Here is part two of my insights from last week’s DRI class action seminar:
No Injury Classes and Article III Standing: Andrew Pincus, lead counsel in Spokeo, Inc. v. Robins (to be decided by the Supreme Court next Term, see my May 1, 2015 blog post), spoke on this subject. The question presented is whether a federal statute can confer standing on a named plaintiff simply based on a statutory violation where the plaintiff does not suffer any concrete harm. Pincus expects the case will be argued in the first or second week of November. His client is making two alternative arguments — a constitutional argument, and a statutory interpretation argument. The constitutional argument is, of course, that Article III requires a concrete harm, in part because the injury needs to be of the type that was recognized in 1787. Also, a showing of actual harm to the plaintiff is necessary, as a matter of separation of powers, to separate private party suits from government enforcement proceedings. Otherwise, there would be an improper delegation of executive branch power. The alternative argument is that the statute at issue (the Fair Credit Reporting Act) should be interpreted as requiring a concrete harm, to avoid a constitutional problem. This is based on the principle of constitutional avoidance, and the principle that if Congress is going to take a step that interferes with the ordinary constitutional framework, it must do so clearly. If Congress were to allow a statutory violation without a concrete harm, it likely would impose a monetary cap with respect to class actions. Most of this seems likely to have less direct impact on insurance class actions, which generally involve state law and rarely present federal statutory claims. But this decision, to the extent it is on constitutional grounds, would govern standing in federal court in diversity cases, and could also influence state courts that look to federal law in evaluating their own standing.
International Class Actions: This panel explained how most of the world now has class actions, and in many countries they are conducted much differently from U.S. class actions. Some of the procedures sound pretty scary from a defense perspective. In Brazil and most of Latin America, the defendant does not know how the class will be defined, and thus cannot properly evaluate the size of the class or exposure, until after liability is determined! And Brazil’s high court has ruled that all class actions are nationwide! Mexico allows class members to opt into the class up to 18 months after the trial court’s decision on the merits. In Argentina, the defendant has only five days to answer the complaint, produce its evidence and identify witnesses for what amounts to an immediate trial on the merits. And we thought the Eastern District of Virginia was the “rocket docket.” France just started to allow class actions last Fall. They will decide both suitability for class treatment and liability in the “first judgment,” although they have no punitive damages. One of the first class actions filed was against an insurance company (no surprise there). In Canada, generally there is a low threshold for class certification, issue certification is common, and defendants typically have few options at the class certification stage. But defendants win some class actions at trial, and they benefit from a “loser pays” rule with respect to attorneys’ fees (although third-party funding is allowed, allowing plaintiffs’ lawyers to shift the risk), and there are no juries. The class action environment internationally is certainly a factor that should be considered when insurers and other large corporations are considering international mergers.
Media Relations in Class Cases: Jim Moorhead presented on this topic. He noted how plaintiffs’ firms have tended to dominate Google searches regarding particular class actions or “hot” issues in class actions generally. Defendants can pay for ads that counteract that. (And it strikes me that defense lawyer blogging helps somewhat since those blog posts often make the first or second page of Google.) Jim also talked about the importance of a social media presence, another area where plaintiffs’ lawyers tend to dominate. Jim emphasized the importance of establishing the company as a source of timely and accurate information on the issue with a strong initial response that is not legalistic, and not a response that may have to be retracted later. He stressed that a company, when faced with a difficult issue, should take specific actions and steps that demonstrate that it is addressing the issue (e.g., stating publicly that it is assigning certain people to investigate or otherwise handle a matter), and make statements about how the company is committed to doing what is lawful and ethical (and making improvements if appropriate). He said there are ways to do this effectively without creating problems in the litigation. When dealing with investigative reporters, he suggested first trying to understand what the story being worked on is, and providing a short written response tailored to that.
Psychology of Legal Ethics: Kevin Underhill of Shook, Hardy & Bacon LLP presented on this topic. Using Watergate and other examples, one of his main points was that ethics transgressions can arise because of “group think,” i.e., the tendency of individuals working on a team not to want to challenge the leader or the general sentiment or initial thinking of a group. This problem can be avoided with a culture that makes sure everyone is comfortable and encouraged to make their own independent evaluation and raise concerns. Other problems arise as a result of moving too quickly, without taking the time to stop and think things through.