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Archive for the ‘CAFA Requirements’ Category

Earlier today, the Supreme Court granted cert in Dart Cherokee Basin Operating Company, LLC v. Owens, No. 13-719, in which it will take up the contours of the standard for providing factual support in a notice of removal under the Class Action Fairness Act of 2005 (CAFA).  Specifically, the issue presented is as follows:

Whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required “short and plain statement of the grounds for removal” enough?

This is the third CAFA removal case that the Court has accepted in as many years.  During the October 2012 term, the Court decided Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013), in which it held that a class representative may not avoid CAFA jurisdiction by stipulating to a recovery of damages of less than $5,000,000 on behalf of members of the proposed class.  Earlier in the current term, the Court decided Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), holding that a parens patriae action brought by a state attorney general on behalf of Mississippi residents was not a “mass action” subject to CAFA.

 

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The U.S. Supreme Court issued its first class-action-related decision of the 2013-14 term today, or more precisely, its first non-mass-action-related decision of the term.  In Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), the Court held that a parens patriae action brought by the Mississippi attorney general on behalf of Missouri citizens was not a “mass action” subject to the Class Action Fairness Act of 2005.  My partner Casie Collignon has a more detailed write-up on the decision at the BakerHostetler blog Class Action Lawsuit Defense.

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If you’re prosecuting or defending a class action or are interested in class action developments (and I’m not sure why on Earth you would be reading this otherwise) you’ll want to know about a great new ABA publication on the Class Action Fairness Act of 2005 (CAFA).  The Class Action Fairness Act, Law and Strategy, is a book of collected works written by experts on both sides of the bar and deftly edited by former ABA CADS Committee Chair Gregory C. Cook.  Those familiar with CADS (the Class Actions and Derivative Suits Committee of the ABA Section of Litigation) will recognize the names of many of the knowledgeable contributors.

The book covers nearly every CAFA-related topic conceivable, from the history of CAFA to the provisions expanding federal diversity jurisdiction in class actions and the provisions regulating federal class action settlements.  It can be used as a reference guide for the basic requirements of CAFA, but it also provides practical strategy tips for both plaintiffs and defendants in dealing with common and not-so-common CAFA issues.  Here is a summary of the Table of Contents:

  • Chapter 1 – Introduction and Overview
  • Chapter 2 – CAFA in Congress: The Eight-Year Struggle
  • Chapter 3 – Hey CAFA, Is that a Class Action?
  • Chapter 4 – The Amount in Controversy under CAFA: Have You Got What It Takes for Federal Court?
  • Chapter 5 – CAFA’s Numerosity Requirement, or How to Count from 1 to 100
  • Chapter 6 – Basics of MInimal Diversity in CAFA
  • Chapter 7 – Welcome to the Jungle: CAFA Exceptions
  • Chapter 8 – How CAFA Expands Federal Jurisdiction to Include Certain Mass Actions
  • Chapter 9 – Advanced Procedural and Strategic Considerations on Removal under CAFA
  • Chapter 10 – CAFA-Related Appeals
  • Chapter 11 – CAFA Settlement Provisions

Be sure to click the link on the title of the book, above, for information about how to get your copy.  If you don’t have it, chances are that your opponent will!

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The United States Supreme Court has granted certiorari to decide whether a plaintiff’s stipulation to seek less than $5 million in damages can deprive the federal courts of jurisdiction to hear the case under the Class Action Fairness Act of 2005 (“CAFA”). The specific question presented in Standard fire Insurance Company v. Knowles is as follows:

Last Term, this Court held that in a putative class action “the mere proposal of a class … could not bind persons who were not parties.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant’s right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a “stipulation” that attempts to limit the damages he “seeks” for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the “stipulation,” exceeds $5 million, is the “stipulation” binding on absent class members so as to destroy federal jurisdiction?

For copies of the cert petition and other briefs, and the opinion below, see the SCOTUS Blog page for the case:

http://www.scotusblog.com/case-files/cases/the-standard-fire-insurance-co-v-knowles/

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Earlier today, the Tenth Circuit joined the majority of Circuit Courts of Appeals in holding that a plaintiff cannot conclusively avoid federal removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA) by including in the complaint a statement of intention not to seek more than $4,999,999.99 in damages on behalf of the putative class.  In Frederick v. Hartford Underwriters Insurance Company, No. 12-1161 (10th Cir. June 28, 2012) the Tenth Circuit followed decisions from the First, Second, Fourth, Sixth, Seventh, Eighth and Eleventh Circuits in holding that a Defendant may support jurisdiction by showing by a preponderance of the evidence that the amount in controversy exceeds $5 million, even if the plaintiff expressly pleads a lesser amount.  It rejected a more stringent “legal certainty” standard, which has been applied by the Ninth and Third Circuits.

