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Class Action Countermeasures

Discussions of the Strategic Considerations Involved In Class Action Defense

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.

Amicus Brief in Campbell-Ewald v Gomez (Rule 68)

Posted in Uncategorized

Last Wednesday, Lawyers for Civil Justice filed its amicus brief in Campbell-Ewald Corp. v. Gomez, the case in which the Supreme Court will finally rule on whether Rule 68 offers of judgment (or equivalent settlement offers) can moot a class action.  For those interested, a copy of the brief is available here: Campbell-Ewald Corp v Gomez (LCJ).

Please come back on Thursday for another, more substantive posting.

Perfecting the (European) Class Action

Posted in Uncategorized
Last month, I got to experience what I consider a career highlight: I was invited to speak on “Perfecting the Class Action” at  Middle Temple.  The spiel I gave would be familiar to readers here (it was a basic description of the Rule 23 class action, and a quick summary of the current controversies surrounding its reform), but what made the event really special was the distinguished company I was in, each of whom was speaking on how class action reform is progressing in different areas.  As I’ve done with other conferences I’ve attended, I thought I would share some of the highlights from the presentations.
There were four other speakers: Alexander Layton, QC, Ianaka Tzankova, the Honorable Wallace Jefferson (Ret.), and Diana Wallis.
  • Alexander Layton (who told me the blog was “delightfully polemic”) represented the British viewpoint, and gave an excellent overview of the current state of collective redress in the United Kingdom.  There are no opt-outs class actions (barring the recently-carved exception for antitrust claimants, which has yet to be tested).  That leaves the primary form of collective redress in the UK as the Group Litigation Order, and its close cousin, the Special Purpose Vehicle.  Group Litigation Orders are similar to opt-in class actions.  They developed as a response to unwieldy insurance cases, and they retain a number of case-specific features.  The primary challenge in a GLO is finding the claimants (what is often referred to here as “book building,”) and ensuring adequate funds (litigation funding is not allowed for these cases).  The Special Purpose Vehicle is a concept borrowed from investing and corporate law—it’s essentially a one-time, single-purpose corporation formed for the sake of a transaction or a case—but it’s finding some success in front of British Courts.
  • Dr. Tzankova, who has litigated a number of collective actions in the Netherlands, talked about the three different methods of securing collective redress there: litigation foundations, power-of-attorney foundations, and settlement foundations.  While each has certain benefits, each also runs into specific issues.  The litigation foundation is easily certified, but is only available for injunctive or declaratory relief (much like a Rule 23(b)(2) class action).  It makes settlement more difficult, and encourages parallel lawsuits.  The power of attorney foundation is a method of collecting assignments of claims and assembling them in a Special Purpose Vehicle, but it’s limited by the law of assignments, and often requires labor-intensive book-building.  Finally the settlement foundation can streamline a claims process, but requires a willing defendant; so it only works when settlement looks very likely already.
  • Judge Jefferson spoke in his capacity as Treasurer of the American Law Institute, and offered an account of its role in drafting the increasingly-influential Principles of Aggregated Litigation.
  • Finally, former Member of European Parliament (and current head of the European Law Institute) Diana Wallis spoke on the ELI’s role in the emerging debate over collective redress in Europe.  Her primary thesis (which makes sense for a pan-European organization) is that the greatest challenge for European collective redress is the lack of any mechanism for cross-border collective claims.  The ELI has put forward a Statement on Collective Redress and Competition Damages, which recommends an opt-out class action for when EU law is breached, but so far the European Parliament has not taken action on it.  (You’ll also note that the Statement is heavily indebted to Dr. Tzankova’s scholarship.)
So, all of this is interesting to comparative legal studies nerds like myself, but what is the takeaway for the American class action lawyer?  One thing that each of these perspectives highlights is the particular genius of Rule 23: by creating a representative action, it did eliminate the costly and difficult process of assigning claims that litigants in most other countries face.  But it also provides an excellent response to those who would argue that a less expansive Rule 23, one that is held to the same substantive limits as other laws, would spell the death of collective redress.  There are other methods out there, and many of them are successful.  Keeping Rule 23 within its prescribed limits will not kill the class action; nor will it create a corporate-ruled dystopia, unless, of course, we want to consider Europe to be one.

How Entrepreneurial Are Entrepreneurial Class Actions?

Posted in Scholarship

Plaintiffs’ lawyer-turned-professor Morris Ratner has published a new article on making litigation costs a profit center for class action plaintiffs. You may remember he wrote about this issue before with Professor William Rubinstein.  This new article, titled Class Counsel as Litigation Funders, makes it clearer that he isn’t talking so much about allowing plaintiffs’ counsel to charge a markup on photocopies as he is trying to establish parity between the lawyers who fund a case by fronting the costs and the lawyers who work a case. (Remember, in larger cases, many lawyers are required by co-counsel to contribute to a litigation fund.) In other words, he wants these lawyers (let’s call them the Bank) to be rewarded the way investors are rewarded, instead of simply being stuck with whatever their specific lodestar allows at the end of the case.

