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

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

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

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

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

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

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

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

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

(Citation omitted.) 

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

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

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

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

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

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

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

UPDATE, 15 OCTOBER 2010 - The three-judge panel that decided this case subsequently reversed itself in a per curiam opinion.  

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

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

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

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

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

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

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

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

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

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

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

As for too narrow:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Among the professors’ findings:

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

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

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 For the most part, this blog has focused on tactics that defendants may use to oppose class certification. But another important part of class action defense is being alert to new trends in class-action practice. And, in the last few years, a new type of class action has arisen that is worth looking at more closely: the data-breach class action, which seeks to hold companies liable for revealing customer data once they've been hacked.

For example, take In re Hannaford Bros. Co. Customer Data Security Breach Litigation. The specific opinion affirmed a remand of a class action under CAFA's home-state exception (a class of Florida citizens had sued a Florida corporation in Florida state court), but the underlying facts describe the archetypical data-breach class action. As the court described them:

Defendant Kash N' Karry Food Stores, Inc. operates a chain of grocery stores in Florida. A computer hacker stole the credit card information of customers who had shopped at Kash N' Karry's stores between December 2007 and March 2008. Plaintiff Thomas Grimsdale, III regularly shopped at Kash N' Karry's stores in Tampa, Florida during this period and paid for his purchases using his bank debit card.

On April 4, 2008, Grimsdale sued Kash N' Karry in Florida state court, alleging that Kash N' Karry had failed to adopt adequate security measures to protect its customers' credit card information. He sought to represent a class of approximately 1.6 million persons who had “used credit/debit cards at [Kash N' Karry's] stores between December 7, 2007 and March 10, 2008 and/or had their personal and sensitive Confidential Information stolen and/or compromised as a result of the [security] Breach.”

Information security is a growing concern among American businesses.  And a number of plaintiffs' firms have begun filing data-breach class actions.  Data-breach class actions have qualities that are--at least superificially--appealing to the plaintiffs' bar. Data breaches are often events that present small (or ambiguous) harms to a large number of potential class members. And if the security breach can be tied back to a single incident, then there may be common issues applicable to a class.

Does this mean that data-breach class actions unbeateable? Hardly. It is often difficult to prove any actual injury in a data-breach class action. And, if some class members' data was actually used illegally (while the rest remained untouched), it will be difficult to certify a class without getting into the merits of all class members' claims.

But, given the vulnerability of personal data, and the growth in filings of data-breach class actions, it is certainly worth defense counsel's time to think through the issues presented by these kinds of cases.

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When drafting its Principles for Aggregated Litigation, the American Law Institute considered a novel idea.  instead of applying the law of each of the fifty states to a multi-state class action based on state law (as the Supreme Court had long held was required by due process), a court could instead apply the "average" state law, determined averaging the probability a defendant would be held liable under each jurisdiction substantive law.

The ALI ultimately rejected the proposal. But Harvard Law professor David Rosenberg, joined by 3L Luke McCloud, thinks that courts should actually adopt the proposal when deciding whether to certify a class.

So what's their pitch?

The rejection of the average law solution is profoundly mistaken. It stems from the prevailing view among courts and commentators that the nature of the governing law and businesses‟ understanding and response to it at the time of the underlying conduct is the same regardless of whether the contemplated activity involves an intrastate or interstate risk. Our principal contribution is a basic, straightforward point: the average of the differing state laws is in reality the actual law that in fact ultimately governs the choice a business will make and expresses the choice the multiple states involved expect and presumably want the business to make regarding whether and how safely it should engage in activities involving interstate risk.

(Footnotes omitted.)

The authors make an intriguing theoretical argument, but it's woefully incomplete. Without diving too deep, a few of the questions it leaves unanswered:

Who decides what the "average law" is? Given the novelty of the proposal, a plaintiff who just argues "Well, we'll use average state law," is going to have to show that the proposal works in practice. And part of that will be showing the court that it is possible to apply average state law in both a fair and efficient way.  Deciding the best "average" will likely require as much work from the court as crafting an "Esperanto" jury instruction.  

Does the authors' model account for changes in law? As any practicing lawyer can tell you, each new case issued in a state court changes the odds of proving liability, sometimes subtly, sometimes less so. It's certainly possible for a mathematical model to account for changes in information, but it's not something the authors account for here.  And accounting for changes will inevitably complicate the model.

What about Shady Grove? This is the doctrinal objection, and it's a huge one. Because Rule 23 gets its legal force from the Rules Enabling Act, it cannot change the substantive rights of the parties. As the Supreme Court reaffirmed this year:

A class action, no less than traditional joinder (of which it is a species), merely enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits. And like traditional joinder, it leaves the parties’ legal rights and duties intact and the rules of decision unchanged.

Using the law actually applicable to a given claim is at the very least a "rule of decision," if not a full-fledged substantive right.

There are other possible flaws with the authors' proposal (for example, there may well be Seventh Amendment implications). But the fact that Rosenberg and McCloud did not account for the clear dictates of class action law is reason enough that federal courts will likely steer far clear of it.

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