Presented on June 13, 2013, at the 2013 Carlton Fields Class Action Forum in New York, NY. Download the full Class Action Survey at http://classactionsurvey.com/. "The 'Rigorous Analysis' Overlay On Current Class Action Jurisprudence" by D. Matthew Allen. "Class Action Waivers: The World From Concepcion to Oxford" by M. Derek Harris. "Other Recent Hot Topics in Class Action Jurisprudence – Removal, Coupon Settlements and Cy Pres Awards" by Amanda Arnold Sansone.
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1. Class Action JurisprudenceD. Matthew AllenM. Derek
HarrisAmanda Arnold Sansone
2. The Rigorous AnalysisOverlay On Current ClassAction
JurisprudenceD. Matthew Allen2
3. Rule 23(a) Requirements Numerosity - the class is so
numerous thatjoinder of all members is impracticable. and
Commonality there are questions of law or factcommon to the class.
and Typicality the claims of the representativeparties are typical
of the claims of the class. and Adequacy the representative parties
will fairlyand adequately protect the interests of the class.3
4. Rule 23(b) Requirements Rule 23(b)(1)(A) separate actions
will create incompatiblestandards for the defendant. OR Rule
23(b)(1)(B) limited fund; individual adjudication
wouldsubstantially impair the interests of other parties. OR Rule
23(b)(2) injunctive/declaratory relief; the defendant hasacted or
refused to act on grounds that apply generally to theclass. OR Rule
23(b)(3) damages class; common questionspredominate and class
action relief is superior to alternatives.4
5. Four Phases of Class Actions Phase 1: The Innovative Phase
(1966-early 1970s) Phase 2: The Realistic Phase (mid-1970sto early
1980s) Phase 3: The Formalistic Phase (early1980s to 1995) Phase 4:
The Rigorous Analysis Phase(1995 to present)5
6. Phase 1: Innovative Phase 1966 to early 1970s Judicial
positive outlook toward the classdevice as: Exciting and innovative
tool to efficientlymanage and resolve complex cases Empowering
courts to do social justice6
7. Judicial Attitudes InThe Innovative Phase The complete
overhaul of Rule 23 significantlyexpands the scope of class actions
... [T]he districtcourt unhampered by traditional classifications
isgiven a large measure of discretion in balancingconflicting
interests. Siegel v. Chicken Delight The social desirability of
consumer class actionswas to insure that a David plaintiff has a
Goliathcapability against the Goliath propensities of hisadversary.
Katz v. Carte Blanche Corp. (3d Cir.;Aldisert, J.
dissenting).7
8. Judicial Attitudes InThe Innovative Phase Class actions
serve an important function inour judicial system. By establishing
atechnique whereby the claims of manyindividuals can be resolved at
the sametime, the class suit both eliminates thepossibility of
repetitious litigation andprovides small claimants with a method
ofobtaining redress for claims which wouldotherwise be too small to
warrant individuallitigation. Eisen v. Carlisle & Jacquelin
(2dCir. 1974)8
9. The Innovative Phase Any device which is workable only
because it utilizesthe threat of unmanageable and expensive
litigation tocompel settlement is not a rule of procedure it is
aform of legalized blackmail. If defendants whomaintain their
innocence have no practical alternativebut to settle, they have
been de facto deprived of theirconstitutional right to a trial on
the merits. Thedistinctions between innocent and guilty
defendantsand between those whose violations have workedgreat
injury and those whose have done little if anyharm have become
blurred, if not invisible. The onlysignificant issue becomes the
size of the ransom to bepaid for total peace. Milton Handler, 71
Colum. L. Rev. 1, 9 (1971).9
10. The Realistic Phase Mid-1970s to early 1980s Characterized
by: Cautions against certification based on legalpresumptions.
