Archive for May, 2008

Law.com has an article today summarizing a 2-1 decision by a panel of the United States Court of Appeals for the Second Circuit regarding the scope of a securities law exception to the Class Action Fairness Act’s removal provisions.  The article both summarizes the case and contains a link to the opinion itself.  The decision concerns an exception to the federal removal jurisdiction conferred by CAFA, codified at 28 U.S.C. §§ 1332(d)(9)(C) and 1453(d)(3) for claims that “relate[] to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.”  The exception came into play because the defendant was a citizen of the forum state.  The majority held that the exception did not apply to claims for relief under state consumer fraud laws based on the defendant’s alleged acts in marketing securities because the claims did not “relate” the rights or obligations of holders of the securities.  

The opinion also addresses issues relating to procedures on interlocutory appeal of an order remanding a case removed under CAFA, including a finding that the phrase in 28 U.S.C. § 1453(c)(1) that an appeal be filed “not less than 7 days after the entry of the order” contains a typographical error and must be interpreted to mean “not more than 7 days after the entry of the order,” a conclusion also reached by other circuits. 

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It’s a little later this week than normal because I unexpectedly had to attend a hearing out of state, but better late than never.  Here are some blog posts of interest to class action practitioners from this past week…

The Complex Litigator has an extensive analysis of an upcoming Law Review article by Professor Sheila Scheuerman of the Charleston College of Law regarding “inferential preclusion of punitive damages claims in class actions.”


For the latest in California class certification decisions, see The UCL Practitioner:


The California Wage and Hour Law weblog reminds the plaintiffs’ bar that some of the best ideas on employment class action strategies come from defense lawyers (right back at you)…


… and reviews a recent Ninth Circuit Court of Appeals decision regarding the ability of a district court in which a certified class action is pending to enjoin other competing actions:


SCOTUS Blog provides links to case materials in for class action cases in which Petitions for Certiorari have been filed with the United States Supreme Court raising, including issues relating to class action arbitration bans in consumer contracts and removal issues:



Drug and Device Law Blog analyzes a recent Oregon Supreme Court decision in a class action lawsuit addressing whether having to undergo medical monitoring can be an injury sufficient support a negligence claim:

http://druganddevicelaw.blogspot.com/ (See Post entitled So Big And Yet So Small)

Class Action Defense Blog provides a detailed summary of a recent federal court decision certifying a class in an action against a pharmaceutical company for its alleged actions to prevent generic competitors from entering the market:


D&O Diary provides yet another excellent analysis of trends in subprime class action litigation:


Federal Civil Practice Bulletin provides a link to an article by Vanderbilt Law Professor Amanda Rose regarding securities class action reforms:


EDTexWeblog.com discusses a federal district court’s denial of a motion to dismiss a class action filed under the Federal Odometer Act:


Northern Law Blog discusses the benefits of responding to class action settlement notices.


Smart Blog discusses a lawyer’s rating website that successfully defeated a class action lawsuit on First Amendment grounds:


A (very) left-of-center blog criticizes Barak Obama’s support of CAFA.  (Not to get too political, but this post only helps solidify my own support of Mr. Obama.  No doubt a major press release of my endorsement will follow):


istockanalyst.com provides an extensive commentary of both potential abuses in class action lawsuits in general and issues regarding a particular shareholder class action attacking a proposed merger between satellite radio providers…


…but InjuryBoard.com defends the benefits of class action lawsuits:


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The first time I ever used a mock trial as an evaluation tool for a class action, my expectation was that it would provide a great way to gauge potential exposure if the case went to trial.  I soon found that mock trials are a great tool for evaluating exposure in a class action only if you’re interested in narrowing down the range of possible verdicts from a defense verdict to a zillion dollars. That was about the range we got in our five or so different mock jury panels, except the zillion might have been a hundred million–still a fairly made-up number in a case where the actual amount of compensatory damages sought was a few hundred thousand dollars.  In truth, the best jury consultants can’t provide, and don’t even promise to provide, a narrow range of possible verdicts.  So what are they good for?  Quite a bit, actually, if you don’t treat them like something they’re not.  Here are a couple of areas in which mock trials can be useful:

Setting or adjusting client’s expectations.  If you have a client who won’t accept the risk that any group of six or twelve citizens could ever buy the plaintiffs’ crazy theories, a mock trial can be a very effective way to convince him or her otherwise.  A good jury consultant can put together a mock jury pool that matches very closely matches that of the forum and can provide statistics on initial written questionnaires as well as the ability to view multiple jury panels deliberate over the issues in the case.  Just seeing that more than half the prospective jurors in the jury pool are willing to award the plaintiffs money even if your client didn’t do anything wrong may be enough to change any expectation that there is no risk of losing.

