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Archive for the ‘Class Action Trends’ Category

I attended the National Institute on Class Actions in Las Vegas last week, and it was probably the best one yet, considering the powerhouse lineup of speakers and excellent topics.  This year’s event also marked the 20th anniversary of the Institute, and the 50th anniversary of the introduction of the modern class action rule in 1966.  I’ve tried to include a short summary of some of the highlights of each of the presentations below.  For more on what you missed, click here for the full program brochure.

Class Actions 101, 201, and 301

As has become a tradition in recent years, the conference kicked off with Yoga, along with a series of class action training sessions for attorneys and judges new to the practice area.  As in past years, the training portion of the program was led by class action expert Drew McGuinness and Program Chair Dan Karon, with help this year from Lauren Guth Barnes and E. Colin Thompson.  In addition to the basic Class Actions 101 course and the advanced Class Actions 201 course, new this year was Class Actions 301, taught by Karon, which covered legal writing tips for class action lawyers.

“Viva Review!” The Past Year in Class-Action Action.

Instructors: Professor John C. Coffee, Jr., Professor Alexandra D. Lahav

The main program kicked off with what has become an annual tradition at the Institute.  Class action scholars John Coffee and Alexandra Lahav gave their annual rundown on the key developments in the courts on class action issues over the past year and their predictions for where class actions are headed in the coming year.  One highlight for me was Lahav’s summary of divergent rulings on the question of ascertainability, which continues to be an area of uncertainty and controversy in the lower courts.

“From Mirage to Immense.” The Genesis, Creation, and Evolution of Rule 23.

Host: Daniel R. Karon

Guest: Professor Arthur R. Miller

What better way to celebrate the 50th anniversary of the modern formulation of Rule 23 than to hear the story of the 1966 amendment by someone who actually helped draft it.  Titan of American civil procedure, Professor Arthur Miller, gave a colorful history of the development of Rule 23, including entertaining stories about how a small group of now-well-known attorneys and academics, including Miller, Ben Kaplan, Archibald Cox, and Charles Alan Wright, came together in the mid-1960s to develop the innovations that gave us the class action rule we know today.  A highlight was the story of how Miller used a manual typewriter to memorialize what ultimately became 23(b)(3) while in the back seat of Kaplan’s car on a ferry ride to the Kaplans’ summer home in Martha’s Vineyard.  A neighboring car mistook the sound of the typewriter as a sign that the boat was sinking.

“Winning Big or Crapping Out.” Class-Action Ethics from a Real-Life Perspective.

Host: Melissa H. Maxman

Guests: Honorable Gene E.K. Pratter, Professor Joshua P. Davis, Thomas G. Wilkinson, Jr.

This panel examined a series of hypotheticals raising ethics issues, specifically how the courts sometimes treat ethics issues differently when they arise in the class action context.  Among the colorful examples was the situation in which a plaintiffs’ class action attorney has a consensual sexual relationship with a woman who he later discovers is an absent class member.

“A Winning Hand or a Flop?” After 50 Years, Are Class Actions Still Legit?

Host:  E. Michelle Drake

Guests:  Michelle K. Fischer, Professor Richard D. Freer, Patrick J. Ivie, Jocelyn Larkin

In this presentation, a diverse group of plaintiffs’ and defense attorneys, a public interest attorney, settlement administrator, and an academic discussed common criticisms of modern class actions and insights into future trends. I was particularly interested to hear the panelists views on the viability of claims-made settlements and the benefits and criticisms of using electronic and other non-traditional notice in settlement adminstration.

“Behind the Curtain.” Examining Class Actions from the In-House Perspective.

Host: Sabrina H. Strong

Guests: Jennifer Bechet, Karin F.R. Moore, Ken K. Patel, Robert E. Bailey

This presentation offered insights from a panel of in-house attorneys whose companies face class action lawsuits. I thought one of the key points, reinforced in different ways by several panelists and consistent with my own experience, is that the threat of class actions doesn’t ordinarily have a deterrent effect on corporate business practices because most companies aren’t looking to intentionally harm their customers.

“Pit Boss Powwow.” Exactly What Is the MDL Judge College and How Does It Work?

Host: Vincent J. Esades

Guests: Honorable Barbara J. Rothstein, Honorable Jack Zouhary, Honorable J. Frederick Motz Sure

A behind-the-scenes treat, this panel of federal judges offered insights into how judges are selected and trained to preside over multi-district litigation proceedings. I thought it was notable that in recent years, practitioners have been brought in to speak at the annual training program to offer a practitioner’s perspective about what works and what doesn’t in complex MDL proceedings.

