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Posts Tagged ‘dukes v. wal-mart’

The seemingly revolutionary concept of a “reverse class action” has gotten some attention from the technical media lately, in reference to efforts by the holder of a copyright to seek common relief against a group of alleged infringers.  As pointed out earlier today by Mike Masnick in this entry on his blog TechDirt, “reverse class action” in this context is actually a procedural vehicle that is not new, but is rarely used in practice: certification of a class of defendants.

Rule 23(a) expressly contemplates the possibility of a defendant class because it provides that “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members only if” the prerequisites of numerosity, commonality, typicality, and adequacy are satisfied.  FRCP 23(a) (emphasis added).  However, the successful use of this mechanism in practice has proven rare.

Defendant classes in cases seeking damages are impractical in most cases because Rule 23(b)(3), the portion of the rule governing actions for damages, requires that class members be given notice and an opportunity to opt out of the case.  So, you could theoretically sue a class for damages if you could meet the other criteria, but each defendant would have the right to exclude himself or herself from the case, which could leave you back where you started.

Another possibility is an action for injunctive relief against a defendant class under FRCP 23(b)(2).  Depending on Supreme Court’s upcoming decision in Wal-mart v. Dukes, Rule 23(b)(2) could provide a mechanism for obtaining significant monetary relief as well, without the same opportunity as in Rule 23(b)(3) for class members to opt out.  However, courts are split on whether the express language of FRCP 23(b)(2) prevents certification of a defendant class.  Some courts have held that the language in FRCP 23(b)(2) permitting class certification when  “the party opposing the class has acted or refused to act on grounds that apply generally to the class . . .” means, logically, that the party opposing class certification cannot be the defendant.  However, other courts have allowed defendant classes under FRCP 23(b)(2), at least in special situations, such as a case against a class of government officials.   See Generally Brown v. Kelly, No. 07-3356-cv, slip op. (2d Cir., June 24, 2010) (discussing the split in the courts recognizing that Rule 23(b)(2) could be used to certify a class of local government officials under some circumstances, but reversing class certification on other grounds).

That leaves FRCP 23(b)(1).  Again, this section uses the phrase “by or against individual class members,” so it at least opens up the possibility of a defendant class.  However Rule 23(b)(1)(A) authorizes class actions only when individual actions “would establish incompatible standards of conduct for the party opposing the class,” potentially ruling out classes of defendants categorically under the same reasoning that has been applied to Rule 23(b)(2).  Rule 23(b)(1)(B) allows class actions where individual adjudications “would be dispositive of the interest of the other members” or “would substantially impede or impair their ability to protect their interests.”   It is not clearly established what circumstances might meet this standard, but the mere possibility that one case will have a stare decisis (precedential) effect on others is probably not  enough.  (See this 2003 Tech Law Journal article discussing Tilley v. TJX Cos., 345 F.3d 34 (1st Cir. 2003)).

For more on the concept of defendant classes (in the patent infringement context), see this June 2009 Los Angeles Lawyer article by Mark Anchor Albert.

For anyone curious about the possibility of defendant class actions in Canada, see this 2004 article by Vince Morabito  in the Duke Journal of Comparative and International Law.

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

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

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I’m embarrassingly late in reporting on them, but I would be remiss if I did not mention two key recent United States Circuit Courts of Appeals decisions addressing the legal standards governing class certification under FRCP 23:

In American Honda Motor Co. v. Allen, No. 09-8051 (7th Cir., April 7, 2010) the Seventh Circuit held that a district court abused its discretion by failing to conduct a Daubert inquiry into the admissibility of expert testimony before relying on that testimony in determining that the plaintiff had met his burden of establishing the elements of class certification. 

Meanwhile, in Dukes v. Wal-Mart Stores, Nos. 04-16688 and 04-16720 (9th Cir., April 26, 2010) (en banc), the Ninth Circuit Court of Appeals clarified that circuit’s standards for conducting the “rigorous analysis” necessary to determine whether the elements of Rule 23 are satisfied.  Following extensive discussion of the history of class certification standards both outside and within the Ninth Circuit, the court articulated class certification standards that essentially mirror those recognized in the Second Circuit’s decision in In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006).  However, applying those standards, the court came to a very different result, affirming certification of a nationwide class of thousands of female employees seeking injunctive and declaratory relief, back pay, and punitive damages arising out of allegedly common, discriminatory employment practices.

Both decisions are worthy of careful reading and study, and you will no doubt hear more about both decisions in the weeks and months ahead.

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