Class Action Countermeasures

Adequacy and Commitment - Buettgen v. Harless

Andrew Trask — Tue, 07 Sep 2010 08:13:37 -0500

Adequacy can be a difficult concept to get one's head around. And, as a result, courts and parties have found a number of different ways to frame the question of whether a named plaintiff is an adequate class representative. They can look at whether the named plaintiff knows enough about the case to oversee her counsel (although some courts are sometimes reluctant to disqualify a plaintiff on these grounds). Courts can also ask whether the plaintiff has enough independence from counsel to oversee them when their interests may diverge from the class's. And sometimes courts can just look at the personal character of the named plaintiff.
Another way of framing the issue is to look at whether the named plaintiff is committed to protecting the interests of the class. What do I mean by "committed"? Take the case of Buettgen v. Harless, 263 F.R.D. 378 (N.D. Tex. 2009). Buettgen was a securities case, involving allegations that the defendants had, through various misrepresentations, artificially inflated the stock price of phone directory company Idearc, Inc. A number of different plaintiffs filed class actions against Idearc and its officers, including a group of individual investors calling themselves the "Buettgen Group," another group of individual investors calling themselves the "Lyman Group," and two institutional funds, one Swiss and one American.

Each of these four plaintiffs filed a motion to be considered as lead plaintiff for the consolidated class actions, a position that carries with it control of the litigation, and a larger share of fees for plaintiffs' counsel. The court, in deciding the motions, pointed out that the Private Securities Litigation Reform Act (PSLRA):

"requires a court to presume that the most adequate plaintiff is the person or group of persons that:
(1) filed the complaint or a motion in response to a notice;
(2) has the largest financial interest in the relief sought by the class; and
(3) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.
Id. § 78u-4(a)(3)(B)(iii)(I).

This presumption can be rebutted only by proof offered by a class member that the presumptively most adequate plaintiff:
(aa) will not fairly and adequately protect the interests of the class; or
(bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class.
Id. § 78u-4(a)(3)(B)(iii)(II)."

In this case, all four plaintiffs had filed the appropriate motions. The court ranked the plaintiffs by the size of their losses (the Buettgen Group had sustained the largest loss, followed by the Swiss fund, the Lyman Group, and the American fund). But when the court looked at each plaintiff's adequacy, the analysis got more difficult. The Swiss fund was vulnerable to unique defenses, and therefore not adequate. But the Court also expressed reservations about the two investor groups, because neither was cohesive enough to represent the class. (Why would cohesiveness matter? Because if a group is not cohesive, then it is likely that it was put together by plaintiffs' counsel to meet the "largest financial interest" prong of the PSLRA, implying that the counsel controlled the plaintiffs.) As the court observed:

"[T]he Buettgen Group fails to present evidence that the members of the group have ever communicated in a meaningful way. For example, instead of explaining how they are prepared to work together to manage this litigation on behalf of the proposed class, the Buettgen Group submitted essentially boilerplate certifications discussing their stock purchases and alleged losses. ... Additionally, the Buettgen Group's motion is undermined by the group's invitation to the Court to hand-pick one of its constituents to serve as lead plaintiff if the Court deems the Buettgen Group inappropriate. Buettgen Group Such a willingness to abandon the group only suggests how loosely it was put together. ...
Likewise, the Lyman Group suffers from the same grouping issues that apply to the Buettgen Group. The Lyman Group consists of two individuals that provided similar boilerplate certifications as the Buettgen Group. Also, the Lyman Group states, "if the Court is inclined to appoint only one Lead Plaintiff, each of the Movants moves in the alternative for appointment individually as Lead Plaintiff." As stated above, when a group shows willingness to abandon the group the Court is lead to believe the group was only loosely put together. "

(Internal quotations and citations omitted, emphasis added.)

What does this ruling mean for defendants? It provides another way of looking at adequacy of named plaintiffs. If the named plaintiffs are not sufficiently committed to the litigation to talk to each other, then it is unlikely that they can oversee their counsel independently. And that is a good reason to find them to be inadequate class representatives.

WLF Webinar on Plaintiffs' Lawyers and Public Relations

Andrew Trask — Fri, 03 Sep 2010 05:35:10 -0500

Two weeks from today, on September 17, 2010 at 10 AM, I'll be participating (along with Overlawyered's Walter Olson) in a webinar hosted by the Washington Legal Foundation titled: Legal PR, Trial Lawyers’ Style: How Plaintiffs Seek Advantage Outside of Court and Proactive Countermeasures for Defendants.

As the WLF describes it:

This interactive program examines the various communications and public relations strategies plaintiffs’ attorneys utilize in specific cases and to accentuate their role in civil justice, and provides strategies defendants can use to respond to trial lawyer PR and positively turn the “spin” to their advantage.

Please feel free to join us. It should be an interesting program.

Which Mass Tort Cases Deserve Settlement?

Andrew Trask — Thu, 02 Sep 2010 05:00:38 -0500

Fordham Law professor Howard Erichson (http://law.fordham.edu/faculty/1095.htm) has posted a new working paper that addresses the thorny issue of settlements in mass tort cases. Titled Uncertainty and the Advantage of Collective Settlement, (forthcoming, DePaul Law Review) it posits six different types of uncertainty in mass torts, each of which he links to well-known cases. According to Erichson, there is uncertainty about

1. General causation (eg, Bendectin litigation)
2. Liability (tobacco/Agent Orange)
3. Exposure (ephedra/Wolburn leukemia clusters)
4. Product ID (asbestos)
5. Individual medical causation (Vioxx)
6. Damages

Erichson argues that, for cases 4, 5, and 6, aggregate settlement is a good idea, while litigation is probably better for cases 1, 2, and 3. What's his definition of "good idea"? He makes a few casual references to "justice," but what he really seems to mean is a settlement where the defendant pays compensation in proportion to the harm it (likely) caused. As Erichson puts it:

When parties face uncertainty about individual causation, a collective settlement may offer an excellent opportunity for an outcome that reflects proportional liability even in the absence of a proportional liability rule of tort law. However, collective settlement offers this advantage only when the uncertainty relates to the likelihood that each plaintiff will prevail on causation. If causation is uncertain but it is clear that each plaintiff can or cannot meet the preponderance standard, then collective settlement would reflect the same overliability or underliability that would result from individual or collective adjudication.

When liability and causation are clear but the amount of damages is uncertain, collective resolution – whether by adjudication or settlement – offers the benefit of reducing variability and possibly providing greater accuracy. Particularly with regard to punitive damages, collective resolution can serve the important function of reducing variable results among similarly situated claimants.

Erichson likes typologies, and views himself as providing starting points for further analysis by other researchers. So the fair question to ask is: is this a useful breakdown of types of uncertainty? And the answer is: somewhat.

One problem is that it seems Erichson stretched a little to get six categories. In particular, "individual medical causation" feels like a fudge. There's little to distinguish it from liability, except that--according to Erichson--in one case, the legal question is uncertain, and in the other, the factual question is. In either case, however, it would require individual trials to determine whether the substance caused the illness, and whether that meant that the manufacturer was liable. (For example, in some mass tobacco cases, it appears one of the larger problems with aggregate treatment was how to address the difficult issue of determining individual medical causation.)

