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Posts Tagged ‘trustee’

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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From time to time we will troll the class action blogosphere for news and information about our favorite class action topics.  Here are just a few of the recent headlines from around the web.

Complex litigation as a commodity investment? 

Hedge funds have traditionally been willing to explore new territory in the non-traditional investment sphere.  At least some appear to be finding potentially attractive opportunities in so-called Litigation Funding Companies.  LFC’s are often run by former lawyers–some with an investment or hedge fund background.  They identify potentially profitable lawsuits and agree to fund the litigation (to a point) in exchange for a percentage of the settlement.  Three Geeks and a Law Blog has an interesting multi-part series on this new trend.  Read it here.

http://www.geeklawblog.com/2012/03/rise-of-third-party-litigation-funding.html

10 ways to defend class actions using Walmart v. Dukes

Andrew Trask, class action attorney at McGuire Woods and co-author of the Class Action Playbook recently put together a list of takeaways explaining how class action defense attorneys can use Wal-mart v. Dukes.  His post links to a power point presentation he recently gave at DePaul University.  It’s a quick read and worth checking out.

http://www.classactioncountermeasures.com/uploads/file/DePaul%20-%20Defense.pdf

BP Settlement

The BP litigation in the Deepwater Horizon Oil Spill off the Gulf Coast has settled for all claimants except the federal government.  The Mass Tort Litigation Blog has been providing regular updates including this post discussing what’s known about the settlement.  It appears the settlement will consist of two separate agreements. One will resolve economic claims while the other will resolve medical claims.  The Blog cites news reports explaining that “either the settlement will be paid by the $20 billion fund BP created to compensate victims or the fund will close and be replaced by a court overseen claims facility.”

http://lawprofessors.typepad.com/mass_tort_litigation/

Irregular transaction was not enough to show a Bank had actual knowledge of an alleged Ponzi scheme.

Race to the Bottom contributor Susan Beblavi unpacks the Eleventh Circuit’s semi-recent opinion in Lawrence v. Bank of America, D.C. Docket No. 8:09-cv-02162-VMC-TGW, 2012 LEXIS 777 (11th Cir. Jan. 11, 2012).  In that case, putative class action plaintiffs alleged the Bank of America substantially assisted in a Ponzi scheme operated by one of its account holders.  The Eleventh Circuit upheld the District court’s dismissal of the case reasoning that even though BOA authorized numerous large transactions by the account holder, the bank wasn’t required to investigate them under Florida law.  Moreover, the court found the purported red flags were too weak to infer that it was plausible that the bank had actual knowledge of the alleged scheme.  Read more at the link below.

http://www.theracetothebottom.org/home/2012/3/8/lawrence-v-bank-of-america-allegations-of-actual-knowledge-o.html

Parens Patriae actions, class actions?

The 9th Circuit holds that parens patriae actions under Nevada law are not class actions removable to federal court under CAFA, adding to a circuit split on the issue.  For a succinct explanation, see Katherine Heckert’s post at the Carlton Fields Class Action Blog:

http://www.carltonfields.com/classactionblog/blog.aspx?entry=521

Walmart v. Dukes reasoning reverses class certification again

Skaddon’s Russell Jackson posts that the Louisiana Supreme Court has again reversed class certification due to problems of commonality and causation.  Previously, the Louisiana high court adopted the U.S. Supreme Court’s common question analysis in Walmart v. Dukes to reverse class certification in Price v. Martin.  In a recent per curiam opinion in Alexander v. Norfolk So. Corp., No. 11-C-2793, Slip op. (La. Mar. 9, 2012), the Louisiana Supreme Court cited Price for the proposition that class certification requires a rigorous analysis and significant proof of a common question. The case involved a chemical spill involving train cars. Hundreds complained of a bad smell and irritation to their eyes, throat and nose.  This led to a class action that was certified by the trial court and affirmed by an appellate court.  It turned out, each putative class member would need individual toxicology testing to determine whether they are among the minority of people who are susceptible to very low levels of the released chemical.  The Louisiana Supreme Court ultimately reversed class certification based on the lack of predominance of common issues, and the need for individualized trials.  Read more here.

http://www.consumerclassactionsmasstorts.com/2012/03/articles/predominance-1/once-again-the-louisiana-supremes-reverse-class-certification-citing-causation-as-a-problem/

The Perils of Electronically Stored Information

Todd Dawson’s post on Baker Hostetler’s Employment Class Action Blog illustrates just how badly things can go when a key “smoking Howitzer” document slips through defense counsel’s ESI review and ends up in the plaintiffs’ hands.  In an FLSA Collective Action, the employer produced two million documents. Prior to the production, the employer’s attorneys used various search terms to identify privileged documents.  Inevitably, one got through – a bad one. Even worse, the court concluded that the employer had waived privilege.  Thus, not only did the plaintiffs’ counsel get to see the document, they got to use it as well.  To see how this disaster could have been avoided, read more here.

http://www.employmentclassactionreport.com/flsa/inadvertent-esi-disclosure-of-attorney-client-communication-waives-privilege-in-flsa-collective-acti/

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Alison Frankel, whose On the Case blog is featured in the Thomson Reuters News and Insight section, posted this interesting article today discussing a novel alternative to the class action as a device to resolve mass disputes.  The procedural device in question is Article 77 of the New York State Code, which allows a trustee to seek court approval of decisions relating to a trust.  Frankel’s article today offers an update on proceedings brought under Article 77 seeking approval of an agreement between institutional investors and the trustee of hundreds of residential mortgage-securitization trusts, which had created in order to allow banks to raise funds in order to offer residential mortgages to consumers.  If approved, the settlement would resolve the claims of not only the institutional investors who reached the settlement with the trustee, but also potential claims of other investors in the trusts.  Thus, Article 77 essentially provides a means of creating a global settlement of all investor’s claims, without allowing the opportunity to opt out, which would have been available if the agreement had been presented as a proposed class action settlement. 

Frankel has done an excellent job of summarizing the issues in the case as well as today’s Second Circuit Court of Appeals decision holding that the federal courts lack jurisdiction over the case under the Class Action Fairness Act (CAFA) as a result of the securities exception in 28 U.S.C. §§ 1332(d)(9)(C) and 1453(d)(3), so I won’t re-summarize the article here but simply commend it to your reading.  The case is BlackRock Fin. Mgmt. Inc. v. The Segregated Account of Ambac Assur. Corp., 11-5309-cv(L), (2d Cir., Feb. 27, 2012).

Although the use of Article 77 to create a binding settlement that does not require an opportunity to opt out may be a novel strategy, the case highlights an often-overlooked option that may be available in any class action litigation involving a trust, benefits plan, or other fund with a custodian or trustee.  This would include certain banking and securities cases or class actions filed under the Employee Retirement Income Security Act (ERISA) against a party other than the trustee.  Rather than having to negotiate with class action lawyers, it may be possible in these contexts to come to a global resolution of a dispute by negotiating with the trustee and then seeking court approval of that agreement.  Even if a class action is pending, resolution of the dispute with the trustee may provide grounds to defeat class certification on superiority grounds, since a settlement with a party having a fiduciary responsibility to the beneficiaries of the fund can be an adequate and significantly more efficient means of resolving any dispute.

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