Filingg Class Actions in Federal Shady Grovemedia.straffordpub.com/...federal-court-after-shady... · 7/14/2011 · No. 09-cv-3072, 2011 U.S. Dist. LEXIS 22211 (D. Md. Mar. 4, 2011)

Presenting a live 90‐minute webinar with interactive Q&A

Filing Class Actions in Federal gCourt After Shady Grove Navigating Divergent Circuit Court Rulings on State Law Prohibitions of Class Actions

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JULY 14, 2011

Today’s faculty features:

Jack E. Pace, Partner, White & Case, New York

Paul G. Karlsgodt, Partner, Baker Hostetler, Denver

Gretchen Carpenter, Partner, Strange & Carpenter, Los Angeles

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Conference Materials

If you have not printed the conference materials for this program, please complete the following steps:

• Click on the + sign next to “Conference Materials” in the middle of the left-hand column on your screen hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program.

• Double click on the PDF and a separate page will open. Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

Continuing Education Credits FOR LIVE EVENT ONLY

For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps:

• Close the notification box

• In the chat box, type (1) your company name and (2) the number of attendees at your location

• Click the blue icon beside the box to send

Tips for Optimal Quality

S d Q litSound QualityIf you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection.

If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-888-450-9970 and enter your PIN when prompted Otherwise please send us a chat or e mail when prompted. Otherwise, please send us a chat or e-mail [email protected] immediately so we can address the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key againpress the F11 key again.

Application and Interpretation of Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.

Jack E. Pace III July 14, 2011

Overview of Shady Grove

Shady Grove Orthopedic Assocs. P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010) Putative class action by medical provider to recover unpaid statutory interest

allegedly owed by Allstate as a result of late payment of benefits. Case dismissed on ground that NY CPLR Section 901(b) prohibited class actions in Case dismissed on ground that NY CPLR Section 901(b) prohibited class actions in

suits seeking penalties or statutory minimum damages. Second Circuit affirmed. Supreme Court rules 5-4 that restrictions on class actions under Section 901(b) do

not apply in federal court. Two-step analysis:

(1) Does Rule 23 conflict with the state law at issue?(2) If there is a conflict, is the rule authorized by the Rules Enabling Act?

Court held that Rule 23 and Section 910(b) are in conflict as they both attempt “to Court held that Rule 23 and Section 910(b) are in conflict as they both attempt to answer the same question”: whether the case could proceed as a class action.

Court also held that Rule 23 was authorized by Rules Enabling Act and therefore preempted Section 901(b).

White & Case Shady Grove 6

Plurality v. Concurrence

Scalia and Stevens disagreed on how to apply the second step of the analysis but d l iagreed on conclusion.

Scalia (plurality): To be valid a rule “must really regulat[e] procedure.” “If [a federal rule] governs only ‘the manner

and the means’ by which the litigants' rights are ‘enforced ’ it is valid; if it alters ‘the rules ofand the means by which the litigants rights are enforced, it is valid; if it alters the rules of decision by which [the] court will adjudicate [those] rights,’ it is not.”

Focus on the federal law: substantive nature or purpose of state law “makes no difference.”

Stevens (concurrence): Focus on state law at issue – not the federal rule.

Court must determine “whether [a] state law actually is part of a State’s framework of substantive rights or remedies.”

Whi h i i t l ? Which opinion controls? According to “narrowest grounds” rule, concurrence.

According to subsequent Supreme Court decision, plurality. See Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp., 130 S. Ct. 1758, 1781-82 (2010) (Ginsburg, J., dissenting)


Animalfeeds Int l Corp., 130 S. Ct. 1758, 1781 82 (2010) (Ginsburg, J., dissenting)

Cases Applying Scalia’s Plurality

In re Principal U.S. Property Account ERISA Litigation, No. 4:10-cv-198, 2011 WL 1898915 (S D Iowa May 17 2011)1898915 (S.D. Iowa, May 17, 2011) Plaintiff has standing to pursue class action under ERISA. FRCP 23 did not enlarge or modify the

substantive rights of ERISA and was authorized under the Rules Enabling Act. Willever v. U.S., No. 09-cv-3072, 2011 U.S. Dist. LEXIS 22211 (D. Md. Mar. 4, 2011)

FRCP 26(a)(2) 37(c) and 55(d) conflicted with Maryland Health Care Malpractice Claims Act but FRCP 26(a)(2), 37(c), and 55(d) conflicted with Maryland Health Care Malpractice Claims Act but were procedural, and therefore controlled: “if there is a collision, the Federal Rule controls, regardless of how the state law is characterized.”

