Complex Civil Litigation - UVA Law

Flusche 1 of 17 Complex Civil Litigation – Outline I. Class Certification (1) A. Implicit Requirements – definable class, rep class member, live claim B. Explicit Requirements – numerosity, commonality, typicality, adequacy C. Rule 23(b)(1) – equitable class – mandatory 1. Inconsistent Judgments Class (A) – permit cert if separate actions could establish inconsistent outcomes 2. Limited Fund Class (B) – permit cert if separate actions would be practically dispositive of P’s claims D. Rule 23(b)(2) – civil rights class – opposing party acted or refused to act; injunctive or declaratory relief E. Rule 23(b)(3) – damages – predominance & superiority F. Mass Tort Claims – mass accident advised against in Notes, but some certified G. Securities Fraud – individual reliance (fraud-on-the-market, omission = reliance, fraud-created-the-market) H. Defendant Class Actions – typicality hard (unless conspiracy or juridical link); b(2) hints that not appropriate I. Class Certification Decisions – must be “at an early practicable time” – don’t need to look into merits J. Specialized Issues – court must rule, can implicitly certify; cert of specific issues ok; subclasses useful II. Alternatives (6) A. Permissive Joinder – joinder of Ps (or Ds) if: assert right to relief jointly, severally AND common question B. Compulsory Joinder – mostly D’s rule – opens possibility of termination C. Impleader – D can implead someone who may be liable (indemnification / subrogation) D. Interpleader – individual facing multiple claims on particular fund can group E. Intervention – nonparty can intervene to protect its interests F. Consolidation – consolidation permitted if common question G. MDL Transfer – consolidation for pretrial proceedings H. Convenience Transfer – transfer to another DC where case could have been brought (Ps > Ds) I. MMT Transfer – gives DC original jurisdiction, if minimal diversity & 75+ people died (and other factors) J. Bankruptcy – filing stays all suits – but neither side really likes III. Pretrial (8) – can certify on pleadings – common practice to bifurcate discovery IV. Trial (9) – settlement problematic – techniques for trial: polyfurcation, sampling, bind futures, distribution trust V. Notice and Opt-Out (10) – b(3) requires (others optional, but all require for settlement) VI. Communications with Class (11) – P favored – ask: motivation of players; rule VII. Multi-Jurisdictional Class Action (11) – subject matter (diversity = roadblock), personal (Shutts eases), venue VIII. Choice of Law (13) – can’t ignore differences in state law – must analyze and respond – can use subclasses IX. Res Judicata (13) – claim: members bound, if notice & rep adequate – issue: not for opt outs, cert decision is X. Federal/State Relations (14) – cir split on enjoining state ct; full faith & credit, anti-injunction, rooker-feldman XI. Settlement (15) – must give “heightened attention” to R 23 requirements, except manageability XII. Attorney’s Fees (15) – percentage method, lode star method, benchmark method; statutory fees XIII. Agent Orange (16) I. Class Certification A. Implicit Requirements 1. Definable Class a. If class prevails, some remedy must be delivered b. If class loses, Ds insist that class members be bound by judgment (res judicata) c. Must know who to notify 2. Representative Class Member 3. Live (Not Moot) Claim a. Some members of group might have problem solved over time – their claim is moot B. Explicit Requirements (R 23(a)) 1. Numerosity a. So numerous that joinder of all members is impracticable b. How many? – usually 40-50 – but case-by-case Flusche 2 of 17 c. Consider: number of people, geography, size of claims, facts of the specific case d. Don’t forget about futures e. Zeidman, p. 62 i. Class of people who owned and sold stock, who sustained losses on such sales ii. Court – class should exclude professional and institutional investors iii. Not sufficient f. Potential social prejudice against homosexuals satisfies numerosity (Patrykus, p. 69) g. Subclasses must independently certify criteria h. Re-evaluate if people opt-out 2. Commonality a. (a)(2) – must be “questions of law or fact common to the class” b. General rule – one common question is enough c. Focuses on group seeking certification (but tends to merge with typicality) d. Questions: susceptible to adjudication by reps of the group, would materially advance litigation if adjudicated e. Approaches: no