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Archive for the ‘Employment Class Actions’ Category

Many commentators correctly that the decision in Wal-Mart Stores, Inc. v. Dukes would be favorable to business interests.  However, unlike the Court’s earlier decision in AT&T Mobility v. Concepcion, the decision does not necessarily threaten to sound a death knell for class actions or even a particular category of class actions.  Instead, the decision merely clarifies the standards on which future class actions are to be evaluated in the federal courts, but it does so in a way that is likely to impact class actions in many areas of the law outside of the employment law context.  Here are some of the key issues on which the opinion will undoubtedly be cited in the future, and some thoughts on the potential impact of the decision on each issue.

1) Standard of review  – The majority’s decision clarifies a long-standing misconception about the ability of a federal court to consider questions relating to the merits of a case in the class certification phase.  For more than 30 years, plaintiffs’ counsel and many courts have cited the Court’s opinion in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) as prohibiting any examination of the plaintiffs’ claims on the merits at the class certification phase.  Consistent with the majority trend in the lower federal courts, the Supreme Court’s decision in Wal-Mart Stores, Inc. confirms that a court should consider and resolve any issues of fact that are necessary to determine whether one or more elements of Rule 23 are satisfied, regardless of whether those issues may overlap or be identical to one or more issues to be decided in ruling on the merits of the plaintiff’s claims.

2) Evaluation of Expert Testimony – The majority decision makes clear that it is appropriate for a federal court to conduct a Daubert analysis to consider the reliability and helpfulness of expert witness opinions at the class certification phase.  It is no longer sufficient for a plaintiff to present expert testimony and then argue that the Court may find that testimony reliable at some later point in the proceedings.  Again, in keeping with te trend among the federal circuit courts, the Court’s analysis in Wal-mart Stores, Inc. makes clear that the reliability and relevance of expert testimony proposed as “common proof” should be evaluated before granting class certification.

3) Use of Statistical Evidence in Support of Class Certification – The majority’s decision leaves open the possibility that statistical evidence might be used in establishing the existence of common proof in certain cases, but it sets a high standard for when proffered statistical evidence can be considered as adequate proof of the existence of “common issue.”  Significantly, Part III of Justice Scalia’s opinion, which was joined by all 9 justices, disapproves of the “Trial by Formula” approach to class actions, in which a sample of claims is tried on the merits, and the results of that sample are then applied proportionally to the claims of the entire class.

4) Certification of Claims Seeking Monetary Relief Under FRCP 23(b)(2) – This is perhaps the most uncontroversial aspect of the opinion in that part of the unanimous holding of the Court.  The Court’s holding is also straightforward, at least conceptually: claims for monetary relief may not be certified under FRCP 23(b)(2) unless they are merely incidental to injunctive or declaratory relief being requested on behalf of the class as a whole.  However, the devil may be in the details, as future courts (especially outside the employment law context) will be left with the task of defining what monetary relief is “incidental” to injunctive or declaratory relief and what is not.

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As was widely expected, the Supreme Court has overturned class certification in what has been called the largest employment discrimination class action in history. The slip opinion in Wal-mart v. Dukes, No. 10-277, (S. Ct. June 20, 2011). is available at the Court’s website.

The justices were unanimous in finding that Rule 23(b)(2) did not allow the class action to go forward for the purpose of seeking monetary relief in the form of back pay. However, the Court split 5-4 on whether the case should have been allowed to go forward for the purpose of pursuing injunctive relief. Justice Scalia wrote for the majority and Justice Ginsburg authoring a partial dissent.

Much more on the decision later…

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Last week, Seventh Circuit Court of Appeals Judge Richard Posner authored an opinion addressing one of the key issues awaiting a ruling by the United States Supreme Court this term, holding that an employment discrimination class action seeking back pay could not be certified under FRCP 23(b)(2).   Here is a relevant excerpt from the opinion, Randall v. Rolls-Royce Corp., No. 10-3446, slip op.  at 12-14 (7th Cir., March 30 2011) (I have removed the internal citations for ease of reading),

[I]magine if the plaintiffs in this case were just seeking an injunction commanding basepay equalization between male and female employees.

But that’s not what they’re seeking, exclusively or even mainly; and indeed this isn’t a proper Rule 23(b)(2) suit.  Class action lawyers like to sue under that provision because it is less demanding, in a variety of ways, than Rule 23(b)(3) suits, which usually are the only available alternative. . . . Of particular significance, “plaintiffs may attempt to shoehorn damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out protections. The incentives to do so are large. Plaintiffs’ counsel effectively gathers clients—often thousands of clients—by a certification under (b)(2). Defendants attempting to purchase res judicata may prefer certification under (b)(2) over (b)(3).” . . . How far Rule 23(b)(2) can be stretched is the issue in the gigantic class action against Wal-Mart, Dukes v. Wal-Mart Stores, Inc. . . . now before the Supreme Court. The present case is not as big a stretch, but it is big enough. 