And the second problem is that Erichson really doesn't consider the means by the settlement will be achieved, and the method of settlement can have a tremendous effect on its "justice." There's no question that the parties would have difficulty pushing through a mass-tort settlement as a classwide settlement. And while it is possible to settle a mass tort without invoking Rule 23, those settlements bring their own problems. Among other issues, settling many different cases on the same "take it or leave it" terms seems unfair, but engaging in a lengthy plaintiff-by-plaintiff claims may not save much time or money over the original trials. As Judge Eldon Fallon observed about the Vioxx settlement:

The potential harm to the public's perception of the judicial process is especially acute in the instant case because of the large number of claimants participating in the settlement. The approximately 50,000 plaintiffs and the $4.85 billion settlement fund have captured the public's attention, resulting in a heightened degree of public scrutiny on the settlement proceedings and the judicial process in general. Disproportionate results and inconsistent standards threaten to damage the public's faith in the judicial resolution of mass tort litigation by creating an impression of inherent unfairness.

That, right there, is the rub. To make the settlement seem fair, it has to be fair, treating like cases similarly, and different cases differently. Judge Fallon's solution was to assert the power to review individual plaintiffs' lawyers contingent-fee contracts (which would check the lawyers' understandable impulse to settle as many cases as possible on whatever terms). That is an unwieldy solution, but better than nothing. How to resolve mass-tort claims like this--where individual causation is uncertain--remains a very difficult question. Erichson's proposed typology is useful on the easier questions, but unfortunately glosses over one of the most challenging issues in aggregate litigation today.

How to Oppose FLSA Collective Actions

Andrew Trask — Tue, 31 Aug 2010 04:55:13 -0500

In the world of class actions, case brought under the Federal Labor Standards Act (FLSA) stand apart from other class actions. Unlike a standard Rule 23 class action, the plaintiff in an FLSA action has the option of filing a class action under Rule 23, a collective action under the FLSA, or both.

What is a collective action? Like a class action, a plaintiff in a collective action trades individual control over her lawsuit for the economies of scale and the bargaining leverage that come with group litigation. But FLSA collective actions follow different procedural rules than Rule 23 class actions, ones generally considered more permissive. FLSA certification usually occurs in two parts. First, in the "notice stage," the trial court decides whether it should notify other “similarly situated” employees who might wish to opt in to the litigation. If the court decides in favor of notice (and with it, conditional certification), it informs the putative class members with a court-ordered notice and gives them an opportunity to opt into (not out of) the class. After any other plaintiffs opt in, discovery commences. After discovery is complete, the defendant can move for decertification. If the court decertifies the proposed opt-in class action, it dismisses the opt-in plaintis without prejudice to reasserting their claims individually.

This more permissive procedure means that employment actions under the FLSA have become a growth industry for plaintiffs' lawyers. And the difference in procedure means that the strategies for opposing certification are different. So how does one oppose an FLSA action? Shook Hardy lawyers William C. Martucci and Jennifer Oldvader have published an article in the Kansas Journal of Law & Public Policy answering just that question. (The cite, for those interested, is 19 Kan. J.L. & Pub. Pol'y 433.) And they have several strong proposals for opposing the increasingly-common practice of filing concurrent Rule 23 class actions and FLSA collective actions:

Attack the "common scheme or plan" allegation. "One way of gathering such evidence is to collect declarations from other employees, who can provide vital information on compensation and time-clock policies as well as how these policies are put into practice." If the declarations show that the "policy" was implemented in different ways at different times by different people, a court will have a harder time certifying a class.
Argue that enough discovery has occurred to allow for heightened certification standard. "Generally, the rationale behind the "lenient" conditional certification standard is that a plaintiff has not had time to conduct any discovery at the conditional certification stage. However, where discovery has occurred, a defendant may be able to successfully argue that a heightened standard of review is more appropriate."
Argue the conflict between collective action and class action. "When faced with the possibility of an opt-in FLSA collective action and an opt-out state law class action, a defendant may be able to successfully argue that a district court should decline to exercise supplemental jurisdiction because the state law class action predominates over the FLSA collective action."

Martucci and Oldvader focus their article on "off the clock" actions where plaintiffs are allegedly not paid for time they worked (as opposed to misclassification actions, where plaintiffs are denied overtime because their job does not qualify for it). But their tactical advice is sound. For attorneys looking to defend these kinds of cases, this is essential reading.

Are Securities Class Actions Bad for Shareholders?

Andrew Trask — Thu, 26 Aug 2010 05:45:40 -0500

Obviously, securities fraud is bad for firms. But, once a fraud has been discovered (driving down the stock price), does a securities class action add injury to injury? A number of commentators have suggested so, using the following logic: a securities class action takes money from the firm, and pays it to the shareholders, minus costs and attorneys' fees. The hitch is that the firm is owned by the shareholders, which means that the attorneys have just taken money from the shareholders' property and handed it to them directly, while taking a one-third cut for themselves. (This is sometimes known as the "circularity" critique, because the money just moves in a circle--except for the part that moves into the lawyers' pockets.)

If securities class actions really just represent a 33% "lawyer tax," then why haven't firms challenged these lawsuits as being, on their face, evidence of inadequate counsel? One big reason is that doing so is dangerous from a rhetorical point of view. If a firm has been accused of defrauding its shareholders, it may lack the ethos to argue that the real fraud is the lawsuit itself.

And yet the circularity problem remains. However, a new article from the University of Pennsylvania Law Review, Lying and Getting Caught: An Empirical Study of the Effect of Securities Class Action Settlements on Targeted Firms, by Lynn Bai, James D. Cox, and Randall S. Thomas (158 U. Pa. L. Rev. 1877), suggests a possible legal argument for countering this kind of lawsuit.

The authors looked at a number of firms in different industries that had been accused of securities-related frauds (usually accounting frauds designed to artificially inflate the price of the stock), in order to determine whether the resulting class actions harmed the firms' performance in the long term. They examined a number of different measurements of performance, including stock price, sales, and liquidity.

The basic conclusion? Filing a securities class action has an immediate negative effect on stock price, but the firm gradually rebounds, even as the litigation progresses. However, both stock price and operational efficiency tend to remain low for a long time afterwards. Why? Because, in settling a class action, the firm winds up using most of its cash to pay the shareholders and lawyers, forcing a liquidity crisis that impairs its short-term performance. Once a firm lacks sufficient cash to operate day-to-day, it can't do what it needs to regain legitimate competitiveness, resulting in a continually depressed stock price.

Now, one possible reason for a continued low stock price is that the firm's performance was never that great to begin with. However, the authors also compared the firm's performance to the amount they paid in settlement, and found a strong relationship. In the authors' own words:

"defendants were more likely to experience lower liquidity levels than their peers in the post-settlement years than in the Pre-class Period. Moreover, this probability increased with the settlement amount ... These numbers are consistent with the theory that insurance provided less than full coverage of the settlement amounts and that the defendants paid the discrepancy out of their current assets. The settlement payment exacerbated liquidity constraints, making the defendants more vulnerable to liquidity crunches and prone to bankruptcy."

