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Posts Tagged ‘rule 23’

One of the key questions in the aftermath of the Supreme Court’s recent decision in Comcast Corp. v. Behrend is the extent to which damages must be susceptible to classwide calculation in order to justify class certification.  In particular, the question is as follows: When the Comcast Court held that class certification was improper because the plaintiff had failed to demonstrate that “damages are capable of measurement on a classwide basis,” did it mean that Rule 23(b)(3) certification is never proper if damages cannot be determined on a classwide basis?  If the answer to this question is yes, then consumer class actions are in trouble because it’s a rare case where classwide determination of damages is possible.  But if the answer to this question is no, then as the Comcast dissent suggested, “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).”

Yesterday, in the second of two moldy washing machine class actions that had been vacated and remanded for further consideration in light of Comcast, the Seventh Circuit Court of Appeals joined the Sixth Circuit in answering “no” to this question.  In Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.), the court reaffirmed its earlier decision that if common issues predominate over individualized issues in resolving the question of liability, then a class can be certified even if the question damages would require individual determinations. As usual, Judge Posner’s decision is colorful and an interesting read, even for those who disagree with the outcome.  The Sixth Circuit’s decision, which was issued last month, is In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013).

In evaluating the potential broader impact of the Sixth and Seventh Circuit’s decisions, it is important to maintain a clear distinction between the question of damages and the related questions of injury and causation of damages.  Courts have long accepted that individualized damages questions do not prevent class certification, and the moldy washer decisions themselves break little new ground other than to interpret Comcast as not having altered that longstanding principle.  However, saying that individualized questions of damages can be left for a later proceeding is very different than saying that there is a good reason to certify a class when the elements necessary to prove liability itself (which typically include both the existence of injury and causation) cannot all be resolved on a classwide basis.  Individualized questions of whether a given class member has suffered any compensable injury at all or whether the allegedly wrongful conduct caused any alleged injury should still defeat predominance, and neither Sears nor Whirlpool should be read to suggest differently.  In those cases, because the plaintiffs had advanced what these courts concluded was a viable theory of common injury, the only individualized questions related to the amount of, and not the existence of, damages. See In re Whirlpool Corp., slip op. at 22 (“Because all Duet owners were injured at the point of sale upon paying a premium price for the Duets as designed, even those owners who have not experienced a mold problem are properly included within the certified class.)

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Today, the Supreme Court issued its ruling in Genesis Healthcare Corp. v. Symczyk, No. 11–1059, which addresses the practice of “picking off” a named plaintiff in a FLSA collective action by making a full offer of judgment under Rule 68 for the amount of the named plaintiffs’ claim.  In a 5-4 majority opinion authored by Justice Thomas, the Court held that the relation back doctrine does not apply to save the collective action from mootness simply because the named plaintiff also sought relief on behalf of others.  The majority distinguished the case from other decisions applying the relation back doctrine in the Rule 23 context after class certification had been denied, pointing out that a certified class under Rule 23 has an independent legal existence from the named plaintiff.  However, the reasoning of the majority’s decision in Genesis Healthcare Corp. could potentially be applied to support the conclusion that an unaccepted offer of judgment moots even a Rule 23 class action if the offer is accepted or expires prior to a ruling on a motion for class certification one way or the other.

The majority’s decision comes with a major caveat.  The majority declined to address the issue whether a non-accepted offer of judgment actually moots an individual’s claim, despite recognizing a split in the circuits on that issue.  This prompted the following commentary in Justice Kagan’s dissent:

The decision would turn out to be the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so. That is the case here, for reasons I’ll describe. Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise. . . .  [T]he individual claims in such cases will never become moot, and a court will therefore never need to reach the issue the majority resolves. The majority’s decision is fit for nothing: Aside from getting this case wrong, it serves only to address a make-believe problem. 

Whether Justice Kagan’s cheeky prediction turns out to be prophetic will be up to the lower courts, who are left to decide the underlying question of mootness.  In the short-term, there is little doubt that the Genesis Healthcare decision will prompt a rash of offers of judgment in both FLSA cases and class actions.

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Professor Eric Voigt of the Jones School of Law at Faulkner University in Alabama has authored an intriguing article entitled A Company’s Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action, 31 Review of Litigation 617 (University of Texas 2012).  Voigt proposes that a company’s voluntary efforts in providing refunds to customers in consumer litigation can, in an appropriate case, be a more efficient means of providing collective redress than a class action settlement, which a court should take into account in conducting the superiority analysis required under Rule 23.  Voigt argues that in evaluating superiority of a class action, non-judicial alternatives must be considered in addition to individual lawsuits.  Therefore, he argues, a court must consider whether a company’s voluntary refund program is a more fair and efficient alternative to class action litigation.  He also proposes various procedural and substantive features that should be included in any voluntary refund program to satisfy the requirement that it be a fair and efficient alternative to a class action.  Voigt’s article is one of the first I have seen addressing this issue in detail, and I highly recommend it to practitioners, academics, judges, and policymakers alike.