Hogan v. Novartis Pharmaceuticals Corp., No. 06 Civ. 0260, 2011 U.S. Dist. LEXIS 37171 (E.D.N.Y. Apr. 6, 2011) Motion in limine to exclude evidence determined by FRE 407 not Rhode Island Rule 407 where

court is sitting in diversity. Analysis ends after considering the federal rule.

Landsman & Funk PC v. Skinder-Strauss Assoc., 640 F.3d 72, 91 n. 27 (3d Cir. 2011) In holding that federal courts have diversity jurisdiction under TCPA, stating that Shady Grove

requires that “federal law regarding class actions would be applied in federal courts, not state law.” Cites Scalia’s plurality opinion and concludes that, under Shady Grove, Rule 23 (and not state law) controls in diversity cases, unless Congress has carved out federal claims beyond its reach.


Cases Applying Scalia’s Plurality (continued)

In re Katrina Canal Breaches Litig., 491 Fed. App’x 898 (5th Cir. 2010) Affirms denial of class certification against insurance companies. Plaintiffs’ request to look to

Louisiana state court decision on class certification was unavailing as “[f]ederal class action certification is controlled by federal procedural rules, notwithstanding state law.”

Am. Copper & Brass, Inc. v. Lake City Indus. Prods., Inc., No. 1:09-cv-1162, 2010 WL 2998472 (W D Mi h J l 29 2010)WL 2998472 (W.D. Mich. July 29, 2010) Michigan procedural rule does not bar class action under TCPA. Interprets Shady Grove as

follows: “(1) Rule 23 regulates procedure; (2) Rule 23 is authorized by the Rules Enabling Act; and (3) Rule 23 is ‘valid in all jurisdictions, with respect to all claims, regardless of its incidental effect upon state-created rights.’”effect upon state created rights.

Yates-Williams v. El Nihum, 268 F.R.D. 566, 569 (S.D. Tex. June 28, 2010) In medical malpractice case, federal rules concerning experts would apply as “[f]ederal courts are

not bound to follow a state law that is in some sense ‘substantive’ if it conflicts with the Federal Rules ”Rules.

Coastal Conserv. Ass’n v. Locke, Nos. 2:09-cv-641-FtM-29SPC, 2:10-cv-95-FtM-29SPC, 2010 WL 1407680, at *2 (M.D. Fla. Apr. 6, 2010) Question is whether rule “really regulates procedure.” Federal administrative agency’s decision


y g p g ywas substantive and not procedural.

Cases Applying Stevens’s Concurrence

Bearden v. Honeywell Int’l Inc., 2010 WL 3239285, at *10 (M.D. Tenn. Aug. 16, 2010) Applies “narrowest grounds” rule. Dismisses class allegations against air conditioning

manufacturer under the Tennessee Consumer Protection Act, which prohibits class claims. “Unlike in Shady Grove, the limitation here is contained in the substantive statute itself, not in a separate procedural rule.”

In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., No. 1:08-WP-65000, 2010 WL 2756947, at *2 (N.D. Ohio July 12, 2010) Class action by consumers against appliance manufacturer under Ohio Consumer Sales Practice

Act is barred, relying on Stevens’ “crucial fifth vote.” Estate of C.A. v. Grier, 752 F. Supp. 2d 763 (S.D. Tex. 2010)

Applies “narrowest grounds” rule. Texas Civil Practice & Remedies Code Section 150.002, which requires plaintiffs seeking damages for professional negligence to file certificate of merit with their complaint, conflicted with FRCP 8, 9, 11, and 26. As both the Texas and federal rules were

d l S i 150 002 d d f d l l li dprocedural, Section 150.002 was preempted, and federal rules applied.

McKinney v. Bayer Corp., 744 F. Supp. 2d 733 (N.D. Ohio 2010) Applies “narrowest grounds” rule. In proposed consumer class action against vitamin producer,

Rule 23 did not preempt Ohio Consumer Sales Practice Act and its bar to class actions.


Cases Applying Stevens’s Concurrence (continued)

Beal v. Walgreen Co., 408 Fed. App’x 898 (6th Cir. 2010)I di l l ti l i ll dl i l fill d i ti h ld li th t FRCP 56( ) d t In medical malpractice claim over allegedly improperly-filled prescriptions, upholds ruling that FRCP 56(c) and not state rule provided applicable standard for determining if summary judgment is appropriate.

