Class Action Countermeasures : Class Action Lawyers & Attorneys : McGuireWoods Law Firm : Complex Litigation, Mass Torts

Those who argue that AT&T v. Concepcion killed the class action must be having an interesting January. Two of the more significant cases so far this year--Compucredit Corp. v. Greenwood (2012) and D.R. Horton, Inc. v. Cuda (NLRB 2012), have involved similar questions about when a defendant can move to compel arbitration in a class action.

But wait, I hear you ask. Didn't Concepcion decide that issue last year? Well, like with most legal questions, the answer is yes and no. Concepcion held that general statements about state unconscionability law cannot trump the dictates of the Federal Arbitration Act. But it left open the question of whether a federal statute could supplant § 2 of the FAA. Both of these lawsuits test that opening: CompuCredit involves the Credit Repair Organizations Act (CROA), and D.R. Horton involves the Fair Labor Standards Act (FLSA).

In CompuCredit, the plaintiffs alleged that the defendant had misrepresented its ability to rebuild card-users' credit, as well as the effective credit limits on its accounts. CompuCredit had moved to compel arbitration, but the district court had denied the motion, and the Ninth Circuit had affirmed.

The Ninth Circuit adopted the following line of reasoning, urged upon us by respondents here: The disclosure provision gives consumers the "right to sue," which "clearly involves the right to bring an action in a court of law." Because the nonwaiver provision prohibits the waiver of "any right of the consumer under this subchapter," the arbitration agreement— which waived the right to bring an action in a court of law— cannot be enforced. 

The flaw in this argument is its premise: that the disclosure provision provides consumers with a right to bring an action in a court of law. It does not.

(Internal citations omitted.) The plaintiffs also relied on the fact that the CROA contained a number of references to lawsuits, and specifically to class actions. They argued that these mentions demonstrated Congress intended to allow a right to a class action in this case. The Court disagreed:

These references cannot do the heavy lifting that respondents assign them. It is utterly commonplace for statutes that create civil causes of action to describe the details of those causes of action, including the relief available, in the context of a court suit. If the mere formulation of the cause of action in this standard fashion were sufficient to establish the "contrary congressional command" overriding the FAA, valid arbitration agreements covering federal causes of action would be rare indeed. But that is not the law.

(Emphasis added, internal citation omitted.)

By contrast, in D.R. Horton, the NLRB held that the right to bring a class or collective action cannot be waived by an arbitration clause. Is that consistent with CompuCredit?

Probably. D.R. Horton involved allegations that the defendant had misclassified building superintendents as exempt from the FLSA. The plaintiff, Michael Cuda, filed a classwide arbitration, and D.R. Horton moved to dismiss, because its arbitration clause did not allow for collective action. Accepting the defendant's logic, the judge dismissed the claim.

The NLRB reversed, explaining:

Section 7 of the NLRA vests employees with a substantive right to engage in specified forms of associational activity. It provides in relevant part that employees shall have the right "to engage in … concerted activities for the purpose of collective bargaining or other mutual aid or protection …"

And it went on to observe that

The Board has long held, with uniform judicial approval, that the NLRA protects employees' ability to join together to pursue workplace grievances, including through litigation.

Section 7 does not specifically mention class actions. But the NLRB decided that, because it did specifically allow for concerted action to protect employees, that class-action litigation fell within the scope of the statute as drafted.

These forms of collective efforts [including class actions] to redress workplace wrongs or improve workplace conditions are at the core of what Congress intended to protect by adopting the broad language of Section 7. Such conduct is not peripheral but central to the Act's purpose.

(Emphasis added.) In other words, the NLRA specifically stated that the parties had a right to use collective action (which had been interpreted to include class actions) to improve their working conditions. The substantive right to use a class action came from the statute itself.

So what can defense lawyers take from this? So long as the federal statute at issue does not specifically provide a right to bring a class actions, it will still be worth including arbitration clauses where appropriate, and moving to enforce those clauses.

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A few years ago, I attended an oral argument with a colleague. (He was there to argue a substantive motion in our case, I was there to take on the class-related issues.) It turned out we were in front of a hot bench that day: the judge clearly had formed several opinions of the case, and was not shy about peppering both plaintiff and defense counsel with questions--some seemingly out of left field--that forced each to justify his case. His approach clearly shook both sides a little. As we left without a decision on our motions, my colleague shook his head: "I just don't know what he was thinking," he said.

It's a common challenge among lawyers: what is my judge thinking? And it's a vital one; after all, if we know what a judge is thinking, we can better persuade him to rule in our favor. But most judges, while they reveal some of their thought processes during oral arguments and in orders, seem more opaque during the briefing process that takes up so many lawyers' time.

In his 2008 book How Judges Think, Judge Richard Posner of the Seventh Circuit Court of Appeals pulls back the curtain to give people a glimpse of--if not what a given judge is thinking, at least how he gets there. Why listen to Judge Posner? Leaving aside his long and accomplished record, he's a judge, and he consorts with other judges. And, as an appellate judge, his job is to second-guess trial judges. If anyone has an inside track on how judges think, it's probably him. How Judges Think has obvious benefit for lawyers. If you know how they think, you know how to best pitch your arguments.

So, what are Posner's main points?

Judges are not law professors, but they are part-time legislators. Given the way the common law works, particularly in the United States, judges frequently find themselves making what one might consider "legislative decisions" when deciding cases. (For example, when a judge distinguishes a previous case, he's usually providing a new rule, however specialized. To take an ancient example, the common law used to take any threatening gesture to be an assault, until someone put his hand on his sword--a threatening gesture--and growled that if it weren't the day the judges were in town, there would be trouble--seriously undermining the threat. New facts, new rule: saying you won't commit assault negates a threatening gesture.)

