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

 Since the Supreme Court issued its opinion in Smith v. Bayer Corp., comity has become a more important doctrine to the class action world. Bayer, as you may recall, said that the denial of certification does not have a preclusive effect, but suggested that, instead, courts might use the doctrine of comity to reach the same result when plaintiffs' counsel file repetitive class actions in the hope of winning certification in just one.

In the Seventh Circuit, Judge Posner quickly dashed that hope, pointing out that comity is also not a preclusive doctrine, which meant that courts were still free to exercise their discretion to hear copycat class actions.

Now, in Baker v. Home Depot USA, 2013 U.S. Dist. LEXIS 9377 (N.D. Ill. Jan. 24, 2013), a trial court in the Northern District of Illinois has resurrected a little hope that arguing comity may actually work.

Baker involved Home Depot's use of wood treated with Chromium Copper Arsenate (CCA), a substance alleged to contain two known carcinogens. The use of CCA treated wood was discontinued in late 2002--except that the plaintiff alleged Home Depot continued to sell it until the end of 2003.

And, it turns out, various plaintiffs had been filing class actions since 2003 alleging the exact same facts against Home Depot. So Home Depot's counsel filed a motion to dismiss, a motion to strike class allegations (which argued in part that comity required striking the allegations in this case), and a motion for sanctions. The court partially granted the motion to dismiss, denied the motion for sanctions, and granted the motion to strike class allegations. Its reasoning on the motion to strike:

In Smentek, the Seventh Circuit indicated that the denial of class certification in a materially similar case does not have a preclusive effect. However, the Seventh Circuit also indicated with respect to proposed class action litigation that, based upon the principle of comity, courts are required "to pay respectful attention to the decision of another judge in a materially identical case."

Home Depot has shown that the cases it has cited in its motion to strike are materially identical to the instant action. In those cases, the courts found that the named plaintiffs could not satisfy the commonality, typicality, and adequacy requirements of Rule 23(a), that individual issues of fact and law would predominate, and that a class action would not be manageable, nor the superior method for resolving the claims brought. … It is clear that many of the same problems identified by the courts in those cases with respect to class certification are similarly present in this case."

(Emphasis added.)  The takeaway for this case is pretty clear: be persistent. If a class action cannot work, most courts will respect prior opinions that have denied certification. And, of course, take class allegation seriously; you never know when plaintiffs will spend a decade chasing a class theory with obvious flaws.

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Colorado citizen Landis Edwards bought the online quest game Elder Scrolls: Oblivion. He played it, a lot. In fact, he played it until it broke. According to Mr. Edwards, the game suffered from an animation defect that occurred after about 200 hours of gameplay.

So Mr. Edwards sued, on behalf of a class of Colorado residents who had also bought the game. Edwards v. Zenimax Media Inc., No. 12-cv-00411-WYD-KLM, 2012 U.S. Dist. LEXIS 137520 (D. Colo. Sep. 25, 2012). What Mr. Edwards didn't mention was that his lawsuit was a copycat of another class action filed by the same counsel. Walewski v. Zenimax Media Inc., 2012 U.S. Dist. LEXIS 33474, 2012 WL 847236 (M.D. Fla. Mar. 13, 2012). The Middle District of Florida had denied certification in that case because the class was overbroad.

Zenimax moved to strike the class allegations. It argued that, like the previous class, this one was overbroad. (A sensible argument, since the definition was largely the same.) But it also argued that, as a matter of comity, the court should strike the class allegations in this copycat case.

The plaintiff argued against applying the principle of comity, but, citing Smith v. Bayer Co. the court agreed its use was appropriate.

First, the General Allegations in both complaints, including the explanation of the Elder Scrolls Franchise, the Defendants' alleged representations regarding gameplay of Elder Scrolls IV: Oblivion, the allegations concerning the animation defect; and the damages suffered by purchasers are all identical.

Second, in both complaints the facts relating to the named Plaintiffs are substantially similar because both named plaintiffs allege that they viewed Defendants' advertisements and representations regarding Oblivion gameplay, that they were unaware of the Defect, and that they would have altered their decision to purchase Oblivion if they had known. Additionally both plaintiffs claim they experienced the Defect while playing Oblivion, which impeded gameplay progression and now both plaintiffs no longer play Oblivion because of the Defect. Third, the complaints contain nearly identical claims. …

The only difference is that the Edwards complaint addresses all persons or entities residing in Colorado, whereas the Walewski complaint addresses all persons or entities residing in the United States.

…

Given that the complaints and the class definitions in particular are substantially similar, I find the opinion in Walewski to be highly persuasive and relevant to the resolution of the Motion to Strike in this matter.

And, like the Middle District of Florida before it, the court found that the class was too broad to certify:

I find that this definition is inadequate because it is overbroad and includes Colorado residents who presumably purchased Oblivion from anyone, anywhere, at any time regardless of whether he or she was ever injured by or even experienced the alleged Defect. Further, it is not limited to those persons or entities who purchased Oblivion from the Defendants and therefore includes people who purchased a copy of the game--new or used--from anyone else. I also note that even if a class of purchaser presently was ascertainable, sales of Oblivion will continue, rendering an alleged class of "all purchasers" further unascertainable because membership in the class would be in constant flux.

