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Posts Tagged ‘commonality’

Earlier today, the Supreme Court denied certiorari in two highly anticipated appeals of decisions by the Sixth and Seventh Circuit Courts of Appeals to grant class certification over breach of warranty claims involving allegedly defective washing machines.  The denial of cert in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013) was a surprise to many commentators who had seen the moldy washer cases as providing the perfect opportunity for the Court to continue its trend clarifying the boundaries of class certification in cases like Wal-Mart Stores, Inc. v. Dukes,  Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, and Comcast Corp. v. Behrend.  The denial of cert means that the Court will not be addressing the question of whether it is appropriate for a federal court to order class certification of discrete, common issues in a case without analyzing whether those issues predominate more generally over the individualized questions, like injury or damages.  That question will be left to the lower courts for the time being.

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This is the first in what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last Thursday in Chicago.  The National Institute sets the gold standard for class action conferences, and this year was no exception.  Program Chair Daniel Karon and the rest of the organizing committee did an excellent job selecting six of the most timely and relevant topics facing class action practitioners today.  As always, the list of panelists was a veritable who’s who in the class action field.  If you ever have the opportunity to attend this annual conference, I highly recommend it.

As has become the custom at the National Institute, Columbia Law Professor John C. Coffee, Jr. kicked off this year’s program with a comprehensive and insightful summary of the year’s key developments in class action law.  This year’s presentation saw what has been a hit solo act turn into an even better duet, as Professor Coffee shared the stage with Connecticut Law Professor Alexandra Lahav.  The session was titled “Holy Cow!  This Year the Courts Said What?!” A Brief History of this Year’s Developments in Class Action Jurisprudence.  Attendees were also treated to a comprehensive, 179-page summary of the year in class actions by Professors Coffee and Lahav entitled The New Class Action Landscape: Trends and Developments in Class Certification and Related Topics.

The first part of Professor Coffee’s presentation covered each of the class action-related cases on the U.S. Supreme Court’s docket this term.  Here is a list of those cases with some of Professor Coffee’s insights:

  • Connecticut Retirement Plans & Trust Funds v. Amgen, Inc., 660 F.3d 1170 (9th Cir. 2011) – Amgen raises the question whether the plaintiff must establish the materiality of an alleged false statement at the class certification stage of a securities fraud class action.  Professor Coffee believes that this case is a close call, but whichever way it comes out, it does not threaten to end securities class action litigation as we know it.
  • Behrend v. Comcast Corporation, 655 F.3d 182 (3d Cir. 2011) – In Behrend, the Court could decide whether a trial court must perform a full Daubert analysis of expert testimony offered in support of or in opposition to class certification.  The case raises the question, at least in the antitrust context, whether the plaintiff must present a  formal damages model or whether the mere possibility of common proof is enough.
  • Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011) – This is a wage and hour case under the FLSA, which has a different procedure than Rule 23.  FLSA claims are more accurately characterized as collective actions, rather than class action.  The issue is whether a settlement offer for the full amount of the named plaintiff’s FLSA claim can moot the claim and prevent the case from proceeding on a collective basis, a concept also known as “picking off.”   One of the arguments that has been raised is that the writ of certiorari should be dismissed as improvident granted, so it is unclear whether the Court will actually enter a substantive ruling.
  • Knowles v. The Standard Fire Insurance Company, 2011 U.S. Dist. LEXIS 130077 (W.D. Ark. December 2, 2011) – This case raises the question whether a plaintiff can plead around CAFA removal jurisdiction by stipulating to less than $5 million in damages on behalf of the putative class.  Professor Coffee felt confident in making the prediction that the defendant will win.  He points to dicta in the Court’s recent decision in Smith v. Bayer Corporation calling into question whether a plaintiff can do anything to bind the members of a putative class before it is certified.

Professor Coffee then went on to highlight some of the big developments in the lower courts from over the past year, which include:

The proper burden of proof to be applied at class certification.  The circuits are split on this issue, with some applying a preponderance of the evidence standard and others simply requiring a rigorous analysis with no particular evidentiary standard.

