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

In years past, when I was a budding class-action nerd at O'Melveny & Myers, I used to look forward to the ABA's annual convention on class actions. While I couldn't go myself (not cost-justified for baby lawyers), John Beisner would always come back and circulate Professor John Coffee's Five-Year Reviews of class action law. I learned a lot about Rule 23 that way--not just the doctrine, but the way that the lawyers were actually using the Rule. Those five-year reviews were an essential guidebook for me as I made my way in an area of law that often seemed like a foreign country.

Fast-forward a few years, and, for various reasons, I haven't felt the same urgency about keeping up with Professor Coffee's reviews. And that was why I was delighted to read fellow blogger Paul Karlsgodt's post linking to the latest one.  I immediately downloaded the new survey (The New Class Action Landscape: Trends & Developments in Class Certification & Related Topics), transferred it to my trust iPad, and sat back to get a guided tour through a country I visit quite often, but from a skilled tour guide.

This year, Professor Coffee was joined by Professor Alexandra Lahav. Unfortunately, the result was far less than ideal. In fact, reading this survey was like joining a tour where the guides spent a great deal of time vaguely lost and telling me what used to be in various locations, while occasionally missing the really great sights they were standing in front of.

Specifically, there were several disturbing issues with this survey of the "New" Class Action Landscape:

• Lots of things in it are hardly "new". Professors Coffee and Lahav spend significant time, for example, in their adequacy discussion focusing on Berger v. Compaq Computer Corp. (82-84), and Judge Posner's opinion in Culver v. City of Milwaukee (97-98).  Neither of these are poor opinions, but both are more more than ten years old: there are law firm partners who have practiced their entire career with these precedents. And Judge Posner alone has produced a host of significant cases about the adequacy requirement since then that the survey simply doesn't mention. Placed next to these old chestnuts, some of the survey's omissions are mystifying: why cite the ten-year-old Culver as a "recent" example of the Seventh Circuit's opinion of incentive payments (97), but ignore the actually recent Espenscheid?
• It gets basic pieces of Rule 23 wrong. For example, the survey contends that an important part of the Rule 23(a)(4) inquiry involves the question of adequacy of counsel. (79) True enough, up until 2003, when Rule 23(g) was introduced as a specific replacement for Rule 23(a)(4)'s inquiry into class counsel. For the first few years after the 2003 amendments, it was understandable that people might confuse this inquiry; Rule 23(g) has now existed for a decade.  There is simply no excuse for getting this wrong.
• It ignores many significant recent cases and trends in class-action litigation. There's no mention of the Supreme Court's decision about loss causation in Halliburton. (A particularly strange omission since the review argues that the 2011-12 Term was heavily pro-defense (176).) There is no mention of Klier v. Elf Atochem (and no discussion of the growing controversy over cy pres relief.) There is no mention of the Ninth Circuit's influential Bluetooth opinion. There is no discussion of Rule 23(c)(1)(B), and its renewed focus on trial plans. Pilgrim v. Universal Healthcard rates a mention in a string cite on predominance (112) ; there is no discussion of how it is the first appellate court opinion to smile on the motion to strike. In other words, while at times our tour guides are focusing on ten-year-old trends that are really just background now, at other times they completely miss those cases that most practitioners have been focusing on. I'm on record as believing that understanding terrain is vitally important; in this case, the errors and omissions have sorely diminished my trust in my guides.

Contrary to what some might think at this point, I really don't like saying that the academics in my area of law are out of touch. I don't want them to be. I want class-action scholars to be much smarter than me, much better-informed, and much faster to spot trends in case law that they can see from their armchairs that I might miss in the trenches. And there are some interesting and informative discussions in here, in particular on burdens of proof (30-33), numerosity (65-68), and typicality (71-75). (Even here, however, the discussion is less a discussion of recent trends, and more just an overview.)

