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

Tomorrow, October 1, 2010, The Class Action Playbook goes on sale.    So, today and tomorrow, I'm running run brief excerpts from the book's introduction to give readers an idea of the approach my coauthor Brian Anderson (the O'Melveny & Myers lawyer, not the Brewers' play-by-play announcer) and I have taken.  Today, a brief discussion of the strategic approach to class actions:

[C]lass actions are different than other civil litigation. Any lawsuit requires a lawyer to think strategically along one dimension: Will the tactics he adopts help his client win the case on the merits? In class action litigation, because of the centrality of the debate over whether to certify a class, there is another dimension: Will these tactics help the lawyer obtain (or defeat) class certification? These two dimensions may conflict. Strategies that may help a litigant win a motion on the merits can undermine its arguments when debating certification, and vice versa.

What is strategy? The term means different things to different people. Some legal scholars define strategy as the accumulated choices made by a litigator —a possibly accurate description, but not very enlightening. Carl von Clausewitz, perhaps the premier military strategist in Western history, referred to strategy as “the use of engagements for the object of a war.” That definition is more useful when applied to litigation, although it is worth removing from a purely military context, and making a few of Clausewitz’s assumptions explicit. For our purposes, strategy is:

(1) a plan for action toward a goal;
(2) that comprises a series of actions over time; and
(3) that assumes other parties will oppose (or otherwise interfere with) the plan.

This definition combines the hallmarks of both the classic and modern definitions of strategy. Clausewitz and similar strategists draw a distinction between strategy and tactics. Tactics are short-term plans for handling an immediate conflict. Strategy is the longer-term coordination of tactics. But the most important component of our definition of strategy is the one that Clausewitz only assumed. Strategy does not operate in a vacuum: It assumes the existence of other parties who will, at worst, actively oppose the strategy, and, at best, merely get in the way. Our definition of strategy includes this dynamic quality: Unlike a mere plan, a strategy aims to anticipate and respond to the actions of each side in class-action litigation.

The purpose of this book is to discuss the points at which class-action litigators—whether representing plaintiffs or defendants—must make strategic decisions. We identify those decision points, and then discuss the tactical choices available to each side. To the extent possible, we also try to evaluate the strength of various tactics available in each circumstance.

At the risk of sounding immodest, I'm quite proud of this book.  It's garnered a few nice reviews already, and I'd encourage those interested in learning more about class-action litigation to check it out.  That said, I'm not stupid.  There's one big objection to address: why would anyone interested in bringing a successful class action read a book written by a pair of defense lawyers, including one who writes a blog called Class Action Countermeasures?  It's a valid question, one that I'll answer in tomorrow's post.  

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Many apologies for providing you all with just a linkdump for my Tuesday entry, but I'm lying in bed with a triple-digit fever.  Still, there are certainly other legal blogs that do a thoughtful job of covering class-action issues, and I'm lucky that several of them have great entries right now.

• Justice Scalia has stayed a Louisiana state court ruling requiring tobacco companies to pay into a $241 million dollar "quit smoking" fund.  His reason: it's "significantly possible" that the Court may overturn the decision on constitutional grounds.  Specifically: “the extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question.”  [SCOTUSblog]
• The Second Circuit has held, in a divisive 2-1 split, that the Alien Tort Claims Act (ATCA) does not apply to corporations. This should have a huge effect on international human-rights class actions.  [Mass Tort Defense]
• Wal-Mart's certiorari petition asking the Supreme Court to review the Ninth's Circuit's Dukes v. Wal-Mart opinion has drawn a number of high-powered amicus briefs.  [WSJ Law Blog]

Come back again on Thursday, when regular content should resume.

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 With the exception of Supreme Court rulings or groundbreaking appellate opinions, there is little that counts as "breaking news" in the class-action world. But a lead-counsel appointment in the Southern District of New York has drawn so much coverage in the last twenty-four hours that it seems worth at least a brief discussion on a Friday morning.

The case is In re Gildan Activewear Inc. Securities Litigation. Judge Baer's order appoints class counsel, and imposes a diversity requirement on the plaintiffs' firms (Robbins Geller and Labaton Sucharow). The relevant language:

"WHEREAS this proposed class includes thousands of participants, both male and female, arguably from diverse backgrounds, and it is therefore important to all concerned that there is evidence of diversity, in terms of race and gender, in the class counsel I appoint, see In re J.P. Morgan Chase Cash Balance Litigation, 242 FRD 265, 277 (S.D.N.Y. 2007); it is hereby"

"ORDERED that Co-Lead Counsel, Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP, shall make every effort to assign to this matter at least one minority lawyer and one woman lawyer with requisite experience; and it is further ..."

