media creates the impression of a more intimate, one-on-one communication (in case you’re wondering, I wrote this post just for you, seriously).  Seymour offered a few specific points that a party to high-profile litigation should consider in developing an effective PR strategy.  The first is to walk the fine line of advocating your position in the case without going too far in vilifying your opponent, since you may well find yourself sitting across the negotiating table later.  Slagter echoed this point counseling plaintiffs to always be mindful of the “end game” in litigation in developing their media strategy.   Seymour’s second piece of advice to litigants is to understand the “shape” of the case, i.e. how the case will develop and how long each phase will likely take. 

There were several interesting questions posed during the Q&A portion of the presentation.  One question involved what happens in the middle of the case, after the initial media exposure has died down but before a final resolution.  Knüppe noted that in the Dexia case, opposing counsel was very good about not leaking information to the press during negotiations that led to a final settlement.  However, in order to maintain a flow of information during the negotiations, periodic newsletters were sent to concerned shareholders to advice them on the status of the case.

Another series of questions asked about the relationship between media and the judiciary.  First, the panel was asked to what extent courts in different jurisdictions may take into account media publicity about a case in their decision making.  The general consensus was that the media should not impact judicial decision making, but panelists provided examples of instances where courts either commented on media exposure in their judgments or admitted after a case that media exposure had been on their minds at the time of the decision.  Second,  the panel was asked to what extent it is appropriate for a judge to make use of media in case management.  This question generated a discussion about a key distinction between truly representative class actions in the United States and mass actions in Europe.  In the United States, the court has an obligation to ensure that absent class members are provided information about the case and to take on an affirmative role in managing the delivery of that information.  In Europe, by contrast, the role of communicating with individual consumers is left to the firm or association that the consumer selects as his or her representative, and if the court has any role at all, it is merely to ensure that attorneys represent who they say they represent. 

Oxford Professor Christopher Hodges had an interesting observation to wrap up the session.  He talked about the media’s social responsibility in seeking an ultimate truth with regard to high-profile litigation rather than simply reporting on the allegations being made.  He pointed as an example to litigation claiming that infant vaccinations caused autism.  He noted that although the litigation had been based on a medical hypothesis that was later debunked, the initial media attention that had been given to the plaintiffs’ claims generated among some segments of the public a fear of vaccinations that continues to have serious negative public health consequences, long after the litigation.

The main holding of the Colorado Supreme Court’s decision in Jackson can be summarized with the court’s statement that:

A trial court must conduct a rigorous analysis of the evidence and find to its satisfaction that each C.R.C.P. 23 requirement is established.

Jackson, Slip Op. at 18.  At first glance, this statement may not seem out of step with the “rigorous analysis” standard commonly recognized by the federal courts.  However, the majority’s intentional use of the phrase “to its satisfaction” rather than “by a preponderance of the evidence” makes the Colorado standard a potentially far less exacting hurdle.  A large portion of Justice Martinez’s majority opinion is dedicated to explaining why the court chose to make the class certification decision a matter of pure judicial discretion by the trial court rather than a matter of evidentiary proof.  The majority opinion makes reference no less than four times to the state’s “policy of favoring the maintenance of class actions” and juxtaposes this policy against a federal policy that the majority characterizes as “limiting class actions.” 

Also key to the majority’s analysis was the language of Colorado’s rule 23 allowing the court to make a “conditional” class certification order, language that has recently been removed from the federal rule.  Because certification can be tentatively granted and later revoked by the trial court in Colorado, the court reasoned, the applicable evidentiary standard should be more flexible and less definitive than the “preponderance” of the evidence standard applied in most federal courts, where (the Jackson court reasoned) the rule requires a single class certification decision.

The majority addressed two other issues that are closely related to the standard of review.  The first was whether a trial court may resolve factual disputes that overlap with the merits of the case.  On that issue, the majority reached the relatively uncontroversial conclusion that a court may consider disputes about facts that overlap with the merits, but “only to the extent necessary to satisfy itself that the requirements of C.R.C.P. 23 have been met.”  Slip op. at 27.   