Tait v. BSH Home Appliances Corp., No. 10-711, 2011 U.S. Dist. Lexis 54456 (C.D. Cal. May 12, 2011) Tennessee Consumer Protection Act limitation on class actions applies to purported class action under laws of pp p p

five states concerning defective front loading washing machines. In re Packaged Ice Antitrust Litig., No. 08-01952, 2011 U.S. Dist. Lexis 26048

(E.D. Mich. Mar. 11, 2011) Class claims under New York's Donnelly Act allowed, as NY CPLR § 901(b) no longer stands as bar after Shady

Grove. Notes that class claims under the laws of Idaho, Kansas, and Montana still may serve as effective bars to maintaining class actions, as they appeared intertwined with substantive law.

Mitchell v. Iowa Interstate RR Ltd., No. 07-1351, 2010 WL 2089301, at *1 n.1 (C.D. Ill. May 25, 2010) FRE 803(4) regarding hearsay, and not Illinois rules of evidence, applied. “Only if a state’s evidentiary rule is

actually ‘an expression of state substantive policy’ will that Rule be given effect in a diversity [case] ”actually an expression of state substantive policy will that Rule be given effect in a diversity [case]. In re Wellbutrin XL Antitrust Litig., 756 F. Supp. 2d 670 (E.D. Pa. 2010)

Looks to five-justice concurrence plus dissent to arrive at majority approval of focusing on state rule. Majority of Court “rejected Justice Scalia’s Rules Enabling Act analysis that only examines the Federal Rule on its own in favor of an analysis that considers the important state interests.” Denies leave for plaintiff to amend complaint in light of Illinois bar to indirect purchaser class claims, but allowed leave to amend as to New York indirect


g p ,purchaser class claims as still potentially available under New York law after Shady Grove.

Other Cases Interpreting Shady Grove

Other courts have applied Shady Grove without explicitly siding with the plurality or concurrence, for example:

In re OnStar Contract Litig., No. 2:07-MDL-01867, 2010 WL 3516691, at *1 (E.D. Mich. Aug. 25, 2010) (Michigan Consumer Protection Act would not bar class claims by non-residents as it conflicted with Rule 23)co c ed u e 3)

In re Static Random Access Memory (SRAM) Antitrust Litig., No. C 07-01819 CW, 2010 WL 3069329, at *1, *3 (N.D. Cal. Aug. 4, 2010) (granting leave to amend complaint to add class claim under New York’s antitrust statute).

Pefanis v. Westway Diner, Inc., No. 08 Civ. 002(DLC), 2010 WL 3564426, at *7 (S.D.N.Y. Sept. 7, 2010) (granting motion to amend complaint to add claim for statutory damages where previously barred by Section 901(b))

McBeth v. Gabrielli Truck Sales, Ltd., 731 F. Supp. 2d 316, 320–21 (E.D.N.Y. 2010) (same), , pp , ( ) ( )


Other Federal Rules Implicated by Shady Grove

Shady Grove applies to more than just Rule 23. For example: Durmishi v. Nat’l Cas. Co., 720 F. Supp. 2d 862, 875–77 (E.D. Mich. 2010) (FRCP 35 conflicts

with Michigan rules on physical and mental examinations but valid under Rules Enabling Act)

M.S. v. Cedar Bridge Military Academy, No. 1:08-CV-2271, 2011 U.S. Dist. LEXIS 51487, at *9 (M.D. Pa. May 13, 2011) (applying FRCP 35 over Pennsylvania rules)

Godin v. Schencks, 629 F.3d 79, 86-87 (1st Cir. Dec. 22, 2010) (FRCP 12(b)(6) and 56 do not preempt Maine’s anti-SLAPP statute)

Retained Realty, Inc. v. McCabe, 376 Fed. App’x 52, 55-56 (2d Cir. 2010) (FRCP 54(b) preempts Section 49-15 of the General Statutes of Connecticut re reexaminations of foreclosures)

Goldberg v. Pacific Indem. Co., 627 F.3d 752, 755 n.5 (9th Cir. 2010) (analyzing whether FRCP 68 conflicts with Arizona Rule of Civil Procedure 68 but not reaching Rules Enabling Act analysis

Estate of C.A. v. Grier, 752 F. Supp. 2d 763 (S.D. Tex. 2010) (Texas Civil Practice & Remedies Code Section 150 002 preempted by FRCP 8 9 11 and 26)Code Section 150.002 preempted by FRCP 8, 9, 11, and 26)