As Voigt’s analysis suggests, even though it lacks the same preclusive effect as a class action settlement judgment, a voluntary refund program is something that a defendant may consider in attempting to avoid or defeat a class action in an appropriate case.  Candidates for this strategy could include any case where the cost of providing direct relief to customers for 100% of damages that could be claimed in a lawsuit is outweighed by the cost of defending a potential class action combined with the likely cost of having to ultimately settle the case for some smaller amount.   The strategy is far from failsafe because a voluntary refund program lacks the same preclusive effect as a class action settlement, and because a court’s evaluation of the superiority requirement is a matter of discretion.  However, having done a voluntary refund program with the protections proposed in Voigt’s article can provide a strong basis to seek an early ruling not to certify any subsequent class action.  Similarly, even when a class action lawsuit has already been filed, the prospect of doing a voluntary refund program can be used as leverage in bringing down an unreasonable settlement demand from plaintiff’s counsel.  This is especially true in jurisdictions that do not recognize the “catalyst” theory (click link to read 2005 article on the topic by Professor Roy Simon) as a basis for the recovery of attorney’s fees.

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The United States Supreme Court has granted certiorari in another class action to be heard during the October 2012 term.  In Comcast Corp. v. Behrend, No. 11-864, an antitrust class action, the Court will address the following issue:

Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.

The case is an appeal from the Third Circuit Court of Appeals’ ruling in 2011 upholding the district court’s finding that the plaintiff had presented by a preponderance of the evidence that damages could be proved on a common, class-wide basis.  However, a lengthy opinion from Judge Jordan, concurring in part and dissenting in part, took issue with the conclusions reached by the plaintiffs’ expert that antitrust damages could be established on a common basis for the class as a whole. 

As with many of the cases addressed by the Supreme Court over the past few years, this case provides an opportunity for the court to either enter a specific ruling narrowly tailored to the area of law in which it applies (here, antitrust or competition law) or a sweeping ruling impacting the procedure governing class certification more generally.  In particular, the Behrend case could potentially resolve the issue whether difficulties in proving damages on a class-wide basis is a reason to deny certification.  For many years, lower courts have relied on the rule that individualized damages issues are not a barrier to class certification.   A reversal of that rule could have a major impact on the viability of class actions in a variety of contexts.

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According to Pete Kasperowicz at The Hill’s Floor Action Blog, Senator Al Franken (D-Minn.) and Representative Rosa DeLauro (D-Conn.) have introduced legislation in Congress intended to reverse limitations on employment discrimination class actions recognized in the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes

A fact sheet available on Senator Franken’s official website describes the key provisions of the bill as follows:

The Equal Employment Opportunity Restoration Act will restore workers’ ability to challenge discriminatory employment practices on a class-wide basis. It adds to Title 28 of the U.S. Code a new section 4201, which does the following:

  • Section 4201(a) creates a new judicial procedure – called “group actions” – that workers can use when bringing employment discrimination cases. The requirements for establishing a group action are the same as the pre-Dukes requirements for maintaining a class action under Rule 23 of the Federal Rules of Civil Procedure—namely, clarifying that the merits of the case need not be proven to certify the group action.
  • Section 4201(b) provides that group actions can be used regardless of whether the group is challenging an objective employment practice, a subjective employment practice, or a mixed employment practice (such as the use of a written test to qualify for an interview).  It also provides that employers’ written anti-discrimination policies can be considered as a defense to certification only insofar as the employer demonstrates that the policy actually has been implemented in practice.
  • Section 4201(c) says that the group actions authorized by this section are subject to the same procedural requirements as class actions authorized by Rule 23. These include notice and opt-out requirements. This section also preserves the application of the Class Action Fairness Act and the availability of appeals.
  • Section 4201(d) says that courts can use statistical analyses and any other procedures they deem necessary to provide justice to prevailing plaintiffs.

It does not appear from Senator Franken’s fact sheet that the bill has significant bipartisan support, and having just been introduced, there is no telling how far it will go towards becoming law in its present form.  However, we’ll keep an eye on any future developments here at CAB.

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For those readers who are interested in additional insights on Judge Posner’s opinion in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 11-3639 (7th Cir., Feb. 24, 2012), which was the subject of Wednesday’s CAB post, here’s a link to an insightful executive alert on the decision, which was authored by colleagues in Baker Hostler’s New York office, partner Deborah Renner and associate Matthew Moody.