So it denied certification.

What can defendants take from this opinion? Aside from being yet another good explanation of overbroad class definitions, the court also explained why the doctrine of comity--as discussed in Smith v. Bayer Corp.--is not necessarily as useless as the Seventh Circuit may believe.

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 Back in 1990, Kenneth Carter was in an automobile accident with an underinsured motorist, one serious enough to exhaust the other party's limited bodily injury coverage. Carter's policy allowed him to stack coverage, meaning he probably had $150,000 coming to him. But his insurer didn't tell him that, instead allowing him to believe that he only had $50,000 in coverage. So Carter sued his Allstate, his insurer, and made a settlement demand for $250,000. (His counsel represented a few other claimants with similar allegations, and made individual settlement demands of up to $6 million for them.) Allstate tried to remove the case to federal court, but because Carter had joined a local defendant, the case was remanded. After remand, Carter amended his complaint to add class action allegations.

At that point, Allstate removed the lawsuit again under the auspices of the Class Action Fairness Act. And then it moved to strike the class allegations, because it had already faced--and defeated at certification--a class action his lawyers had previously filed alleging similar facts. Allstate did not argue preclusion or comity; instead it made the common-sense argument that the same flaws that had doomed the previous class action were present in Carter's complaint.

At this point, Carter's counsel tried something that probably seemed inspired in the moment: they conceded the motion to strike. They then moved to remand the case again, arguing that the court lacked jurisdiction over Carter's claim for one of four reasons: (1) the amount in controversy was not sufficient; (2) with amendment, his proposed class action was a local controversy because of the claims against the local defendant, (3) the striking of his class allegations should be considered an exception to the "time of removal" rule for jurisdiction, and--requiring particular chutzpah--(4) the striking of his class allegations demonstrated they were frivolous, and therefore his lawsuit was not a real class action for CAFA purposes.

The court, in Carter v. Allstate Ins. Co., 2012 U.S. Dist. LEXIS 117288 (N.D. W. Va. Aug. 21, 2012), rejected each of these arguments. It found that (1) the proposed class action was more expansive than the previous class action that the lawyers had brought in federal court, and therefore would likely meet the $5 million amount in controversy; (2) the defendant claims adjuster had likely not administered every class member's claims, and therefore the claims against her were not a "significant basis" for the class action; and (3) (and (4)) that there was no reason to depart from the normal rule that jurisdiction is determined from the time of removal.

The lesson here is a subtler one than usual. GIven the gantlet they often must run, plaintiffs are often intensely tactical rather than strategic in their thinking. It doesn't matter as much if they have a coherent long-term goal if they can't get past the next motion. (This could be one reason why otherwise-helpful plaintiff's lawyer Max Kennerly always insists that writing kitchen-sink briefs is a good idea.) That can put plaintiffs at a disadvantage against defendants, because unless tactics are part of a larger coherent strategy, it doesn't matter how brilliant they are. At some point, the court's need for a consistent story will catch up with the plaintiffs. And once a party is exposed as acting purely tactically, it lacks the ethos to convince the court in more difficult arguments that may arise. Good strategy is coherent, and that coherency alone will sometimes help one to win.

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 At its height, the mass-tort litigation against Merck for its drug Vioxx received a great deal of press attention. And, when Merck settled with most of the plaintiffs, its decision to only settle with attorneys who were willing to resolve their entire inventory of Vioxx cases generated controversy among the legal commentariat. 

Last week, one set of plaintiffs' lawyers placed an unusual coda onto the Vioxx litigation. They filed a class action challenging the Vioxx settlement, Weeks v. Merck & Co., 2012 U.S. Dist. LEXIS 78954 (E.D. La. Jun. 6, 2012).. (They did so on behalf of a plaintiff who had already unsuccessfully sought to rescind his settlement.) But these new "Vioxx plaintiffs" made a key mistake early in. They defined their class as:

all litigants who had personal-injury actions pending in any jurisdiction of the United States alleging damages as a result of ingestion of Vioxx, subject to the 'all in' provisions of the MSA [who] consented to ... the terms of the MSA for fear of losing their retained counsel.

(Emphasis added.)  Merck moved to strike the class allegations, because the class definition would require an individualized inquiry into each member's state of mind. The court agreed.

ascertaining the class cannot be done by any objective method or without impinging on the merits of any particular class member's claim. In every instance, the Court would have to examine the specific circumstances of a purported class member's attorney-client relationship and individualized decision to enroll in the MSA. Each inquiry would involve whether that particular claimant was coerced, which is a primary factual dispute between the parties ...

The plaintiffs tried to recoup by arguing that the definition fit everyone who had settled with Merck. The court, however, noted that

Plaintiffs' argument simply shifts the inherent subjectivity to the definition of the harm rather than resolving it.

What did it mean by that statement? It meant that determining the legitimacy of an individual litigation settlement was an inherently individualized (and subjective) inquiry. The court noted the issues that would rapidly become enmeshed in this class action when it described the different harms that the plaintiffs had alleged. The plaintiffs claimed that either they had been forced to take bad settlements because of the threat of losing counsel, or they had taken bad deals because they had been advised by attorneys with serious conflicts of interest. But each of these harms would still require some inquiry into state of mind--either the plaintiff's, to establish fear of coercion, or the attorney's, for conflict of interest.

