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Posts Tagged ‘tort reform’

Tiger Joyce, President of the American Tort Reform Association, authored an impassioned op-ed for the Washington Times yesterday entitled A Class-action Blow to U.S. Manufacturing.  Joyce argues that the entire manufacturing industry is at risk if the United States Supreme Court declines to grant certiorari of the Sixth Circuit’s decision in the case of Whirlpool v. Glazer, No. 12-322, in which the court upheld class certification of claims that washing machines were defectively designed, causing chronic mold problems.  Whether Joyce’s warning is hyperbole or prescience remains to be seen, but the case does raise some interesting issues of note to class action practitioners.  The issues presented for review are as follows:

1. Whether a class may be certified under Rule 23(b)(3) even though most class members have not been harmed and could not sue on their own behalf.

2. Whether a class may be certified without resolving factual disputes that bear directly on the requirements of Rule 23.

3. Whether a class may be certified without determining whether factual dissimilarities among putative class members give rise to individualized issues that predominate over any common issues.

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A recent article by Ann Woolner of Bloomberg offers an interesting profile of class action pioneer William Lerach, who has been traveling the world and relaxing in his seaside mansion since his release from prison last year.  Lerach was convicted in 2007 for his part in a kick-back scheme in which lawyers agreed to split fees with clients in order to convince them to participate as representatives in class actions.   Whatever you might think about Lerach, it’s hard to deny his influence on the development of modern U.S. class actions.  However, the hubristic conduct that led Lerach to prison, his public lack of remorse for his actions, and the idea that he is now left to live happily ever after, will continue to make him a poster child for those who argue that our U.S.  system of class actions is in need of drastic reform.

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According to this February 8, 2011 article from Lee Ann Schultz of the Twin Cities Daily Planet, the Minnesota legislature is considering a bill that, according to its sponsors, would curtail consumer class action litigation in the state.  The bill, HF211, has three key provisions of interest, which would:

  1. limit private actions under three consumer protection statutes to actions filed by “natural persons who purchase or lease goods, services, or real estate for personal, family, or household purposes”;
  2. require proof of personal loss of money in order to support a cause of action for damages under the consumer protection statutes; and
  3. make class certification orders immediately appealable and imposes an automatic stay of proceedings at the trial court while the appeal is pending.

All three measures are similar to class action reform measures passed or at least considered by various states over the past decade or so.  However, there are at least three aspects of the proposed reforms that would make consumer protection actions in Minnesota more restrictive than in other states.

First, this bill appears to limit consumer protection actions to actual consumers.  Some state statutes broadly construe who is a “consumer” for the purposes of enforcing the consumer protection law, so that small businesses and other non-natural “persons” can sometimes qualify. 

Second, while most states have some sort of requirement that there be proof of causation of injury in a consumer protection case, HF211 would require a specific kind of injury:

No award of damages in an action covered by this subdivision may be made without proof that the person or persons seeking damages suffered an actual out-of-pocket loss. The term “out-of-pocket loss” means an amount of money equal to the difference between the amount paid by the consumer for the good or service and the actual market value of the good or service that the consumer actually received.

This language appears to restrict consumer protection claims to only those situations in which the named plaintiff and other would-be class members suffered a loss of value to the product or service purchased.  So, a claim that deceptive marketing or advertising practice caused consumers to suffer financial losses other than loss of value to the product itself would apparently be foreclosed.  The specific language may be intended to avoid the kinds of uncertainty that has plagued litigants in California following the passage of Proposition 64 in 2005, a voter-approved reform that requires proof that the named plaintiff “lost money or other property” in order to pursue a class action under the state’s Unfair Competition Law (UCL).

Curiously, the bill makes reference to a requirement that this injury be proved on an “individual” basis, even in a class action:

Each such person seeking to recover damages for violations of these sections, either in an individual action, a class action, or any other type of action, is required to plead and prove on an individual basis that the deceptive act or practice caused the person to enter into the transaction that resulted in the damages.

It is unclear whether this language, if adopted, would a) effectively prevent any consumer protection claim from being pursued on a class basis because all consumer protection claims would require individual proof of injury, b) be interpreted only as a threshold matter to insure that the class representative (but not absent class members) has standing before the case is allowed to proceed, or c) somehow introduce a new requirement of “individual” proof for all class actions, even while still allowing class actions to be pursued in some form.

