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Posts Tagged ‘dukes’

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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I’m very excited to be speaking at a Strafford Publications CLE webinar tomorrow entitled: Statistics in Class Action Litigation: Admissibility, Expert Witnesses and Impact of Comcast v. Behrend.   The program is scheduled for June 18, 2013 at  1:00pm-2:30pm EDT.  This is the third iteration of this presentation, which has been updated to offer insights in light of the Supreme Court’s Comcast decision earlier this term.  Brian Troyer of Thompson Hine in Cleveland and Justin Hopson and Rick Preston from Hitachi Consulting in Denver will be co-presenting.  Below is a synopsis of the program.  Click here for more information and to register:

Class certification standards have become more rigorous, and the skillful use of statistical evidence is an important part of class actions. Effectively employing or challenging statistics can make a difference in winning or losing a class certification motion.

Statistical evidence is introduced through expert witness testimony, and Daubert challenges may be an effective strategy. This raises the issue of the scope of the court’s inquiry into the merits at the class certification stage.

The 2011 Wal-Mart v. Dukes Supreme Court ruling underscored the prominent role of statistical evidence in assessing the merits at the certification stage. The Court’s recent Comcast v. Behrend ruling reinforces Dukes regarding merits assessments at class certification, thus impacting the continued role of statistical evidence.

Listen as our experienced panel examines statistical evidence in certification proceedings, the impact of Comcast v. Behrend and related case law, and best practices for using statistics and cross-examining witnesses.

Outline

  1. Role of statistical evidence in support of class certification
  2. Expert testimony and Daubert analysis at class certification stage
  3. Impact of Comcast v. Berhrend and Wal-Mart v. Dukes
  4. Science of statistics and cross-examining the statistics witness

Benefits

The panel will review these and other key questions:

  • What is the impact of Comcast and Dukes upon the use of statistical analysis at class certification?
  • What strategies can counsel use to effectively cross-examine statistics witnesses?
  • What types of statistics can be introduced and what are the proper ways to utilize statistics?

Following the speaker presentations, you’ll have an opportunity to get answers to your specific questions during the interactive Q&A.

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I’m pleased to announce that the BakerHostetler Class Action Defense Team has just released its 2012 Year-end Review of Class Actions, a joint project with the firm’s Employment Class Actions, Antitrust, and Data Privacy practice teams.  See below for a synopsis of the project.  Click the link above to access a copy of the report itself:

We are pleased to share with you the BakerHostetler 2012 Year-end Review of Class Actions, which offers a summary of some of the key developments in class action litigation during the past year. Class action litigation continues to persist in all areas of civil litigation despite the Supreme Court’s 2011 decisions in AT&T Mobility v. Concepcion and in Wal-Mart Stores, Inc. v. Dukes, which were seen by many commentators as marking the beginning of the end of class actions as we know them. But while the Supreme Court’s 2011 decisions have had a significant impact on class action litigation, they have not brought about its demise and are not likely to do so anytime soon. In the last two years, we’ve seen landmark decisions and the addition of important judicial gloss to those decisions. 2013 will be no different as the Supreme Court is set to weigh in on a series of key cases this spring.

We hope you find this Review a useful tool as you move forward into the new year. This comprehensive analysis of last year’s developments in class action procedure and jurisdiction, as well as developments by subject matter will hopefully provide context and insight as you look ahead to 2013′s expected trends in class action law, including the proliferation of privacy class action litigation and class action litigation relating to the LIBOR rate-fixing scandal.

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My colleagues at BakerHostetler have put together some great content on several class action-related topics recently that readers should find interesting.

First, the Baker Hostetler Class Action Defense Team issued an executive alert today discussing the Supreme Court’s decision to grant certiorari in another case involving class arbitration waivers.  The alert, titled U.S. Supreme Court Considers Arbitration Clauses and Class Actions Next Year, summarizes the issues to be addressed in Oxford Health Plans LLC v. Sutter.  The alert was authored by newly elected Cleveland Partner Ruth E. Hartman and Class Action Defense Team Leader Ernie Vargo.

Another executive alert, titled Recent Trends in Class Actions for Telephone and Fax Solicitation and Advertising, was issued last week by the Privacy and Data Protection and Class Action Defense Teams.   The alert, authored by my colleague in Denver, Justin Winquist, summarizes the latest trends in class action litigation under the Telephone Consumer Protection Act (TCPA).

Finally, my partner Casie Collignon authored a blog post yesterday with an update on the latest in the ongoing saga of Dukes v. Wal-Mart on remand following the U.S. Supreme Court’s decision.  The post is entitled, California District Court Awaits Class Certification Motion in Wal-Mart.

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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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