"ORDERED that the parties shall appear for a preliminary approval hearing on October 7, 2010, at 12:30 p.m., at which point Plaintiffs' compliance with the diversity requirement, as well as the other requirements listed here, will be evaluated ..."

(Emphasis added.)  This is not the first time Judge Baer has imposed this requirement. (And I'm not sure why this order has drawn more attention than the last one.) Nonetheless, it's clear that the discussion around this particular order raises at least three questions:

Can Judge Baer do this? Yes. Leaving aside the fact that he's a judge, he's got discretion to do something exactly like this according to Rule 23(g), which regulates the appointment of class counsel.  That rule, in full:

(g) Class Counsel.
(1) Appointing Class Counsel.
Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court:
(A) must consider:
(i) the work counsel has done in identifying or investigating potential claims in the action;
(ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action;
(iii) counsel's knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class;
(B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class;
(C) may order potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney's fees and nontaxable costs;
(D) may include in the appointing order provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and
(E) may make further orders in connection with the appointment.

Most lawyers focus on 23(g)(1)(A), which gives the factors they must meet, and there's nothing about racial or gender diversity there. But, 23(g)(1)(B) mentions that the Court "may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class." This is the justification Judge Baer used back in 2007 in In re JP Morgan ("The proposed class includes thousands of Plan participants, both male and female, arguably from diverse racial and ethnic backgrounds. Therefore, I believe it is important to all concerned that there is evidence of diversity, in terms of race and gender, of any class counsel I appoint.") Class counsel are aware, at least on a visceral level, that this requirement can include almost anything.  So it would appear that Judge Baer has the discretion to do so.

Should he do this? That really depends on one's political outlook. I'm a practicing class action lawyer; I'm more interested in strategy than policy. But, it appears that the strongest arguments on each side are probably:

• "Public lawyers" ought to be diverse. Governments everywhere have minority contracting requirements or opportunities. Why should courts be any different when they appoint class counsel? Many class-action lawyers already claim to be "public lawyers." [http://www.classactioncountermeasures.com/2010/06/articles/certification-1/are-class-actions-public-or-private-cases/] If so, there's no reason not to impose some of the same conditions we impose on government contractors.
• Diversity doesn't have much to do with securities law. In re JP Morgan (which was an age discrimination and ERISA case) the link between the diversity of counsel and the diversity of the class was at least marginally stronger. (Although Judge Baer did not require the firms to provide any aged lawyers.) It's harder to say why one's gender or racial background would affect their understanding of the securities laws, particularly when their clients are institutional investors, as opposed to individuals. And my guess is that, to the extent that either firm opposes the order, this is the line of argument they follow.

What does it mean that he did this? First, Judge Baer's order may tip the balance to Robbins Geller being lead counsel. A (very) quick trawl through both Robbins Geller's and Labaton Sucharow's websites shows that Robbins Geller has the requisite levels of diversity. Labaton, however, does not appear to have any female partners or senior partners. (It does have two female "Of Counsel.") If Judge Baer decides that partnership is the "requisite level of experience" (no guarantee), Labaton may have difficulty meeting that criterion.

Second, given how competitive plaintiffs' counsel already are in seeking lead counsel appointments, Judge Baer's order changes the game, at least for firms in the class-action-rich Southern District of New York. Expect to see a number of plaintiffs' firms reevaluating their hiring and attorney-development policies. And I would also guess we may see some firms use their diverse teams as a selling point in lead-counsel battles.

Finally, Judge Baer's order suggests a possible adequacy-of-counsel argument for defendants. Given the personal and political volatility of diversity debates, it's an argument that counsel should deploy carefully. But, if a firm finds itself defending a Title VII class action in the Southern District of New York, it may well be worth it to bring plaintiffs' counsel's lack of diversity to the court's attention.

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National Economic Research Associates, Inc. (NERA), an excellent source for statistics on litigation, has released a report on the recently-implemented class-action law in Italy: Italian Class Actions Eight Months In: The Driving Forces. 