Repudiation of use of device for socialactivism purposes. Emphasis
on close application of factualrecord to elements of cause of
action todetermine predominance.10
11. 11
12. The Formalism Phase 1980s to 1995 Decisions characterized
by formalisticappeal to legal principles: The court cannot prejudge
the merits.Commercial Tissue Prods. (N.D. Fla. 1998). The court
must accept the facts in the complaintas true. In re Potash
Antitrust Litig. (D. Minn.1995). Doubtful cases should be
certified. CumberlandFarms (E.D. Pa. 1988).12
13. The Formalism Phase contd Liability is the overriding issue
over causation anddamages. In re Flat Glass Antitrust Litig.
(W.D.Pa. 1999). The parties interests are best served by
resolvingdifferences in a single action. Commercial TissueProds.
(N.D. Fla. 1998). Plaintiffs expert testimony should be
givendeference. Carbon Dioxide Antitrust Litig. (M.D.Fla. 1993).
Presumptions that make it easier to provecommon elements are often
used.13
14. The Rigorous Analysis Phase 1995 to the present (in the
federal system) Repudiation of class certification of largeproduct
liability or employmentdiscrimination cases: In re Rhone Poulenc
(7th Cir. 1995) In re Am. Medical Systems (6th Cir. 1996) Castano
v. Am. Tobacco Co. (5th Cir. 1996) Valentine v. Carter Wallace (9th
Cir. 1996) Jackson v. Motel 6 (11th Cir. 1997)14
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25. Class Action Waivers: The WorldFrom Concepcion to OxfordM.
