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Class Action Countermeasures

Discussions of the Strategic Considerations Involved In Class Action Defense

Campbell-Ewald Co. v. Gomez – Court Leaves Mootness Question Open

Posted in Motions Practice

As you probably know, on Wednesday, the Supreme Court finally issued its long-awaited opinion in Campbell-Ewald Co. v. Gomez.  Tammy Adkins & Helen Arnold of McGuireWoods’s Chicago office wrote up an excellent summary, which I’m quoting below:

On January 20th, 2016, in Campbell-Ewald Co. v. Gomez, a case closely watched by both sides of the class action bar, the U.S. Supreme Court ruled in an opinion authored by Justice Ruth Bader Ginsberg that an unaccepted Rule 68 offer of judgment did not moot the Telephone Consumer Protection Act (TCPA) putative class action brought by plaintiff Jose Gomez.

Defendant Campbell-Ewald, a contractor and advertising partner for the U.S Navy, allegedly sent the plaintiff unsolicited marketing text messages urging him to join the U.S. Navy. Plaintiff Gomez sued on behalf of himself and a nationwide class under the TCPA. He sought treble statutory damages, costs and attorney’s fees, as well as an injunction against Campbell-Ewald’s unsolicited messaging.

Campbell-Ewald extended to the plaintiff a Rule 68 settlement offer of $1,503 per text message, satisfying his treble damages claim. The plaintiff let the offer lapse without accepting it. Campbell-Ewald then filed a motion to dismiss Gomez’s claims, based on the offer of settlement, arguing that there was no longer a case or controversy as required for federal jurisdiction.

In the majority opinion, the Court found that an unaccepted settlement offer cannot moot a complaint. Under basic contract law, the Court held that in this circumstance, there is no offer and no acceptance, and therefore the offer can have no effect on the plaintiff’s claim, aside from Rule 68’s penalty of stopping the clock on costs. The Court stated: “We hold today … that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”

The Court further stated that Article III requires only a case or controversy, and the case does not become moot so long as the parties have a concrete interest, however small, in the litigation. According to the Court, a case becomes moot only “when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Because the plaintiff rejected the defendant’s settlement offer, and the offer itself did not admit liability, “Gomez gained no entitlement to the relief Campbell previously offered.”

Although the Court’s majority opinion seemingly holds that defendants cannot strategically moot class action claims by offering the named plaintiff all of his or her requested relief, the Court expressly left open the question of whether the result would be different if the defendant were to deposit the full amount of the plaintiff’s individual claim in an account payable to the plaintiff and the court entered judgment for the plaintiff in that amount. Moreover, the concurring and dissenting opinions indicated other possible ways that the case could have come out differently if the facts were different – such as if the defendant had deposited the funds with the court or if the defendant had admitted its liability in the settlement offer. These questions leave the door open to other possible outcomes, and therefore, we will likely continue to see variations of this case in the future.

Justice Ginsburg’s majority opinion was joined by Justices Anthony Kennedy, Stephen Breyer, Elena Kagan and Sonia Sotomayor. Justice Clarence Thomas concurred in the judgment, and filed his own concurrence. Chief Justice Robert G. Roberts authored a dissenting opinion, which was joined by Justices Antonin Scalia and Samuel Alito. Justice Alito also filed a separate dissenting opinion.

A few other thoughts about the opinion:

  • The logic here is completely Justice Kagan’s from her dissent in Symczyk.  In fact, Justice Ginsburg’s opinion explicitly adopts her reasoning there.
  • Because the court relied on Justice Kagan’s logic, it did nothing to resurrect the entity theory of class actions.  It appears that the “class as pre-certification entity” is still a dead letter in the Roberts Court.
  • I’m a little surprised that the Court did not resolve the mootness question once and for all, but it makes sense they would avoid controversial decisions when they had an easy basis for decision.
  • But that means it’s time to watch for “escrow pickoffs,” a tactic first raised in oral argument and mentioned again in the opinions.  Basically, a defendant can tender complete payment to an account with the plaintiff’s name on it, or to the court.  At that point, it’s unclear whether there is still complete adversity.
  • This will not have a huge effect on day to day practice.  Only the Seventh Circuit had really smiled on the Rule 68 offer of judgment as a mootness tactic (in Damasco), and it reversed itself recently.  And, even in the Seventh Circuit, actual mooting of claims was comparatively rare.
  • The Court did not rule on the use of a Rule 68 offer to limit costs in a class action.  That still remains a valid and potentially powerful tool for defendants to use.

So, the main takeaway here is that the Court has offered some guidance on mooting class actions, but has not yet closed off the strategy entirely.

 

NOTE – This post was edited to fix a few typos.

