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Registration is still open for our ABA Regional program in San Francisco on Friday, June 21.  Click the link below to register and for more information.  The program features four informative panel presentations on cutting-edge trends in class actions and mass tort litigation.  Don’t miss it!

Program Registration Link

For any public interest lawyers or others with financial need, if you’d like to attend but would have trouble paying the registration fees, please reach out to me directly at pkarlsgodt@bakerlaw.com and I’ll make sure we get you registered.

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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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Yesterday, the ALPS 411 Blog published my guest post titled I got this email about a class action.  What should I do?  Among other things, the post addresses how one goes about deciding whether an emailed class action notice is real or spam (or worse). 

For readers not familiar with the company, ALPS is an attorney liability insurer and financial services provider headquartered in my home state of Montana.  Be sure to check out the ALPS 411 Blog for excellent content relating to a host of topics of interest to attorneys, including ethics, malpractice, risk management, and general practice tips.

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For those readers who may be dissatisfied with my somewhat uneven coverage of all things class action lately, here’s a reminder about a great source for the latest in class action news and trends: the ABA’s Class Actions and Derivative Suits (CADS) Committee Group Page on LinkedIn.  CADS membership is free to all ABA Section of Litigation members.  Participation in the LinkedIn group is a benefit to all CADS members.  For more information on how to join CADS, click here.  For the LinkedIn Group, click here

Some highlights of the content available on the LinkedIn page:

  • A summary of the recent oral argument before the United States Supreme Court in Standard Fire Insurance Co. v. Knowles
  • Coverage of a recent 7th Circuit decision discussing whether misconduct by putative class counsel requires denial of class certification.
  • Links to articles authored by members in other publications or blogs.
  • Announcements about upcoming CADS events.

And much more…

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According to Deborah Mao in this article published today on businessweek.com, regulators for the city of Hong Kong has proposed new legislation that would permit representative actions for certain consumer class actions.  The legislation is reportedly a response, at least in part, to concerns about the difficulty of shareholders to seek collective redress for alleged acts of securities fraud, although the new law would not initial apply to securities fraud claims. 

The legislation would likely provide for class actions to be financed through a public legal aid program rather than through contingency fees, as is typically the case in the United States.  The proposal is still in the early stages, and specific legislation remains to be “drafted and introduced,” according to an official quoted in the article.

We’ll keep an eye on future developments relating to the proposed legislation.  Stay tuned…

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The 5th Annual Conference on the Globalization of Class Actions and Mass Litigation was even better than advertised.  It was an engaging and enlightened gathering of the world’s top experts in the areas of class, collective, and mass litigation.  And what better environment to have a conference on developments in international law than at the beautiful and historic Raad van State in the Hague.  I can’t say enough about the great job that Professors Deborah Hensler, Christopher Hodges, and Ianika Tzanokova did in putting this year’s conference together.

The individual sessions all followed a similar general presentation format, which was very effective.  Each panel presentation was focused around a case study based on the facts of a real case or set of cases.  An academic would present the case study and generally introduce a set of issues flowing from that case study.  A panel of practitioners, judges, and industry or consumer experts would then discuss the application of the problem in different geographic regions, political or judicial frameworks, or other contexts.  The idea was focus the discussion on what is actually happening “on the ground” in the areas of class actions and mass litigation, which was a welcome perspective to those of us for whom what’s happening on the ground is what matters the most.  The panels were diverse enough to offer a variety of viewpoints, but the topics were well-matched to the experiences of the panelists so that the presentations had continuity and a clear focus. 

In the interest of not having to wait another week to post my thoughts on all of the sessions (and in not having a single post of such length that it will put some of you to sleep), I’ll be posting them separately over the next week or so.  Here are my notes of the first session:

Session 1: The Challenge of Mass Communications: Problem or Opportunity?

The case study for this session was presented by Professor Ianika Tzanokova of Tilburg University, who also hosted the conference.  The panel was chaired by Mr. Michael Seymour, International Director of Crisis & Issues Management, Edelman, and the panelists were Mr. Arnold Croiset van Uchelen, Senior Partner AllenOvery LLP, Mr. Ben Knüppe, Trustee of DSB Bank/Former CEO of Dexia Bank, Mr. Jan Maarten Slagter, Director Dutch Retail Shareholder Association (VEB) and Mr. Stephan Holzinger, Holzinger Associates Nederland.

The case study was of the Dexia investment products litigation in The Netherlands, mass litigation that was influenced greatly by media exposure.  The litigation involved financial products called securities lease products, in which customers of Dexia’s predecessors in interest would loan money to consumers to fund investments, a scheme that worked well until the market downturn of the late 1990s.  Dexia had been the subject of a TV program in Holland that resulted in tens of thousands of angry customer calls to the station that broadcast the program. Ultimately multiple special purpose consumer associations were set up for the purpose of aggregating, and ultimately settling, claims.  Throughout the course of the litigation, both the defendant and the competing plaintiffs’ groups had to deal with complex and challenging public relations issues.