Judges engage in this kind of rule making without the benefit of specialized knowledge. Heavy caseloads mean don't have time to be experts in the various subjects that come before them, even--some of the time--the substantive law. (This is not a slam on judges' intellectual abilities at all. Mastering a specific legal discipline takes time and focus. Federal trial judges often have to pivot in the course of only a few hours between criminal sentencing, deciding a motion to dismiss a complex intellectual property case, and mediating a dispute involving the proper bounds of bifurcation of class discovery. That requires a lot of brainpower, but it does not allow the time for specialization.) As Judge Posner puts it:

No judge of [a federal court of appeals] can be an expert in more than a small fraction of the fields of law that generate the appeals he must decide, or can devote enough time to an individual case to make himself, if only for the moment (knowledge obtained by cramming is quickly forgotten), an expert in the field out of which the case arises.

Moreover, while professors worry about originality, judges worry about productivity. Or, as Walter Dellinger used to tell young lawyers:

A law professor's job is to say "Look at this; no one's ever argued this before." A lawyer's job is to take the same argument and say "Do this; it's how we've always done it."

In general, Judge Posner's chapter on legal academia ("Judges Are Not Law Professors") is well worth a read. He makes a lot of the same criticisms of academia that other judges have, but his dual role as prolific judge and prolific scholar gives those critiques some added oomph.

Judges have different external constraints from most of us. Article III judges are appointed for life, guaranteed a generous pension, and extremely difficult to remove once installed. (Leaving aside the political difficulty involved in impeachment, it is difficult to measure judicial output in a politically neutral fashion.) So they don't worry about getting fired, or making lots more money. (Though they would really like their cost-of-living adjustments.)

So what do judges worry about? They worry about handling their current cases as well as they can, clearing their backlog, and not getting reversed.

So backlog pressure keeps him working hard and reversal threat keeps him working carefully -- though an alternative strategy is to push the parties to settle, since settlements reduce backlog without risk of reversal.

(Here, Judge Rosenthal may disagree with Judge Posner; she thinks judges aren't as concerned about settlement anymore.)

Judges are people, but they have an extra set of internal constraints. What does this mean? It means that, like other people, judges ultimately can't outrun their prejudices.

A judge's personal background characteristics, such as race and sex, and his personal and professional experiences are among the nonpolitical, nonlegalist factors that have been found to influence his decisions.

In particular, given the grinding politics of the appointment process, judges are unlikely to be apolitical.

So, apart from the play of unconscious influences, we cannot expect federal judges to be complete political eunuchs, their decisions never influenced by politics because they have no politics. Such political neuters are unlikely to be appointed.

(Elected judges are more clearly affected by politics, for what should be obvious reasons.) According to Judge Posner, judges mostly use these intuitions as "tiebreakers." In other words, it's unlikely a lawyer can get a judge to ignore material facts or law, but in close cases different judges will lean in different ways.

That said, judges do face one important set of internal constraints. According to Judge Posner, judges are united in their use of "legal reasoning"--in particular analogy and distinction--keeps them from going too far afield. So does their sense of "common sense," which Posner explains as a healthy aversion to appellate reversal or legislative reprisal. (He doesn' mean judicial pay cuts, he means legislative responses like the Lily Ledbetter Act that functionally reverse a court ruling.)

So, based on all of this explanation, what specific practical advice can the class-action lawyer take?

• Don't be afraid to argue policy. Judge Posner refers to these policy arguments as "legislative facts," arguments about the effects that any common-law rule making will have. While they're especially persuasive to appellate judges, trial judges care about them too, especially during pretrial motions. And these kinds of "legislative facts" are particularly important in class-action litigation, where even small legal rulings have the potential to affect thousands (if not millions) of putative class members.
• Keep it simple. Judges aren't stupid, but they are pressed for time. The more a lawyer can help them master the material in front of them, the more persuasive that lawyer will be. (This is one of the reasons why--despite some lawyers' arguments otherwise--it's rarely a good idea to write "kitchen-sink" briefs.) This is particularly true in class-action litigation, which often overlays a complex procedure over complex substantive legal principles.
• Where possible, play to the judge's priors. After all, you don't always know where the close calls will be, and you want to get the benefit of the doubt in those places.

How Judges Think is well worth the read. And--along with Economic Analysis of Law--it's destined to be one of Judge Posner's most influential books. This is a book that should be on every practicing lawyer's shelf.

[Disclosures: When I was a student long ago, I worked on a number of Judge Posner's books. Also, despite the quotation marks, Professor Dellinger's statement is my best reconstruction rather than a direct quote.]

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 Today's classic opinion comes from a time that may seem foreign to most modern class-action practitioners. Not only is it pre-Dukes, it is pre-Amchem. And yet it's likely one of the most influential class-action opinions of the last twenty years. In re GM Pick-Up Truck Fuel Tank Products Liability Litigation (3d Cir. 1995) involved an alleged design defect in GM pick-up trucks over a fifteen-year period. The plaintiffs had alleged that GM's side-mounted fuel tanks were likely to catch fire during side-impact accidents.

So far, this sounds like many other hard-fought products-liabilty class actions. But, in this case, GM chose not to fight. Instead, after only four months of consolidated litigation, GM settled with the plaintiffs' lawyers, and agreed to a certified class for settlement purposes only.

The settlement drew out a number of objections, but the trial court approved the classwide settlement anyway. Notably, once it had found the settlement to be fair, reasonable, and adequate, it did not bother to actually conduct a Rule 23 inquiry. Instead, it just certified the class.