Third, this bill would allow appeals of class certification decisions as of right and would create an automatic stay.  By contrast, federal rule 23(f), and the similar rules of many states allow interlocutory appeal of class certification orders only in the discretion of the appellate courts and do not mandate an automatic stay of proceedings at the trial court level while the appeal is pending.

The Bill was introduced in the state House on January 24.  It is not clear what the Bill’s chances of passage are.  Only one of the Bill’s 12 authors is a Democrat (or, for my Minnesota friends who want to be picky, DFL).

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Trial lawyers everywhere are saying a collective “I told you so” to a tort reformer who has filed a would-be class action against the City of Sacramento for its practices in towing cars parked in no-parking zones.  For more details on the story, see this entry in the Los Angeles Times’ L.A. Now Blog.

The plaintiff, Fred Heistand, is general counsel for the Civil Justice Association of California, an organization that, according to its website,

works to reduce the excessive and unwarranted litigation that increases business and government expenses, discourages innovation, and drives up the cost of goods and services for all Californians

Evidently to counterbalance the societal costs generated by his own suit, Mr. Heistand reportedly has pledged to donate any award of attorney’s fees obtained in the suit to the CJAC.

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I’m on the road this week with limited time to blog, but for those of you who are desparate for class-action related news and opinion, here are a pair of interesting op-eds about tort reform issues from The Examiner:

First, this editorial by Quin Hillyer discusses efforts in several states to pass tort reform measures that the author claims have improved state economies by curbing “jackpot justice” in “judicial hellholes.”

http://www.dcexaminer.com/opinion/columns/QuinHillyer/Class-action_lawsuit_reform_progresses_in_states_012709.html

And this staff editorial discusses an AAJ proposal to create what the author thinks will be a “lawsuit czar.”

http://www.dcexaminer.com/opinion/Good_grief_-_now_the_trial_lawyers_want_a_White_House_lawsuit_czar_012609.html

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Legal Blog Watch has a new post from Robert J. Ambrogi up today summarizing the latest edition of the American Tort Reform Association‘s annual “Judicial Hellholes” rankings for 2008-09 (see the link on the executive summary page for the full report).  Class action lawyers won’t be too surprised by the “honorees” on this year’s list.  One item of note was that Madison County, Illinois, once the standardbearer for “judicial hellholes” has stayed off the list for the second year in a row, although it’s still on the organization’s “watch list.”

I found the comments to Ambrogi’s post interesting.  One commenter questioned whether it was appropriate for Law.com to be endorsing the views of such a “radical corporate propaganda machine” as the ATRA (Legal Blog Watch is part of the Law.com Legal Blog Network).  This prompted a response from another reader that the article was appropriate in the spirit of fostering healthy debate and that the American Association for Justice (formerly ATLA) is viewed by some as being just as radical as the ATRA.  I’m not going to weigh in on that dispute, but I will be checking back to see whether Legal Blog Watch ever publishes an AAJ “generous dispensers of recompense” list.

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This evening, I came across an excellent blog article by David J. Sales, a trial lawyer with the Florida personal injury firm, Searcy Denney.  His article discusses Democratic Presidential candidate Barack Obama’s vote in favor of the Class Action Fairness Act of 2005 and the significance of that vote in demonstrating an independent streak, allowing him to counter John McCain’s claim to being the “maverick” candidate willing to break with his party.

Sales makes two insightful observations about CAFA that refute popular myths about the statute.  First, he points out that by passing a statute that shifts jurisdiction over many class action lawsuits from state courts to the federal courts, Congress created a “decidedly anti-federalist” measure, a point that calls into question any perception of the law as a triumph in conservative lawmaking.  Second, he notes that the effects of CAFA have not been been measurably harmful to consumers as many Democrats and trial lawyers warned, a point that discredits any argument that support for CAFA could only have been justified by a pro-big business, anti-consumer agenda.

