Here is part two of my insights from DRI’s 2014 class action seminar held last week:

Halliburton v. Erica P. John Fund DecisionAaron Streett, who  argued the Halliburton v. Erica P. John Fund, Inc. case in the Supreme Court, spoke about the decision.  The Court declined to overrule the efficient market presumption it had previously adopted in securities fraud litigation, but held that defendants are entitled, at the class certification stage, to introduce evidence to rebut that presumption by demonstrating that the alleged misrepresentation did not affect the market price.  This is largely, and perhaps entirely, an issue unique to securities litigation.  Aaron did not expect the decision to have significant impact outside of that narrow context, but noted that it might be a useful decision in other class actions where there is a rebuttable presumption that is part of the cause of action at issue.  The decision also reaffirms that merits issues, where they overlap with class certification issues, must be addressed at the class certification stage.

Constitutional Limits on Class ActionsProfessor Martin Redish of Northwestern University Law School and Tristan Duncan of Shook Hardy & Bacon presented on constitutional limits to class actions.  Prof. Redish stressed that Rule 23 is “not a roving device for doing justice” and cannot alter substantive law.  He strongly rejects the theory that plaintiffs in class actions are acting as private attorneys general or bounty hunters because they do not have that right by virtue of Rule 23.  He noted that there may be viable arguments that class actions violate due process when the manner in which they are conducted alters the substantive law.  There is also an argument that mandatory class actions under Rule 23(b)(1) and (b)(2), where there is no right to opt out, may violate due process rights of absent class members – an issue that has not been aggressively pursued by defendants at the appellate level in many years.   This is a key point to remember, particularly if (b)(2) class actions become more prevalent.  Tristan Duncan also noted that, when a class action is litigated in state court, there may be a viable argument that the state court’s interpretation of state law violates due process (e.g., because a very vague “unfairness” standard is being applied)  or constitutes a judicial taking.  Defendants may want to look for a suitable test case to bring these issues to the Supreme Court and ask it to impose constitutional limits on class actions.  Such a case might involve a “no injury” class action, or one in which the conduct was lawful or permitted or authorized by regulation (later overturned retroactively).

Emerging IssuesJohn Beisner of Skadden presented on emerging issues in class actions.  A hot issue is ascertainability of the class, particularly after the Third Circuit’s decision in Carrera v. Bayer Corp., which is strongly favorable to defendants.  Overbreadth of classes and standing of absent class members is another hot issue.  Beisner also suggested that defendants should argue a lack of typicality where the named plaintiffs have suffered harm but the vast majority of absent class members have not.  Another key point he made was that motions to strike the class allegations are becoming more successful – particularly with respect to unascertainable classes, nationwide classes, personal injury classes and fatally-flawed named plaintiffs.  Defendants may want to be more cautious, however, about when to raise predominance at the motion to strike stage.

Cy Pres:  Professors Hines and Redish and John Beisner also spoke about the use of cy pres in class action settlements.  Significant attention has been given to Chief Justice Roberts’ unusual statement regarding his vote to deny certiorari in Marek v. Lane, a case involving a cy pres settlement by Facebook.  Chief Justice Roberts’ statement noted that the Marek case was not a good vehicle for resolving the fundamental issues involving cy pres settlements because the issue presented was narrow, but that there are important issues the Court may need to address in the future.  Prof. Redish noted that we may see a constitutional Article III attack on some cy pres settlements where money is not reaching consumers or achieving the goals of the substantive law, and courts are essentially playing a role that they are not designed to play, and potentially altering substantive law.  If the courts were to preclude this type of settlement entirely, however, it could make settlements very difficult in class actions in which it is difficult to identify the class or it is not practical to issue individual payments.


Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Wystan Ackerman Wystan Ackerman

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class…

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class actions involving homeowners’ insurance coverage and market conduct/claim-handling practices. He has been prominently involved in high-profile property insurance litigation concerning the September 11th catastrophe and Hurricane Katrina, and Chinese-made drywall. Based in the insurance capital of Hartford, Connecticut, Wystan writes the blog Insurance Class Actions Insider, which was selected by Lexis Nexis as a top insurance blog for 2011.

Wystan grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state. He always had strong interests in history, politics and baseball and his heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox). Wystan says it was his early fascination with Lincoln that drove him to practice law. As a high school senior, he was one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified his interest in law and government. He went on to Bowdoin College, where he wrote for the Bowdoin Orient and majored in government. After Bowdoin, he went on to Columbia Law School. He also interned in the chambers of then-Judge Sonia Sotomayor on the Second Circuit. Wystan graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole.

When Wystan’s not at his desk, flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation he often can be found watching “Dora the Explorer” or reading or playing whiffleball with his young daughter, helping his wife with her business, Option Realty, reading a book about history or politics, or watching the Boston Red Sox.

Read Wystan’s bio.