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Rule 20, Permissive Joinder 1 Complex Litigation Outline Prof. Steinman Fall 2005 Devices to Aggregate Claims Pros Cons Enables litigation that would otherwise be Loss of control of the parties and attorneys unrealistic for economic reasons (negative claim litigation) Efficiency—avoids duplicative proceedings Affects the jury pool, CHOICE OF LAW and outcome (location of litigation is no small matter) Facilitates consistent results Sweeping effect on claims asserted Final judgment for Ds Homogenization loss of issues Greater stakes greater care greater Complication of discovery increased cost preparation of litigation Accuracy—gives court more information on Accuracy—double edged sword— which to base its decision information overload less accuracy Preferable to parties/tax parties to avoid trial Opportunity to settle may be lost Even - Federalism concerns—cases dragged into federal court that otherwise wouldn’t be there - Greater pressure to settle WAYS to INVOLVE PARTIES WITH INTERESTS in the SUIT 1. Joinder of necessary parties under Rule 19 2. Class Action suits under Rule 23 3. Intervention by excluded parties under Rule 24 METHODS of DISPOSING of DUPLICATIVE or RELATED LITIGATION 1. Stay proceeding 2. Enjoin a suit 3. Consolidate actions (which may require a transfer) 1 Rule 20, Permissive Joinder 2 Permissive Joinder—See generally Rule 19, Supplemental Jx, below Rule 20 Permissive Joinder 1. Claims (or defenses) must arise from the same transaction, occurrence, or series of events a. Same Transaction or Occurrence: fact sensitive, no hard rules, but i. Transaction (Rule 13) = series of occurrences, depending not so much on the immediateness of their connection as upon their logical relationship ii. All logically related events entitling a person to institute a legal action against another 2. Common question of law or fact must exist - Standard of Review on Appeal: abuse of discretion o Deferential standard of review because the trial court is probably in a better position to determine whether the claims should be aggregated - When can you appeal? o Interlocutory appeals are permitted unless it falls within the exceptions outlined in § 1292(b) Mosley v. GM (1974) - Action: ten individuals sued GM alleging discrimination on the basis of (1) race for promotion, wrongful discharge, conditions of employment and hiring, and (2) gender for hiring - Mosley court’s application of Rule 20 o Court found the claims arose from the same series a company-wide alleged policy of discrimination o Court did not NEED to find this way, so why did it? Court WANTS to aggregate claims Signifies the beginning of pro-aggregation policy Problem: suppose a black woman could assert all of the claims, but is not a party to the suit Danger of non-victims litigating injury that is not theirs: binds parties that are not part of the suit, regardless of the merits of the first Could achieve an unfavorable stare decisis difficult for nonparty to litigate their claim in the future o Aggregation of claims is based on the complaint no stringent evidence is required Not necessary to present evidence that there is company-wide discrimination to satisfy permissive joiner under Rule 20 - Pros of Aggregation o Where there’s smoke there’s fire: evidence of one accusation may manifest credence for another - Cons for D o Greater stakes—company-wide, division-wide discrimination o May result in injunctive relief company-wide change in policy o Slippery slope where do we draw the line? White men? Prospective employees? Should all rejects be joined, too? Stanford v. Tennessee Valley Authority (1955) - ISSUE: where the claims properly joined? o D’s move to dismiss or sever - RULE: Rule 20 Joinder where o One action against Ds alleges liability that is jointly, severally, or in the alternative, AND o Where the action arises from the same transaction or occurrence Joint Liability: P alleges that toxic fumes from each D’s plant commingled in the air and then fell on the land damage 2 Rule 20, Permissive Joinder 3 Alternative Liability: P alleges that fumes from either D1 or D2 damage, which is unknown - HOLDING: misjoinder under Rule 20 o Ds’ plants are separately owned and operated, activities are separate and distinct, located at different distances from P’s property o Therefore, separate transactions - REMEDY: sever and then consolidate o Misjoinder under Rule 21 is NOT ground for dismissal o At most, the claims should be severed o BUT, Rule 42 allows consolidation (See Pre-Trial Consolidation, below). Consolidation: appropriate where there are common Qs of law or fact—NO requirement for same transaction or occurrence Pros Cons Ds can cross examine each other Likely outcome for P Efficiency Jury confusion Uniformity Discovery complications Likely outcome for P Discovery is separate Ds are ill equipped to appear together at trial Joinder vs. Consolidation - Rule 20 and Rule 42 yield the same result—so, what is the difference? o Rule 42 does NOT require the “same transaction or occurrence” - When is one more appropriate than the other? o Joint liability both should be sued in the same action to avoid violating DP rights o Severally liability doesn’t matter whether they are heard together or separately Chance & Hall (1972) CHANCE - FACTS: 13 kids injured in 12 different accidents over 5 years in 10 states suing 6 manufacturers for negligence, conspiracy, assault and strict liability - ISSUE: where Ds properly joinder under Rule 20? - RULE: if the Ds are JOINTLY liable then the joinder was appropriate. o Three theories of joint liability: Concert of action Enterprise liability Alternative liability - D’s ARGUMENT: the joinder was impermissible because the governing law from 10 states will present no common Qs of law. o No requirement for common Qs of law if there are common Qs of fact o Look to choice of law principles of the state in which the district court sits (Eerie Doctrine) - HOLDING: Wholesale severance is inappropriate, but Rule 20 joinder is perhaps too much (difficulty in applying the “same transaction or occurrence” requirement) - REMEDY: Permit Ps to litigate the issues of joint liability together, then transfer each case to the appropriate jx to litigate the individual issues 3 Rule 20, Permissive Joinder 4 Effect of Supplemental Jx on Permissive Joinder - NEW RULE: §1367: Supplemental Jurisdiction (1990) o §1367(a): federal court can assert jurisdiction when it forms part of the “same constitutional case or controversy under Article III” Explicitly authorizes exercise of jx over claims that involve joinder or intervention of additional parties o §1367(b): PROHIBITS supplemental jx that would encourage Ps to evade the complete diversity requirement of §1332 (Kroger) DOES NOT APPLY to claims of additional non-diverse Ps who are joined pursuant to Rule 20 (permissive joinder) INCLUDES claims by Ps joinder under Rule 19 compulsory jx and intervening Ps under Rule 24 4 Rule 19, Compulsory Joinder 5 Compulsory Joinder Rule 19 Compulsory Joinder 1. Are there persons who should be joined, either because: a. Their own interests, or b. The interests of the parties might be harmed by their absence 2. If the parties determined to be necessary under Rule 19(a) CANNOT be joined, should the action in “equity and good conscience” be dismissed? - Practical approach is preferred to inflexible application Eldredge v. Carpenters 46 Northern California Counties JATC (1981) - FACTS: Ps allege Ds discriminated on the basis of gender by imposing the requirement of having a job for admission; women are not hired in fair proportions women are not given apprenticeships in fair proportions - ISSUE: are the EMPLOYERS indispensable parties so that Rule 19 joinder is required? - RULE: Rule 19(a) requires to be joined: o (1) persons in whose absence “complete relief cannot be granted” o (2) impaired interests of absentees - APPLICATION: o Three steps to Rule 19: (1) Should people be joined if feasible? (2) If yes, join them. (3) If joinder is not feasible, should the action be dismissed? o (1) Should people be joined? Question whether you can grant complete relief to all EXISTING parties, NOT whether you can grant complete relief for all possible parties Court says that employers contracted for JATC to represent their legally protectable interests interests are adequately represented o (2) Is it feasible? Consider SMJ, PJ, venue, # of Ds needed to be joined Court says joinder is NOT feasible b/c of difficulty in joining 4500 Ds—representation would be inadequate, too o (3) Should case be dismissed? “equity and fair conscience” Factors: Extent to which judgment may be prejudicial to absentee Can prejudice be lessened/avoided? Will truncated suit without absentees be adequate for existing parties? Is there another court where suit can be brought to join all parties? Court says it is not necessary to join all employers and they can always intervene to represent