The second issue was whether the trial court should resolve expert witness disputes in reaching its determination on class certification.  On this issue, the court’s holding was nuanced.  Although it recognized that the trial court must evaluate the competing experts’ opinions in order to determine whether the evidence at trial can be presented in a way to resolve the class claims through a common set of facts, the majority held that a trial court should not rule on the admissibility of the plaintiffs’ expert’s testimony at the class certification phase.  The majority again recognized that this holding was contrary to the holdings of several federal court decisions, but it reasoned that a different standard was justified under the Colorado rule because a trial court had the power to reconsider a preliminary certification order following a pretrial Shreck (the Colorado equivalent of Daubert, not to be confused with Shrek, the surly but loveable ogre) hearing on the admissibility of a plaintiffs’ expert’s testimony.  See id. at 31-32.

A strongly-worded dissent from Justice Eid, who was joined by Justice Rice, criticized the decision by stating, in summary, that:

the majority’s standardless approach makes class certification in Colorado essentially unreviewable by appellate courts and raises serious procedural due process concerns.

Slip Op. at 1 (Eid, J., dissenting).  Justice Eid’s dissent contains a wealth ammunition for academics, commentators, and the courts of other jurisdictions to question the majority’s reasoning.  But alas, for litigants in Colorado, it does not have the force of law.  So, rather than discuss it in depth, I simply commend it to your reading.

There are a host of questions that arise out of Jackson that will likely be the subject of future litigation in the Colorado courts, and I’ll address a few of them now.  However, I’ll apply the Colorado Supreme Court’s class certification standard to the following remarks by saying that they are preliminary and tentative and subject to later reconsideration as the record develops.

Does the Jackson decision mean that trial courts in Colorado should take a ”certify first, ask questions later” approach to the certification question?  

This is a position that any party seeking class certification will likely take in the wake of Jackson.  However, a review of all four companion cases decided by the Colorado Supreme Court on Monday makes clear that this is not a permissible approach.  Jackson vests wide discretion in the trial court to grant or deny certification depending on whether the class certification elements are met to the court’s satisfaction, but it also requires the trial court to consider evidence presented by both sides in analyzing whether class treatment is appropriate.  These conclusions are reflected by the results in State Farm Mutual Automobile Insurance Co. v. Reyher, in which the court applied its new standard and held that a trial court had acted within its discretion in denying class certification after a rigorous analysis, and Garcia v. Medved Chevrolet, Inc., in which it determined that the trial court had erred by granting class certification without taking into consideration the evidence presented by the defendant showing that individual questions would predominate.

Is the “rigorous analysis” standard meaningless in light of the trial court’s vast discretion under Jackson?

 Justice Eid’s dissent argues that the majority’s decision renders the “rigorous analysis” requirement a purely procedural requirement.  In other words, as long as the trial court goes through all the motions, the court still has relatively unfettered discretion to grant or deny certification.  This may be true as an analytical matter, but as a practical matter, performing the “rigorous analysis” requires the trial judge to think critically about how the trial is actually going to be conducted.  It also prevents the trial judge from glossing over what may turn out to be insurmountable practical problems in fairly adjudicating the case through common, class-wide evidence.  Thus, even if a “rigorous analysis” is a purely procedural requirement, that does not mean that it will have no impact on the outcome of class certification motions.

Has the Colorado Supreme Court resurrected the pre-Dukes misinterpretation of Eisen as prohibiting any analysis of the merits of the case?

That the answer to this question is no may not be completely clear from the majority’s opinion in Jackson itself, but it becomes clear when Jackson is read in combination with Justice Martinez’s companion opinion in Reyher.  While, curiously, the majority opinion in Jackson makes no reference to Dukes, the opinion in Reyher cites Dukes approvingly in holding that a trial court cannot simply accept the plaintiff’s allegations as true.  The line that can’t be crossed is that the trial court cannot prejudge the merits, a conclusion that is consistent with the Supreme Court’s recent ruling in Erica P. John Fund, Inc. v. Halliburton Co.

Is class certification now effectively unreviewable in the Colorado appellate courts?

