In recent years, academics outside of the United States have made some of the most valuable contributions to the development of legal theory of class actions and other collective litigation. Here are two examples of recent works by thought leaders in this area:
INDIVIDUAL STANDING IN CLASS ACTIONS (A LEGITIMIDADE DO INDIVÍDUO NAS AÇÕES COLETIVAS)
Author: Larissa Clare Pochmann da Silva (Master in Law in UNESA, Doctorate in Law student at UNESA and Professor of Complex Litigation and Civil Procedure at UCAM – Rio de Janeiro, Brazil)
Abstract (translated from Portuguese):
Individual Standing in Class Actions offers an important and interesting approach to the question of standing, one of the most important themes relating to the development of Brazilian class actions.
The first part the book summarizes research on foreign law, inquiring into the state of the art of collective protection throughout Latin America (Brazil, Argentina, Chile and Mexico), in the United States and Canada, in the European Union (Germany, France, England and Italy) and in Australia. Part two offers a comparative analysis of these jurisdictions’ various approaches to standing.
Part three organizes the main objections to representational standing and argues for laws recognizing the standing of individuals to sue in a representative capacity, demonstrating the reasons for its relevance, and the important role to be played by lawyers in class actions.
Finally, the book addresses the question of the participation of the individual from various perspectives, seeking to offer a systematic framework for the standing discussion and proposals for the improvement of collective protection in Brazil.
The result is a work that contributes to the development and strengthening of collective action law in Brazilian and brings a new perspective of modernization and improvement of tools for access to justice and the effectiveness of the process.
Pochmann da Silva’s book is available at http://www.editoragz.com.br/produto.asp?prodId=199.
AN ECONOMIC ANALYSIS OF RELIANCE IN MARKET FRAUD AND NEGLIGENT MISREPRESENTATION
Authors: Alon Klement and Yuval Procaccia (Interdisciplinary Center (IDC) Herzliyah – Radzyner School of Law, Israel)
Abstract:
A deeply entrenched principle in the law of fraud and negligent misrepresentation provides that damages can be recovered only upon a showing of reliance. To prevail, plaintiffs must not only establish the mere falsity of a statement, but also show that they had acted upon the statement and sustained injury as a consequence.
Despite the intuitive appeal of this principle, this paper argues that the reliance requirement ought to be abandoned. Harm can be caused by a misrepresentation without reliance, and recovery for such loss should not be barred. When a firm misrepresents an attribute of a product, its price in equilibrium typically rises. The inflated price is an injury caused to all consumers, relying and non-relying alike. A rule restricting recovery to only relying consumers results in inadequate deterrence of the firm, which in turn spurs a host of inefficient effects: it may distort allocative efficiency; encourage investments by firms in the production of fraud; induce investments by consumers in self-protection efforts and in detrimental reliance investments; and prompt competing firms to invest excessively in signaling. Furthermore, it undermines deterrence by erecting a substantial barrier to private enforcement through class actions.
While the discussion focuses on consumer markets, it applies more broadly to other markets and other market structures. We explicitly discuss its extension to security markets, in which the requirement has been famously revoked. While the analysis supports existing policy in the domain of primary security markets, it does not do so in the context of secondary markets.
Klement and Procaccia’s article is available for download at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2372922
Association, Causation, and the Fuzzy World of the Baysian p-Value in Class Actions
Posted in Class Action Trends, Commentary, tagged 10-b, 10b, anosmia, basic, baysian, class action statistics, hopson, kaye, matrixx, p-value, reasonable investor, scientific evidence, securities, securities class action, securities fraud, statistics, zicam on November 15, 2011| Leave a Comment »
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:
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