Mitchell v. Iowa Interstate RR Ltd., No. 07-1351, 2010 WL 2089301, at *1 n.1 (C.D. Ill. May 25, 2010) (federal, not state, rule on hearsay (FRE 803(4)) applied)

All Plaintiffs v. All Defendants, No. 10-40119, 2011 U.S. App. LEXIS 13079 (5th Cir. June 27, 2011) (FRCP 23(e)’s grant of discretion to district courts to approve class settlements does not


2011) (FRCP 23(e) s grant of discretion to district courts to approve class settlements does not conflict with Texas Unclaimed Property Act re allocation of settlements funds)

Telephone Consumer Protection Act

State class action limits apply Holster III v. Gatco, Inc., 618 F.3d 214, 215 (2d Cir. 2010)

State class action limits do not apply Sawyer v. Atlas Heating & Sheet Metal Works, Inc., No. 10–3672, 2011 WL 2039663

(7th Cir. May 26, 2011)

Landsman & Funk PC v. Skinder-Strauss Assoc., 640 F.3d 72, 91 n. 27 (3d Cir 2011)(3d Cir. 2011)

Leyse v. Clear Channel Broad. Inc., No. 1:09-CV-237, 2010 WL 2253646 (S.D. Ohio June 2, 2010)

Am. Copper & Brass, Inc. v. Lake City Indus. Prods., Inc., No. 1:09-cv-1162, 2010 WL 2998472 (W.D. Mich. July 29, 2010)

Giovanniello v. ALM Media, LLC, No. 3:09cv1409 (JBA), 2010 WL 3528649, at *3 (D. Conn. Sept. 3, 2010)


W ld id F O Cli t hitWorldwide. For Our Clients. www.whitecase.com

White & Case LLP1155 Avenue of the AmericasNew York, NY 10036United StatesTel: + 1 212 819 8200Fax: + 1 212 354 8113

In this presentation, White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

8208358

N i i h Sh d GNavigating the Shady Grove:Strategic Decisions in Class Action DefenseStrategic Decisions in Class Action Defense in the Federal (or State) Courts In 2011 and Beyond

Paul Karlsgodt

© 2010 Baker & Hostetler LLP

When Should Shady Grove Be on Your Mind?Your Mind?

• Removal– Consider whether you really want to remove a state

court case when there is a possibility that Shady Grove may eliminate a possible state law defense to class certification.

• Pleadings stage– Consider a motion to strike class allegationsConsider a motion to strike class allegations.– Is a state law substantive prohibition or limitation on

class actions an affirmative defense?• Motions for class certification• Motions for class certification• Other dispositive motions

– Shady Grove has not been limited to state rules that

17 Baker Hostetler

ymight impact FRCP 23.

Places to Look for Shady Grove IssuesIssues

• Types of CasesCl i ki t t t lti– Claims seeking statutory penalties.

– State consumer protection act violations.– The federal Telephone Consumer Protection Act (TCPA).

• Types of IssuesTypes of Issues– Prerequisites to suit

• See, e.g., Estate of C.A. v. Grier, 752 F. Supp. 2d 763 (S.D. Tex. 2010) (Shady Grove precluded application of a state requirement that affidavit of merit be submitted in a medical malpractice case).p )

– Statute of limitations and tolling• See Sawyer v. Atlas Heating and Sheet Metal Works, Inc., --- F.3d ----, 2011

WL 2039663 (7th Cir., May 26, 2011) (Shady Grove prevented state tolling rules from preventing FRCP 23 certification analysis).

Ad i i i E h i– Administrative Exhaustion• See Mitchell-Tracey v. United General Title Ins. Co., No. WDQ-05-1428,

2010 WL 4781203 (D. Md., Nov. 17, 2010) (Shady Grove did not preclude analysis of exhaustion of administrative remedies under state law).

18 Baker Hostetler

New Considerations on Removal and Forum Selectionand Forum Selection

• Does removal create the possibility of expanded damages that the plaintiff isn’t entitled to in state court?plaintiff isn t entitled to in state court?– Consider whether multiple states’ statutes are involved.

• If I remove, will the plaintiff be able to file successive class actions in state court?– See Smith v. Bayer Corp., 131 S. Ct. 61 (2010) (holding that federal courts

lack the power to enjoin attempts to re-litigate class certification when the state’s class certification rule is subject to a different standard than FRCP 23).