their interests - HOLDING: Joinder is NOT necessary and intervention can resolve any potential problems. Effect of Supplemental Jx on Compulsive Joinder - NEW RULE: §1367: Supplemental Jurisdiction (1990) o §1367(a): federal court can assert jurisdiction when it forms part of the “same constitutional case or controversy under Article III” Explicitly authorizes exercise of jx over claims that involve joinder or intervention of additional parties 5 Rule 19, Compulsory Joinder 6 o §1367(b): PROHIBITS supplemental jx that would encourage Ps to evade the complete diversity requirement of §1332 (Kroger) DOES NOT APPLY to claims of additional non-diverse Ps who are joined pursuant to Rule 20 (permissive joinder) INCLUDES claims by Ps joinder under Rule 19 compulsory jx and intervening Ps under Rule 24 6 Intervention 7 Intervention Rule 24 Intervention - Provides a means for an outsider has an interest in the outcome of a case to voluntarily join the suit as a party - Principle means for an excluded person to force his or her way into the suit - Economy and efficiency: merges additional issues related to the original case into one suit, avoiding multiple trials - Brunet’s Powerful Economies of Intervention: o (1) prevents docket clogging o (2) prevents inconsistencies in fact finding and law determination consistency o (3) avoids complicated issues of collateral estoppel Planned Parenthood v. Citizens for Community Action(1977) - ISSUE: Was district court’s denial to an organization concerned with representing the property interests of the community to intervene in an action against a local city ordinance aimed at preventing the construction of an abortion clinic improper? - RULE: Three part test for determining eligibility for intervention (Rule 24(a)(2)) o (1) that he has a recognized interest in the subject matter of the primary litigation o (2) that his interest might be impaired by the disposition of the suit, and o (3) that his interest is not adequately represented by the existing parties - APPLICATION: o (1) recognized interest in original suit Must be a “significantly protectable interest” Court said interest in property is the most basic right that Rule 24 was intended to protect— thus, applicant’s interest in property value was sufficient o (2) impairment of ability to protect applicants’ interests Court said applicants needed to be joined to protect interests in property value o (3) adequate representation Court said the absence of evidence in the record that reflects the effect an abortion clinic could have on property values was sufficient to support inadequacy of representation - HOLDING: Denial of intervention was improper; applicants should be permitted to intervene. US v. Reserve Mining (1972) - Illustrates intervention from BOTH sides o Interests of interveners on D side Chamber of commerce, property owners, etc. alleging economic interests in the reserve, a major source of economy in the state While the suit is not a civil action, it is public action that is well-suited to act as an administrative tribunal open to hear interests of all parties NOTE there is difficulty in reconciling the difference in relief sought (money damages vs. injunctive relief) o Interests of interveners on P side Citizens and 4 environmental groups alleging interests in the recreational and aesthetic aspects of the lake, the environmental impact, and the lake as a source for drinking water - Illustrates how intervention may be used to join parties who would not be able to assert claims on their own o The interveners on both sides would NOT be able to bring suit on their own because none of the parties are alleging claims based on LEGAL RIGHTS—only wish to voice their interests - Illustrates the necessity for a CONSENT DECREE when interveners are present 7 Intervention 8 o Gives interveners the opportunity to object to the terms of the settlement where they would not be able to in a private settlement o Interveners are not BOUND by the consent decree but they are certainly subject to the effects Effect of Supplemental Jx Under §1367 on Intervention - See Supplemental Jx, below - If Federal Q, claim must arise from a common nucleus of operative fact if federal court does NOT have SMJ over the claims of interveners - If Div Jx, federal court shall NOT have SMJ over Rule 24 interveners if complete diversity will be destroyed 8 Consequences of Failure to Join—Supplemental Jx 9 CONSEQUENCES of FAILURE to JOIN INDISPENSIBLE PARTIES Martin v. Wilkes (1989) - Three suits: o (1) NAACP & Black FFs vs. City & Board consent decrees are entered that include the affirmative action in hiring o (2) White FFs vs. City & Board (Ps allege that consent decrees will cause discrimination against white FFs) relief is denied for failure to show irreparable harm o (3) Different FFs vs. City & Board (Ps allege that the consent decrees are unconstitutional for discriminating on basis of race) district court says these FFs are precluded from challenging the the consent decrees because they were not parties to the suit - ISSUE #1: Should the White FFs have been joined to the first suit? o White FFs could have intervened in the first suit, but they were not timely o However, the White FFs did not know that their interests were being challenged until the entering of the consent decree o Illustrates that it is better to intervene early rather than risk being unable to represent your interests - ISSUE #2: Could the third suit have been avoided had the White FFs intervened into the first? o Probably not, just because their interests would have been represented does not guarantee that they would have been satisfied with the outcome - ISSUE #3: Where does the burden f failure to intervene lie? Should the White FFs be bound by the consent decree or should it be vacated? - HOLDING: Plaintiffs are burdened with joining necessary parties under Rule 19. o SCT finds that Ps (Black FFs & NAACP) should have joined the White FFs under Rule 19 o Policy: it is preferred to impose burden on parties to the suit rather than third parties who might not even be aware of the litigation Supplemental Jurisdiction for Joinder (Compulsive or Permissive) and Intervention - OLD RULES: Ancillary and Pendent Jurisdiction o Ancillary Jurisdiction When federal court doesn’t have SMJ as an incident to disposition over the ENTIRE case (i.e., a compulsory counterclaim that isn’t a federal Q) BUT, cannot extend jx when it will undercut the intent of the particular jurisdictional statute involved (i.e., complete diversity) Purpose = “judicial economy and fairness to the litigants” o Pendent Jurisdiction Allows a federal court to entertain a state-law claim derived from “a common nucleus of operative fact” as a federal law claim (Gibbs) Purpose = “judicial economy and fairness to the litigants” - NEW RULE: §1367: Supplemental Jurisdiction (1990) o §1367(a): federal court can assert jurisdiction when it forms part of the “same constitutional case or controversy under Article III” Explicitly authorizes exercise of jx over claims that involve joinder or intervention of additional parties o §1367(b): PROHIBITS supplemental jx that would encourage Ps to evade the complete diversity requirement of §1332 (Kroger) DOES NOT APPLY to claims of additional non-diverse Ps who are joined pursuant to Rule 20 (permissive joinder) INCLUDES claims by Ps joinder under Rule 19 compulsory jx and intervening Ps under Rule 24 9 Federal Injunction of State Proceedings 10 STAY ORDERS/INJUNCTIONS What is “duplicative” litigation? - Duplicative Litigation = simultaneous prosecution of two or more suits in which some of the parties are so closely related that the judgment in one will necessarily have a res judicata effect on the other - Three basic types of DUPLICITIVE Litigation: o (1) Repetitive Suits: multiple suits on the same claim by the same P against the same D o (2) Reactive Suits: separate suit filed by a D to the first action against the P to the first action, seeking a declaratory judgment that it is not liable under the conditions of the first action or asserting an affirmative claim that arises out of the same transaction or occurrence as the subject matter of the first action o (3) Overlapping Class Actions: separate actions by class members on the same cause of action raised in the class action, seeking to represent the same or similar class - Related Litigation: separate suits which involve similar parties and issues, BUT res judicata will NOT apply Problems of Duplicative Litigation - Allowing separate cases between the same parties on the same or similar issues proceed independently is wasteful o ALSO allows parties to forum shop o Can result in inconsistent or conflicting determinations General Rule = first to file suit has priority Playtex v. Gluckin (1969) - RULE: The first suit should have priority absent a showing of convenience favors the second action proceeding first. (court should use it’s discretion) o Mattel exceptions: (1) “customer action” where the first suit filed is a customer of the alleged infringer while the second suit involvers the infringer himself (2) where forum shopping ALONE motivated the choice of the situs for the first suit - HOLDING: Issuance of a preliminary injunction against the first suit in favor of the second suit proceeding first was NOT an abuse of discretion. - Why is there are exception here? (balancing test) o Gluckin will likely put up a more forceful defense (Woolworth has less at stake than Gluckin, also may have less knowledge of the product) Primary party is really Gluckin, not Woolworth (a mere customer of Gluckin) o Location of witnesses and evidence (Woolworth’s evidence was in NY—the jx of the 2nd suit) o Playtex will not lose its opportunity to sue Woolworth b/c Playtex can bring in Woolworth as an additional counterclaimant against Gluckin (because there is PJ) Pretrial Consolidation Rule 42 Consolidation - If there are COMMON QUESTIONS of law or fact, court can: o (1) order joint hearing of any/all matters, OR o (2) consolidate actions 42(b) requires the court to order separate trials of claims or issues where furtherance of the convenience is possible or it is necessary to avoid prejudice. Consolidation is increasingly employed in mass tort situations, and is often upheld - Jurisdictional requirements o Actions MUST be pending in the same the same division of the same federal court, BUT 10 Federal Court’s Injunction Against State Proceedings ANTI-INJUNCTION ACT 11 o §1404(b): motion, consent or stipulation of the parties within the court’s discretion to transfer action to any other division in the same district All potential consolidation actions should be assigned to one judge to determine the feasibility and appropriateness of consolidation - Effects of Consolidation o Does NOT merge the suits into a single cause o Does NOT change the parties’ rights in any way o Does NOT make parties in one suit parties to another o Discovery some courts strictly adhere to SCT’s dictum that the claims do not merge (meaning no discovery to peripheral parties) but some court have authorized suit-wide discovery o BUT consolidation often has effects on the litigants’ procedural right notwithstanding the SCT’s dictum that it should not - Policy: o Convenience, economy, accuracy and avoidance of duplication - What about interlocutory appeals? Three attitudes: o No merger of claims means that immediate appeal should be allowed o Consolidation still creates one civil case, meaning that Rule 54(b) certification for interlocutory appeal is needed o Case by case basis Katz v. Realty Equities Corp. of NY (1975) - HOLDING: An order requiring the drafting of a single complaint for separate claims that were consolidated for pretrial purposes only was not beyond the court’s discretion where the single complaint would be more convenient for pretrial handling. o There is no benefit to collect 16 identical answers from the same D in each of the cases o Consolidated complaint does not supersede the individual complaints or impermissibly merge the rights of the individual parties EFFECTS OF CONSOLIDATION ON LITIGANTS TRANSFER §1404: Forum Non Conveniens - Federal court can transfer any civil action to any other federal district or division if: o (1) it is in the interest of justice o (2) it is more convenient for the parties o (3) it is to an eligible receiver (another district where the suit could have been brought—i.e., SMJ, PJ, and venue are all satisfied) - Plays an important role in helping consolidation (can only consolidate claims in the same district) Ginsey v. ITK Plastics (1982) - FACTS: o Ginsey filed suit in ED of PA to recover payment for goods returned to it in breach of K If not PA, P would prefer NJ o ITK: ED of PA has no PJ, and Mass is more appropriate because there is another similar suit between the same parties there - HOLDING: in the interest of economies, time and effort, it is easier to transfer the claim to facilitate consolidation. 11 Federal Court’s Injunction Against State Proceedings ANTI-INJUNCTION ACT 12 o Great weight should be given to forum that P selects to bring claim in, however, sometimes it just makes more sense to do it someplace else - CHOICE of LAW: o Transferee ct should use choice of law principles form transferor court (from the state in which the district court sits) Policy: if §1404 transfer could be used to change choice of law, it would be used as a vehicle for forum shopping (obviously courts want to avoid this) BUT, it is favorable to transfer to a court which will be applying its own law - If the is a §1406 transfer, there is no need to look to choice of law principles for transferor court because it was never the proper venue in the first place o §1406(a) allows transfer in the interests of justice when venue was IMPROPER in the FIRST place - RULE: Consolidation should NEVER affect choice of law because there is no merging of claims TRANSFER UNDER MULTIDISTRICT LITIGATION PROCEDURES - Judicial Panel on Multidistrict Litigation (JPML) o Created by Congress o Civil actions with common Qs of fact may be transferred to one district for pre-trial consolidation (usually use §1407) Then, remanded after pretrial proceedings o Policy: convenience of parties, promotion of justice and efficiency In re Aviation Products Liability Litigation (1972) - Two Categories of Cases: o (1) P Corps asserting claims for damages resulting from defects in design and manufacture of helicopter engines o (2) P individuals asserting claims for personal injuries - Common Qs o Were there defects in the design and manufacture of helicopter engines that resulted in crash? Conceded that issues are not identical, but are interwoven Discovery will be common in all suits - Why do Ds object to consolidation? o Concern that it will make them participate in discovery that is not useful for them o Lack of a single district with jx over all Ds—precludes a common trial on liability - Did pretrial consolidation make sense? o Very different facts, different altitudes, etc—but the discovery will be around the engineers responsible for the design of the engines Makes more sense to depose these witnesses once rather than several times o Also, fact that there is no single district with PJ over all Ds is irrelevant If all other requisites to §1407 transfer are satisfied, consolidation for pretrial proceedings may proceed despite lack of PJ (venue doesn’t matter) o Manual for Complex & Multidistrict Litigation: parties can seek order to excuse them from attending deps but can still see the transcripts and re-depose if there was an interest of theirs that was not adequately represented - Choice of Transferee Forum o Considerations: docket congestion, location of evidence or witnesses, concentration of parallel litigation in state courts 12 Federal Court’s Injunction Against State Proceedings ANTI-INJUNCTION ACT 13 In re Factor VIII or IX Concentrate Blood Products - ISSUE: Does transferee judge have the authority to limit # of expert witnesses at a trial? - HOLDING: §1407 is rendered ineffective if transferee judge is unable to make meaningful orders. - Questions: o What is the scope of transferee judge’s authority? (When does he go too far?) o What is the scope of transferor judge’s authority to modify the transferee court’s orders? Lexecon: at the completion of pretrial proceedings, the action MUST be remanded (unless it has been terminated) even where parties want to allow transferee court try the issues - Major criticisms §1407: - No venue requirements; panel can choose whichever district it wants - Can be used to do much grander things than just promote efficiency in the courts o Westinghouse: D was unable to pay 100% of conflicting orders consolidation o In re Asbestos: court makes suggestions on streamlining 26,000 separate claims Case deferral program: cases with critically ill Ps litigated first Limited Fund Class Actions: global settlement with even distribution 13 Federal Court’s Injunction Against State Proceedings ANTI-INJUNCTION ACT 14 Anti-Injunction Act Exceptions of When Federal Court Can Enjoin State Proceedings 1. As expressly authorized by and Act of Congress a. Act need not explicitly reference §2283 b. i.e., § 1983 Civil Rights Statute c. Mitchum v. Foster: if Congress provides a right or remedy, the statute can only be given its intended scope by enjoining the state action—no express provision is necessary 2. Where necessary in aid of its jx a. Traditionally applied when federal court’s jx is in rem and the state court action may effectively deprive the federal court of the opportunity to adjudicate as to the res b. Analogized (1) to school desegregation suits to prevent state proceedings that would interfere with the federal court’s continuing jx, (2) to a class action so far advanced that it was the virtual equivalent of a res, and (3) to a proceeding involving a bankruptcy and district court’s continuing jx with respect to settlement