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Posts Tagged ‘Supreme Court’

Earlier today, the Supreme Court granted cert in Dart Cherokee Basin Operating Company, LLC v. Owens, No. 13-719, in which it will take up the contours of the standard for providing factual support in a notice of removal under the Class Action Fairness Act of 2005 (CAFA).  Specifically, the issue presented is as follows:

Whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required “short and plain statement of the grounds for removal” enough?

This is the third CAFA removal case that the Court has accepted in as many years.  During the October 2012 term, the Court decided Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013), in which it held that a class representative may not avoid CAFA jurisdiction by stipulating to a recovery of damages of less than $5,000,000 on behalf of members of the proposed class.  Earlier in the current term, the Court decided Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), holding that a parens patriae action brought by a state attorney general on behalf of Mississippi residents was not a “mass action” subject to CAFA.

 

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The U.S. Supreme Court issued its first class-action-related decision of the 2013-14 term today, or more precisely, its first non-mass-action-related decision of the term.  In Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), the Court held that a parens patriae action brought by the Mississippi attorney general on behalf of Missouri citizens was not a “mass action” subject to the Class Action Fairness Act of 2005.  My partner Casie Collignon has a more detailed write-up on the decision at the BakerHostetler blog Class Action Lawsuit Defense.

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2013 was a memorable year for class actions.  I’ve assembled my top 10 most significant developments below.  There were almost enough U.S. Supreme Court decisions to fill up the entire list, but my number 1 development was still a pair of lower court decisions that may also become the story of the year in 2014.

10. Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013) – Not a class action decision per se, but likely to have significant repercussions on the development of international class action law.  Extraterritorial effect of the Alien Tort Statute is significantly limited.

9. Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138 (2013) - Another non-class action decision already having a significant impact on the question of standing in data privacy class actions.

8. Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) - Class Arbitration is not completely dead, but there’s a blueprint for how to kill it.

7. American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)- Arbitration continues to reign supreme, even under the “federal law of arbitrability”

6. Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) – Can class actions be defeated simply by picking off the representatives one at a time?  That’s for the circuits to decide.

5. Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184 (2013) – Supreme Court holds that materiality is a common question and that proof of materiality is not a prerequisite to class certification, but raises questions about the continued viability of the Basic fraud on the market presumption in securities cases.

4. Certiorari granted in Halliburton v. Erica P. John Fund, No 13-317 - That didn’t take long.  On the heels of , Supreme Court agrees to revisit the Basic fraud on the market presumption.

3. Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013) – Limited holding = damages theory has to match theory of liability.  Expansive holding = no class certification unless the question of damages is susceptible to common, classwide proof.  Which holding will be embraced by the lower courts?

2. Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013) – First ever CAFA decision limits representative plaintiffs’ ability to bind class prior to class certification.  Can’t avoid federal jurisdiction by stipulating to no more than $4,999,999.99 in damages on behalf of a putative class.

1. Moldy Washing Machine Decisions – Limited Comcast holding prevails so far.  Two lower courts reaffirm class certification orders after remand in light of Comcast.  Issue certification is alive and well, for the moment, but stay tuned to see if the Court takes up these cases in 2014.

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The Supreme Court issued its decision today in the first of two arbitration-related class action cases on the 2012-13 docket.  Today’s decision bucks what had been a trend in the Court’s decisions in recent years strongly favoring individual arbitration and limiting the situations in which class arbitration (private arbitration in which the plaintiffs proceed in a representative capacity on behalf of a class) can occur.