So, does this suggest that a securities defendant could accuse a plaintiff of being inadequate simply for filing the lawsuit in the first place? Not really. But it does suggest that in many cases, a securities class action may not be superior to other methods of resolving the lawsuit. If a class-action settlement (or by extension, damages award) harms the firm by reducing liquidity when the firm needs it most, then it is harming many of the same shareholders it is supposed to help. By contrast, SEC fines aimed at the officers who profited from a fraud, or SEC consent orders aimed at reforming the company's bad practices, can reform bad practices without crippling a firm's ability to rebound from actions of bad managers.

The Strategic Dilemma of Bad Settlements - Mirfasihi v Fleet Mortgage

Andrew Trask — Tue, 24 Aug 2010 05:22:46 -0500

When a defendant is faced with a class action complaint, sometimes the best strategy appears to be to settle quickly, before having to engage in costly litigation or burdensome discovery. But, as readers of this blog know, that strategy is not always as straightforward as it first seems. In today's case, we have another example, where what first appeared to be a quick-and-painless settlement wound up taking eight years and visiting the Seventh Circuit Court of Appeals three times.

In 2000, a group of class-action plaintiffs sued Fleet Mortgage claiming that it had sold their personal information to telemarketers, in violation of the Fair Credit Reporting Act (FCRA) and various state consumer-fraud acts. Mirfasihi originally brought suit on behalf of two classes, one of people whose information was shared, and one of people who actually bought something from the telemarketers.

Fleet Mortgage negotiated a settlement of the entire case, which the trial court approved. But, based on the appeal of some objectors, the Seventh Circuit reversed, because the settlement had released the claims of the "information sharing" class without giving them anything in return. After the case was remanded, the parties negotiated a second settlement, with a heavy cy pres component. (The court found cy pres appropriate because the information sharing class's claims were not worth much, if at all.) This settlement drew objections as well, and the Seventh Circuit again reversed and remanded, this time because the lower court had not "made an adequate effort to value the claims of the information-sharing class." On this second remand, the trial court found--after an extensive survey of the various state consumer-protection laws at issue--that the information-sharing claims had no value at all. The objectors appealed again, arguing that the information-sharing claims might be worth as much as a billion dollars, and that their lawyers deserved far more than the $18,750 fee they had received.

This time, the Seventh Circuit pulled no punches. Writing for the panel, Judge Posner first affirmed that the claims of the information-sharing class were worthless. Then, he proceeded to explain the primary dilemma that meritless class actions pose to all parties:

"We are disheartened that the litigation by the information-sharing class has been allowed to drag on for eight years, when it had no merit—and that as a matter of law, without need to take evidence. It is an example of the typical pathology of class action litigation, which is riven with conflicts of interest, as we discussed recently in Thorogood v. Sears, Roebuck & Co., supra, 547 F.3d at 744-46. The lawyers for the class could not concede the utter worthlessness of their claim because they wanted an award of attorneys' fees. The lawyers for Fleet were reluctant to argue the utter worthlessness of the claim because they were able to negotiate a settlement that cost their client virtually nothing—provided they did not take such a strong stand that it jeopardized the class lawyers' shot at a generous award of attorneys' fees, and hence the settlement. And the objectors were motivated to exaggerate the value of the claim of the information-sharing class so that they could get a generous award of attorneys' fees. At the very outset of the case, before certifying the class, the district court should have required the parties to present the belatedly presented survey of the consumer protection laws of the 50 states, plus argument concerning the scope of the Fair Credit Reporting Act, to demonstrate the existence of a colorable claim."

Class-action defense lawyers can learn several lessons from this opinion. First, early challenges to cases may be preferable to settlements, if for no other reason than they can test the merit of questionable claims. Second, certain classwide issues--like the feasibility of a nationwide class based on state law--do not have to wait until class discovery has been completed. And finally, if the plaintiffs don't watch out for the interests of the absent class members, then the defendant may have to; not doing so may cost the defendant years and tens of thousands of dollars in appeals. As I've said before, sometimes, settling on the cheap can be a very expensive strategy.

Are Class Action Lawyers Paid Too Little? Probably Not.

Andrew Trask — Thu, 19 Aug 2010 05:18:23 -0500

Brian Fitzpatrick (of "Objector Blackmail" fame) has published another article in the University of Pennsylvania Law Review asking the provocative question: are class-action lawyers paid too little? His provocative answer: yes they are. According to Fitzpatrick, in small-stakes class actions, lawyers should collect a 100% contingency fee. What's his justification? An argument he refers to as "insurance-deterrence theory." Fitzpatrick assumes that any money that goes to class-action lawyers serves a deterrence function, because not only does it cost the defendant money, it also funds further opposition to corporate wrongdoing. (Fitzpatrick is not the only person to make this kind of argument; many plaintiffs' lawyers and academics argue that class actions primarily serve as a public deterrent to corporate wrongdoing.) He also assumes that, if a harm is too small for a class member to reasonably buy insurance to prevent, then that money is better spent on the "deterrence" of paying the class lawyer than the "insurance" of compensating the class member.

Fitzpatrick dismisses most arguments to cap fees (for example, that class actions exist to compensate class members rather than enrich lawyers, or that giving plaintiffs' lawyers further incentives to file questionable cases might lead to further abuse) as "political." However, even leaving aside these arguments, Fitzpatrick's argument runs afoul of the basic structure of Rule 23.

100% fees make inadequate settlements. Rule 23(e) requires a settlement to be "fair, reasonable, and adequate." One way the court measures these criteria is by determining whether a proposed settlement represents good value to the proposed class. A class settlement that provided the members with nothing, and the lawyers with everything would be unlikely to pass this test. (It also would not pass the settlement-approval requirements of the Class Action Fairness Act. If courts are legally required to scrutinize settlements that give class members only coupons, then they certainly can't rubber-stamp settlements that give the lawyers everything and the class nothing.)
100% fees require inadequate class representatives. Fitzpatrick's proposal is also flawed because there is no reasonable class member that would willingly agree to forgo any possibility of recovery so that her counsel could be paid more. In essence, Fitzpatricks proposal relies on a class representative that would be willing to say "I understand I was defrauded for $100, but instead of getting that money back, I'd rather you just gave it all to my lawyer. And I'm confident everyone else like me will feel the same way." For many courts, that kind of statement would serve as evidence that the class representative was not sufficiently independent of her counsel.
100% fees indicate inadequate class counsel. Under Rule 23(g), "Class counsel must fairly and adequately represent the interests of the class." That means that they must watch out for the class's best interest, not their own. From that standpoint, a 100% fee clearly does not look out for the best interests of the proposed class instead of the lawyers.

One has to admire Fitzpatrick's chutzpah; agree or not, he's made a bold proposal. But he's completely ignored the existing Rule 23 requirements to get there. As it turns out, Fitzpatrick's proposal is inadequate, in every sense of the word.