Treatment of expert testimony.  The federal district courts continue to resist resolving a battle of the experts at the class certification stage, but dicta from the Supreme Court in Dukes, as well as holdings by several of the circuits, are putting increasing pressure on the federal courts to perform a Daubert analysis (and the Court could resolve this issue for good in Behrend).

Class Arbitration Waivers.  Some lower courts, especially the Second Circuit, continue to carve out exceptions to the Supreme Court’s ruling favoring arbitration agreements in Concepcion.   One key issue is whether a class arbitration waiver may still be held unconscionable as a matter of federal law.  Professor Coffee quipped that the Second Circuit will only change if the Supreme Court “stuffs it down their throat.”  While unconscionability under state law is no longer a viable argument against enforcing an arbitration clause, clauses with fee-shifting provisions continue to be susceptible to attack.

Settlement Only and Limited Fund Classes.  There is a lower court trend in permitting certification in settlement classes in cases that could not be certified as class actions in contested cases, notwithstanding the Supreme Court’s opinion in Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997).  The primary justification tends to be that any individualized issues of fact in the case went to manageability, which is no longer an issue in the settlement context.   In cases where courts have found that individualized issues impact both predominance and manageability, settlement classes have continued to be rejected.

Partial Certification.   The question of issue certification has been one of the hottest trends in the federal courts in the wake of Dukes.  Professor Coffee pointed out that the resolution of whether courts allow partial certification tends to be determined whether the fact of certification creates an extortionate threat to settle the case.

Class Action Settlements.  If you read just one class certification decision this year, Professor Coffee recommends Judge Rosenthal’s memorandum opinion in In re: Heartland Payment Systems, Inc. Customer Data Security Breach Litigation, MDL No. 09-2046 (S.D. Tex. March 20, 2012), which has a well-organized, step-by-step analysis of the approval of a class action settlement.

Professor Lahav focused her remarks on what has been happening in the lower courts in response to the three key aspects of the Court’s decision in Dukes: 1) the “new commonality” requirement; 2) the rejection of the use of Rule 23(b)(2) to recover individualized money damages; and 3) the rejection of “trial by formula,” of the use of statistical sampling to solve individualized damages problems.

The “new commonality”.  Among Professor Lahav’s key observations was that in the Title VII context, there must be a policy, but if there is an identifiable policy, the courts will allow discretionary elements of that policy to be attacked.  This trend is best exemplified by Judge Posner’s decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc.  As many commentators predicted, Plaintiffs have had better success after Dukes by narrowing the geographic scope of discrimination claims.  This has also been true in the consumer context.  In the civil rights context, allegations of systemic constitutional violations have had success when the courts have focused on the systemic nature of the practice, but not when courts have focused on the effects of a systemic practice on the prospective class members.  In general, there has been an increasing reliance on issues classes to overcome individualized issues that might destroy commonality or predominance.

Rule 23(b)(2) and monetary damages.  The majority opinion in Dukes raised the question whether there can ever be a class with monetary damages.  None of the circuit courts have provided further guidance on when damages might be sufficiently “incidental” to still allow relief.  One area that has seen mixed results since Dukes is the area of medical monitoring class actions, where the remedy sought is medical monitoring of the possible health effects of a toxic exposure but the cost of monitoring can vary from person to person.  Professor Lahav pointed to the Third Circuit’s decision in Gates v. Rohm & Haas Co., No. 10-2108 (3d Cir., Aug. 25, 2011), as potentially supporting arguments on both sides.  Hybrid class actions, where classes are certified based on both Rule 23(b)(2) and 23(b)(3), are becoming increasingly common, especially in the Title VII context.  One unanswered question is whether damages claims are precluded if a Rule 23(b)(2) class is certified but not successful.

Statistical evidence and “trial by formula.”   Statistical evidence is still accepted in contexts where it has been accepted traditionally, e.g. civil rights, disparate impact, and antitrust cases.  It is not allowed in cases where the defendant can raise individualized defenses.  One proposed solution is, again, issues classes, but this creates a class action funding problem – How do lawyers get paid?

