101 class action trends and predictions - slides

www.WIPLEvent.comPresented by:

www.WIPLEvent.com

The Capital Hilton, Washington, DC

September 17-19, 2014

Presented by:


v

Class Action Trends and Predictions: What's happening in your world?

Sandy HauserPartner, Dentons

Beth McCrohanVP & Sr Corporate Counsel, The Prudential Insurance Company of America

Dr. Susan Powell President,Strategic Litigation Research


Panelists

3

• Sandra Hauser heads the Litigation and Dispute Resolution practice in Dentons’ New York office; serves on the US Policy and Planning Committee; co‐leads the US Class Action/Financial Litigation team and is part of the Chambers‐recognized Insurance Litigation team. Sandra represents companies facing class actions and complex commercial litigation involving securities, consumer fraud and deceptive trade practices, product liability, antitrust, asset‐backed securities, health care and major insurance disputes before trial and appellate courts, arbitrations and regulatory agencies.

• Elizabeth Foulk McCrohan (Beth) is Vice President and Senior Corporate Counsel at The Prudential Insurance Company of America. Currently, Beth is a supervising attorney in the Enterprise Litigation Group, responsible for Prudential’s Individual and Group Insurance litigation. Beth received her undergraduate degree from Ursinus College, with honors, and her J.D. from Temple University School of Law. After completing law school, Beth became a staff attorney at Reliance Standard Life Insurance Company in Philadelphia. When she left Reliance Standard in 1995 she held the position of Vice President of Compliance/Consumer Relations and Deputy General Counsel overseeing the Compliance/Consumer Relations department and serving as chief counsel for insurance and annuities. Since joining Prudential, Beth’s practice has focused on managing Prudential’s insurance litigation. This work has included the supervision and successful defense of several class action matters. In addition to managing litigation, Beth has provided legal support to Claims, Underwriting and Customer Service areas as well as handling regulatory and compliance issues. Beth currently serves as the Chair of the Litigation Committee of the American Council of Life Insurers and co‐Chair of the Litigation Committee of the Association of Life Insurance Counsel.

• Dr. Susan Powell is President of Strategic Litigation Research, Inc. located in New York City. Her formal research background includes serving as Director of Research for McGraw‐Hill, Inc. She advanced to Group Vice President of the Business & Professional Publishing Group within McGraw‐Hill, Inc. In 1986, Dr. Powell founded a consulting company to assist clients in research and analysis of corporate matters, starting Strategic Litigation Research in 2000. Dr. Powell earned her M.A. and her Ph.D. degrees from the University of California at Berkeley. She earned her B.A. degree at the University of California at Santa Barbara.


Class Action Developments and Trends, 2014:

What's Happening in Your World?

4

• Part I: Legal Developments and Trends (the Highlights)

• Part II: What Is Keeping You Up at Night? New Trends and Dilemmas in Class Action Litigation (e.g., the "no injury" class action; the rise in attempts at "issue certification" when overall predominance fails; the challenge of settling class cases under increased judicial scrutiny)

• Part III: What the World Really Thinks of Us: How Juries, Judges, and Our Internal and External Constituencies React to Class Cases


Class Action Developments and Trends, 2014:Legal Developments

5

Setting the Stage:• After Wal‐Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011),and AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740 (2011), many predicted the end of the class action frenzy, calling Rule 23 a tool of a largely bygone era.

• As the ABA has reported, many thought that Dukes would make it so hard to obtain class certification that plaintiffs’ lawyers would stop filing cases (or at least slow down).

• Others thought Concepcion would stop consumer class actions in their tracks, as more and more companies adopted class action waivers.

• Comcast v. Behrend [CITE] seemed to be another gut punch to class actions, opening a new front for defendants and increasing plaintiffs' investment before pay‐off, with focus on damages.

• But for those of us on the front lines, the battle still seems to be raging, with dozens of new class actions filed each week, albeit changing targets and new hot issues (Privacy vs. Insurance Fraud; Deceptive Trade Practices vs. ERISA).