Classic Cases - Sprague v. General Motors Corp.

Andrew Trask — Tue, 17 Aug 2010 05:34:00 -0500

The final "classic case" for now, Sprague v. General Motors Corp. involved an alleged violation of the Employee Retirement Income Security Act of 1974 (ERISA). The plaintiffs had sued GM claiming that it had not provided them with the fully "paid up" lifetime healthcare benefits it had promised when it convinced them to take early retirement. The trial court certified a class of 50,000 early retirees, and declined to certify a class of 34,000 general retirees. GM appealed the certification of the early retiree class, and the plaintiffs appealed the denial of certification of the general retiree class. The Sixth Circuit reversed the certification, and affirmed the denial of certification--a complete victory for the defendant. In doing so, it made several important holdings about commonality and typicality:

Commonality. As the court pointed out, a common issue had to have some level of specificity. (An issue discussed here before.) Otherwise, every mass lawsuit would meet the commonality requirement, simply because the question "are class members residents of the Milky Way Galaxy?" would be a common issue.

It is not every common question that will suffice, however; at a sufficiently abstract level of generalization, almost any set of claims can be said to display commonality. What we are looking for is a common issue the resolution of which will advance the litigation.

In other words, a common issue must be a common material issue.

Reliance. The court also held that, because GM made different statements to different retirees, their ERISA claims were not suitable for class treatment.

GM's statements to the early retirees were not uniform. Among other things, the statements varied (1) based on the person making the representation, (2) based on the particular special early retirement pro- gram that applied, (3) from facility to facility, and (4) from time to time. Given the wide variety of representations made, there must have been variations in the early retirees' subjective understandings of the representations and in their reliance on them. Some retirees might have interpreted GM's statements to mean that their benefits were vested. Others might have understood that their benefits were subject to change. Some early retirees might have relied on GM's statements about health care benefits, while for others the statements might have made no difference at all in the decision to retire early.

Like the Fifth Circuit in Castano, the court here came up with a succinct description of the largest problem with classes that require a finding of reliance.

Typicality. The most quoted part of the Sprague opinion involved typicality. The court held that plaintiffs had not met the typicality requirement because proving their claims would not prove the claims of the other class members. As the court put it:

In pursuing their own claims, the named plaintiffs could not advance the interests of the entire early retiree class. Each claim, after all, depended on each individual's particular interactions with GM-and these, as we have said, varied from person to person. A named plaintiff who proved his own claim would not necessarily have proved anybody else's claim. The premise of the typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the claims of the class. That premise is not valid here.

(Internal citations omitted.)

The primary lesson defendants can derive from Sprague is a simple one: when possible, frame issues to show the court how resolving them will not advance the litigation for the whole class. After all, the point of allowing a class action to proceed is that proving the plaintiff's case will prove the class's case as well. If that underlying premise is false, then a class action is not appropriate.

One way to judge a book ...

Andrew Trask — Mon, 16 Aug 2010 15:46:01 -0500

If you'll pardon a brief bit of self promotion, The Class Action Playbook has a cover:

According to the Amazon page, the release date is October 11, 2010. Rest assured, you'll get updates here.

Early Intelligence on Case Merits - The Preliminary Judgment

Andrew Trask — Thu, 12 Aug 2010 05:52:54 -0500

Geoffrey Miller is one of the few law professors out there who consistently investigates real empirical questions about class actions. He's published on the role of objectors in class-action settlements, the use of non-pecuniary relief, and even the effect of judicial review on settlement rates. So when Miller comes out with a policy proposal--as he does in a recent article in the University of Illinois Law Review, it's worth paying attention to what he says.

Miller starts from the premise that "something is wrong with settlements." (If one were glib, one could say that his critique proves that something is right with settlements. Nobody's pleased with them.) His proposed solution? The preliminary judgment. As Miller proposes it, at any point, a party could move the court to declare whether it believed the plaintiff could establish her case by a preponderance of the evidence currently available.

A preliminary judgment is simply a tentative assessment of the merits of a case or any part of a case, based on the same sorts of information that the courts already consider on motions for summary judgment. The difference between a preliminary judgment and a summary judgment is that the court, in a preliminary judgment, would not be limited to deciding issues with which no reasonable jury could disagree. Instead, the court would provide its own provisional judgment on the merits of the case based on the information provided by the parties. A preliminary judgment, once given, would convert into a final judgment after the expiration of a reasonable period of time - say, thirty days. Any party against whom a preliminary judgment is issued, however, would have the right to object prior to the expiration of the period (with or without explanation), in which case the judgment would be vacated and the case would proceed according to ordinary rules of procedure. Like other threshold rulings, the preliminary judgment would then have no preclusive effect in the continuing litigation.

(Internal footnote omitted.) According to Miller, this "preliminary judgment" would offer more information to the parties than a ruling on other preliminary motions--presumably because it would apply the same decision rule that applies at trial. He also believes it would reduce litigation costs.

In reality, while the motion for preliminary judgment would likely prove another useful tool, there is no reason to believe that it would be immune from the strategic behavior prompted by other versions of preliminary motions. Preparing a motion for preliminary judgment would not be costless. Defendants would have strong incentives to file early preliminary judgment motions, much as they already do with other preliminary motions. (This analysis would hold true whether one believes that defense counsel file early motions to rid themselves of frivolous cases, to frame the remainder of the litigation, or simply to run up their hourly bills.)

The lesson Miller's analysis suggests is a simple one, and one that this blog has advocated for some time now: Challenge both certification and merits as early as possible. While this isn't quite the same as getting a "preliminary judgment," the same advantages Miller touts operate. Each side gets an early look at the merits of the case. If the case lacks merit, the court should recognize the strength of the defendant's arguments and dismiss it (or at least strike the class allegations). If the case has some merit, better the defendant learn that as early as possible.

Classic Cases - Castano v. American Tobacco Co.

Andrew Trask — Tue, 10 Aug 2010 03:33:00 -0500

Castano v. American Tobacco Co. (5th Cir. 1996) involved a class of smokers, their estates, and their survivors arrayed against what was becoming a classic corporate villain: the tobacco companies.

Like in In re Rhone-Poulenc Rorer, the atmospherics favored the plaintiffs. Tobacco companies had already lost credibility in the court of public opinion. And the plaintiffs wisely took advantage of various embarrassing documents by asserting nine fraud-, warranty-, and tort-based causes of action, all based on the tobacco companies' allegedly inflicting the "injury of nicotine addiction" on a generation of smokers. Faced with a class that probably included friends and family on one side, and what appeared to be mustache-twirling villains on the other, the district court certified the class.

Of course, as lawyers might take for granted today, a nationwide personal-injury class asserting a number of fraud-based claims might be largely sympathetic, but it would not result in a workable trial. Since (like in Rhone-Poulenc Rorer) there was no Rule 23(f) that allowed for interlocutory appeals, the defendants sought appellate review under 28 U.S.C. § 1292(b).