True, the only monetary relief sought is back pay; true, too—contrary to the common but erroneous notion that courts of equity can’t award monetary relief—they can do so if the award is merely incidental to the grant of an injunction or declaratory relief: “incidental” in the sense of requiring only a mechanical computation. That is the “clean-up” doctrine of equity. . . . In such a case, to make the class representative bring a second suit, for damages, on top of his injunctive action would create pointless redundancy. . . .

The plaintiffs argue that if only equitable relief is sought, a class action suit may be maintained under Rule 23(b)(2) even if the equitable relief is mainly monetary. We disagree. To read “injunctive” in the rule to mean “equitable” is to become mired in sticky questions of differentiating between “legal” and “equitable” actions—and such questions abound. . . .  We can avoid the mire by recognizing that Rule 23(b)(2) class actions are limited to cases in which “final injunctive relief or corresponding declaratory relief” is appropriate, rather than extending to all cases in which any kind of equitable relief is sought. . . . The monetary relief sought in a case, whether denominated legal or equitable, may make the case unsuitable for Rule 23(b)(2) treatment. . . .  As this case illustrates: calculating the amount of back pay to which the members of the class would be entitled if the plaintiffs prevailed would require 500 separate hearings. The monetary tail would be wagging the injunction dog. An injunction thus “would not provide ‘final’ relief as required by Rule 23(b)(2). An injunction is not a final remedy if it would merely lay an evidentiary foundation for subsequent determinations of liability.”

Could it be that the resolution of this issue is as simple as the recognition that “equitable” doesn’t mean “injunctive” and that class actions seeking monetary relief, whether “equitable” or “legal” can only be brought under Rule 23(b)(3), not Rule 23(b)(2)?  The Supreme Court should have an answer within the next two months.

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The Wal-Mart v. Dukes argument was held as scheduled today.  Here is a Wal-Mart v. Dukes Oral Argument Transcript.  Some initial observations:

  • The beginning of the defendant’s argument was focused on the proper standard for reviewing whether the plaintiff had sufficiently common evidence of a uniform policy.
  • It was not until later in the defendant’s argument that the questioning turned to the question certified for review: whether a Rule 23(b)(2) class action should be certified in a class action seeking monetary relief in the form of back pay.  Questioning on this issue continued into the plaintiff’s argument, but then returned to questions of what standard should apply more generally in certifying an employment discrimination class action.
  • On balance, the tougher questioning of the defendant’s attorney was from the more liberal faction of the court, and the tougher question of the plaintiff’s attorney was from the more conservative faction of the court. 
  • However, to the extent the questions can be a sign of a potential split in the Court (always a dangerous assumption), it is interesting that Justice Ginsburg seemed particularly troubled by the plaintiff’s position on the applicability of Rule 23(b)(2) to the back pay claims.
  • Overall, the sentiment seemed to be against allowing Rule 23(b)(2) to be used as a vehicle to resolve individual back pay claims (again, recognizing that the nature and tone of oral argument questions is not a very reliable way to predict outcomes).  However, there seemed to be some support among several Justices for the possibility that a case could be certified under Rule 23(b)(2) for injunctive relief only, on the ground that hiring policies are discriminatory because they are excessively subjective.

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The United States Supreme Court will hold oral argument next Tuesday, March 29, 2011, in case of Wal-mart v. Dukes, No. 10-277.  The issue for review, at least so far, according to order granting certiorari, is:

Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) – which by its terms is limited to injunctive or corresponding declaratory relief – and, if so, under what circumstances.

Hopefully, questions posed by the justices during the argument will also provide insight into what the Court meant in its somewhat vague directive that the parties brief the issue “Whether the Class Certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).”

Another thing I’ll be looking out for is whether the questions appear to limit the analysis to the employment discrimination context, or whether they portend a more general analysis of Rule 23 that could impact class actions in other subject matter areas.

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Can plaintiffs seek back-damages using a class action vehicle that’s built for righting wrongs in equity through remedies like injunction?  In the biggest work place class action ever, the United States Supreme Court has granted cert on the question of whether plaintiffs can use the Rule 23(b)(2) injunctive class procedure as a vehicle to seek money damages.  Why does it matter?  Because injunctive classes are much easier to certify than damages classes.  Usually, when plaintiffs seek damages as their primary remedy they pursue class certification through Rule 23(b)(3), the money damages class, which has significantly more burdensome procedural requirements to achieve class certification than its injunctive counterpart.  The high court should have an answer by June of 2011.

For an accessible preview check out Lyle Denniston’s article at Scotus Blog.  Read the 9th Circuit opinion here.  Check out other comments by Supreme Court watchers:  David G. Savage has an article in the L.A. Times; Jess Bravin and Ann Zimmerman have this piece in the Wall Street Journal; Adam Liptak and Steven Greenhouse file this report in the New York Times.

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It’s back!  We can’t promise that it will appear weekly, so we changed the name to Class Action Blogosphere “Periodic” Review.  But, as always, we have combed through our favorite blogs and news feeds to bring our readers up to speed on a some of the notable developments in class action news.

