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Posts Tagged ‘class action notice’

Renowned notice expert and friend of ClassActionBlawg.com, Shannon Wheatman of Kinsella Media, recently published an article with some insightful tips on ensuring successful notice in class action settlements.  In the article, titled Cutting Through the Clutter: Eight Tips for Capturing Class Members’ Attention and Increasing Response, Dr. Wheatman shares eight specific ideas for ensuring meaningful notice in an age of ever-increasing media fragmentation.  For more information and to download a copy, click the title of the article above.

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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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Phoenix Attorney Shawn Aiken sent me an advance copy of a draft class action bill set to be introduced in the Arizona legislature this week.  The bill sets forth some specific requirements for class certification that are much more exacting than those required under federal Rule 23 and most state class action rules.  Some of the highlights are summarized below.  Click this link for a complete copy of the bill.

  • clear and convincing evidence would be required to justify a grant of class certification
  • orders granting class certification would have to be supported by a detailed written statement of the reasons and evidence justifying the decision
  • in assessing superiority, the court would be required to consider, among other things, “whether it is probable that the amount which may be recovered by individual class members will be large enough in relation to the expense and effort of administering the action to justify maintaining the case as a class action”
  • there would be a rebuttable presumption against class certification in cases involving claims where individual knowledge, causation, and  reliance are required elements
  • certification of a case as a class action would not relieve any class member of the requirement of proving individual injury or damages
  • class notice must include a statement of “the possible financial consequences for the class”
  • the law would expressly provide that the plaintiff would bear the initial cost of distributing notice to the class
  • appeals from orders granting or denying class certification could be taken as a matter of right the same as a final judgment, and trial court proceedings would be automatically stayed pending the appeal

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My apologies for the late notice (I’ve been on vacation), but I’ll be speaking at a Webinar on class action notice requirements tomorrow, and it’s not too late to sign up.  The panel also includes Winston & Strawn Partner Matthew Walsh and notice expert (and occasional contributor to this blog) Shannon Wheatman.  Here’s a brief description of the program: 

Attorneys’ options for delivering notice of class actions and settlements to members have increased, even as they must adhere to more stringent standards to ensure due process. Courts are more receptive to notice in forms like email, websites, postcards and ordinary course mailings.

Even as delivery methods evolve, the words themselves remain a vital consideration for attorneys. Recent F.R.C.P. Rule 23 revisions require notices be drafted in plain and simple language. Attorneys are often not meeting the plain language standard, which can potentially jeopardize judicial review.

Defendants are obliged to comply with increased notice requirements under the Class Action Fairness Act. Failure to provide notice of a class action settlement to federal and state regulators can also lead to opt-outs by class members.

Listen as our panel of experienced litigators examines the vital notice requirements affecting due process in class actions. The panel will review email and other nontraditional means of delivering notice to members, explain avoidable mistakes that compromise meeting the plain language requirement, and discuss defendants’ need to provide proper notice of settlements.

For more information and to register for the program, visit the program page on Strafford’s website.

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The Record staff writer Harvy Lipman authored this article today discussing the New Jersey Attorney General’s warning to consumers about a scam involving a fake class action notice.  The official-looking notice directs recipients to send personal information in order to obtain settlement benefits in a fictitious securities case brought by a fictitious government official.

I have to wonder whether the emergence of fake class action notice scams will provide fodder for class action settlement objectors who argue about the effectiveness of a real class action settlement notice program.  This is all the more reason to do something that I preach about regularly on CAB: always consider retaining a qualified notice expert as part of a class action settlement.

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I was not able to attend the ABA National Institute on Class Actions program in New York City last week, but class action notice expert and occasional CAB contributor, Dr. Shannon R. Wheatman, Vice President, Kinsella Media (swheatman@kinsellamedia.com), was there and she graciously agreed to send me her notes of what sounds like another great conference. Shannon was a fitting correspondent this year because three federal court judges talked about the need for plain language class action notice, which also happens to be the topic of Shannon’s doctoral dissertation. Shannon’s notes follow below. – PGK

Notes from the 15th Annual National Institute on Class Actions (New York City)

Following an energetic introduction from Goldman Scarlato Karon & Penny partner Dan Karon, Columbia Law Professor John C. Coffee kicked things off with his annual review of developments in federal class action law. He focused on the U.S. Supreme Court’s recent class action decisions. He noted, “The landscape has changed – and changed dramatically – this year.”

