Earlier this week I attended the ABA’s national webinar entitled “The Future of Class Actions,” part of its Premier Speaker Series. The panelists were Paul Bland of Public Justice, Mark Perry of Gibson Dunn and Judge Lee Rosenthal of the Southern District of Texas. Here is what I found most interesting:
- Paul Bland, the plaintiffs-side member of the panel, argued that Wal-Mart, as an employment case, is distinguishable in many consumer class action contexts. His example was where cases are based on identical contract documents and a common practice by the defendant. That almost describes to a tee what plaintiffs typically argue in seeking to certify insurance class actions, which suggests we may see more focus on insurance. But when you dig into the details, frequently the policy language for the proposed class is not identical and the “common practice” is really nothing more than a guideline with plenty of case-by-case exceptions to it, making the case much more analogous to Wal-Mart.
- There seemed to be a general consensus among the panelists that, post-Wal-Mart, more evidentiary hearings (essentially mini-trials) are being held on class certification in federal courts, and we are likely to see more of that. I think that’s a good thing regardless of which side of the case you’re on, such a hearing tends to focus a busy judge more intently on the evidence on class certification. It also gives class action lawyers more opportunities to conduct evidentiary proceedings, given the very few class actions that go to trial.
- Mark Perry made an interesting point about a sometimes overlooked part of the class action rule requiring that courts certifying a class “must define the class and the class claims, issues, or defenses . . . .” Fed. R. Civ. P. 23(c)(1)(B) (emphasis added). He made the point that under this rule and in light of Wal-Mart, district courts should be carefully examining each element of the plaintiffs’ causes of action and each defense, and determining whether they can be tried on a classwide basis. I thought that was a great point. Some decisions fall into the trap of looking at the issues in the case too broadly without digging into the details of each cause of action and each defense. The need for individual proof of defenses can be critical in defending against class certification.
- Judge Rosenthal pointed out that there is a significant open question after Wal-Mart as to whether a Rule 23(b)(2) class can recover an award of relatively small penalties on each class member’s claim, which, when aggregated, amount to a very large penalty that can potentially cripple a defendant, particularly a smaller company. This is an issue the insurance industry needs to be paying very close attention to because insurance claim-handling statutes sometimes provide for these types of penalties. The Louisiana Supreme Court’s recent decision in Oubre v. Louisiana Citizens Fair Plan, No. 2011-C-0097, 2011 La. LEXIS 3014 (La. Dec. 16, 2011) is a good example of how this type of aggregation of small penalties can result in a huge potential exposure for an insurer (see my recent blog post on Oubre for more). The latest word on Oubre is that the Louisiana Supreme Court denied rehearing and that Louisiana Citizens intends to petition for certiorari in the U.S. Supreme Court, as recently reported on Property Casualty 360. I wouldn’t hold your breath for that petition to be granted, but you never know.
- On AT&T v. Concepcion, Paul Bland took the position that if Concepcion results in enforcement of arbitration provisions barring class action arbitrations even in circumstances where it is not financially viable for an individual to pursue an arbitration (as the Eleventh Circuit has held), then consumer class actions will disappear except in circumstances where there is no contract between the putative class members and the defendant. Mark Perry pointed out that the Consumer Financial Protection Bureau will have the power to bar the use of arbitration clauses by lenders within its jurisdiction, and that the NLRB has recently ruled that it is an unfair labor practice for employers to ban class arbitrations (this is on appeal). They didn’t mention insurance, but, as I’ve noted here before, that is another area where state regulators and state legislatures have power to regulate the use of arbitration provisions (see my August 22, 2011 and December 14, 2011 blog posts for more on this). One risk I see here is that if the insurance industry does not pursue greater use of arbitration post-Concepcion and most other industries do, that could make the insurance industry a more prominent target of the plaintiffs’ class action bar.
- There was an interesting discussion about the Fifth Circuit’s opinion in In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004), a case involving allegations of racial discrimination in the sale and administration of low-value industrial life insurance policies. In a 2-1 decision, the majority reversed a denial of class certification, holding that damages potentially could be obtained under Rule 23(b)(2). The majority accepted the plaintiffs’ argument that damages, although individualized, could be calculated in an across-the-board way through the use of the insurer’s rating practices and data, and thus were proper under Rule 23(b)(2). The court also suggested that, although notice and opt out procedures are not required under Rule 23(b)(2), they can be used in (b)(2) cases, and might be appropriate in that case. Judge Rosenthal suggested that there are open questions as to whether these holdings survive Wal-Mart.