In a unanimous ruling, the Court in Oxford Health Plans LLC v. Sutter upheld an arbitrator’s decision to interpret an arbitration agreement as allowing for class arbitration, despite express reference to class arbitration in the parties’ written agreement.  Writing for the Court, Justice Kagan reasoned that applicable standard of review prevents the courts from second-guessing whether the arbitrator’s interpretation of the party’s contract was the correct one and only permits review of whether the decision was based on an interpretation of the parties’ agreement.  Because the arbitrator’s decision was clearly based on an analysis of contractual intent, the arbitrator’s decision could not be overturned.  The fact that the arbitrator had interpreted the parties’ agreement as providing for class arbitration and the deferential standard applicable to the arbitrator’s decision distinguished Oxford Health Plans from Stolt-Nielsen S.A. v. AnimalFeeds International Corp., in which the Court had held that class arbitration cannot be compelled absent express agreement by the parties.

Important to the Court’s decision was the fact that the defendant had conceded that the arbitrator should decide the question of whether the parties had agreed to class arbitration.  It was this concession that let Justice Alito to agree with the Court’s decision.  However, in a concurring opinion joined by Justice Thomas, Justice Alito expressed doubt that any ruling in the class arbitration proceeding would have any preclusive effect as to absent class members, an observation that raises a serious question about whether the Oxford Health decision will be of any practical impact in other cases.  He noted:

Class arbitrations that are vulnerable to collateral attack allow absent class members to unfairly claim the “benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one,” American Pipe & Constr. Co. v. Utah, 414 U. S. 538, 546– 547 (1974).  In the absence of concessions like Oxford’s, this possibility should give courts pause before concluding that the availability of class arbitration is a question the arbitrator should decide.

Defendants will likely see the concurrence as a roadmap for asking the question to be addressed by a court in the first instance, as opposed to simply conceding that the arbitrator should decide the issue whether class arbitration is allowed. 

There are two clear takeaways from the Oxford Health decision: 1) in drafting an arbitration provision, make sure to address the issue of whether arbitration on a class-wide basis will be allowed.  Under Stolt-Nielsen, agreements that bar class arbitration will be enforced; 2) think carefully before conceding that an arbitrator, rather than a court, should make decisions about how an arbitration agreement should be interpreted.

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My sincere apologies to the loyal ClassActionBlawg reader for the scarcity of new content lately. I’m on the road this week, but thought I should at least drop a note about two interesting class-action-related developments in the U.S. Supreme Court over the past week:

1) the Court granted cert in  State of Mississippi v. AU Optronics Corp., to address the issue whether parens patriae actions filed by state attorneys general seeking restitution on behalf of state citizens are “mass” actions, permitting removal under the Class Action Fairness Act (CAFA).  For more on the case, see Deborah Renner’s post on the BakerHostetler Class Action Lawsuit Defense Blog.  If it were up to me, I’d go further and say that parens patriae cases are actually “class” actions under CAFA, but apparently the Court has its own idea about the scope of the issue.

2) The Court vacated Judge Richard Posner’s decision in Butler v. Sears Roebuck & Co. and remanded for reconsideration in light of its recent decision in Comcast Corp. v. Behrend.  This follows the Court’s earlier decision to vacate the Sixth Circuit’s decision in In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation for the same reason.  Given the many questions left unanswered by the Comcast decision, it will be interesting to see what the Sixth and Seventh Circuits do with the moldy washer cases on remand.

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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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The United States Supreme Court issued its decision in Comcast Corp. v. Behrend, No. 11-864 today.  In a 5-4 decision, the Court held that the class of cable subscribers had been improperly certified.  Justice Scalia, writing for the majority, reasoned that the expert testimony offered by the plaintiff to show that antitrust damages were capable of class-wide proof addressed alleged damages that did not logically flow from the plaintiff’s theory of class-wide liability.  The majority held that the trial court had erred by refusing to consider questions concerning the expert testimony on damages that might overlap with the “merits,” while the Third Circuit had erred by accepting the plaintiffs’ contention that it had a class-wide theory of damages through expert testimony without actually scrutinizing the factual basis for that contention:

The Court of Appeals simply concluded that respondents “provided a method to measure and quantify damages on a classwide basis,” finding it unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.” 655 F. 3d, at 206.  Under that logic, at the class-certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.  Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.

