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Posts Tagged ‘class action statistics’

Tomorrow, July 13, 2017 at 1:00 p.m. EDT, I’ll be presenting on a panel of attorneys and experts discussing the use of surveys and statistics in class actions.  The presentation is part of the ABA’s Committee Roundtable series and is sponsored by the Class Actions and Derivative Suits Committee.  Committee Roundtable events are free to ABA Section of Litigation members.  Click here to register.  See below for a copy of the program description:

 

Roundtable on Surveys and Statistics in Class Certification

Presented by:

Class Actions and Derivative Suits Committee

Co-Sponsored by:
Securities Litigation Committee

Thursday, July 13, 2017 – 10:00 – 11:00 AM PST

Join this Roundtable to hear leading Plaintiff’s counsel, Defense counsel and experts discuss the following topics concerning the use of Surveys and Statistics in Class Certification:

  1. General primer on the different types of statistics and common terminology
  2. Summary of case law use of statistics in arguing for and against class certification
  3. Types of statistics commonly used in class actions
    • Regression analysis
      • Example of case where used – antitrust case alleging a conspiracy to increase prices
      • Explain how regression could be used to estimate impact
      • Macro-commonality (Are regression estimates of impact consistent across broad groups within the proposed class?)
      • Micro-commonality (How do the prices paid by individual members of proposed class compare to the estimated impact)
    • Surveys
      • Example of case where used – food labeling cases
      • Surveys (with conjoint analysis) combined with regression (or other econometric techniques) often used to attempt to isolate the price premium that resulted from the misleading aspect of the labeling
  4. Preparing and cross-examining experts on opinions involving statistics

Presented by:
Brendan P. Glackin (Lieff Cabraser Heimann & Bernstein, LLP)
D. Lee Heavner (Analysis Group, Inc.)
Paul Karlsgodt (Baker & Hostetler LLP)
Olivier Toubia (Columbia Business School)

Introduction by:
Tonna Farrar (Bonnett, Fairbourn, Friedman & Balint, PC)

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I’ll be on the faculty of an upcoming Strafford CLE webinar entitled Statistics in Class Certification and at Trial: Leveraging and Attacking Statistical Evidence in Class Actions to be held next Tuesday, May 12, 2015, at 1:00 p.m. EDT.  This is a reprise of a program that I have done several times with Thompson Hine Partner Brian Troyer, and we’re pleased to be joined this time around by Edward J. Wynne of the Wynne Law Firm.

Click on this link to register and take advantage of a special 50% discount to the program.

 

 

 

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David H. Kaye, Distinguished Professor of Law and Weiss Family Faculty Scholar at the Penn State School of Law, recently published a fascinating commentary in the BNA Insights section of the BNA Product Safety & Liability and Class Action Reporters, entitled Trapped in the Matrixx: The U.S. Supreme Court And the Need for Statistical Significance.  In the article, Professor Kaye applies his vast expertise in the areas of scientific evidence and statistics in the law to add some color to the U.S. Supreme Court’s March 2011 decision in the securities class action Matrixx Initiatives, Inc. v. Siracusano

For those not familiar with Matrixx, the case involved allegations that the makers of the cold remedy product, Zicam, withheld information from investors suggesting that the product may cause a condition called anosmia, or loss of smell.  At the risk of oversimplifying, the holding of Justice Sotomayor’s unanimous opinion can generally be summarized as follows: in a securities fraud action arising out of an alleged failure to disclose information about a possible causal link between a product and negative health effects, the plaintiff need not allege that the omitted information showed a statistically significant probability that the product causes the ill effects in order to establish that the information was material.  The decision reaffirms the applicability of the reasonable investor standard for materiality announced in Basic Inc. v. Levinson, which looks to whether the omitted information would have “significantly altered the ‘total mix’ of information made available” to investors. 

