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Posts Tagged ‘fiduciary duty’

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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According to Sundeep Tucker of the Financial Times, a recent study by the Goal Group, a UK-based “class action services specialist,” found that Asian institutional investors were not taking advantage of settlement funds available in U.S. securities class action settlements.  The article points to a cultural aversion to “corporate confrontation” and perceptions about the complexity of the claims process as reasons why Asian investors have chosen not to participate.

Tucker quotes Steven Everard, managing director of Goal, as saying that an institutional investor has a “clear duty” to seek class action proceeds on behalf of its clients, suggesting that the failure to make a claim in a U.S. securities class action settlement could expose an Asian institutional investor to liability itself.

Especially with class action procedures expanding overseas, the prospect of fiduciary liability for an institutional investor raises the possibility, at least conceptually, of “nested” class actions, where a party is sued in a class action for breach of fiduciary duty for failing to make a claim for benefits in another class action.  (“Nested” class actions is not a term of art as far as I know.  In fact, I just made it up, but I expect credit if it catches on!).  I have not heard of such a thing happening, but it’s probably only a matter of time…

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