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Archive for the ‘Federal Court Decisions’ Category

Yesterday, U.S. District Judge Paul Magnuson issued an order granting certification in the consolidated MDL proceeding brought on behalf of issuing banks claiming damages resulting from Target’s 2013 payment card hacking incident.  Click Here for a copy of the order.  The BakerHostetler Class Action Lawsuit Defense Blog will feature a more detailed write-up on the decision soon.

In the way of initial reaction, I don’t think the decision will be impactful in cases outside the specific context of issuing bank class actions against retailers in payment card breach cases because of unique issues having to do with common injury and causation of loss.  In particular, in evaluating whether variations in injury and causation should prevent certification, Judge Magnuson distinguished the issuing bank case from the class actions brought on behalf of individual consumers arising from the same breach.  Judge Magnuson observed that while the injuries alleged by consumers are largely potential future injuries that may or may not occur, the banks claimed to have already suffered concrete injuries in the form of the cost of reissuing cards to customers.  Thus, he reasoned that the any individualized issues regarding causation and injury were not present with regard to the financial institutions’ claims, and any issues regarding variations in the amount of damages did not prevent class certification.  This distinction means that the decision will be of limited value to plaintiffs in consumer data breach class actions.

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For those who practice in the area of insurance-related class actions, I highly recommend an article posted yesterday by Robinson and Cole Partner Wystan Ackerman, who is the primary contributor to his firm’s Insurance Class Actions Insider blog.  The article, Standing to Sue in Insurance Class Action Addressed By Second Circuit, summarizes the Second Circuit Court of Appeals decision late last month in Mahon v. Ticor Title Ins. Co., No. 10-3005-cv, 2012 U.S. App. LEXIS 12947 (2d Cir. Jun. 25, 2012), which held that the “juridical link” doctrine could not be used to give a plaintiff who bought insurance from one insurance company standing to represent a class of insureds who purchased policies from the defendant’s sister companies.

The Mahon decision is an important development in the area of insurance class action law.  Insurance companies are commonly organized into holding company systems.  (The primary reason for this is not to make it more difficult to sue them, but rather so that they can comply with individual states’ domicile, risk-based capital, rate filing, and  other regulatory requirements, as well as to allow the introduction of new products without disrupting the expectations of existing policyholders.)  As a result, the same insurance brand can be sold through a number of different underwriting companies.  At the risk of grossly oversimplifying the concept, the “juridical link” argument, as it has been raised in the insurance class action context, is that companies that are linked together through common ownership, brand, business practices, or sharing of resources can be sued in the same lawsuit by a representative plaintiff that has a claim against any one of them.

Those who prosecute or defend insurance class actions on a regular basis will recognize that the juridical link argument is nothing new.  Use of the juridical doctrine as a tactic to sue multiple, related defendants in a single class action hit its peak in the middle part of the last decade.  However, the tactic has waned in recent years as plaintiffs’ lawyers realized that it was much more efficient to simply round up a separate class representative for each underwriting company than to spend their time and effort briefing the complex procedural and constitutional issues implicated by the juridical link doctrine. 

Even so, as the recentness of the Mahon decision suggests, the argument has not gone away for good, and practical considerations in any given case can make it a tactic worth pursuing.  And, if the doctrine is on the comeback trail as a litigation tactic, Mahon provides an arrow in the quiver of defense attorneys for defeating it.

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Last Friday, the Seventh Circuit Court of Appeals issued a significant employment class action decision that may challenge conventional wisdom about the impact of the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes.   The opinion, authored by respected Judge Richard Posner, is McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 11-3639 (7th Cir., Feb. 24, 2012).

The procedural history of McReynolds is interesting, because the plaintiffs had actually moved for reconsideration of an earlier denial of class certification after the decidedly pro-employer decision in Dukes was announced.  Although the trial court judge was unconvinced to change his earlier decision, he did agree that Dukes presented a good basis for reconsideration of the class action issue, and expressly stated in his decision that he believed the case was a good candidate for an interlocutory appeal under Rule 23(f).

The Seventh Circuit accepted the appeal, and reversed the denial of class certification.  The Seventh Circuit panel recognized that individualized issues would prevent certification of any claims for back pay or damages, but held that certification of the issue of whether the defendant’s challenged employment policies had an adverse impact on members of a protected class would still be appropriate under Rule 23(b)(2), which allows a class to be certified for the purpose of awarding injunctive relief, and Rule 23(c)(4), which allows certification of particular issues.  Essentially, the case would be certified for the purpose of deciding whether the defendant’s challenged policies created a disparate impact to members of a protected class and for the purpose of ruling on plaintiffs’ request to enjoin the practices.  Any claims for back pay, compensatory or punitive damages would then have to be brought as separate proceedings. 

In reaching its conclusion, the court drew a key factual distinction between the practices being challenged in the case before it and the practices that had been challenged in Dukes.  In McReynolds, the practice being challenged was the company-wide policy of “permitting brokers to form their own teams and prescribing criteria for account distributions that favor the already successfulthose who may owe heir success to having been invited to join a successful or promising team.”  The court distinguished this policy, which it characterized as a firm-wide policy of Merrill Lynch, from the allegations in Dukes, which were that the lack of a uniform corporate policy on discrimination created too much discretion in local managers to create locally discriminatory policies.

I’ll be posting more on this decision within the coming week, so stay tuned…

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The Baker Hostetler Employment Class Action Blog is constantly putting out quality content, but they have two new recent posts that I would especially recommend to my readers.  They include:

  • This February 6 post from John Lewis discussing the impacts, both on employment cases and otherwise, of the Second Circuit’s recent Amex III decision.
  • This February 6 Post from Greg Mersol discussing a recent federal court decision holding that the pleading standards articulated in Iqbal and Twombly do not apply to affirmative defenses in class actions.
  • This January 20 post from John Lewis discussing the U.S. Supreme Court’s most recent pro-arbitration opinion in CompuCredit Corp v. Greenwood.