In reversing the certification, the Fifth Circuit provided a number of observations that still carry great weight today:

Variations in state law matter. According to the Fifth Circuit,

The district court erred in its analysis in two distinct ways. First, it failed to consider how variations in state law affect predominance and superiority. Second, its predominance inquiry did not include consideration of how a trial on the merits would be conducted.

The Fifth Circuit provided a claim-by-claim analysis of material differences. It also held that differences in available affirmative defenses were material.

Fraud claims are extremely difficult to certify. The Fifth Circuit also observed:

The court's treatment of the fraud claim also demonstrates the error inherent in its approach. According to both the advisory committee's notes to Rule 23(b)(3) and this court's decision in Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880 (5th Cir.1973), a fraud class action cannot be certified when individual reliance will be an issue. The district court avoided the reach of this court's decision in Simon by an erroneous reading of Eisen; the court refused to consider whether reliance would be an issue in individual trials.

(Footnote omitted.) Defense lawyers continue to rely on that reasoning today when plaintiffs propose massive classes based on individual frauds.

Large-value claims make for poor class actions. The Fifth Circuit also noted that, as had been apparent for some time, there was real money in tobacco cases.

[I]ndividual damage claims are high, and punitive damages are available in most states.The expense of litigation does not necessarily turn this case into a negative value sut, in part because the prevailing party may recover attorneys' fees under many consumer protection statutes.

As a result, it would be very difficult to prove that the proposed class action was superior to an individual case for a plaintiff who had suffered actual harm.

So what's the takeaway for Castano? Many defense lawyers consider this one of their "go-to" cases for predominance and superiority analysis. And for a lucid explanation of why a rigorous analysis is necessary before certifying a class, few cases are better.

Apportioning Due Process, Ignoring Alternatives

Andrew Trask — Thu, 05 Aug 2010 06:15:51 -0500

Noted plaintiffs’ lawyer Elizabeth Cabreser has an article in a recent issue of the Denver University Law Review, Apportioning Due Process: Preserving the Right to Affordable Justice. The article is notable for several reasons, but mostly because Cabreser uses it to tell a story that supports the rhetoric plaintiffs' lawyers invoke when moving to certify a class. To wit:

Due process is expensive.
Primarily because corporate defendants use procedure as an attrition weapon. (Also, hourly billing encourages defendants to work a "thousand plodding hours" instead of "one brilliant one.")
The Class Action Fairness Act (CAFA) just makes the problem worse. The passage of CAFA has sent class actions to a bottlenecked federal judiciary, further delaying relief to people who desperately need it.

It's a well-written article that strives to accomplish two goals at once. First, Cabreser tells a story about due process, and one likely to have intuitive appeal to judges.

At the same time, she's building a case for the superiority of class actions over other ways of resolving disputes. If litigation is so expensive, and the claims are so small, then the only solution must be a class action. Right?

Maybe not. In her discussion of how to make justice more affordable for individuals, Cabreser ignores a number of other methods individuals have of challenging large corporations over smaller claims. Those include:

Small claims court.
Arbitration. Corporations often have arbitration clauses in their contracts with individuals. And, often, those clauses state that the corporation will cover the costs of the arbitration. Sometimes, they even provide a premium for the consumer if the corporation fights the arbitration and loses. It's small wonder that class-action plaintiffs' firms don't like arbitration, because it often precludes large-fee class actions. But the fact that arbitration won't pay a Lieff Cabreser's fees hardly makes it an unattractive option for most consumers.
Statues that authorize attorneys' fees.

What can we take away from this? First, this is an excellent example of plaintiffs’ rhetoric supporting class actions. Second, when plaintiffs start talking about how a class action is the only possible alternative, it’s time for defendants to get suspicious. Class actions may sometimes be the best solution to a widespread problem, but they are rarely the only one.

(One final note: careful readers will observe that the entries this week are a little briefer than usual. That’s because I’m on vacation. Expect more “classic cases” and quick summaries of interesting articles throughout August.)

Classic Cases - In re Rhone-Poulenc Rorer

Andrew Trask — Tue, 03 Aug 2010 05:26:43 -0500

I'm going to try a new semi-regular feature, which is to provide summaries of some of the seminal cases on which class-action defendants frequently rely. Instead of focusing on the tactics that led to these rulings, I'll be highlighting the most commonly-used passages, as well as some that may be wrongly overlooked.

We'll start this out with In re Rhone-Poulenc Rorer (7th Cir. 1995). In re Rhone-Poulenc Rorer involved a particularly difficult set of facts: a proposed class of HIV-positive hemophiliacs sued a group of drug companies that manufactured blood solids. Because the companies did not know enough about how HIV was spread, they had not screened properly for the disease, and had inadvertently infected the members of the class. (The hemophiliacs needed blood solids to provide the clotting factor that their blood lacked.) The plaintiffs sought certification of a class asserting two theories, a conventional negligence theory (the drug companies should have had better screening procedures for HIV), and a more inventive "serendipity" negligence theory (had the drug companies done a better job of screening against Hepatitis B, they would also have caught the HIV-infected blood).

The trial court certified the proposed class. Since Rule 23(f) (allowing for interlocutory appeals of class certification orders) did not yet exist, the defendants sought a writ of mandamus from the Seventh Circuit. A panel of the Seventh Circuit led by then-Chief Judge Richard Posner granted mandamus and reversed the certification order. In doing so, it made the following observations that have proven useful to defendants:

Certified classes create intense pressure to settle.

Suppose that 5,000 of the potential class members are not yet barred by the statute of limitations. And suppose the named plaintiffs in Wadleigh win the class portion of this case to the extent of establishing the defendants' liability under either of the two negligence theories. It is true that this would only be prima facie liability, that the defendants would have various defenses. But they could not be confident that the defenses would prevail. They might, therefore, easily be facing $25 billion in potential liability (conceivably more), and with it bankruptcy. They may not wish to roll these dice. That is putting it mildly. They will be under intense pressure to settle.

The law of negligence varies from state to state.

The law of negligence, including subsidiary concepts such as duty of care, foreseeability, and proximate cause, may as the plaintiffs have argued forcefully to us differ among the states only in nuance, though we think not, for a reason discussed later. But nuance can be important, and its significance is suggested by a comparison of differing state pattern instructions on negligence and differing judicial formulations of the meaning of negligence and the subordinate concepts.

Or, as Posner put it, quoting Oliver Wendell Holmes,

"The common law is not a brooding omnipresence in the sky, but the articulate voice of some sovereign or quasi sovereign that can be identified." The voices of the quasi-sovereigns that are the states of the United States sing negligence with a different pitch.

(Internal citations omitted.)

Courts must be careful when bifurcating a class action.

Bifurcation and even finer divisions of lawsuits into separate trials are authorized in federal district courts. And a decision to employ the procedure is reviewed deferentially. However, as we have been at pains to stress recently, the district judge must carve at the joint.

(Internal citations omitted.) How does one tell an improper bifurcation?