The End of Consumer Class Actions as We Know Them?

One story is, by far, the biggest news in the class action world.  Today, the U.S. Supreme Court will hear argument in the case of AT&T Mobility Services v. Concepcion.  The key issue is whether class action exemptions in consumer contracts are enforceable even when state contract law bars such exemptions.  AT&T argues that the Federal Arbitration Act preempts state contract law.  Thus, if a class action exemption is tied to an arbitration clause it is enforceable despite contrary law at the state level.  For an accessible read, check out Brian T. Fitzpatrick’s story in the San Francisco Chronicle…

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/06/INA41G6I3I.DTL

… and see also

All Writs Act Better than Collateral Estoppel

Class action defense lawyers may have a new tool to use against copycat class actions; particularly those involving plaintiffs’ lawyers who attempt to extort settlements through threat of discovery.  It’s called the All Writs Act.  It was used by Judge Posner in the Seventh Circuit to grant an injunction blocking a copycat class action in another jurisdiction.  The case is called Thorogood v. Sears, Roebuck & Co.  For more information check out Andrew Trask’s November 10 post on Class Action Countermeasures.  Judge Posner even cites Trask’s new book, The Class Action Playbook.  (See CAB Review of the book here).

http://www.classactioncountermeasures.com/2010/11/articles/discovery/using-the-all-writs-act-to-block-copycat-class-actions/

For a slightly different take on Posner’s decision, read Russell Jackson’s post on Consumer Class Actions & Mass Torts.

http://www.consumerclassactionsmasstorts.com/2010/11/articles/predominance-1/7th-circuit-enjoins-relitigation-of-denial-of-class-certification/

Motion to Dismiss + Discovery = Motion Granted?

The Rule 12(b)(6) Motion to Dismiss can sometimes feel like a mini-motion for summary judgment.  Over the years, courts have been more willing to consider information beyond merely the pleadings including documents that are referenced by plaintiffs and central to their claims.  Anything more is supposed to convert the motion to dismiss into a motion for summary judgment, right?  Maybe not.  One court has apparently permitted discovery in the context of a Rule 12 Motion to dismiss.  Get the story in a post titled Preemption, Pleading & Rule 11 at Drug and Device Law.

http://druganddevicelaw.blogspot.com/2010/11/preemption-pleading-rule-11.html

Big Changes Coming for Rule 26 and Expert Witnesses

The communications between attorneys and their expert witnesses are currently discoverable in federal court. Not for long.  Federal Rule 26 is about to change in a way that will protect certain communications between counsel and expert.  The rule change will also extend work product protection to the draft reports of experts.  Check out the latest post in the North Carolina Business Litigation Report.

http://www.ncbusinesslitigationreport.com/2010/11/articles/discovery-1/work-product-protection-for-communications-between-lawyers-and-expert-witnesses-coming-next-month-under-revised-federal-rules-of-civil-procedure/

Hooters Waitresses Have no Class … Action?

Always read the fine print.  According to the Washington Post, whatever the Supreme Court decides in AT&T Mobility Services vs. Concepcion may have ramifications for a class of waitresses trying to sue Hooters.  You see, the job application has an arbitration clause that bars lawsuits.

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/05/AR2010110507318.html?hpid=moreheadlines

Oppress Me, Please

Professor James C. Morton reports on a Canadian decision allowing class certification of a case seeking the remedy of “oppression” in his blog, Morton’s Musings.  Doesn’t sound like a very pleasant  remedy to us, but they march to the beat of their own drummer north of the border.

http://jmortonmusings.blogspot.com/2010/11/oppression-remedy-properly-sought-in.html

You Mean to Tell Me that Fast Food Makes you Fat!?

Sean P. Wajert of Mass Tort Defense reports on a recent decision denying class certification to a plaintiff seeking to hold a fast food chain responsible for allegedly misleading consumers into thinking that its fare poses no health risks.

http://www.masstortdefense.com/2010/11/articles/class-action-alleging-false-food-ads-rejected/

Securities Class Action Filings Down

As reported in the Conference Board’s Governance Center Blog by guest contributor Anthony Galban, Sr. V.P. of Chubb & Son, securities class action filings are down significantly in 2010.

http://tcbblogs.org/governance/2010/11/04/guest-contributor-securities-class-action-filings-are-down-but-will-the-trend-continue/

Hot Pockets are Fast and Tasty

Greg Mersol of Baker Hostetler’s new Employment Class Action Blog reports on the latest in a series of California decisions denying class certification in a wage and hour case seeking to hold an employer liable for not ensuring that its employees to take meal breaks.

http://www.employmentclassactionreport.com/class-action/another-court-denies-certification-of-a-california-meal-break-class/

Describe that Class for Me Again?

The Complex Litigator‘s H. Scott Leviant reviews a recent California Court of Appeal decision holding that class certification was not appropriate because the proposed class was not ascertainable.

http://www.thecomplexlitigator.com/post-data/2010/11/1/in-sevidal-v-target-corporation-an-unascertainable-class-doo.html

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