The Ten Most Significant Class Action Cases of 2015

Posted in Certification

Some years are exciting in class action practice; others are tamer. In general, in any established area of the law, precedent accumulates only incrementally. And, with the modern Rule 23 entering its 50th anniversary year, it makes sense that this might be one of the years that would demonstrate that principle. There were no stunning reversals or announcements of new law this year. The Supreme Court cases promising fireworks this term were argued in 2015, but decisions held until 2016. So this year’s ten most important cases were mostly building blocks adding to pre-existing trends in the law. As a result, this list may feel a little arbitrary, and there are good arguments for looking at other cases as significant as well. Nonetheless, here are ten cases from this year you’re likeliest to see cited in various forms.

DirecTV, Inc. v. Imburgia (S.Ct. 2015).  In the wake of Concepcion, several state courts—most notably California—have sought additional ways to limit the use of class action waivers in arbitration agreements. California tried to hold that a class arbitration waiver was unenforceable; Justice Breyer, writing for a 6-judge majority, held that the Federal Arbitration Act preempted the lower court’s decision.

Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015). Ascertainability is becoming one of the primary battlegrounds in class certification fights. And this is one of the first counterattacks to the Third Circuit’s aggressive holdings on ascertainability. In this opinion, the Seventh Circuit affirmed the lower court’s certification of a food labeling class, holding that ascertainability does not require an administratively feasible method of identifying a proposed class, just an objective one. Expect to see this cited in class cert reply briefs for some time to come.

Neale v. Volvo N. Am. LLC, 794 F.3d 353 (3d Cir 2015). One of the frustrating things about “no-injury” cases is the way in which they conflate a number of different Rule 23 issues. In Neale, the lower court granted certification in a case alleging that certain Volvos had a sunroof drainage defect. The defendant appealed, arguing in part that the class lacked standing because many of the class members had experienced no problems with their sunroofs.  The Third Circuit vacated and remanded, clarifying that, while the case before it presented numerous predominance problems, so long as the named plaintiff has a valid claim, Article III standing is met.

Johnson v. Nextel Communications, Inc., 780 F.3d 128, 146 (2d Cir. 2015). In vacating the certification of a labor negotiation class, the Second Circuit reaffirmed the problem of state law variations in strong terms: “Once it is established that the substantive law of each class member’s state will apply to his or her claims, the case for finding the predominance of common issues and the superiority of trying this case as a class action diminishes to the vanishing point.”

Remijas v. Neiman Marcus Group, 794 F.3d 688 (7th Cir 2015).  The plaintiffs sued Neiman Marcus, alleging that its susceptibility to hackers had caused them some form of unspecified future harm. The lower court dismissed the case, holding the plaintiffs lacked Article III standing. The Seventh Circuit reversed, holding that “injuries associated with resolving fraudulent charges and protecting oneself against future identity theft” provided injury concrete enough for standing. At the time, it was heralded as a case that would enable data-breach class actions. Little so far has changed that analysis.

In re BankAmerica Corp. Secs. Litig., 775 F.3d 1060 (8th Cir. 2015). The Eighth Circuit reversed a settlement with a significant cy pres component. In doing so, it held that cy pres must be used as a last resort, and the money must go to something that will provide an actual indirect benefit to the class. In the continued fight over the propriety of cy pres relief, this stands out as a particularly sharp declaration of principle.

Allen v Bedolla, 787 F.3d 1218 (9th Cir 2015). The Ninth Circuit vacated a settlement in keeping with its “high procedural standard for review of class action settlements negotiated without a certified class.” It appeared particularly concerned about the possibility of collusion. Its analysis of the nuances district courts must watch is particularly important.

Reyes v. Dollar Tree Stores, Inc., 781 F.3d 1185 (9th Cir. 2015). The Ninth Circuit reversed a remand under CAFA, holding that certification of class worth more than $5 million was ground for re-removal. In other words, it doesn’t matter how far plaintiffs can push a case in state court, if it belongs in federal court, it should wind up there.

Graham v. R.J .Reynolds Tobacco Co., 782 F.3d 1261 (11th Cir. 2015). Ever since the Florida Supreme Court affirmed certification of the Engle tobacco litigation, the federal courts have struggled with how to implement the Florida jury verdict (that “all cigarettes are inherently defective and that every cigarette sale is an inherently negligent act”) consistent with due process. In rejecting the district court’s verdict for the jury in one of the Engle progeny cases on obstacle preemption grounds, the Eleventh Circuit showed just how difficult it is to transform vague classwide findings into actual money for class members.

Pagliaroni v. Mastic Home Exteriors, Inc., 2015 U.S. Dist. LEXIS 126543 (D. Mass. Sep. 22, 2015). More and more defendants are challenging no-injury class actions on typicality grounds. After all, if the named plaintiff suffered an actual loss, but most of the class did not, it should be obvious why the named plaintiff is atypical. In denying certification of a proposed class of homeowners who alleged a latent defect in their decks, the District of Massachusetts showed that the typicality challenge is gaining traction.

Correction: I originally had the wrong procedural posture for Neale in this post, a dumb error.  Thanks to Matthew Mendelsohn of @MendelsohnLaw for spotting it.  The error has been corrected.