The first jury will not determine liability. It will determine merely whether one or more of the defendants was negligent under one of the two theories. The first jury may go on to decide the additional issues with regard to the named plaintiffs. But it will not decide them with regard to the other class members. Unless the defendants settle, a second (and third, and fourth, and hundredth, and conceivably thousandth) jury will have to decide, in individual follow-on litigation by class members not named as plaintiffs in the Wadleigh case, such issues as comparative negligence -- did any class members knowingly continue to use unsafe blood solids after they learned or should have learned of the risk of contamination with HIV? -- and proximate causation. Both issues overlap the issue of the defendants' negligence.

So what are the primary takeaways from In re Rhone-Poulenc Rorer? Defendants should make sure they put the plaintiff to their burden. Rushed state law analyses and underdeveloped trial plans are not enough.

Bench Trials in Class Actions

Andrew Trask — Thu, 29 Jul 2010 05:07:36 -0500

Bench trials comprise a significant percentage of class-action trials. And class-action defense lawyers are often conflicted about whether it's better to try a case in front of a jury or a judge. A judge may be better equipped to sort through some of the more complex issues in the case, but sometimes complexity can favor the defense in front of a jury. Moreover, many defense lawyers consider a judge who has certified a class to have already stated some opinion on how the case should proceed.

So what do lawyers need to be aware of when trying a class trial to a judge? According to an article by Paul Holland in NYU's Clinical Law Review ("Sharing Stories: Narrative Lawyering in Bench Trials"), the most important thing to remember is that judges like stories just as much as jurors do. More importantly, Holland identifies at least three places where bench trials significantly differ from jury trials, each of which has implications for a class trial:

Opening statements carry greater risk than in jury trials. "Jurors are generally trial novices, eagerly awaiting the entertaining lawyer storytellling characteristics of an effective opening. In contrast, judges are likely to see the lawyers' openings, however diverting, as the only thing standing between them and the evidence upon which their decisions should rest. Judges are unlikely to interrupt an opening statement, but may quickly dismiss lawyers they believe to be off-track." This factor may play to a class-action defendant's strengths; it blunts, at least in part, the rhetorical effectiveness of the David v. Goliath story many class plaintiffs like to tell.
Framing decisions as easy may backfire. "When decisions appear to be easy, they will be made quickly, often by automatic thinking and shortcuts." And judges' automatic thinking will include the various patterns they recognize from years of watching lawyers maneuver against each other in court. For a class action, this means that the defense should may not need to worry quite as much about the delicate balance of making issues simple enough for a jury to grasp, while still preserving the complexities of a classwide trial for appeal.
Judges often give more feedback than juries. Since the judge is both referee and factfinder, nothing prevents her from asking questions during the course of the trial, or signaling that she is more interested in some kinds of evidence than others. (In fact, for a judge with a backlog of cases, cutting straight to the relevant factual questions is probably the most responsible thing she could do.) Of course, in focusing in on what she considers relevant, the judge gives the lawyers valuable feedback on what she thinks of the case, allowing for midcourse corrections. In a class trial, that updating can prove particularly helpful for balancing the risks of an adverse verdict against the costs of a classwide settlement.

Given the wide variation in judicial temperament, the single most important factor in deciding whether to pursue a bench trial is still the specific judge who would be trying the case. But knowing the risks specific to a bench trial can help a defense lawyer make the best decision possible for his client.

CAFA Opinion Encourages Forum-Shopping - Cappuccitti v. DirecTV

Andrew Trask — Tue, 27 Jul 2010 04:27:01 -0500

Followers of this blog have probably noted (and probably with some chagrin) that I rarely discuss just-released cases, because I'm more interested in what we can learn about the strategies in a case than breaking the latest legal news. This case, though, is different, because last week the Eleventh Circuit released an opinion on jurisdiction under the Class Acton Fairness Act (CAFA) that is baffling in large part because it ignores the ways in which parties actually litigate a class action.

In the recently-decided Cappuccitti v. DirecTV (11th Cir. Jul. 19, 2010), the Eleventh Circuit dismissed a class action for lack of subject-matter jurisdiction under CAFA.

As part of its reasoning, it held that at least one plaintiff must allege more than $75,000 in damages:

While § 1332(d) may have altered § 1332(a) to require only minimal diversity in CAFA actions, there is no evidence of congressional intent in § 1332(d) to obviate § 1332(a)’s $75,000 requirement as to at least one plaintiff.

(Citation omitted.)

How did the court reach that conclusion? Plaintiffs Renato Cappuccitti and David Ward sued DirecTV, Inc., claiming that DirecTV wrongfully charged its subscribers fees for cancelling their subscriptions prior to the subscriptions’ expiration. They brought suit in federal court under CAFA (both plaintiffs were Georgia residents, DirecTV is a California corporation, and the amount in controversy exceeds $5 million). DirecTV moved to dimiss and to compel arbitration. The district court refused to compel arbitration, and partially dismissed the plaintiffs' claims. DirecTV appealed the denial of arbitration.

The Eleventh Circuit never reached the arbitration question. Instead, it held that it lacked subject-matter jurisdiction over the case because neither of the plaintiffs had alleged a claim worth more than $75,000. As the opinion puts it:

in a CAFA action originally filed in federal court, at least one of the plaintiffs must allege an amount in controversy that satisfies the current congressional requirement for diversity jurisdiction provided in 28 U.S.C. § 1332(a). Such a conclusion is compelled by the language of § 1332 as well as the general principle that federal courts are tribunals of limited jurisdiction whose power to hear cases must be authorized by the Constitution and by Congress.

The Eleventh Circuit based its holding on a reading of several cases interpreting the "mass action" provisions of CAFA. But it also worked from the assumption that its job is to reduce the number of class actions filed in federal court:

If we held that § 1332(a)’s $75,000 requirement for an individual defendant did not apply to § 1332(d)(2) cases, we would be expanding federal court jurisdiction beyond Congress’s authorization. We would essentially transform federal courts hearing originally-filed CAFA cases into small claims courts, where plaintiffs could bring five-dollar claims by alleging gargantuan class sizes to meet the $5,000,000 aggregate amount requirement. While Congress intended to expand federal jurisdiction over class actions when it enacted CAFA, surely this could not have been the result it intended.

This reasoning is puzzling, because the vast majority of federal class actions aggregate smaller claims. In fact, much of the federal court's Rule 23 jurisprudence is based on the benefits that derive from allowing plaintiffs to aggregate small-dollar claims. (It also ignores footnote 12 of the Supreme Court's Allapattah opinion, and its own opinion in Evans v. Walter Industries, Inc., each of which accept that the $5 million aggregate requirement replaced the $75,000 individual requirement.)

With the issuance of the Cappuccitti opinion, the Eleventh Circuit has made itself an outlier on CAFA jurisdiction. (Placing it in opposition to the Second, Third, Fifth, Sixth, Seventh, Eighth, and Tenth, Circuits) Given the odd result of the Cappuccitti opinion, it is likely that plaintiffs who wish to keep cases out of federal court will file them in Georgia, Florida, and Alabama. Defendants should prepare themselves accordingly.