The court's decision revealed an important point to remember about ascertainability. If there are problems with the class definition, it is usually because there are larger problems with the class. Changing the definition will not change the underlying problem.

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 Earlier today, I had the distinct pleasure of presenting at the CLE International Class Action conference in Los Angeles with an old friend of mine, plaintiff's lawyer Garrett Wotkyns of Schneider Wallace.   The topic was The Gauntlet: Early Challenges to Class Certification, which regular readers will know is a topic near and dear to my heart.  (Cue joke about defense lawyers' hearts.)

The slides, which contain only a few in-jokes and as many obscure Clint Eastwood references as we could cram in, are available for download here.  

Many thanks to the nice folks at CLE International for inviting me to talk.  I had a lot of fun.

UPDATE - Broken link is fixed.  My apologies for any inconvenience.

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This week's case is the first known follow-up to the Sixth Circuit's Pilgrim opinion, Rikos v. Proctor & Gamble Co., 2012 U.S. Dist. LEXIS 25104, (S.D. Ohio 2012). In Rikos, the plaintiff sued Proctor & Gamble for allegedly misrepresenting the ability of its product Align to aid in digestion. The plaintiff filed in the Southern District of California, and asserted claims on behalf of a nationwide class.

Proctor & Gamble promptly transferred the case to the Southern District of Ohio. Then it moved to dismiss. (The court granted the motion to dismiss claims for injunctive relief, denied it for the remainder.) After that, Proctor & Gamble strike the class allegations, arguing that the class definition was overboard, and that individual factual and legal issues would predominate over any common issues.. As the court there noted,

Either party may freely move for resolution of the class-certification question at any stage of the proceedings, and the class action allegations may be stricken prior to a motion for class certification where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met.

The court's analysis was straightforward. It held that the plaintiff could not constitutionally apply California law to the entire class. After conducting a choice of law analysis, it found that individual legal issues would predominate in each of the plaintiff's claims.

While it is true that discovery may define the class more precisely, the fact remains that a nationwide class consisting of all purchasers of Align will inevitably include non-California residents who law analysis, individual questions of law will purchased the product outside of California. Accordingly, the Court finds that a nationwide class may not be certified for Plaintiff's claims listed in Count I and Count II of the complaint ...

[Also,] each class member's express warranty claim should be governed by the laws of the jurisdiction in which the transaction took place. Accordingly, individual questions of law predominate"

So Pilgrim is clearly alive and well in the Sixth Circuit. That said, the most important takeaway in this case is that the defense gave a vigorous opposition from the very first. It moved to dismiss. It moved to change venue. And it moved to strike class allegations. Not every motion was successful, but combined, they got rid of a potentially bothersome case before the enormous expense of discovery. These are great ways of keeping costs down, and clients happy.

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 This was a busy year for class-action jurisprudence. Clearly, most of the Supreme Court cases had some effect on class action practice. But the district and appellate courts also rendered a host of rulings this year that significantly affect class-action practice. Despite what a number of academics and plaintiffs' lawyers have claimed, the class action is not dead.  That said, it's probably true, to quote plaintiff's lawyer Daniel Girard, that while the "death of the class action" is overstated, the "Golden Age of the private attorney-general" is over. There were so many interesting opinions in the past year, with so many implications, that it was hard to identify just ten. Consequently, I've cheated a little. The final two entries actually comprise four cases which, taken as pairs, indicate a couple of new trends to watch out for.

