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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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John B. Isbister, founder and chair of the ABA’s annual National Institute on Class Actions, graciously agreed to offer his insights into this year’s programs, the history of the event, and trends in class action litigation generally.  This year’s two programs are being offered in San Fransisco on October 30, 2009 and Washington, D.C. on November 20, 2009.  My Q & A with John follows.  Be sure to check out the links for sample audio clips from last year’s program.

What excites you most about this year’s Institute? 

There are a lot of changes in class action practice right now.  Hot issues include many of the issues that we are examining at the National Institute.  For example, the litigation about arbitration clauses with class action waivers and the changing law on class certification standards (the shift from “some showing” to preponderance of the evidence) will both be examined at the National Institute.  All of these changes are court driven; as opposed to many of the changes in the past that were a function of changes to Rule 23 and CAFA.  Court driven changes are things that can be affected by lawyers, so there is the opportunity for good lawyers to have a real  impact on how Courts deal with these issues.  We are very fortunate to have as speakers some of the best lawyers in the country who are dealing with these issues.  My hope is that the National Institute will make all of the people who attend better able to serve their clients and better handle these cutting edge issues.

Why the decision to split the Institute into two separate programs this year?

This is “customer driven.”  We wanted to do a program in California–an area that has a lot of class litigation.   However, we recognized that in today’s economy a California program probably would not attract many lawyers from the East Coast.  So we decided to do both an East Coast and a West Coast program to satisfy both markets.

Which one should I attend, the one in D.C. or the one in San Francisco? 

Both cover substantially the same material and both have a great faculty.  The difference is that the San Francisco National Institute has a program on California class actions.  If an attorney does a lot of California class actions, the San Francisco program will have a special attraction. For those who want a taste of what the Institute is like, we’ve recently posted audio from the rigorous analysis standard and consumer fraud class actions in federal court sessions at last year’s conference.

What do you see as the emerging trends in class action law?  

An increase in the difficulty in getting a class certified–primarily driven by the shift from “some showing” standard to the preponderance of the evidence burden of proof  standard.  I think this moves the discovery and litigation of a number of issues to the front of a case that at earlier times would have only been contested at trial.  This sets the stage for a battle of experts at the class certification stage, which is also something we’re covering online this month.  It also enables defendants, who traditionally are reluctant to go to trial in a class action to litigate these issues at a preliminary stage.  

How about trends in class action filings? 

While I think it is harder to get a class certified, I do not think this has slowed filings of class cases.  Class action plaintiffs’ lawyers continue to be creative in using this procedural device to look for ways to economically litigate large numbers of claims that probably could not be litigated on their own. The sub-prime/financial crisis sparked a record number of new class action filings.

This is the 13th year for the Institute.  Why do you think this program has been so successful for so long? 

We have consistently identified and addressed current issues in the area of class litigation.  We have also consistently attracted the best lawyers, academics and Judges to be on our facility.  This year we are again privileged to have Professor John C. Coffee open the program. Professor Coffee is one of the most quoted sources in the news on topics related to securities litigation, the financial crisis and class actions in those areas.  His presentation is an overview on developments in class litigation always gets  rave reviews and sets the stage for the rest of the day.  This year Professor Arthur Miller–the guy who wrote the book on civil procedure–will moderate a discussion with  three experienced federal Judges on current issues in class litigation.   John Beisner and Elizabeth Cabraser–two of the most respected defense and plaintiffs’ lawyers respectively will be together discussing changing class certification standards–you can’t get better speakers than those two.  Finally, this program is a great bargain. Attendees get a full day’s worth of CLE credit (including some ethics credit), they get to have lunch and network with other class action practitioners, and they get a great book of written material.  We  also have some nice discounts for members of the American Bar Association, and  particularly  members of the ABA Section of Litigation.

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