Highlights from the ABA Institute on Class Actions

Posted in Uncategorized
Last week I had the good fortune to attend the ABA’s Institute on Class Actions in New Orleans.  It’s usually a great combination of legal talent, and it’s noted for the depth and quality of its panels.  Among this year’s highlights:
  • Professors Coffee & Lahav‘s annual review of class action trends. A few years ago, I panned the memo they used in 2012 as overly inclusive and out of date. I’m happy to say that both this year’s memo and presentation were tightly focused on events from 2014 and 2015, with only a few additional cases discussed for necessary context.  In particular, Professor Coffee’s discussion of fee-shifting and Professor Lahav’s update on commonality were very useful. Hopefully, they’ll make the paper available on SSRN.
  • An excellent panel, hosted by Fredrick Burnside and including appellate lawyer Ben Gould, discussed a recent tactic by plaintiffs in the 2d and 9th Circuits to secure appellate review of a class action denial: the losing plaintiff can just dismiss her case with prejudice, and then appeal the dismissal.  (Previously.)  Microsoft, at least, has appealed the question of whether plaintiffs can do this to the Supreme Court. Given some of the more interesting questions the tactic raises (most importantly: if the court reverses the denial of certification, who represents the class on remand?) it will be interesting to see if the Court takes it up.
  • Another excellent panel on Campbell-Ewald Corp. v. Gomez featured, among other things, Deepak Gupta graciously eating crow over his recent (pre-argument) prediction that this case would be an easy win for the plaintiffs, and a very interesting discussion about whether the “right to aggregate” is part of the relief that a plaintiff seeks in a class action.
  • There were also quality panels on the role of compensation in class actions, the surprising rise of the class action trial, and the question of whether the Supreme Court’s class action jurisprudence really matters at the trial court level.  All provided excellent food for thought, and will likely fuel more posts in the next few months.

The New New Proposed Amendments to Rule 23

Posted in Certification, Uncategorized
Warning: This is another “amending Rule 23 post.”  Regular discussion of actual class action litigation will recommence on Thursday.  While I assisted Lawyers for Civil Justice with its response to the Subcommittee’s proposals, the following is only my personal opinion.
Last week, the Rule 23 Subcommittee released its latest draft proposal for amending Rule 23.  (2015-1105 Rule 23 Subcommittee Report)
The Subcommittee has abandoned (or in a few cases, placed “on hold”) several of its proposed amendments.  Among them:
  • There is no longer an attempt to amend Rule 23(c)(4) to specify that it trumps Rule 23(b)(3).
  • There is no longer any attempt to enshrine cy pres relief in Rule 23.
  • The attempt to add an explicit ascertainability requirement has been placed on hold.
  • The attempt to except Rule 23 from the Rule 68 offer of judgment has been placed on hold.
For the most part, this set of developments is good news.  The Rule 23(c)(4) proposal would have significantly changed certification practice, and would have undermined one of the fundamental methods of protecting due process in an opt-out class action.  Enshrining cy pres relief in the Rule would very likely have violated the Rules Enabling Act, a risk that would not have justified the additional flexibility the amendment might have offered to settling parties.  And, while I still believe that the ascertainability requirement should be explicit rather than implicit, the “minimalist approach the Subcommittee had had proposed (which would have reduced a judicially-recognized “threshold requirement” to an optional “management tool”) is no longer a danger.  I’m personally happy to maintain a strong implicit requirement rather than a watered-down “explicit” provision.  And the Rule 68 offer issue will be decided this year by the Supreme Court.
So what does that leave?  The following six proposals, some of which are new:
1.   “Frontloading.”  The Subcommittee defines “frontloading” as “ provid[ing] [relevant]{sufficient} information about the proposed settlement” at the preliminary evaluation stage.  The Subcommittee has eliminated its “laundry list,” which leaves a fairly vague standard that, hopefully, courts can fill in.  (Careful readers will note that the last time I wrote about this, I complained about the laundry list.  And all I can say is, yes, I know.  I’m still ambivalent about whether the better response to strategic lawyering is a list of factors or a vaguer standard.  Looks like we’ll find out.)
2.   Excluding “preliminary approvals” of class certification and orders regarding notice to the class about possible settlements from immediate appeal under Rule 23(f).  I’m presuming this is an attempt to reduce appeals by “bad” objectors looking for a payoff to leave.  (It might also reduce appeals of denials of preliminary approval.)  I personally haven’t experienced this tactic in either form, but I’m hard-pressed to see how it could be abused.
3.   Clarifying Rule 23(c)(2)(B) to state that Rule 23(e)(1) notice triggers the opt-out period.  The Subcommittee’s justification here is that this will reduce repeated notices to the class.  Assuming that “front-loading” includes full information about both the relief the class members will receive and the fees their counsel are taking, I don’t see an issue here.  But starting the clock on opt-outs (and, presumably, objections) without full information could encourage further abusive settlement practices.
4.   Notice to unnamed class members.  This is the “email”/“appropriate technology” provision.  As I’ve said before, you’d pretty much need to be a Luddite to not want to reduce notice costs with reliable technology.
5.   Handling objections by class members to proposed settlements.  The Subcommittee proposes a two-part addition to Rule 23(e): proposed Rule 23(e)(5)(A) would require objectors to state the grounds of their objection; proposed Rule 23(e)(5)(B) would require court approval of any withdrawn objection, and disclosure of any side payments.  (There are some variations in the proposed language, but this is the gist.)  So we’re really talking about front-loading objections like we do settlements, and adding transparency to the process.  Good ideas both.
6.   Criteria for judicial approval of class-action settlements.   The Subcommittee would replace the infamous “fair, reasonable, and adequate” with either language allowing the court to disapprove the settlement for any reason, or language further specifying the factors the court must find to approve a settlement.  While I’m confident these provisions by themselves won’t eliminate abusive settlements, they will at least provide more guidance to the courts.  More importantly, I don’t see the provisions doing much harm.  (I do worry a little, in the second alternative, about providing a “catch all” for the court to come up with new reasons for justifying settlements, unless the Rule makes very clear that you still have to find the other mandatory factors.)
Finally, the Subcommittee is submitting without endorsing a proposal for a Rule 23(b)(4) that would allow courts to ignore predominance when certifying settlement classes.  The Subcommittee notes that it was advised to leave this issue alone, advice I wholeheartedly agree with.
It’s possible to notice two trends here.  First, the “big” “sexy” Rule 23 ideas are rapidly getting winnowed out of these proposals, most likely because there is little if any area of agreement between plaintiffs’ and defense counsel on which ones will work in practice.  Second, what are left are largely technical, largely incremental reforms.  That’s for the good, I believe.  Trying for sweeping reforms is certainly tempting (hey, I recommended my own), but it’s far better to reflect the trends in litigation, rather than set them.