1. Wal-Mart Stores Inc. v. Dukes (S. Ct.) - Whether you think it killed the class action or not, Wal-Mart Stores, Inc. v. Dukes (called "Wal-Mart" by some, "Dukes" by others) was the runaway most important case of the year for class-action practitioners. It clarified an ongoing debate about whether Rule 23(b)(2) could be used for money damages (it can't), it finally provided a standard for Rule 23(a)(2) (a common question must have a common answer), and it finally put to bed a common misreading of Eisen that had justified ignoring inconvenient facts when certifying class actions. Those all make it the most significant decision of the year, even before you get to the press hype.
2. AT&T Mobility v. Concepcion (S. Ct.) - Concepcion is the other case that has been accused of killing the class action (sometimes on its own, sometimes in conjunction with Dukes.) It hasn't managed that feat, but it has sent what one plaintiffs' attorney called "a seismic change" through class-action practice. While we're still feeling the aftershocks it's clear that it is now more difficult to bring "creative" consumer claims that are governed by clear purchase contracts; and certain individualized employment disputes are also finding their way into arbitration rather than class actions. And that's before we get into the Supreme Court's discussion of exactly what due process requires from aggregated litigation.
3. Pilgrim v. Universal Health Card, LLC (6th Cir.) - This case, the first appellate opinion to address the motion to strike class allegations at the pleading stage, has made the tactic truly viable. For years, class-action defendants have faced down multi-state classes that they knew from prior experience could not get certified. And yet, because courts were reluctant to rule on the viability of these class actions before discovery, defendants faced long and expensive discovery just to get to a legal issue that required no additional facts. Pilgrim marks the first time that an appellate court has recognized that determining whether variations in state law predominate over other issues does not require discovery, it just requires an analysis of the laws in question.
4. Klier v. Elf Atochem Inc. (5th Cir.) - Thought that cy pres relief was a no-brainer in your class action settlement? Think again. Joined later in the year by the Ninth Circuit's opinion in Nachsin v. AOL, LLC, Klier finally bridles the runaway use of cy pres relief to dress up less valuable class actions. The fact that it also provided a stark critique of the always-problematic medical-monitoring class action was just a bonus.
5. Smith v. Bayer Corp (S. Ct.) - Significant" does not have to mean "pro-defendant." In Smith, the Supreme Court held (abrogating the Seventh Circuit's Thorogood opinion last year) that a defeat at class certification does not preclude another class member from bringing the same class action somewhere else. It based this decision on the eminently logical reason that, until a case has been certified as a class action, it is just an individual plaintiff's case. (That same logic underlies the Seventh Circuit's recent re-affirmation that one can moot a class action before certification.)
6. Erica John Fund v. Halliburton (S. Ct.) - Similarly, securities defendants were perfectly happy with the Fifth Circuit's requirement that a plaintiff demonstrate loss causation when certifying a securities class under a "fraud on the market" theory, even if that requirement could not be found in the text of Rule 23. The Supreme Court, in a short, well-reasoned, and unanimous opinion, definitively closed off that particular line of argument.
7. In re Bluetooth Headsets Products Liability Litigation (9th Cir.) - The Ninth Circuit's rejection of a problematic class-action settlement (the class got nothing, the attorneys got $850,000) imposed a common-sense "proportionality" requirement on class counsel fees, recognized that segregation of the fee request from the rest of the settlement does not eliminate perverse incentives for class counsel, and required a cross-check for lodestar-based fees.
8. Judge Alsup's Class Settlement Checklist - Judge Alsup has handled a number of class actions in his few years on the bench. And this was the year that he developed a standing order that lays out what he expects from any classwide settlement, before negotiations may even have begun. It's an outstanding idea, and it provides excellent guidance to plaintiffs and defendants about what they can and can't accomplish in a settlement in his court. While I may not agree with all of his analysis, I can't fault his attempt to create certainty in the negotiation process.
9. In re Aqua Dots Products Liability Litigation (7th Cir.) & Pipefitters Local 636 Insurance Fund v. Blue Cross Blue Shield of Michigan (6th Cir.) - The Sixth and Seventh Circuits both faced the question of how to handle class actions that, while they might benefit the plaintiff and the plaintiffs' lawyers, would do no one else any good. Judge Easterbrook of the Seventh Circuit pointed out that while it is logical to say that a class action duplicating a voluntary recall is not a good idea, it doesn't exactly fall under the text of superiority. So instead, he held that a plaintiff who brings a redundant class action is inadequate. The Sixth Circuit, faced with a class action that might benefit the class but would in the process hurt other citizens of Michigan, simply held it not superior to other methods of resolving the controversy (including individual lawsuits).
10. CE Design v. King Architectural Metals (7th Cir.) & Creative Montessori Learning Centers v. Ashford Gear LLC (7th Cir.) - In a pair of opinions this year, Judge Posner seemed single-handedly determined to restore integrity to the class action. In CE Design, he held that a named plaintiff who has credibility problems cannot serve as an adequate class representative. In Creative Montessori, he held that class counsel who have engaged in deceptive methods to prosecute their class action are not adequate class counsel. The message behind these two cases seems clear: everyone in a class action is expected to be on the up-and-up, not just the defendants.

In making this list, I had to leave off a number of significant developments in class action practice. Taco Bell tried a risky but successful PR strategy this year. The Second Circuit held that subclasses might require their own counsel. The federal appellate courts have split--even after Dukes--on how to treat expert testimony. 2011 was an interesting time for class actions. Perhaps uniquely so. It will be interesting to see how each of these developments shakes out in 2012.

[Note - edited after publication to fix a formatting error and an unfinished sentence.]

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Last week, the Sixth Circuit affirmed a trial court's decision striking class allegations where a proposed nationwide class would necessarily invoke the laws of fifty different jurisdictions. (Russell Jackson has an excellent writeup of the opinion here.) There is no question the opinion is a useful one for defendants. And, since it's the first appellate opinion on a motion to strike in decades, it may be time for an overview of where the motion to strike class allegations stands today.

In the past year, a large number of motions to strike have been filed. (I count at least 25 reported opinions on early challenges to the certifiability of classes.) How have those motions turned out?
Ten of those opinions denied the motion to strike outright as premature, without further analysis.