analysis, seek the same remedy under same theories, more rigorous f. Does not seek to determine predominance g. Marisola A. ex rel. Forbes, p. 75 i. Class (certified) – all children who are or will be in custody of ACS + those children who aren’t in custody who are at risk and whose status should be known to ACS ii. Common questions: whether the services were being delivered, what the law requires 3. Typicality a. (a)(3) – “the claims or defenses of the representative parties [must be] typical of the claims or defenses of the class” b. Significance? – rep might need more significant relationship with class, rep needs a “keen interest” c. Unique defenses applicable to rep might harm typicality d. Rep must ordinarily have claim against every D named in complaint e. As a first step, you must show a class that needs representation (discrimination at frozen food warehouse – rep only applies to warehouse, not entire corporation – Taylor, p. 90) f. Different factual situations can destroy this (environmental contamination varied for all properties – Reilly, p. 94) i. But might can get around this with subclasses 4. Adequacy a. (a)(4) – “the representative parties will fairly and adequately protect the interests of the class” b. Probably only factor required by DP – continuing duty on court to monitor c. Ds usually challenge this – want to make sure the judgment satisfies DP for res judicata d. Rep – vigorous prosecution, knowledge of the case, honesty, lack of conflicts of interest, ability to finance, membership in class e. Counsel – qualifications, performance, involvement of reps, no unlawful or unethical conduct, no conflicts of interest, educate reps, identify inadequate reps f. Court can now appoint class counsel – R 23(g) g. Solutions – might not certify; if certified, might require new reps h. Rep can’t be in conflict of interest with any members (rep for first suit was in conflict of interest with some people who did not want covenant validated, no adequacy / res judicata – Hansberry, p. 109) C. Rule 23(b)(1) – equitable class – mandatory 1. Inconsistent Judgments Class (A) a. Rule – permits cert if prosecution of separate actions could establish inconsistent outcomes b. Focuses on potential dilemma of D – might be subject to conflicting court orders c. Parties seeking cert must establish realistic probability that opposing party will face separate actions that will likely result in varying adjudications Flusche 3 of 17 d. Cert improper if class members are only seeking damages (suing fraudulent stockbroker – In re Dennis Grennman Securities Litigation, p. 158) e. Even declaratory relief might be improper, if court thinks it is a request for damages (air crash disaster – McDonnell-Douglas Corp.) f. Medical monitoring is close to the line (defective pacemaker leads – (b)(1) proper, since separate adjudications might destroy medical monitoring fund – In re Telectronics Pacing Systems, Inc., p. 165) 2. Limited Fund Class (B) a. Rule – prosecution of separate actions could create risk that would be practically dispositive of other people’s interests b. Focus on potential dilemma of P c. Must show that, if any individual proceeds without the others, people with legitimate claims will be deprived of practical opportunity to recover d. Majority of courts refuse to certify mass tort cases here e. P’s attorney tries to claim that (b)(3) CA will bankrupt company – must certify (b)(1) class (no opt-out or notice) f. Must show that company really will be bankrupt g. Punitive damages – not easy to get here – intended to punish D D. Rule 23(b)(2) – civil rights class 1. Rule – authorizes class if party opposing class has acted or refused to act on grounds generally applicable to class, thereby making injunctive or declaratory relief necessary 2. Examples: school desegregation, patent suits, suits alleging unlawful pricing practices 3. Requirements a. Party opposing class must have acted or refused to act on grounds applicable to class b. Injunctive relief must be appropriate to class as a whole i. Must settle the legality of the conduct 4. Majority requires no showing of predominance a. Class members must complain of pattern or practice that is applicable to class as a whole (INS adjudications – factual distinctions are irrelevant – CA needed to adjudicate constitutionality of the forms/procedure – Walters, p. 192) b. Might need more cohesiveness than (b)(3), or suit could turn into lengthy series of individual