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

And so we come to Sun Tzu. Poor, abused, overused, Sun Tzu, who's been drafted to advise on everything from sales to blogging.

Sun Tzu is popular because he's easy to quote.  Because Sun Tzu is so aphoristic, most books, commentators, etc., focus on either (1) how to apply those aphorisms in a modern context ("Know the enemy and know yourself, in a hundred battles you will never be in peril" is a popular one, at least measured in Kindle highlights); or (2) annotating the work to explain the true context of some of Sun Tzu's more popular sayings. (Which means, you're either getting disconnected advice or lessons in Chinese military history.)

But, at least as the author originally conceived the work, it was meant to communicate real strategic lessons to others like him. Leaving aside the easy aphorisms ("To subdue the enemy without fighting is the acme of skill …"), I'd like to focus on what one can glean by treating Sun Tzu as an actual strategist. So, today, let's focus on one of Sun Tzu's less glamorous, yet incredibly useful discussions: terrain.

Sun Tzu devotes an entire chapter to analyzing terrain. (Chapter X, for those reading along at home with the OUP's edition.) It discusses various kinds of ground, including "accessible, entrapping, indecisive, constricted, precipitous, and distant." And several other chapters (particularly on Marches and Maneovres) rely heavily on his analysis of terrain.

What does terrain have to do with litigation? Who cares what kind of ground the courthouse sits on?

Terrain matters because it's a central element of any strategy. (The OED defines terrain as a tract of land as regarded by a geographer or military tactician.) For soldiers, that means terrain is the actual ground on which they fight. As Sun Tzu points out, it matters what kind of ground one occupies. Certain ground offers tactical advantages. And different ground requires different tactics.

For lawyers, terrain is different. It's the facts and law that surround the case. But the effects are the same. Some of that terrain can be modified to help the lawyer, much as one might conform physical terrain into a defensible position. But some is just there, immovable. A lawyer can argue for different interpretations of a rule, but she can't change the text of a statute without the help of a legislature. And while she can highlight favorable facts and minimize unfavorable ones, she can't (short of unethical conduct) eliminate facts completely.

Or, as Sun Tzu put it:

Conformation of the ground is of the greatest assistance in battle. Therefore, to estimate the enemy situation and to calculate distances and the degree of difficulty of the terrain so as to control victory are virtues of the superior general. He who fights with knowledge of these factors is certain to win; he who does not will surely be defeated.

So far, so obvious. Most lawyers caution that you should know the facts and the law surrounding your case. But reading Sun Tzu on terrain lends one other insight that should help legal strategists, class action or otherwise: terrain can be analyzed.  And different basic strategies are best suited to different types of terrain.  

There's a dearth of good writing about legal strategy. Some of that is because insiders in a given case can't write about matters protected by work-product or the attorney-client privilege. But another reason for the void is that lawyers often claim their cases are exceptional because of specific facts, specific clients, or specific laws. We wind up cataloguing trees instead of learning to fight in forests. (There are solid marketing reasons to do this. This is how we sell ourselves as lawyers. Only we have the proper experience defending FDCPA class actions against mid-tier lending institutions in the Eastern District of North Carolina.)

It doesn't have to be that way. Rather than contenting ourselves with aphorisms ("Know the facts! Know the law!") or claiming that each unique case requires a unique, non-transferable strategy, we can start, like Sun Tzu, actually cataloguing the strategies that have evolved for different forms of legal terrain.

In other words, it's time for more discussions of how legal strategy actually works on the ground.

(Image is Kampa Dzong, Tibet [1904] John C. White [RESTORED], courtesy of Wikimedia Commons on a Creative Commons license.)

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One of the key issues that many (including me) assumed would be resolve in Wal-Mart v. Dukes was the question of what kind of Daubert inquiry would be necessary at the class certification stage.