trust’s reorganization proceedings c. Carlough v. Amchem: a federal judge considering settlement of an asbestos class action COULD enjoin prosecution of state court class actions which purported to request the judicially declared opting out of all class members in that state i. Purpose of state court action was a preemptive strike against the vialility of the federal suit 3. To protect or effectuate its judgments a. Allows an injunction to prevent relitigation of a suit in which a judgment has been entered b. Judgment: an order from which an appeal lies c. Res Judicata vs. AIA i. If you plead RJ lose, it is TOO LATE to plead AIA ii. Strategically, it is better to plead AIA FIRST Standard Microsystems v. Texas Instruments (1990) - Does not fit squarely within the exceptions to the AIA o Can only be #2 if: In rem jx where state may interfere with federal court’s control over res OR, complex MDL that is advanced and shows good reason to bar state court from interference - Barancik: state action maybe enjoined if a motion for injunction against state actions is made BEFORE the commencement of any state court actions In re Baldwin-United Corp. (1985) - HOLDING: If injunction is issued before the commencement of state actions, AIA is not applicable - All Writs Act grants ancillary jx when: o (1) parties tries to relitigate existing federal judgment o (2) to prevent state court from interfering with federal court’s ability to decide a case ALL WRITS ACT vs. ANTI-INJUNCTION ACT - All Writs Act is always the Act the enables federal courts to enter injunctions, even anti-suit injunctions - Anti-Injunction Act limits the circumstances under which federal courts can enjoin state court proceedings - When it comes to enjoining suits that have not yet been filed: federal court is invoking the AWA and is not limited by the AIA 14 Federal Court’s Injunction Against State Proceedings ANTI-INJUNCTION ACT 15 15 CLASS ACTIONS Types of Class Actions Maintainable 16 CLASS ACTIONS - Procedural Benefits o One trial to litigate hundreds, even thousands, of claims enormous benefit o Deterrence: provides remedy where D has gotten away with millions, but each individual P has only lost a few dollars - Missions of Class Action o (1) to reduce units of litigation by bringing under one umbrella what might otherwise be many separate but duplicating actions; o (2) even at the expense of increasing litigation, to provide a means of vindicating the rights of groups of people who individually would be without effective strength to bring their opponents into court at all (i.e., negative value actions) - 1938: Federal Rules adopt Rule 23 with 3 classifications o (1) True Class Action Involves a right which is “JOINT, or common, or secondary in the sense that the owner of a primary right refuses to enforce that right and a member of the class thereby becomes entitled to enforce it.” 1921: SCT reaffirmed a case from 1853 which held that a decree in a class action involving joint or common rights binds ALL class members o (2) Hybrid Class Action The right involved was SEVERAL rather than joint, but the object of the action was the adjudication of claims which affected SPECIFIC PROPERTY involved in the action Courts tended to hold that the decree was binding on ALL class members NOTE: this is now largely superseded by the Bankruptcy Act o (3) Spurious Class Action The right involved was a SEVERAL but there was a COMMON Q of law or fact affecting the several rights and a COMMON RELIEF was sought NOT binding on all members Similar to the contemporary (b)(3) class action Largely panned by the courts Benefits: A means of securing joinder in federal courts without incurring the jurisdictional obstacles involved in Rule 20 joinder Could compel the settlement of all claims arising out of widespread injury (i.e., train wreck) Could be a more effective device in dealing with race relations problems - 1966 Amendments abolish the 3 classifications and adopt 4 prerequisites o NUMEROSITY o COMMONALITY o TYPICALITY o REPRESENTATIVENESS - Three tier approach—looser definitions and NOT mutually exclusive categorization - Other Rules: o 23(c)(1): court must determine at an early stage in litigation whether certification is practicable Should P’s have opportunity to conduct discovery prior to forming argument for class certification? o 23(d)(2): providing right to notice and opt-out within court’s discretion o 23(f): INTERLOCUTORY APPEAL is permissible 16 CLASS ACTIONS Types of Class Actions Maintainable 17 Similar to spurious class action, COMMON Qs predominate, class action is superior to other methods and there are not undue management difficulties Binding on ALL members (all 3 classes are binding) ETHICAL CONSIDERATIONS IN CLASS ACTION PRACTICE - Named P is obligated to represent the best interests of the class BUT he also has personal interests to pursue which might not coincide with what is in the best interest of the class - Also, attorney is obligated to act in best interest of the class but may be motivated by attorneys fees and contingency fee contract Kline v. Coldwell, Banker & Co. (1975) ISSUE: Is skepticism regarding P’s motivations for filing claim enough reason to deny certification? - Generally, policy goes against denying certification based on skepticism - Better to use another device (i.e., lack of commonality or typicality) PREREQUISITES to a CLASS ACTION MAINTAINABLE - Burden on class representative to prove that prerequisites are satisfied ADEQUATE DEFINITION of the CLASS - Must have an adequate definition of the class BEFORE the four prerequisites are satisfied - Must be clear to COURT and to PARTIES who is involved - NOT necessary to ascertain exactly whom and how many members will be within the definition - The EXACTITUDE with which the class is defined depends in part on the RELIEF sought - Overinclusiveness and underinclusiveness are of particular importance - Courts have approved classes which included FUTURE MEMBERS (Robertson v. NBA, holding that a class of “all presently active players, those who were active at the time the action was originally commenced, and future players in the NBA,” was neither amorphous, nor imprecise due to the ease of identifying potential NBA players). - Court may redefine and fine-tune the definition - Policy goes against denial of certification based on definition of class o Problems only surface when it comes to enforcing the remedy o No need for notice and res judicata is not a problem because subsequent parties will identify themselves Simer v. Rios (1982) - ISSUE: is the class sufficiently defined? - FACTS: o Definition: (1) those individuals eligible for assistance, but who were denied; (2) those who were discouraged from seeking assistance o Statutory purpose: to enable low income families to participate in energy conservation o Eligibility requirements: shut off notice - PURPOSE of DEFINING CLASS o To give NOTICE to eligible members o To give MONETARY relief o ENFORCEMENT purposes res judicata/collateral estoppel - NOTICE o (b)(1) and (b)(2): court can determine appropriate means of notice o (b)(3) must provide notice to all members who are identifiable by reasonable effort 17 CLASS ACTIONS Types of Class Actions Maintainable 18 - HOLDING: It is proper to deny class certification when there are significant problems in identifying the members of the class. o Here, court found that it would be too difficult to identify “those who were discouraged from seeking assistance” due to shut-off requirement 18 CLASS ACTIONS Types of Class Actions Maintainable 19 NUMEROSITY - No magic number - Consider whether joinder or intervention would be more practicable—consider geography o McAlister: excessive costs of joinder may be sufficient to establish numerosity o Large number of Ps, each of whom must be served with all pleadings, motions, and documents and has the full rights of an appearance can be very unwieldy o Where number of Ps is so large that individual influence of pleading, discovery and litigation is effectively eliminated anyway - Negative Value: where individual members lack incentive to vindicate their rights in separate actions o Civil rights claims: where fear/reluctance effects people from filing individual suits strength in numbers - Consider the type of relief sought o Doe v. Charleston Area Medical Center (1975): “informal” survey showing 70 women/month were forced to seek abortions elsewhere was enough where constitutional declaratory judgment was sought o Injunctive relief is of particular importance regarding numerosity because actions that do NOT seek money damages typically provide LESS incentive for individual action - Generally, the cut off is where multiparty suits start to look like class actions - Sometimes, numerosity is closely linked to the merits of the claim o Makuc: evidence that defect in motorcycle tire existed in one out of every 50 tires was insufficient because it only establishes that in one out of every 50 