“Hitting the Jackpot!” A One-on-One Class-Action Conversation with Judge Richard Posner.

Host: Daniel R. Karon

Guest: Honorable Richard A. Posner

In one of the highlights of the Institute this year (along with Professor Miller’s presentation), Judge Richard Posner sat down via teleconference for an interview with Dan Karon.  Judge Posner’s remarks were filled with unique insights and a few zingers including his comment that class action settlements are “an invitation to shenanigans” where, in his view, the class is at the mercy of the plaintiffs’ attorneys, and the Defendants interested in getting off as lightly as they can, so the judiciary has an important role in scrutinizing the terms.  He also talked about his process for reaching a decision in a case.  He considers the case as a problem to be solved in general terms, comes up with a practical solution to that problem that makes sense, and then evaluates whether there is anything in the law that “blocks” that solution.  At one point he quipped, “I don’t get a lot out of Rule 23,” preferring instead to consider the Rules of Civil Procedure in general terms and reaching a holistic judgment.

“Small Wagers, Big Results.” How the Supreme Court’s Tyson Foods Decision Could Affect Your Practice.

Host: Andrew J. McGuinness

Guests: Honorable Terrence G. Berg, Eric Grannon, James Langenfeld, Ph.D., Paul Novak, Joseph M. Sellers

This panel presentation on expert witnesses and statistical sampling was highlighted by a mock oral argument of a class certification proceeding in which the plaintiff sought to introduce statistical sampling evidence in an antitrust case.  The argument offered a practical way of evaluating how issues presented by the Supreme Court’s decision in Tyson Foods might play out in a context other than wage and hour employment litigation.

“Into the Stratosphere or Simply a Circus Circus?” After Fifty Years, What’s Class Actions’ Future?

Host: Fred B. Burnside

Guests: Professor Brian T. Fitzpatrick, Professor Robert H. Klonoff, Arthur H. Bryant, William Donovan, Jr.

A fitting end to an outstanding program, this panel of top class action scholars and practitioners offered insights into the current state of class actions and what might be in store in the near future.  Here are some highlights on the predictions offered by the panelists: 1) class actions are not going away; 2) the continued growth of mass commerce will continue to spawn class action litigation; 3) Justice Scalia’s death will have a significant impact on class action jurisprudence going forward and the judiciary is likely to get less friendly to defendants in the short-term; 4) technology will make a big difference for the better in managing class action litigation; 5) defendants will continue to come up with creative, far-reaching ways of limiting class actions; 6) plaintiffs’ attorneys will continue to bring class actions when a) they think they can make money and/or b) they think they will advance the public good; 7) there will be some good class actions and some horrible ones; 8) look out for states to pass new consumer protection laws similar to the New Jersey New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA); 9) the TCPA and all-natural litigation booms will continue in the near future; 10) The CFPB will broadly define consumer finance services; 11) more class actions will go to trial; 12) what happens with the enforceability of arbitration clauses will have a big impact on the viability of many categories of class actions in the future; 13) look for more class actions in the federal courts in New York state.

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Robinson & Cole Partner Wystan Ackerman, fellow class action blogger and friend of ClassActionBlawg.com, recently sent me a note about an exciting upcoming class action conference sponsored by DRI.  The conference will be held in Washington D.C. on July 21-22, 2016 and features a top notch slate of speakers and two days worth of cutting-edge class action related content tailored to the defense bar.   Click the link below for a program description and additional links to the registration site.

https://www.classactionsinsider.com/2016/06/dri-class-action-seminar-2016/

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I’ll be on the faculty of an upcoming Strafford CLE webinar entitled Statistics in Class Certification and at Trial: Leveraging and Attacking Statistical Evidence in Class Actions to be held next Tuesday, May 12, 2015, at 1:00 p.m. EDT.  This is a reprise of a program that I have done several times with Thompson Hine Partner Brian Troyer, and we’re pleased to be joined this time around by Edward J. Wynne of the Wynne Law Firm.

Click on this link to register and take advantage of a special 50% discount to the program.

 

 

 

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BakerHostetler’s 2014 Year-End Review of Class Actions (and what to expect in 2015) was published on February 2, and is available for download at the firm’s website.  This annual summary is a joint effort of numerous attorneys throughout the firm, but for the second year in a row, the 2014 edition was ably edited by Dustin Dow in the firm’s Cleveland Office.