Professor Lahav also revisited statistical trends in class actions, focusing primarily on data compiled by the Federal Judicial Center in 2008 which analyzed the impact of the Class Action Fairness Act (“CAFA”).  She made the key point that statistical data on class action trends has been severely lacking since the FJC study, making updated empirical analysis of class action trends difficult.

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The United States Supreme Court has granted certiorari in another class action to be heard during the October 2012 term.  In Comcast Corp. v. Behrend, No. 11-864, an antitrust class action, the Court will address the following issue:

Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.

The case is an appeal from the Third Circuit Court of Appeals’ ruling in 2011 upholding the district court’s finding that the plaintiff had presented by a preponderance of the evidence that damages could be proved on a common, class-wide basis.  However, a lengthy opinion from Judge Jordan, concurring in part and dissenting in part, took issue with the conclusions reached by the plaintiffs’ expert that antitrust damages could be established on a common basis for the class as a whole. 

As with many of the cases addressed by the Supreme Court over the past few years, this case provides an opportunity for the court to either enter a specific ruling narrowly tailored to the area of law in which it applies (here, antitrust or competition law) or a sweeping ruling impacting the procedure governing class certification more generally.  In particular, the Behrend case could potentially resolve the issue whether difficulties in proving damages on a class-wide basis is a reason to deny certification.  For many years, lower courts have relied on the rule that individualized damages issues are not a barrier to class certification.   A reversal of that rule could have a major impact on the viability of class actions in a variety of contexts.

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According to Pete Kasperowicz at The Hill’s Floor Action Blog, Senator Al Franken (D-Minn.) and Representative Rosa DeLauro (D-Conn.) have introduced legislation in Congress intended to reverse limitations on employment discrimination class actions recognized in the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes

A fact sheet available on Senator Franken’s official website describes the key provisions of the bill as follows:

The Equal Employment Opportunity Restoration Act will restore workers’ ability to challenge discriminatory employment practices on a class-wide basis. It adds to Title 28 of the U.S. Code a new section 4201, which does the following:

  • Section 4201(a) creates a new judicial procedure – called “group actions” – that workers can use when bringing employment discrimination cases. The requirements for establishing a group action are the same as the pre-Dukes requirements for maintaining a class action under Rule 23 of the Federal Rules of Civil Procedure—namely, clarifying that the merits of the case need not be proven to certify the group action.
  • Section 4201(b) provides that group actions can be used regardless of whether the group is challenging an objective employment practice, a subjective employment practice, or a mixed employment practice (such as the use of a written test to qualify for an interview).  It also provides that employers’ written anti-discrimination policies can be considered as a defense to certification only insofar as the employer demonstrates that the policy actually has been implemented in practice.
  • Section 4201(c) says that the group actions authorized by this section are subject to the same procedural requirements as class actions authorized by Rule 23. These include notice and opt-out requirements. This section also preserves the application of the Class Action Fairness Act and the availability of appeals.
  • Section 4201(d) says that courts can use statistical analyses and any other procedures they deem necessary to provide justice to prevailing plaintiffs.

It does not appear from Senator Franken’s fact sheet that the bill has significant bipartisan support, and having just been introduced, there is no telling how far it will go towards becoming law in its present form.  However, we’ll keep an eye on any future developments here at CAB.

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Robert H. Klonoff, Dean of the Lewis and Clark Law School and author of the quintessential class action compendium, Class Actions and Other Multi-Party Litigation in a Nutshell, has authored an excellent research paper entitled The Decline of Class Actions.  The paper which will be published in Volume 90 of the Washington University Law Review, but a draft is now available for free download at SSRN.  Dean Klonoff asserts that recent trends in class action decisions, which make it more difficult for plaintiffs to obtain class certification, have undermined the “compensation, deterrence, and efficiency” objectives underlying Rule 23.  He urges policymakers, rulemakers, and the courts to take a “more balanced approach to classwide adjudication.”