• What does our recent experience really tell us about the overall picture? Should we Rule 23 geeks start looking for other work?


Class Action Developments and Trends, 2014: Legal Developments

6

• The answer, it seems, is NO …



7

• Our panelists' #1 observation:

– The environment of regulatory activism ‐‐ at both the State/AG and federal level ‐‐ has both fed the Plaintiffs' class action bar, and fed off of the successes in class action litigation, particularly in the Consumer Product and Antitrust areas.

– The trend is not likely to stop any time soon:• NAAG working groups• CFPB• Other federal agencies jumping into the litigation game (e.g. FHFA and others)



Observations from the NERA Report: Recent Trends In Securities Class Action Litigation, shows an increase in litigation:• The three main takeaways that commentators are discussing:

– ‐‐ a marked increase in securities class action filings in the last 2 years – ‐‐ an increase in court dismissals of 10b‐5 cases on opening motions, BUT also – ‐‐ a significant increase in average class settlement amounts, driven by the

highest dollar settlements, over $100M.• Securities class actions were up 10% year over year (2013).• The Wall Street Journal summarizes:

– "But while plaintiffs are filing more lawsuits, the claims are more likely to get dismissed. Dismissal rates increased from 32%‐ 36% for cases filed between 2000 and 2002 to 44%‐51% for cases filed between 2007 to 2009, according to the report. . . . The average settlement amount in 2013 hit a record $55 million, an increase of 53% over 2012 and 31% more than the previous high in 2009, the report found."

8



9

IF these case trends continue: • There could be more lawyers filing class actions, and more motion practice,

as judges will seriously consider dismissing those cases in which the plaintiff fails to satisfy the PSLRA pleading standards (at the motion to dismiss stage) or present the evidence required to withstand a motion for summary judgment.

• Corporations may choose to eliminate risks early, to the great delight of the plaintiffs lawyers.

• Trials are less and less likely: “Of the 4,226 class actions filed since the PSLRA, only 20 have gone to trial and only 14 of them reached a verdict.” NERA Report p. 36. The PSLRA (“Plaintiffs Securities Litigation Reform Act”) was signed into law in 1995.


10

AND,might we see more massive settlements (either inside or outside of the government context)? According to Cornerstone Research:• Settlements in securities class actions have risen to the highest level since

2007.• Driving up the numbers in 2013 were six “mega‐settlements,” valued at

$100 million or higher. • Total settlement dollars last year were 60 percent higher than the average

for the previous five years, according to the report.• Cases that lasted into more advanced stages of litigation were settled for

much higher amounts than those that were settled early on, according to the research. Advanced cases settled for a median 3.5 times more than early settlers.




11

The Headline News from the Supreme Court's 2014:• Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S. Ct.

1184 (2013). : Proof of materiality is not a prerequisite for class certification in a 10b‐5 securities fraud class action.

• Haliburton v. Erica P. John Fund, 134 S. Ct. 2398 (2014): "Fraud on the market" presumption survives, but a new window opens to show absence of price impact at class certification stage.

• Fifth Third Bancorp v. Dudenhoeffer, No. 12‐751: Presumption of "prudence" in ERISA stock drop class actions is rejected, where employers permit employees to invest retirement assets in their company's stock. But substantive requirements offer room for defense.

• Portends a continuation of the trend


Class Action Developments and Trends, 2014: What is Keeping You Up at Night?

12

• NON‐Securities Class Action Practice Trends (selected):• Explosion in Consumer Class Actions arising from Privacy Laws and alleged

Data Breaches.o Highlights core legal questions: Standing to sue, injury, causal

connections, "knowing"/negligent conduct.o This is the topic of other conference panels … stay tuned.

• The No‐Injury Class Action: false advertising cases, "economic loss" from purported product defect that caused "inflated" pricing.