Prof. Coffee began his discussion with the impact of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). He noted three distinct messages in that decision: (1) a new standard for commonality, (2) individualized money damages are not available under 23(b)(2), and (3) affirmative defenses must receive individualized hearings. Prof. Coffee said the new commonality standard would have the greatest impact on 23(b)(2) classes including employment and environmental litigation. Affirmative defenses will be used by defendants to show that the class is unmanageable or that it fails the predominance requirement. Prof. Coffee provided some ways to get around affirmative defenses: (1) raise a Twombly/Iqbal challenge to affirmative defenses that are not pled with enough specificity to satisfy the “plausibility” standard, (2) seek only partial certification and leave affirmative defenses to be resolved in individual actions, and (3) concede that defendants can raise an affirmative defense, but deny that it can be raised to a jury.

Prof. Coffee discussed dueling class actions and the ruling in Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), which held that the relitigation exception did not permit a federal court to enjoin a class from seeking certification in a West Virginia state court. Basically, Prof. Coffee said, the Court ruled that the benefit of the doubt must go to the state court; a federal court lacks power to bind non-parties, such as absent class members.

The discussion turned to AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). The Supreme Court’s majority found that state law rules are preempted when they obstruct the Federal Arbitration Agreement’s objectives. Prof. Coffee believes mandatory arbitration clauses will be making their way into more employment contracts.

Highlights of panel discussions

The Practice that Never Sleeps: Reexamining the Class Action Practice and Considering Where It – Indeed, We – Go from Here

This panel (Dan Karon, Judge Colleen McMahon, Judge Benita Y. Pearson, Professor Brian T. Fitzpatrick, J. Philip Cabrese, Derek G. Howard, and Peter M. Ryan) provided a discussion of the state of affairs in class actions. Dan Karon asked the panel “What’s with all of the hostility?” Prof. Fitzpatrick believes it comes from a misperception based entirely upon the outliers that give class actions a bad name. Prof. Fitzpatrick conducted an empirical study of fee awards (filed from 2006-2007) in over 700 cases. He found the average fee award was 15%. So, the “perception that lawyers are getting everything and class members are getting nothing is not true.”

Derrick Howard stated that it is fiction that most class actions are frivolous. The risk of bringing a class action on a contingent basis is substantial. Class action attorneys, he said, are acting as private attorneys general to correct wrongs. It was noted that the DOJ is closing half its antitrust field offices. How will that effect enforcement? Class action attorneys have to be the enforcers.

Judge McMahon, from the U.S. District Court for the Southern District of New York, said, “Don’t endow us with superhuman powers.” Most class actions are settled with little opposition, she said. Judges cannot “intuit” that something is wrong if no one speaks up. Judge Pearson, from the U.S. District Court for the Northern District of Ohio, said it is important to allow enough time for objectors and intervenors to know and respond in some way to proposed settlements.

This is where things got interesting. Larry Schonbrun, a self-proclaimed professional objector, stood up and told the panel that the court should appoint a class guardian to ensure a settlement is fair and reasonable. Judge McMahon replied, “Who pays for that?” The panel agreed that this would cause a substitution of judgment that was not necessary or even helpful. Schonbrun went on to say that the court has the power to find out if the settlement is unfair but the court chooses not to exercise that power.

Judge Pearson disagreed with Schonbrun and remarked that because a settlement is hard-fought does not mean it is fair and just. She requires the parties to walk her through the terms of the settlement. She also wants to talk with the class representatives.

The content and design of class action notices were discussed. Judge Pearson said she always wants to see what a notice will look like when printed to ensure it is readable. Judge McMahon went on to note that writing a notice is like crafting jury instructions. She told attorneys that they “have to work hard to make it readable” and they “have to work hard to make it comprehensible.” One audience member remarked that there are plain language notice experts who can help attorneys.