The widely disparate outcomes in the three companion cases decided along with Jackson reflect that appellate review will still have a function after Jackson.  An appellate court may clearly find 1) that the trial court conducted a rigorous analysis of the evidence and acted within its discretion in either granting (Jackson, Patterson) or denying (Reyher) class certification; or 2) that the trial court failed to conduct a rigorous analysis of the evidence and therefore the case must be remanded (Garcia).   What is less clear is whether there ever going to be circumstances in which an appellate court could find that a trial court performed a rigorous analysis but abused its discretion in deciding the outcome of the class certification motion, and whether, if so, the appellate court could dictate the result of the class certification motion rather than remanding that decision to the trial court.

What are the practical implications of Jackson?

There many potential practical implications of the Jackson decision.  First, the standard in Colorado is clearly less stringent than the federal court standard.  This raises the prospect that plaintiffs will view Colorado as a favorable forum for class action litigation, and it will almost certainly raise the stakes in battles over forum selection and federal jurisdiction.  Moreover, given the trial court judge’s broad discretion over the class certification, the particular leanings and predispositions of the trial court judge become pivotal in the likely success or failure of a class action.

Second, the court’s emphasis on the tentative nature of class certification decisions under Colorado Rule 23 means that even once they are certified, class actions in Colorado are likely to be subjected to repeated efforts at decertification as the case progresses.

Third, the emphasis on the “rigorous analysis” standard increases the likelihood that, despite the lack of a clear standard for resolving the issue, class certification will necessitate a mini-trial involving the presentation of live witnesses and a fully-developed record, likely increasing the cost of discovery and the class certification process itself.

On the other hand, none of these potential impacts would be a drastic change from the way that class actions are already being litigated in the Colorado Courts.  Parties already fight over removal and forum selection, courts already conduct evidentiary hearings on class certification motions, and defendants already make repeated efforts at decertifying a class.  Thus, the legacy of  Jackson may ultimately be merely to validate the existing customs and practices for litigating  class actions in Colorado.

Although it is a federal statute, the TCPA does not provide for federal court jurisdiction in private actions to enforce it.  TCPA class actions may only be filed in or removed to the federal courts if there is diversity jurisdiction under CAFA. 

This has naturally given rise to the question of whether state laws limiting class actions, such as § 901(b) of New York’s Civil Practice Law and Rules, which prohibits class actions for claims seeking statutory penalties, are applicable in federal court exercising diversity jurisdiction over TCPA claims.   Before the Supreme Court’s decision in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., the Second Circuit Court of Appeals said yes.  After the Supreme Court remanded for reconsideration in light of Shady Grove, the Second Circuit said yes again, reasoning that the TCPA’s language allowing private enforcement “if otherwise permitted by the laws or rules of court of a State” gave the states broad power to determine how TCPA actions may be prosecuted within their borders.  The Third Circuit has disagreed with this conclusion, holding that State limitations on class actions do not apply in TCPA class actions filed in the federal courts.  Given the Third Circuit’s view, defendants in at least some jurisdictions may have a strong incentive to oppose federal jurisdiction in TCPA cases.

Another question that arises from the peculiar federalist nature of the TCPA is whether a state or federal statute of limitations applies.  Earlier this week, in Giovanniello v. ALM Media LLC, the Second Circuit answered this question and held that a shorter state law limitations period applied rather than the 4-year federal catchall provision. 

Several recent decisions have highlighted a split among both the state and federal the courts about whether TCPA claims should be permitted to be brought as class actions at all.  Of particular note is the recent decision of the New Jersey Superior Court, Appellate Division in Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., which provides an excellent survey of the various state and federal court decisions on both sides of the issue.  The court in Local Baking Products ultimately decided that class certification of TCPA claims was not appropriate. It reasoned that class actions are not a superior procedure for enforcing the TCPA because Congress had made statutory penalties available so that individuals would be incentivized to pursue vindication of their rights in individual actions in small claims or other state courts.  In addition to lack of superiority, a common reason offered by other courts for rejecting class certification is that the question of whether faxes or calls were authorized is too individualized for common questions to predominate.