Whether or not you agree with Dean Klonoff’s criticisms from an academic point of view, the article is a must read for anyone looking for a good synopsis of the key developments in the U.S. class action law over the past several years.  From the Class Action Fairness Act to the Supreme Court’s recent decisions in Dukes and Concepcion to slightly less glamorous topics such as the necessity of a precise class definition, Klonoff’s article is impressive in its comprehensive analysis of relevant recent developments.

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I’m embarrassingly late in posting a link to a terrific article from Steptoe & Johnson Partner Jennifer Quinn-Barabanov entitled Has Dukes Killed Medical Monitoring?  The article, published in the November 2011 Issue of DRI’s For the Defense Magazine, explores the potential impact of the Supreme Court’s decision Dukes in defending against class certification of product liability claims that seek as a remedy medical monitoring of class members who were exposed to an allegedly harmful product.

I highly recommend Quinn-Barabanov’s article for those of you who may have missed it when it came out in November.  The article is a must-read for anyone facing (or prosecuting) a medical monitoring class action.

It also makes at least two key contributions that are independent of the medical monitoring context.  First, it offers an analysis of the potential application of various aspects of the Wal-mart Stores Inc. v. Dukes decision outside of the employment discrimination context, including the arguably heightened commonality analysis and the admissibility of expert testimony in support of class certification.  Second, it is a good primer on the possible distinctions between truly injunctive relief, which still may be the basis for a Rule 23(b)(2) class action, and merely equitable relief incidental to a claim for monetary relief, which the Dukes Court held cannot support class certification under Rule 23(b)(2).

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It’s not too late to sign up for tomorrow’s Strafford Publications Webinar Class Certification After Dukes, Bayer and Halliburton Rulings.   As a preview, here is a copy of the written materials for my portion of the presentation, Opposing Class Certification After Dukes, Bayer and Halliburton.  I hope you can make it.

 

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Along with leading Colorado Employment attorney Todd J. McNamara, I’ll be presenting at a breakfast seminar at the CBA-CLE next Tuesday with the (hopefully) self-explanatory title: Wal-Mart v. Dukes: Reshaping Class Certification.   The particulars follow below.  Hope to see you there!

When:

July 12, 2011 8:30 AM – 9:30 AM

Where:

CLECI Large Classroom
1900 Grant Street, Suite 300
Denver CO 80203
(303) 860-0608

Credits:

General credits: 1.00

Prices

CBA Member $59.00
CBA Labor & Employment Section Member $29.00
CBA Litigation Section Member $29.00
Non Member $69.00
 
July 2011
 
Wal-Mart v. Dukes: Reshaping Class CertificationLIVE IN DENVER
 
 
Program Description:
 
When it issued its decision in Wal-Mart Stores, Inc. v. Dukes, the Supreme Court did much more than simply end one of the largest class action suits in American history. It also set a host of new ground rules for federal courts to evaluate class certification, both in employment discrimination cases and in other types of class actions. This program will discuss the significant potential impacts of this landmark decision on a host of issues, including 1) evaluation of merits issues at the class certification stage; 2) the potentially broadened scope of the commonality element of FRCP 23(a); 3) the standards for evaluating expert testimony at the class certification stage; 4) the threshold standard needed to establish “common proof” of an employment or other business practice; 5) the use of statistical evidence in support of class certification; and 6) the standards for adjudicating claims for monetary relief under FRCP 23(b)(2). The program will examine what the Court had to say about these and other topics, and it will also explore the questions that remain unanswered following the decision.
 
Presented by Paul G. Karlsgodt, Esq. and Todd J. McNamara, Esq.
 