Thus, Matrixx eschews a bright-line rule (statistical significance) in favor of a more flexible “reasonable investor” standard.  Professor Kaye does not take issue with the Court’s rejection of a bright line rule requiring a plaintiff to plead (and ultimately, prove) statistical significance of omitted information in the securities context.  Instead, he is critical of the Court’s failure to articulate in better detail the technical shortcomings of using statistical significance as a bright-line rule, and he cautions against interpreting Matrixx as suggesting that something less than statistical significance would be appropriate to prove a causal link between a product and disease in other contexts.  In other words, it is one thing to say that the causal link does not have to be statistically significant in order for information about an association between the product and disease to be meaningful to investors or consumers.  It is another thing to say that statistical significance is unimportant when it is necessary to actually show evidence of a causal link itself, such as in the toxic tort context.

Although I followed and generally agreed with Professor Kaye’s article from a legal perspective, there were some technical concepts discussed in the article that were admittedly a bit over my head.  Fortunately, I knew just who to ask for more insight, having recently worked with Justin Hopson of Hitachi Consulting on two CLE presentations discussing the use of statistics in class actions.  Here are some of Justin’s observations after reading the article:

  • The article is well-written.  Professor Kaye would make a good expert witness.
  • Kaye identifies studies showing that zinc sulfate caused anosmia.  He does not comment on zinc acetate, nor zinc gluconate, the active ingredients in Zicam.  It sounds like the causal link may have been known, and available to use.  So, this was not a case about “arbitrary statistics.”  Instead, the issue had to do with the measurement of an understood, causal relationship.
  • Kaye describes the standard applied in Matrixx as looking to whether a reasonable investor would find the omitted information “sufficiently extensive and disturbing” to induce him to make a different investment decision.  Nonlawyer experts may be tempted to ask for a formulaic definition for this phrase, and it may not be obvious without explanation that the standard would leave the question about what is “sufficiently extensive and disturbing” to the factfinder.
  • Kaye talks about the historical treatment of .05 as the threshold “significance level” that makes something statistically significant.  I’ve often thought of “significance level” associated with the relative degress of the “risks”.  If the risk of being wrong is death, then is 1-in-20 OK?  You really have to think through: What does Type I and Type II error look like in my experiment?  What are the implications?
  • If one were really attempting to compute the potential causal connection between Zicam and anosmia, it might help to understand why the FDA suggested a background rate in “all cold remedies”.  If the causality is related to zinc sulfate, then isn’t that the common population?
  • The point that the 0.05 “convention” is somewhat arbitrary is an important one.  Kaye observes that “[a] useful rule of complaint drafting must avoid inquiries into the soundness of expert judgments about the population, the test statistic, and the model.”  Hmm…so how do we get a useful rule if you cannot attack the fundamentals?  Indeed, Kaye’s next point is that Bayesian analysis should be used sometimes.  All inferential statistics have assumptions, and any appropriate standard of pleading or proof should be flexible enough to allow the opposing lawyer to challenge every single assumption. 
  • The observation that “the p-value, by itself, cannot be converted into a probability that the alternative hypothesis is true” is also very important.  This is a common misunderstanding in beginning stats because we teach, “I fail to reject the null hypothesis.  Or I reject the null, and accept the alternative hypothesis.”  It becomes very important to correctly specify null/alternative in exhaustive and exclusive terms.  Otherwise some other non-specified conclusion should be reached.
  • The one thing I might challenge is the assertion that adverse event reports (AERs) are “haphazardly collected data”.  I’m not sure why Kaye chose this phrase.  The AERs should be observations.  It is only their cause that is in doubt.  It is not their function to establish the causal link.  Instead, the link would have to be established with other data, such as through a clinical trial using a well-organized data collection process.

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Colorado litigators, I hope you will consider attending our next Class Action Subsection Luncheon scheduled for next Thursday, June 30, 2011 at noon.  The topic is “Statistics in the Courtroom.”  I will be presenting the law, and my co-presenter, Justin Hopson of Hitachi Consulting, will  be presenting the science.  Among other things, we will analyze the Supreme Court’s treatment of statistical evidence in the recent Wal-Mart Stores, Inc. v. Dukes decision.  I hope you can make it.  A program description follows.