Gomez is not the slam-dunk you think it is

Posted in Certification
It’s rapidly becoming conventional wisdom that Campbell-Ewald Co. v. Gomez (argued yesterday) is going to be a win for the plaintiffs.  Respected academics like Robert Klonoff have stated it, and respected reporters like Perry Cooper have quoted respected plaintiffs’ counsel like Deepak Gupta to the same effect.  But, dig a little deeper into the arguments they’re all using to justify their predictions, and it’s not quite as clear that Gomez will be decided in favor of the plaintiff.  Those arguments are:
The Court has no way to counter Justice Kagan’s dissent.  In a blunt dissent in Genesis Healthcare v. Symczyk, Justice Kagan argued that the majority had gotten it wrong: a withdrawn Rule 68 offer would not moot a class action because a withdrawn offer can’t moot anything.  It was a good argument, but there are two reasons it won’t apply in this case.  First, it didn’t convince five Justices last time.  Second, Campbell-Ewald  also made a non-Rule 68 settlement offer for full individual relief.  So yes, one of the five Justices in the majority might buy into the dissent’s logic, but that logic would not apply to the (non-withdrawn) settlement offer.  The Court will still have to confront the question of what happens when full relief is offered to an individual plaintiff.  (And, indeed, at argument, this question came up.)
 
The Seventh Circuit has reversed itself.  It’s assumed that the Court granted certiorari because of the apparent circuit split between the Seventh Circuit and the remainder of the appellate courts to rule on the issue.  The Seventh Circuit’s recent reversal might be a reason not to grant cert, but unless you believe that the Court is solely looking at whether the appellate courts are in consensus, it’s not a persuasive reason to overrule previous precedent.  Moreover, Justice Easterbrook’s opinion uses Justice Kagan’s logic, meaning that it doesn’t apply to the non-Rule 68 offer.
Rule 68 is a class action killer.  This is the argument that gets trotted out most often.  Professor Klonoff puts it best:
Acceptance of Campbell-Ewald’s position would enable defendants in putative class actions to engage in gamesmanship by relying on unaccepted offers of judgment to derail putative class actions.
This is, of course, plaintiff’s argument in Gomez.  But claiming that the Court will buy the argument because the argument is self-evident is simply begging the question.  Five Justices rejected this argument in Genesis Healthcare.  There is no reliable evidence that any of them have changed their minds.  (Nor is there persuasive evidence that the four justices in the minority believe it.  At argument, Justice Kagan in particular was very intent on putting the policy arguments to the side.)  And the Court has, in the last five years, proven remarkably resistant to the argument that any particular ruling will kill the class action.
This hardly means that Gomez will be a slam-dunk for the defendants.  Predicting Supreme Court opinions ahead of time is like reading tea leaves in a cup of coffee.  But let’s be rigorous here.

The Next Decade of Class Actions

Posted in Uncategorized

A few years ago, I complained that class action scholarship was on the decline, and could improve from, among other things, digging into the actual caselaw out there, and making hard, falsifiable predictions about where the law is headed.

