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Posts Tagged ‘rigorous analysis’

As 2010 winds down, it’s time to review the key developments in class action law.  It was an especially busy year for the federal courts, and in particular the U.S. Supreme Court, on issues impacting class action practice.  Here, in chronological order, are 10 key developments from the year that was:

  1. January 5 – In In re Baycol Products Litigation, the Eighth Circuit follows the Seventh Circuit’s lead in upholding the right of a federal court to enjoin a putative statewide class action from proceeding where a federal court had already denied class certification in a case involving substantially similar claims.  (See CAB entries dated January 7 and January 12).
  2. February 23 – In a decision that will impact many class actions removed under the Class Action Fairness Act, the Supreme Court adopts the “nerve center test” as the standard for determining corporate citizenship, in Hertz Corp. v. Friend.  (See CAB entry dated March 2)
  3. March 31 – The Supreme Court holds that states may not regulate the types of claims that may be filed as class actions in the federal courts, in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.  (See CAB entry dated April 8)
  4. April 7 – In American Honda Motor Co. v. Allen, the Seventh Circuit holds that a trial court must rule on challenges to the admissibility of expert testimony relevant to class certification before deciding whether a class may be certified.  (See CAB entry dated May 4)
  5. April 26 – The Ninth Circuit issues its decision in Dukes v. Wal-mart Stores, Inc., adopting rigorous class certification standards similar to those previously adopted by the Second Circuit in In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006), but nonetheless certifying under FRCP 23(b)(2), what has been called the largest employment discrimination class action in history.
  6. April 27 – The Supreme Court seemingly puts an end, for all practical purposes, to the concept of class arbitration by holding that a defendant could not be compelled to defend an arbitration on a class basis where the arbitration clause did not expressly provide for class arbitration, in Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp.  (See CAB entry dated May 11).
  7. June 24 – In Morrison v. National Australia Bank, the Supreme Court deals a fatal blow to “foreign-cubed” class actions, holding that § 10(b) of the Securities and Exchange Act of 1934 does not allow for fraud claims involving transactions on foreign exchanges that occurred outside the United States. (See case summary at SCOTUS blog).
  8. July 19, October 20 – An Eleventh Circuit panel issues a controversial decision in Cappuccitti v. DirecTV, Inc., severely restricting CAFA removal jurisdiction to cases where the amount in controversy exceeds $75,000 with respect to at least one class member, but later reverses itself in an October 15 opinion.  (See Guest Post from Eric Jon Taylor and Jon Chally at CAFA Law Blog for more on the first decision and this October 20 CAB entry on the second decision).
  9. November 9 – Supreme Court hears oral argument in AT&T Mobility v. Concepcion, in which the Court considers whether the Federal Arbitration Act preempts state law holding a class arbitration waiver unconscionable.  (See CAB fsummary of oral argument dated November 17).
  10. December 6 – Supreme Court grants certiorari in Wal-Mart Stores, Inc. v. Dukes, to decide the issue of whether a claim for monetary relief can be certified under FRCP 23(b)(2).  (See CAB entry dated December 7).

Just considering the cases still awaiting ruling before the Supreme Court, 2011 promises to be another exciting year in the world of class actions.  Happy New Year to all!

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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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While doing some research today on another issue, I came across this news clipping from the May 3, 1973 issue of the St. Petersberg Times discussing a federal court of appeals decision in a class action decided a few days before. 

The article begins:

NEW YORK – A three-judge panel of the U.S. Court of Appeals ruled here Monday that a person who files a class-action suit must pay the cost of notifying each person on behalf of whom the suit was brought – even if that means notifying millions of people.

The decision, handed down by Judges Harold R. Medina, J. Edward Lumbard and Paul R. Hays, could, if it stands, bring an end to mass class-action lawsuits.

The decision, Eisen v. Carlisle & Jaquelin, 479 F.2d 1005 (2d Cir. 1973), ultimately did stand.  The United States Supreme Court, in Eisen v. Carlisle & Jaquelin, 417 U.S. 156 (1974), agreed with the Second Circuit panel’s holding that the plaintiff must be required to bear the cost of class notice.  However, in reaching that conclusion the Court created a rule that would for decades become a key argument by plaintiffs in support of certification in class actions: that it is improper for a trial court to consider the merits of the plaintiff’s claims in evaluating class certification.  See Generally Geoffrey P. Miller, Review of the Merits in Class Action Certification, 33 Hofstra L. Rev. 51 (2004).  In this way, the decision, in an odd way, actually contributed to the explosion of class actions between the late 1970s and early 2000s.  Several key recent federal decisions, including In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006) and In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305  (3d Cir. 2008), reflect an erosion of what was previously considered by many authorities to be a hard-and-fast rule preventing any consideration of the merits at the class certification stage.  This interpretation had caused many courts to gloss over practical problems posed by certification of cases in which certification was only arguably appropriate if one accepted the plaintiff’s bare allegations on issues of fact.

So, aside from perhaps marking the end of the use of a hyphen between “class” and “action,” the Second Circuit’s decision in 1973 did not mark the end of anything.

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Economist David Gulley, Ph.D., of Navigant Consulting, has authored an informative white paper entitled Recent Trends in Rule 23 Class Certification Expert Analysis.  Dr. Gulley’s article explores the expanding role of experts and increased scrutiny over expert opinion testimony in class certification proceedings in light of recent federal appellate decisions placing renewed emphasis on the rigorous analysis standard.  See the Second Circuit’s opinion in In re IPO Securities Litigation and the Third Circuit’s opinion in In re Hydrogen Peroxide Antitrust Litigation.  The paper is a great resource for both class action attorneys and experts who are asked to testify in class certification proceedings.

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Shannon P. Duffy of The Legal Intelligencer has authored an article summarizing the Third Circuit Court of Appeals’ decision in In re Hydrogen Peroxide Antitrust Litigation, No. 07-1689 (3d Cir., Dec. 30, 2008), which the article calls a “ruling that is sure to be required reading for antitrust lawyers.”  The decision also addresses more general class certification issues that are sure to be of interest to lawyers to practice in other areas. 

In particular, the Court has an interesting analysis of how a trial court must weigh conflicting expert testimony on class certification issues in carrying out the “rigorous analysis” required of a federal court in evaluating whether a class should be certified under FRCP 23.  The trial court had considered only whether the plaintiff had offered expert testimony that could be considered admissible under a Daubert analysis in finding that the plaintiff had established that the issue of antitrust injury was susceptible to common, class wide proof.  The trial court refused to weigh this evidence against the conflicting expert testimony offered by the Defendant that the antitrust injury could not be determined on a class wide basis.  The Third Circuit reversed, holding that the trial court was required to also consider conflicting expert testimony and then make a decision whether the issue was truly susceptible to class wide proof.   The court was clear that on remand, the trial court did not have to accept the defendant’s expert’s view, it merely had to demonstrate that the expert’s testimony had been considered in making an actual determination.

The decision reaffirms the idea that in carrying out the “rigorous analysis”, a district court must not shy away from making an actual determination of each of the issues necessary for class certification, even if that determination involves weighing conflicting testimony or involves deciding an issue that also happens to be a disputed issue on the merits of the plaintiff’s claims.  A court must not simply give the plaintiff the benefit of the doubt or view the evidence in the light most favorable to the plaintiff, as in ruling a motion to dismiss under FRCP 12(b)(6).

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