So the objectors appealed. And the Third Circuit agreed with them. Its largest central holding (one accepted enough that it is not often debated today) was that a settlement class must still meet the requirements of Rule 23. But, more importantly for today's litigators, it also concluded

that the settlement is not fair and adequate; more precisely, we hold that the district court abused its discretion in determining that it was, primarily because the district court erred in accepting plaintiffs' unreasonably high estimate of the settlement's worth, in over-estimating the risk of maintaining class status and of establishing liability and damages, and in misinterpreting the reaction of the class

The court also identified a particular danger of settlement-only classes, that does not exist (or at least not to the same extent) for litigation classes.

Despite the potential benefits of class actions, there remains an overarching concern-that absentees' interests are being resolved and quite possibly bound by the operation of res judicata even though most of the plaintiffs are not the real parties to the suit. The protection of the absentees' due process rights depends in part on the extent the named plaintiffs are adequately interested to monitor the attorneys (who are, of course, presumed motivated to achieve maximum results by the prospect of substantial fees), and also on the extent that the class representatives have interests that are sufficiently aligned with the absentees to assure that the monitoring serves the interests of the class as a whole. In addition, the court plays the important role of protector of the absentees' interests, in a sort of fiduciary capacity, by approving appropriate representative plaintiffs and class counsel.

And this, the court held, was why adequacy was so important in settlement-only classes.

Without determining that the class actually was adequately represented, the district judge has no real basis for assuming that the negotiations satisfactorily vindicated the interests of all the absentees. The focus on the negotiation process also cannot address the part of the adequacy of representation inquiry intended to detect situations where the named plaintiffs are unsuitable representatives of the absentees' claims. To state that class members were united in the interest of maximizing over-all recovery begs the question. Although that observation might allay some concern about a conflict between the attorney and the class, a judge must focus on the settlement's distribution terms (or those sought) to detect situations where some class members' interests diverge from those of others in the class. For example, a settlement that offers considerably more value to one class of plaintiffs than to another may be trading the claims of the latter group away in order to enrich the former group.

(Emphasis added.) The court in this case found that the class had not been adequately represented, and that the settlement was not fair, reasonable, or adequate. In deciding that the settlement was not appropriate, the court specifically found that :

1. The parties had overstated the likelihood the plaintiffs would lose at a contested certification hearing.
2. The parties had overstated the value of the settlement to the class.
3. The silence of absent class members did not mean consent.
4. The difference in treatment between fleet owners and individual truck owners suggested that the settlement was not fair.
5. The court had not made an adequate finding that counsel's fees were appropriate.

There are three reasons In re GM Pickup is a classic case. One, it's one of the first cases to deal with the problem of the settlement-only class, and as a result, it has been heavily cited since. Two, it's a comprehensive look at the issues involved in class-action settlements. (And it was recognized so at the time. How often do you see a concurrence that calls the main opinion "a truly masterful opinion" and a "a most thorough and scholarly analysis"?) Three, take another look at that list of findings. Each of those is a problem that recurs in class actions, frequently.  In re GM Pick-Ups was a historic opinion. And those who do not learn from history are doomed to repeat it.

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Last week, my post on the Ten Most Interesting Articles in 2011 got linked by Professor Alexandra Lahav at the fine Mass Tort Litigation Blog. She recommended my list of ten interesting but unwritten articles to students looking for notes topics, although she cautioned that 

I don't agree with Mr. Trask's assessment of my own work, legal academia or what people ought to write about …

Which is a completely fair opinion, even though I'm not entirely sure what those assessments are myself. Leaving aside what I think of Professor Lahav's work (I've featured it three times on this blog, and included it in one "Ten Most Interesting" list--I think her work is thought-provoking and worthy of serious discussion), I recently bemoaned the fact that 2011 was not a great year for interesting class-action scholarship. (Specifically, I complained that too many articles either previewed the same Supreme Court cases, or predicted the death of the class action.) And, in doing so, I stepped into a old debate that has grown heated in the past few months: what is the point of law school (and law professors) anyway?

The sources of that heat make this a particularly important question right now. The cost of legal education keeps rising, and so does legal-sector unemployment. While it grows more expensive, it also appears that legal education is becoming less relevant to actual law practice. Most of us have to justify our existence sometime, and law professors are taking their turn in the hot seat. They're not all doing it gracefully. While some have been thoughtful, others have been defensive, or self-congratulatory.

So what are legal scholars good for? They have two primary roles: they teach students and they research. I'll leave the teaching alone because it's been (let's just say "too long") since I was in law school, and I don't currently interview new hires.

But legal scholarship? Here I have an opinion, one that's been informed by reading pretty much everything published on class actions in the last four years through LEXIS or SSRN. I frequently rely on legal scholarship about class actions, on this blog, in my other writing, and in my own legal work. I think scholarship is more useful than most lawyers realize, even if you do have to sift a lot of silt to get to the gold. Since this is a defense-oriented blog, I focus on scholarship that is useful for class-action defense lawyers, but those are hardly the only worthwhile articles.

But I also think that legal academia is suffering from an ethos problem, one that stems from too much legal scholarship making too little effort to be relevant or interesting to those actually in the law. And, since law review articles may cost as much as $100,000 of student tuition each, that's a shameful waste of resources.

I'm a firm believer in academic independence. It enables scholars to follow where the facts and law lead for a given problem. That's something professional advocates can't do in the same way. And I accept that academic independence means that legal academia will never be merely a free R&D department for private lawyers.

