The DRI Class Action Seminar I attended last week provided a wealth of insights. It was great to meet some readers of this blog there. On the blog I will highlight what I saw as key takeaways and their specific application to the insurance industry. In this first part, I’ll discuss some further insights on the three Supreme Court cases from this term, and the subject of coordination of litigation and regulatory inquiries.
- Wal-Mart v. Dukes (see my prior blog post): Ted Boutrous, who argued Wal-Mart, stressed the importance of the Court’s unanimous rejection of “trial by formula,” where the court rejected the use of statistical modeling to prove classwide damages. The Rules Enabling Act bars the use of Rule 23 to alter substantive rights. I think it is key for insurers to focus on what defenses they would have in individual cases and demonstrate them with examples from the putative class. Boutrous predicted we will see more efforts from plaintiffs to stay in state court, and more mass joinders not brought as class actions but with similar exposure. He said careful attention also should be paid to how Wal-Mart will impact approval of class settlements, which will need to present at least one common issue satisfying the new commonality requirement. It’s also good to see that at least two state courts (in Florida and Michigan) have followed Wal-Mart. See Tire Kingdom, Inc. v. Dishkin, 2011 Fla. App. LEXIS 10550, at *22 (Fla. 3d Dist. Ct. App. July 6, 2011) (following Wal-Mart on commonality); Henry v. Dow Chemical Co., Case No. 03-47775, slip op. (Mich. Cir. Ct., Saginaw County) (refusing to re-certify class).
- Smith v. Bayer Corp. (see my prior blog post): Phil Beck, who argued Smith, said the problem of serial relitigation of class certification likely will have to be solved by Congress. He suggested affirmatively arguing stare decisis in a strong way once courts have repeatedly denied class certification in favor of the defendant on the same issue. Where parallel cases are brought in state and federal court, the defendant might try to implead the state court named plaintiffs into the federal case. I asked about a declaratory judgment action by the defendant against a putative class, seeking final resolution of the class certification issue. He thought that might work but of course has significant risks.
- AT&T v. Concepcion (see my prior blog post): Both Andy Pincus, who argued Concepcion, and Neal Berinhout, lead in-house counsel on the case, spoke at the seminar. They talked about how AT&T designed its consumer-friendly arbitration provision because it was tired of the burden of class actions brought by the plaintiffs’ bar that had little merit but large defense costs, and it wanted to make its customers happy if they had legitimate disputes, and resolve them quickly. There have been relatively few arbitrations because of AT&T’s self-imposed incentive to settle disputes (if they don’t, they can face an arbitration with a significant minimum damage award and double attorneys’ fees). Insurers often have similar motivations to keep their customers happy and resolve disputes quickly, and may want to pursue this, but the regulatory environment and applicable insurance law is more complex – some states limit or prohibit arbitration provisions in insurance policies in some contexts, and there are issues regarding the interplay of the Federal Arbitration Act and the McCarran-Ferguson Act. See Am. Bankers Ins. Co. v. Inman, 436 F.3d 490, 494 (5th Cir. 2006); McKnight v. Chicago Title Ins. Co., 358 F.3d 854, 858 (11th Cir. 2004). To the extent insurers try to implement this, AT&T’s provision is certainly a model that comes with Supreme Court approval, although an insurer may not need to go quite as far as the AT&T provision does in being consumer-friendly, and disputes over insurance claims differ significantly from disputes AT&T has with consumers. While there have been Congressional efforts started to overturn the Concepcion decision, they do not seem to be getting any traction yet, but should be monitored closely.
- Coordination of litigation and regulatory inquiries: Amanda Perez, in-house counsel at Pfizer, talked about how she has addressed situations where Pfizer is faced with an issue that leads to a regulatory inquiry and multiple fronts of litigation at the same time. Insurers are sometimes faced with analogous circumstances where departments of insurance are making inquiries at the same time as class actions and other litigation is pending. She made good points about how critical it is to think about the endgame for the entire issue upfront, and how discovery should be coordinated across multiple suits where possible, so that plaintiffs’ lawyers in multiple suits get only one deposition of company personnel.