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Last Friday, the Seventh Circuit Court of Appeals issued a significant employment class action decision that may challenge conventional wisdom about the impact of the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes.   The opinion, authored by respected Judge Richard Posner, is McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 11-3639 (7th Cir., Feb. 24, 2012).

The procedural history of McReynolds is interesting, because the plaintiffs had actually moved for reconsideration of an earlier denial of class certification after the decidedly pro-employer decision in Dukes was announced.  Although the trial court judge was unconvinced to change his earlier decision, he did agree that Dukes presented a good basis for reconsideration of the class action issue, and expressly stated in his decision that he believed the case was a good candidate for an interlocutory appeal under Rule 23(f).

The Seventh Circuit accepted the appeal, and reversed the denial of class certification.  The Seventh Circuit panel recognized that individualized issues would prevent certification of any claims for back pay or damages, but held that certification of the issue of whether the defendant’s challenged employment policies had an adverse impact on members of a protected class would still be appropriate under Rule 23(b)(2), which allows a class to be certified for the purpose of awarding injunctive relief, and Rule 23(c)(4), which allows certification of particular issues.  Essentially, the case would be certified for the purpose of deciding whether the defendant’s challenged policies created a disparate impact to members of a protected class and for the purpose of ruling on plaintiffs’ request to enjoin the practices.  Any claims for back pay, compensatory or punitive damages would then have to be brought as separate proceedings. 

In reaching its conclusion, the court drew a key factual distinction between the practices being challenged in the case before it and the practices that had been challenged in Dukes.  In McReynolds, the practice being challenged was the company-wide policy of “permitting brokers to form their own teams and prescribing criteria for account distributions that favor the already successfulthose who may owe heir success to having been invited to join a successful or promising team.”  The court distinguished this policy, which it characterized as a firm-wide policy of Merrill Lynch, from the allegations in Dukes, which were that the lack of a uniform corporate policy on discrimination created too much discretion in local managers to create locally discriminatory policies.

I’ll be posting more on this decision within the coming week, so stay tuned…

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I’m embarrassingly late in posting a link to a terrific article from Steptoe & Johnson Partner Jennifer Quinn-Barabanov entitled Has Dukes Killed Medical Monitoring?  The article, published in the November 2011 Issue of DRI’s For the Defense Magazine, explores the potential impact of the Supreme Court’s decision Dukes in defending against class certification of product liability claims that seek as a remedy medical monitoring of class members who were exposed to an allegedly harmful product.

I highly recommend Quinn-Barabanov’s article for those of you who may have missed it when it came out in November.  The article is a must-read for anyone facing (or prosecuting) a medical monitoring class action.

It also makes at least two key contributions that are independent of the medical monitoring context.  First, it offers an analysis of the potential application of various aspects of the Wal-mart Stores Inc. v. Dukes decision outside of the employment discrimination context, including the arguably heightened commonality analysis and the admissibility of expert testimony in support of class certification.  Second, it is a good primer on the possible distinctions between truly injunctive relief, which still may be the basis for a Rule 23(b)(2) class action, and merely equitable relief incidental to a claim for monetary relief, which the Dukes Court held cannot support class certification under Rule 23(b)(2).

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Mark Herrmann, former contributor to Drug and Device Law Blog and Vice President and Chief Counsel for Litigation at Aon, Inc., recently authored and entertaining and enlightening post in the legal industry blog, Above The Law.  In Inside Straight, Torpedoing Class Actions, Herrmann highlighted a 2009 book by Northwestern Law’s Martin Redish entitled Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit, in which Redish argues that as applied in current practice, class actions undermine the foundations of American constitutional law.  Rather than exploring the nuances of Redish’s constitutional analysis, Herrmann uses the book to make a deeper point about the state of class action defense practice:

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.

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It’s not too late to sign up for next Tuesday’s Strafford CLE Webinar entitled Class Action Settlement Objectors, Minimizing and Defending Challenges by Professional Objectors, Government Officials and Public Interest GroupsHere is a link to the registration page for the webinar, and see the synopsis below.  New Jersey Appellate Law Blog‘s Bruce Greenberg and I will be the presenters.   We hope you can join us!

Class action settlements can be jeopardized or delayed by objections by nonclass counsel, government officials and public interest groups. Particularly vexing are objections from “professional objectors” who may appear to be motivated only to extract part of the fee or take over as class counsel.

Government official objections are usually aimed at coupon settlements and settlement release language intended to bind state officials. Public interest groups that file objections have varied purposes and political agendas. Coupon settlements and cy pres provisions are natural targets.

There are several key preventative measures and tactics that both sides to a class action settlement can take to ward off and protect proposed settlements from nonclass counsel objectors as well as government and public interest objections.

Listen as our authoritative panel of class action attorneys discusses trends in settlement objections and best practices that both plaintiff and defense counsel can take to protect proposed settlements.

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