CAFA has not brought about an end to class actions, as some conservatives hoped and as some liberals had feared.  Maybe for some the law didn’t go far enough in preventing class action abuse, and maybe for others it went too far in restricting access to justice.  But it did add some reasonable procedures that may at least in some cases improve the quality of decision making and prevent abuse in class actions.  Isn’t that exactly the kind of compromise that the vast majority of us who find ourselves closer to the middle of the American political spectrum would like to see happen more often?

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Here are some blog entries from the week that was that might be of interest to class action practitioners:

Class Action Decisions

The UCL Practitioner provides a summary of recent decisions in several U.S. Circuit Courts of Appeals involving the standards for approving class action settlements and fee awards.  http://www.uclpractitioner.com/2008/08/recent-class-ac.html

Class Action Defense Blog comments on a California federal court decision addressing class certification in a wage and hour class action for alleged unpaid wages for meal and rest breaks in light of the California Court of Appeal’s recent decision in Brinker Restaurant Corp. v. Superior Court (2008 WL 2806613)…

http://classactiondefense.jmbm.com/2008/09/class_action_defense_caseskimo.html

… and  more from the same decision on National Law Journal’s Legal Pad, LA…

http://www.lalegalpad.com/2008/09/federal-judge-r.html

… and commentary from Wage Law on the possible unintended consequences of Brinker.

http://wagelaw.typepad.com/wage_law/2008/08/the-law-of-unintended-consequences.html

CAFA Law Blog provides another entertaining musical revue of a CAFA remand case, this time to the tune of a Steve Miller Band favorite:

http://www.cafalawblog.com/-case-summaries-plaintiff-gets-on-that-707-with-plans-of-rridin-high-but-that-big-ol-jet-airliner-wont-carry-her-too-far-away.html

Classified offers a synopsis of a Florida federal court decision analyzing whether the superiority element of class certification was met in a fair debt collection case despite the fact that the alleged damages of individual class members were de minimus:

http://www.carltonfields.com/classactionblog/blog.aspx?entry=235

The Insurance Reinsurance Blog summarizes and provides a link to an Eighth Circuit Court of Appeals decision upholding a lower court’s decision dismissing an insurance class action on the ground that permitting a federal lawsuit to go forward would impair Missouri’s right to regulate insurance and would violate the McCarran-Ferguson Act.

http://www.insurereinsure.com/BlogHome.aspx?entry=929

North Carolina Appellate Blog summarizes a North Carolina Court of Appeals decision holding that Rule 23(c) did not require notice to absent class members in the event of a court-ordered dismissal as opposed to a voluntary dismissal.

http://womblencappellate.blogspot.com/2008/09/coa-holds-that-no-class-notice-required.html

Several blogs, including the Consumerist, Tech News, and LawMemo commented on the Washington Supreme Court’s decision last week holding a class arbitration waiver unconscionable.

http://consumerist.com/5043570/washington-upholds-att-customers-right-to-class-action#c7514731

http://www.newsvine.in/2008/09/02/once-again-court-says-telco-cant-force-arbitration-over-a-lawsuit/

http://www.lawmemo.com/arbitrationblog/2008/09/unconscionabili.html

Practice Tips

Drug and Device Law Blog offers an excellent summary of the Multidistrict Litigation (MDL) coordination process:

http://druganddevicelaw.blogspot.com/2008/09/multidistrict-litigation-process.html

The Complex Litigator has been providing on-location updates from the Consumer Attorneys Association of LA (CAALA) annual convention, including this summary of practice pointers on the prosecution of class actions in California by attorney Jerome Ringler:

http://www.thecomplexlitigator.com/2008/08/liveblogging–2.html

Class Action Trends

DigitalDay Break comments on what a recent class action lawsuit and settlement regarding online accessibility for the disabled might mean to online marketers.

http://digitaldaybreak.wordpress.com/2008/09/02/what-the-target-accessibility-lawsuit-ruling-means-to-online-marketers/

The D&O Diary discusses reasons why D&O insurance premiums have not skyrocketed despite the recent wave of subprime litigation.

http://www.dandodiary.com/2008/08/articles/d-o-insurance/subprime-lawsuits-mount-so-what-about-do-pricing/

Class Action (and related) Commentary

Federal Civil Practice Bulletin summarizes an article from Vanderbilt Professor Richard A. Nagreda entitled “Class Certification in the Age of Aggregate Proof”:

http://federalcivilpracticebulletin.blogspot.com/2008/09/prof-nagareda-posts-article-on-class.html