The Frederick decision means that plaintiffs cannot foreclose federal jurisdiction in class actions through creative pleading in the Tenth Circuit.  However, the burden is still on the defendant to prove as a matter of fact that the amount at stake in the case exceeds $5 million.  Therefore, it also highlights the need for defense counsel to gather, plead, and be prepared to prove specific facts showing the amount at stake in the case. 

It is always important to remember that proving the amount in controversy does not require the defendant to prove the damages that are likely to be awarded against it in the case (of course most defendants would say that this amount is zero).  Instead, it requires the defendant to establish the highest amount that the plaintiff class could conceivably win based on the legal claims presented, the relief sought (both damages and other relief sought expressly and damages that could legally flow from the claims presented), and the maximum potential value that the plaintiff could reasonably put on that relief.  The preponderance standard requires the defendant to prove facts that would cause more than $5 million to be awarded if the plaintiff proves the claims and potential theories of damages that flow from those claims.

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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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Rita Robinson, who writes the Boomer Consumer blog for the Seattle Post-Intelligencer, posted an entry titled Attorneys general oppose DirectBuy’s class-action lawsuit settlement discussing an amicus brief filed by Attorneys General from 34 states, Puerto Rico, and the District of Columbia objecting to a proposed settlement in a consumer fraud class action brought against online wholesale club DirectBuy, Inc. in the U.S. District Court for the District of Connecticut.

A copy of the brief is available for download here courtesy of the Washington Attorney General’s website.   The essential theory of the case was that the defendant “represented that paid DirectBuy memberships entitle customers to purchase goods from manufacturers and suppliers at actual cost when, in fact, Defendants receive kick-backs from the suppliers and manufacturers out of the purchase price paid by DirectBuy members — resulting in members paying more than the actual cost for such goods.”  Amicus Brief at 4.   The 34-page brief raises a variety of objections to the settlement, but the primary beef is that only benefit to claimants was membership extensions or discounts on future memberships, which they argue amounts to a “coupon” settlement.

The case illustrates the practical impact of a key but often overlooked component of the Class Action Fairness Act of 2005, the requirement that “appropriate” government officials be given notice of a proposed class action settlement in federal court.   This is a topic that was the subject of a series of CAB posts in 2008, which you can access at the links below:

As noted in June 25, 2008 entry, although CAFA requires that notice be given to state and federal officials, it is rare for those officials to take any action to object to the settlement after they receive it.  One exception, as exemplified by the DirectBuy case, is a coupon settlement.  (The other thing that can get officials’ attention is where the release in a proposed settlement purports to bind state officials, such as a clause that purports to release parens patriae claims by the state.)

Although CAFA requires notice to state officials, it does not give them any power to prevent the settlement.  In fact, state officials do not even have the express power to formally object to a settlement, which is why when they do act, it is usually in the form of an amicus (friend of the court) brief.  Ultimately, approval or disapproval of the settlement is still up to the trial court.  However, it should go without saying that if you’re a party or attorney seeking approval of a class action settlement, it’s much better not to have government officials filing an amicus brief critical of your settlement.

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I will be speaking in an upcoming live phone/web seminar on CAFA removal issues sponsored by Strafford Publications.  Here is some information about the program:

CAFA Removal and Remand: Latest Developments

Tuesday, March 29, 1:00pm-2:30pm EDT

Program Description:

Jurisdictional ambiguities in the CAFA statute continue to challenge litigators. One example is the Eleventh Circuit’s Cappuccitti v. DirecTV ruling that the district court lacked jurisdiction because no individual plaintiff or putative class member met the amount-in-controversy requirement. While the Eleventh Circuit later vacated its decision, its initial confusion was caused by CAFA’s ambiguous jurisdictional structure. Another evolving jurisdictional issue is the federal court’s authority to retain jurisdiction post-removal. Courts still wrestle with the effect of post-removal events such as denial of class certification or loss of diversity on continued federal court jurisdiction. While several recent cases more firmly establish continued post-removal federal court jurisdiction, this issue is far from settled.