But there is no reason, given the money law students (and, by extension, taxpayers, law firms, and clients) spend to fund those articles should result in so many proposals that ignore current law, faux dissents to existing opinions, jeremiads, or rehashes of the same Supreme Court cases. It should be eminently possible for academics to write articles that are original, useful, and still interesting to read.

So, based on those assumptions (and because I have a book deadline at the end of the week), here are ten simple things legal academics could do to make their work more relevant, and more interesting:

1. More looking for the overlooked. Professor Miriam Gilles wrote an excellent article on class-action arbitration--in 2005. It was good because lawyers weren't paying much attention to arbitration at the time. In the past year, as the legal status of class-action arbitration got resolved, we saw a flurry of articles rehashing Professor Gilles, but nothing focusing on emerging trends in numerosity, motions to strike class allegations, or new uses for superiority. Why not? Why weren't there any professors watching these trends?
2. More focus on district court cases. Where do you find the overlooked? On the front lines. And those are the trial courts. Based on two years' work with LEXIS, I can confidently say that the federal court system produces between 50 and 100 opinions in class actions each week. That's a lot of raw data, and a lot of overlooked trends. Who's looking there? Hardly anyone. Instead, everyone focuses on the same few appellate cases.
3. More focus on how the common law actually works. Many law review articles focus on Congressional action, what the Supreme Court should do, or arguments that are just plain contrary to existing law. But it takes little effort to come up with our own wish lists and invoke the genies of a unified Congress or Supreme Court. In our common-law system, most of the real change occurs when lawyers convince a trial court to rule their way. (That then generates those cases for appeal that the Langdell method loves so much.) So why aren't more articles proposing new arguments for lawyers to make?
   
4. More work with primary litigation documents. District court cases shouldn't even be a cutting edge. Lawyers breed documents like crazy, and in these days of ECF and PACER, it is entirely possible to get access to entire court dockets without leaving the comfort of your office. So why aren't law professors taking more advantage of these rich seams of raw data? Imagine a survey of the most common commonality arguments. Or the most common discovery requests, and whether they get actual responses.
5. More natural experiments. There are 13 federal judicial circuits, 89 federal district courts, and 50 state court systems. Each of these has different judges, and come up with subtly different lines of cases. Economists love stuff like this; it means they can test all kinds of crazy theories. Why haven't our law professors done that? Got two different rules on experts at class certification? You can test how that affects certification rates, or filings of class actions. Where are these articles?
6. More predictions and more followups. Scientists make predictions, and then follow up on them later. Legal scholars make predictions ("The class action will die soon!") but rarely follow up on them. And yet, the followup is the most informative part. It even adds some drama--everyone loved when Oprah would revisit her best stories.
7. More changing of minds. Unless a scholar knows everything when she starts out, she should encounter facts that will change her views at points. (It's certainly happened to me.) Yet we rarely see that in scholarship.  Depaul professor Mark Moller recently did so in an interesting article on due process arguments. Why isn't this more common in articles? From a rhetorical standpoint, it adds credibility to an argument. And from a human-interest standpoint, it adds some drama.
8. Less overt ideology. Academics are certainly free to root for whomever they want and vote for whomever they like. But the ideal of the academic is that she is free to go where the facts lead. The appearance of partiality can harm even disciplines that should be immune from political controversy. So why not leave the partisanship to the lawyers and think tanks and tackle questions without preconceptions? I guarantee scholarship that aims toward neutrality is more useful to judges, and there is no question articles would be more interesting if we couldn't predict the results just from the author's name.
9. More fact-checking. Plaintiffs make one claim. (Class actions as a whole deter corporate wrongdoing.) Defendants argue the opposite. (Class actions in practice overdeter by focusing on government investigations.) The factual debate has a real impact on which legal rule is a better idea. Who's right? Legal scholars are ideally placed to referee these debates, particularly if they're seen as open-minded and not overtly ideological. 
10. More identification of stakes. Legal debates happen for a reason, and it's rarely just that one side is good and the other is not. Instead, specific arguments often involve specific strategic and tactical choices in litigation. Identifying the practical stakes to various legal positions helps to put those debates in context--for students, for judges, and for practitioners new to an area.

These suggestions are simple, but not easy. Fact-checking takes work. Convincing student editors that district-court rulings have merit will be a slog. But they should lead to scholarship that's both interesting to read and actually relevant to how lawyers argue (and judges decide) cases.

I've had my fill of top ten lists, and I'm sure you have too. Next week, we're back to the usual "case and a thought" method. So come back then for the classic case In re General Motors Pick Up Truck Fuel Litigation, and a review of Judge Posner's How Judges Think.

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 In 2004, five women applied to be paramedics with the Chicago fire department, a demanding job with a demanding application process. While they were otherwise qualified, these five women, for whatever reason, did not pass the city's physical ability test. After they were removed from the city's eligibility list, they sued the city in Ernst v. City of Chicago (2012 U.S. Dist. LEXIS 1003 (N.D. Ill. Jan. 5, 2012)), alleging that the test violated Title VII.

If that were the whole story, there would be no reason for me to write about it. But in 2011, three years after they filed their original lawsuit and almost a year after fact discovery had closed, the plaintiffs sought to amend their lawsuit to turn it into a class action.

Why did they wait so long? It's hard to say. It could be that it took a year for their lawyers to process the discovery received and notice classwide patterns (unlikely, Title VII cases that challenge policies or tests are common candidates for class-action treatment). It could be that their lawyers just hadn't thought of it (also unlikely, since the court repeatedly praised their performance in the case). Or it could be that adding class allegations was a negotiating tactic to bring a three-year lawsuit to some kind of resolution. The court itself was flummoxed, finding nothing that could "persuasively account for the extended delay."