Does this matter to plaintiffs’ lawyers? Does it ever. A recent fight between Bank lawyers and laboring lawyers on the Neurontin antitrust class action show just how important (1) allocation of fees is, and (2) how much that is influenced by “lodestar”—the plaintiffs’ equivalent of the billable hour.

Scholars like Arthur Miller and Alexandra Lahav tend to talk in terms of “public interest” lawyering, eliding the the fact that most class counsel are profit-driven. Ratner’s a little more direct. These are entrepreneurs, he says, so let’s treat them like they’re motivated by profit. Or, as he puts it:

Class actions facilitate private law enforcement by manipulating the financial incentives of entrepreneurial class counsel, prompting them to act as litigation funders by advancing their time and litigation costs.

I should stop here for a moment to say: Professor Ratner’s article is well-argued and comprehensively sourced. It’s the kind of article where one can admire the scholarship even while disagreeing with the conclusions. Nonetheless, I have to admit I felt a little dirty reading it, and I couldn’t quite pin down why. I defend corporations; I’m familiar with the profit motive. And I think it’s smart to treat both sides as if they are largely rational, with the same mix of “good” and “bad” actors. So why the visceral reaction to this argument?

I think it’s because, when you strip away the mythologizing and the paeans to public interest, and leave yourself with just the entrepreneurial plaintiffs’ lawyer, as Professor Ratner does here, it becomes very clear just how little like other entrepreneurs class action plaintiffs’ lawyers are.

The story we tell ourselves about entrepreneurs is that they take risks and they build things.  They create a good or service, and bring it to the public, and if that good or service is compelling enough, then they succeed.  How does the “entrepreneurial” class action lawyer compare?  See for yourself.

Their entire infrastructure is subsidized by the taxpayer. Plaintiffs’ lawyers claim they offer “enforcement” or “deterrence.” But they do so by using the court system. There are, according to the latest estimations, approximately 7,500 class actions filed each year in the federal courts. Serious judicial bandwidth is taken up by the class action, including complex motion practice and discovery. And the plaintiffs get it for the same $100 filing fee as anyone else. Who makes up the overage? Well, it’s either other litigants who are paying the same fee for less judicial time, or the taxpayers who pay the rest.

Their operating costs are subsidized by their adversaries. One of the largest operating costs in class action litigation is discovery. And, due to the asymmetric nature of discovery, much of that cost is borne by the defendant, who must pay for identifying custodians, collecting documents, reviewing them for relevance and privilege, and then defending their choices when plaintiffs invariably challenge them. The Advisory Committee’s proposed changes to Rule 26 (which will require “proportionality”) should address this issue somewhat, although plaintiffs’ counsel are already promising to conduct discovery into the discovery they will be allowed. Proposals for a “requester pays” system, where class counsel would pay for the expansive discovery they seek, are rejected out of hand as too expensive.

They force people to buy their product. Ratner is explicit about this in the article. It is next to impossible to get consent up front for a Rule 23(b)(3) class action. So instead, we have “simulated consent” by court order. It is very difficult to think of another business in which one is allowed to charge potential customers for a product they did not ask for without their consent.

I am under no illusion that the entrepreneurial class action is going away any time soon. It’s institutionalized at this point; judges can point to the fact that class counsel run class actions instead of their clients, and still do nothing about the underlying issue. And any proposed reforms that would rein in the profit-seeking of class action lawyers tend to be dead on arrival. But it is worth looking at exactly what that “entrepreneurship” actually looks like. And, in general, it looks like exactly the kind of business model that might inspire one to file a class action.