Understanding the panel’s discussion requires a basic review of how mass or collective actions are litigated in The Netherlands (and other European civil law jurisdictions).  Dutch law allows consumer associations to represent the interests of consumers, but only to the extent that individual consumers affirmatively consent to the representation.  Essentially, as Arnold Croiset van Uchelen explained, the system is one that relies on assignments and powers of attorney.   When mass claims arise, as they did in the Dexia case, this means that consumer or plaintiff groups compete to round up members, and then compete for the court’s and the defendant’s attention based on the number of claimants that they purport to represent.  One of the practical problems tends to be that victim’s advocates make claims to the media about how many of the claimants that they represent, in the interest of attracting attention to their cause.  Certainly, many of these claims are legitimate, but the opportunity exist for a particular advocacy group to exaggerate the number of claimants that it represents in the hopes of gaining media attention and, ultimately, negotiating leverage.

Speaking from the industry perspective, former CEO of Dexia, Ben Knüppe presented a simple and direct argument about how to deal with the problem of media communications in European mass actions.  The media is always looking for the simple message.  The most radical position tends to get the most press, and as a result, the media often presents the view of fringe groups rather than the more reasonable views of the majority (as an aside, it stuck me how apt this commentary is in describing American politics).  However, it is impossible to regulate how the media will portray the litigants’ competing messages.  So, in Mr. Knüppe’s view, the system is in need of reform to regulate who should be permitted to represent plaintiffs’ interests in mass litigation.

Jan Maarten Slagter offered the unique perspective of someone who represents consumer interests but who has also been a member of the media.  He defended the media by saying that the media always tries to get to “a truth” but pointed out that there are always multiple truths to a story due to differing perspectives.  He then offered some specific guidance to organizations representing plaintiffs’ interests:  A plaintiff’s organization has to play a difficult and subtle game.  It’s important to be the first out of the gate in getting media exposure.  You must show strength in the position of your argument, but you have to be careful to manage expectations.  And when a consumer group achieves a settlement with the defendant, it often has to deal with competing groups and objectors.  In this context, he noted that it is important to take the “wind out of the sails” of these competing interests by showing to the media, and ultimately the public, that you have negotiated the best deal.

Arnold Croiset van Uchelen talked about the roles of different types of media in mass litigation.  Commenting on the role of social media, he noted that it plays an important role in modern litigation because unlike traditional media, it allows for two-way conversations between the media and the public.  However, echoing one of Ben Knüppe’s points, he cautioned that it also tends to allow the most radical elements to come to the forefront.  After commenting that the media tends to side with the plaintiffs in mass litigation because the media “loves misery,” he focused on the potential positive role of traditional media in mass litigation.  He argued that the traditional media could play a stronger role in pointing out distinctions between competing plaintiffs’ groups in order to better serve the public about their choices in obtaining representation.  Later in the presentation, one of the panelists gave an example of a TV station asking consumer groups to provide information about their organization and financing.

Stephan Holzinger had some good advice for those who represent defendants in mass litigation.  Most fundamentally, he remarked on something that should be obvious but that may not be the first instinct for many defendants, “you run best with the truth.”  He also counseled for the need for defendants to engage the media proactively in high-profile litigation as a way to head off problems with other interests, such as employees, suppliers, shareholders, and competitors.  As a specific example, he pointed to Taco Bell’s successful public relations campaign in response to a would-be class action suit accusing it of consumer fraud for not using 100% beef in its tacos.  Ultimately, Taco Bell was able to turn the lawsuit into a successful advertising campaign.

Public relations expert Michael Seymour anchored the panel with some comments about the dynamics of media impact on public perception.  He found it interesting that several of the other panelists had commented about “using” the media in the context of litigation.  He noted that in understanding traditional media, you have to consider that it must always move fast and that it always has only the partial attention of its audience.  He added that social media tends to be effective because people have the most trust in “someone like myself” and that social media creates the impression of a more intimate, one-on-one communication (in case you’re wondering, I wrote this post just for you, seriously).  Seymour offered a few specific points that a party to high-profile litigation should consider in developing an effective PR strategy.  The first is to walk the fine line of advocating your position in the case without going too far in vilifying your opponent, since you may well find yourself sitting across the negotiating table later.  Slagter echoed this point counseling plaintiffs to always be mindful of the “end game” in litigation in developing their media strategy.   Seymour’s second piece of advice to litigants is to understand the “shape” of the case, i.e. how the case will develop and how long each phase will likely take. 