Whatever the reason, the City of Chicago opposed the amendment, arguing that the delay was prejudicial, in no small part because it would have to reopen discovery. The plaintiffs pooh-poohed the alleged prejudice, and argued that the City could not seek discovery of absent class members in any case. They also argued that, because they were challenging a City policy, it was already on notice that the case was a good candidate for class treatment.

The court disagreed. It observed that, given the lead plaintiff's attorney's exemplary conduct of the case to that point, there was no way she could have missed the possibility the case could make a class action, meaning that the delay was particularly inexcusable. It also pointed out that the defendants might well be entitled to discovery from other class members on a showing of good cause. And it observed that

it cannot be denied that the transformation of the case into a class action would raise entirely new issues of certification, notice, and the other complex issues that are a part of class actions and this after the individual claims have already moved three years closer to ultimate resolution of the case.

Then, in a conclusion that quoted both Henry VI Part I ("Defer no time, delays have dangerous ends") and Twelfth Night ("In delays there lies no plenty"), the court denied the motion to amend.

Motions to amend are usually easy for plaintiffs to win, so the fact that they lost in this case should offer a few lessons for class-action litigators. Here are a few:

1. Long delays can in fact be prejudicial; a fact worth remembering when plaintiffs make eleventh-hour amendments.
2. Class actions are big and complicated. Reminding the court of that fact--even during "easy" motions--almost always helps the defendant.
3. The better you are at prosecuting (or defending) your case, the more the court will come to expect from you.
4. If nothing else, it never hurts to brush up your Shakespeare.

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Lexblog TV did a brief interview-by-Skype with yours truly on Wal-Mart Stores, Inc. v. Dukes and AT&T Mobility v. Concepcion.  If my (admittedly poor) embedding skills are working you should be able to see it below.  If not, I've linked it here.  

I'd call this one shameless self-promotion, but frankly, I'm fairly shamed.  After watching it, I'm resolving to (1) just stare at the webcam the next time, and (2) get back to the gym.

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 (I'm recovering from a cold, and on deadline for a book, so my apologies that this post is a little late and a little short.)

Today's piece of "classic scholarship" was published in Public Choice in 2003. The authors, Jeffrey Haymond and James E. West, took a public-choice perspective on the class action, arguing that class actions are basically a wealth-transfer from corporations to plaintiffs' lawyers. (In this case, it's not something that class-action lawyers should take personally. Public choice theory tends to treat any movement of money as a "wealth transfer." Taxes are a wealth transfer. So are campaign donations.) As they put it:

[A]n examination of class action lawsuits leads to a similar model of extortion, not political but legal extortion. In this theory, trial lawyers have obtained a conditional property right to impose costs via the class action lawsuit. They have obtained this right bypassing the bar (whereby government restricts competition from others).

This was hardly the first article to argue that class actions were a form of "legal extortion" (by threatening costly litigation), but it was one of the first to actually describe the mechanisms by which the economic pressure occurs before certification. The lawyers also offered an argument for why a legislature (the usual subject of public-choice analysis) would delegate the collection of this wealth transfer to private lawyers rather than hold onto it themselves:

Trial lawyers have contributed handsomely to politicians, especially those supportive of plaintiff's right to sue.

In addition, when private parties pay for the right to extract private rents, the extraction is one step removed from the political realm, making it easier for politicians to avoid blame in the aftermath of egregious verdicts.

These arguments have been well-rehearsed over the years. (And, to some degree, they have been ameliorated by legal reforms such as the enactment of CAFA, which reduced the potential problems from some elected state-court judges who might favor--consciously or unconsciously--plaintiffs who had contributed to their campaigns.) Nonetheless, the article is still worth a read, if only for its empirical work on what happens when a company is "threatened" (by press release or complaint) with a class action.

[T]he change in daily rate of return when the threat of a class action lawsuit was issued is negative and highly significant across both model specifications and all three event window durations, all well above the 99% level of significance. We found that most of the individual firms had a negative return when the threat of a class action lawsuit was issued, with around 70% of the cases in each treatment being negative. In short, we find the data consistent with Hypothesis 1 as described above.
Given the strong results ... it appears that on average a statistically significant reduction in return is observed when the threat of a class action lawsuit is issued. Whether our data is more consistent with legal rent extraction or a public interest hypothesis is determined by whether or not a significant increase in return of sufficient size is observed when the threat is retracted.

It is this research that keeps the article relevant even today. Among other things, it suggests that class counsel in securities cases who engage in publicity when filing their lawsuits may in fact be harming the interests of the same investors that they claim to protect.

Important disclaimer (which I may not include often enough): just as every population has a little rogue in it, so does every population have conscientious and hardworking folk.  I met many of these among the state judge population recently at the annual meeting of the American College of State Court Business Judges.  I have also been lucky to correspond with a number of conscientious, hardworking, and honest plaintiffs' lawyers in the past year.

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Just before the Christmas holiday, the Third Circuit (meeting en banc) issued an opinion approving a classwide settlement in an antitrust case. The en banc opinion is unusual. (Any en banc opinion is.) But in this case, the opinion is unusual not just because it represents a break from routine, but because of how it reaches its result.

The case is Sullivan v. DB Investments, the culmination of litigation against South African diamond giant De Beers. The primary allegation in the underlying lawsuit was that De Beers had exploited its market dominance to inflate the price of rough diamonds, which would inflate the price of diamonds down the line. De Beers got sued by both direct purchasers and indirect purchasers (in this case: jewelers, other middlemen, and consumers).