This program will provide class action litigators with an examination of the latest case law developments in CAFA removal and remand, analyze continued jurisdictional ambiguities and pitfalls, and offer litigation strategies for navigating these ambiguities. The panel will offer perspectives and guidance on these and other critical questions: How are the courts resolving ambiguities in CAFA’s amount-in-controversy requirements for federal court jurisdiction? Do the federal courts retain jurisdiction even after class certification is denied or diversity is destroyed? What post-removal events or circumstances can result in a remand to state court?

The panel presentation will be followed by a  live question and answer session.

For more information and to register, see the Strafford Publications website.

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While browsing the news today, I came across an informative class action-related snippet on www.lexology.com apparently authored by someone at my firm.  (I’m not sure specifically whom to credit for the tip, I just know it wasn’t me.)  The article summarizes a January 2010 decision authored by Seventh Circuit Court of Appeals Judge Richard Posner regarding the impact of a denial of class certification under the Class Action Fairness Act.  The case is Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010).  A full copy of the opinion is available courtesy of the good folks at the CAFA Law Blog.  Here’s a link to the Baker Hostetler article.

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Here are some blog posts from the (2) weeks that were that might be of interest to class action practitioners:

Responses to the October 29 CABWR “Lay Down the Gauntlet” Challenge of the Week

Many thanks to Walter Olson at Point of Law for posting a link to the “Lay Down the Gauntlet” Challenge of the Week from the last CABWR, but alas, my question was either too uninformed to justify a response or so brilliant that everyone was stumped.  Or maybe Walter Olson is my only reader.  I guess if you only had one reader, he wouldn’t be a bad choice.  Oh well…

http://www.pointoflaw.com/archives/2008/11/meal-and-rest-b.php

Class Action Decisions

The UCL Practitioner provides a thorough analysis of the Seventh Circuit Court of Appeals decision in Thorogood v. Sears, Roebuck & Co., ___ F.3d ___ (7th Cir. Oct. 28, 2008) addressing aggregate class proof, in which Judge Posner quipped: “At argument the plaintiff’s lawyer, skeptical that men ever operate clothes dryers—oddly, since his client does—asked us to ask our wives whether they are concerned about rust stains in their dryers. None is.”

http://www.uclpractitioner.com/2008/11/new-seventh-circuit-class-certification-decision-thorogood-v-sears-roebuck-co.html

FiercePharma and Pharmalot discuss a Florida federal court’s decision dismissing a RICO case filed against a drug manufacturer for alleged fraud in its marketing practices about the safety and effectiveness of its product, a decision that appears to conflict with Judge Weinstein’s recent Zyprexa decision (discussed at the recent National Institute on Class Actions):

http://www.fiercepharma.com/story/judge-throws-out-rico-class-action/2008-11-11?utm_medium=rss&utm_source=rss&cmp-id=OTC-RSS-FP0 

http://www.pharmalot.com/2008/11/judge-tosses-rico-lawsuit-against-astrazeneca/

Consumer Law & Policy Blog comments on a New York state appellate court decision holding that incentive awards may not be given to named plaintiffs in class action settlements:

http://pubcit.typepad.com/clpblog/2008/11/new-york-appell.html

Wild Wild Law discusses a Nevada court’s decision to deny class certification in a case involving allegations that an endoscopy clinic’s use of needles contaminated with Hepatitis C and its subsequent notification to patients who may have been exposed, caused severe emotional distress.  (See ClassActionBlawg entry on the case here):

http://wildwildlaw.blogspot.com/2008/11/class-action-denied.html

Florida ADR Law.com provides a synopsis of a Florida federal court’s decision to uphold a class arbitration waiver provision in a consumer mobile phone service contract:

http://floridaarbitrationlaw.com/blogs/index.php?blog=5&title=atat_wireless_iphone_arbitration_class_a&more=1&c=1&tb=1&pb=1

First Mediation summarizes a California Court of Appeal decision overturning the approval of a class action settlement in part because the court had not inquired about data underlying settlement communications made during a mediation:

http://www.firstmediation.com/blog/?p=335

The Am Law Daily provides an update on a high-stakes antitrust class action against railroad operators:

http://amlawdaily.typepad.com/amlawdaily/2008/11/the-am-law-li-6.html

ZoneBlitz provides commentary and reaction to the jury’s verdict in favor of former NFL players in a class action against the NFLPA.  (See ClassActionBlawg entry here):

http://www.zoneblitz.com/2008/11/10/jury-awards-former-football-stars-281-million/