Agenda:
8:00 am – 8:30 am Registration
8:30 am – 9:30 am Program (Continental Breakfast Provided)
 
 
Faculty:
 
Paul G. Karlsgodt, Esq.
Baker Hostetler
 
Paul Karlsgodt is a litigation partner whose practice emphasizes class action defense and other complex commercial litigation. Mr. Karlsgodt has represented insurance companies and other FORTUNE 500 companies in numerous nationwide and statewide consumer class action lawsuits and related litigation. He has represented clients in class action lawsuits involving sales and marketing practices, insurance coverage, claims adjustment practices, corporate securities, retailer/dealer disputes, employment and taxation.
 
Mr. Karlsgodt is editor and primary contributor to the legal blog, http://www.ClassActionBlawg.com, which covers a variety of class action-related issues, including decisions, trends, best practices, news and reform, both in the U.S. and throughout the world. He also founded and served as the first Chair of the Class Actions, Derivative Suits and Mass Torts Subsection of the Litigation Section of the Colorado Bar Association. He remains an active member of the Subsection.
 
 
Todd J. McNamara, Esq.
McNamara Roseman & Kazmierski LLP
 
 
Todd McNamara opened his own firm in 1995 and limits his practice exclusively to employment law matters. Mr. McNamara was lead private class counsel in Wilkerson, et al., v. Martin-Marietta, the largest age discrimination claim brought within the State of Colorado, which settled for a reported $7.6 million. Mr. McNamara secured the first race discrimination verdict in the United States against a real estate franchise for failure to award a sales agency to an African-American in Tyler v. ReMax. Most recently, Mr. McNamara, together with class cocounsel, settled a $3.85 million disability discrimination case against the United States Postal Services.
 
Todd has previously served as co-chair of the Colorado Bar Association Labor Law Committee, and is a member of the National Employment Lawyers Association. He serves as an arbitrator and mediator for the American Arbitration Association Employment Panel. He is co-editor of FederalEmployment Jury Instructions and has just recently completed a seventh supplement to that publication, which is used throughout the United States by both lawyers and judges. He is a co-chapter editor with the Practitioners Guide to Colorado Employment Law and has published a number of other articles on employment law issues in both Trial Talk and The Colorado Lawyer. Todd is a Fellow of The College of Labor and Employment Lawyers, one of approximately only 20 in Colorado.

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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 Indianapolis Star reported yesterday on a class certified in a case filed in Marion County, Indiana against the Hoosier Lottery alleging that the lottery defrauded purchasers of its Cash Blast scratch game tickets by misrepresenting the odds of winning the top prizes after most of those prizes had already been awarded.

I haven’t been able to hunt down a copy of Judge Gerald Zore’s opinion, but based on the descriptions of the order in the Star article, there are a couple of potentially troubling aspects to the case.  First, the court reportedly based the certification decision in part on 49 affidavits from people saying that they bought tickets “because they thought there were more prizes than existed.”  Based on the Star’s description of the allegations in the case, the argument is that tickets continued to be sold with no change in the description of the odds even after most of the larger money prizes had already been claimed.  However, it does not appear that this left purchasers without the opportunity to win any prize at all.  Consequently, this does not appear to be the type of fraud case where the plaintiffs will be able to prove that no reasonable person would ever have bought a lottery ticket if the true odds had been made known.  Common sense and experience suggests that there were probably thousands of people who bought tickets without a thought for the odds.  If so, it is curious that the court would find relevant the fact that 49 affiants said that they did rely on the advertised odds in deciding to buy a ticket.  Certainly, there would be some purchasers who relied on the published odds, and others who did not.  Individualized reliance and causation issues would seem to come in to play in this case just as in most other consumer fraud class actions.

Second, one of the named plaintiffs, Jeff Frazer, reportedly paid $40,000 for 4,000 $10 tickets and considered his purchases an “investment” based on the advertised odds.  His co-plaintiff, Jeff Koehlinger, paid another $2,470 for tickets.  It’s hard to imagine how the court was able to get around the significant typicality and adequacy problems seemingly inherent in these individuals trying to represent a class of lottery scratch game buyers.

See this MSNBC link for more on Mr. Frazer’s story.  The blog WalletPop has a commentary on broader societal implications that this case brings to light about the human cost of state-sponsored gambling.

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