The report describes (for those of us in the US) the law governing class actions in Italy. Class actions are opt-in, not opt-out like in the US. And they are limited to contractual claims, products-liability claims, anti-competitive claims, and "unfair commercial practices" claims. Classes are deemed "admissible" (roughly equivalent to certified) unless the claim is "manifestly unfounded," there is a conflict of interest, the rights at issue "are not homogenous" or the lead plaintiff cannot adequately represent the interests of the class. In addition, the lead plaintiff must be a consumer, and must have "an interest" in the suit.

In addition, the Italian law provides that there can be no more than one class action for a given matter (which implies some kind of automatic consolidation of additional lawsuits), and conforms to general Italian civil practice in that there is no pretrial discovery. (That's not a misprint: no pretrial discovery.)

The authors also observe that nonprofit consumer associations, rather than plaintiffs lawyers, are the primary drivers behind class-action litigation. As a result, they anticipate that these plaintiffs may push more for reform of business practices than for large damages awards. Specifically:

Consumer associations may aim to send a signal to the overall industry and push for changes in current business practices; they are thus less likely to be enticed to settle by monetary offers alone. An example is the Intesa case: Codacons [a consumer association] sought monetary damages but also sought to change the way in which the bank operated in charging fees and interest on lines of credit. During mediation, Codacons was willing to forsake its claim of €1,250 per account holder in exchange for a settlement of €1 per account holder and a change in the bank’s contract renouncing the challenged fees for all account holders.

Concurrently, consumer associations also have (maybe only implicitly) the goal of increasing the clout of the association. Thus, consumer associations may aim to increase their own visibility. This is a further reason why they are less likely to be enticed to settle by monetary offers alone. They may aim to increase their own visibility because part of consumer associations’ power comes from their reputation and the widening of their association base; thus, publicity is likely to be more important to them than to US plaintiff law firms. Consequently, the reputational damage suffered by defendants could be larger in the current Italian situation than it would be with US-like plaintiff law firms.

(Internal footnotes omitted.) This leads to what I consider the most interesting part of the paper, which is NERA's description of the effects of the law. In eight months, consumer-association plaintiffs have filed six actions, only one of which (the Intensa case, mentioned above) reached the admissibility stage. (The court denied admissibility because the lead plaintiff had not personally been charged the fees challenged in the lawsuit.)  From these six cases (and another fifteen that have been "announced" but not filed), the authors infer that

Consumer associations seem to be adopting different strategies with respect to class action. Some, like Codacons, have been filing a comparatively high number of class actions and announcing claims for billions of Euros; others, like Unione Nazionale Consumatori, have filed fewer and financially less ambitious class actions, promoting themselves as more realistic in their aims. Unione Nazionale Consumatori’s Secretary General stated that the class action law needs to be used with moderation, intelligence, and practicality. He vowed to follow these principles by choosing the suits that could be brought to a conclusion in a short time and maybe choosing those defendants that would be more prone to settle. He has not spared criticism towards those consumer associations following the strategy of filing many claims and issuing loud proclamations. Indeed, he compared some of the announcements of claims for billions of Euros to a farce.

(Internal footnotes omitted.)

What can we learn from the Italian case so far? Not much, with only eight months of experience on which to draw. But it does suggest that reducing the monetary incentive to file a class action could reduce the number of actions filed per capita. And it also suggests that even when one removes that incentive, finding good plaintiffs remains difficult. Which is unfortunate, because, as I've mentioned before, I might be willing to switch sides to bring cases in Florence.

(Photo from Wikimedia Commons, used under GNU license.) 

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 Depositions are one of the most important parts of class discovery. (And for many lawyers, they're also the most fun.) Since so few class actions go to trial, a deposition of a named plaintiff is when the defense lawyer finally gets to act like a lawyer on TV, confronting the named plaintiff with evidence, poking holes in poorly-constructed stories or arguments. But how much of the named plaintiff deposition is mere theatrics and how much is useful for actually defeating certification? For an excellent example of well-deployed depositions, let's look at a recent FLSA case: Lugo v. Farmer's Pride, Inc., 2010 U.S. Dist. LEXIS 88139 (E.D. Pa. Aug. 25, 2010).

The substantive allegations in the case involve "doffing and donning" (a nickname for FLSA cases alleging that plaintiffs were not paid for time spent putting on and taking off work clothes. In this case, Farmer's Pride owned a chicken-processing plant in Pennsylvania. In order to work in various departments of the plant, workers had to wear various items of protective clothing, including smocks, hair and beard nets, safety glasses, hearing protection, and protective sleeves. (Failure to do so could result in disciplinary action.)