• Clerkin v. Mylife.com, Inc., 2011 U.S. Dist. LEXIS 96735 (N.D. Cal. 2011) ("Defendants fail to identify any authority permitting the use of a motion to dismiss for failure to state a claim to contest the suitability of class certification.").
• Eliason v. Gentek Building Prods., Inc., 2011 U.S. Dist. LEXIS 94032, *7 (N.D. Ohio Aug. 23, 2011) ("While raising possibly valid concerns, Defendants' arguments on class certification are premature. Whether the commonality requirement has been demonstrated cannot be determined until discovery has taken place and choice of law provisions applied.").
• Garcia v Lane Bryant, Inc., 2011 U.S. Dist. LEXIS 125484 (E.D. Cal. Oct. 31, 2011). (Grants motion to dismiss, denies MTS because "Although Defendants' motion is unopposed, dismissal of Plaintiffs' class allegations at this stage of the proceeding is premature. Although class allegations may be wholly insufficient[,] compliance with Rule 23 is not to be tested by a motion to dismiss for failure to state a claim.") (internal quotations omitted).
• Ginardi v. Frontier Gas Servs, LLC, 2011 U.S. Dist. LEXIS 89504, *11-12 (E.D. Ark. Aug. 10, 2011) ("Plaintiffs are correct that it is premature to strike the class action allegation.").
• Kas v. Mercedes-Benz USA, LLC, 2011 U.S. Dist. LEXIS 127581 (C.D. Cal. Oct. 31, 2011) ("Nevertheless, we will defer final decision pending a more robust briefing at the class certification stage.").
• Martin v. Ford Motor Co., 765 F. Supp. 2d 673 (E.D. Pa. 2011) ("Since the Motion to Strike filed by Defendant is premature, the merits of this argument will not be addressed at this stage of the case.").
• P.V. v. School Dist. of Philadelphia, 2011 U.S. Dist. LEXIS 125370 (E.D. Pa. Oct. 31, 2011) ("unless the parties have completed discovery and at least one party has moved for class certification, a court very rarely has the information necessary to conduct the 'rigorous analysis' inherent in the class certification decision.").
• Rivellio v. Penn State Fed. Credit Union, 2011 U.S. Dist. LEXIS 99668 (M.D. Pa. Sep. 6, 2011) ("The Court is not convinced that this case is one of the "rare few where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met."").
• Rogers v. Capital One Servs., LLC, 2011 U.S. Dist. LEXIS 17064 (D. Conn. Feb. 19, 2011) ("a defendant may move to strike class allegations prior to class certification proceedings "if the inquiry would not mirror the class certification inquiry and if resolution of the motion is clear."").
• Vlachos v. Tobyhanna Army Depot Fed. Credit Union, 2011 U.S. Dist. LEXIS 69725 (M.D. Pa. Jun. 29, 2011) ("The Court will not address the merits of the argument because the motion to strike is premature at this stage, as the plaintiff has not yet moved for class certification.").

Three denied motions to strike on their merits, usually because the plaintiff had made sufficient allegations to support a class action.

• Alegations of commonality - NBL Flooring, Inc. v. Trumball Ins. Co., 2011 U.S. Dist. LEXIS 110518 (E.D. Pa. Sep. 27, 2011) ("These allegations speak to a blanket course of conduct that may apply to all insureds.").
• Denies because of plausible allegations - Perrin v. Papa John's Int'l, Inc., 2011 U.S. Dist. LEXIS 22957, *18-19 (E.D. Mo. Mar. 8, 2011) (""Plaintiff may or may not succeed in proving his claims with respect to other drivers, but at this stage of the case he has set forth sufficient facts to support a plausible allegation of an under-reimbursement [*19] large enough to support a claim that Defendants did not reasonably approximate the delivery drivers' expenses."")
• Plaintiff had standing - Ralston v. Mortg. Inv. Group, Inc., 2011 U.S. Dist. LEXIS 102945 (N.D. Cal. Sep. 12, 2011) ("The fact that some class members purchased their loans from originators other than MIG does not deprive Ralston of standing to assert claims on their behalf").

Two denied motions to strike as moot, since the courts granted concurrent motions that disposed of the case.

• Eldee-K Rental Props., LLC v. DirecTV, Inc., 2011 U.S. Dist. LEXIS 132981 (N.D. Cal. Nov. 17, 2011). Court granted concurrent motion to dismiss.
• Ass'n of N.J. Chiropractors v Aetna, Inc., 2011 U.S. Dist. LEXIS 67718 (D.N.J. Jun. 20, 2011). Denies as Court granted concurrent motion to compel arbitration.

And finally, the remainder of the courts have granted motions to strike. And they have done so for various reasons. Among them, they have ruled that

The class was not ascertainable.

• Bradley v. Mason, 2011 U.S. Dist. LEXIS 64877 (N.D. Ohio Jun. 20, 2011) ("First, the existence of the class must be pleaded and the limits of the class must be defined with some specificity.").
• Bauer v. Dean Morris, L.L.P., 2011 U.S. Dist. LEXIS 100399 (E.D. La. Sep. 7, 2011) - struck class allegations where merits-based class definition
• Schilling v. Kenton County, 2011 U.S. Dist. LEXIS 8050 (E.D. Ky. Jan. 27, 2011) ("Plaintiffs' proposed class definition is fatally flawed because the Court cannot determine its individual members without reviewing the evidence relative to each KCDC inmates' incarceration, which would amount to a merits-based inquiry of each individual's claim.").

Variations in state law precluded certifiable class.