Judge Pearson talked about proper deliverability of notice. She said debt collectors can find people and that it can be done without extraordinary costs and time. She seemed to be intimating that some class action notices remain undelivered and that there must be ways to get better addresses.

One attorney on the panel said that when Twombly was decided, everyone thought it was the death knell for class actions. Instead, there was a leveling effect as people adjusted. There is a temptation to interpret Supreme Court decisions as the final word but, as one attorney noted, “A 5-4 decision is not a death knell of anything.” Lawyers are very creative and will find a way to deal with Wal-Mart and Concepcion.

The Empire Cases – AT&T Mobility v. Concepcion and Wal-Mart Stores, Inc. v. Dukes from Those Who Made Them Happen”

This panel was comprised of the lawyers involved in Concepcion (F. Paul Bland, Jr. and Andrew J. Pincus) and Wal-Mart (Mark A. Perry and Joseph M. Sellers). Fred Burnside expertly moderated this session. Paul Bland would have liked to see a different case go up for review. There was no factual record in Concepcion because of the categorical rule of evidence set forth in the Discover Bank case.

The panel discussed the net effect of Concepcion. Basically, Concepcion does not require enforcement of a class action ban even when the evidence shows that the plaintiffs could not effectively vindicate their statutory rights in individual arbitration. Fred Burnside said that the American Arbitration Association (“AAA”) has to post results. He found more than 100 instances where people arbitrated for less than $100. So, some people appear to be using arbitration to vindicate their rights. However, it was later revealed that there have only been 1,300 AAA claims in the past year.

Joe Sellers began the discussion on Wal-Mart. He remarked that he fielded 74 questions during oral argument and that the defense, led by Mark Perry, received far fewer. He was most surprised that Justices Ginsburg and Sotomayor were skeptical of the use of formulas for determining back pay even though they have been used for 35 years. The Court disregarded statistical evidence when it failed to find that a specific employment practice tied together 1.5 million class members. The question was raised whether Daubert applies to expert opinions offered at class certification. Sellers said, “The Court did not decide whether Daubert applies to class certification, although in dictum it suggested” it did.

Melee in Manhattan! Class Action Objectors – Are They Protectors of Absent Class Members or Merely Gadflies?

This was the most highly anticipated panel. Vincent J. Esades put together a panel that included Nancy F. Atlas, from the U.S. District Court for the Southern District of Texas and three professional (Ed. Note-see Mr. Frank’s comment below distinguishing his role from that of a “professional objector as that term is often used) objectors (Ted Frank, Darrell Palmer, and Lawrence W. Schonbrun). The crowd followed Dan Karon’s earlier admonition “to not throw chairs,” but the discussion was heated at times.

Judge Atlas said that most judges care enormously about absent class members and protecting the process. She agreed that there are good objections that help fine-tune a settlement by pointing out substantive issues. However, she said, there are a lot of bad objections as well that do not serve to point out any real issues with the settlement. Larry Schonbrun was the most vocal about blaming attorneys for excessive fees and judges for doing a “miserable job in approving fees” just to get the case off the docket. Schonbrun said he doesn’t believe that courts want to hear objections. Darrell Palmer disagreed.

Ted Frank said that he goes after the worst settlements. Palmer said the system falls short because class counsel does not make sure class members know what is going on or how to file a claim. Frank, who often objects to attorneys’ fees, said fees should be based on the amount actually distributed to class members.

Larry Schonbrun revealed that he had been an attorney in one class action but has offered over 150 objections. He fervently believes objections should be raised in every settlement. Darrell Palmer told the crowd that “objecting is a hobby for me.”

Judge Atlas echoed Judges McMahon and Pearson by saying that class action notices need to be “legible and comprehensible to laypersons.” She talked about having a good headline and writing in plain English.

The matter of cy pres awards was raised. Ted Frank said settlement monies should go to the class and not to favorite charities chosen by attorneys or judges.

An audience member asked the objectors how much each of them has accepted to sell appeals over the last decade. Ted Frank said “none,” Darrell Palmer said “a lot,” and Larry Schonbrun declined to answer. Darrell Palmer said the way to stop this practice is to stop paying off objectors. The professional objectors revealed that most objections address attorneys’ fees and poorly written notices.