The case was not really litigated. De Beers suffered a default judgment because it refused to recognize the jurisdiction of the US courts. It then negotiated a classwide settlement with the plaintiffs' counsel.

The district court approved the settlement, despite the fact that the settlement implicated the antitrust laws of 50 states. (Many state antitrust laws do not allow indirect purchasers to recover for antitrust claims.) Several objectors appealed, arguing that the settlement could not be fair if it allowed people without a legal claim to recover the same amounts as class members who did have solid legal claims. A split panel of the Third Circuit reversed the trial court. Then an en banc panel vacated that opinion and granted an en banc rehearing.

The result was Sullivan. On the surface, the holding (approving a classwide settlement that includes people without a legal claim) may seem unusual, but the fact that the court was approving a settlement class might explain its willingness to overlook the fact that many of the class members would not have been entitled to recover if they had brought their claims in the courts of their home states.

The en banc panel's justification of that holding was more adventurous however, and it has led to some pronouncements that frankly, are just--well, bizarre is the best way to put it. In particular, Sullivan makes a number of statements that flat-out disagree with the Supreme Court's class-action jurisprudence, most notably its definitive statement on class-action settlements Amchem Products, Inc. v. Windsor. Among those statements:

Variations in state law that are outcome-determinative do not predominate over common issues:

the objectors argue that the existence of substantive variations in the state antitrust laws underlying the Indirect Purchaser damages claims should preclude a court from finding that common issues affecting the class as a whole predominate. They also urge that differences among state consumer protection and unjust enrichment laws would likewise preclude a finding of predominance. Our dissenting colleagues focus on this issue as well, and adopt a specific requirement that every class member has “some colorable legal claim” in order for a district court to certify a class. In our view, this requirement would result in a radical departure from what Rule 23 envisions and what our precedent demands, and it founders for many reasons.

(Emphasis added, internal citations omitted.) The Fifth Circuit disagrees, as does the Second. And so did the Third Circuit in Georgine v. Amchem Products, Inc. (which became Amchem).

Predominance focuses only on defendant's conduct:

Our precedent provides that the focus of the predominance inquiry is on whether the defendant’s conduct was common as to all of the class members, and whether all of the class members were harmed by the defendant’s conduct.

The Supreme Court disagreed in Wal-Mart Stores, Inc. v. Dukes. And to see the extent of that disagreement, here is Justice Ginsburg's characterization of that very issue from her dissent:

The Court gives no credence to the key dispute common to the class: whether Wal-Mart's discretionary pay and promotion policies are discriminatory. "What matters," the Court asserts, "is not the raising of common 'questions,'" but whether there are "[d]issimilarities within the proposed class" that "have the potential to impede the generation of common answers." … The Court's emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions "predominate" over individual issues.

(Emphases added, internal citations omitted.)  In short, while Justice Ginsburg disagreed that the commonality requirement should focus on dissimilarities within the class (as opposed to defendant's conduct), she (and her three dissenting colleagues) took it as read that the predominance inquiry did look at dissimilarities.

Courts should not look at whether class claims could survive a motion to dismiss:

An analysis into the legal viability of asserted claims is properly considered through a motion to dismiss under Rule 12(b) or summary judgment pursuant to Rule 56, not as part of a Rule 23 certification process.

and

Class certification and motions to dismiss involve two distinct (and different) standards, and the former does not permit as extensive an inquiry into the merits as the latter does.

(Emphasis added.)  Compare the Supreme Court's holding in Amchem:

The predominance requirement stated in Rule 23(b)(3), we hold, is not met by the factors on which the District Court relied. The benefits asbestos-exposed persons might gain from the establishment of a grand-scale compensation scheme is a matter fit for legislative consideration, but it is not pertinent to the predominance inquiry. That inquiry trains on the legal or factual questions that qualify each class member's case as a genuine controversy, questions that preexist any settlement.

(Emphasis added.)

Choice-of-law inquiries are not appropriate for class certification:

Moreover, district courts undertaking the scrupulous review of state laws could not ensure the validity of each individual claim without first settling upon the precise state law governing each of the putative class members’ claims. This choice-of-law analysis would be particularly difficult in a nationwide class action where an array of factors beyond the residence of the class members must be considered, including, inter alia, the location of the parties and the purchased items, and the place of contracting and performance. See generally Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 467 (3d Cir. 2006). The Seventh Circuit rightly noted that “choice-of-law issues in nationwide class actions are rarely so uncomplicated that one can delineate clear winning and losing arguments at an early stage in the litigation”; “the legal uncertainty resulting from the complicated choice-of-law issues” would unduly complicate the process for establishing predominance under Rule 23. Mirfasihi v. Fleet Mortg. Corp., 450 F.3d 745, 750 (7th Cir. 2006). As a result, many courts find it “inappropriate to decide choice of law issues incident to a motion for class certification.”

(Emphasis added)  The Supreme Court clearly disagreed with this premise in Phillips Petroleum v. Shutts (which, oddly, the Third Circuit did not cite). To wit:

the [choice-of-law] calculus is not altered by the fact that it may be more difficult or more burdensome to comply with the constitutional limitations because of the large number of transactions ....

(Emphasis added.)

The fairness of a class settlement does not depend on the viability of different class members' claims:

only by engaging in the type of fact-intensive merits and choice-of-law analyses that we have rejected could a district court attempt to assay the varying strengths and weaknesses of asserted state claims. We can find no support in our case law for differentiating within a class based on the strength or weakness of the theories of recovery. Accordingly, we decline to require such an analysis.

