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Posts Tagged ‘standard fire’

Earlier today, the Supreme Court granted cert in Dart Cherokee Basin Operating Company, LLC v. Owens, No. 13-719, in which it will take up the contours of the standard for providing factual support in a notice of removal under the Class Action Fairness Act of 2005 (CAFA).  Specifically, the issue presented is as follows:

Whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required “short and plain statement of the grounds for removal” enough?

This is the third CAFA removal case that the Court has accepted in as many years.  During the October 2012 term, the Court decided Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013), in which it held that a class representative may not avoid CAFA jurisdiction by stipulating to a recovery of damages of less than $5,000,000 on behalf of members of the proposed class.  Earlier in the current term, the Court decided Mississippi ex rel. Jim Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014), holding that a parens patriae action brought by a state attorney general on behalf of Mississippi residents was not a “mass action” subject to CAFA.

 

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In case you missed it, the BakerHostetler class action defense team published its second annual Year-End Review of Class Actions last month.  The 2013 issue was expertly edited by Dustin Dow of our Cleveland office, and features contributions from other members of the firm’s class action defense team across the country.  The 54-page report has a thorough recap of the key class action developments in the U.S. Supreme Court as well as other federal and state courts, summaries of key developments in various substantive areas of law in which class actions are prominent, and a preview of what to look for in 2014.  Click the link above to download a copy.

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2013 was a memorable year for class actions.  I’ve assembled my top 10 most significant developments below.  There were almost enough U.S. Supreme Court decisions to fill up the entire list, but my number 1 development was still a pair of lower court decisions that may also become the story of the year in 2014.

10. Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013) – Not a class action decision per se, but likely to have significant repercussions on the development of international class action law.  Extraterritorial effect of the Alien Tort Statute is significantly limited.

9. Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138 (2013) – Another non-class action decision already having a significant impact on the question of standing in data privacy class actions.

8. Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) – Class Arbitration is not completely dead, but there’s a blueprint for how to kill it.

7. American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)- Arbitration continues to reign supreme, even under the “federal law of arbitrability”

6. Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) – Can class actions be defeated simply by picking off the representatives one at a time?  That’s for the circuits to decide.

5. Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184 (2013) – Supreme Court holds that materiality is a common question and that proof of materiality is not a prerequisite to class certification, but raises questions about the continued viability of the Basic fraud on the market presumption in securities cases.

4. Certiorari granted in Halliburton v. Erica P. John Fund, No 13-317 – That didn’t take long.  On the heels of , Supreme Court agrees to revisit the Basic fraud on the market presumption.

3. Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013) – Limited holding = damages theory has to match theory of liability.  Expansive holding = no class certification unless the question of damages is susceptible to common, classwide proof.  Which holding will be embraced by the lower courts?

2. Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013) – First ever CAFA decision limits representative plaintiffs’ ability to bind class prior to class certification.  Can’t avoid federal jurisdiction by stipulating to no more than $4,999,999.99 in damages on behalf of a putative class.

1. Moldy Washing Machine Decisions – Limited Comcast holding prevails so far.  Two lower courts reaffirm class certification orders after remand in light of Comcast.  Issue certification is alive and well, for the moment, but stay tuned to see if the Court takes up these cases in 2014.

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The Class Actions, Mass Torts and Derivative Suits Subcommittee of the Colorado Bar Association, now ably chaired by my BakerHostetler partner, Casie Collignon, held its first CLE luncheon of the year this past Friday.  The program, United States Supreme Court vs. Class Actions in 2013, featured excellent commentary about the Supreme Court’s 2013 class action decisions by The Honorable Marcia Krieger, Chief Judge, U.S. District Court for the District of Colorado, Seth Katz of Burg Simpson, and John Fitzpatrick of Wheeler Trigg O’Donnell.  Here are just a few of the many insightful observations made by each of the speakers:

Judge Krieger opened by observing that none of the cases this term have been a surprise from the standpoint of what a trial court judge would have expected given existing law.  Amgen was predictable because the question of materiality in a securities fraud case is unquestionably a common issue, so it is not surprising that it is a question for trial, not a prerequisite for class certification.  Standard Fire can be viewed as a straightforward application of agency law: a plaintiff cannot bind a class of people that he or she doesn’t yet represent.  Comcast exemplifies the importance of examining the plaintiffs’ theory of liability and the relationship to the theory of loss.  Damages are not the same as loss.  The theory by which the plaintiff establishes loss determines the measure of damages.

When asked to identify any trends that she has been seeing in class actions recently, Judge Krieger identified issue certification as a key trend.  She has been seeing more situations where the factual issues may be individualized but there are common legal issues that can be resolved classwide.  She noted that she has been inclined to grant partial certification limited to the common legal issue(s) in that situation.

From the plaintiffs’ perspective, Katz agreed that the outcome of Standard Fire was not surprising, and he went as far as to say that the outcome was correct, noting that plaintiffs’ attorneys shouldn’t be afraid of the federal courts.  Although the holding of Amgen was favorable to plaintiffs, Katz noted an issue that should be of great concern to plaintiffs, and that is the commentary from the conservative wing of the court suggesting that they might be willing to revisit the fraud-on-the-market presumption adopted in Basic Inc. v. Levinson.  Katz sees the potential of a 4-4 split on that issue, with Chief Justice Roberts being the deciding vote.  He predicts market studies being commissioned by both sides over the coming years to demonstrate or disprove the continued efficiency of the markets.

