Archive for May 26th, 2009

After hearing and reading countless media reports today about how Supreme Court Appointee Sonia Sotomayor’s  judicial record will be scrutinized between now and her confirmation, I got to wondering about her judicial record in class actions.  My research turned up a few key cases on class action issues, which I have summarized below.

In Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2d Cir. 2005), Judge Sotomayor authored an opinion affirming in part and reversing in part the dismissal of a putative securities class action, holding that the Securities Litigation Uniform Standards Act (“SLUSA”) did not preempt certain state law claims alleging damages relating to securities transactions brought by plaintiffs who were not buyers or sellers of the securities.  The portion of the decision that limited the reach of SLUSA preemption was overruled by the United States Supreme Court, in a 8-0 decision authored by Justice Stevens in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 126 S. Ct. 1503 (2006).  The case turned primarily on an issue of statutory interpretation, the meaning of the phrase, “in connection with the purchase or sale of a covered security” as used in the portion of the statute that expressly preempts class actions based on state law, with the Supreme Court adopting a broad interpretation of that phrase in contrast to the narrow interpretation given by the Second Circuit.

In Moore v. PaineWebber, Inc., 306 F.3d 1247 (2d Cir. 2002), Judge Sotomayor wrote an opinion upholding a denial of class certification in a RICO fraud case after recognizing that common proof of misrepresentations could be made in a form other than a written, standardized sales script, finding that the district court had not abused its discretion in holding that there was no evidence of a centralized scheme in which common misrepresentations were made to all class members.

Martens v. Thomann, 273 F.3d 159 (2d Cir. 2001) may be an example of the type of decision that reflects a trait highlighted by the President’s comments and media reports, a respect for the impact of judicial decisions on lives of real people.  In this case, the court reversed and remanded, primarily on due process and other procedural grounds, the district court’s imposition of sanctions against two class representatives and their individual attorneys who sought to pursue a motion to “enforce” a previously approved settlement in a Title VII employement class action.

From a class action defense perspective, In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124 (2d Cir. 2001) would be the most troubling of Judge Sotomayor’s class action decisions, were it not for her participation on the panel in In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. 2006).  The In re Visa Check opinion, issued prior to the 2003 amendments to FRCP 23, suggested a standard that prohibited a district court from weighing any disputed evidence that might overlap with the merits of the plaintiffs’ claim as long as the plaintiff could provide some expert testimony that, if believed, would support the conclusion that one or more issues could be decided on a classwide basis.  However, in In re IPO Securities Litigation, decided post-2003, the court held that a court must weigh conflicting evidence in determining whether each element necessarily for class certification had been certified even though that decision may also overlap with the merits.  In reaching that conclusion, the court stated that:

we . . . disavow the suggestion in Visa Check that an expert’s testimony may establish a component of a Rule 23 requirement simply by being not fatally flawed. A district judge is to assess all of the relevant evidence admitted at the class certification stage and determine whether each Rule 23 requirement has been met, just as the judge would resolve a dispute about any other threshold prerequisite for continuing a lawsuit.

In re IPO Securities Litigation, 471 F.3d at 24. 

Judge Sotomayor has issued published decisions in a few other class action lawsuits during her tenure as a judge on both the appellate and trial court levels.  These decisions appear fairly case-specific and do not reflect a particular judicial philosophy on class action issues. 

  • In re WorldCom, Inc., 546 F.3d 211 (2d Cir. 2008) – Upheld bankruptcy court’s order discharging putative state law class claims that a telecommunications company’s act of sending light pulses through fiber optic cable buried on his property constituted a trespass and supported a claim for unjust enrichment.


  • In re NYSE Specialists Securities Litigation, 503 F.3d 89 (2d Cir. 2007) – Affirmed lower court decision that the New York Stock Exchange was entitled to absolute immunity on certain claims brought on behalf of a would-be class of investors but reversed on grounds that the lead plaintiffs lacked standing to sue the Exchange for federal securities fraud for alleged false statements involving other entities. 


  • Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) – Upheld the trial court’s decision denying a motion to compel arbitration in a set of consolidated, putative class actions where the arbitration provision was set forth on a web page located below the “download” button allowing users to download free software off the Internet.


  • Cruz v. Coach Stores, Inc., 202 F.3d 560 (2d Cir. 2000) – Affirmed the denial of a motion for class certification in an employment discrimination case after agreeing that the motion was untimely, that the elements of class certification had not been met, and that the district court had not abused its discretion in finding that the plaintiffs’ proferred expert report submitted in support of the motion was inadmissible.


  • Hoffmann v. Sbarro, Inc., 982 F. Supp. 249 (S.D.N.Y. 1997) – Allowed a opt-in class to proceed in a case seeking unpaid employment benefits under the Fair Labor Standards Act (“FLSA”). 


  • Semmler v. Metropolitan Life Ins. Co., 172 F.R.D. 86 (S.D.N.Y. 1997) – Denied class certification in an ERISA case seeking relief for a plan administrator’s decision to deny certain benefits for healthcare services.


  • Nellis v. Shugrue, 165 B.R. 115 (S.D.N.Y. 1994) – Upheld a bankruptcy court had the power to approve a global settlement of debtors’ claims over objections from certain debtors that the settlement should be considered a “class action” settlement.

Overall, her decisions on class action issues do not suggest a pro-plaintiff or pro-defense bias.  Rather, they seem to reflect a willingness to consider each case on its own merits and to either admit when she has made a mistake or at least be guided by changing circumstances rather than any ridged adherence to a predetermined philosophy or idealogy.

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