Earlier this month, however, the Supreme Court of Kansas upheld a lower court’s decision granting class certification in a TCPA case.  In Critchfield Physical Therapy v. The Taranto Group, Inc., the court rejected both the argument that individual actions in small claims court would be superior to a class action and the argument that the question of consent was too individualized.  In addition, the court rejected the argument that class actions would not be superior in light of the threat that aggregating thousands of individual statutory penalties together could create an ”annihilating” judgment against the defendant that would be disproportionate to any harm to the class.  A similar argument had been successful in a FACTA case in California federal court, but later reversed by the Ninth Circuit in Bateman v. American Multi Cinema, Inc.

Meanwhile, while a bill has been introduced in the U.S. house to “modernize” the TCPA by permitting certain informational robo-calls to be made to mobile phones, among other things, the bill would not modify the private enforcement provisions of the statute.

One quandary facing courts and counsel in TCPA class actions is how to give notice to consumers if a class is certified.  Last month, a Madison County, Illinois judge ordered that notice of a class action for unsolicited faxes under the TCPA should be disseminated by. . . 

. . . you guessed it . . .  

fax.

Notes from the 15^th Annual National Institute on Class Actions (New York City)

Following an energetic introduction from Goldman Scarlato Karon & Penny partner Dan Karon, Columbia Law Professor John C. Coffee kicked things off with his annual review of developments in federal class action law. He focused on the U.S. Supreme Court’s recent class action decisions. He noted, “The landscape has changed – and changed dramatically – this year.”

Prof. Coffee began his discussion with the impact of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). He noted three distinct messages in that decision: (1) a new standard for commonality, (2) individualized money damages are not available under 23(b)(2), and (3) affirmative defenses must receive individualized hearings. Prof. Coffee said the new commonality standard would have the greatest impact on 23(b)(2) classes including employment and environmental litigation. Affirmative defenses will be used by defendants to show that the class is unmanageable or that it fails the predominance requirement. Prof. Coffee provided some ways to get around affirmative defenses: (1) raise a Twombly/Iqbal challenge to affirmative defenses that are not pled with enough specificity to satisfy the “plausibility” standard, (2) seek only partial certification and leave affirmative defenses to be resolved in individual actions, and (3) concede that defendants can raise an affirmative defense, but deny that it can be raised to a jury.

Prof. Coffee discussed dueling class actions and the ruling in Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), which held that the relitigation exception did not permit a federal court to enjoin a class from seeking certification in a West Virginia state court. Basically, Prof. Coffee said, the Court ruled that the benefit of the doubt must go to the state court; a federal court lacks power to bind non-parties, such as absent class members.

The discussion turned to AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). The Supreme Court’s majority found that state law rules are preempted when they obstruct the Federal Arbitration Agreement’s objectives. Prof. Coffee believes mandatory arbitration clauses will be making their way into more employment contracts.

Highlights of panel discussions

“The Practice that Never Sleeps: Reexamining the Class Action Practice and Considering Where It – Indeed, We – Go from Here”

This panel (Dan Karon, Judge Colleen McMahon, Judge Benita Y. Pearson, Professor Brian T. Fitzpatrick, J. Philip Cabrese, Derek G. Howard, and Peter M. Ryan) provided a discussion of the state of affairs in class actions. Dan Karon asked the panel “What’s with all of the hostility?” Prof. Fitzpatrick believes it comes from a misperception based entirely upon the outliers that give class actions a bad name. Prof. Fitzpatrick conducted an empirical study of fee awards (filed from 2006-2007) in over 700 cases. He found the average fee award was 15%. So, the “perception that lawyers are getting everything and class members are getting nothing is not true.”

Derrick Howard stated that it is fiction that most class actions are frivolous. The risk of bringing a class action on a contingent basis is substantial. Class action attorneys, he said, are acting as private attorneys general to correct wrongs. It was noted that the DOJ is closing half its antitrust field offices. How will that effect enforcement? Class action attorneys have to be the enforcers.

Judge McMahon, from the U.S. District Court for the Southern District of New York, said, “Don’t endow us with superhuman powers.” Most class actions are settled with little opposition, she said. Judges cannot “intuit” that something is wrong if no one speaks up. Judge Pearson, from the U.S. District Court for the Northern District of Ohio, said it is important to allow enough time for objectors and intervenors to know and respond in some way to proposed settlements.

