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Posts Tagged ‘class certification’

BakerHostetler’s 2014 Year-End Review of Class Actions (and what to expect in 2015) was published on February 2, and is available for download at the firm’s website.  This annual summary is a joint effort of numerous attorneys throughout the firm, but for the second year in a row, the 2014 edition was ably edited by Dustin Dow in the firm’s Cleveland Office.

As the title suggests, the 59-page document provides a comprehensive update on the key decisions and trends in a variety of subject matter areas, including consumer protection, insurance, banking, data privacy, antitrust, securities, and labor and employment, as well the latest procedural developments impacting class action practice, both throughout the United States and abroad.

It’s free, so don’t miss it!

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In keeping with the time-honored tradition of end-of-the-year top 10 lists, I’ve assembled my annual list of the top 10 most significant class action developments below.  Whether these are actually the top 10 most significant decisions over the past year may be subject to reasonable debate, so please feel free to add your own favorites in the comments section.

1. Certiorari denied in “moldy washer” cases - In my view, the single biggest development impacting class action practice over the past year was the Court’s decision not to take on the question of “issue certification” presented in the Sears and Whirlpool “moldy washer” cases.  This non-decision opens the door for significant litigation over whether isolated issues should be certified for class treatment even where significant individual litigation would be necessary following resolution of the class wide issues.

2. Judge Posner’s class action settlement decisions – Judge Posner wins the award for the jurist having the single biggest impact on class action practice in 2014.  In addition to the Supreme Court declining to take on review of his decision in one of the “moldy washer” cases, Butler v. Sears, Roebuck & Co., Judge Posner authored two significant (and harshly worded) decisions discussing the standards for evaluating the fairness of class action settlements, including Eubank v. Pella Corp., Nos. 13-2091, -2133, 2136, -2162, 2202 (7th Cir., June 2, 2014), and Redman v. RadioShack Corp., case number 14‐1470, 14‐1471 and 14‐1658 (7th Cir., Sept. 19, 2014).  These decisions are emblematic of a more general trend in the courts of subjecting class action settlements, especially coupon settlements, to ever-greater scrutiny.

3. Basic framework remains largely unchanged after Halliburton II – One of only three Supreme Court decisions of significance on class action issues this past year, the Court largely maintained the status quo in declining to overrule the framework for evaluating “fraud on the market” theory of reliance in securities class actions.

4. Whirlpool trial ends with victory for the defendant – Not long after the Supreme Court declined review, the first of the “issue” class cases went to trial against Whirlpool.  The trial ended in a defense verdict, although as I wrote in October, I’m not sure that’s necessarily a good thing for defendants in the long-term.

5. Court clarifies removal pleading standards in Dart Cherokee Basin Operating Co. v. Owens – In one of the Roberts Court’s most helpful class-action-related decisions, at least from a practical standpoint, the majority removed barriers to corporate defendants’ ability to remove cases under the Class Action Fairness Act (CAFA), clarifying that jurisdictional facts need only be pled, not supported by evidence, in the notice of removal.

6. California Supreme Court issues significant decision on the use of statistical evidence to support class certification – An individual state court decision has to be pretty significant to make my annual top 10 list, but I think Duran v. U.S. Bank National Association fits the bill.  The decision is one of the most comprehensive to date in addressing the potential pitfalls of reliance on statistics as a proxy for common, class wide proof.

7. Supreme Court holds in AU Optronics that consumer actions brought by state attorneys general are not “mass actions” subject to the Class Action Fairness Act – It’s probably a misnomer to call AU Optronics a “class action” case, since the issue presented was whether actions brought by state AGs on behalf of consumers were “mass actions.”  But because the case involved interpretation of CAFA, it makes this year’s list.

8. International class and collective action litigation continues to expand – Class, collective, and multi-party actions continue to expand outside of the United States and Canada.  Examples included France joining the list of Civil Law jurisdictions in Europe to enact a “class action” law, and a group action in Austria, joined by more than 25,000 litigants, challenging Facebook privacy policies.

9. Data breach class actions proliferate – High profile data breaches and hacking incidents made news, and resulted in class actions, in 2014.  From a rash of payment card breaches impacting customers of large retailers like Target and Home Depot to the more recent Sony hacking incident, data breach class action litigation shows no signs of slowing down any time soon.

10. Supreme Court grants, then dismisses, certiorari in Public Employees’ Retirement System of Mississippi, v. IndyMac MBS, avoiding a high court ruling on the question of whether statute of repose can be tolled for absent class members under the American Pipe tolling doctrine.  In what has become a trend of the past year, this is yet another missed opportunity for the Supreme Court to address a class action issues of significance.

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Anyone still checking this site will have noticed a complete lack of new content lately, which is mostly the result of pure laziness on my part but partially due to the demands of several other writing projects I’ve been working on.  I’m pleased to announce that one of these articles it out, and the folks at Practical Law the Journal have graciously given permission for me to post a reprint here.  Click the following link to view the article, entitled Key Issues in Data Breach Litigation, which is featured in the October 2014 issue.  Please be sure to visit the Practical Law website to learn how to subscribe to more great content on timely legal topics.

Also, speaking of data privacy litigation, I’ll be part of a panel presenting on the topic at the ABA Institute on Class Actions next week in Chicago.  It’s not too late to register.