The 1993 case Daubert v Merrell Dow Pharmaceuticals, Inc., involved a challenge to the longstanding "general acceptance" test for scientific evidence articulated by the D.C. Circuit Court of Appeals in Frye v. United States. The litigation in Daubert concerned infants suffering from birth defects that allegedly resulting from their mothers' use of the anti nausea drug Bendectin. After extensive pretrial discovery, Merrell Dow moved for summary judgment because no evidence existed demonstrating Bendectin to be a human teratogen (that is, a substance that causes birth defects). Merrell Dow attached an affidavit by a toxicology expert stating that the scientific literature on Bendectin showed no teratogenic effects. The plaintiffs countered Merrell Dow's expert testimony with expert testimony of their own. Despite the conflicting testimony, the trial court granted summary judgment for Merrell Dow because the methods the plaintiffs' expert employed were not sufficiently established to receive general acceptance; the Ninth Circuit affirmed on appeal.

The Supreme Court held that the enactment of the "more liberal" Federal Rules of Evidence superseded the Frye "general acceptance test," and remanded the case. However, the Daubert Court offered the District Court further guidance. It ventured several "observations" to consider in determining the admissibility of scientific evidence that later courts have adopted as required, namely:

1. whether the methodology can be proven wrong (its falsifiability);
2. whether the method has undergone publication and peer review;
3. the method's known or potential rate of error; and even
4. whether the method enjoys general acceptance.

(Courts are also supposed to determine how well the evidence "fits" the subject matter, but they often enforce this prong less rigorously.)

Heading into the Supreme Court's opinion, there was a clear circuit split as to whether to engage in a full Daubert inquiry during class certification. The Fourth and Ninth Circuits (in Brown v. Nucor Corp. and Dukes) had held that a Daubert inquiry was premature at class certification. The Second, Third, and Seventh Circuits had held that a court should check the qualifications of any experts, including anything up to a full Daubert inquiry.

The Supreme Court declined to address the issue directly. But the majority opinion did strongly hint at how the issue should be resolved:

The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so.

(Internal citation omitted.)

Now, the Eighth Circuit has become the first appellate court to weigh in post-Dukes. And it has decided that the Supreme Court's hint was only a hint.

In re Zurn-Plex Plumbing Products Liability Litigation involved allegedly defective plumbing systems. (The brass fittings used to join pipes were allegedly ""doomed to leak within warranty" because of a phenomenon known as stress corrosion cracking.) The plaintiffs sued for breach of warranty, negligence, and violation of consumer fraud statutes. During the course of the pretrial litigation, the defendants moved to strike the testimony of two plaintiffs' experts. The trial court denied the motions, and then, based in part on those experts' testimony, it certified a Minnesota-only class for the negligence and breach-of-warranty claims.

The defendants appealed, but to no avail. The Eighth Circuit treated the Court's hint as dicta, and decided there was no reason to conduct at full Daubert inquiry at the certification stage. Instead, it held that the trial court's "focused inquiry" was sufficient:

The district court charted a middle course between the positions urged by the parties. After reviewing the evidence that had been produced, the court concluded that a full and conclusive Daubert inquiry would not be necessary or productive at this stage of the litigation, particularly since the expert opinions could change during continued discovery. The court instead conducted a focused Daubert inquiry to assess whether the opinions of Dr. Staehle and Dr. Blischke, based on their areas of expertise and the reliability of their analyses of the available evidence, should be considered in deciding the issues relating to class certification.

What does this mean for defense counsel? It means that the applicability of Daubert to certification proceedings is still a live issue. And that means that we are likely to see more expert evidence of questionable validity used to support certification motions. After all, in a class action, settlement--not trial--is plaintiffs' preferred endgame. And certified classes create "hydraulic pressure" to settle even questionable claims. So long as courts decline to test plaintiffs' expert testimony before certifying a class (particularly where it relates to the common issues in the class), plaintiffs will continue to use questionable testimony to buttress questionable claims.

(Hat tip to Jessie Kamens of BNA for drawing this case to my attention.)

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Richard Nagareda's object in Mass Torts in a World of Settlement, his only book-length theoretical work, was to show how settlements operate in a world in which aggregated litigation is common, and trial almost unheard of.

One of Nagareda's primary observations is that settlements of mass torts are best handled by some administrative apparatus. In the meantime, the legal system is evolving to become more administrative in response to these mass torts.