Testing theories.  Mock trials can be a great way to test theories before having to face a real jury.  A jury consultant can provide a variety of methods of varying levels of sophistication for testing and evaluating the effectiveness of factual theories and themes.  On one end of the spectrum, simply providing a forum for the lawyers to talk to focus groups can provide a simple way to test out how regular people will react to the lawyer’s theories of the case.  On the more expensive end of the spectrum are technologies allowing mock jurors to provide feedback on the effectiveness and appeal of an argument as it is being made.   Lawyers and their clients can watch focus groups talk about their reactions to the arguments or even watch mock jury panels deliberate on a remote video feed.

Understanding bias and planning for jury selection.  A mock trial can help a lawyer get a rough idea of what juror profiles are likely to be favorable or unfavorable to his or her side of the case.  Not only can likely jurors’ attitudes be probed as a group, but jury consultants can provide detailed reports on the attitudes and reactions to facts of individual prospective jurors, both before and after the case information is presented.

The benefits of a mock trial will vary significantly depending on the particular issues and facts in the case, the forum involved, and the lawyers’ and client’s familiarity with the forum.  However, in the right case, a mock trial can be a useful tool in helping both counsel and client evaluate a case and prepare for trial.  Just don’t expect a precise monetary valuation of your case.

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Browsing the class action newswires today I came across this press release announcing a class action filed by a group of disgruntled mothers against their ungrateful offspring.  The suit, apparently a putative injunctive class action sought to be certified under Rule 23(b)(2), seeks an order that children “stop asking because from now on they are not getting – without more gratitude.”  I’m not saying that I jumped to the conclusion that I was a defendant, but in the abundance of caution, I read on.

A full read of the press release revealed, much to my relief, that it isn’t a real class action but rather a virtual “lawsuit” filed on a website called www.RealVerdict.com.  The website allows users to file grievances against others, give evidence as “witnesses” in these virtual cases, and vote as jurors on who should win.  Unlike other websites offering to assist potential litigants with assistance in real lawsuits (see April 14 entry entitled Class Action Lawsuits the Latest Internet Craze? ), Realverdict.com makes clear that its cases provide no legally binding dispute resolution.  However, as a forum for venting, comic relief, public commentary, private arbitration, or maybe even theory testing for real lawsuits (ok, probably not the last two), it might be worth a try.

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Here is an article on CFO.com that caught my eye today.  Reportedly, Republican Congressmen John Boehner and Lamar Smith have sent letters to Democratic majority leaders seeking an investigation into what the article refers to as “the practices of the class actions litigation industry.”

Certainly, there have been some high-profile abuses among members of the plaintiffs’ class action bar recently.  But these are examples of individual arrogance and greed, not evidence of an epidemic in need of a Congressional investigation–especially in light of the myriad other things Congress could be doing these days.  The acts of a few bad apples shouldn’t ruin the bunch. 

Among other things, Boehner and Smith seek “[r]eforms that Congress can make to rid the judicial system of [class action] abuses.”  If you really want to spend government money to prevent class action abuse, here’ s a modest proposal from a class action defense lawyer’s perspective: try better funding for the courts.  If there were more, better-paid judges available to give the time and thoughtful analysis needed in carrying out their function as gatekeepers rather than simply doing whatever they can to manage their overflowing dockets, maybe there wouldn’t be any incentive to pursue frivolous class actions and abusive tactics.  Just an idea.