How Plaintiffs Use PR: The Scruggs-Rendon Emails

Andrew Trask — Thu, 22 Jul 2010 05:19:11 -0500

I’ve written before that plaintiffs’ lawyers consider public relations to be an important weapon in their arsenal. But how, exactly, do they use it when they’re involved in a case?

Recently, a collection of emails between the former Scruggs Katrina Group (the firm former lawyers Richard and Zach Scruggs put together to prosecute class-action and qui tam claims related to Hurricane Katrina) and PR firm The Rendon Group were made public, providing an inside look at how the relationship can work. (For the story on why these emails were made public, see Rendon Group, Inc. v. Rigsby, 2010 U.S. Dist. LEXIS 60138 (D.D.C. Jun. 17, 2010).) The emails were first made available by Mississippi’s YallPolitics blog, and have also drawn comment from the bloggers at Overlawyered and The Insurance Coverage Blog. (In fact, the Insurance Coverage Blog features prominently in the emails themselves.)

So, assuming the normal warnings in a case like this (every case is unique, blogger may not have perfect information, be careful what you read on the internet …), what can we learn from these emails? (Citations are to Bates numbers in the collection.)

Public relations does not mean just press relations. It should come as no surprise that many of these emails between a plaintiffs’ firm and a PR firm concerned newspaper coverage. But some involved less traditional media. As Overlawyered and The Insurance Coverage Blog note, some of the emails discussed ways of countering the ICB's coverage of SKG. And, more interesting, some emails reported on how Rendon employees built a favorable Wikipedia page on qui tam plaintiffs the Rigsby sisters. (TRG 000957)
Negotiating around public officials can be difficult. I’ve written before about how plaintiffs’ lawyers seem to have a love-hate relationship with public officials and politicians. On the one hand, they can be a valuable source of information and pressure. On the other, they can have different, conflicting agendas. As one of the PR executives describes it: "This is a lawsuit. The game is that the lawyers and judge surprise attack each other constantly. Throw in a Senator, Congressman, Attorney General, Governor and about 2 dozen major news outlets....much less State Farm's PR engine...you never know what's going to happen or when." (TRG 001118)
Plaintiffs' lawyers have differing agendas. This should come as no surprise to most defense lawyers. But watching the mechanics from the inside is always instructive. As Scruggs himself puts it: "Maybe I should resume trying to build plaintiff lawyer consensus, although SF has hitherto opposed it, probably because there were already too many moving parts. Senter wants peace--not process, e.g., our class bringing only the latter. Walker would be given orders to broker peace, altho Merlin and the like want only piece and Judy/Anita only blood." (TRG 001145)
Sometimes, the PR target is not the defendant, but the judge. It’s no secret that plaintiffs frequently look for intelligence on judges. (And there are emails in this collection that discuss the judge’s age, his class action experience, and the fact that he “Gets overturned a lot.” But what may be surprising is that plaintiffs also use public relations as a way of putting pressure on the judiciary to rule their way. As one email from Rendon reveals, "We think SF should not be the focus but the judiciary." (TRG 001598) What does that mean? From the same email: “Getting the Wash Post, Legal Times, National Law Journal etc to be interested in the issue. Maybe court TV... client wants John Roberts to be aware of the dysfunction.”

What’s the lesson we can learn from this? For class-action plaintiffs, litigation can be a multi-front war. While the defendants may not choose to fight on every front, they should at least be aware of what those fronts are.

Never Assume Commonality - Gaston v. Exelon Corp.

Andrew Trask — Tue, 20 Jul 2010 04:56:37 -0500

Commonality is rarely the subject of much discussion in class certification. The plaintiff often treats it as a perfunctory hurdle, subsumed into the more difficult questions of predominance (under Rule 23(b)(3)) or cohesiveness (under Rule 23(b)(2)). But, much like numerosity, commonality is a requirement that may reward careful scrutiny when a defendant opposes class certification.

In Gaston v. Exelon Corp., 247 F.R.D. 75 (E.D. Pa. 2007), a group of African-American employees sued their employer for engaging in various policies (including its promotion and compensation decisions) that they claimed violated Title VII. They sought to represent a class of employees

who have been or may be subjected to Exelon's challenged policies and practices that deny Black exempt employees equal opportunity …

Exelon filed a motion to strike class allegations, which the court granted in part, ruling that no 23(b)(2) class was possible. When the plaintiffs later moved to certify a Rule 23(b)(3) class, the court actually found a number of problems with plaintiffs' class proposal. The class definition was not ascertainable. The named plaintiffs were subject to unique defenses, making them inadequate and atypical representatives. But the fundamental problem the court found was that the proposed common issues were not common.

In fact, the court took a Goldilocks-like approach to commonality (that is, if Goldilocks hadn't liked the baby bear's stuff either). It found that the proposed common issues were either too broad, too narrow or just plain irrelevant. What do I mean by too broad? As the court put it:

[P]laintiffs' first proposed question is “whether PECO's performance evaluation policy or practices negatively impact Class members.” Id. Were a question of this sort suitable to demonstrate commonality, that requirement would become a puff of smoke. Plaintiffs could simply propose the ques- tion “has employer discriminated against class mem- bers” and always meet the commonality requirement. Obviously, something more is necessary.

As for too narrow:

Other supposedly common questions that plaintiffs identify apply only to a small fraction of the proposed class. The question “whether Class members are less likely to be promoted into intermediate- or high-level salary grades than are otherwise-similar White employees,” for example, only applies to class members who were eligible for a promotion into those grades.

And finally, the court found that the remaining common questions had no bearing on the case itself.

Other questions, such as “whether Class members are less likely to be in high-level salary grades,” are simply irrelevant to a Title VII suit. As we discussed above, it is not sufficient for plaintiffs merely to identify a disparity in the representation of black employees in higher salary grades. They must also identify a pattern or practice of employment decisions during the class period that has resulted in this disparity.

What does this analysis mean for defendants? Despite the traditional view that commonality is a low hurdle for the plaintiff to clear, it is still worth challenging when the only common questions have nothing to do with the heart of the case.

Forum-shopping in MDL Cases: Where Do Consolidated Cases Go?

Andrew Trask — Thu, 15 Jul 2010 05:41:04 -0500

Multi-district litigation is becoming more and more common in class actions, and has added another strategic dimension to the cases.

For plaintiffs it adds the question of which law firm should lead the consolidated litigation.
And, as should be clear by now, that is no small question for plaintiffs.

But the other issue it complicates--for both sides--is forum-shopping. Forum-shopping tends to be unavoidable in class-action litigation. For plaintiffs, forum-shopping usually involves choosing the best possible mix of favorable law, favorable judges, favorable demographics, and potential interference from other plaintiffs' firms. [For a fuller discussion of the factors plaintiffs consider in forum-shopping, be sure to check the Class Action Playbook, coming out in September.] For defendants, forum-shopping is often limited to the question of whether to remove a case or not.