There were several interesting questions posed during the Q&A portion of the presentation.  One question involved what happens in the middle of the case, after the initial media exposure has died down but before a final resolution.  Knüppe noted that in the Dexia case, opposing counsel was very good about not leaking information to the press during negotiations that led to a final settlement.  However, in order to maintain a flow of information during the negotiations, periodic newsletters were sent to concerned shareholders to advice them on the status of the case.

Another series of questions asked about the relationship between media and the judiciary.  First, the panel was asked to what extent courts in different jurisdictions may take into account media publicity about a case in their decision making.  The general consensus was that the media should not impact judicial decision making, but panelists provided examples of instances where courts either commented on media exposure in their judgments or admitted after a case that media exposure had been on their minds at the time of the decision.  Second,  the panel was asked to what extent it is appropriate for a judge to make use of media in case management.  This question generated a discussion about a key distinction between truly representative class actions in the United States and mass actions in Europe.  In the United States, the court has an obligation to ensure that absent class members are provided information about the case and to take on an affirmative role in managing the delivery of that information.  In Europe, by contrast, the role of communicating with individual consumers is left to the firm or association that the consumer selects as his or her representative, and if the court has any role at all, it is merely to ensure that attorneys represent who they say they represent. 

Oxford Professor Christopher Hodges had an interesting observation to wrap up the session.  He talked about the media’s social responsibility in seeking an ultimate truth with regard to high-profile litigation rather than simply reporting on the allegations being made.  He pointed as an example to litigation claiming that infant vaccinations caused autism.  He noted that although the litigation had been based on a medical hypothesis that was later debunked, the initial media attention that had been given to the plaintiffs’ claims generated among some segments of the public a fear of vaccinations that continues to have serious negative public health consequences, long after the litigation.

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As 2010 winds down, it’s time to review the key developments in class action law.  It was an especially busy year for the federal courts, and in particular the U.S. Supreme Court, on issues impacting class action practice.  Here, in chronological order, are 10 key developments from the year that was:

  1. January 5 – In In re Baycol Products Litigation, the Eighth Circuit follows the Seventh Circuit’s lead in upholding the right of a federal court to enjoin a putative statewide class action from proceeding where a federal court had already denied class certification in a case involving substantially similar claims.  (See CAB entries dated January 7 and January 12).
  2. February 23 – In a decision that will impact many class actions removed under the Class Action Fairness Act, the Supreme Court adopts the “nerve center test” as the standard for determining corporate citizenship, in Hertz Corp. v. Friend.  (See CAB entry dated March 2)
  3. March 31 – The Supreme Court holds that states may not regulate the types of claims that may be filed as class actions in the federal courts, in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.  (See CAB entry dated April 8)
  4. April 7 – In American Honda Motor Co. v. Allen, the Seventh Circuit holds that a trial court must rule on challenges to the admissibility of expert testimony relevant to class certification before deciding whether a class may be certified.  (See CAB entry dated May 4)
  5. April 26 – The Ninth Circuit issues its decision in Dukes v. Wal-mart Stores, Inc., adopting rigorous class certification standards similar to those previously adopted by the Second Circuit in In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006), but nonetheless certifying under FRCP 23(b)(2), what has been called the largest employment discrimination class action in history.
  6. April 27 – The Supreme Court seemingly puts an end, for all practical purposes, to the concept of class arbitration by holding that a defendant could not be compelled to defend an arbitration on a class basis where the arbitration clause did not expressly provide for class arbitration, in Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp.  (See CAB entry dated May 11).
  7. June 24 – In Morrison v. National Australia Bank, the Supreme Court deals a fatal blow to “foreign-cubed” class actions, holding that § 10(b) of the Securities and Exchange Act of 1934 does not allow for fraud claims involving transactions on foreign exchanges that occurred outside the United States. (See case summary at SCOTUS blog).
  8. July 19, October 20 – An Eleventh Circuit panel issues a controversial decision in Cappuccitti v. DirecTV, Inc., severely restricting CAFA removal jurisdiction to cases where the amount in controversy exceeds $75,000 with respect to at least one class member, but later reverses itself in an October 15 opinion.  (See Guest Post from Eric Jon Taylor and Jon Chally at CAFA Law Blog for more on the first decision and this October 20 CAB entry on the second decision).
  9. November 9 – Supreme Court hears oral argument in AT&T Mobility v. Concepcion, in which the Court considers whether the Federal Arbitration Act preempts state law holding a class arbitration waiver unconscionable.  (See CAB fsummary of oral argument dated November 17).
  10. December 6 – Supreme Court grants certiorari in Wal-Mart Stores, Inc. v. Dukes, to decide the issue of whether a claim for monetary relief can be certified under FRCP 23(b)(2).  (See CAB entry dated December 7).

Just considering the cases still awaiting ruling before the Supreme Court, 2011 promises to be another exciting year in the world of class actions.  Happy New Year to all!

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