Overlawyered reports on a modest proposal from ESPN Columnist Rick Reilly that a class action be filed against minor league baseball players who “sat stewing in the minors while big leaguers were allowed to cheat.” 

http://overlawyered.com/2008/08/espn-columnist-minor-league-players-should-sue-over-steroids/

North Carolina Business Litigation Report discusses a North Carolina Court of Appeals decision allowing a plaintiff to proceed in a usury and deceptive trade practices action challenging the practice of litigation funding, or an agreement providing for an advance of litigation costs by a law firm in exchange for a premium return in the event that the case was successful.  Coincidently, the decision comes as the practice of litigation funding is becoming more common overseas.

http://www.ncbusinesslitigationreport.com/2008/09/articles/class-actions/the-practice-of-litigation-funding-gets-a-chilly-reception-from-the-north-carolina-court-of-appeals/#more

and more commentary on the acceptance of litigation funding in loser pays jurisdictions like Australia, from Point of Law:

http://www.pointoflaw.com/archives/2008/09/shareholder-cla.php

Mass Tort Litigation Blog addresses recent changes to British law permitting investment in law firms:

http://lawprofessors.typepad.com/mass_tort_litigation/2008/08/uk-changes-allo.html

The Race to the Bottom provides a critical, multi-part response to a July report issued by the U.S. Chamber of Commerce Institute for Litigation Reform, which proposed various reforms in securities class actions.

http://www.theracetothebottom.org/home/the-chamber-of-commerce-and-excessive-litigation-be-careful-3.html

“Urban-based accidental journalist” curb girl laments life as an absent class member in a class action settlement involving health insurance in a way that she does not find entirely clear:

http://sidewalkeater.blogspot.com/2008/09/class-action.html

Class Action Politics?

Christina Walldren criticizes Barack Obama’s support for the Class Action Fairness Act (CAFA), arguing that CAFA has the effect of “shutting off avenues of redress” for “working class people”…

http://christinawalldren.com/2008/09/02/we-shall-overcome/

… and more commentary sharing the same general sentiment from the designers.

http://jevdet.blogspot.com/2008/09/corporate-state-lackey-obama.html

As an aside, for all of you disenfranchised members of the radical left, In case it helps you feel better, I can tell you from experience that discrimination, employment, and consumer fraud class actions are still going strong and state courts are still seeing their fair share of class actions despite the “thinly veiled ‘special interest extravaganza’” that led to CAFA’s passage–and PLEASE remember that a vote for Ralph Nader (or Dr. John Hagelin or Lyndon LaRouche) is a vote for Bush.

But lest you think that the far left is the only group not solidly on the Obamamania bandwagon, here’s an entry from the Delaware Curmudgeon quoting with approval this analysis from legal scholar “jmflynny,” who responds to an Obama campaign charge that John McCain and Sarah Palin are against equal pay for equal work with the statement that “the Democrat Party hates businesses, given that they want to give any employee the right to file, without proof, class-action lawsuits for something that may or may not have happened decades ago.”

http://delawarecurmudgeon.blogspot.com/2008/09/on-equal-pay-for-equal-work-issue.html

Another friendly reminder–a vote for Bush is also a vote for Bush.  A vote for Bob Barr on the other hand…

…Nope.  Still a vote for Bush.

Finally, here is arguably the most balanced blog commentary from this past week on the relative positions of the presidential candidates on class action and tort reform issues, written by, I hate to admit this, a trial lawyer…

http://www.nctriallawblog.com/north_carolina_trial_law_/2008/08/mccain-v-obama.html

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I have previously commented on various class action reforms being considered or implemented in Europe.  These reforms and the debate surrounding them shed an interesting light on US class action law because proposed reforms are inevitably compared to the US class action procedure.  On one hand, US class action procedure provides the model for the basic structure for many of these proposed reforms.  On the other hand, perceived class action abuses in the US provide ammunition for those seeking to prevent or water down the unfettered right of private litigants to bring class or other collective actions. 