This is where things got interesting. Larry Schonbrun, a self-proclaimed professional objector, stood up and told the panel that the court should appoint a class guardian to ensure a settlement is fair and reasonable. Judge McMahon replied, “Who pays for that?” The panel agreed that this would cause a substitution of judgment that was not necessary or even helpful. Schonbrun went on to say that the court has the power to find out if the settlement is unfair but the court chooses not to exercise that power.

Judge Pearson disagreed with Schonbrun and remarked that because a settlement is hard-fought does not mean it is fair and just. She requires the parties to walk her through the terms of the settlement. She also wants to talk with the class representatives.

The content and design of class action notices were discussed. Judge Pearson said she always wants to see what a notice will look like when printed to ensure it is readable. Judge McMahon went on to note that writing a notice is like crafting jury instructions. She told attorneys that they “have to work hard to make it readable” and they “have to work hard to make it comprehensible.” One audience member remarked that there are plain language notice experts who can help attorneys.

Judge Pearson talked about proper deliverability of notice. She said debt collectors can find people and that it can be done without extraordinary costs and time. She seemed to be intimating that some class action notices remain undelivered and that there must be ways to get better addresses.

One attorney on the panel said that when Twombly was decided, everyone thought it was the death knell for class actions. Instead, there was a leveling effect as people adjusted. There is a temptation to interpret Supreme Court decisions as the final word but, as one attorney noted, “A 5-4 decision is not a death knell of anything.” Lawyers are very creative and will find a way to deal with Wal-Mart and Concepcion.

“The Empire Cases – AT&T Mobility v. Concepcion and Wal-Mart Stores, Inc. v. Dukes from Those Who Made Them Happen”

This panel was comprised of the lawyers involved in Concepcion (F. Paul Bland, Jr. and Andrew J. Pincus) and Wal-Mart (Mark A. Perry and Joseph M. Sellers). Fred Burnside expertly moderated this session. Paul Bland would have liked to see a different case go up for review. There was no factual record in Concepcion because of the categorical rule of evidence set forth in the Discover Bank case.

The panel discussed the net effect of Concepcion. Basically, Concepcion does not require enforcement of a class action ban even when the evidence shows that the plaintiffs could not effectively vindicate their statutory rights in individual arbitration. Fred Burnside said that the American Arbitration Association (“AAA”) has to post results. He found more than 100 instances where people arbitrated for less than $100. So, some people appear to be using arbitration to vindicate their rights. However, it was later revealed that there have only been 1,300 AAA claims in the past year.

Joe Sellers began the discussion on Wal-Mart. He remarked that he fielded 74 questions during oral argument and that the defense, led by Mark Perry, received far fewer. He was most surprised that Justices Ginsburg and Sotomayor were skeptical of the use of formulas for determining back pay even though they have been used for 35 years. The Court disregarded statistical evidence when it failed to find that a specific employment practice tied together 1.5 million class members. The question was raised whether Daubert applies to expert opinions offered at class certification. Sellers said, “The Court did not decide whether Daubert applies to class certification, although in dictum it suggested” it did.

“Melee in Manhattan! Class Action Objectors – Are They Protectors of Absent Class Members or Merely Gadflies?”

This was the most highly anticipated panel. Vincent J. Esades put together a panel that included Nancy F. Atlas, from the U.S. District Court for the Southern District of Texas and three professional (Ed. Note-see Mr. Frank’s comment below distinguishing his role from that of a “professional objector as that term is often used) objectors (Ted Frank, Darrell Palmer, and Lawrence W. Schonbrun). The crowd followed Dan Karon’s earlier admonition “to not throw chairs,” but the discussion was heated at times.

Judge Atlas said that most judges care enormously about absent class members and protecting the process. She agreed that there are good objections that help fine-tune a settlement by pointing out substantive issues. However, she said, there are a lot of bad objections as well that do not serve to point out any real issues with the settlement. Larry Schonbrun was the most vocal about blaming attorneys for excessive fees and judges for doing a “miserable job in approving fees” just to get the case off the docket. Schonbrun said he doesn’t believe that courts want to hear objections. Darrell Palmer disagreed.