I have no illusions that Professor Robert Klonoff hangs on my every word about legal scholarship.  After all, he’s too busy practicing it himself.  But one of the things that makes him one of my favorite academics (even though I don’t always agree with him) is that he’s one of the few doing what feels like real academic work.

Take his latest working paper, to be published by the Emory Law Journal next year: Class Actions in 2025: A Prognosis.  This is an ambitious, meaty article.  It’s newsworthy in part because it contains the current reporter for the Rule 23 Subcommittee predicting no structural changes to Rule 23.  But it’s worth reading for a far more interesting reason than that: this is the only class action article I can recall that makes actual, concrete predictions about where the law is headed.  [Disclosure: Professor Klonoff gave my first book, The Class Action Playbook, a very nice blurb back in the day.]

So what are Professor Klonoff’s big predictions?  In his words:

Securities class actions will continue to flourish, but consumer, employment, and personal injury class actions will continue to decline.

The Supreme Court will curtail the ability of plaintiffs to establish liability or damages through expert statistical sampling (referred to frequently as “trial by formula”).

The “ascertainability” requirement imposed by the Third Circuit will be repudiated by the Supreme Court or by the Third Circuit itself.

The Supreme Court will conclude, as have numerous circuits, that an unaccepted offer of judgment to a class representative pursuant to Federal Rule of Civil Procedure 68 is a legal nullity and does not moot the individual’s claim or the putative class action.

Defendants will advance several arguments against class certification that, until now, have had only limited success. These will include expansive applications of Rule 23’s typicality, predominance, and superiority requirements. Although defendants will not be fully successful with these arguments, they will succeed in erecting some additional barriers to class certification.

During the next decade, courts addressing class certification and the fairness of settlements will give greater weight to allegations of unethical behavior by class counsel and by counsel representing objectors to settlements.

The future of class actions will ultimately lie in the hands of a small number of appellate court judges who have a special interest and expertise in aggregate litigation.

He also predicts, in more general terms, that more class actions will go to trial.

Some of Professor Klonoff’s predictions already seem a little shortsighted.  For example, he predicts that “no injury” class actions may disappear as a result of legislation like HR 1927, despite the fact that the bill looks unlikely to make it through the Senate as currently constituted.  Similarly, he predicts that consumer and labor class actions will decline because of the ubiquity of arbitration clauses, which seems not take into account the active role the CFPB has taken in policing class-action arbitration.  (I say “seems” because he takes the slightly longer view on how credible those regulations may prove to be.)

But it’s not the specific win-loss record he accumulates that makes this article worthwhile.  Instead, it is the fact that Professor Klonoff shows his work, using current caselaw.  You can disagree with his prognosis (and, on certain specific predictions, I do), but it is grounded in the actual state of the law, rather than what he wishes class action law looked like.  And that makes him valuable reading for both the academic and the practitioner.