According to the Supreme Court in Amchem, this statement is factually incorrect. The Third Circuit has in fact differentiated based on theories of recovery:

The Court of Appeals next found that "serious intra- class conflicts preclude[d] th[e] class from meeting the adequacy of representation requirement" of Rule 23(a)(4). Ibid. Adverting to, but not resolving charges of attorney conflict of interests, the Third Circuit addressed the question whether the named plaintiffs could adequately advance the interests of all class members. The Court of Appeals acknowledged that the District Court was certainly correct to this extent: "'[T]he members of the class are united in seeking the maximum possible recovery for their asbestos-related claims.' " Ibid. (quoting 157 F.R.D., at 317). "But the settlement does more than simply provide a general recovery fund," the Court of Appeals immediately added; "[r]ather, it makes important judgments on how recovery is to be allocated among different kinds of plaintiffs, decisions that necessarily favor some claimants over
others." 83 F.3d, at 630.

In short, it appears that the en banc opinion did not consider much of the relevant Supreme Court jurisprudence on the issues facing it.  

Many of these strange statements make a lot more sense if they are limited to either (1) specific kinds of antitrust cases, or (2) settlement-only classes. They're still debatable--Amchem, for example, dealt with a settlement-only class--but they at least have an underlying logic that a court might be reluctant to interfere with an agreement between parties. In fact, Judge Scirica's concurrence specifically spells out that this was a settlement-only class, and therefore would not face many of the manageability problems that plaintiffs might face were they to take the case to trial. The majority appeared to agree with this conclusion in at least one part of its opinion. When evaluating the fairness of the settlement, it explicitly stated that

although the size and variety of issues implicated in this nationwide class action do not present an obstacle to certification of a settlement class, there is a significant risk that such a class would create intractable management problems if it were to become a litigation class, and therefore be decertified. Accordingly, we agree with the District Court that the considerable risk of maintaining the class action through trial weighed in favor of settlement.

(Internal quotations omitted.) And, in several places, it stressed the fact that this was an antitrust class action as well, and that antitrust cases are more susceptible to certification under certain circumstances.

Given the confusion sown by the majority opinion, the fact that many statements seem to contradict the Supreme Court's class-action jurisprudence, and the circuit splits this opinion opens, it would seem to be ripe for a certiorari petition. (Of course, it is always difficult to predict whether the Supreme Court will grant certiorari in cases like these.)

Meanwhile, given the en banc panel's sporadic attempts to limit the reach of its holding (however confusing in the context of the opinion itself), there are two strategies defense lawyers can employ when plaintiffs in the Third Circuit inevitably cite this opinion:

1. Point out that the opinion is limited to settlements (and where appropriate, more specifically to antitrust settlements), and
2. Quote the Supreme Court. In a contest between the Third Circuit and the Supreme Court, the Court wins. At least, it usually does.

(Thanks to Glenn Lammi for suggesting the first case of the year.)

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 During the latter half of 2011, I was privy to the following exchange between a well-known law professor and a well-known practitioner:

PROFESSOR: Yes, I wrote a piece which concluded that the class action is dead. You heard it here.
PRACTITIONER: And yet plaintiffs keep filing the things …

That exchange (which I promise actually happened), summarizes the primary trend in class-action scholarship in the last year: declaring the device "dead," either because classes are now too hard to certify because of Dukes, too hard to bring in the first place because of Concepcion, or too expensive because of curtailment of attorneys' fees. Leave aside the fact that these arguments are most likely wrong (because, well, plaintiffs keep filing the things); they're dull as well. So, while the federal court system made it difficult to choose only ten significant cases this year, the rush of early autopsies of the class action made it difficult to scrape up ten interesting articles. That said, here are the Ten Most Interesting Class Action Articles of 2011:

1. Collective Justice or Personal Gain (Akron L. Rev. 2011) - Professor Stephen Meili provides outstanding empirical work on how plaintiffs' lawyers keep class-action plaintiffs involved in their in cases. It provides (1) a fascinating peek behind the curtain, and (2) great fodder for further discussion of whether plaintiffs' counsel are fulfilling their fiduciary duty to the class.
2. Unreliable Securities for Retirement Income Security: Certifying the ERISA Stock-Drop Class (Vanderbilt L. Rev. 2011) - This student comment cogently describes an emerging trend in securities class actions--the ERISA stock-drop class action--and one of the key controversies within that trend. When people ask why we bother having student-run law reviews, a piece like this helps to make the argument in support.
3. Embedded Aggregation in Civil Litigation (Cornell L. Rev. 2011) - The late Professor Nagareda discusses how even seemingly individual litigation can contain issues that require courts to make decisions about aggregating claims -- and he uses those cases to show why the constraints of Rule 23 are more than just "hypertechnical bugaboos." Fascinating reading.
4. Majority of Class Action Publication Notices Fail to Satisfy Rule 23 Requirements (Rev. Litig. 2011) (See also.) - Another excellent empirical study which asks: does class-action notice do what we intend it to? Most practitioners suspect that notice does not in fact actually notify the vast majority of class members about their claims. This study confirms that suspicion with cold, hard facts.
5. Two views of Class Actions (Fordham L. Rev. 2011) - Professor Lahav's article is hardly flawless, but the first half gets at a question that deserves a lot more discussion: are class actions primarily a joinder device or some other kind of legally transcendent entity? These two strains of thought continue to compete with each other as courts debate the propriety of various kinds of class actions, and some of the pre-certification tactics employed by the parties.
6. "Abandoned Claims" in Class Actions: Implications for Preclusion and Adequacy of Counsel (George Wash. L. Rev. 2011) - Abandoning claims (or "claim-splitting") has long been a practice of class-action plaintiffs. For almost that long, it has worried courts, who don't like to leave absent class members in the lurch. Professor Sherman provides a thoughtful review of various preclusion cases, and suggests that the phenomenon may be more of a superiority than an adequacy problem.
7. Financiers as Monitors (WP 2011). After the now-traditional "death of the class action" introduction, Professor Burch provides an interesting justification of third-party litigation financing, arguing that third-party financiers may provide a necessary monitoring role for entrepreneurial plaintiffs' lawyers. Having heard a number of financiers talk about how they fund litigation, I'd say that Burch's argument rings true.
8. Class Action Professional Objectors: What To Do About Them? (WP 2011) - Professor Lopatka and Judge Smith have provided an interesting analysis of class-action objectors. While they're largely critical of objectors, they do recognize that some objections have merit. So the question they seek to answer is: how should judges separate the legitimate objections from the objectors-for-profit? Their answer (large appeal bonds) won't be popular with some non-profit objectors, but they do put forward an intellectually honest proposal for discussion.
9. Overlitigating Corporate Fraud (WP 2011) - Professor Erickson asks a nagging question: do securities fraud class actions really deter corporate misconduct that has fallen through the cracks? Or do they just draft along behind government investigations and other existing enforcement mechanisms? She approaches this from a doctrinal rather than an empirical standpoint, but it's still a valuable first step in testing the deterrence justification that so many class-action proponents put forward.
10. Short Sales, Class-Action Lawsuits, and Potential Information Leakages (WP 2011). Professors Blau and Tew have noticed two interesting phenomena. First, some plaintiffs' lawyers leak their securities class-action complaints to short-sellers, a conclusion the professors reach by looking at spikes in short-sale activity just before a class action gets filed. (The tactic makes sense: short sales of the stock will put pressure on the corporation's management to settle a case. It may also raise some adequacy concerns, since what class counsel has done is to drive down the price of the stock in order to benefit themselves.) They also notice that post-filing short sales tend to correlate with the more successful securities class actions.