• Attempts at Issue Certification under Fed. R. Civ. P. 23(c)(4)• Increasing Judicial Scrutiny of Class Action Settlements


What Is Keeping You Up at Night? Defending The No‐Injury Class Action

13

• The "no injury" class action was, we thought, to be taken up by the Supreme Court last year: First American Financial Corp. v. Edwards, 132 S. Ct. 2536 (2012)

• The specific question before the Court in Edwards was whether a plaintiff alleging that her title insurance company violated the Real Estate Settlement Procedures Act (RESPA) must show that she suffered an injury from the insurance company’s unlawful conduct beyond the violation of her legal rights under the statute.

• RESPA prohibits title insurers and other real‐estate‐related companies from participating in kickback schemes related to real estate closings. Congress provided that a consumer who discovers an illegal kickback related to her closing can sue to recover statutory damages (and attorney’s fees) without having to prove that the violation caused her any financial injury or any diminution in the quality of services.

• The defendant, First American, argued that the plaintiff had suffered no discernible injury from the alleged illegal kickback. Because the rates charged the plaintiff were set by state law, she suffered no financial injury. And she did not show that the quality of the services had been reduced by the kickback. In these circumstances, First American argued, Congress was forbidden by Article III from authorizing suit against the insurance company, even if the plaintiff could prove a violation of her statutory rights.

• The lower courts rejected that argument, but the Court granted certiorari. It appeared that the Court was considering using the case to establish new Article III limitations on Congress’s power to create private rights of action. Not so. No consensus on what those limitations should be?

• The broader question still lurks.


What Is Keeping You Up at Night? Defending The No‐Injury Class Action

14

• US Chamber of Commerce recently asked (unsuccessfully) for the Supreme Court to review another no injury case, arguing:"If consumers can bring lawsuits without the need to demonstrate any

injury beyond the alleged statutory violation itself, businesses will predictably be tied up in damages litigation over harmless alleged lapses, diverting their resources from more productive uses." • What are we seeing in practice?• How is the way in which these cases present altering our strategy for

defending class actions? Confront the "no injury" early on? Or develop the case through discovery, even though it turns our stomach?

• Does this wave of cases reflect a more fundamental challenge to the basic fact that companies are in business to make money? How do we address the "profit issue" in class actions ‐‐ hide it or embrace it?


What Is Keeping You Up at Night? Issue Certification Under Rule 23(c)(4)

15

• The Issue: Can a Federal Court use this obscure section of Rule 23 to certify a class as to parts of a claim, without finding that the whole cause of action satisfies the predominance requirement?

• Split in the Circuits• What does it mean that an issue "materially advance[s] the disposition of

the litigation as a whole"?• What does this trend of the Plaintiffs' bar to use 23(c)(4) tell us about how

we litigate class cases? Does it alter discovery strategy, timing of summary judgment motions on key legal issues, or the experts we hire?


What Is Keeping You Up at Night? How to Get a Class Settlement Done in the Era of Judicial Scrutiny?

16

• Recent Examples:– Facebook/Cy Pres settlement– Citibank settlement– HP– What strategies have worked?


17

What The Real World Thinks of Us?


How much confidence do you have in big business? (% responding “a great deal” or “quite a lot”)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Savings & Loan CrisisEnron Collapse

1980’s Recession Great Recession

Source: Gallup Poll

Confidence in Big Business


53

59

51 5149

5760

58

64

53

All Cases Personal Injury Product Liability Intellectual Property Business

AgreeDisagree

(78%)(22%)

Plai

ntiff

-Orie

ntat

ion

(%)

Verdict Preference by Opinion of Large Corporations and Case Type


Questions?

Sandy Hauser, Partner [email protected]

Beth McCrohan, Vice President and Senior Corporate Counsel The Prudential Insurance Company of America [email protected]

Dr. Susan Powell, PresidentStrategic Litigation Research [email protected]

Documents

101 class action trends and predictions - slides