• Pilgrim v. Universal Health Card, LLC, 2011 U.S. App. LEXIS 22715, *4 (6th Cir. 2011) ("the district court held, because each class member's claim would be governed by the law of the State in which he made the challenged purchase, and the differences between the consumer-protection laws of the many affected States would cast a long shadow over any common issues of fact plaintiffs might establish. That judgment is sound and far from an abuse of discretion …"). 
• Plaisance v. Bayer Corp., 275 F.R.D. 270 (S.D. Ill. 2011) [] ("In the instant case, defendants have identified numerous facial deficiencies in the class allegations; no amount of time or discovery can cure these deficiencies.").

From the pleadings, the class lacked commonality

• *Schilling v. Kenton County, 2011 U.S. Dist. LEXIS 8050 (E.D. Ky. Jan. 27, 2011) ("to resolve the legal issue presented the Court must delve into the specific facts of each inmate's incarceration and the medical needs relative to that inmate.")

From the pleadings, the class lacked typicality

• Schilling v. Kenton County, 2011 U.S. Dist. LEXIS 8050 (E.D. Ky. Jan. 27, 2011) ("The Sixth Circuit has held that where the plaintiffs' claims depends on each individual's unique interactions with the defendant, the typicality requirement is lacking. That is certainly the case here.") (internal citation omitted).
• Wright v. Family Dollar, Inc., 2010 U.S. Dist. LEXIS 126643 (N.D. Ill. Nov. 30, 2010) ("These defenses, unique as to plaintiff and any other manager in the putative class, prevent plaintiff from establishing typicality and therefore from showing that she will be able to maintain a class action.").

From the pleadings, the class lacked adequacy.

• Wright v. Family Dollar, Inc., 2010 U.S. Dist. LEXIS 126643 (N.D. Ill. Nov. 30, 2010) ("it is clear from the complaint that the putative class is permeated by conflicts of interest").

From the pleadings, the class lacked predominance.

• Bauer v. Dean Morris, L.L.P., 2011 U.S. Dist. LEXIS 100399 (E.D. La. Sep. 7, 2011) - (struck class allegations where individual issues concerning liability, affirmative defenses, and damages apparent from pleadings).
• Bevrotte v. Caesars Ent. Corp, 2011 U.S. Dist. LEXIS 114463 (E.D. La. Oct. 4, 2011) (individual issues of causation and damages would predominate; class not superior to individual litigation).

So, what can defense counsel take from this? First, the trend on motions to strike is becoming more favorable. More courts are willing to entertain these motions on their merits. (You may notice the majority of the denials come from only a few jurisdictions.) And the first appellate court to decide this issue has (correctly, I would argue) found that if the issue is a purely legal one or can be decided from the pleadings, then there is no reason to rule on it sooner rather than later.

Second, those courts that are granting motions to strike are granting them on various grounds. This is also good news, as it provides defendants with precedent for further motions to strike.

And finally, at least if one credits the opinions in Pilgirm and Plaisance, most plaintiffs don't seem to have any strong counter-arguments to a well-argued motion to strike. The best they can argue is that the motion is premature, and discovery is necessary for a rigorous analysis. And, in certain cases, that will be true. But in many more--like when plaintiffs propose nationwide classes that require applying the laws of fifty different states--there will be no discovery that will change the analysis a court must engage in.

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My regular Tuesday post will be up tomorrow (Classic Cases - looking at Kirkpatrick v. JC Bradford Co.).  But Russell Jackson has an excellent writeup of a recent Sixth Circuit opinion that affirms a motion to strike class allegations based on state law variations.  

Go.  Read.  

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Readers of this blog know that I've been an early (and ardent) advocate of challenging poorly-conceived class actions as early as possible. And, during the last three to four years, the motion to strike class allegations has (with good reason) become a popular tactic among defense counsel. And, several months ago, we got one of the best examples of how well a good motion to strike can succeed, in Plaisance v. Bayer Corp., 2011 U.S. Dist. LEXIS 47795 (S.D. Ill. 2011).

In Plaisance, the plaintiff sued Bayer Corp., alleging that various people who had used the birth control Yaz or Yasmin had suffered from various "adverse cardiovascular events" (heart or blood problems). In the complaint, the plaintiff asserted claims for fraud, breach of warranty, and negligence, and sought certification of a nationwide "personal injury" class--a difficult proposal at the best of times, since personal injuries tend to vary widely from person to person, not to mention the fact that teasing out the cause of various personal injuries can also require a series of very detailed individualized inquiries.

Rather than wait until after lengthy (and expensive) discovery and motions practice to raise these points, Bayer moved to strike the class allegations. The plaintiff argued that Bayer's motion was premature, but she also responded substantively to its arguments.

The court, in a particularly thoughtful opinion, held that the motion to strike in this case was not premature:

In the instant case, defendants have identified numerous facial deficiencies in the class allegations; no amount of time or discovery can cure these deficiencies. Plaintiff's argument with regard to the filing of additional class actions in other states is unavailing for the same reason. After reviewing the parties' briefs and the allegations in the first amended complaint, it is obvious from the pleadings that no class action can be maintained. Accordingly, the Court properly proceeds with its ruling on defendants' motion to strike or dismiss plaintiff's class allegations. See Rule 23(c)(1)(A) (providing that the court, "[a]t an early practicable time ..., must determine by order whether to certify the action as a class action"); Rule 23(d)(1)(D) ("In conducting an action under this rule, the court may issue orders that ... require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly.").