What makes this so frustrating is that Professors Coffee and Lahav are both accomplished class action scholars, who usually do outstanding work. Like I said before, I used to look forward to Professor Coffee's five-year reviews with great anticipation, because I knew I would learn something new. I didn't have to worry about filtering out wrong information, or wading through well-established precedent. Both of these scholars are capable of better than this, and that's exactly what I wish they had made available.

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Mass torts have long been a problem for the American judicial system. Today, it's Vioxx, the BP oil spill, and Chinese drywall. Fifteen years ago, it was asbestos, Agent Orange, and silicone gel breast implants. Back in the 1980s and 1990s, when mass torts first threatened to overwhelm crowded dockets in various jurisdictions, the courts carefully considered whether to use class actions as a means of resolving thousands of similar tort claims.

And, at that time, Columbia University law professor (and recent Daily Show guest) John Coffee wrote an in-depth examination of the various problems and conflicts of interest that arose when courts tried to use Rule 23 to solve the mass tort problem: Class Wars: The Dilemma of the Mass Tort Class Action.

Professor Coffee began by providing an excellent working definition of a mass tort:

Mass tort litigation is characterized by several unique features: (1) a predictable evolutionary cycle during which the value and volume of individual claims starts low and then spirals upward; (2) high case interdependency so that litigated outcomes in any mass tort area quickly impact on the settlement value of other pending cases in that same field; (3) a highly concentrated plaintiffs' bar, in which individual practitioners control exceptionally large inventories of cases, sometimes totaling in the tens of thousands; and (4) a capacity to place logistical pressure on individual courts that is simply unequalled by any other form of civil litigation.

Over time, courts have progressively held that mass torts are not well-suited for class-action treatment, particularly not in the form of "settlement classes" (that is, class actions filed specifically to enforce a pre-existing settlement agreement between plaintiffs and defendants). And Professor Coffee spends much of the article discussing the difficulties that arise from doing so. The portions of his discussion that remain most relevant have to do with the conflicts of interest that arise from aggregated settlements.

On an ethical level, probably the most disquieting phenomenon about recent mass tort settlements has been the acceptance of a single attorney acting as the representative of multiple subclasses of plaintiffs. Not only have the interests of these subclasses clearly conflicted, but the class counsel has explicitly traded off the interests of subclasses against each other, obtaining substantial compensation for one subclass in return for a waiver of cash compensation by anoth- er. In such multiparty negotiations between the defendants and different subclasses of plaintiffs, even the well-meaning plaintiffs' attorney shifts inevitably from the role of an advocate and adviser for clients to the role of a philosopher king, dispensing largess among his client subjects.

While the specific cases may have changed, the fundamental dilemma remains the same, however, whether it is a class action or just a series of consolidated tort cases. Any resolution of mass torts has to accommodate (1) the plaintiffs' desire for redress of some kind, (2) the defendant's desire for global peace, and (3) the plaintiffs' attorneys' desire for fees.

And Professor Coffee discusses a number of issues that still resonate. While the explicit development of "settlement classes" has waned, defendants will still take advantage of filed class actions to try to achieve releases of larger issues through a classwide settlement. And Coffee's descriptions of inventory settlements and settling future claims are both still relevant today.

So what can modern defendants take from this article? The most useful portions have to do with objection-proofing possible settlements:

• Negotiate down attorneys' fees. It makes sense to negotiate on fees more closely than defendants have done in the past. While it doesn't matter as much to the defendant who gets paid (from a fiscal, not emotional, standpoint), courts care. And courts are beginning to eye "clear-sailing" and quick-pay provisions with greater suspicion.
• Try to give the class some cash benefit. Courts have long been suspicious of non-monetary benefits. And they're expressing their concerns more openly.
• Make sure subgroups are separately represented. In a discussion that seems especially prescient today, Professor Coffee notes that "On an ethical level, probably the most disquieting phenomenon about recent mass tort settlements has been the acceptance of a single attorney acting as the representative of multiple subclasses of plaintiffs." A defendant interested in a global settlement of certain complaints could do worse than to insist that subclasses receive separate counsel. (Among other advantages, counsel who are both zealous and ethical can help the defendant reduce payments for true nuisance claims.)