If I Can Make It There, I Can Make It Anywhere: Lessons Learned from Class Action Trials for the Rest of Us

This panel (Andrew J. McGuinness, Judge Jack Weinstein, James Donato, David Sanford, Edmund W. Searby, and Thomas M. Sobol) discussed preparing for a class action trial. There really are not many differences between a class action and a very complex individual trial. The rules of evidence are the same and Rule 23 does not deal with trials – only with the notice requirements for certification. The panel discussed that jury members may not even know what a class action means. Judge Weinstein, from the U.S. District Court for the Eastern District of New York, spoke of the importance of the charge to the jury. Judge Weinstein said he allows more leeway in jury voir dire in class action trials. If the evidence will involve a lot of statistics, he wants to have someone on the jury who will lead the other jurors to understand. Tom Sobol said he likes to come out first with the defense witnesses in order to tell the story to the jury. Jim Donato said the “victory is in the details.” He allowed jurors in one of his cases to ask questions at any time during the trial. Judge Weinstein said he has never allowed unfiltered questions because the risk of mistrial “frightens me.” Edmund Searby said it is best to get class representatives on and off the witness stand as quickly as possible to avoid any damage. The key, he said, is to have a class representative who is likable and credible.

New Kid on the Block – The Consumer Financial Protection Bureau: What Is It, How Will It Work, and How Will It Affect Us?

The final panel examined the Consumer Financial Protection Bureau (“CFPB”). This panel was moderated by Jeffrey A. Leon and included a representative from the CFPB (David M. Gossett); James D. Kole, who practices with the Illinois Attorney General’s Office; defense attorney, Michael Thurman; and plaintiffs’ attorney, Jonathan D. Selbin.

David Gossett provided an overview of the CFPB. The agency is in limbo until a director can be named. The CFPB will be working closely with the FTC on joint regulations. The CFPB will have broader rulemaking powers since it (unlike the FTC) can actually write regulations. Gossett asked any attorney trying to reach a settlement on the same claims as an enforcement action to reach out to the CFPB. He also talked about CAFA notice and how the CFPB will need to be noticed (specific guidelines will be set out in the future). A study on mandatory arbitration clauses will be undertaken before the CFPB considers the propriety of banning them.

Michael Thurman stated that defendants will be happy to learn that the FTC and CFPB will not initiate separate enforcement actions. He also thinks the CFPB’s enhanced rulemaking power is good because it will lay out specific rules for businesses. James Kole said the Illinois Attorney General is viewing the CFPB as a positive force in the realm of consumer fraud protection. Jonathan Selbin asked some key questions on how the CFPB could impact class actions, including the possibility of preemption, exhaustion requirements, discovery and document production, and whether the CFPB can release class claims. He raised the concern that potential settlement with the CFPB could create a reverse auction atmosphere for defendants.

Save the date – 16th Annual National Institute on Class Actions – October 11, 2012 – Washington, DC

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Recently, I have commented on two types of objectors in class action settlements.  This March 31 entry discusses the problem of so-called “professional” objectors.  And this April 12 entry addresses objections raised by government officials.  There is at least one other type of organized objectors to class action settlements: public interest organizations.  (I use the term “organized objectors” to distinguish these types of objections from objections that may be sent in by individual class members who are not represented by separate counsel).  Mechanically, objections by public interest organizations may be accomplished in a manner similar to that used by professional objectors: through the representation of one or more settlement class members by lawyers employed by or cooperating with the organization.  However, unlike with professional objectors lawyers, the representation is usually pro bono.  Alternatively. as with objections by government officials, public interest objections to a settlement may be accomplished through amicus briefs to the court.

There are a variety of public interest organizations that file objections to proposed class action settlements.  These organizations have widely differing purposes and political agendas.  For example, the Center for Class Action Fairness (CCAF) was founded by attorney and leading tort and class action reform advocate (and contributor to the popular law blog, Overlawyered), Ted Frank.  CCAF is a nonprofit organization formed for the stated purpose of providing “pro bono representation to consumers and shareholders aggrieved by class action attorneys who negotiate settlements that benefit themselves at the expense of their putative clients.”  In this April 18, 2011 press release, Frank summarizes various cases in which his organization successfully objected to class action settlements that “will result in class members receiving over $5 million more than what their class attorneys were willing to negotiate.” 