(Emphases added.)  The court found two different facial problems with plaintiffs' proposed class action. First, the plaintiff's proposed class would require applying the disparate legal rules of fifty different jurisdictions.

In the instant case, under applicable choice of law rules, the merits of the putative class members' claims would be governed by the substantive law of each class member's home state. Accordingly, the laws of all fifty states plus the District of Columbia would be applicable to the putative nationwide class members' claims. Amongst the states, there are differences in the law of product liability as well as in the applicable theories of recovery and their subsidiary concepts. These differences, even if slight, are not insignificant. Indeed, "such differences have led [the Seventh Circuit] to hold that other warranty, fraud, or products-liability suits may not proceed as nationwide classes").

(Internal citations omitted.) As a result, the court held that the plaintiff could not maintain a nationwide class action based on her claims, because there was no way to reconcile the conflicting state laws. (The plaintiff did try to sidestep the problem by subclassing, but faced the additional obstacle that she did not have 49 other class representatives waiting in the wings.) This particular ruling makes a great deal of sense. There is no reason a court has to go beyond the pleadings to determine which states' laws will apply to plaintiffs' claims, or whether variations in state laws would preclude a nationwide class. There's no question a state-law variations analysis takes work, but there's no reason why that work had to wait until after discovery.

The court also that the complaint indicated a number of individualized factual inquiries would be necessary:

In the instant case, almost every element of the asserted claims will require highly individualized factual inquiries unique not only to each class member but also to each class member's prescribing physician. For example, as defendants' brief highlights, establishing causation will require (1) an examination of each class member's medical history, including pre-existing conditions and use of other medications; (2) an evaluation of potential alternate causes for the alleged injury; and (3) an assessment of individualized issues pertaining to each class member's prescriber, including how the doctor balances the risks and benefits of the medicine for that particular patient, the particular doctor's prescribing practices, the doctor's knowledge about the subject drug, and the doctor's sources of information with regard to the subject drug.

As the court pointed out, this didn't even begin to address the individualized reliance issues that come up in many fraud claims. But, given the elements of the plaintiff's causes of action, there was no way around these particular individualized inquiries.

Given these various problems with plaintiff's proposed class, the court granted Bayer's motion to strike. What can defense counsel learn from this? Challenge bad class complaints early. Bayer had some great natural advantages; among other things, there is a long paper trail establishing how difficult it is to bring classwide personal injury claims. But so long as the defects that a motion to strike challenges are purely legal (such as the variations in different states' laws), there is no reason why a defendant should have to wait until after a lengthy, expensive, and possibly unnecessary discovery period to challenge them.  

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Paul Karlsgodt over at ClassActionBlawg.com has an outstanding post up that outlines his thinking on when (and how) a defendant should challenge the certifiability of a class.  He explicitly recognizes that 

[T]here is also an art to defending class actions, and part of the art is in knowing whether to challenge class certification at each available opportunity. Of course, because this is about the art and not the science, there is no single answer to this question, but below I have tried to sketch out some of the possible considerations in making the decision to use various different procedural devices at different phases of the litigation.

(Emphasis in orginal.)  The general advice that follows is a very helpful summary of the different opportunities to challenge the certification of a class.  

I'd quibble with only two aspects of his post: (1) Paul and I have slightly differing opinions on the usefulness of the motion to strike class allegations.  (2)  I would really have liked to see his take on whether to file a motion to deny certification (a rare, but increasingly useful strategic option).  

But these are quibbles.  What Paul has done here is what co-author Brian Anderson and I were aiming at with The Class Action Playbook: he's given an excellent summary of each opportunity to challenge a class, and set out his views of the risks and benefits to each challenge.  

Go, read it for yourself.  I assure you, it's time well-spent.  

[Dislcosure: Paul gave this blog an early boost, and provided a very nice review of the Playbook.]

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 I've written before about the the growing defense tactic of filing early challenges to class certification. Last week, Law360 reporter Leigh Kamping-Carder reported on the trend. (Subscription required.) While she interviews a plaintiff's attorney (who wonders if everyone went to the same seminar), the most interesting part is the interviews with defense attorneys about the strategic concerns involved in filing a motion to strike. 

"If you can resolve class issues before conducting discovery, that's tremendously advantageous to a defendant,' [Dykma Gossett PLLC attorney J. Kevin] Snyder said. "As a defense lawyer doing mostly defensive class actions, you're always looking for ways to save your clients money," he added.

On the other hand, the lawyers Kamping-Carder interviews also express concern about the disadvantages to moving early. Leaving aside the mixed success rate with motions to strike, they worry about what happens if the court denies the motion:

"Then you've basically just given the plaintiffs a road map of what you're going to say," as well as a month to take discovery to oppose your best arguments," [Venable LLP partner Daniel B.] Chammas said.

If the motion backfires and defendants lose, they have a court on record holding that the case should proceed as a class action, [Mannatt Phelps & Philips attorney Brad W.] Selling said."

