As I’ve done in past years, this post and the next one will summarize some takeaways I gleaned from this year’s DRI Class Action Seminar.
Impact of Dart Cherokee: Nowell Berreth, who argued this case in the Supreme Court, spoke about this case, which held that a notice of removal is not required to attach evidence. Rather, it’s merely a pleading like a complaint that needs to include a “short and plain statement” of the grounds for removal. The greatest impact of Dart Cherokee has been the Court’s statement about there being no presumption of removal under CAFA. This has been cited by courts of appeals in summarily reversing or vacating decisions granting motions to remand. Even the Ninth Circuit, which was not previously particularly friendly to removals under CAFA, has done this. So this decision seems to have enhanced defendants’ chances of getting remand decisions reviewed on appeal at the court of appeals level, although the Supreme Court’s ruling about its own CAFA jurisdiction may make it more difficult to get a certioriari petition granted if the court of appeals denies review.
Cutting Edge Developments in Class Action Law: Scott Burnett Smith presented on this topic. He highlighted a couple of circuit splits that might be ripe for Supreme Court review. The Third and Fourth Circuits are split on ascertainability, regarding whether the class members have to be actually identifiable at class certification, or whether it’s sufficient to have merely a method for identifying the class. There is also a split between the Seventh, Ninth and Eleventh Circuits on the viability of injunctions of state court proceedings to protect class settlements — the Seventh Circuit has rejected that (with a certiorari petition remaining pending in the Supreme Court), while the Ninth and Eleventh have allowed it. Although it has not receive a lot of attention, the Supreme Court’s decision on personal jurisdiction in Walden v. Fiore, which narrowed the test for specific jurisdiction, is helping some defendants in class actions. The new test focuses on the defendant’s contacts with the forum state, rather than with the plaintiffs.
Judge Posner on Attorneys’ Fees: Judge Richard Posner of the Seventh Circuit spoke about his concerns with plaintiffs’ attorneys’ fees in class actions. His main concern is that class representatives are not typically acting as clients and making any effort to rein in their lawyers’ fee applications. Defendants also may not worry much about how much of what they are paying goes to the class as opposed to the plaintiffs’ attorneys (although I’m not sure that’s correct where the class members are long-term customers of the defendant whom the defendant has a continuing relationship with). Judge Posner sees objectors as part of the solution to this problem. He said that judges should be evaluating how much time was spent by plaintiffs’ counsel and how the work was allocated between them. And where they have agreed to a modest settlement because of a lower likelihood of success on the merits or on class certification, that should result in a lower fee. He also suggested that in some cases it may make sense to defer the award of fees, or part of it, until it is known how many class members have made claims in a claims-made settlement, and how much relief they have obtained. This allows the fee application to be evaluated in connection with the actual relief to the class. Judge Posner also suggested that the only real justification for cy pres relief is punitive, if the class action device is seen as having a deterrent role. He suggested that judges should give little weight to a “clear sailing” provision in a settlement agreement (an agreement by the defendant not to oppose an attorneys’ fee up to a particular amount), and that if there is a good reason for a reversion provision (allowing money not awarded to be returned to the defendant), it should be permitted. Another panelist made an important point about how Rule 23 does not allow an award of attorneys’ fees if there is no statute or contract provision providing for them. In those circumstances, defendants can take a class action to trial without risking an attorneys’ fee award.
Mediation of Class Cases: Former U.S. Magistrate Judge Diane Welsh of JAMS explained how a procedure of doing individual mediations in select cases, with the individual plaintiffs present, was successful in achieving a mass settlement in a mass tort context. In her view, that was more effective than bellweather trials, which have a tendency to lead to more extreme verdicts on either side, which can make settlement more difficult. Individual mediations of the named plaintiffs’ claims and perhaps some putative class members’ claims might be useful in attempting to settle a class action, depending on the circumstances.
Rule 23 Amendments: Members of the subcommittee of the advisory committee considering potential amendments to Rule 23 discussed the status of their work and took comments from the audience. They are working on a proposal (not reflected in the current draft amendments) to encourage “front-loading” of class actions more, with a list of information that should be provided to the judge early in the case, and information that should be presented with a motion for preliminary approval of a class settlement. They are also considering whether to wade into the debate about ascertainability (given the circuit split discussed above). Some consideration is being given to whether objectors should have to qualify in some respect before they are heard. John Parker Sweeney, president of DRI, argued that the committee should address “no injury” class actions, by adding to the rule a provision that a class cannot be certified if the class members’ injuries are different in scope from the named plaintiffs’ injuries. Committee members expressed some skepticism about whether they should wade into that area given that it is currently before the Supreme Court. Michael Pennington spoke against the proposal to allow settlement classes to be certified without predominance, suggesting that might lead to more “strike suits” by plaintiffs’ attorneys. I suggested that the proposed rule provision that would reinstitute a requirement for court approval of settlements with named plaintiffs should not be adopted because it could make settlement of nonmeritorious class actions more difficult, and goes against Smith v. Bayer Corp.‘s holding that putative class members are not parties until a class is certified. With respect to the proposal that “issues classes” not require predominance, I suggested that if the committee were to adopt that, they should at a minimum allow district courts to evaluate whether predominance is required, in part by evaluating whether the case or issue belongs under Rule 23(b)(2) or Rule 23(b)(3). In some cases the parties reasonably dispute which part of the rule applies, or whether the issue is truly a common issue or not. The judge should be able to decide that predominance is required because the issue belongs under (b)(3), or is one on which individual application is necessary. With respect to ascertainability, I suggested that the committee consider including the requirement in the rule (to reflect the nearly universal case law) but not wade into the debate about how precisely to apply the requirement.
Practical Approaches to Defending Class Actions: John Parker Sweeney pointed out how Wal-Mart v. Dukes provides a good roadmap to defending a class action by taking rigorous discovery of the named plaintiffs and perhaps some putative class members as well. Jennifer Quinn-Barabanov made a good point about how, in filing a Daubert motion and setting up your expert to defend one, you want to make sure you are leaving some issues for the merits, not trying to litigate the merits entirely at the class certification stage. She also made a great point about how defendants can search for public records, public information and third-party sources of information about the named plaintiffs and putative class members to develop additional information in defending against class certification.