But, once the question of consolidating multiple cases into multi-district litigation arises, those questions get reopened, and the field of possible choices expands to include any federal district court. While the Judicial Panel on Multidistrict Litigation (JPML) should only consolidate cases that share "common issues," few guidelines constrain where it may assign a consolidated case. Since the specific court chosen can have a material effect on how the case gets conducted, what factors does the JPML take into account?

Margaret Wilson (of Vanderbilt University) and Tracey George (of the Federal Judicial Center) have set out to answer that question. In their recent paper "Deciding Who Decides: Consolidating Multidistrict Litigation," they set out to test whether any factors about the case--or the panel--influenced the assignment of MDL cases. Their conclusion?

As the model shows only two factors are statistically significant in their relationship to the assignment of a case. Higher numbers of recommendations for a district and those districts currently represented on the Panel were more likely to receive a transfer.

(Emphasis added.) Not only were the districts represented on the Panel more likely to receive the transferred case, it was the judges on the Panel who were most likely to oversee those cases.

Judges who take senior status are statistically less likely to be assigned the MDL, all else being equal. Judges who previously served as Chief Judge, however, and current JPML judges were all statistically significantly more likely to be assigned the MDL.

This result has a certain logic to it. Judges are likely to know the resources of their own districts, and may also be likely to decide they are best qualified to handle a multi-district case.

What are the implications of this finding? If a defense lawyer finds itself arguing before the JPML, it may make sense to argue for the most favorable district represented on the Panel as the best destination. At the very least, doing so may constitute a good backup plan.

Too Big to Certify?: Human Rights Class Actions Under ATCA

Andrew Trask — Tue, 13 Jul 2010 05:08:42 -0500

One of the strongest justifications for class actions is that they address large social wrongs that would otherwise go unremedied. But can there be a wrong that is simply too large for a class action to handle it properly? Something truly huge, like apartheid or genocide.

Some plaintiffs' lawyers, like Hausfeld LLP, say no. In fact, the Hausfeld firm has staked its business model on that view.

Unfortunately, in most cases, the answer is probably yes. Some issues, like genocide or other large-scale human-rights violations, may simply be too complex to attack on a classwide basis in an American courtroom.

For example, take the case of Presbyterian Church of Sudan v. Talisman Energy, 226 F.R.D. 456 (S.D.N.Y. 2005). The proposed class definition hints at the scope of the problem into which the plaintiffs sought to insert the Southern District of New York. They asked to represent:

All non-Muslim, African Sudanese inhabitants of blocks 1, 2 or 4 or Unity State … [the “Class Area”] at any time during the period January 1, 1997 to June 15, 2003 [the “Class Period”], who were injured during that period by acts of the Sudanese military or allied militia constituting genocide, extra-judicial killing, enslavement, forced displacement, attacks on civilians constituting war crimes, confiscation and destruction of property, torture or rape.

The plaintiffs alleged that the defendants—Talisman Energy and the state of Sudan—

collaborated in a joint military strategy of ethnic cleansing against the plaintiffs for the purpose of creating a secure buffer zone that facilitated the development and exploitation of oil reserves …

The plaintiffs sought relief under the Alien Tort Claims Act (which allows foreign nationals to bring lawsuits in the US under certain circumstances), and requested certification under both Rule 23(b)(2) and Rule 23(b)(3).

The court held that the 23(b)(2) request, which simply asked for the creation of a "constructive trust," was

an ill-disguised claim for damages. Consequently, the plaintiffs' request is precisely the sort of sham request for injunctive relief that the Second Circuit has stated cannot support a Rule 23(b)(2) certification.

In deciding whether to certify a Rule 23(b)(3) damages class, the court rehearsed a number of different approaches. It noted that the vast majority of ATCA classes had never reached certification, and of the three that had been certified, none were under Rule 23(b)(3). It examined the closest analogous class actions it could find—toxic torts, mass accidents, products-liability cases—and noted that certification of these classes was rare as well. Ultimately, the court held that, while there were “certainly important common issues to be resolved at trial,” causation would likely require an individualized inquiry.

The plaintiffs will have to show with respect to each individual class member that the injuries for which they are claiming damages were actually caused by the Campaign. Given that Talisman intends to show that warfare persisted through much of the Class Period between shifting, protean factions of rival rebel groups based loosely on tribal affiliations, and that such warfare included attacks on villages in the Class Area, proximate causation of each attack will be a hotly contested issue.

ATCA class claims raise a host of complex issues, none of which are easy to resolve at any level. They often involve delicate questions of international relations. They can pose a public relations problem for companies that do not handle the issues properly. And they raise valid and difficult questions of conscience for individual employees. But, addressing these issues, even just by deciding liability for historical injuries, is enormously complex. If the American executive branch—which is in charge of foreign policy—has yet to find an effective solution to these tragic problems, it’s hardly surprising that the courts have not, either.

Negotiating with Your Own Side: Intra-Team Negotiations in Class Actions

Andrew Trask — Thu, 08 Jul 2010 05:01:56 -0500

When we talk about complex litigation, we usually refer to the legal issues involved in joining a large number of varied claims. But the legal debates are not the only issue that makes complex litigation so complicated; sometimes it’s just the lawyers. Because class actions involve such high stakes, they often require more than just one attorney or one law firm. On the defense side, lawyers may find themselves dealing with discovery counsel, with co-counsel, or with large client teams. And, because of differing roles, differing client agendas, or just plain old competition, those lawyers may not always work together smoothly.

So, how can lawyers on each side best work with their co-counsel? We can glean some insight from a working paper from business professors Kristin Behfar, Ray Friedman, and Jeanne Brett. “The Team Negotiation Challenge: Defining and Managing the Internal Challenges of Negotiating Teams” draws on open-ended interviews with a number of business executives to identify the issues that arise within teams. While the paper focuses specifically on negotiation within teams engaged in putting together a business deal, the dynamics will ring familiar to any lawyer who has ever had to coordinate a joint scheduling order, negotiate a common settlement, or file a joint brief.

Among the professors’ findings:

Some of the largest challenges are posed by scheduling. In any large organization, simply coming up with the time to discuss issues can itself require a separate round of negotiations. (See also most lawyers’ Outlook inboxes.)
Confusion over roles may create conflict. Not a surprising result, but still worth some attention. Among the issues the authors identify were negotiation among team members that must be ratified by separate department heads (read “each law firms’ partners).
Personality conflicts are the greatest danger to negotiation. The authors found that teams that suffered relationship conflicts were less likely to be prepared for negotiations (since they were spending their time on the conflict instead of the substantive issues), suffered more stress and anxiety, and were more likely to escalate conflicts with the other side.
Substantive differences make negotiation easier. One might not expect this to be the case, but it actually makes logical sense. If a team must negotiate substantive differences before presenting its public stance, it must – at least temporarily – resolve any toxic personality conflicts. (This jibes with the old saw that “Academic politics are so vicious precisely because the stakes are so small.”)

There are any number of takeaways from the article (its advice to develop nonverbal signals for “public” negotiations is particularly interesting), but the most important conclusion is one that I recognize from some of the mentors I’ve been blessed with over the years: reducing internal drama makes a litigation team more effective.