Derek Harris25
26. Class Action WaiversWhat are they?Class Action Waivers
areoften found in arbitrationagreements. Companiesoften require
that peoplesettle their issues througharbitration.Where are they
found? Consumer Contracts Credit Card Agreements Cell Phone
Agreements Service Agreements Financing Agreements Employment
Agreements26
27. Sample WaiverCLASS ACTION WAIVER. YOU AND MICROSOFTAGREE
THAT ANY PROCEEDINGS TO RESOLVEOR LITIGATE ANY DISPUTE, WHETHER
INARBITRATION, IN COURT, OR OTHERWISE,WILLBE CONDUCTED SOLELY ON AN
INDIVIDUALBASIS, AND THAT NEITHER YOU NORMICROSOFT WILL SEEK TO
HAVE ANY DISPUTEHEARD AS A CLASS ACTION, AREPRESENTATIVE ACTION, A
COLLECTIVEACTION, A PRIVATE ATTORNEY-GENERALACTION, OR IN ANY
PROCEEDING IN WHICHYOU OR MICROSOFT ACTS OR PROPOSES TOACT IN A
REPRESENTATIVE CAPACITY.27
28. AT&T Mobility LLC v. Concepcion On April 27, 2011, the
U.S. Supreme Courtheld 5-4 that a state law requiring
theavailability of classwide arbitrationinterferes with the
fundamental attributesof arbitration and creates a
schemeinconsistent with the Federal ArbitrationAct.28
29. History of Concepcion Plaintiffs initiated a lawsuit in
afederal district court inCalifornia seeking to recover$30 in taxes
they werecharged for phones advertisedas free. Their suit
wasconsolidated with a classaction. The Plaintiffs wireless
serviceagreement with AT&T includedan arbitration provision
waivingthe right to proceed withdispute resolution throughclass
arbitration. AT&T filed a motion to compelarbitration, which
the districtcourt denied. The district court held the classaction
waiver provision of thearbitration agreement wasunconscionable
underCalifornia law, and thatCalifornias unconscionabilitylaw was
not preempted by theFederal Arbitration Act. The U.S. Court of
Appeals forthe Ninth Circuit affirmedfinding the class action
waiverwas unenforceable. The U.S. Supreme Courtreversed and
remanded thecase.29
30. Supreme Court RationaleJ. Scalia (Majority Opinion) When
state law prohibits outright the arbitration of aparticular type of
claim the analysis is straightforward:The conflicting rule is
displaced by the FAA. The overarching purpose of the FAA, evident
in thetext of 2, 3, and 4, is to ensure the enforcement
ofarbitration agreements according to their terms tofacilitate
streamlined proceedings. The California state law on which the
Ninth Circuitsdecision was based stands as an obstacle to
theaccomplishment and execution of the full purposesand objectives
of Congress, therefore, it is preemptedby the FAA.30
31. Circuits Split After Concepcion The Third Circuit, in Homa
v. AmericanExpress Co., held that a class action waivermust be
enforced even if a plaintiff showsthat a claim cannot be
effectively prosecutedin an individual arbitration. The Second
Circuit has held that, even afterConcepcion, high costs of
litigation and lowrecovery available for individual claims,
mayrender a class action waiver provisionunenforceable.31
32. In re American ExpressMerchants Litigation AmEx I (2d Cir.
2009) Class action waiver held unenforceable because highcosts of
litigating antitrust claims meant individualclaims would not be
pursued and without a classaction plaintiffs would not have a
remedy. AmEx II (2d Cir. 2011) Class action waiver unenforceable
under FAAbecause enforcement would preclude vindication
ofplaintiffs statutory rights. AmEx III (2d Cir. 2011) Class action
waiver unenforceable because costs ofindividual arbitration would
be prohibitive, whichwould prevent plaintiffs from pursuing
antitrust claims.32
33. AmEx III Sets the Stage In its Opinion in AmEx III, the
Second Circuit notedthat Concepcion and other Supreme Court
casesdid not address the issue presented in the AmExcases, which
is:Whether a class-action arbitration waiver clause isenforceable
even if the plaintiffs are able todemonstrate that the practical
effect ofenforcement would be to preclude their ability tovindicate
their federal statutory rights. After the AmEx III ruling, American
Express filedpetition for certiorari, which was accepted by theU.S.
Supreme Court33
34. Supreme Court Set to Rule Again On February 27, 2013, the
U.S. SupremeCourt heard oral argument in AmericanExpress Co. v.
Italian Colors Restaurant. The Supreme Court has yet to issue
itsOpinion34
35. Oxford Health Plans LLC v. Sutter Supreme Court holds
language authorizing acivil action in arbitration allowed
thearbitrator to rule that the parties intended forclass
arbitration to be maintained because aclass action is a civil
action. Indicates a retreat from Stolt-Nielsen wherethe Supreme
Court held that parties cannotbe compelled to submit to class
arbitrationunless they agree to it.35
36. Lessons Learned In light of the recent Supreme Court
decisionsenforcing class action waivers, companies shouldconsider
implementing class action waiverprovisions into their contractual
agreements withconsumers, employees, vendors, shareholders, and
others. Companies using or implementing class actionwaivers be to
be sure to include clear prohibitionsof class arbitrations in their
contracts. Otherwise, as the court noted in its decision, the
potentialfor those mistakes is the price of agreeing
toarbitration.36
37. Other Recent Hot Topics in Class ActionJurisprudence