As the title suggests, the 59-page document provides a comprehensive update on the key decisions and trends in a variety of subject matter areas, including consumer protection, insurance, banking, data privacy, antitrust, securities, and labor and employment, as well the latest procedural developments impacting class action practice, both throughout the United States and abroad.

It’s free, so don’t miss it!

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In keeping with the time-honored tradition of end-of-the-year top 10 lists, I’ve assembled my annual list of the top 10 most significant class action developments below.  Whether these are actually the top 10 most significant decisions over the past year may be subject to reasonable debate, so please feel free to add your own favorites in the comments section.

1. Certiorari denied in “moldy washer” cases – In my view, the single biggest development impacting class action practice over the past year was the Court’s decision not to take on the question of “issue certification” presented in the Sears and Whirlpool “moldy washer” cases.  This non-decision opens the door for significant litigation over whether isolated issues should be certified for class treatment even where significant individual litigation would be necessary following resolution of the class wide issues.

2. Judge Posner’s class action settlement decisions – Judge Posner wins the award for the jurist having the single biggest impact on class action practice in 2014.  In addition to the Supreme Court declining to take on review of his decision in one of the “moldy washer” cases, Butler v. Sears, Roebuck & Co., Judge Posner authored two significant (and harshly worded) decisions discussing the standards for evaluating the fairness of class action settlements, including Eubank v. Pella Corp., Nos. 13-2091, -2133, 2136, -2162, 2202 (7th Cir., June 2, 2014), and Redman v. RadioShack Corp., case number 14‐1470, 14‐1471 and 14‐1658 (7th Cir., Sept. 19, 2014).  These decisions are emblematic of a more general trend in the courts of subjecting class action settlements, especially coupon settlements, to ever-greater scrutiny.

3. Basic framework remains largely unchanged after Halliburton II – One of only three Supreme Court decisions of significance on class action issues this past year, the Court largely maintained the status quo in declining to overrule the framework for evaluating “fraud on the market” theory of reliance in securities class actions.

4. Whirlpool trial ends with victory for the defendant – Not long after the Supreme Court declined review, the first of the “issue” class cases went to trial against Whirlpool.  The trial ended in a defense verdict, although as I wrote in October, I’m not sure that’s necessarily a good thing for defendants in the long-term.

5. Court clarifies removal pleading standards in Dart Cherokee Basin Operating Co. v. Owens – In one of the Roberts Court’s most helpful class-action-related decisions, at least from a practical standpoint, the majority removed barriers to corporate defendants’ ability to remove cases under the Class Action Fairness Act (CAFA), clarifying that jurisdictional facts need only be pled, not supported by evidence, in the notice of removal.

6. California Supreme Court issues significant decision on the use of statistical evidence to support class certification – An individual state court decision has to be pretty significant to make my annual top 10 list, but I think Duran v. U.S. Bank National Association fits the bill.  The decision is one of the most comprehensive to date in addressing the potential pitfalls of reliance on statistics as a proxy for common, class wide proof.

7. Supreme Court holds in AU Optronics that consumer actions brought by state attorneys general are not “mass actions” subject to the Class Action Fairness Act – It’s probably a misnomer to call AU Optronics a “class action” case, since the issue presented was whether actions brought by state AGs on behalf of consumers were “mass actions.”  But because the case involved interpretation of CAFA, it makes this year’s list.

8. International class and collective action litigation continues to expand – Class, collective, and multi-party actions continue to expand outside of the United States and Canada.  Examples included France joining the list of Civil Law jurisdictions in Europe to enact a “class action” law, and a group action in Austria, joined by more than 25,000 litigants, challenging Facebook privacy policies.

9. Data breach class actions proliferate – High profile data breaches and hacking incidents made news, and resulted in class actions, in 2014.  From a rash of payment card breaches impacting customers of large retailers like Target and Home Depot to the more recent Sony hacking incident, data breach class action litigation shows no signs of slowing down any time soon.

10. Supreme Court grants, then dismisses, certiorari in Public Employees’ Retirement System of Mississippi, v. IndyMac MBS, avoiding a high court ruling on the question of whether statute of repose can be tolled for absent class members under the American Pipe tolling doctrine.  In what has become a trend of the past year, this is yet another missed opportunity for the Supreme Court to address a class action issues of significance.

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The California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank National Association yesterday, addressing the use of statistical sampling as a way of evaluating aggregate liability and damages in a class action. Although Duran is a wage and hour case, its analysis is pertinent to the use of statistical evidence in a variety of other class action contexts.