– CAFA should prevent successive state court filings in many cases, but what if less than $5M is at stake or exceptions to CAFA could apply?

• Is a federal court more likely to uphold an arbitration agreement?– See AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011).See AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011).

• Is the class certification standard more favorable to defendants than federal court?

19 Baker Hostetler

Shady Grove Interpretedy p• Courts are applying the Stevens concurring

i i h h di d ith th j itopinion where he disagreed with the majority.• The Scalia/Stevens test:

1 Does FRCP 23 answer the question in dispute in a1. Does FRCP 23 answer the question in dispute in a way that would conflict with application of the state rule?

2. Would application of FRCP 23 effectively abridge,2. Would application of FRCP 23 effectively abridge, enlarge, or modify a state-created right or remedy?

a. Easy test – Is the state law a procedural rule or part of the state’s framework of substantive rights and remedies? If substantive then federal courts must apply it If not thensubstantive, then federal courts must apply it. If not, then go to the hard test;

b. Hard test – Is the state rule so “bound up bound up with the state-created right or remedy that it defines the scope of

20 Baker Hostetler

that substantive right or remedy.”

Special Shady Grove Issuesp y• What if a substantive state or even federal law limits enforcement of

certain rights to what is allowed under state procedure?certain rights to what is allowed under state procedure?– See Holster v. Gatco, Inc., 618 F.3d 214 (2d Cir. 2010) (holding post-

Shady Grove that NY’s bar on class actions to collect statutory penalties applied when plaintiff sought relief under the TCPA, a federal law that permitted enforcement “if otherwise permitted by the laws or rules ofpermitted enforcement if otherwise permitted by the laws or rules of court of a State”).

– But see Landsman & Funk PC v. Skinder-Strauss Assocs., 640 F.3d 72, 91 n.27 (3d Cir. 2011) (holding that Shady Grove prevents application of NY CPLR § 901(b) rule in a case under the TCPA)NY CPLR § 901(b) rule in a case under the TCPA).

• What about situations where a state rule allows a claim to be brought in a representative capacity without meeting class certification requirements?

Cardenas v McLane Foodservice Inc No SACV 10 473 DOC (FFMx)– Cardenas v. McLane Foodservice, Inc., No. SACV 10-473 DOC (FFMx), 2011 WL 379413 (C.D. Cal., Jan. 31, 2011) (holding that California Private Attorney General Act did not conflict with Rule 23 and therefore was not superseded by Rule 23 under Shady Grove).

21 Baker Hostetler

Briefing a Shady Grove Issueg y

• Is the rule generally applicable or limited to a particular g y pp pstatute (e.g. consumer protection act)?

• Is the rule contained in a section of the code that indicates whether it is procedural or substantive?indicates whether it is procedural or substantive?

• Is the rule in the same section or provision that defines the right or its enforcement?A th l t ill t t h th b t ti• Are there examples to illustrate how the substantive rights could be expanded if the state rule were to apply?

• See if the judge has decided other issues of statutory j g yinterpretation – is he or she likely to be persuaded by– Legislative history?– Public policy?

22 Baker Hostetler

p y

Impact of Shady Grove on Other IssuesIssues

• Does Shady Grove support the argument that:– FRCP 23 generally governs class certification in diversity cases?

• Yes, but that’s probably nothing new.– All Erie Doctrine questions should be analyzed in light of the

Shady Grove analysis (not just those under FRCP 23)?Shady Grove analysis (not just those under FRCP 23)?• Yes, see cases cited above applying Shady Grove outside the FRCP

23 context. – Federal public policy favors class actions?

• Definitely no. See AT&T Mobility v. Concepcion, supra.– Rule 23 occupies the field when it comes to class actions?

• Probably not. Shady Grove is an Erie Doctrine case, not a true preemption case.p p

– Federal courts should be allowed to control the interpretation of class certification rules everywhere?

• Nope, see Smith v. Bayer Corp., supra.

23 Baker Hostetler

For Further Studyy• Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., 130 S. Ct.

1431 (2010)1431 (2010).• Lower Court Cases Analyzing Shady Grove

– In re Wellbutrin XL Antitrust Litigation, 756 F. Supp. 2d 670 (E.D. Pa. 2010).