CBA – Class Action Sub-Section LUNCHEON

CBA Offices, 1900 Grant Street, 9th Floor,

Executive Conference Room Denver, CO 80203

Thursday, June 30, 2011

Topic: “Statistics in the Courtroom”

 

As the standards of proof for class certification have become more rigorous over the past few years, the use of statistical evidence in class certification proceedings has become a growing trend.  For the practitioner, this means that knowing when and how to use statistics can be the difference between winning and losing a class certification motion. 

 

In Part I of this Program, Paul Karlsgodt of Baker Hostetler will discuss the legal principles involved and case law dealing with the admissibility and use of statistics in the courtroom, especially in class certification proceedings.

 

In Part II, Justin Hopson of Hitachi Consulting will discuss the types of statistics that can be used in the courtroom, what statistics mean, how statistics can and cannot not be used, and tips for cross-examining statistics experts.

 

1 General CLE Credit Applied for.

Registration for the Luncheon begins at 11:30 a.m.
The Luncheon will begin at 12:00 PM.

To RSVP for the Luncheon:
Call 303.860.1115, X727 or SEND AN E-MAIL TO LUNCHES@COBAR.ORG, PLEASE INCLUDE YOUR NAME AND Class Action luncheon in your e-mail.

Please register by Wednesday, June 29, 2011, Noon.

If sending a check please make it out to Colorado Bar Association, Class Action Sub Section, 1900 Grant Street, Suite 900, Denver, CO 80203.  Please also call or e-mail in your reservation when sending a check.
**Cancellations can be made only by calling 303.860.1115, X727 or by e-mail to mailto:lunches@cobar.org.**
Cancellations after Wednesday, June 29, 2011, Noon, will be responsible for payment.

The cost of the luncheon is $15.00 for Litigation Section members, $25.00 for Non-Members. Vegetarian meals must be requested when making reservation. 

Call-in option will be $5, please RSVP to lunches@cobar.org, and indicate that you would like to call-in.  Instructions for the call-in will be sent out before the luncheon. 

 

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I must have more readers than I thought, and some quality readers at that!  Andrew Oh-Willeke, Denver lawyer and author of the blog Wash Park Prophet, posted this question as a comment to one of my recent posts, and it seemed like a great topic deserving of its own post:

Do you know of any statistics on how many class action lawsuits are filed in state courts in Colorado?  The state judiciary doesn’t track Rule 23 motions in the statistics in its annual reports, so it is hard to track trends.  One can make some order of magnitude educated guess by ruling out non-class action eligible suits in District Court (e.g. Rule 120 motions and distaint warrant cases are not going to involve class actions, and presumably all Colorado class actions filed in state court would be filed in District Court, etc.), but, given the different procedural environment, reasoning by analogy from federal district court class action rates isn’t a very sound estimation method, and most places with reputations as class action meccas (e.g. Madison County, Illinois; California) are also unlikely to be representative of Colorado’s state court litigation situation.  Has the Class Action Fairness Act of 2005 shifted what class actions there are in Colorado almost entirely to federal court, or is there a steady stream of class action cases being brought under the radar in the state?

The best source that I’m aware of for tracking filings is a fee-based subscription service called CNS (for Courthouse News Service), which you can find online at http://www.courthousenews.com.   They have a database that tracks filings in the federal courts and some, although not all, state courts.  Below is what I found out from a series of searches on their filings database for U.S. District Court for the District of Colorado, as well as most of the counties along the Front Range.  Because CNS does not include all state courts in Colorado, these numbers are not a complete, but given that the majority of the state population is in the counties whose district courts are included in the CNS database, they should give you a rough idea.
2007
  • 32 total filings described as “class actions”
  • 23 federal court
  • 9 state court filings (Denver 7, Douglas 1, Weld 1)
  •  

2008
  • 25 total filings
  • 19 federal
  • 6 state (Denver 4, Arapahoe 4, Boulder 1)
2009
  • 70 total filings
  • 60 federal court
  • 10 state court (Denver 7, Boulder 3)
2010 (through yesterday)
  • 37 total filings
  • 21 federal court
  • 16 state court (Denver 13, Arapahoe 1, Boulder 2)
So, it appears that while a majority of class action filings have been made in federal court (assuming that there aren’t significant numbers of additional state court filings in counties that aren’t in the CNS database), the percentage of federal filings has not necessarily been increasing in the years following the passage of CAFA in 2005.  In fact, the year with the highest percentage of state court filings is 2010, in which 43% of the total class actions have been filed in state court. 
 