Removal, CouponSettlements and Cy Pres AwardsAmanda Arnold
Sansone37
38. Class Action Fairness Act of 2005(CAFA) - Original
Jurisdiction More than 100 members of class Parties are minimally
diverse Matter in controversy for aggregate ofclaims of individuals
exceeds the sum orvalue of $5 million38
39. Post-CAFA Removal of ClassActionsThe Standard Fire
Insurance Company v.Knowles, -- S. Ct. --, 2013 WL 1104735(2013)
Arkansas citizen sues on behalf of Arkansasresidents with
Arkansas-law-based claims inArkansas state court With his
complaint, Knowles served astipulation that the class would never
acceptdamages exceeding $5 million Standard Fire removed39
40. Post-CAFA Removal of ClassActions contd District court
remanded to state court because ofthe stipulation while also
recognizing that the casewould otherwise meet the
amount-in-controversythreshold 8th Circuit declined motions to hear
interlocutoryappeal, for rehearing and for rehearing en banc
Supreme Court accepted review due to a circuitsplit Supreme Court
held that Knowles and his counseldid not have authority to
stipulate away damagesclaims of absent putative class members in a
classthat has not been certified40
41. Removal Case(s) to WatchAbeid-Saba et al. v. Carnival Corp,
et al. and Scimone et al v.Carnival Corp. (S.D. Fla.) Both cases
are actions of passengers of the Costa Concordiacruise ship In
February, 2013, the federal district judge remanded thesetwo cases
to state court after Carnival tried to removebecause neither case
separately met CAFAs 100-plaintiffrequirement and counsel had not
asked suits to be triedtogether District judge said there was no
doubt that these two suitswere structured this way to avoid
removal, but that CAFApermits artful pleading to get around removal
in mass actioncases On May 21, 2013, the Eleventh Circuit granted
Carnivalpermission to appeal so stay tuned41
42. Post-CAFA Settlement ofClass Actions Congress concerned
with couponsettlements CAFA codified Congresss intent toregulate
coupon settlements increased judicial scrutiny ( 1712(e)) series of
specific rules governing award ofattorneys fees in class actions
containing couponsettlements ( 1712(a)-(d))42
43. In re HP Inkjet Printer Litigation(9th Cir. May 15, 2013)
District court noted that a weak case and approved thecoupon
settlement Class members to receive $5 million in online
couponsonly redeemable at www.hp.com Center for Class Action
Fairness filed objections andthe district court approved over those
objections Class counsel submitted a $7 million lodestar
butrequested an award of $2.3 million in fees and$600,000 in costs.
District court awarded $1.5 millionin fees and $600,000 in costs
(looked at lodestar andthen looked at settlement value as a cross
check)43
44. In re HP Inkjet Printer Litigation(9th Cir. May 15, 2013)
contd Ninth Circuit reversed the district court because
classmembers paid out in coupons, not cash, so feesshould be
considered in light of redemption value ofcoupons instead of face
value Ninth Circuit also said that the parties invited errorbecause
the coupons were not to be issued untilappeals are resolved so
there is no redemption valuedata for the district court to consider
Stay tuned . . .44
45. The Controversy of Cy Pres Awards An option for settlement
funds that eithercannot be distributed or remain unclaimedfollowing
distribution Parties typically attempt to find the nextbest use
Wide range of organizations havebenefitted Have been criticized by
many courtsthough45
46. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)(9th Cir.
2012) (S.D. Cal May 3, 2013) Kelloggs advertisements suggested
thattheir frosted mini-wheats were scientificallyproven to improve
childrens cognitivefunctions for several hours after thechildren
ate the cereal Kellogg sued on grounds thatadvertisements were
allegedly deceptive46
47. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)(9th Cir.
2012) (S.D. Cal May 3, 2013) contd 1st Proposed Settlement
Negotiated by a mediator with JAMS $2.75 million to be made
available for claimsby class members with remainder donated
tounspecified charities that feed the indigent $5.5 million worth
of donated food tocharities that feed the indigent Class counsel
sought $2 million fee Ninth Circuit rejected settlement &
fee47
48. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)(9th Cir.
2012) (S.D. Cal May 3, 2013) contd 2nd Proposed Settlement: May 3,
2013, district judge preliminarily approvednew settlement Kellogg
to establish a $4 million cash fund forclass members on a claims
made basis Remaining funds will be distributed equally toConsumers
Union, Consumer Watchdog and theCenter for Science in the Public
Interest Attorney fees will be deducted from thesettlement fund and
are capped at 25% of thefund plus costs To be continued . .
.48
49. Three Tips for Cy Pres Awards Have cy pres beneficiary with
a nexus to theclaims in the case (required in manyjurisdictions)
Specifically name the cy pres beneficiary inthe settlement (and, if
possible, evenspecifically provide permitted use of the cypres
funds) Discount amount of credit class counselreceives for the cy
pres award whencalculating fee award49
50. Download the 2013 Carlton FieldsClass Action Survey
atwww.ClassActionSurvey.com