– McKinney v. Bayer Corp., 744 F.Supp.2d 733 (N.D. Ohio 2010).– Bearden v. Honeywell Int'l, Inc., No. 3:09–1035, 2010 WL 3239285

(M.D.Tenn. Aug.16, 2010).• Articles discussing Shady GroveArticles discussing Shady Grove

– Scott L. Nelson, Class Actions in the Supreme Court: Arguing Shady Grove v. Allstate (essay about the oral argument in Shady Grove from counsel for the petitioner) (http://www.citizen.org/documents/Arguing Shady Grove Allstate.pdf).( p g g g_ y_ _ p )

– Linda S. Mullinex, Federal Class Actions: A Near-Death Experience in a Shady Grove, 79 Geo. Wash. L. Rev. 448 (2011) (http://groups.law.gwu.edu/LR/ArticlePDF/79-2-Mullenix.pdf).

24 Baker Hostetler

Paul G. KarlsgodtP [email protected]

Denver303 East 17th Avenue Suite 1100Denver, CO 80203-1264

T 303.764.4013F 303.861.7805

25 Baker Hostetler

STRANGE & CARPENTERCARPENTERSTRANGE & CARPENTERCARPENTER

Class Actions In The Shadow Of In The Shadow Of

Shady Grove

Gretchen Carpenterp

12100 Wilshire Blvd., Suite 1900Los Angeles, CA 90025

Tel: (310) 207 5055

STRANGE & CARPENTERSTRANGE & CARPENTER

Tel: (310) 207-5055Fax: (310) 826-3210

[email protected]

ST

ST THE DECISIONSh d G O th di A i t P A

TR

AN

GE

TR

AN

GE

Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.,

130 S. Ct. 1431 (March 31, 2010)E &

CA

RE

& C

AR

( )

• Rule 23 is mandatory. Rule 23 creates “a categorical rule entitling a plaintiff whose suit meets the specified R

PE

NT

ER

PE

NT

E

rule entitling a plaintiff whose suit meets the specified criteria to pursue his claim as a class action.” Shady Grove, 130 S. Ct. at 1437 (emphasis added).E

RE

R

27

THE PLURALITY OPINION(J ti S li j i d b Chi f J ti R b t d

ST

ST

(Justice Scalia, joined by Chief Justice Roberts and Justices Thomas and Sotomayor)

TR

AN

GE

TR

AN

GE

• Bright line rule – Rule 23 supersedes state laws prohibiting class actions.

E &

CA

RE

& C

AR

• Immaterial whether the rule affects “substantive” rights or significantly affects the outcome.

RP

EN

TE

RP

EN

TEE

RE

R

28

THE CONCURRENCE(Justice Stevens)

ST

ST

(Justice Stevens)

• Focus on state laws • Leaves open the possibility that some class prohibitions can be

ST

STT

RA

NG

ET

RA

NG

E

Leaves open the possibility that some class prohibitions can be upheld under the Rules Enabling Act (28 U.S.C. § 2072(b)), which provides that federal rules “shall not abridge, enlarge or modify any substantive right.”

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

y y g• “When a State chooses to use a traditionally procedural vehicle

as a means of defining the scope of substantive rights or remedies, federal courts must recognize and respect that

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

choice.” Id. at 1450. • “A federal rule, therefore, cannot govern a particular case in

which the rule would displace a state law that is procedural in th di f th t b t i i t t i d ith t t

RP

EN

TE

RP

EN

TEE

RE

R the ordinary use of the term but is so intertwined with a state right or remedy that it functions to define the scope of the state-created right.” Id. at 1452 (emphasis added).

• “[T]he bar for finding an Enabling Act problem is a high one ”

ER

ER

• [T]he bar for finding an Enabling Act problem is a high one. Id. at 1457.

29

ST

ST THE DISSENT

(J ti Gi b j i d b J ti K d

ST

STT

RA

NG

ET

RA

NG

E

(Justice Ginsburg, joined by Justices Kennedy, Breyer, and Alito)

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

• points out the “large irony” in the decision in light of CAFA’s enactment to limit class actions. Id. at 1473.

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

ER

PE

NT

ER

PE

NT

EER

ER

ER

ER

30

ST

ST IMPLICATIONS OF SHADY GROVE ARE ST

STT

RA

NG

ET

RA

NG

E

STILL UNCLEAR

OPEN QUESTIONS

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

OPEN QUESTIONS:• Which opinion controls – Scalia plurality or

Stevens concurrence?

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

Stevens concurrence? • What laws are preempted?

