I recommend a recent post by Russell Jackson on his Consumer Class Actions and Mass Torts Blog. He interviews Rob Herrington about a book he recently published on class action defense strategy, which is targeted for business leaders. I’ve bought the book and will offer my thoughts tailored to insurance class actions on my blog after I find the time to read it. Some of you may also be interested in reading it.
Here are a few initial thoughts that occurred to me based on Russell’s interview. The interview comments that:
Too often, however, business leaders are brought into the discussion too late – after a class has been certified or just before a key deposition. At that point, it usually is too late; executives face a Hobson’s choice of paying millions to settle what often seem like dubious cases or risking trial, where exposure may be in hundreds of millions or even billions of dollars.
I don’t see this factual scenario too often in insurance class actions, the business people tend to get involved quite early when this kind of lawsuit is filed. But, as the interview also notes, by the time suit is filed, it may be too late to take any business steps to reduce exposure, at least in that case. The best way to reduce exposure is to identify issues that might give rise to class action exposure well before any suits are filed and take steps to mitigate the exposure. That’s never easy to do, and it looks like Rob Herrington did some research on this and his book offers some insights on how to do that. I look forward to reading about that.
Another interesting comment in the interview was about potential legal reforms pertaining to class actions. Herrington suggested:
First, impose a discovery stay and a heightened pleading standard for putative class actions, similar to the reforms instituted through the Private Securities Litigation Reform Act (PSLRA). In too many cases, plaintiffs’ lawyers use discovery, particularly the enormous costs of e-discovery, to put pressure on defendants to settle. There is no reason to permit plaintiffs to wield that type of weapon until the court is satisfied that the complaint states a cause of action based on facts, rather than speculation and innuendo. Second, permit an immediate appeal of orders granting class certification (rather than just those denying) and permit more robust review by appellate courts. . . . Finally, implement a system that requires plaintiffs to pay for discovery costs up and until the point where they can establish, through evidence, a prima facie case of liability.
I’m not sure we don’t already have both of these as a practical matter in substantial part, at least in federal courts. My reading of the Supreme Court’s decisions in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly is that there is a heightened pleading standard for complex cases, including class actions, and also the Court says discovery should be stayed pending resolution of a motion to dismiss or a motion to strike the class allegations. Most federal district courts seem to agree with that, although not uniformly. Rule 23(f) provides for immediate appeals from decisions granting class certification in federal court, although review is discretionary. Most state courts have such interlocutory appeals as well. So I think we’re pretty far along towards achieving items (1) and (2). Other than mandating an absolute stay as with the PSLRA I’m not sure how much more could be done in federal court. As to the third suggestion, that is such a major change that it seems like a longshot to achieve. Another approach might be to require plaintiffs’ attorneys to pay some portion of the defense costs if class certification is denied.
As an aside, the ABA is currently working on its new Blawg100 list of top law blogs, so for any readers of my blog who think there are blogs worthy of inclusion on that list, such as Russell’s or even mine, feel free to submit the ABA’s electronic nomination form.