These statistics have to be taken with some huge grains of salt.  They do not reflect removals of cases filed originally in state court.  That analysis could be done using the CNS data because CNS tracks removals, but it would be fairly time consuming.  Moreover, the data also doesn’t provide any qualitative information about the cases included in the statistics.  A pro se filing that uses the words “class action” in the civil cover sheet description would be treated the same as a real class action filed by a reputable firm.  Finally, many of the federal class action filings are employment cases, where federal question jurisdiction provides a jurisdictional basis independent of CAFA.
 
There are a couple of other factors to consider in assessing the potential impact of CAFA on choice of forum.  First, many of the active class actions being litigated in the state were filed before CAFA, so CAFA’s expanded removal jurisdiction does not apply to them.  I am currently defending 3 Colorado class actions in various stages of proceedings, and all three were filed pre-CAFA.  Second, at least in the consumer area, plaintiffs seem to be concentrating less on nationwide class actions and more on individual statewide class actions.  This trend is probably in part due to CAFA but also in part due to a series of decisions over the past decade holding that variations in state consumer protection acts and other laws can preclude class treatment of a would-be nationwide class (see, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012 (7th Cir. 2002)).  CAFA jurisdiction does not apply in a diversity case where the defendant is a citizen of the forum state and more than 2/3 of the class members are also citizens of the forum state.  28 U.S.C. § 1332(d)(4).  A federal court may decline to exercise jurisdiction when the primary defendants and at least 1/3 of the class members are citizens of the forum state.  Id. § 1332(d)(3).    So, there are still many situations where a class action can be brought in state court and not removed by the defendant.

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PriceWaterhouseCoopers has published its 13th annual report on trends in private securities class actions.  The 2008 report offers a variety of statistics, trends, and insights into securities class action litigation from the past year. 

Some of the statistical highlights include an overall increase in filings but a decrease in the number and amount of settlements.  The report examines filings by circuit and examines trends in the nature of allegations being made, the types of corporations, industries, and corporate officers being targeted as defendants, and trends in institutional investors being named as lead plaintiff. 

Not surprisingly, the report offers specific analysis of the impact of the global economic crisis on the types of cases filed in 2008, and it includes special section on U.S. securities class actions against foreign companies and trends on the inclusion of foreign plaintiffs or class members in U.S. class actions. 

The report concludes with a section offering strategic advice for managing civil securities litigation following a criminal investigation into alleged corporate misconduct.

PWC’s website has a variety of other securities-related publications:

http://10b5.pwc.com/public/Default.aspx

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Two news sources reported today on a forum sponsored by the Manhattan Institute to discuss a research paper releaseed by the U.S. Chamber of Commerce Institute of Legal Reform (ILR).  See the Wall Street Journal’s Market Watch section and an American Lawyer article by Brian Baxter posted on Law.com.  The report and press release is available for viewing at the IRL website: www.InstituteforLegalReform.com

Among numerous other statistics provided in the report, the report states that securities class action filings increased by 58% in 2007 over 2006 and that $51.8 billion was paid out in securities class action settlements over the last decade.  The report also states that the average dollar amount per settlement increased by 43%, not taking into account “billion dollar plus settlements,” and contends that “[b]etween 1995 and 2005, securities class action litigation caused the destruction of nearly $25 billion of shareholder wealth.”  The report offers various proposals for securities class action reform, including the adoption of the “Securities Litigation Attorney Accountability and Transparency Act,” (S.3033, H.R. 5463), or SLAATA, a bill being championed by Texas Senator John Cornyn.  (See this previous ClassActionBlawg.com entry).

The ILR has an unapologetically pro-business slant, but whether you agree or disagree with the organization’s views, the statistics provided and issues raised in the report are important ones to consider in the ongoing debate over securities and other class action reform.

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