Comcast, Katz noted, caused a collective sigh of relief in the plaintiffs’ bar because it does not go as far as many would have feared by requiring Daubert hearings at the class certification phase.  He noted that one positive impact for plaintiffs arising from the “death of Eisen” (the rejection in decisions like Wal-Mart and Comcast of the idea that merits questions were off-limits at the class certification phase) is that it gives plaintiffs’ counsel an opportunity to obtain merits discovery much earlier in a case than was allowed previously.  On the other hand, Katz expressed fear about the possibility that the Court is trying to raise the bar for plaintiffs with a subtle change in the language about what common proof is necessary on the issue of damages.  Where earlier decisions required that damages be “susceptible to classwide proof,” the Comcast majority phrased the standard as requiring the plaintiff to “prove classwide damages.”  Katz predicts that defendants will argue that this means damages must be uniform, as opposed to simply being susceptible to formulaic calculation.  He noted, however, that the few lower courts that have interpreted Comcast so far have rejected a broad application of the decision.

Fitzpatrick combined philosophical commentary about the evolution of class actions with some practical tips for defense lawyers.  Standard Fire, he argued, is proof that judicial hellholes still exist.  He pointed to Amgen as an example of the dangers of accepting conventional wisdom, pointing out that the outcome in that case might well have been different if the defendants had stipulated to the existence of an efficient market.

Comcast, Fitzpatrick said, provides an opportunity for defendants to prevail at the class certification stage by discrediting a plaintiffs’ expert.  Focus not just on the opinions themselves, he suggested, but also on 1) the existence of bias; 2) the expert’s credentials, and 3) flaws in the methodology.  Scour the country for transcripts about the plaintiffs’ experts.  Look at misstatements and exaggerations in the expert’s CV.  Make sure you find and read all of their prior statements in books, media, and transcripts.  Just as important, Fitzpatrick reminded defense practitioners, is the make sure to prepare your own experts for class certification.

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The Supreme Court issued its first-ever decision interpreting the Class Action Fairness Act (CAFA) today, and its holding strengthens defendants’ right to a federal forum in class actions. 

The question presented in Standard Fire Insurance Co. v. Knowles, No. 11-1450, slip op. (U.S., Mar. 19, 2012) was a simple one: can a plaintiff avoid federal jurisdiction under CAFA by stipulating to less than $5 million in damages on behalf of the putative class?  The Court’s unanimous answer was no, and its reasoning is also simple:

Stipulations must be binding . . . [and] a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.

Slip op. at 3-4.  

Does Standard Fire mean the end of any debate about the federal courts as a forum for class actions?  Probably not.  Justice Breyer’s well-reasoned opinion makes the issue sound like a no-brainer, but this is an issue that had been far from settled in the lower courts.  The fact that the Supreme Court had to intervene on this issue is in part a symptom of a lingering antagonism by many lower federal court judges toward diversity jurisdiction.  The ruling is unlikely to change the predisposition of some federal judges to look for ways to clear their dockets by remanding diversity cases to the state courts.  Although the effectiveness of this particular method for avoiding CAFA jurisdiction is now settled in defendants’ favor, that is not to say that other tactics for avoiding federal jurisdiction in class actions won’t succeed in the future.

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I’m pleased to announce that the BakerHostetler Class Action Defense Team has just released its 2012 Year-end Review of Class Actions, a joint project with the firm’s Employment Class Actions, Antitrust, and Data Privacy practice teams.  See below for a synopsis of the project.  Click the link above to access a copy of the report itself:

We are pleased to share with you the BakerHostetler 2012 Year-end Review of Class Actions, which offers a summary of some of the key developments in class action litigation during the past year. Class action litigation continues to persist in all areas of civil litigation despite the Supreme Court’s 2011 decisions in AT&T Mobility v. Concepcion and in Wal-Mart Stores, Inc. v. Dukes, which were seen by many commentators as marking the beginning of the end of class actions as we know them. But while the Supreme Court’s 2011 decisions have had a significant impact on class action litigation, they have not brought about its demise and are not likely to do so anytime soon. In the last two years, we’ve seen landmark decisions and the addition of important judicial gloss to those decisions. 2013 will be no different as the Supreme Court is set to weigh in on a series of key cases this spring.

We hope you find this Review a useful tool as you move forward into the new year. This comprehensive analysis of last year’s developments in class action procedure and jurisdiction, as well as developments by subject matter will hopefully provide context and insight as you look ahead to 2013’s expected trends in class action law, including the proliferation of privacy class action litigation and class action litigation relating to the LIBOR rate-fixing scandal.

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The Supreme Court is set to hear oral argument Monday in the case of Standard Fire Insurance Co. v. Knowles.  At issue is whether a plaintiff can avoid federal removal jurisdiction under the Class Action Fairness Act (CAFA) by stipulating to a recovery of less than $5 million on behalf of  a would-be class.  Debra Lyn Bassett has a good preview of the argument over at SCOTUSblog:

http://www.scotusblog.com/2013/01/argument-preview-avoiding-removal-by-limiting-damages/

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