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I’m out of town for depositions this week, so here’s a slightly abridged version of the Class Action Blogosphere Weekly Review.  Special thanks this week to The Mommy Blog for including classactionblog.com in Blog Review #158.  With that, here are some blog entries of interest to class action lawyers from this past week…

The Complex Litigatorprovides a great summary of online e-discovery resources:


For the latest trends in securities class action filings, including the impact of the subprime mortgage crisis, see this D&O Diary entry:


Class Action Defense Blogdiscusses a recent Ninth Circuit decision rejecting an “incidental damages” approach to certification under Rule 23(b)(2), which allows certification of classes seeking injunctive or declaratory relief:


The UCL Practitioner summarizes a recent antitrust decision discussing class action arbitration waivers:


California Punitive Damages reports on a class action lawsuit filed by family members of deceased service members alleging that a T-shirt company used the soldiers’ names without permission…


and see commentary from the same case on a blog from The Thomas Jefferson Center for Free Expression:


Here’s an interesting entry from the Blogger News Networkcommenting on the possible impact, or lack thereof, of a recent class action settlement on combatting identity theft:


Point of Law argues that recent Seventh Circuit Court of Appeals decisions have eroded the Class Action Fairness Act:


This siriusbuzz.com post raises interesting questions about a litigant who seems to be popping up everywhere:


Several blogs have entries commenting on the end of the well-publicized “class action” (sigh) trial against the Veterans’ Administration:





Finally, there are some people who think that class action lawsuits stink, but here’s an article about one that really does smell…


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I commented recently on the fact that the well publicized “class-action” trial against the United States Department of Veteran’s Affairs was never actually certified as a class action.  Instead, the case is being pursued by two nonprofit veterans’ advocacy groups who are pursuing the case on behalf of their members based on a concept called associational standing.  The popular media often uses the misnomer “class action” to define a wide range of lawsuits in which one or a few litigants prosecute a case on behalf of a larger group of interested parties.  Here is a partial glossary of them, along with some other terms often associated with representative actions:

Class Actions – Class actions are brought by one or more class representatives on behalf of a larger group of similarly situated people or legal entities.  Rule 23, Federal Rules of Civil Procedure, and similar state rules of civil procedure, govern whether a case can proceed as a class action.  A case does not become a true class action until the judge certifies a class.  Before a class is certified, lawyers and courts often refer to the case as a putative class action.

Derivative Suits – These lawsuits are brought by shareholders of a corporation on behalf of the corporation to pursue the rights of the corporation that the corporation itself has failed to enforce.  Derivative suits are governed by Rule 23.1, Federal Rules of Civil Procedure and similar state court rules.  A lawyer considering a lawsuit for corporate wrongdoing may face a choice between filing the case as a class action or a derivative suit.  See this recent WSJ Law Blog article for a recent example.

Collective actions – Some statutes, notably the federal Age Discrimination and Employment Act (ADEA) and Fair Labor Standards Act (FLSA), allow a court to certify a collective action as opposed to a representative action.  The key difference between these collective actions and representative actions like class actions is that in a collective action, absent parties are asked whether they want to opt in to the lawsuit.  By contrast, in a class action, absent parties are bound by the result of the litigation unless they opt out of the case after getting notice.  Many FLSA cases are brought as both collective actions and class actions.   The collective action procedure covers the FLSA claim, while the class action procedure governs any related state law claims.  Here’s a good article for more detail on the distinctions between collective actions and class actions.

Attorney general actions – State attorneys general and other governmental authorities (like the Federal Trade Commission) may, by statute, bring actions to enforce the rights of consumers and the public at large.  Here’s a link to the Colorado Attorney General’s consumer protection page.  See the Federal Trade Commission website for examples of consumer actions being pursued by the FTC.

Parens patriae actions – Parens patriae actions are a species of attorney general actions in which the government brings claims to recover monetary losses on behalf of its citizens.  In these actions, the government stands in the shoes of individual citizens and prosecutes the action to recover money for their benefit.  Here’s a link to a paper addressing parens patriae actions.