Practical Rhetoric – Pleading & Plausibility

Posted in Scholarship
There’s lots of recent scholarship complaining about how pleading standards have gotten too stringent.  Professor Anne Ralph of Ohio State University Law School believes she’s found a solution.  In her article in the Yale Journal of Law & HumanitiesNot the Same Old Story: Using Narrative Theory to Understand and Overcome the Plausibility Pleading Standard, she outlines how plaintiffs might use the principles of narrative theory to meet the Twombly/Iqbal “plausibility” standard.
So, what exactly is “narrative theory”?  As Professor Ralph explains it:
Narrative theory answers the complex question of why narratives are persuasive. Narrative theory also seeks to explain the characteristics that every narrative possesses and how those characteristics function. The persuasive characteristics of narratives imbue narratives with plausibility. For this and numerous other reasons, narrative theory holds great promise for meeting the plausibility standard.
A narrative is, in short, a story.  Narrative theory studies not only the composition, but also the transmission and reception of stories.145 The concept of the “narrative transaction” focuses on the effect of the story on the audience, recognizing that, in understanding a story, “all . . . readers and listeners . . . have to work with is the presentation of events in the vehicle of narrative discourse.”
(Internal footnote omitted.)
According to Professor Ralph, there are three aspects of a story that can make it persuasive: (1) narrative coherence (is the story internally coherent?); (2) narrative correspondence (does it fit with the audience’s “stock stories” for dealing with the world?); and (3) narrative fidelity (does the story match the audience’s common sense intuitions?).
How does that help the poor pleader?  Well, it gives some guidance as to what plausibility actually means.
Litigants can help move their claims across the line of plausibility by making better use of narrative techniques. Narrative techniques may be especially useful to a plaintiff who asserts a claim of illegal discrimination or another civil rights violation, as it is in these contexts that a judge’s “judicial experience and common sense” may diverge most significantly from the litigant’s allegations. In such instances, a litigant should consider the ways audience members (who may or may not share the same cultural background and stock stories) will “read” her allegations and should consider utilizing additional narrative techniques to demonstrate a claim’s plausibility.”
(Emphasis added.)  In other words, narrative theory can point one to the areas in the complaint where they can shore up its persuasiveness.  More specifically, Professor Ralph notes that more detail is almost always better than less.  (This intuition is backed up by a recent paper from Professor William Hubbard.)  But, in addition, drafters can ask themselves the following questions:
  • Is the story internally consistent?  As law students, we’re taught that pleading in the alternative is just fine.  And it’s true that, on its face, pleading in the alternative is not legal grounds for dismissal under Rule 12(b)(6).  But the less consistent the story plaintiff is telling, the less plausible it will seem.
  • Does this story look like the other stories in the caselaw?  “Stock stories” sound like either cliches or stereotypes.  But lawyers have another well of stories to draw from: the cases that form the common law in their area.  Read enough fraud cases, or enough product liability cases, and you begin to see common patterns that generate (and then reinforce) the legal elements of a claim or the findings of fact surrounding it.  The more the alleged details of a case match those stock stories, the stronger the complaint will be.
  • Does the story in the complaint match my common sense intuitions?  Plausibility also relies on the degree to which the complaint matches common sense.  But wait! say scholars like Arthur Miller, common sense isn’t necessarily all that common.  And isn’t that just handing way too much discretion to judges, who live in an elite bubble isolated from the common person?  Well, maybe.  Except for two things.  First, as Professor Ralph notes, we all have some common cultural ground.  For example, the vast majority of us grew up in the United States and were educated here, giving us a common culture from which to draw.  But there’s more.  The vast majority of complaints are drafted by US-trained lawyers, who share a common education and a common set of norms with the judges who must find them plausible.  (And, let’s be clear, judges rightly exhibit huge patience with pro se plaintiffs.)  So the cultural gulf is nowhere near as wide as critics would have you believe.  So long as the plaintiffs’ lawyer can frame the story in a way that makes sense to the court, it should be plausible.
More importantly, what does this mean for those of us who want to dismiss poorly-pled complaints?  Plenty.  Because this account of narrative theory also gives a method of attacking the complaint.
  • Look for logical inconsistencies in the plaintiffs’ account.  (In a cash-grab class action, there are often quite a few.)  And don’t be afraid to ask the kinds of questions our professors used to terrorize us with in law school.  Who benefits?  Do we expect a corporation to act against its economic interest?
  • Look for other moments that seem not to make sense.  How many coincidences or leaps of faith is the plaintiff asking us to accept?  How complicated is the alleged wrongdoing compared to the alleged benefit?  (We once convinced a judge to dismiss a meritless conspiracy claim by pointing out that it just didn’t make sense for the defendant to engage in the level of individualized skullduggery alleged in exchange for a benefit of a few hundred dollars.)
  • Compare the complaint to the caselaw.  If the caselaw shows certain details are always present in these cases, and the complaint doesn’t allege them, it is fair for the judge to draw the inference that they’re not true in this case.  Does this penalize a plaintiff for choosing the wrong lawyer?  Possibly.  Of course, since most class-action plaintiffs are chosen by their lawyers instead of vice versa, it should be less of a concern.
In general, this is exactly the kind of article we need to see more of.  It takes a theory that gets tossed around a lot, and offers concrete, practical applications to real-world litigating.
[Disclosure: I know Professor Ralph, and have socialized with her on occasion.]