Arthur Miller on Aggregate Litigation

Posted in Uncategorized
I’ve written before about legal giant Arthur Miller (now with the Lanier Law Firm) and his pessimistic take on modern federal procedure.  In the ‘teens, he has largely worried about the effect of procedural rulings on the plaintiff’s right to her day in court.
Now, in his latest article, The Preservation and Rejuvenation of Aggregate Litigation: A Systemic Imperative, 64 Emory L.J. 293 (2014), he expresses concerns about the future of the class action.  They’re not groundbreaking, but there is no reason to expect Professor Miller to break ground at this phase in his distinguished career.  Instead, it’s important to look at what he says because he is the most legitimate voice class action plaintiffs’ counsel have.  So, what does he have to say?
Well, to start, he continues to employ some of the same pro-plaintiff assumptions as in his last jeremiad.  He assumes that all claims brought should be tried, even if they can be disposed of before trial.  He continues to characterize plaintiffs’ lawyers as “entrepreneurial” and “social interest,” and “defense interests” as “scorched earth.”  And he harbors a newfound suspicion that concerns about electronically-stored information have not “been advanced honestly.”
Class action practice has become front-loaded to its detriment.  In keeping with his previous jeremiad, Professor miller believes that there are too many “stop signs” for plaintiffs on the way to certification of a class.  In particular, he criticizes the enforcement of the “rigorous analysis” standard (even though courts themselves don’t always know how to apply it), and worries that:
The certification process has become so arduous that its cost and delay – coupled with the risk of eventual failure – either deter the institution of potentially meritorious class actions or lower their settlement value.
The class action isn’t dead (yet).  In general, Professor Miller is optimistic about the ability of plaintiffs’ counsel to innovate, and find the “back doors” in adverse rulings.  He is particularly optimistic about the use of issue certification, which he views as “somewhat of a game-changer.”  He specifically endorses the tactic of marrying a request for Rule 23(b)(2) relief with a request for issue certification, a la McReynolds v. Merrill Lynch.
Plaintiffs’ difficulties with class actions are largely self-inflicted.  Plaintiffs’ counsel (well, some unnamed plaintiffs’ counsel) tend to act “like pigs at the trough” and play “territorial games.”  Instead, he believes that class action plaintiffs’ attorneys should organize in order to combat the reputation they have been tarred with by “defense interests.”  But he also points out that plaintiffs would do well to pay more attention to complaints before they file them, to make sure they actually have valid, certifiable claims:
The lesson this history teaches is that considerable pre-institution attention must be paid by counsel to the composition and definition of the class as well as the substantive claims to be advanced. The natural plaintiff’s instinct to be overinclusive in framing classes must be resisted in some situations. Less may be preferable to more.
So what’s the takeaway here?  In general, class actions are doing just fine.  Even Arthur Miller says so.  But, more importantly, the largest problems plaintiffs currently face—what look like big wins for defendants on the commonality, predominance, and ascertainability fronts—may just be the consequence of over-inclusive classes.  Which is what may of us “defense interests” have been saying for quite some time.

Will HR 1927 Kill the Class Action?

Posted in Certification, Uncategorized
Since HR 1927 was introduced, there has been an outcry that it will “kill the class action.”  In fact, opponents (among them Professors Alexandra Lahav, Samuel Issacharoff (Issacharoff HR1927 Letter), and Arthur Miller (Miller HR1927 Letter)) have complained that it was specifically designed to do so.  Nothing could be further from the truth.  In fact, the bill was specifically designed to have a minimal impact on Rule 23.  So how did the disconnect between the intent and the reaction occur?  I thought it would be worth walking through the criticisms of the bill so far, and what is actually going on.
No more civil rights class actions.  Critics have misread the bill’s provision to ban any injury that is not to person or property.  The language is
 Screenshot 2015-05-04 11.34.44
The criticism is that this would ban any injury that doesn’t fall into these narrow categories.  If this criticism were accurate, I’d oppose the bill myself.  But it’s not.  It’s based on a misreading.  The definition of “injury” in this case is only for the purposes of determining when a court must make the inquiry and whether proof is required.  If a type of injury was not specified, the bill doesn’t affect it.  So civil rights class actions (like Brown v. Board of Education), or statutory damages class actions (like those arising under FCRA) are not affected by the bill.  (Expressio unius est exclusio alterius.)  It is possible that the current language is more ambiguous than I think, in which case Congress can fix it.  And if they don’t, it is also within a court’s powers to give the statute its intended, more restrictive meaning.
The bill requires identical injuries.  According to the critics, if one class member is injured in the amount of $2, and another for $3, then one cannot certify a class.  This is an overly restrictive reading of “type and extent.”
 Screenshot 2015-05-04 09.54.04
Extent does not mean “exact quantity.”  It means “general amount.”  If I’m wrong, and this is a genuine issue, this is another place where a simple language change would solve the problem the critics have identified.  Perhaps to “scope” or “scale.”
It will require full-blown trials before certification.  The language in the bill is “proof by admissible evidence.”  This was drafted to track the language of various recent Supreme Court cases.  So HR 1927 no more requires a full-blown trial on the merits than the Supreme Court has.  Even if this were new, it’s aimed at a narrow issue: whether the injury suffered by the named plaintiffs matches the injury suffered by the class.  “Admissible evidence” includes documents produced by the defendant, affidavits, deposition testimony, and expert testimony—all evidence already offered in a rigorous certification inquiry.
It’s a class-action killer.  I’ve been over this criticism many, many times.  The PSLRA did not kill the securities class action.  CAFA did not kill the class action.  Wal-Mart Stores, Inc. v. Dukes didn’t kill it.  Nor did Comcast Corp. v. Behrend.  (In fact, Comcast inspired judicial retrenchment.)
I know Congress is polarized.  And I know that means any bill generated by one side will inspire knee-jerk suspicion from the other side.  But it is still possible to have an honest, rigorous debate about these issues.  H.R. 1927 was designed to take care of the kind of situation found in Whirlpool and Pella.  If plaintiffs’ lawyers find those cases acceptable, they can defend then.  But the same old rhetoric about how any proposed reform will kill the class action is tired and inaccurate.
We’re all better than that, aren’t we?