trials (smokers claiming medical monitoring fund, not certified – Barnes, p. 195) 5. Monetary damages a. If principal focus is monetary, (b)(2) denied b. But if money is minor, (b)(2) ok c. Could be hybrid – certify injunctive under (b)(2) and damages under (b)(3) d. Court might require damages to be “incidental” (employees claiming discrimination, could not get cert, due to claims for compensatory & punitive damages – Allison, p. 198) 6. Necessity is not a requirement for any class E. Rule 23(b)(3) – damages 1. Rule – common questions must predominate & class action must be superior to other methods 2. Focus on issues of fairness and efficiency 3. Predominance a. Must be more than a common question of law or fact & more than commonality b. Alleging a conspiracy might be enough, classic consumer fraud (alleged anti-trust case – conspiracy provides commonality, damages easy to calculate mechanically – certified – Brown, p. 224) c. Fraud can be problematic – if individual reliance is an issue, weighs against cert (Ps alleged fraudulent insurance sales by car financers – no cert – Young, p. 231); if representations were oral, no cert d. Choice-of-law can impact – if court must apply 51 different laws 4. Superiority a. Alternatives – individual actions, intervention by govt., R 19-20-24-42, bankruptcy b. Factors: Flusche 4 of 17 i. Interests of members of class in individually controlling prosecution (larger claims = no CA) ii. Extent and nature of pending litigation (not clear) iii. Desirability of concentrating litigation in one place (look to parties, witnesses, events) iv. Manageability criteria (notice, size of class, choice-of-law) c. Also: alternative regulatory mechanism, judicial efficiencies F. Mass Tort Claims 1. Committee Notes – mass accident ordinarily isn’t appropriate for class action 2. Asbestos cases certified, claiming that state-of-the-art defense is the common question; predominance and superiority met also – don’t want to have hundreds of identical trials (Jenkins, p. 770) a. Compare with AO – only dealing with one state’s law, predominance easier 3. Nationwide class of hemophiliacs infected with AIDS, sued blood suppliers – class decertified: Ds were being coerced to settle, difficult choice-of-law questions, bifurcated approach from TC would violate 7th A jury trial rights of Ds (In the Matter of Rhone-Poulenc River Inc., p. 774) 4. Nationwide class of nicotine-dependent persons decertified – choice of law problems (Castano, p. 781) 5. Class Action Fairness Act – intended to keep state courts from certifying these types of cases 6. Exposure only – SC raised, but didn’t decide in Ortiz a. Has been allowed for asbestos, reasoning that they were injured on cellular level (Amchem) b. Other courts won’t certify – individualized issues predominate, difficulty in providing notice & opt out 7. Mature vs. Immature! – Manual advises caution – Castano stated that since “addiction as injury” cases had never been tried, there was no track record to judge predominance & superiority G. Securities Fraud 1. Elements: misrepresentation or omission, material fact, reliance, damages 2. Takeover process: bid announced, stock soars, announcement false, stock falls 3. Avoid individual proof of reliance a. Fraud-on-the-market (shareholders sued corporation who made 3 public denials of merger, cert ok – Basic, Inc., p. 895) i. Assumes that shareholders rely on the idea that the market price takes into account all the available information and reflects a fair price for the stock ii. All information is priced into the market iii. It is assumed that anyone who trades has relied on the market price, thus the information iv. Rebuttable – if market makers knew the truth, news of merger discussions were public, someone sold shares unrelated to merger talks b. When omission involved, individualized proof of reliance not required (Affiliated Ute Citizens) c. Fraud-created-the-market – applies when fraud is so extensive that security should not be traded at all 4. Materiality – omitted fact = material, if there is substantial likelihood that the disclosure would’ve altered the view of the reasonable investor (Basic) 5. Certification requirements for (b)(3) class: a. Numerosity – not a problem for national market b. Commonality – it’s an issue of law and fact whether people were defrauded c. Typicality – pretty easy d. Adequacy – some people are more interested than others (larger shareholder is more adequate), class