Spamnotes reacts to a Second Circuit Court of Appeals decision rejecting class certification under the Telephone Consumer Protection Act (TCPA):

http://spamnotes.com/2008/11/08/second-circuit–no-tcpa-class-action-in-ny.aspx

Drug and Device Law Blog provides a synopsis of a Massachussets federal court’s decision to limit the amount of a fee award in a class action settlement to the actual benefits claimed as opposed to the theoretical benefits obtained for class members:

http://druganddevicelaw.blogspot.com/2008/11/class-action-settlement-rant-tjx.html

The Complex Litigator discusses a rare appellate decision siding with an objector to a class action settlement:

http://www.thecomplexlitigator.com/2008/11/in-kullar-v-foot-locker-retail-inc-court-of-appeal-sides-with-objector-to-class-action-settlement.html

As always when I miss a week of CABWR, CAFA Law Blog has numerous great summaries on recent CAFA decisions, so I’ll just direct you to the main page.  Ditto for Class Action Defense Blog and its numerous case summaries on various class action-related topics:

Class Action Trends

The D&O Diary summarizes a recent NERA Economic Consulting report on trends in SEC settlements an their values following the passage of Sarbanes Oxley…

http://www.dandodiary.com/2008/11/articles/securities-litigation/nera-study-details-postsox-sec-settlements/

… and comments on future of the plaintiffs’ securities bar in light of recent scandals involving high profile lawyers:

http://www.dandodiary.com/2008/11/articles/plaintiffs-bar/the-future-of-the-plaintiffs-securities-bar/

Boston ERISA and Insurance Litigation Blog discusses a trend away from securities class actions and toward ERISA breach of fiduciary duty class actions:

http://www.bostonerisalaw.com/archives/401k-plans-you-say-securities-law-i-say-erisa.html

CAFA Law Blog offers some astute but unfortunately unconfirmed quotations on developments on the Class Action Fairness Act of 2005 from former VP candidate Sarah Palin in summarizing papers presented at a 2007 Penn Law Review symposium on CAFA:

http://www.cafalawblog.com/-resources-does-palin-know-cafa-you-betcha-thanks-to-the-2007-university-of-pennsylvania-law-review-symposium-and-accompanying-articles.html

Jim Hamilton’s World of Securities Regulation discusses the difficulties of bringing a securities fraud class action in the Fifth Circuit in light of its recent decisions on loss causation:

http://jimhamiltonblog.blogspot.com/2008/11/lost-causes-fraud-pleading-in-5th.html

The Race to the Bottom offers a multi-part analysis of trends in lower court cases addressing the Private Litigation Securities Reform Act of 1996 (PRLSA) since the U.S. Supreme Court’s 2007 decision in Tellabs, Inc. v. Makor Issues & Rights:

http://www.theracetothebottom.org/home/the-tellabs-excuse-a-recappart-1.html

http://www.theracetothebottom.org/home/the-tellabs-excuse-a-recappart-2.html

http://www.theracetothebottom.org/home/2008/11/12/the-tellabs-excuse-a-recappart-3.html

Class Action Commentary

Peter Brantley’s thoughts and speculations include a commentary on the impact of a proposed class action settlement in “arguably assisting in the creation of a monopoly”:

http://blogs.lib.berkeley.edu/shimenawa.php/2008/11/06/class-action-monopoly

Wage Law provides an analysis of the propriety of a defendant filing a preemptive motion to reject class certification before any class is certified:

http://www.californiawagelaw.com/wage_law/2008/11/motions-to-pre-de-certify.html

The Legal Infrastructure of Business discusses entertaining comments made in exclusion (opt-out) requests filed by would-be members of an Iowa consumer class:

http://picker.typepad.com/legal_infrastructure_of_b/2008/11/dont-count-me-i.html

Portfolio.com opines on the possible impact to New York City Mayor Bloomberg’s re-election bid of a discrimination class action filed by pregnant workers against the company that bears his name:

http://www.portfolio.com/executives/features/2008/11/11/Gender-Discrimination-at-Bloomberg