In general, I would say that excessive caution about motions to strike class allegations is not necessary. If the defendant frames it properly, as a challenge to flaws that are apparent on the face of the complaint , then the effect of a denial are the same as a denial of a motion to dismiss. The defendant will not have given away its strongest fact-based arguments, and a denial of arguments based on plaintiff's allegations is not likely to hold that the plaintiff is entitled to certification as a matter of law. At the same time, the motion to strike gives the defendant a chance to prime the court to think about the difficulties involved in certifying a class. Like all of these lawyers advised, one should only move to strike class allegations when one has strong arguments; but assuming the defendant has not asserted weak arguments, the benefits of moving to strike class allegations largely outweigh the risks.

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 When a defendant is faced with a class action complaint, sometimes the best strategy appears to be to settle quickly, before having to engage in costly litigation or burdensome discovery. But, as readers of this blog know, that strategy is not always as straightforward as it first seems.  In today's case, we have another example, where what first appeared to be a quick-and-painless settlement wound up taking eight years and visiting the Seventh Circuit Court of Appeals three times.

In 2000, a group of class-action plaintiffs sued Fleet Mortgage claiming that it had sold their personal information to telemarketers, in violation of the Fair Credit Reporting Act (FCRA) and various state consumer-fraud acts. Mirfasihi originally brought suit on behalf of two classes, one of people whose information was shared, and one of people who actually bought something from the telemarketers.

Fleet Mortgage negotiated a settlement of the entire case, which the trial court approved. But, based on the appeal of some objectors, the Seventh Circuit reversed, because the settlement had released the claims of the "information sharing" class without giving them anything in return. After the case was remanded, the parties negotiated a second settlement, with a heavy cy pres component. (The court found cy pres appropriate because the information sharing class's claims were not worth much, if at all.) This settlement drew objections as well, and the Seventh Circuit again reversed and remanded, this time because the lower court had not "made an adequate effort to value the claims of the information-sharing class." On this second remand, the trial court found--after an extensive survey of the various state consumer-protection laws at issue--that the information-sharing claims had no value at all. The objectors appealed again, arguing that the information-sharing claims might be worth as much as a billion dollars, and that their lawyers deserved far more than the $18,750 fee they had received.

This time, the Seventh Circuit pulled no punches. Writing for the panel, Judge Posner first affirmed that the claims of the information-sharing class were worthless. Then, he proceeded to explain the primary dilemma that meritless class actions pose to all parties:

"We are disheartened that the litigation by the information-sharing class has been allowed to drag on for eight years, when it had no merit—and that as a matter of law, without need to take evidence. It is an example of the typical pathology of class action litigation, which is riven with conflicts of interest, as we discussed recently in Thorogood v. Sears, Roebuck & Co., supra, 547 F.3d at 744-46. The lawyers for the class could not concede the utter worthlessness of their claim because they wanted an award of attorneys' fees. The lawyers for Fleet were reluctant to argue the utter worthlessness of the claim because they were able to negotiate a settlement that cost their client virtually nothing—provided they did not take such a strong stand that it jeopardized the class lawyers' shot at a generous award of attorneys' fees, and hence the settlement. And the objectors were motivated to exaggerate the value of the claim of the information-sharing class so that they could get a generous award of attorneys' fees. At the very outset of the case, before certifying the class, the district court should have required the parties to present the belatedly presented survey of the consumer protection laws of the 50 states, plus argument concerning the scope of the Fair Credit Reporting Act, to demonstrate the existence of a colorable claim."

Class-action defense lawyers can learn several lessons from this opinion. First, early challenges to cases may be preferable to settlements, if for no other reason than they can test the merit of questionable claims. Second, certain classwide issues--like the feasibility of a nationwide class based on state law--do not have to wait until class discovery has been completed. And finally, if the plaintiffs don't watch out for the interests of the absent class members, then the defendant may have to; not doing so may cost the defendant years and tens of thousands of dollars in appeals. As I've said before, sometimes, settling on the cheap can be a very expensive strategy.
 

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

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

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

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

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

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

As for too narrow:

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

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

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

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

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A little more than six months ago, when I first began this blog, I posted about a tactic that was growing in popularity: filing a motion to deny certification rather than waiting for the plaintiff to file a motion to certify a class.  Which raises the question, when is a motion to deny certification appropriate? Should it be filed after discovery? Or can it be filed earlier?

It really depends on the nature of the arguments the defendant will advance. If the class complaint contains legal flaws in the class, it may be possible to file a motion to strike the class allegations, essentially a rule 12(b)(6) motion to deny certification.

Take the case of John v. National Security Fire & Casualty Co. John was a class action in which the plaintiffs sued their insurance company for systematically under-paying their claims for damages in Hurricane Rita. (The plaintiffs alleged that the insurance company did not account for inflation in the costs of building materials.) The defendant filed a motion to dismiss and to strike the class allegations. Because it found that the class definition was not ascertainable, the court struck the class allegations.

The plaintiffs filed an interlocutory appeal, but the Fifth Circuit upheld the decision, holding:

Where it is facially apparent from the pleadings that there is no ascertainable class, a district court may dismiss the class allegation on the pleadings.

In other words, it is possible to file an early challenge to a class action, provided—like a Rule 12(b)(6) motion to dismiss—the flaws are apparent on the face of the complaint.

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