Farmer's Pride moved to decertify the collective action, arguing that "donning and doffing" practices varied by department within its plant, by individual worker's routines, and by compensation scheme (there were two different compensation schemes, one in place until 2007, one in place afterward). The plaintiffs argued that Farmer's Pride had overstated the differences.

But, because Farmer's Pride had relied heavily on deposition testimony from the named plaintiffs and other plant employees, the plaintiffs had a hard time convincing the court that these differences were inconsequential. How did Farmer's Pride use the depositions?

• It used them to question the plaintiffs' ability to testify on others' behalf (typicality). "Defendant also questions the ability of Marco or Caba to speak to the practices and experiences of other hourly production workers, identifying statements in prior deposition testimony by Marco that she did not have knowledge of these facts ( and noting Caba's admission at the evidentiary hearing that she was "not paying attention to what other people [were] doing." (Internal citations omitted.)
• It used them to question the named plaintiffs' credibility (adequacy). "Defendant contends that the inconsistencies present in Marco and Caba's testimony are indicative of a more pervasive problem in the testimony that both named and opt-in plaintiffs have offered over the course of this litigation. In support, defendant points to multiple instances where named or opt-in plaintiffs have provided inconsistent testimony or have admitted to inaccuracies in prior testimony or discovery responses." (Internal citations omitted.)
• And it used them to question plaintiffs' counsel's credibility (adequacy of counsel). "Defendant also offers the testimony of Hasaan Hargett, a former plaintiff in this lawsuit and current hourly production worker at defendant's plant, who detailed at the evidentiary hearing how the facts in the interrogatory response submitted on his behalf were inaccurate, despite the fact that he brought these inaccuracies to the attention of plaintiffs' counsel prior to submission. According to defendant, these numerous contradictions betray an attempt by plaintiffs to manufacture a level of similarity that is not in fact present, and undermine any notion that their testimony can be considered representative in this case."" (Internal citations omitted.)

The defendant's strategy worked; the Court found that the inconsistencies among the testimony of various class member meant that the named plaintiffs' testimony could not stand in for the testimony of other class (or collective action) members.  In its words:

[T]hough plaintiffs tout the testimony of these plaintiffs as representative, neither Marco nor Caba provided a reliable basis which would warrant the Court's acceptance of their own personal facts as applying to others; rather, the Court finds that the record as a whole does not support the conclusion that their particular experiences were shared by all plaintiffs, or reflected a common practice or policy of defendant. Lastly, as defendant has effectively demonstrated, the testimony offered by plaintiffs in general is plagued by inconsistencies that diminish its reliability and show the importance of cross-examination of each plaintiff.

(Internal quotations omitted, emphasis added.) What's the lesson we can learn from this case? No matter how redundant it may seem, be thorough in asking about each class member's experience. The more specifically class members testify about their own individual experiences, the more evident it will become that a class may not be appropriate.

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Just a few miscellaneous notes that can't--by themselves--justify their own posts.  I leave it to the reader to determine if there are any predominating common issues.

• The WLF webinar on "Legal PR, Trial Lawyers’ Style: How They Seek Advantage Outside of Court and Proactive Countermeasures for Defendants," featuring yours truly and Cato Institute Fellow Walter Olson has been archived here.  
• I just received my author's copy of the Class Action Playbook over the weekend, which means that it will be released very shortly (October 1!).  The back cover contains blurbs from, among others, law professor Robert Klonoff and plaintiffs' lawyer Garrett Wotkyns.  If you are a blogger or legal reporter who would like a copy for review purposes, please feel free to contact me.
• Fellow class-action blogger J. Russell Jackson (of Jackson on Consumer Class Actions and Mass Torts) has a great writeup of the recent Weiner v. Snapple case (which should be especially useful for those briefing superiority) at the WLF website.
• Also, since they've said everything I could have: here's a sampling of blog entries on the Second Circuit's recent Zyprexia decision.  Bottom line: it is always worth challenging plaintiffs' use of aggregate proof in non-securities class actions.  

Come back tomorrow for the regular Tuesday entry.  

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Just a pair of reminders:

Please tune in at 10 AM today to the WLF's website for their webinar on Public Relations and Class Actions.  (You can also email questions to interactive@wlf.org.)  