North Carolina Business Litigation Report comments on public comments by the N.C. state treasurer and other prominent people and how those comments reflect public sentiment regarding a proposed bank merger that a pending shareholder class action seeks to enjoin:

http://www.ncbusinesslitigationreport.com/2008/11/articles/class-actions/north-carolina-state-treasurer-says-wachoviawells-fargo-merger-is-highway-robbery/

Overlawyered discusses a multi-million dollar settlement of claims against the Mexican government for alleged unpaid benefit amounts owed to workers who came to the U.S. during World War II as part of a guest worker program:

http://overlawyered.com/2008/11/wwii-era-mexican-braceros-settlement/

WiredMag comments that class actions “that seem funny aren’t always a laughing matter” to those involved, including one in which a plaintiff claims to have been tricked into paying premium fees for an Internet networking service based on representations that his classmates were looking for him…

http://wiredmag.livejournal.com/3526145.html

… more on the same case fromVibe …

http://www.vibetechmag.com/?p=2809

… and In other non-humorous Class Action News

Reacting to a class action filing that was tailor-made for the blogosphere, The ConsumeristSheFinds, Consumer Reports Blog, Jamerican Muslimah: Talking it Plain, Blogue, Behind Blue Eyes, The Red Dress Diary, Style Crunch and Winn & Tonic (and about a zillion others) offer varying perspectives on a putative class action filed against a well-known seller of women’s intimate apparel for allegedly selling bras treated with a substance that caused skin rashes:

http://consumerist.com/5084654/class-action-lawsuit-victorias-secret-bras-causing-skin-rashes

http://www.shefinds.com/blog/index.php/weblog/comments/news_victorias_secret_causes_a_rash/#When:13:00:43Z

http://consumerreportsblog.blogspot.com/2008/11/class-action-suit-claims-damages-caused.html

http://jamericanmuslimah.wordpress.com/2008/11/12/is-your-vickis-bra-making-you-sick/

http://blogue.us/2008/11/12/we-know-victorias-secret/

http://bechindblueeyes.blogspot.com/2008/11/victorias-secretformaldehyde-bras.html

http://style.popcrunch.com/victorias-secret-is-sexy-but-it-may-be-dangerous/

http://winnandtonic.wordpress.com/2008/11/11/victoria-secrets-bras-mutilate-breasts-no-bra-look-to-return/

Pro Football Talk summarizes the claims in a would-be class action filed by an NFL player against the manufacturer of a nutritional supplement manufacturer for failing to disclose to consumers that its product included a controlled substance–a substance perhaps not coincidently was banned by the NFL, and for which several current NFL players have tested positive:

http://www.profootballtalk.com/2008/11/10/grady-jackson-files-starcaps-class-action/

International Class Action Law

This South China Morning Post editorial discussing Hong Kong’s lack of a class action procedure and suggesting that now may be the time to adopt one and change the rules prohibiting contingent fees:

http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cba0a0a0/?vgnextoid=1357e46f3178d110VgnVCM100000360a0a0aRCRD&vgnextfmt=teaser&ss=insight&s=opinion

See this entry in Tan Kin Lian’s Blog for a link to the full article:

http://tankinlian.blogspot.com/2008/11/scmptime-to-reconsider-class-action.html

Several months ago, I commented on a story from Finnish newspaper YLE discussing Finland’s never-once-used class action law.  Well, according to this story, the wait is over.  Apparently, the consumer ombudsman has filed a class action over problems with an electronic voting system used during recent municipal elections:

http://www.yle.fi/news/id107325.html

FP Legal Post offers tips for defendants in avoiding class action exposure in Canada through proactive internal complaint resolution:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/11/10/preventative-measures-for-class-action-defendants.aspx

大海的道味 discusses a legal battle facing two Internet companies in Argentina in a case that the author says “amounts to a class action suit against the Internet companies, although there is no such thing as a class action suit in Argentina”:

http://zhou520530qq.blogspot.com/2008/11/argentine-judge-google-yahoo-must.html

Legal Theory Blog and Mass Tort Litigation Blog provide an abstract of a scholarly article by NYU Law Professors Samuel Issacharoff and Geoffrey P. Miller entitled “Will Aggregate Litigation Come to Europe?”:

http://lsolum.typepad.com/legaltheory/2008/11/issacharoff-mil.html

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

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