motorcycle tires the injury MAY have occurred—no proof of actual occurrences - Policy behind requirement the “joinder is impracticable” o Individual litigation is preferred o Problems with binding unnecessary people to the judgment Board of Education of Township High School v. Climatemp, Inc. (1981) - ISSUE: Is the number of plaintiffs sufficient to certify the class action? - HOLDING: The number of entities potentially victimized is not so numerous that intervention or joinder of plaintiffs is impractical - APPLICATION: o No magic number: joinder has been held to be impractical with as few as 40 but as many as 350 o Must achieve economies of time, effort, and expenses and promote more uniformity than joinder o Geography and jurisdictional challenges may go against joinder COMMONALITY - Common Qs of law or fact must PREDOMINATE over any questions affecting only individual class members - Of particular importance with 23(b)(3) class actions - Generally, damage issues will not alone destroy certification (See Blackie, below) - SUBCLASSES can be an appropriate method of dealing with conflicts among class members o NOTE: not all differences among class members will divide along such clear lines - Class certification may not be appropriate due to individual defenses under the doctrine enunciated o Particular concern for preoccupation with an individual defense on part of the class representative or a subclass Blackie v, Barrack (1976) - COMMON Qs 19 CLASS ACTIONS Types of Class Actions Maintainable 20 o (1) Were reserves adequate under general accounting principles? o (2) Was there culpability with respect to overvalued inventory? o (3) Was there a consistent disregard for accounting? - APPLICATION o What is Predominance? Central role, logical priority—number is not of particular importance D claims the following issues are INDIVIDUAL: (1) damages and (2) subjective reliance o Subjective Reliance: FRAUD on the MARKET THEORY: court rules that subjective reliance is a common Q if misrepresentation is material, then causation is adequately established (in stock fraud) o Damages: CONFLICTS D argues that conflicts among class members precludes class certification What if some members need to maximize inflation while others need to minimize? This can be resolved with a rescissory measure of damages (i.e., return stock for the price it was sold) - HOLDING: Commonality is not precluded by individual questions related to damages or the issue of subjective reliance in fraud on the market claims. Smilow v. Southwestern Bell Mobile Systems (2003) - COMMON Qs o (1) Ps claims are based on a standard contract that all Ps entered into with D o (2) All class members received user guide and monthly invoices showing D was charging for incoming calls (waiver defense) - Court based holding of PREDOMINANCE on testimony from expert who claimed he could reasonably identify the class members and actual damages through the use of a computer program o Court is permitted to go beyond the issues raised in the pleadings, however it should not go so far to decide the case on its merits o CRITICISM: does this case show a way to circumvent the predominance requirement TYPICALITY - Typicality and commonality requirements tend to merge o Both typicality and commonality serve as “guideposts for determining whether under particular circumstances maintenance of a class action is economical and whether P’s claim and the class’s claim are so interrelated that the interests of the class members will be adequately protected in their absence.” o Commonality applies to the common Qs presented by the claims while typicality applies to the nature of the representative’s claim. - Strategy: it is best to define the class generally to prove typicality with more ease o i.e., in Falcon had there been a general definition of those discriminated against on the basis of race by Southwestern Bell, P would have had a typical claim General Telephone Co. v, Falcon (1982) - FACTS: P initiates class action against D for discrimination in (1) promotions, and (2) hiring - ISSUE: Is P representatives claim typical having been hired but not promoted? - RULE: Class representative must be part of the class and possess the same interest and suffer the same injury as the class members. 20 CLASS ACTIONS Types of Class Actions Maintainable 21 o While discrimination is often by nature a class action, the requirements of Rule 23 still must be carefully satisfied. o There must be ACTUAL, not presumed conformance with Rule 23 - HOLDING: The requirement for typicality is not satisfied because it is not clear that the representative will adequately protect the interests of those discriminated in hiring. o Because Falcon was hired, his claim was not typical and he should not be permitted to prosecute a claim behalf of the unemployed. La Mar v. H&B Novelty & Loan Co. (1973) - D class action several shops and 33,000 customers - ISSUE: Whether a P with a cause of action against a single D can institute a class action against the single defendant AND an unrelated group of Ds who have engaged in conduct closely similar to that of the single D? - HOLDING: P representative should possess a claim against each member of the D class o CRITICISM: strict application of this requirement would prevent actions where a P class sues a D class REPRESENTATIVENESS - Test for adequacy (See Peil): o (1) representatives should have no interests which are antagonistic to other member of the class o (2) representatives’ attorney should be capable of prosecuting the instant claim with some degree of expertise - Need not be the BEST possible representative (But see PSLRA, below) - MUST be one who will pursue a resolution of the controversy with requisite VIGOR and in the interest of the CLASS - Private Securities Litigation Reform Act (PSLRA): o Directs the initial P in securities fraud actions to provide detailed notice to other investors, inviting them to express an interest in serving as “lead plaintiff” o Then, the court should appoint “lead plaintiff” based on who is “most capable of adequately representing the interests of the class members - RELATIVES/CRONIES—Conflict of Interest o Class representatives CANNOT be too closely identified with the lawyer. (See London v. Wal- Mart Stores, 2003, holding lifelong friend and former stock broker of class counsel was not an appropriate class representative due to potential conflict of interest) - Also relates to adequacy of CLASS COUNSEL Hansberry v. Lee (1940) - ISSUE: To what extent are nonparties bound by prior class action suits? - HOLDING: The procedure and the course of the litigation sustained here by the plea of res judicata do not satisfy the requirement that the parties have been adequately represented in the prior litigation. o The Parties who sought to secure the racially restrictive covenant cannot be said to be in the same class with or to represent those whose interest was in resisting performance o Dually and potentially conflicting interests covenant, by nature, imposes obligations on some and confers rights on others Peil v. National Semiconductor (1980) - ISSUE: Should a third requirement be added to the test for adequacy requiring that the representative have first-hand knowledge of the relevant facts? 21 CLASS ACTIONS Types of Class Actions Maintainable 22 - HOLDING: “To require a person unschooled in the realm of complex and abstract security laws to have first-hand knowledge of facts cloaked in an alleged conspiratorial silence… would render the class action device an impotent tool.” o Influence and control over suit by the attorney is controlled by the court’s ability to limit the fee award to P’s counsel should it prevail 22 CLASS ACTIONS Types of Class Actions Maintainable 23 RULE 23(b)(1)(A)—“INCOMPATIBLE STNADARDS” CLASS ACTIONS - Certification of this type is appropriate “when the prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class.” (See Rule 23(b)(1)(A)). - TEST: look to impact on party OPPOSING the class and whether separate actions would subject it to incompatible standards - NO OPT OUTS for individual class members - Class certification MUST NOT have the effect of an injunction against Ps with pending individual claims o In re Federal Skywalk Cases (1982): Class certification was reversed where certification of a mandatory class action had the effect of an injunction, prohibiting class members from prosecuting or settling their pending state court suits (violates the Anti-Injunction Act) - Example: suits by taxpayers to invalidate a municipal action or suits by shareholders to compel the declaration of a dividend - If MONEY DAMAGES are central to the case, the court usually will not certify an “incompatible standards” class o NOTE: actions which would require D to pay some but not all Ps is covered by (b)(3), not (b)(1) - Possibility to opt-out (23(d)(2)) RULE 23(b)(1)(B)—“LIMITED FUND” CLASS ACTIONS - Aggregation of the claims must exceed the aggregation of all of