I get the impression, even from some of these articles, that academics think class actions aren't so much dead as dull; they're just kind of bored with the device as it stands. These professors tend to think that class actions are cool because of their ability to effect large-scale social change or raise big constitutional issues. Now that the Supreme Court has issued a record five opinions on class-action practice in a single year, I can see where it might be hard for them to identify the next area of constitutional import. Since, as Daniel Girard observed this year, we may have witnessed the end of the "Golden Age of the private attorney general" (a debatable but interesting observation), it's much harder to write articles that recommend new areas in which to file class actions.

Except: plaintiffs do keep filing the things. And, in doing so, they've raised a number of really interesting issues of legal strategy and civil procedure that the professors either haven't noticed, or don't think are worth their time. So here's a list of the ten most interesting articles that didn't get written this year.

1. The changing role of adequacy in class-action practice. Where does one strike the balance between a class representative who can provide discovery and oversight, and the ability to actually bring a class action without investing thousands in finding the "perfect" representative? How much does class counsel's role in the litigation matter? The Seventh Circuit in particular made three key rulings about adequacy this year: CE Design, Creative Montessori, and In re Aqua Dots. What do these cases suggest about the inquiries into adequacy of counsel and adequacy of representation?
2. The changing role of superiority. Should the analysis include the effects on non-parties to class actions? The Sixth Circuit has held that the superiority inquiry can look at the effect of a class action on a state's elderly population. How does the logic of that holding apply in the notoriously circular securities class actions? 
3. The evolving debate over the propriety of the motion to strike class allegations. Currently, the uneven development of motion-to-strike jurisprudence has resulted in vastly different practices across jurisdictions. What does this say about how Rule 1 and Rule 23 can intersect? How will motions to strike affect the kinds of class actions that plaintiffs bring? Do different holdings about the motion to strike result in different certification debates?
4. The emerging circuit split over the treatment of experts at class certification. There's one good article out there already, but it predates the rush of opinions that occurred this year. How do those affect the debate? Does Scalia's dicta in Dukes have any effect?
5. The class action and fiduciary duty. Various courts have recognized that named plaintiffs, counsel, and even judges have fiduciary duties to absent class members. But what are the precise contours of those duties? How (and how often) do courts actually enforce them?
6. The various new challenges to the "feasibility of joinder" aspect of numerosity. This has been a fascinating, though small, development over the last eighteen months, one that warrants more attention.
7. Public relations and class actions. Despite the increasing amount of raw data out there, no one has really done a comprehensive study of the role of public relations strategies in class-action practice, or an empirical study on their effectiveness. Do class actions with media pushes result in settlement or larger awards?
8. Follow-on class actions. Do class actions that follow recalls or investigations get certified as readily as "original" class actions?
9. Copycat class actions. What are the incentives for bringing them? How often do they actually work for the copycats? How do "original" plaintiffs and defendants fight them?
10. Settlement timing. At what point in litigation are class settlements most likely to occur? Most practitioners' intuition is that settlement occurs most frequently after certification. But is that actually the case? If not, what does that mean for class-action strategy?

I'll concede that these topics aren't as sexy as pronouncing on the latest Supreme Court opinions. But they're real trends and controversies, they touch on interesting aspects of representative litigation, and exploring them would be of real use to both practitioners and policymakers.

Regardless of whether those ten topics turn into articles, I have no doubt that the various battles still being fought over class certification on a daily basis will yield further scholarship. And, as soon as some aspect of class-action litigation turns sexy again, I'm pretty sure these same professors who pronounced the device "dead" will talk about its surprising comeback.

When that happens, remember: class actions were never dead. After all, plaintiffs kept filing the things.

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