Nagareda starts from the premise that mass torts deal with "generalized" wrongs. (He argues that this phenomenon arises largely from industrialization, which allows for both wide distribution of products, and large-scale accidents. In other words, mistakes are bigger in the industrialized world.) He also points out that the vast majority of tort claims are resolved by settlement rather than trial, and that the settlement agreement "describes a business transaction." That fact, the transformation of legal controversy into business transaction, explains much about how class-action and mass-tort firms operate.

So, according to Nagareda,

Mass torts accentuate the role of lawyers as agents. As in traditional tort litigation, the endgame for a mass tort dispute is not trial but settlement. But the scope of the settlement differs. Here, the most ambitious settlements seek to make and enforce a grand, all-encompassing peace in the subject area of the litigation as a whole. Lawyers, once again, act as the designers of these deals, and the strategic motivations of lawyers on both sides shape the design of the peace.

(Emphasis added.) On the plaintiff side, entrepreneurial lawyers create the connections among individual mass-tort plaintiffs. As a result, they wind up with the best information about the "price" of the legal claims each plaintiff is asserting. That price is the price the defendant pays for a release from all claims related to the subject matter of the litigation. So the business deal that these lawyers are looking to strike is cash for the plaintiffs (and their lawyers) in exchange for peace from litigation for the defendants.

These transactions take considerable resources to set up. Plaintiffs' firms have to invest considerable resources into demonstrating causation, which they generally separate into "general" and "specific" causation. General causation shows the capability for harm. (There is a link between cigarettes and lung cancer.) Specific causation shows the harm actually occurred. (These cigarettes caused this case of lung cancer.)

But developing a theory of causation--particularly general causation--takes money. Experts need to be paid. So do those people who process the discovery the plaintiffs get from defendant corporations. It also points out that it costs money to recruit clients (which helps explain the rise of plaintiff "referrer" firms).

Moreover, plaintiffs who assume control of mass-tort litigation are asserting control not just against the defendant, but also against other plaintiffs' lawyers and even--to some extent--against the courts. And, if mass torts go on long enough, the endgame for the litigation may not be settlement, but bankruptcy, another administrative-like function of the courts.

So why do plaintiff lawyers spend so much money? Because it pays, richly. As several legal scholars have revealed, the "effective hourly rate" [http://www.manhattan-institute.org/lawyer_barons/index.html] of mass-tort lawyers is usually in the tens of thousands of dollars. (More about Professor Brickman's work next month.) As a result, Nagareda observes, a law firm's investment in litigation does not necessarily track the specific substantive merits of the case. Instead it tends to track the likelihood that a specific litigation will pay off in fees.

On the defendant side, the largest influence on settlement strategy is insurance. So Nagareda spends considerable time on the role of insurance in creating mass tort settlements and, in particular, the phenomenon of "stacking insurance." Stacking insurance means buying primary insurance, then excess insurance. Insurers in turn will buy reinsurance. What all this means is that a number of entities beyond the defendant may have an interest in the final settlement. And many of them have to invest resources in monitoring the progress of the litigation. (This is not always the case. In smaller class actions or mass torts, the defendant may be effectively self-insured.)

Nagareda does address classwide settlements specifically: he considers them good enforcement mechanisms for bought peace. (This is, in fact, how Amchem and Ortiz wound up in front of the Supreme Court; each case involved a court that took legal shortcuts in order to resolve a mass tort through a classwide settlement.) The primary problem with class settlements, however, (as Judge Easterbrook once pointed out) is that there's no chance to go through the "pricing" phase. But what classwide settlements do offer is preclusive effect. If the settlement doesn't prevent further lawsuits, it's not of much value to the defendant. (And this helps to explain the rash of recent cases involving preclusion.)

In general, Nagareda's insights are useful for defense attorneys. The more a defense attorney understands the "business plan" that drives plaintiffs in aggregated litigation, the better equipped she is to defend against it.

Nagareda's book also helps to explain why attempts at true administrative settlements, such as the BP spill fund, are not more successful. The plaintiffs' trial bar has a powerful financial incentive to oppose more administrative settlement mechanisms. Those mechanism may be more efficient, and they may get more money to claimants in less time and with less conflict, but they do so at the expense of attorneys' fees.