Ted Frank said that he goes after the worst settlements. Palmer said the system falls short because class counsel does not make sure class members know what is going on or how to file a claim. Frank, who often objects to attorneys’ fees, said fees should be based on the amount actually distributed to class members.

Larry Schonbrun revealed that he had been an attorney in one class action but has offered over 150 objections. He fervently believes objections should be raised in every settlement. Darrell Palmer told the crowd that “objecting is a hobby for me.”

Judge Atlas echoed Judges McMahon and Pearson by saying that class action notices need to be “legible and comprehensible to laypersons.” She talked about having a good headline and writing in plain English.

The matter of cy pres awards was raised. Ted Frank said settlement monies should go to the class and not to favorite charities chosen by attorneys or judges.

An audience member asked the objectors how much each of them has accepted to sell appeals over the last decade. Ted Frank said “none,” Darrell Palmer said “a lot,” and Larry Schonbrun declined to answer. Darrell Palmer said the way to stop this practice is to stop paying off objectors. The professional objectors revealed that most objections address attorneys’ fees and poorly written notices.

“If I Can Make It There, I Can Make It Anywhere: Lessons Learned from Class Action Trials for the Rest of Us”

This panel (Andrew J. McGuinness, Judge Jack Weinstein, James Donato, David Sanford, Edmund W. Searby, and Thomas M. Sobol) discussed preparing for a class action trial. There really are not many differences between a class action and a very complex individual trial. The rules of evidence are the same and Rule 23 does not deal with trials – only with the notice requirements for certification. The panel discussed that jury members may not even know what a class action means. Judge Weinstein, from the U.S. District Court for the Eastern District of New York, spoke of the importance of the charge to the jury. Judge Weinstein said he allows more leeway in jury voir dire in class action trials. If the evidence will involve a lot of statistics, he wants to have someone on the jury who will lead the other jurors to understand. Tom Sobol said he likes to come out first with the defense witnesses in order to tell the story to the jury. Jim Donato said the “victory is in the details.” He allowed jurors in one of his cases to ask questions at any time during the trial. Judge Weinstein said he has never allowed unfiltered questions because the risk of mistrial “frightens me.” Edmund Searby said it is best to get class representatives on and off the witness stand as quickly as possible to avoid any damage. The key, he said, is to have a class representative who is likable and credible.

“New Kid on the Block – The Consumer Financial Protection Bureau: What Is It, How Will It Work, and How Will It Affect Us?”

The final panel examined the Consumer Financial Protection Bureau (“CFPB”). This panel was moderated by Jeffrey A. Leon and included a representative from the CFPB (David M. Gossett); James D. Kole, who practices with the Illinois Attorney General’s Office; defense attorney, Michael Thurman; and plaintiffs’ attorney, Jonathan D. Selbin.

David Gossett provided an overview of the CFPB. The agency is in limbo until a director can be named. The CFPB will be working closely with the FTC on joint regulations. The CFPB will have broader rulemaking powers since it (unlike the FTC) can actually write regulations. Gossett asked any attorney trying to reach a settlement on the same claims as an enforcement action to reach out to the CFPB. He also talked about CAFA notice and how the CFPB will need to be noticed (specific guidelines will be set out in the future). A study on mandatory arbitration clauses will be undertaken before the CFPB considers the propriety of banning them.

Michael Thurman stated that defendants will be happy to learn that the FTC and CFPB will not initiate separate enforcement actions. He also thinks the CFPB’s enhanced rulemaking power is good because it will lay out specific rules for businesses. James Kole said the Illinois Attorney General is viewing the CFPB as a positive force in the realm of consumer fraud protection. Jonathan Selbin asked some key questions on how the CFPB could impact class actions, including the possibility of preemption, exhaustion requirements, discovery and document production, and whether the CFPB can release class claims. He raised the concern that potential settlement with the CFPB could create a reverse auction atmosphere for defendants.

Save the date – 16^th Annual National Institute on Class Actions – October 11, 2012 – Washington, DC