And the official release date for The Class Action Playbook (which, among other things, discusses how plaintiffs and defendants use public relations in litigation) is October 1.  But you can pre-order at Amazon now.

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John J. Mearsheimer is one of the foremost modern proponents of the theory of "offensive realism" in international relations. While he has written extensively on foreign policy and strategy, the best summation of his theory is in his 2001 book The Tragedy of Great Power Politics.  The theory, in a nutshell, is that great powers (like the United States and China) are ultimately doomed to resolve their differences in violent clashes. Why?

The structure of the international system forces states which seek only to be secure nonetheless to act aggressively towards each other. Three features of the international system combine to cause states to fear one another: 1) the absence of a central authority that sits above states and can protect them from each other, 2) the fact that states always have some offensive military capability, and 3) the fact that states can never be certain about other states' intentions. Given this fear--which can never be wholly eliminated--states recognize that the more powerful they are relative to their rivals, the better their chances of survival.

According to Mearsheimer, this fear for survival inevitably pushes great powers into violent conflict with each other, and pursuing noble goals like spreading democracy will not prevent the tragic outcome.

This gloomy view of international relations is based on three core beliefs. First, realists, like liberals, treat states as the principal actors in world politics. Realists focus mainly on great powers, however, because these states dominate and shape international politics and they also cause the deadliest wars. Second, realists believe that the behavior of great powers is influenced mainly by their external environment, not by their internal characteristics. The structure of the international system, which all states must deal with, largely shapes their foreign policies. Realists tend not to draw sharp distinctions between 'good' and 'bad' states, because all great powers act according to the same logic regardless of their culture, political systems, or who runs the government. It is therefore difficult to discriminate against states, save for differences in relative power. In essence, great powers are like billiard balls that vary only in size.

Mearsheimer explains the implications of his theory throughout the book, and while I don't agree with all his conclusions, he makes a persuasive case.  I'd heartily recommend it to anyone looking for a thoughtful take on international relations.

So why am I talking about this book in a blog about class-action strategy? Am I so dense as to argue that class-action plaintiffs and defendants are like great powers in the international system? Almost. I think Mearsheimer's theory of "offensive realism" offers at least two insights to class-action defendants.

The first insight is that one doesn't necessarily need to know what the other is actually thinking to make informed guesses about the strategy it will employ. I've written before about how, to defendants, plaintiffs' lawyers' motives often seem as opaque as the Soviet Union's did during the Cold War.  As a result, it is worth looking at the constraints that plaintiffs' lawyers face when trying to guess how they might act. Looking at the structure of the plaintiffs' world (instead of at their motives) also helps defendants avoid the mistakes that can come with lazy demonizing. It doesn't matter whether plaintiffs' lawyers are "good" or "bad," what matters is how they react to their environment.

And that's the second insight offensive realism can provide. I'm not so foolish as to argue that Mearsheimer's theory describes class-action plaintiffs and defendants. But I do think it comes awfully close to describing class-action plaintiffs by themselves. (For a dissenting metaphor, see the Manhattan Institute's various Trial Lawyers Inc. reports.) There is no central authority that regulates plaintiffs' lawyers. In fact, a common complaint among defendants is that class-action plaintiffs' lawyers are not even regulated by their clients. Every plaintiffs' firm has some offensive capability (the ability to file lawsuits). And entrepreneurial plaintiffs' counsel often must compete fiercely against each other. Given the need to grow or die, it's no wonder that class-action firms file lawsuits that outside observers may consider meritless or overblown. The analogy is far from perfect, but frankly, it's not a bad place to start.

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Back in July, I wrote about the treasure-trove of documents released when public-relations firm The Rendon Group was compelled to respond to a subpoena from Katrina-related litigation involving State Farm. This upcoming Friday, I'll be participating in a WLF-sponsored webinar on public-relations tactics in class actions. To provide some background for my remarks, I thought I'd go into a little more depth on the story of how the Rendon documents came to be produced. (For the full case, see 2010 U.S. DIST. LEXIS 60138)

The "complicated story" (the court's words) began when sisters Kerry and Cori Rigsby (both of whom were claims adjusters for a State Farm subcontractor) claimed to have found documents related to what they alleged were fraudulent denials of claims related to Hurricane Katrina. The Rigsby sisters, represented by then-lawer Richard Scruggs, filed a qui tam action in Mississippi; their documents also served as the foundation for class-action litigation filed against State Farm. Much of this litigation collapsed after the Rigsby sisters were disqualified from testifying and the Scruggs-founded Katrina Litigation Group was disqualified from prosecuting the cases, because of what federal trial Judge L.T. Senter, Jr. referred to as "ethical misconduct" and "conflicts of interest." The qui tam action remained, but the court winnowed it down to claims regarding a single denial of coverage.