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 There is no question that Wal-Mart Stores, Inc. v. Dukes will be the most-cited case in class-action practice for years to come. But before Dukes, Amchem Products, Inc. v. Windsor was the Supreme Court's definitive announcement of its interpretation of Rule 23 standards.

What's interesting about the case is that it involved a class-action settlement. The Windsor (before, Georgine) case was never supposed to be litigated. Instead, it was a settlement class. The proposed settlement class was a response to the asbestos litigation crisis (courts in the 1990s had been swamped by personal injury claims related to asbestosis), and was supposed to "achieve global settlement of current and future asbestos-related claims."

So, after a series of asbestos cases were consolidated, attorneys for both sides began negotiating a global settlement. As the Court described the proposed settlement document:

[I]t proposed to settle, and to preclude nearly all class members from litigating against CCR companies, all claims not filed before January 15, 1993, involving compensation for present and future asbestos-related personal injury or death.An exhaustive document exceeding 100 pages, the stipulation presents in detail an administrative mechanism and a schedule of payments to compensate class members who meet defined asbestos-exposure and medical requirements.

As one might expect, the proposed settlement drew a lot of objections from multiple sources. The objectors challenged the lack of an inflation adjustment (which meant that older claimants would be compensated less), the low compensation levels to many class members, and the inclusion of claims for medical monitoring. They also objected "strenuously" to the adequacy of the class representatives (not surprising, given the vastness of the class and the willingness to throw in just about every claim possible).

Despite the objections, the trial court approved the settlement. The Third Circuit reversed, based solely on the issue of certification. The settling parties appealed to the Supreme Court, which granted certiorari.

Given the number of issues at stake (the parties had sought certification under several provisions of Rule 23), the Court began with a number of definitive statements of class certification requirements. Among them, for Rule 23(b)(1)(A):

Rule 23(b)(1)(A) "takes in cases where the party is obliged by law to treat the members of the class alike (a utility acting toward customers; a government imposing a tax), or where the party must treat all alike as a matter of practical necessity (a riparian owner using water as against downriver owners).

And, for Rule 23(b)(3):

In the 1966 class-action amendments, Rule 23(b)(3), the category at issue here, was "the most adventuresome" innovation. Rule 23(b)(3) added to the complex-litigation arsenal class actions for damages designed to secure judgments binding all class members save those who affirmatively elected to be excluded.

(Internal citations omitted.) The Court noted that plaintiffs (and sometimes defendants) had become more inventive in their uses of the class action device over the years.

"In the decades since the 1966 revision of Rule 23, class-action practice has become ever more "adventuresome" as a means of coping with claims too numerous to secure their "just, speedy, and inexpensive determination" one by one. See Fed. Rule Civ. Proc. 1. The development reflects concerns about the efficient use of court resources and the conservation of funds to compensate claimants who do not line up early in a litigation queue."

The Court also held that settlement status was relevant to certification, but the fact that a case was settling did not mean that a court could ignore all of the Rule 23 requirements. Instead:

Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, see Fed. Rule Civ. Proc. 23(b)(3)(D), for the proposal is that there be no trial. But other specifications of the Rule--those designed to protect absentees by blocking unwarranted or overbroad class definitions--demand undiluted, even heightened, attention in the settlement context. Such attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.

The Court then held that, in this case, the parties had been too adventuresome. On their own, the personal-injury asbestos claims required inquiries into causation for each injury that would predominate over any common issues. And, given the kitchen-sink nature of the claims the parties had included, the individual issues had only compounded. The court also found that the parties could not demonstrate adequacy. As it put it:

The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent.

In this case, ether was a clear, irreconcilable conflict between injured and exposure-only plaintiffs:

In significant respects, the interests of those within the single class are not aligned. Most saliently, for the currently injured, the critical goal is generous immediate payments. That goal tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future.

And, finally, the Court offered a suggestion that has yet to get any real traction:

The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution. And Rule 23, which must be interpreted with fidelity to the Rules Enabling Act and applied with the interests of absent class members in close view, cannot carry the large load CCR, class counsel, and the District Court heaped upon it.