At the other end of the political spectrum (at least from the perspective of tort reform) from CCAF, is Public Justice, an organization founded by leading trial lawyers that describes itself as “America’s public interest law firm.”  A stated objective of Public Justice is to fight interests aimed at “closing the courthouse doors so victims can’t hold the powerful accountable,” including fighting “class action bans and abuses.”  Like CCAF, Public Justice has successfully objected to or intervened in a variety of class action settlements.  Some of its work in this area is summarized in the article “Fighting Class Action Abuse,” which is available on its website.

A third organization, Public Citizen, is a consumer advocacy group that has the stated goal of preserving the right of consumers to seek relief through class actions.  However, according to its website, “[a]t the same time, we recognize that on occasion class action settlements may not be in the interest of all class members, and in such cases we have often represented class members in objecting to and seeking to improve the terms of such settlements.”

Although the political motivations of these organizations might be different, there are several key similarities between these groups.  First, their interest in objecting to a settlement is based on a sincerely held belief that their involvement is necessary to protect the public interest.  This means that they are not motivated by profit, but rather by a conviction that the settlement (or the system itself) is unfair.  Like government objectors, their goal is to gain disapproval of or modification to the settlement, not to extort a portion of the fee.

Second, regardless of the ultimate motivating philosophy, even public interest groups with drastically different political agendas can find the same kinds of settlements or settlement terms objectionable.  Not surprisingly, many of their objections are the same as those that a government official might make.  Coupon settlements are a natural target.  A conservative group formed to combat class action abuse might object to a coupon settlement because the fact that a coupon settlement was the best the plaintiffs’ could do for the putative class reflects that he case was a frivolous, lawyer-driven case that had no societal value in the first place.  A consumer advocacy group might object to the same settlement because of a perception that it is unfair for a defendant to profit from its own wrongdoing.  Where both groups might agree is that the court should not approve a settlement that includes little or no benefit to class members and a large payout to the plaintiffs’ lawyers.

One area in which right-leaning and left-leaning public interest groups may diverge is in their view of cy pres provisions in class action settlements, that is, distribution of any unclaimed funds to a charity.  Class action reform advocates object to cy pres distributions because they don’t benefit the members of the class, and are sometimes simply a tool used by trial lawyers to raise funds for their own pet causes.  Trial lawyers in turn, argue that cy pres is the best way to deal with unclaimed funds, because the alternative would be to let the money revert back to the defendant, which would allow the defendant to profit from its wrongdoing.  (Although I want to stay neutral, as a defense lawyer, I am compelled to point out that the fallacy in this reasoning is the class action settlement context, the defendant hasn’t been found to have done anything wrong.  Rather it has voluntarily agreed to provide some compensation in exchange for peace from further litigation).

As with objections by government actors, objections to class action settlements by public interest groups are rare, but they present a significant risk to approval of a settlement if they do occur.   There are a variety of steps that counsel can make to avoid these types of objections, including:

  • Ensure that the settlement notice is in plain English, understandable, and contains all information required by Rule 23(c)(2)(B).  The Federal Judicial Center guidelines for plain English notice provide an excellent template, but the template obviously must be tailored to each case in order to provide effective notice.  Hiring a qualified notice expert (not simply a settlement administrator) to help draft the notice and testify about the fairness of the notice plan can protect against possible objections to the fairness of the notice.
  • Make sure that the notice is delivered in a way that makes it truly the best notice practicable.  Intentionally using a method of notice that is unlikely to be read and appreciated by class members, in the hopes of reducing the response rate, is folly.  If you don’t do everything reasonable possible to give class members adequate notice of a settlement, you risk having the entire settlement disapproved after you have incurred the significant notice costs. In many cases, direct mail is still considered the best way of distributing notice.  Technology has made direct mail possible even in cases where the last known addresses of class members are a few years old.  Old addresses can be updated through the post office change of address system, as well as through various private databases.  Again, having a qualified notice expert can help.  If it is truly impossible to reach a sufficient number of class members through direct mail, then a published notice can be used as a supplement, but it is better to think of published notice as a last resort. 
  • Avoid settlement terms or arguments that exaggerate the true value of a benefit to be given to the class.  A settlement does not have to give class members 100% of the claimed damages in order to be fair.  It is, after all, the result of a compromise.  However, exaggerating the value of benefits, especially non-monetary benefits, is one of the surest ways to draw objections and skepticism from the Court.
  • Avoid unnecessary publicity.  Unnecessary publicity (by either the plaintiffs or the defendant) raises the risk that public interest groups will scrutinize it.  This is another reason to use direct mail when possible. 
  • If the settlement does include a cy pres component, try to find an organization that is likely to benefit some or all of the class members directly.  Distribution to any organization in which one of the lawyers has a personal affiliation or stake will raise a red flag.  Donations to a victim’s assistance fund, for example, are less likely to receive scrutiny than a donation to a lawyer’s law school.
  • In any settlement that may include unclaimed funds (whether those funds revert to the defendant, are distributed pro rata to other class members, or are distributed to a charity),  above all else, do whatever you can to ensure that class members have a fair opportunity to participate in the settlement.  You often can’t force class members to claim benefits, but you do have the power to make sure that there are no artificial barriers to participation.

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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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Class action notice expert and occasional CAB guest blogger, Dr. Shannon Wheatman, has a must-read article coming out on trends in class action notices.   The article, co-authored with plain language expert, Dr. Terri R. LeClercq, is being published in the University of Texas law journal The Review of Litigation and will be titled Majority of Class Action Publication Notices Fail to Satisfy Rule 23 Requirements.  As the title suggests, Wheatman and LeClercq have found that a majority of class action notices are still not meeting the plain language notice guidelines established by the Federal Judicial Center.  What’s more, their study suggests that many class action notices do not even meet the basic requirements set forth expressly in FRCP 23(c)(2)(B).

The article summarizes historical developments and best practices dealing with plain language notices in class actions, and sets forth the results of an empirical study of class action notices given between 2004 and 2009.  The study included publication notices given in both state and federal courts and in the settlement context as well as the contested certification context.   The notices had been used in cases involving a wide variety of subject matter areas, including “antitrust, banking and finance, consumer, employment, environmental, humanrights, insurance, pharmaceutical, privacy, securities, and telecommunications.”  The key findings included:

  • Over 90% of securities notices used an uninformative case caption in the header of the notice.
  • Most notices did not include a noticeable and informative headline to capture the attention of potential class members.
  • Over 60% of notices were written in less than an 8-point font.
  • The majority of notices failed to clearly inform class members of the binding effect of the settlement.
  • Over two-thirds of the notices with an opt-out right did not inform the class member that they could opt out of the litigation or settlement.
  • Over 75% of the notices did not tell class members they had the right to appear through an attorney.
  • Over two-thirds of the notices failed to satisfy the concise, plain language requirement of Rule 23.

Shannon R. Wheatman and Terri R. LeClercq, Majority of Class Action Publication Notices Fail to Satisfy Rule 23 Requirements, 30 Rev. Litig. 53, 58 (2011). 

For anyone who has flipped through People Magazine or Sports Illustrated recently, it is probably not a revelation to hear that class action notices are not meeting the requirement that they “concisely and clearly state in plain, easily understood language” certain basic information to class members.  For those of us responsible for carrying out class action notice plans that comply with the rules of civil procedure, however, this article is a reminder that we need to do better. 

Unfortunately, the article is not available online, but for more information on the print version, see the UT Law Publications website, or email Shannon Wheatman at swheatman@kinsellamedia.com.

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I was not able to attend the National Institute on Class Actions program in San Fransisco, but class action notice expert Dr. Shannon R. Wheatman (swheatman@gmail.com), was there and she graciously agreed to send me her notes of what sounds like another great conference.  I think that Shannon’s article also marks the first guest post on ClassActionBlawg, and I am very grateful for her contribution.  Shannon’s notes follow below. – PGK

Notes from the 13th Annual National Institute on Class Actions (San Francisco)

Following an introduction from Tydings & Rosenberg partner and National Institute on Class Actions founder, John B. Isbister, Columbia Law Professor John C. Coffee kicked things off with his annual review of developments in federal class action law.  His review covered trends and key decisions over the past five years.  He identified several key areas that he believes are likely to be addressed in the federal courts in the near future. 