Private attorney general actions – Some statutes allow any person to bring an action to protect the rights of the public.  Until recently, an example of a statute allowing this type of action was the California Unfair Competition Law, Business & Professions Code Section 17200, which allowed a case to be brought on behalf of consumers injured by a defendant’s act of unfair competition, whether or not the plaintiff him or herself was harmed in any way.  This changed recently when the voter referendum Proposition 64 was passed, which requires a litigant to have lost money or other property as a result of the challenged practice, and must be able to satisfy the requirements for a class action in order to be allowed to pursue a UCL claim in a representative capacity.  A great resource for developments on the UCL is Kimberly Kralowec’s blog The UCL Practitioner.  Another example is California’s Labor Code Private Attorneys General Act of 2004 (PAGA), also called the Bounty Hunter Statute, which allows employees to pursue violations of the state labor code whether or not they had suffer injury, including the ability to pursue statutory penalties on behalf of the state and to share in any recovery of those penalties.  Here’s a link to an interesting California Court of Appeal decision addressing both PAGA and the UCL and the viability of an assignment of representative claims under those laws.

Qui tam actions – The federal False Claims Act is another example of a law that allows a private individual to pursue an action on behalf of the government.  An individual who has information about the misappropriate or theft of government funds may file an lawsuit under the Act known as a qui tam action.  The government has an opportunity to decide to take over the prosecution of the case, but if it declines, the person who filed the action may proceed and in the event of a recovery, he or she is entitled to a portion of the recovery.  Here is a link to an article summarizing the federal False Claims Act.

Associational actions – An association may, in some circumstances, bring an action on behalf of its members.  See this previous entry regarding the recent trial against the VA for more discussion on the requirements for associational standing.

Mass actions – Many lawsuits that people commonly associate with the term “class action” are really mass actions.  Mass actions are cases that involve the joinder of many individual claims for discovery, resolution of certain legal issues, or other purposes.  Unlike class actions, however, each claim ultimately has to be brought by an individual plaintiff, who must have some involvement in the proceedings.  Examples include many products liability cases, like those involving alleged injuries caused by tobacco, asbestos, or pharmaceuticals, where a common set of acts form the basis of a the claim for liability but where the effects are too individualized to establish all of the requirements necessary to support a true class action.  They may also be cases involving claims that arise from a single catastrophic event, like an airplane crash, toxic leak, or oil spill.  A well-known example is the Exxon Valdez oil spill case.  When numerous mass actions against the same defendant or group of defendants are filed in the federal courts, the cases are often transferred to a single district court under rules promulgated by the United States Judicial Panel on Multidistrict Litigation (MDL)

Bellwether trials – This is not so much a type of lawsuit but rather a procedural device to assist in resolving cases involving similar claims.  A bellwether trial is a essentially a sample test case, where one claim or set of claims are tried first to establish a precedent for the rest.  Bellwether trials generally cannot be used to bind parties in one case to the results of another, but they can be a useful tool for providing information to assist attorneys with valuing similar cases for settlement purposes.  Here are some good entries discussing bellwether trials from the Drug and Device Blog and the Mass Tort Litigation Blog.

Aggregator actions – For lack of a better phrase, this novel procedural vehicle involves the assignment of various plaintiffs’ right to pursue a lawsuit to a single person or entity, called an aggregator.  This procedural device is at issue in a case now pending before the United States Supreme Court.  See this entry at SCOTUS Blog.

Virtual representation – This is a concept applied in the trusts and estates area.  Under the doctrine of virtual representation, the participation in a proceeding of one heir or trust beneficiary can sometimes be deemed to be sufficient to protect the interests of unborn, unascertainable, or minor beneficiaries who could not otherwise appear.  See page 20 of this comprehensive summary of the 2005 Uniform Trust Code.

Non-mutual offensive collateral estoppel – The doctrine of collateral estoppel, or issue preclusion, provides that a party can be prevented from relitigating certain issues that were previously resolved against it.  Ordinarily, the concept applies to issues that were previously litigated between the same parties, but is sometimes possible for a plaintiff to bind a defendant to an earlier ruling in a case in which the plaintiff was not a party, if the earlier case involved a plaintiff with similar interests, and if the defendant had the same incentives to defend the lawsuit.  This doctrine has been applied only in very limited situations.  For a good analysis, see this Ninth Circuit Court of Appeals opinion

Reverse Bifurcation – Is a controversial procedure used in the West Virginia courts in which the punitive damages phase of a mass tort case against a defendant is tried before the liability phase.  See previous entries here, here, and here.

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