Be advised, the advice to be gleaned from Professor Coffee's article, particularly in light of current settlement case law, doesn't make for easy or cheap class settlements. But as I've said for some time now, for defendants, settling on the cheap can get really expensive.

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Last March, dean of class action scholarship John Coffee Jr. published an article in the Columbia Law Review titled "Litigation Governance: Taking Accountability Seriously." Coffee's argument is that, from a corporate governance perspective, there are two ways to keep an organization's leaders accountable: "exit" and "voice." In other words, judges and legislators can make it easier for shareholders to leave an organization, or they can give them a greater voice in governing it. He then tries to apply those principles to class actions and other forms of collective redress. Specifically, he worries about how the current class-action regime may not really hold plaintiffs' counsel accountable during the course of a lawsuit:

Perhaps more importantly, an intense, low visibility competition has arisen for the coveted position of class counsel because the winner of this competition stands to capture significant rents. This competition has been the underlying cause of recent scandals within the plaintiffs' bar. Although the nature of this competition has recently changed, its latest manifestation - pay-to-play contributions by plaintiffs' law firms to public pension funds - may enable some competitors to undercut the very reforms that Congress established to control class action abuses. The vulnerability of these reforms, it will be argued, flows directly from the class action's special governance rules and reveals the dangers of relying primarily on "voice," rather than "exit."

(Internal footnote omitted.)  Coffee focuses on the "exit" method (which he identifies as opt-outs under Rule 23(b)(3)).  As a result, he spends much of his time analyzing the European model of certifying "opt-in" actions or--as they're sometimes called across the Atlantic--"collective redress." He notes that allowing for opt-in litigation (much like the FLSA collective action) usually does a better job of aligning counsel's interests with their clients', and that technology has made opting in more feasible in large-scale class actions. Given that many class actions generally have very low participation rates, encouraging opt-in classes would, at the very least, reduce exorbitant fees and remove the need for using the increasingly controversial

However, in the process, he also provides a good policy argument for defendants who seek to oppose certification. It's difficult to regulate exit, but courts already have a way to regulate voice that Coffee does not consider: enforcing the adequacy requirement. If courts were stricter about policing the adequacy of the named plaintiff--specifically, her ability to independently oversee her counsel--the plaintiff could potentially do a better job of policing counsel herself. How could courts do this?

• Allow discovery into the nature of plaintiff's relationship with her lawyer. Courts have already deemed family members and close friends to be inadequate class plaintiffs, but they have also allowed a number of close business and personal relationships to go unchallenged.
• Consider whether the lawsuit originated with the lawyer or the plaintiff. Courts frown on lawyers who craft a complaint and then recruit the plaintiff in individual lawsuits. There is little reason to assume that a recruited plaintiff has the independence to oversee her counsel when their interests might conflict with the class's.
• Examine what the plaintiff has done her homework. Courts are clear that plaintiffs do not need to be experts in the subject matter of the lawsuit to be adequate, which makes some sense. A plaintiff in an ERISA suit, for example, need not know the ins and outs of the statute like her lawyers should. But if the plaintiff has not read the complaint, does not keep tabs on the case with counsel, or offers an understanding of the case that contradicts her counsel's, the court has strong evidence that the plaintiff cannot independently oversee counsel.

I'm realistic. I don't expect a revolution in enforcing adequacy. Courts have long known the "open secret" that lawyers make the decisions about class actions instead of their clients.  And the prevalence of pay-to-play practices with large institutional clients in securities actions suggests that some plaintiffs' counsel are determined to co-opt their clients.  Nonetheless many courts gloss over adequacy when the defense raises it. Some of this may be inertia: why upset a system that may provide some rough justice. But some of this is also framing. When challenging adequacy, defense counsel should consider couching their arguments in terms of the ability to oversee counsel, rather than stressing more stringent, hard-to-meet standards like expertise.
 

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