The proposal for an administrative solution to mass-tort claims like asbestos is an interesting one that deserves more discussion. And, in this Thursday's post, we'll look at one academic's efforts to address just that issue.

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 Law professor Geoffrey Hazard is well-known in legal and academic circles as an expert on civil procedure and legal ethics. So when he (with co-author Dana Remus) writes an article on the use of rhetoric in civil litigation, it's well worth reading, even if it never mentions class actions specifically.

The problem that Hazard and Remus set themselves up to address is whether recent ethical lapses by lawyers (including some covered here) can be prevented by stronger ethics rules, or by moving away from the adversarial system of litigation. Hazard and Remus argue that the best solutions to areas where advocacy may have overtaken a search for truth in litigation lie in procedure, rather than ethics.

We therefore reject the suggestion of many critics that the problems of advocacy are properly addressed by reconstituting our legal system. We believe that solutions are better sought in the rules of procedure and evidence and in the law governing lawyers.

In fact, according to Hazard and Remus, there is no "objective truth" in litigation:

The assumption that lawyers, judges, and jurors can access the objective truth of a litigated legal dispute is incorrect and unwarranted. As an initial matter, and as Aristotle explains, uncertainty inheres in any context of “practical knowledge”—any context of human affairs. This uncertainty is heightened in the subset of human relationships that deteriorate into litigation. Litigation signifies that the parties lack a shared understanding of the facts and differ over proper application of the law. The parties may agree on some facts—for example, who owned a particular car, who completed the accounting, or who was formally responsible for compliance measures—but, by definition, they will disagree on others. Similarly, they may agree on some aspects of applicable law but will necessarily disagree on others.

It's certainly true that, given the various cognitive biases human beings exhibit, finding an objective "truth" in a lawsuit may require superhuman effort. But Hazard and Remus go further, arguing that the strength of the adversarial system is that it doesn't focus on a search for truth.

The critics’ approach diverts attention from what we believe to be the proper focus of reform efforts—the extrinsic regulatory controls of procedural rules, rules of evidence, and the law governing lawyers. These controls seek to set the moral risk of the lawyer-advocate’s function at a socially accepted level by counterbalancing economic pressures on lawyer-advocates to engage in questionable or improper conduct. To the extent that lawyers are exhibiting the dishonesty and deceit that critics allege, the current risk level may be too high.

Instead, they argue (as a number of academic have over the years) that the adversarial system works best at resolving questions of fact, even if it's just providing a flawed but final answer to certain questions.

We have defended our system of adversarial advocacy not as capable of discovering objective truth, but as capable of constructing legitimate and authoritatively accepted truth.

In the end, the normative ("should") part of the article is a little weak, focusing on how "good" lawyers are good advocates, and it's just the "bad" ones who give advocacy a bad name. As an old friend of mine used to say, this kind of argument is as effective as defending the jury system by saying "Good juries convict guilty people." But since Hazard and Remus are responding to largely academic criticisms about the American justice system (I assume no one in a position to enact legislation is seriously considering a ground-up reform of litigation), it's probably not entirely fair to criticize them for not offering practical solutions to excessive rhetoric or truth-shading.

Nonetheless, Hazard and Remus offer some interesting observations about how advocacy and rhetoric work in legal argument. And they offer an excellent introduction to how Aristotle's classic Rhetoric applies to modern lawyering.

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 Sometimes, a case will come along that illustrates clearly a number of the different strategic choices that lawyers have to make when defending class actions. In Lightfoot v. District of Columbia, 2011 U.S. Dist. LEXIS 1983 (D.D.C. Jan. 10, 2011), a group of former District employees sued the District of Columbia, "challenging the policies and procedures that the District applied to terminate, suspend, and modify disability compensation benefits." (It appears they were largely represented by students at George Washington University, as well as lawyers from a prominent DC firm working pro bono.) Over the course of a decade of litigation (involving a number of dispositive motions, a certification hearing, and at least one trip to the DC Circuit Court of Appeals), the District of Columbia was able to whittle the case down to a single issue: whether the District had terminated disability benefits without proper notice.