Even if you aren’t an employment lawyer, I would strongly suggest adding www.employmentclassactionreport.com to your list of favorites!

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As promised in my post late last week, the Baker Hostetler client alert on last week’s Second Circuit decision in In Re American Express Merchants’ Litigation, No. 06-1871 (2d Cir., Feb. 1, 2012) (Amex III) was released today.  Here is a link to the alert, authored by New York partner Deborah Renner and Columbus associate Jennifer Vessells, and titled Second Circuit Again Holds Class Action Waiver Unenforceable.

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The Baker Hostetler class action practice team issued a new Executive Alert today authored by Columbus Partner Mark Johnson entitled Fifth Circuit Restricts Cy Pres Doctrine in Class Action Settlements.  The alert discusses the Fifth Circuit’s recent decision in Klier v. Elf Atochem North America, Inc., restricting the use of the cy pres doctrine to distribute unclaimed class action settlement funds in the absence of express terms in the settlement agreement.

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Having been focused on several other speaking and writing projects recently (in addition to my day job), it’s taken longer than I had hoped to comment on several recent class-action-related decisions by the federal circuit courts of appeals.  Here’s a brief summary of three recent decisions of note:

Washington State v. Chimei Innolux Corp., No. 11-16862 (9th Cir. Oct. 3, 2011) – joining the Fourth Circuit in holding that a parens patriae action brought by state attorneys general or other state officials for the benefit of the state’s citizens is not a “class action” for the purposes of removal under the Class Action Fairness Act (CAFA).

Klier v. Elf Atochem N. Am., Inc., No. 10-20305 (5th Cir., Sept 27, 2011) – holding in the absence of an express provision in the settlement agreement to the contrary that unclaimed funds should be distributed pro rata to class members who participated in the settlement as opposed to being given to charity as a cy pres distribution.  Take note of the concurrence by Judge Edith H. Jones, which makes a strong argument that in the absence of any agreement to the contrary or express waiver of the right to recover unclaimed funds, the equities favor returning those funds to the defendant rather than paying them to the class or distributing them to charity.

Esurance Ins. Co. v. Keeling, No. 11-8018 (7th Cir., Sept. 26, 2011) – holding that when punitive damages are at issue, the correct standard is whether it would be “legally impossible” for the plaintiff to recover an amount of punitive damages that, when combined with the amount of compensatory damages sought, would exceed the $5 million amount in controversy threshold under CAFA, but concluding that it was not legally impossible under Illinois law, even though it was unlikely, that $4.4 million in punitive damages could be awarded in a case where the compensatory damages were slightly more than $600,000.

A great resource for more timely commentary and analysis on recent class action decision in the federal courts of appeals is Alison Frankel’s blog On the Case.

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My recent SCOTUSblog post  on the October 2010 Supreme Court Term class action decisions does not address an important decision from the Third Circuit Court of Appeals, which was issued last week.  In Litman v. Cellco Partnership, the Third Circuit held that New Jersey decision holding class arbitration waivers unconscionable was preempted by the Federal Arbitration Act.  To that extent, the court’s analysis is a relatively straightforward application of the federal preemption analysis in Concepcion.  But what is important about the Litman decision is that the court’s analysis makes no mention of whether the arbitration clause at issue contained the sorts of consumer-friendly procedural protections contained in the AT&T Mobility arbitration clause at issue in Concepcion.  Based on the quoted portions of the agreement discussed in Litman, it appears that it did not.  As a result even in cases outside the Third Circuit, Litman provides a defendant with strong authority for arguing that class arbitration waivers cannot be held unconscionable under state law principles regardless of the presence of any special consumer protections ensuring that arbitration provides a meaningful mechanism for redress.

However, potential defendants should still be cautious about going too far with arbitration provisions that mandate a waiver of all avenues for class relief if they don’t also contain some provision for incentivizing the pursuit of individual arbitration of a meritorious claim.  There are a variety of other arguments, including arguments based on the federal common law of arbitrability, that may still be persuasive to many courts when the particular arbitration agreement at issue appears to foreclose any possibility of litigation at all.  Moreover, the decision of only one of the federal circuits will not likely be enough to prevent attempts by plaintiffs’ lawyers to attack broadly-worded arbitration agreements in consumer contracts in the short-term.  So, although Litman is a good decision for defendants, prudent corporations will not treat it as an invitation to adopt draconian class arbitration waivers that have the effect of precluding nearly all consumer litigation.

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As I have noted in a series of posts recently, class action settlement objectors should not be taken lightly.  (See this August 1, 2011 post and others cited within).  Last week, the Second Circuit Court of Appeals offered an excellent case in point in its decision in In re Literary Works in Electronic Databases Copyright Litigation, No. 05-5943-cv(L) (2d Cir., Aug. 17, 2011), in which a two-judge majority sided with ten objectors in vacating the approval of a class action settlement involving copyright infringement claims by freelance authors against various publishers who provide content in online databases.   Based in part on principles limiting settlement class certification that were recognized in two well-known Supreme Court opinions from the late 1990s, Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), the court held that the interests of various subclasses within a proposed settlement class had interests that were too divergent to be adequately represented by a single group of class representatives and class counsel.  Andrew Trask has a good summary and some insightful commentary about the decision and its potential future impact on his blog, Class Action Countermeasures.  Alison Frankel offers additional perspective in her column for Thompson Reuters, On the Case.

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