RP

EN

TE

RP

EN

TEE

RE

RE

RE

R

31

PLURALITY OPINION CONTROLS

• Justice Ginsburg’s dissenting opinion in Stolt Nielsen S A v

ST

ST

• Justice Ginsburg s dissenting opinion in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S.Ct. 1758, 1781-82 (joined by Justices Stevens and Breyer) (relies on Scalia’s plurality opinion for determining whether a rule is procedural: “‘Rules allowing multiple

ST

STT

RA

NG

ET

RA

NG

E

claims (and claims by or against multiple parties) to be litigated together . . . neither change plaintiffs’ separate entitlements to relief nor abridge defendants’ rights; they alter only how the claims are processed ’”)

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

processed. )

• Cases applying the plurality opinion: • American Copper & Brass, Inc. v. Lake City Industrial Products, Inc.,

( h l )

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

2010 WL 2998472 (W.D. Mich. Jul. 28, 2010) • Coastal Conservation Ass’n v. Locke, 2010 WL 1407680 (M.D. Fla.

April 6, 2010)• In re Katrina Canal Breaches Litigation, 401 Fed. Appx. 884 (5th Cir.

RP

EN

TE

RP

EN

TEE

RE

R In re Katrina Canal Breaches Litigation, 401 Fed. Appx. 884 (5th Cir. 2010)

• Yates-Williams v. Nihum, 268 F.R.D. 566, 568 (S.D. Tex. 2010) • In re Principal U.S. Property Account ERISA Litigation, --F.R.D.--,

2011 WL 1898915 (S D I M 17 2011)

ER

ER

2011 WL 1898915 (S.D. Iowa, May 17, 2011)• Hogan v. Novartis Pharmaceuticals Corporation, 2011 WL 1336566

(E.D.N.Y. April 6, 2011)32

CONCURRING OPINION CONTROLS

• The “narrowest ground” rule

ST

ST

• The narrowest ground rule.

• Cases distinguish Shady Grove by finding the statutes containing class action restrictions are substantive in nature.

ST

STT

RA

NG

ET

RA

NG

E

containing class action restrictions are substantive in nature. The factors the courts have looked at are:

1) whether the class action restriction is “intimately

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

) yinterwoven” with the substantive remedies;

2) whether the limitation is part of the state’s f k f b h d d

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

framework of substantive rights and remedies;

3) whether the restrictions on class actions apply generally or only to the statute at issue; and

RP

EN

TE

RP

EN

TEE

RE

R generally or only to the statute at issue; and

4) whether the statutory restrictions on class actions appear in the very statutes that define the

ER

ER

appear in the very statutes that define the substantive rights at issue.

33

CONCURRING OPINION(continued)

ST

ST

• Cases applying the concurring opinion:

• Tait v. BSH Home Appliances Corporation, 2011 WL 1832941

ST

STT

RA

NG

ET

RA

NG

E

Tait v. BSH Home Appliances Corporation, 2011 WL 1832941 (C.D. Cal. May 12, 2011)

• In Re Whirlpool Corp. Front-Lading Washer Prod. Liab. Litig., 2010 WL 2756947 (N.D. Ohio July 12, 2010)

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

• McKinney v. Bayer Corp., — F. Supp. 2d —, 2010 WL 3834327 (N.D. Ohio Sept. 30, 2010)

• Beardon v. Honeywell Int’l, Inc., 2010 WL 3239285 (M.D. Tenn. Aug 16 2010)

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

Aug. 16, 2010)• In re Wellbutrin XL Antitrust Litigation, — F. Supp. 2d —, 2010

WL 5186052 (E.D. Pa. Dec. 22, 2010)• In re Packaged Ice Antitrust Litigation, 2011 WL 891169, at *15

RP

EN

TE

RP

EN

TEE

RE

R

g gn.4 (E.D. Mich. Mar. 11, 2011) (pointing to class action limitations in Idaho, Kansas, and Montana which it believed would survive Shady Grove as being sufficiently “intertwined”

ith th b t ti i ht d fi d i th t t t ”)

ER

ER

with the substantive rights defined in the statute”)

34

WHICH STATE LAWS ARE PREEMPTED BY RULE 23?

• Court expressly didn’t decide Rule 23 preemption of state laws restricting class action

ST

ST

remedies, such as statutes setting a ceiling on total recoverable damages. Shady Grove, 130 S. Ct. at 1439, n. 4.