Seven years before the current opinion, the trial court had certified a class of former District employees. It then ordered the parties to compile a list of the class members. The composition of the list (which at times included as many as 5,000 and as few as 500 members) became a large source of disagreement over the intervening five years, sparking discovery fights and at least one change in the class definition to exclude members who would be precluded from recovering by a recently-passed statute.

In 2007, the defendants moved to decertify the class. While the court denied the motion, it did order the parties to come up with a final class list, a process it admitted later "was a tortured one and consumed substantial time and resources of the parties and this Court." Once the list was completed, the plaintiffs filed a motion for summary judgment, which finally provided a clear picture of how they intended to prove their case. At that point, the defendants moved again to decertify the class, arguing that it was not bound together by common issues.

This time, the court agreed with the defendants. While it conceded that commonality was supposed to be a simple inquiry, it said that, in this case the inquiry had been complicated by plaintiffs' "amorphous" common issues. As the court put it:

Plaintiffs ... seek to conflate a wide variety of practices and impute them to the class as a whole by collecting them under a single, unilluminating umbrella of "systemic" failures. That is, lurking behind the rather vague and conclusory statement that Defendants had a "policy and practice of failing to provide members of the Plaintiff class Due Process" lies a wide variety of more discrete and particularized practices that could conceivably serve as the foundation for municipal liability.

...

This is because Plaintiffs have [the commonality inquiry] backwards. The question is not whether a constellation of disparate but equally suspect practices may be distilled from the varying experiences of the class; rather, Plaintiffs must first identify the "policy or custom" they contend violates the dictates of procedural due process and then establish that the "policy or custom" is common to the class.

(Emphasis added, internal citations omitted) There's certainly room to ask whether the district court could have reached some of these conclusions earlier. (And, at least for purposes of commonality, the Supreme Court's Dukes opinion might guide it going forward.) But the more important lesson here is that, if a defendant believes a class was wrongly certified, it makes sense to continue to challenge the certification ruling. Facts become clearer, laws and understandings of facts change.

So what can defendants learn from this case? There are actually three:

First, time is often on the side of the defense. The longer a class action takes, the longer a court has to acclimate itself to the various issues that make the case unworkable; also the more likely that external events (like the passage of a statute) will interfere with plaintiffs' original plan. But playing for time can come with heavy costs. It can involve complying with costly discovery, and engaging in extensive (and expensive) motions practice. Most defendants, particularly in the past few years, would prefer to resolve cases quickly than to wait around for something to happen that might help their case.

Second, motions practice is extremely helpful for class-action defendants. While plaintiffs will often argue that continued motions are designed to stall and harass, Lightfoot shows the real reason they're valuable to defendants: they continually expose the manageability problems in a class proposal that plaintiffs would prefer to gloss over until they've achieved a classwide settlement.

Finally, especially in the wake of Dukes, it is always worth challenging commonality. In the past, few class actions had progressed far enough for courts to see why commonality was an important requirement. But in the past few years, cases like this, Brown v. RJ Reynolds Co., and Dukes have painted vivid examples of the problems that occur when courts do not pay attention to commonality early in.

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 This month's look at "classic" class action scholarship focuses on the article Nonpecuniary Class Action Settlements by Geoffrey Miller and Lori Singer. Like the name suggests, nonpecuniary settlements are settlements that don't require cash payments to the absent class members. According to Miller and Singer, they include:

• Coupon settlements.
• Monitoring settlements, "where the defendant endows a fund whichis used to identify and compensate for future harm allegedly arising from the defendant's product or conduct"
• Securities settlements, "where the defendant distributes stocks, puts, or warrants instead of cash to membersof a class as consideration for a release of claims for alleged wrongdoing"
• Reverter fund settlements, where the defendant may keep any unclaimed funds
• Fluid recovery settlements (also known as cy pres)

(It's interesting to note that Miller and Singer do not consider forms of injunctive relief like "corporate therapeutics," injunctions where the defendant agrees to change its offending behavior. This omission is likely due to the fact that these techniques were not yet in common use in 1997.) According to Miller and Singer, their

goal is to replace some of the recent hysteria about coupon and other nonpecuniary settlements with a more balanced account that identifies the benefits, as well as the costs, of such agreements.