At that point, State Farm filed a counterclaim for misappropriation of confidential documents, and served a subpoena on the Rendon Group seeking documents related to its use of the Rigsby documents. The Rendon Group moved to quash the subpeona, because it was overbroad and complying would violate the attorney-client privilege. The court granted the motion in part and denied it in part, reasoning:

TRG seeks to quash the subpoena duces tecum first on the grounds that the records may be protected by the attorney-client privilege. TRG cannot, however, assert this claim; no one is claiming that there was ever an attorney-client privilege between TRG and the Mississippi firms. The firms' clients were, one supposes, State Farm insureds who sued State Farm or who were once relators in the qui tam action. The Rigsby sisters were only the latter. Those persons might or might not have grounds to claim an attorney-client privilege for information in the possession of their lawyers that reflects a confidential communication between them for the purpose of seeking legal advice or securing legal services. Had such a claim been asserted by such persons, it would then be pertinent to explore whether the lawyers' transmittal of privileged information to a public relations firm was or was not a communication that vitiated or forfeited the privilege.

(Emphasis added, internal record citations omitted.)

Ultimately, the court compelled production of two categories of documents:

1. All documents concerning the Relators, Ms. Cori (Moran Rigsby) and Ms. Kerri Rigsby.

2. All documents concerning the False Claims Act action filed by the Relators.

What tactical insights can we derive from this case? For specifics, please tune in to the webcast on Friday. Until then, let's just say that--despite the many challenges they do face--defendants are not helpless in PR battles over class-action litigation.

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All too often, courts and class-action litigants take the question of commonality for granted.  But, when framed properly, the question of commonality can provide a court with the tools necessary to engage in a truly rigorous analysis of a proposed class.

In his recent essay "Common Answers for Class Certification," noted professor Richard Nagareda takes the Ninth Circuit's recent Dukes decision and uses it as a platform to discuss what commonality really means in the context of a class action. In doing so, he provides an excellent analysis of how defense counsel can frame the question of commonality for courts deciding certification. As he puts it:

This Essay spotlights the crucial conceptual error in Dukes: its premise that the raising of common “questions” suffices for class certification. Properly understood, class certification does not turn upon the mere raising of common questions by way of expert submissions or any other form of evidence. Class certification instead turns on the capacity of a unitary proceeding to yield common answers.

Nagareda also points out that courts taking the alternative approach--looking only at whether the question is common, not whether they advance the litigation with common answers--are not wilfully misreading Rule 23.

The Dukes court acts on an understandable impulse—one whereby the format for adjudication inevitably would synchronize with the aggregate character of the allegations on the merits, at least when those allegations rise to the level of presenting a triable case.

Ultimately, Nagareda locates the issue in the fact that most courts are more used to determining issues on the merits than deciding class certification.

The fundamental problem with Dukes consists of the court’s confusion between the class certification determination and the most familiar type of pre-trial ruling that regulates the respective roles of the court and the fact finder at trial: summary judgment. On the Ninth Circuit’s account, the two are intertwined, such that the court regards itself as duty-bound not to withhold class certification when the plaintiffs have put forward a triable case as to the existence of a company-wide policy of discrimination on Wal-Mart’s part. Yet it is only if such a policy of nationwide scope exists that Wal-Mart has acted “on grounds that apply generally to the class,” so as to make appropriate relief “respecting the class as a whole” within the meaning of Rule 23(b)(2)—the basis for the Dukes certification.

In other words, a common question is not common unless the answer applies to the entire class no matter how it is decided.

What can defense lawyers take from Nagareda's analysis? It's always worth reminding the court of how a class trial would actually proceed. Walking the court through how it would have to decide questions on the merits can highlight where supposedly common questions aren't actually common at all.

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

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

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

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

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

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

(Internal quotations and citations omitted, emphasis added.)

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

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

As the WLF describes it:

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

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

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

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

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

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

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

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

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

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

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

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

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