• Example Cal. Civil Code § 2988.5(a)(2) (Vehicle Leasing Act):ST

STT

RA

NG

ET

RA

NG

E

(a) Except as otherwise provided by this section, any lessor who fails to comply with any requirement imposed under Section 2985.8 or 2988 for which no specific relief is provided with respect to any person shall be liable to such person in an amount equal to the sum of:

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

the sum of:

. . .(2) In the case of an individual action, 25 percent of the total amount of monthly payments under the lease except that liability under this subparagraph shall not be less

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

p y p y p g pthan one hundred dollars ($100) nor greater than one thousand dollars ($1,000); or in the case of a class action, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery in such action shall not be more than the lesser of five hundred thousand dollars ($500,000) or 1

RP

EN

TE

RP

EN

TEE

RE

R percent of the net worth of the lessor.

• Courts are divided as to how to apply both tests to particular state statutes.

• Fifth Circuit declined to extend Shady Grove in holding that Rule 23(e) doesn’t

ER

ER

• Fifth Circuit declined to extend Shady Grove in holding that Rule 23(e) doesn t preclude application of Texas’ unclaimed fund statute. All Plaintiffs v. All Defendants, --F.R.D.--, 2011 WL 2519510 (5th Cir. June 27, 2011)

35

PLAINTIFF STRATEGIES FOR LITIGATING CLAIMS WITH STATE RESTRICTIONS

ST

ST

CLAIMS WITH STATE RESTRICTIONS ON CLASS ACTIONS

l d

ST

STT

RA

NG

ET

RA

NG

E

Filing Considerations

• File in federal court when there is CAFA jurisdiction.

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

j

• Argue for application of Justice Scalia’s plurality test and cite cases applying Shady Grove to find Rule 23

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

and cite cases applying Shady Grove to find Rule 23 preemption.

F l i l i l d i l l d d

RP

EN

TE

RP

EN

TEE

RE

R • For multi-state classes, include previously excluded states (for consumer protection cases, Alabama, Alaska, Georgia, Kentucky, Louisiana, Mississippi,

ER

ER

g y ppand Montana).

36

Class Certification Considerations

ST

ST

• Cite to “categorical rule” in support of broad certification.

• Statutory damages claims may already be easier to certify because th i di id l d ti d l di b

ST

STT

RA

NG

ET

RA

NG

E

there are no individual damage questions, and less discovery may be necessary.

• Argue for nationwide class based on a choice of law provision or

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

g pchoice of law analysis, based on an argument that even class action restrictions that are arguably “substantive,” such as provisions in state consumer protection statutes that limit class claims to individuals in that state do not apply in federal court under Shady Grove See OnStar

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

that state, do not apply in federal court under Shady Grove. See OnStar Contract Litigation, 2010 WL 3516691 at *4 (E.D. Mich. Aug. 25, 2010) (examining the Michigan Consumer Protection Act, which barred non-Michigan residents from bringing claims under it, and finding “that

RP

EN

TE

RP

EN

TEE

RE

R the MCPA’s limitation on class actions conflicts with Rule 23 of the Federal Rules of Civil Procedure and therefore does not prevent non-residents from pursuing class-action claims under the MCPA in this action”)

ER

ER

action ).

37

Class Certification Considerations(Continued)

ST

ST

( )

• Cite Shady Grove as support for an argument that the possibility of a very large statutory damages award against a defendant is S

TS

TTR

AN

GE

TR

AN

GE

not an appropriate basis on which to refuse to certify a class.

See also ESI Ergonomic Solutions, LLC v. United Artist Th t Ci it I 203 A i 94 50 P 3d 844 (A i A 2002)

TR

AN

GE

TR

AN

GEE

& C

AR

E &

CA

R

Theatre Circuit, Inc., 203 Ariz. 94, 50 P.3d 844 (Ariz. App. 2002) (“Given that Congress determined the per-violation penalty and allowed for the pursuit of class actions under the statute, it is not for the court to determine that the penalty when applied in a class

E &

CA

RE

& C

ARR

PE

NT

ER

PE

NT

E

for the court to determine that the penalty when applied in a class action context is unfair. The fairness of statutory punishment, within due process concerns, is properly determined by the legislature To deny the superiority of a class action because

RP

EN

TE

RP

EN

TEE

RE

R legislature. . . . To deny the superiority of a class action because the size of the class made the damages annihilating, would serve to encourage violation of the statute on a grand rather than a small scale.”)

ER

ER

)

38

Documents

Filingg Class Actions in Federal Shady Grovemedia.straffordpub.com/...federal-court-after-shady... · 7/14/2011 · No. 09-cv-3072, 2011 U.S. Dist. LEXIS 22211 (D. Md. Mar. 4, 2011)