the assets o Assets look to the market value of the company and other resources (i.e., insurance) o Claims court must consider all relevant factors (i.e., each claimant’s likelihood of winning, addendums, etc.) Note differences between one accident situations (i.e., airplane crashes) vs. multi-incident causation claims (i.e., asbestos, one P might prove causation while another may not) Sometimes, there may be a statutory or contractual limit on the amount of assets receivable Judge Friendly: Should there be a limit to on repetitive punitive damages? - Do NOT total the number of prayers for relief in determining the value of the claims - Jurisdictional Split: to what degree of certainty must the class show that D’s assets are exhaustible? o 2nd Dist: Class must show that individual claims will inescapably compromise the claims of the absent class members o SCT: required only a “substantial probability”—that is less than a preponderance but more than a possibility—that if damages are awarded the claims of earlier litigants will exhaust the D’s assets o Ortiz does not resolve this question - Also, what about bankruptcy? Is it a preferred alternative to (b)(1)(B) claims? - Possibility to opt-out (23(d)(2)) Ortiz v. Fibreboard (1999) - HOLDING: Must show that fund is limited by more than the agreement of the parties and has been allocated to claimants belonging within the class by a process of addressing any conflicting interests among the class members. o Parties must present evidence, not mere representations, of what the assets and value of claims are o Extremely problematic to deny the Ps the right to opt out because Capping of damages 23 CLASS ACTIONS Types of Class Actions Maintainable 24 What do we do with Ps who have pending individual litigation? Will futures have standing to sue? o Constitutional concerns Substantive rights of the litigants o Staying other proceedings does not fit squarely within the prongs of the Anti-Injunction Act Injunction permitted by an express Act of Congress Necessary for Federal Court to stay proceedings in exercise of its jurisdiction Necessary to effectuate a judgment NOTE: there have been arguments for permitting (b)(1)(B)s to circumvent these requirements RULE 23(b)(2) CLASSES—Primarily Injunctive Relief - Appropriate when “the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate FINAL INJUNCTIVE RELIEF or CORRESPONDING DECLARATORY RELIEF with respect to the class as a WHOLE.” o i.e., school desegregation, institutional restructuring cases - Questions relate to the appropriateness of certification where money damages are sought - Possible ability to opt out - Why do Ps seeking injunctive relief need class certification? Doesn’t injunctive relief provide a remedy for all anyway? o To assure enforceability of the injunction—discovery may be limited if class certification is not granted, it will insure the attorney-client privilege is maintained between counsel and unnamed class members In re Monumental Life (2004) - RELIEF SOUGHT: o (1) an injunction prohibiting the collection of discriminatory premiums, o (2) reformation of policies to equalize the benefits available to black insureds, o (3) restitution of past premium overcharges or benefit underpayments (MONEY DAMAGES) - ISSUE #1: is it appropriate to certify a (b)(2) class when monetary relief is sought? - RULE: To be viable, monetary relief under Rule 23(b)(2) must flow directly from the liability to the class as a whole on the claims forming the basis for injunctive relief. o Must be capable of computation based on objective standards o Don’t want individual damage hearings to destroy the purposes for class action suits - ISSUE #2: Must there be opportunity to opt out if money damages are sought? - RULE: Court should use it’s discretion and provide notice requirement and opt-out right as it sees fit o Usually classes seeking money damages are certified under (b)(3) which requires best practicable notice and the right to opt out (because of the preclusive effects on future actions) o (b)(2) does not specify whether notice is necessary and if so, what sort Court should use its discretion and apply 23(d)(2) as it sees fit 23(d)(2): provides notice/opt out for any class action is within court’s discretion - ISSUE #3: Should this be certified as a (b)(3)? o Not preferable: cost of notice is high, Ds will be more inclined to settle and P’s position will be weakened by the opt-out 24 CLASS ACTIONS Types of Class Actions Maintainable 25 RULE 23(b)(3) CLASSES—Monetary Relief - Policy is more focused on economies and efficiencies than in (b)(1)s and (b)(2)s o (1) Primary issue: PREDOMINANCE Is it more preferential to litigate claims together than separately? o (2) Also significant: SUPERIORITY How does the court know if individual members have individual interests—making joinder or intervention more appropriate? Legitimate objective interests are determined from the face of the complaint Also, look to already pending litigation to gauge the amount of likely opt-outs or class actions in other jxs, etc. o (3) is this the most preferential forum for class action? o (4) will management be problematic? Relates to superiority prong Individual suits, joinder, consolidation, collateral estoppel, non-judicial mechanisms, etc. - Most appropriate for mass torts and mass related cases o Initially, legal world was skeptical of ability to solve mass tort claims with class actions due to the individual nature of causation and damages (See Advisory Committee Notes, 1966) See also Mertins v. Abbott Labs (1983) holding that general causation did NOT predominate over individual causation and damage calculation o But (b)(3) certification has since grown to be quite popular Court dockets cannot handle the individual litigation of the repetitive wrong Bifurcation goes hand and hand with mass tort (b)(3) classes Jenkins v. Raymark Industries, Inc. (1986) - Marks the shifts in judicial attitude toward to certification of mass tort classes - PROCEDURAL HISTORY: Ds appeal from a decision granting (b)(3) certification to class of asbestos Ps defined as - ISSUE: Was district judge’s certification of (b)(3) class based on the predominance of D’s “state of the art” defense Ds appropriate? o Bifurcated the determination of punitive and actual damages: Class jury would decide the “state of the art” defense punitive damages Then, mini-trials with subclasses would decide the issues of individual damages o Court: this will significantly advance the resolution of hundreds of cases clearly superior to the alternative of repeating the same issues hundreds of times - HOLDING: Bifurcation of issues is appropriate when it is clear that it is the superior alternative to litigating the issues in individual claims. Castano v. The American Tobacco Company (1996) - “Nicotine Dependency” Theory: P’s novel claim that tobacco companies concealed their manipulation of the nicotine levels in cigarettes - Designed to help certification based on precise definition of class o Limited to those (1) who had been diagnosed as nicotine dependant by a medical practitioner, (2) had smoked cigarettes, and (3) had been told by a medical practitioner that smoking had adverse effects - Class is DENIED o Concern for undue leverage and blackmail o 7th Amendment all issues should be tried by one jury (Compare Jenkins, above) - Marks trend in tightening class action restrictions 25 CLASS ACTIONS Types of Class Actions Maintainable 26 DEFENDANT CLASS ACTIONS - Rule 23: no separate category for D class actions - Particular concern for adequacy of representation—no one wants to play this role o Also, attorneys aren’t jumping to represent these cases either—no big payday Thillens v. Community Currency Exchange Association of IL (1983) - P sues CCEAI and former IL officials for 23 years of conspiracy to restrain P’s trade as an abulatory currency exchange seeking compensatory, punitive, and injunctive relief + attorneys’ fees - Association will essentially act as the representative seems congruent to extend the role of representative in business respects to representative in litigation o Also, normally all Ds would opt out, but here there is incentive for Ds to stay in and let the organization litigate for them 26 CLASS ACTIONS Remedies 27 SEQUENCING of CLASS CERTIFICATION - Usually, certification is determined BEFORE deciding the case on the merits o Fairness to D D should know the stakes of the litigation o Effect of opting out - However, courts are more and more relaxed about certifying classes AFTER deciding the case on the merits - What is the effect of certifying a class after P gets a favorable judgment on the merits? o i.e., SJ, D’s failure to comply with an order to compel, etc. o OFFENSIVE COLLATERAL ESTOPPEL: if certain issues were already litigated it’s possible that class members could hold D collaterally estopped from changing his position SETTLEMENT CLASS ACTIONS - Certifying classes for settlement purposes is somewhat