Non-monetary settlements are attractive to defendants because they don't have to spend as much. (The benefit usually costs less--sometimes far less--than its cash equivalent.) They are attractive to plaintiffs because they allow them to place a dollar value on the settlement that is large enough to justify large attorneys' fees. (I don't have to point out that it is extremely rare for a class-action plaintiff to actually run a class action, do I?)

Miller and Singer identify the largest problem with nonpecuniary settlements as one of valuation. From their perspective, that means that both the defendant (who wants to pay less in total) and the plaintiffs' counsel (who wants the largest possible fee) have an incentive to manipulate the valuation of the nonpecuniary elements.

When nonpecuniary settlements are being negotiated instead of cash awards, there is an added level of complexity because the defendant and class counsel have an opportunity to manipulate the valuation of the settlement in order to serve their individual purposes. The problem of sacrificing class recovery for the attorneys' fee becomes exacerbated. Because the fee is typically in cash, the ratio of the fee to the class recovery can be manipulated by exaggerating the value of the nonpecuniary class settlement. Thus the fee may seem a smaller percentage of the class recovery than it is in fact.

These are not necessarily bad things. Defendants would argue--and economic analysis would back up--that a nonpecuniary benefit that costs them little but is worth a great deal to a class member creates wealth. (But let's be clear: not every coupon is going to be worth more to a class member than it cost the defendant.) Plaintiffs' counsel would argue--and some academics would support--that larger fees will deter bad conduct more efficiently than cash to the class. And Miller and Singer argue that when the defendant shares its savings with absent class members (say by providing them with coupons for free-of-charge and free-of-strings products), a nonpecuniary settlement can actually achieve the rarest of goals, creating value for all parties.

Miller and Singer's article came out eight years before the Class Action Fairness Act institutionalized some of the critiques of coupon settlements, making it more difficult to provide that form of nonpecuniary relief. But, as almost any class-action lawyer will admit, nonpecuniary relief remains in high demand among both plaintiffs and defendants. Sometimes it will create value, but often it still results in settlements that draw valid objections.

CATEGORY - Settlement
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Answers don't get much discussion in class-action strategy, because aside from making sure one's responses are accurate, what is there to say? There are only so many ways a party can say "Admit," "Deny," and "Don't know." The one place where the class-action answer can get tricky is in the assertion of affirmative defenses. What, you may be asking, can possibly go wrong there?

Well, take the case of Hofstetter v. Chase Home Finance, 2011 U.S. Dist. LEXIS 65764 (N.D. Cal. Jun. 21, 2011). The litigation involved the defendants' alleged practice of force-placing (buying for the borrower) required flood insurance in California.

Two months after the court certified a class (and eight months after the deadline for amending pleadings had passed), the defendants found out that some of the proposed class members were delinquent on their mortgage accounts, meaning that even if the defendants were liable to them the damages might be offset by the plaintiffs' own legitimate debts. So they sought leave to amend under Rule 15 to add two more affirmative defenses, setoff and recoupment. (For those keeping count, these were the defendants' 44th and 45th affirmative defenses.)

In addition to arguing the standard "Rule 15 allows liberal amendment" (undercut here by the deadline for amendments), the defendants also argued that they could not have included the two affirmative defenses until after certification because, while the defenses applied to some absent class members, they did not apply to the named plaintiff. Judge Alsup (yes, that Judge Alsup) was having none of their argument.

Although these defenses only became applicable after class certification, defendants were aware of the potential class since the complaint was filed. In March 2010, plaintiff filed a class action complaint ... It is inconceivable that defendants did not know that some unnamed members of the class might be delinquent on mortgage payments from the day the complaint was filed.

(Emphases in original.)

The takeaway from this case is pretty simple: assert every affirmative defense that might apply to a class member, even if it has nothing to do with the named plaintiff. There's little downside to doing so, and in a jurisdiction like the Northern District of California, there may be real consequences to not doing so.

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