Professor Coffee began his discussion on the burden of proof.  He cites a significant shift in the Second, Third, and Fifth Circuits’ adoption of the preponderance of evidence standard for certification.  This has resulted in a front-loading of issues that has typically been consigned to the end of a case.  One example given was on lost causation and damages issues, which may be dispositive, but now need to be addressed at the certification stage in order to prevail.

The First Circuit is resisting the preponderance of evidence standard and this issue will remain at the forefront over the next five years when other circuits decide whether to accept it or not.

The discussion then turned to “hybrid” class actions that seek to combine elements from Rule 23(b)(2) and Rule 23(b)(3) to award injunctive relief and monetary damages.  All circuits have agreed that “incidental” damages can be awarded but their definition of “incidental” differs.   The Ninth Circuit in Dukes v. Wal-Mart, 509 F.3d 1168 (9th Cir. 2007), deemed the damages to be incidental since the primary motive was injunctive relief. 

Since the predominance requirement of Rule 23(b)(3) is a “formidable opponent to class certification” partial certification is gaining acceptance.  Professor Coffee sees this as a possible fix for classes that fail the preponderance of evidence standard.  However, the Second Circuit in McLaughlin v. American Tobacco Company, 522 F.3d 215 (2d Cir. 2008), reversed partial certification because “larger issues such as reliance, injury, and damages” would need to be addressed in individual actions. 

For the past few years Professor Coffee has been discussing class-wide arbitration.  A number of courts have found specific arbitration clauses to be unenforceable and other courts have invalidated class-wide arbitration.  This topic was elaborated on in the first panel discussion.

Highlights of panel discussions

A Funny Thing Happened on the Way to the Courthouse . . . I Had to Litigate an Arbitration Clause!  Crafting, Opposing, and Arguing Clauses and Class-Action Waivers in Three Scenes

Following-up on the 12th Annual’s “I Could Have Sworn it was CAFA, Not Kafka!”  Dan Karon presented a true-to-life example of the evolution of an arbitration clause.   Scene I began with a defense attorney (Todd Fulks) talking with a consultant (Stuart Widman) about the enforceability of his client’s proposed arbitration clause in a mobile phone agreement.  This scenario provided a very entertaining overview of class arbitration challenges.  Scene II involved a discussion between two plaintiffs’ attorneys (Dan Karon and Vincent Esades) who wanted to go forward with a class action for breach of contract but first needed to get a court to rule that the class-action waiver was unconscionable.  Scene III provided a guest appearance from the Honorable Stanwood R. Duval Jr. of the Eastern District of Louisiana.  Judge Duval presided over a mock hearing on the alleged unconscionability of the arbitration clause.  The plaintiff’s attorney commented that the arbitration clause provided a “Willy Wonka effect” with it tiny font.  The most amusing part came when Judge Duval remarked that the arbitration clause “could have been written in invisible ink” in his response to the defense statement that consumers don’t read these agreements anyway so it doesn’t matter. 

Living on the Fault Line: Class Action Issues in California

This panel provided a discussion of the Golden state’s class action landscape.  Hillary Hehman of the California Administration Office of the Courts started the dialogue with an overview of a study on California class actions.  The study found that approximately 22% of class actions filed in California were certified (report is available at www.courtinfo.ca.gov/reference/caclassactlit.htm).  This study dovetails nicely with some research that I was involved in at the Federal Judicial Center that found that approximately 24% of class actions in federal courts were certified (report available at www.fjc.gov).

The remaining panelists (Jocelyn Larkin, Fred Alvarez, Honorable Steven Brick, and Mark Chavez) talked about privacy rights and communication with absent class members prior to certification.  In general, class member contact information is discoverable under California law.  The California Supreme Court in Pioneer Electronics v. Superior Court, 40 Cal.4th 360, 373-374 (2007), ruled that an opt-in procedure is not necessary to allow that communication. 