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The U.S. Supreme Court issued its decision earlier today in Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317 (Halliburton II), its most highly-anticipated class-action-related decision of the October 2013 term.  Those who were hoping for a sea-change in securities class action jurisprudence were left disappointed, as the Court, in an opinion authored by Chief Justice Roberts, declined to overrule its 25-year-old decision in Basic Inc. v. Levinson, 485 U.S. 224 (1988).  Rather than abolish the framework established in Basic, which provides a means for securities fraud plaintiffs to satisfy the elements of class certification through a class-wide presumption of reliance on material misrepresentations, the Court instead held that a defendant can rebut the presumption by demonstrating, at the class certification stage, that the alleged misrepresentations did not actually have any impact on the stock price.  In doing so, the Court reversed the Fifth Circuit Court of Appeals’ decision barring the defendant from offering evidence of non-impact on stock price at the class certification stage.

The Court distinguished its earlier decision in the same case, Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. ___ (2011) (Halliburton I), in which it held that a plaintiff should not be required to prove materiality of the alleged misrepresentation at the class certification stage.  The distinction between the issue of materiality of a misrepresentation (a merits issue not appropriate for the class certification phase according to Halliburton I), and the issue of whether a misrepresentation actually had a common price impact on the stock (a proper class certification question according to Halliburton II) is the key to making sense of the Court’s decision today.  As Justice Roberts stated:

[P]rice impact differs from materiality in a crucial respect. Given that the other Basic prerequisites must still be proved at the class certification stage, the common issue of materiality can be left to the merits stage without risking the certification of classes in which individual issues will end up overwhelming common ones. And because materiality is a discrete issue that can be resolved in isolation from the other prerequisites, it can be wholly confined to the merits stage.

Price impact is different. The fact that a misrepresentation “was reflected in the market price at the time of [the]transaction”—that it had price impact—is “Basic’s fundamental premise.” Halliburton I, 563 U. S., at ___ (slip op., at 7). It thus has everything to do with the issue of predominance at the class certification stage. That is why, if reliance is to be shown through the Basic presumption,the publicity and market efficiency prerequisites must be proved before class certification. Without proof of those prerequisites, the fraud-on-the-market theory underlying the presumption completely collapses, rendering class certification inappropriate.

Halliburton II, slip op., at 21-22.  In other words, a merits question that is indisputedly common to the class should not be considered prior to class certification, but a merits question that also bears on whether the issues to be resolved at trial are truly common or individualized in the first place must be considered as part of the class certification decision.

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The California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank National Association yesterday, addressing the use of statistical sampling as a way of evaluating aggregate liability and damages in a class action. Although Duran is a wage and hour case, its analysis is pertinent to the use of statistical evidence in a variety of other class action contexts.

In the opening line of his majority opinion, Justice Corrigan referred to Duran “an exceedingly rare beast” because it was a wage and hour class action that had proceeded all the way through trial to verdict.  In the trial court, the plaintiff had presented testimony from statistician Richard Drogin, who had also notably served as an expert for the plaintiffs in Walmart Stores Inc. v. Dukes.  Drogin proposed a random sampling analysis that purported to estimate the percentage of the defendant’s employees that had been misclassified for purposes of entitlement to overtime pay.  The trial court did not rely on Drogin’s analysis but instead came up with its own sampling approach, which involved pulling the names of 20 class members, hearing testimony from these witnesses along with the named plaintiffs, and then extrapolating the court’s factual findings across the entire class in order to determine the defendant’s liability.

The supreme court affirmed a decision by the Court of Appeal holding that this sampling approach violated due process and was a manifest abuse of discretion.  Generally, there were two independent reasons for the supreme court’s conclusion: 1) the use of random sampling deprived the defendant of the opportunity to present individualized evidence supporting its defenses to the claims; and 2) the sampling method adopted by the court was inherently flawed and unreliable.

Without categorically rejecting the use of statistics as a tool in managing class action litigation, the supreme court identified numerous conceptual limitations on its use.  First, “[s]tatistical methods cannot entirely substitute for common proof . . . .  There must be some glue that binds class members together apart from statistical evidence.”  So, while statistics may serve as circumstantial evidence to support a common issue–such as the existence of centralized policy or practice, they may not be used as a substitute for establishing commonality or for avoiding individualized determination of individual issues–such as by generalizing effects of a given policy or practice on large groups of claimants where the effects vary in actuality.

Second, a trial court cannot utilize statistical evidence in a way that prevents the individual adjudication of individual defenses.  Although courts are encouraged to develop innovative procedures in managing individual issues, a court cannot ignore individual issues altogether or prevent them from being decided on an individual basis.

Third, if statistical evidence is to be used as part of a litigation plan for managing complex class action, the methods to be employed should be presented, evaluated, and scrutinized at the class certification stage.  The court should not simply assume that statistical methods will permit class treatment and certify the class based on this hypothetical possibility.

Fourth, the court must ensure that the statistical method to be employed has to be reliable, based on statistically valid data, and not prone to a high margin of error.  In other words, junk science or ad hoc, rough justice are not enough.

The Duran opinion is worthy of careful study for anyone considering the use of statistics in class certification proceedings, both in the wage and hour context and in class actions more generally.  It also provides a colorful illustration of the due process and manageability problems posed by the “trial by formula” approach to class actions that the United States Supreme Court criticized in Dukes.

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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.

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In case you missed it, the BakerHostetler class action defense team published its second annual Year-End Review of Class Actions last month.  The 2013 issue was expertly edited by Dustin Dow of our Cleveland office, and features contributions from other members of the firm’s class action defense team across the country.  The 54-page report has a thorough recap of the key class action developments in the U.S. Supreme Court as well as other federal and state courts, summaries of key developments in various substantive areas of law in which class actions are prominent, and a preview of what to look for in 2014.  Click the link above to download a copy.

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