In the opening line of his majority opinion, Justice Corrigan referred to Duran “an exceedingly rare beast” because it was a wage and hour class action that had proceeded all the way through trial to verdict.  In the trial court, the plaintiff had presented testimony from statistician Richard Drogin, who had also notably served as an expert for the plaintiffs in Walmart Stores Inc. v. Dukes.  Drogin proposed a random sampling analysis that purported to estimate the percentage of the defendant’s employees that had been misclassified for purposes of entitlement to overtime pay.  The trial court did not rely on Drogin’s analysis but instead came up with its own sampling approach, which involved pulling the names of 20 class members, hearing testimony from these witnesses along with the named plaintiffs, and then extrapolating the court’s factual findings across the entire class in order to determine the defendant’s liability.

The supreme court affirmed a decision by the Court of Appeal holding that this sampling approach violated due process and was a manifest abuse of discretion.  Generally, there were two independent reasons for the supreme court’s conclusion: 1) the use of random sampling deprived the defendant of the opportunity to present individualized evidence supporting its defenses to the claims; and 2) the sampling method adopted by the court was inherently flawed and unreliable.

Without categorically rejecting the use of statistics as a tool in managing class action litigation, the supreme court identified numerous conceptual limitations on its use.  First, “[s]tatistical methods cannot entirely substitute for common proof . . . .  There must be some glue that binds class members together apart from statistical evidence.”  So, while statistics may serve as circumstantial evidence to support a common issue–such as the existence of centralized policy or practice, they may not be used as a substitute for establishing commonality or for avoiding individualized determination of individual issues–such as by generalizing effects of a given policy or practice on large groups of claimants where the effects vary in actuality.

Second, a trial court cannot utilize statistical evidence in a way that prevents the individual adjudication of individual defenses.  Although courts are encouraged to develop innovative procedures in managing individual issues, a court cannot ignore individual issues altogether or prevent them from being decided on an individual basis.

Third, if statistical evidence is to be used as part of a litigation plan for managing complex class action, the methods to be employed should be presented, evaluated, and scrutinized at the class certification stage.  The court should not simply assume that statistical methods will permit class treatment and certify the class based on this hypothetical possibility.

Fourth, the court must ensure that the statistical method to be employed has to be reliable, based on statistically valid data, and not prone to a high margin of error.  In other words, junk science or ad hoc, rough justice are not enough.

The Duran opinion is worthy of careful study for anyone considering the use of statistics in class certification proceedings, both in the wage and hour context and in class actions more generally.  It also provides a colorful illustration of the due process and manageability problems posed by the “trial by formula” approach to class actions that the United States Supreme Court criticized in Dukes.

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Earlier today, the Supreme Court denied certiorari in two highly anticipated appeals of decisions by the Sixth and Seventh Circuit Courts of Appeals to grant class certification over breach of warranty claims involving allegedly defective washing machines.  The denial of cert in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013) was a surprise to many commentators who had seen the moldy washer cases as providing the perfect opportunity for the Court to continue its trend clarifying the boundaries of class certification in cases like Wal-Mart Stores, Inc. v. Dukes,  Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, and Comcast Corp. v. Behrend.  The denial of cert means that the Court will not be addressing the question of whether it is appropriate for a federal court to order class certification of discrete, common issues in a case without analyzing whether those issues predominate more generally over the individualized questions, like injury or damages.  That question will be left to the lower courts for the time being.

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In case you missed it, the BakerHostetler class action defense team published its second annual Year-End Review of Class Actions last month.  The 2013 issue was expertly edited by Dustin Dow of our Cleveland office, and features contributions from other members of the firm’s class action defense team across the country.  The 54-page report has a thorough recap of the key class action developments in the U.S. Supreme Court as well as other federal and state courts, summaries of key developments in various substantive areas of law in which class actions are prominent, and a preview of what to look for in 2014.  Click the link above to download a copy.