 

As a case in point, Finnish website YLE.fi has a report today on the impact of recent legislation in that country allowing certain class actions.  The article’s caption notes that there has not been “a single group lawsuit” filed under the law despite fears that it would “open a floodgate of litigation.”  The article quotes Outi Haunio-Rudanko, Assistant Director of the Consumer Agency as saying that the threat of enforcement under the law “has worked effectively” in providing leverage for settlements in some consumer cases.

 

US tort reform advocates would probably agree that the most effective class action law is one that never gets used.  And it shouldn’t come as a shock to tort reform advocates or opponents alike why the Finnish law hasn’t “open the floodgates of litigation.”  An unofficial English translation of the final 2007 law can be found hereThe law shares some parallels with FRCP 23 and U.S. state class action rules in terms of the basic requirements for bringing a case as a class action.  However, it differs from U.S. procedure in a couple of major ways.  First, only the “Consumer Ombudsman” has standing to bring a class action.  Second, only those class members who return a “letter of accession to the class”—in other words, only those who opt in—will become class members (not to mention that they get an additional chance to opt out later).

 

A 2003 article from Mondaq.com (free registration may be required to view the entire article) recounted previous efforts to pass class action legislation in Finland.  As outlined in the article, barriers to passage included concerns that 1) other EU countries had not adopted opt-out class action legislation and the potential forum-shopping that could result if Finland were to provide a mechanism for class actions, 2) providing an opt-out model where individual class members could be bound by a decision without ever being aware of the litigation would conflict with the Finish legal tradition of individual choice over legal rights, 3) conflicts of interest could exist between the attorney bringing the case and members of the class, and 4) class action legislation could create a “legal culture towards a ‘litigation-oriented’ society, as in the US”.

  

For a thorough critique of the Finnish law as passed and a comparison between the Finnish law and those adopted by other Noridic countries, see this scholarly article by Mikko Välimäki.  Mr. Välimäki points out that adopting a procedural model for class actions similar to that of the US (including a private right of action and an opt-out procedure) would not be equivalent of adopting US substantive law or US attitudes about litigation.  If Mr. Välimäki is correct, then adopting Rule 23 in Finland verbatim may not have opened the floodgates either.

 

Attorney Joseph K. Hetrick makes a similar point in an interview on the blog Law and More, where he argues that US-style class action litigation has not caught on in Europe due in part to the existence of a larger government safety net and a greater attitude of trust in government programs, making it unnecessary for individuals to seek compensation for injuries through civil litigation and relieving the need to find someone to blame for those injuries.

 

Viewed from this perspective, Americans’ litigious tendencies come not from flaws or inadequacies in our procedural statutes and rules of civil procedure but rather from our societal emphasis on individual economic freedom, small government, and free market economics.  In other words, don’t blame Dickie Scruggs, blame Milton Friedman.

 

Of course, it’s difficult to judge this hypothesis using Finland’s model because the societal attitudes that might prevent litigants from abusing a broader class action rule were the same attitudes that led policymakers to avoid a procedural model that would allow full-scale private opt-out class actions.  However, that may change as more EU countries begin to adopt laws that permit the types of consumer class actions now common in the US.

 

Click these links for additional commentary on the Finnish law and a link to the website for Finland’s Consumer Complaints Board. 

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I came across this article today from Australian news outlet The Age regarding proposed class action reforms being considered in the Australian Federal Court.  Among the possible reforms reportedly being considered is a measure “restricting an appeal on an interlocutory issue until the entire case is heard.”

The quoted statement is admittedly lacking in detail, but the article appears to be saying that interlocutory appeals are now allowed Australian class actions but would be prohibited if the reforms are adopted.  That would be an interesting change of direction considering that the trend in American class action reform has been to go from a prohibition on interlocutory (meaning before a final verdict or judgment) appeals in class actions to allowing them under some circumstances.

Rule 23(f), Federal Rules of Civil Procedure, for example, was amended in 1998 to allow interlocutory appeal of class action certification decisions.   (See my early entry here).  Changes to various U.S. state rules and statutes, including Colorado, regarding interlocutory appeal of class certification decisions have come even more recently.   For a summary of various states’ class action reforms, see this handy guide from the American Tort Reform Association.

For previous news and commentary on ClassActionBlawg.com regarding class action reforms being considered by the EU and several of its member countries, as well as Canada, see herehere, and here.

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