Revised Rule 23 Proposals Show Some Promise

Posted in Certification
The Rule 23 amendment process has continued apace.  For those of you who did not read Paul Karlsgodt’s excellent summary of the September 11 mini-conference (which included a number of class-action luminaries from both sides of the aisle), I’d recommend you head straight over to do so.
For the mini-conference, the Rule 23 Subcommittee published its latest thoughts on various topics (click on “Mini Conference Materials), and these are the latest versions of its proposals to debate.
In general, the proposals have improved significantly.  It’s clear that the Subcommittee is listening to reactions from all sides as part of its barnstorming tour.  That doesn’t mean that there’s not further room for improvement, however.  Without further ado, here are the latest area of debate, and my thoughts on each.  [Disclosure: I assisted in the drafting of some language for both the DRI’s and LCJ’s responses. The following are my personal reactions.]
(1)  Disclosures regarding proposed settlements (aka “front-loading”).  Front-loading (sticking as much information about a class settlement in front of the court as early as possible) is an interesting idea, and it certainly offers what appears today to be a comprehensive list of things the parties should tell the court.  The only question I have is whether enshrining a laundry list in the rule will freeze the inquiry, allowing later practice to evolve around these disclosure requirements?  Lawyers act strategically.  Give them a list of required disclosures, and they’ll grumble, disclose everything, and move the real conversation to things not on the list.  But I certainly think this goes in the right direction.  And if I had a good answer to the “lawyers are strategic” problem, I would be running the legal system instead of just blogging about it.
(2)  Expanded treatment of settlement criteria.  Unlike some of my defense colleagues, I’m generally for this amendment, which would take the various Circuit’s laundry lists of factors and distill them into a single non-exhaustive list of best practices.  I think that rationalizing the various Circuit approaches is not a bad idea.  (I was further convinced after the Duke conference, in which several of the Subcommittee members pointed out the Rule exists in part to educate the lawyer new to the subject matter.)  Of course, as you might guess, I believe the more rigor the better in terms of requiring findings, so I’d opt for the Subcommittee’s more rigorous approach.
(3)  Cy pres provisions in settlements.  The Reporter’s notes point out that there is still an open question as to whether this provision is “necessary and/or desirable.”  I’d say it’s not.  The Reporter has one of my arguments nailed: the courts are already wading into this area, and they’re doing a pretty good job of spotting abuses.  Given that, and given there is a serious (if under-credited) argument that cy pres relief violates the Rules Enabling Act and therefore the Constitution, I think it’s better not to enshrine any approach into the Rule itself.  (Proponents continue to argue that there’s no Constitutional problem where the plaintiffs and defendants have agreed to the relief.  Of course, we are talking about plaintiffs who do not yet represent a class, and defendants who just want the lawsuit done.  There is no mechanism for protecting the absent class member there.)
(4) Objectors.  As the Duke conference made clear yet again, objectors are not popular.  The question here has been, as all parties describe it, how to separate out the valid objections from the quick cash-grabs.  The Subcommittee proposes a series of disclosures, including the objector’s relationship to her attorney, and any compensation agreement.  I’m for this amendment.  I’m all for transparency.  In fact, I’d go further.  I think you could fruitfully require these same disclosures before filing a class action complaint.  (“That would discourage complaints!” cry certain proponents. “Huh,” I say. “Maybe those aren’t the valid class action complaints.”)
(5)  Class Definition & Ascertainability.  The Subcommittee has unveiled its approach to ascertainability, which involves amending Rule 23(c).  Bluntly, I think this is the wrong approach.  Courts treat ascertainability as an implicit “threshold” requirement, like numerosity, commonality, typicality, and adequacy.  (In fact, many courts treat it with more rigor than typicality or adequacy.)  The “minimalist” approach the Subcommittee is proposing would downgrade ascertainability to a “case management tool” that the judge could discard when inconvenient for certification.  Better to just leave it alone under these circumstances.
(6)  Settlement Class Certification.  This is the infamous “Rule 23(b)(4)” proposal.  And I’m still against it.  I don’t care if it’s plaintiffs or defendants who propose a category of settlement class that doesn’t have to meet the predominance requirement: that’s a bad idea.  The predominance requirement exists to protect the interests of both defendants subject to litigation, and absent class members.  Even if it’s occasionally inconvenient for defendants, the due process of absent class members is still important as a policy matter.
(7) Issue Class Certification.  This is another area where the Subcommittee is not certain that an amendment is needed.  After doing more extensive research for the Duke conference, I’d say the answer is that an amendment is not only unnecessary, but just a bad idea.  While there’s a lot of rhetoric about using Rule 23(c)(4) to bypass Rule 23(b)(3), courts are generally doing just fine at rejecting attempts to use Rule 23(c)(4) to certify an otherwise uncertifiable class. The Subcommittee’s proposed amendments would enshrine an understanding that most courts don’t currently share, at least in practice.
(8) Notice.  To my knowledge, no one has opposed revising the notice requirement to take account of modern technology.  I’m certainly not going to be the one to do it.
(9) Pick-Off and Rule 68.  The Reporter notes that it’s unclear this issue needs any further amedment, particularly given that the Supreme Court will be addressing the issue this Term.  And I’d agree with that.
There’s still a long process ahead, and, as the Reporters have stressed, it’s not clear that there will be any amendment to Rule 23.  But it’s certainly a process that has raised interesting questions along the way.

Forum Shopping in the Ashley Madison MDL Proceedings

Posted in Uncategorized

The following post, written by Special Counsel Andrew Phillips, was first published on McGuireWoods’s Password Protected blog.  I’m delighted to reprint it here.

As anticipated in our previous discussion of the Ashley Madison data breach litigation, lawyers representing the various putative classes have begun sparring over their preferred venues. The Missouri Jane Doe – who filed the first putative class action – pushed the Judicial Panel on Multidistrict Litigation to consolidate all of the Ashley Madison litigation before the U.S. District Court for the Eastern District of Missouri, which she argued has the requisite data breach class-action experience and is centrally situated for management of a nationwide class. Since then, other plaintiffs have chimed in, advocating forums in California, Illinois and Texas.

Plaintiffs may prefer different forums for both practical and tactical reasons. Practical considerations include the location of witnesses and evidence, the action’s nexus to the forum, and the court’s docket conditions and MDL experience. Tactical concerns include favorable legal precedent, securing a plaintiff‑friendly forum, or simply the “home field advantage” of litigating before a familiar court and jurist. While the various Jane and John Does suing Ashley Madison each pay lip service to the practical, tactical considerations are apparent.