The dissenting Justices would have dismissed the writ of certiorari as having been improvidently granted.  The dissent’s criticism of the majority’s holding has more to do with the procedural posture of the case and the methodology used by the majority in reaching its factual conclusions than with the legal class certification concepts underlying the majority’s reasoning.  In particular, the dissent faulted the majority for having changed the issue on review after the conclusion of briefing and took issue with the majority’s analysis of the factual basis for the expert’s opinions.

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The Supreme Court issued its first-ever decision interpreting the Class Action Fairness Act (CAFA) today, and its holding strengthens defendants’ right to a federal forum in class actions. 

The question presented in Standard Fire Insurance Co. v. Knowles, No. 11-1450, slip op. (U.S., Mar. 19, 2012) was a simple one: can a plaintiff avoid federal jurisdiction under CAFA by stipulating to less than $5 million in damages on behalf of the putative class?  The Court’s unanimous answer was no, and its reasoning is also simple:

Stipulations must be binding . . . [and] a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.

Slip op. at 3-4.  

Does Standard Fire mean the end of any debate about the federal courts as a forum for class actions?  Probably not.  Justice Breyer’s well-reasoned opinion makes the issue sound like a no-brainer, but this is an issue that had been far from settled in the lower courts.  The fact that the Supreme Court had to intervene on this issue is in part a symptom of a lingering antagonism by many lower federal court judges toward diversity jurisdiction.  The ruling is unlikely to change the predisposition of some federal judges to look for ways to clear their dockets by remanding diversity cases to the state courts.  Although the effectiveness of this particular method for avoiding CAFA jurisdiction is now settled in defendants’ favor, that is not to say that other tactics for avoiding federal jurisdiction in class actions won’t succeed in the future.

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In what would have been bigger class action news yesterday had the Supreme Court not issued its decision in Amgen, the Court also heard oral argument in class arbitration case, American Express Co. v. Italian Colors Restaurant, No. 12-133 (click case title for a link to the transcript).  The primary issue presented is whether the “federal substantive law of arbitrability” may be invoked to invalidate an arbitration agreement in a case involving federal law claims.  The case will test the limits of the Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (holding that the Federal Arbitration Act preempts state laws prohibiting class arbitration waivers). 

It is clear from the questions posed by the Justices that there are certain members of the Court (namely Justice Scalia, author of Concepcion) who remain steadfast in their belief that arbitration agreements that prohibit class claims are enforceable, period, and that there is another faction of the court that has serious doubts about the use of an arbitration agreement to effectively foreclose a litigant from obtaining any meaningful procedure for vindicating his or her rights.  Whether this case follows Concepcion in solidifying the enforceability of class arbitration waivers or carves out an exception will likely depend on a few swing votes in the middle.

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The Supreme Court has issued its opinion in one of the most highly anticipated class action-related cases on the docket this term.  The result in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085, slip op. (U.S., Feb. 27, 2013) is not surprising given the content and tone of the questioning at oral argument.  In an 6-3 opinion authored by Justice Ginsberg, the Court held that the plaintiff in a securities fraud case based on a fraud-on-the-market theory of reliance does not have to prove materiality of the fraudulent statement or omission at the class certification stage.  Because materiality is a common question capable of resolution simultaneously for the entire class, the majority reasoned, it does not have to be proven at the class certification stage.  Justices Scalia, Thomas, and Kennedy dissented.

Amgen is an important decision in the securities fraud context because it addresses the lingering question of whether any special prerequisites exist in certifying a securities fraud class action that aren’t required in certifying other types of class actions.  Like the Supreme Court’s earlier decision in Erica P. John Fund v. Halliburton Co., 131 S. Ct. 2179 (2011), Amgen will probably have an impact beyond the securities fraud context.  In the context of class certification decisions more broadly, the opinion will be almost certainly be cited as clarifying the distinction between issues impacting the elements of class certification, which must be resolved at the class certification phase, and merits issues, which can wait until trial to be resolved.

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