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The Class Actions, Mass Torts and Derivative Suits Subcommittee of the Colorado Bar Association, now ably chaired by my BakerHostetler partner, Casie Collignon, held its first CLE luncheon of the year this past Friday.  The program, United States Supreme Court vs. Class Actions in 2013, featured excellent commentary about the Supreme Court’s 2013 class action decisions by The Honorable Marcia Krieger, Chief Judge, U.S. District Court for the District of Colorado, Seth Katz of Burg Simpson, and John Fitzpatrick of Wheeler Trigg O’Donnell.  Here are just a few of the many insightful observations made by each of the speakers:

Judge Krieger opened by observing that none of the cases this term have been a surprise from the standpoint of what a trial court judge would have expected given existing law.  Amgen was predictable because the question of materiality in a securities fraud case is unquestionably a common issue, so it is not surprising that it is a question for trial, not a prerequisite for class certification.  Standard Fire can be viewed as a straightforward application of agency law: a plaintiff cannot bind a class of people that he or she doesn’t yet represent.  Comcast exemplifies the importance of examining the plaintiffs’ theory of liability and the relationship to the theory of loss.  Damages are not the same as loss.  The theory by which the plaintiff establishes loss determines the measure of damages.

When asked to identify any trends that she has been seeing in class actions recently, Judge Krieger identified issue certification as a key trend.  She has been seeing more situations where the factual issues may be individualized but there are common legal issues that can be resolved classwide.  She noted that she has been inclined to grant partial certification limited to the common legal issue(s) in that situation.

From the plaintiffs’ perspective, Katz agreed that the outcome of Standard Fire was not surprising, and he went as far as to say that the outcome was correct, noting that plaintiffs’ attorneys shouldn’t be afraid of the federal courts.  Although the holding of Amgen was favorable to plaintiffs, Katz noted an issue that should be of great concern to plaintiffs, and that is the commentary from the conservative wing of the court suggesting that they might be willing to revisit the fraud-on-the-market presumption adopted in Basic Inc. v. Levinson.  Katz sees the potential of a 4-4 split on that issue, with Chief Justice Roberts being the deciding vote.  He predicts market studies being commissioned by both sides over the coming years to demonstrate or disprove the continued efficiency of the markets.

Comcast, Katz noted, caused a collective sigh of relief in the plaintiffs’ bar because it does not go as far as many would have feared by requiring Daubert hearings at the class certification phase.  He noted that one positive impact for plaintiffs arising from the “death of Eisen” (the rejection in decisions like Wal-Mart and Comcast of the idea that merits questions were off-limits at the class certification phase) is that it gives plaintiffs’ counsel an opportunity to obtain merits discovery much earlier in a case than was allowed previously.  On the other hand, Katz expressed fear about the possibility that the Court is trying to raise the bar for plaintiffs with a subtle change in the language about what common proof is necessary on the issue of damages.  Where earlier decisions required that damages be “susceptible to classwide proof,” the Comcast majority phrased the standard as requiring the plaintiff to “prove classwide damages.”  Katz predicts that defendants will argue that this means damages must be uniform, as opposed to simply being susceptible to formulaic calculation.  He noted, however, that the few lower courts that have interpreted Comcast so far have rejected a broad application of the decision.

Fitzpatrick combined philosophical commentary about the evolution of class actions with some practical tips for defense lawyers.  Standard Fire, he argued, is proof that judicial hellholes still exist.  He pointed to Amgen as an example of the dangers of accepting conventional wisdom, pointing out that the outcome in that case might well have been different if the defendants had stipulated to the existence of an efficient market.

Comcast, Fitzpatrick said, provides an opportunity for defendants to prevail at the class certification stage by discrediting a plaintiffs’ expert.  Focus not just on the opinions themselves, he suggested, but also on 1) the existence of bias; 2) the expert’s credentials, and 3) flaws in the methodology.  Scour the country for transcripts about the plaintiffs’ experts.  Look at misstatements and exaggerations in the expert’s CV.  Make sure you find and read all of their prior statements in books, media, and transcripts.  Just as important, Fitzpatrick reminded defense practitioners, is the make sure to prepare your own experts for class certification.

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An article posted by my colleagues Judy Selby and Zack Rosenberg in the BakerHostetler Class Action Lawsuit Defense Blog raises some important issues for any company that could find itself the target of a class action lawsuit.  With the proliferation of data privacy and other consumer class actions, that’s just about any company these days.  The article, titled Courts Are Liberally Construing Litigation Insurance Coverage for Class Action Defenses and So Should Defendants, addresses the important issue of liability insurance covering class action lawsuits.  

I’m often surprised in speaking with in-house attorneys and risk management personnel that they are unaware of the extent to which their current insurance coverage might protect them if they were ever sued in a class action, and that they have not considered certain types of specialty lines insurance, such as cyber risk insurance, that might protect them from potentially catastrophic liability and defense costs arising out of a class action.  This is an especially important consideration for companies in industries that aren’t frequently targeted in class actions, because those companies may not think about the benefits of insurance protection until it’s too late.

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