This seems particularly true for those advocating for the Northern District of Illinois. Illinois is the only proposed venue within the Seventh Circuit. And as regular Password Protected readers know, the Seventh Circuit, in Remijas v. Neiman Marcus Group, became the first federal appellate court to find that consumer data breach victims had Article III standing to pursue a class action even in the absence of unreimbursed charges or identity theft. Neiman Marcus has vigorously opposed that decision via a motion for en banc review, arguing that Remijas conflicts with the Supreme Court’s opinion in Clapper v. Amnesty Int’l USA and the Third Circuit’s decision in Reilly v. Ceridian Corp. However, those advocating an Illinois‑based MDL are clearly banking on Remijas to support a more expansive view of standing than might be found in other circuits. Not surprisingly, no plaintiff has advocated jurisdiction in the Third Circuit (covering Delaware, New Jersey, Pennsylvania and the U.S. Virgin Islands), which has refused to find standing among consumer data breach victims.

The focus on standing jurisprudence makes sense because it presents a formidable hurdle to class certification. After all, the breach did not just divulge typical identifying or financial information, but also potentially embarrassing information regarding members’ private sexual fantasies and potential infidelity. And, this more scandalous category of data is cited in support of some plaintiffs’ emotional distress claims. Whether those claims are certifiable is highly questionable, so it makes sense that some plaintiffs are pursuing a forum that has recently taken a more liberal view of the types of injuries that can give rise to Article III standing in a putative data breach class action. However, a Seventh Circuit MDL forum also carries risk: If Neiman Marcus prevails on its motion for en banc review and Remijas is overturned, the Seventh Circuit could transform from ostensibly favorable to decidedly hostile practically overnight.

McGuireWoods LLP data privacy and class action attorneys will continue to closely monitor this litigation. The case is In Re: Ashley Madison Customer Data Security Breach, Case No. 2669 before the U.S. Judicial Panel on Multidistrict Litigation.

Classic Scholarship – A Theory of Legal Strategy

Posted in Scholarship, Strategy, Uncategorized

One of the things that makes legal academia so frustrating to practitioners (and possibly courts) is that much of it appears to focus on easily-researched questions, instead of the genuinely difficult questions that would yield some practical use.

Case in point: there is remarkably little scholarship that takes on the question of how litigators actually litigate cases. And that’s what makes Lynn Lopucki’s and Walter Weyrauch’s 2000 article A Theory of Legal Strategy so unique. Almost no other legal article has attempted to take on the question of how strategy fits into the development of the common law. To be fair, there is a long tradition of legal realism, which posits that judges are swayed by various factors other than just the caselaw in front of them. But few to none of them look at the roles that lawyers play.

Our theory can be summarized as follows: “Law” has direct effect through the rendition and enforcement of judgments in actual cases and indirect effect through the anticipation of such rendition and enforcement in hypothetical cases. Each such case is a complex undertaking that may require hundreds of strategic decisions by the parties and generate an indefinite number of actual or potential legal issues and extra-legal problems. The “merits” of the case, as conven- tionally conceived, may be only one among them. Each of those de- cisions, issues, and problems is potentially outcome-determinative. The odds that any one will determine the outcome are small. But cumulatively, the odds that some combination of these decisions, issues, and problems will determine the outcome are large. The legal strategist manipulates those odds in a game of skill, expanding and developing the array of decisions, issues, and problems in a manner calculated to confuse and ultimately overwhelm the opponent. Even if the “merits” should ever reach a decisionmaker, it will be a decision-maker identified by the game, and the “merits” will reach that decisionmaker in a form determined by the game.

(Internal footnotes omitted; emphasis added.) The authors identify three different type of strategies: (1) those that enlist judges (mainly persuasive argument); (2) those that constrain judges (such as choosing particular cases, or developing a record for appeal); and (3) those that transcend judges (like imposing costs or persuading the litigants not to file a case in the first place).

They also explain one of the reasons why studying legal strategy is so difficult.

Because legal strategies are attempts to manipulate the outcomes of cases irrespective of their supposed merits under written law, strategies are widely viewed as unethical. Lawyers are reluctant to publicize the strategies they pursue partly for that reason. But an even more important reason is that most lawyers understand that strategies work best when unnoticed. Articulation can, and usually does, render them ineffective. These factors combine to drive legal strategy largely underground.

In their attempt to highlight the role of legal strategy in the development of legal doctrine, it is possible that Lopucki and Weyrauch have overstated the role of the lawyer. (At times, they appear to argue that judges and legal doctrine are all but irrelevant to litigation outcomes.) Regardless, it’s both surprising and a little disturbing how little follow up there’s been to this article. The more we understand about how legal strategy actually influences legal doctrine, the better we lawyers can be.