different from certifying classes for litigation o Court usually has a supervisory role in settlement negotiations o Concerns for manageable issues are less prevalent in settlement negotiation than they would be for discovery, etc. o Class members deciding whether to opt-out can make a more informed decision when they know what the deal is going to be - Thus, courts faced with certifying (b)(3) class actions might certify a settlement class when they wouldn’t certify the class for litigation o Tentative and temporary settlement classes are favored when there is little or no likelihood of abuse, and the settlement is fair and reasonable and under the scrutiny of the trial judge. o 23(b)(4): permits courts to certify a (b)(3) for settlement purposes only when the other requirements are not satisfied - Problems: o Ds may be able to shop for a favorably-inclined P’s attorney o Failure of court to make an expeditious determination on class certification may have a negative effect on the court’s ability to scrutinize the settlement o Settlement may be unjust when there isn’t sufficient typicality Amchem Product, Inc. v. Windsor (1997) - ISSUE: Whether the settlement class certification of current and future asbestos-related claims was legitimate? o Court temporarily enjoined class members from separately pursuing asbestos-related personal injury suits in any court pending the issuance of a final order - HOLDING: No, certification for settlement purposes was improper because the settlement terms were not fair. o If the settlement would have been fair, certification would have been appropriate o Also, look to the other requirements of Rule 23 There is no adequacy of representation or predominance of common issues (conflicting interests of injured Ps and exposure-only-Ps) Also, adequacy of notice is an issue for spouse and kids that do not yet know that they are members of the class (even kids that are not yet born) - ISSUE #2: Do exposure-only-Ps have judiciable claims (i.e., standing, etc)? - HOLDING: SCT does not reach this question because the certification was improper—but JS says that as long as the injured Ps have standing the exposure-only-Ps have standing as well. 27 CLASS ACTIONS Remedies 28 OVERLAPPING CLASS ACTIONS - Concern for forum shopping on P and D sides o Ds shop for P’s counsel that will agree to an unfavorable settlement and a judge who will approve it o Ps shop for P-friendly communities (i.e., Madison County) - Injunctive power is often upheld in the context of imminent settlement of actions consolidated by the MDL Panel - In re Diet Drugs (2002) - Federal court enjoins state actions o Does NOT fit squarely within Anti-Injunction Act - RULE: Where a federal court is entertaining complex litigation, particularly with class members from many states, it may enjoin state actions to protect its exercise of jx. o Injunction MUST be (1) narrowly tailored, and (2) consistent with federalism concerns. o Complex litigation fits within “necessary aid of jx” CLASS ACTION FAIRNESS ACT: - Adopts a “minimal diversity” standard for federal court jurisdiction, allowing federal courts to hear class actions so long as any member of the P class is a citizen of a state different from that of any D - Also circumvents the prohibition of aggregating claims to amount the jurisdictional minimum amount in controversy 28 CLASS ACTIONS Remedies 29 CLASS ACTION REMEDIES - Recurring concern: whether individual differences between various class members must always be taken into account or whether a broad classwide remedy, ideally based on an easily ascertainable formula, can be devised FLUID CLASS RECOVERY Simer v. Rios (1981) - FLUID RECOVERY: money is either distributed through a market system in the way of reduced charges or is used to fund a project that will likely benefit the members of the class o Used most often when the individuals injured are unlikely to come forward and prove their claims or cannot be given notice of the case - RULE: Fluid recovery should not be used simply as a mechanism to circumvent the class definitional and notice requirements. o Still must follow Rule 23 o Bebchick—the prototypical fluid recovery case Challenge to rate increase by the Wash. DC transit system Illegal rate had been in effect prior to court’s invalidation how do they redistribute the funds? Order: use money to benefit the users because it was impossible to identify the users who had paid extra and by how much - RULE: General inquiry is whether the use of fluid recovery is consistent with the statute violated o To what extent does the statute embody policies of deterrence, disgorgement and compensation? o Deterrence: D did not intentionally violate a statute, so deterrence is unnecessary o Disgorgement: D did not retain illegally obtained profits o Compensation: statute was in favor of compensation however given the weight of the policies against using fluid recovery, this is not enough - HOLDING: The use of a fluid recovery mechanism is not necessary to further the substantive policies of compensation, especially were the policies of disgorgement and deterrence are not at issue, thereby weighing heavily against fluid recovery. CY PRES - In class actions, the unclaimed funds (from class members who fail to come forward) should be distributed for a purpose as near as possible to the legitimate objectives underlying the lawsuit, the interests of class members, and the interests of those similarly situated o Alternative ways to distribute surplus: Reversion to D (kind of against purpose of class action) Escheated to government 29 CLASS ACTIONS 30 JURISDICTIONAL PROBLEMS & CHOICE of LAW PERSONAL JURISDICTION Phillips Petroleum v. Shutts (1985) - HOLDING: The Kansas trial court properly asserted personal jurisdiction over the absent plaintiff class members and their claims against petitioner. The Due Process Clause requires notice, an opportunity to appear in person or by counsel, an opportunity to "opt out," and adequate representation. It does not require that absent class members affirmatively "opt in" to the class, rather than be deemed members of the class if they did not "opt out." The procedure followed by Kansas, where a fully descriptive notice is sent by first-class mail to each class member, with an explanation of the right to "opt out," satisfies due process. The interests of the absent plaintiff class members are sufficiently protected by the forum State when those plaintiffs are provided with a request for exclusion that can be returned within a reasonable time to the trial court. In re Real Estate Title (1989) - Court certified a (b)(1) and (b)(2) class action on charges that Ds conspired to fix prices for settlement real estate transactions settlement one class member attempted to opt-out of settlement to litigate his claim individually - Court held that if a class member has not been given the opportunity to opt out of a class action involving both injunctive relief AND damages, class member CANNOT be enjoined from litigating his claim individually unless: (1) member has minimum contacts with the forum, OR (2) member has consented to jurisdiction CHOICE OF LAW Phillips Petroleum v. Shutts (1985) - HOLDING: The Kansas Supreme Court erred in deciding that the application of Kansas law to all claims would be constitutional. Kansas must have a "significant contact or aggregation of contacts" to the claims asserted by each plaintiff class member in order to ensure that the choice of Kansas law was not arbitrary or unfair. Given Kansas' lack of "interest" in claims unrelated to that State, and the substantive conflict between Kansas law and the law of other States, such as Texas, where some of the leased land in question is located, application of Kansas law to every claim in this case was sufficiently arbitrary and unfair as to exceed constitutional limits. SUBJECT MATTER JURISDICTION LIMITATIONS ON STATE LAW CLASS ACTIONS - Complete Diversity (See Strawbridge)—where most of the problems arise o Supreme Tribe of Ben-Hur v. Cauble: the diversity statute is satisfied in a class action when the named Ps were diverse to all Ds o (See CAFC, above) o Ease of administration of class actions would be compromised if courts had to inquire into the citizenship of all class members, many of whom might be unknown. - Jurisdictional Amount o Snyder v. Harris: Court analogized to joinder cases, holding that aggregation is allowed only where two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest Where Ps have SEPARATE interests the claims are NOT aggregable (b)(1)s and (b)(2)s are usually not affected by aggregation rules—only (b)(3)s o Zahn v. International Paper Co.: SCT declined to uphold SMJ based on diversity where only one P had a claim in excess of the jurisdictional minimum 30 CLASS ACTIONS 31 No ANCILLARY Jx either EVERY P’s claim must exceed the jx’al minimum if the claims are not joint Criticism: It is when interests are several that an out-of-state party is most