Hydrogen Peroxide Will Clear it up Right Away: Developments in the Law of Class Certification

This panel (Jessica Miller, John Beisner, Elizabeth Cabraser, Bonny Sweeney, and Shirli Fabbri Weiss) discussed the ramifications of the In Re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008), ruling on class certification standards.   Hydrogen Peroxide shattered the myth that antitrust class actions are a given and laid out several predominance requirements for class certification. Elizabeth Cabraser noted, “merits matter more than they used to.”  The Hydrogen Peroxide ruling did not tell District Courts how far they should go in their merits analysis.  The federal judges have been put into a position where they do not have presumed expertise on deciding the merits so they are reluctant to certify if they are uncertain about the substance of the claims.  The panel suggested that in order to get a class certified you need to move for class certification as early as practicable, get as much discovery as possible, and bring experts in immediately.

A Survival Guide for Today’s Class Action Settlement

The final panel examined the substantive, procedural, and ethical issues that arise in the class settlement process.  Judge DuVal discussed the ethical pitfalls in the distribution and determination of attorneys’ fees.  He discussed the Fifth Circuit’s reversal of the approval of attorneys’ fees in the In re High Sulfur Content Gasoline Products Liability Litigation, 517 F.3d 220 (5th Cir. 2008).  Many lessons can be learned from this case, namely that a judge should not overly rely on the committees’ proposal of attorneys’ fees, ex parte hearings should not be held, supportive data on the distribution plan should be required, and sealing attorneys’ fee documents is a Big No-No.  Judge DuVal said the process must be transparent.  He noted that the court in Turner v. Murphy Oil USA, Inc. used a Special Master to determine fees since the attorneys were in disagreement.  He went on to discuss his work in the Katrina cases (In Re: Katrina Canal Breaches Consolidated Litigation) where plaintiffs’ attorneys waived their fees but were allowed to ask for an enhancement of costs.  Judge DuVal ended his discussion on attorneys’ fees by reminding the audience that “pigs get fed and hogs get slaughtered.”  So it is wise not to become a hog when it comes to attorneys’ fees.

The panel (Judge DuVal, John Hooper, and Mike Ciresi) had a lively discussion on the court’s injunctive powers to protect a settlement.  The All Writs Act and exceptions to the Anti-Injunctive Act aid courts but provide a tremendous opportunity for abuse.  Judge DuVal noted that he issued an injunction in the Katrina litigation against state courts to enjoin any other lawsuits against the agencies involved.

The discussion turned towards objectors.  John Hooper noted that “they are not all professional objectors, there are objectors who are professional.”  At this juncture

Judge DuVal talked about the difficulties with the Katrina cases and the objections that people had about the limited fund settlement.  Effective notice goes a long way to quiet objectors.  Judge DuVal remarked that the “notice in the case was excellent.”  I was the notice expert in the Katrina case and was very moved at the fairness hearing by Judge DuVal’s thoughtful opening remarks, which were meant for the numerous class members who lost so much when the levees failed.  These comments seemed to satisfy some of the objectors.

This provided a good segue into the final presentation on new media options for class action notice.  Katherine Kinsella, a leading expert in the design and dissemination of legal notice, provided an overview of traditional (newspaper, magazines, TV, radio, internet, banner ads, keyword searches) v. new media (mobile, blogs, social).  A tutorial on how new media can be used to reach a class member was demonstrated through text messaging.  Audience members were shown how to use their mobile device to text a short code (listed in a publication notice) in order to get more information about the settlement.  This process of having the class member send a text obviates the Telephone Consumer Protection Act, which bans sending unsolicited advertisements by text to anyone without prior express consent.

The overall take away from this presentation was that new media is “exciting and sexy” but more time is needed for it to evolve to a level where it can reach mass numbers of people.   For example, currently only Facebook and MySpace offer coverage above 10% among adults 18 years of age and over, whereas, numerous magazines (for example, People, National Geographic, Parade, Better Homes & Gardens and Good Housekeeping) individually reach and in some instances greatly exceed 10% coverage.  Moreover, most of our media time is spent on traditional media (47.9% on TV alone).  For now new media can be used to complement the mass audience reach of traditional media.

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