likely to be biased by a local court (Currie) - Supplemental Jx—Does §1367 overrule Zahn? o §1367: grants courts that have original jx over the claim of one P supplemental jx over any other claims that form a part of the same case or controversy This would include “pendent” claims of other class members o In re Abbott Labs: SCT held that §1367 overrules Zahn and that supplemental jx does bring diversity of citizenship class actions into federal court Could have been a clerical error to exclude Rule 23 from §1367, but as it is written this is the proper outcome Compare Allapattah v. Exxon: 11th Circuit held that §1367 creates supplemental jurisdiction only over claims for class members that don’t individually satisfy the jurisdictional minimum Compare Meritcare v. St. Paul Mercury: 3d Circuit held §1367 did not change the requirement that each class member’s claim satisfy the jurisdictional minimal requirement In re Bridgestone/Firestone (2002) - Holding: The court of appeals found that the classes could not satisfy the commonality and superiority requirements of (b)(3). - Holding: Choice of law principles require the ct to apply the law of the states in which the injuries occurred, NOT were the manufacturer is headquartered. o The forum state's choice of law principles applied the law of the place where harm occurred. o Because the claims would be adjudicated under the law of so many jurisdictions, a single nationwide class was not manageable. o The court added that the case would not be manageable as a class action even on a statewide basis. - RULE: Class action certification isn’t proper unless all litigants are governed by the same rules o Kramer: it is fine to put the members into subclasses based on applicable law as long as it is manageable 31 CLASS ACTIONS 32 PREJUDGMENT NOTICE to CLASS MEMBERS Eisen v. Carlisle & Jacquelin (1974) - HOLDING: Must give notice to the 2.5 million members of a (b)(3) action that may be identified through reasonable effort even though the cost will be approximately $225,000 o Doesn’t matter that class rep’s claim is only approximately valued at $70 or that most members will NOT opt out because their claims are so small o Court CANNOT exercise its discretion for (b)(3) classes must give individual notice to members identifiable from reasonable effort Advantages of Notice to Class Members 1. Monitoring: class members who are aware of the pendency of a class action may monitor it to protect their interests 2. Opt-out: (b)(3) members may opt-out, but to do so they need notice a. NOTE: Notice should be in plain English (Rule 23(c)(2) Amendment) b. Sometimes courts even require affirmative acknowledgement of receipt (i.e., verified proof of claim to be completed and returned) c. If D has regular mailings to the class, it can be required to include notice of the suit INTERVENTION and OPT-OUT 32 CLASS ACTIONS 33 STATUTES of LIMITATIONS American Pipe v. Utah (1974) - TOLLING RULE: Pendency of class certification tolls the SOL of until certification is granted/denied o Ps filed for class action 11 days before the running of SOL certification was denied o 8 days later, Ps moved to intervene o This was ok, Ps had 11 days from the day of denial to intervene - POLICY: without tolling rule, the purpose of the class action would be frustrated o Ps would be forced to opt-out and immediately intervene rather than risk denial of certification and awaiting the outcome o Also, won’t undercut the policy behind SOL gives notice D of the generic identities of Ps and to preserve evidence and witnesses - Who gets the benefits of the toll? o It doesn’t matter whether the class members subjectively relied on the pendency of class certification it is the right of class members to be passive o Also, would be an administrative nightmare to evaluate the subjective reliance of every intervener - NOTE: suspension is not the only way to toll SOL may also start anew Crown Cork v. Parker (1983) - Distinguish from American Pipe: not an intervener, wants to file a separate suit - ISSUE: Can person who timely files an individual suit after the denial of class certification receive the same benefit of SOL tolling as an intervener? - HOLDING: The filing of a class action tolls the SOL for ALL asserted members of the class, not just interveners. o Same policy issues as American Pipe, puts D on notice of potential claims and to preserve evidence o NOTE: if class member OPTS OUT, the tolling begins to run anew from the day he opts out (Tosti v. City of LA) S of L for Subsequent Class Actions - Tolling early decisions tended to say no tolling for subsequent class action - More recent have taken a more careful approach, o Rather than saying yes there’s a toll, but we are going to throw you out for the same reasons we did before—they usually just say there is no tolling 33 CLASS ACTIONS 34 COMMUNICATIONS with UNNAMED CLASS MEMBERS Gulf Oil v. Bernard (1981) - ISSUE: To what extent may a court limit communications between named class members (and their attorneys) to potential class members during the pendency of a class action - BALANCING TEST: must CLEARLY show that the need for limiting communication is more than the potential interference with the rights of the parties - PURPOSE of GAG ORDER: concern that communication between reps and potential class members will make settlement with those persons an impossibility - Not a first Amendment issue because the Court can decide the case under Rule 23 without reaching the constitutional issues Kleiner c. First National Bank (1985) - ISSUE: To what extent may D talk with unnamed members of the P class? - HOLDING: It was proper to regulate Bank from contact P members because there was a great possibility that D might coerce Ps without providing an opportunity for comparison or reflection - RULE: balance the severity and likelihood of harm against first amendment concerns. MOOTNESS No notes from class Mootness - If Ps claim became moot before class certification, claim is not moot if there is an ability to appeal denial of class certification o See Gahrety - If the class is certified and the rep’s claim becomes moot, usually ct will just ask the class to appoint another rep - If class cert is denied and the P’s claim becomes moot P wants to appeal denial o Usually ct will permit the appeal b/c the outcome effects the certification of an entire class o Note: someone else from the class may intervene - If P’s claim becomes moot and then the ct denies cert, you get importation of mootness doctrine from outside the class action context o Claim is so transitory, ct doesn’t have time o Exceptions to mootness doctrine to allow the action to move forward o Let named P go forward, at that point it’s not at all clear whether P should remain the rep DERCERTIFICATION & MODIFICATION OF CLASS DEFINITION Payne v. Travenol Labs (1982) - Class was certified to include all black applicants who were discriminated against in hiring - Then, Payne amended the complaint to include gender discrimination as well o Then, the only male rep withdrew form the case for religious purposes o Ds move to redefine class class now excludes black males o Redefined class b/c of lack of representativeness and typicality, also conflicts in black women representing the claims of black men when gender is an issue - Court did not err in failing to give black males notice that there claims were no longer represented - RULE: Rule 23 only requires notice (1) in (b)(3) class actions and (2) if a class action is dismissed or compromised - HOLDING: Court is not required to give notice when the class is redefined so as to exclude some members. 34 CLASS ACTIONS 35 o Although, court suggests that notice in this situation is encouraged - RULE: When court is about the decertify a class on the ground of inadequate representation by the named P, the court is not charged with the responsibility of giving notice to that subclass or with finding a new rep—that is the job of class counsel. (Tennessee Valley Authority, 2003) o When faced with the situation when no named P can represent a subclass, a trial court should consider whether it is in the interests of JUSTICE and JUDICIAL ECONOMY to postpone the dismissal of the subclass to allow other members to volunteer to act as representative JUDICIAL CONTROL OF SETTLEMENT - Rule 23(e)(1): claims of a certified class may ONLY be settled after the court finds that it is “fair, reasonable and adequate,” and after notice and an opportunity to object is given to the class - Settlement review is not a substitute for careful evaluation of the certification criteria (See Amchem, above) - Objectors o Benefit: point out weaknesses in settlement, more scrutiny o Problem: often will emphasize their individual interests rather than thinking for the collective interests of the class (professional objectors: exploit there ability to hold out) - NOTE: opt outs DO NOT have standing to object to settlement offer 35
"Complex Litigation Outline"