counsel might want to settle quick to move on to next case e. Predominance – now we presume reliance and look at “reasonable investor” for materiality f. Superiority – if you presume reliance, CA is superior 6. Private Securities Litigation Reform Act of 1995 a. P for class rep – must not have purchased stock for purposes of securities fraud action b. P’s attorneys – must publish notice in widely circulated newspapers c. Court gets to choose lead P (required to consider economic interests, should make it a high stake rep) d. Can’t award attorney’s fees more than reasonable amount of damages 7. Number of securities CAs increased – moved to state courts 8. Securities Litigation Uniform Standards Act of 1998 Flusche 5 of 17 a. Provided for exclusive federal court jurisdiction in most of these cases b. Wants to promote uniformity among the cases H. Defendant Class Actions 1. Recognized by SC in Smith v. Swormstedt in 1853 2. Two types: unilateral (D class against single P), bilateral (class against class) 3. R 23(a) – “one or more members of a class may sue or be sued” 4. Predictable arenas: civil rights, stock traders, patent enforcement 5. R 23(a) a. Numerosity, commonality – not difficult b. Typicality i. Named P who has no claim against particular D can’t be typical of class ii. D rep might have unique defense or relationship with P that makes this hard iii. Two solutions: conspiracy by D class members, juridical link (sheriff rep for all state’s sheriffs) c. Adequacy i. Unilateral – P will have named D rep (wants to pick a weak one, but wants res judicata) ii. D’s rep usually claims he is inadequate iii. D might have conflicts of interest (relating to defenses) iv. D rep’s claim might be too small 6. R 23(b) a. (1) – both A and B appear, on face, to endorse D classes b. (3) – doesn’t suggest either way – understood to be available (but all Ds will opt out) c. (2) – trouble spot – language hints that D class isn’t ok – “the party opposing the class” 7. Notice may be required, even though R doesn’t require (under (b)(1) and (b)(2)) 8. Example, unilateral (cert ok – Thillens, p. 946) a. P sues Exchange Association, 17 named Ds, 350 past & current members, 500 exchanges b. T alleges conspiracy c. Certification granted i. Numerosity – 500 ii. Commonality – conspiracy = common question iii. Typicality – every class member is dues paying member of Assn iv. Adequacy – Assn might be better than any other rep v. 23(b)(3) – damage action – Ds could exit – but want to split defense costs 9. Example, bilateral (no cert – Henson, p. 965) a. P class = every person in counties who has been denied DP with welfare application i. Typicality – could be a problem, but nobody has been getting a hearing b. D class = every welfare dept in the counties that doesn’t receive state aid i. Typicality – juridical link – single resolution is preferred to multiplicity of state actions ii. (b)(3) – allows opt-out – counties will jump ship iii. (b)(2) – seeking injunctive relief – but language contemplates only P classes 10. R 23.1 a. Authorizes shareholders to file suit against corp. if board hasn’t taken action in timely manner b. Alleged aggrieved party is the corp. c. Concern is that shareholder might bring derivative suit and try to get a personal benefit before it is settled d. Named P must represent claims of all shareholders e. Court has to approve settlement f. P must be a shareholder at time of wrongdoing I. Class Certification Decision 1. Original expectation – certification decision would be made from the pleadings 2. Entire case may depend upon this – very few rules governing it 3. There will likely be a limited amount of discovery Flusche 6 of 17 4. Change in rule – 23(c)(1) a. Pre-2003 – certification decision should be made “as soon as practicable after…” b. Now – “the court must – at an early practicable time – determine by order whether to certify…” c. The sooner you certify, the more pressure there is to settle d. Important implications for summary judgment 5. Motions a. Can argue a 12(b)(6) motion – even if everything alleged is true, there are not meritorious claims b. It’s possible to move for summary judgment based on merits of case which have been discovered c. But both of these are pure law questions – D argues there are no facts to determine 6. Nothing in the language or history of R 23 allows courts to look into the merits (Eisen) a. Protects the parties’ interests – court isn’t bound by rules of evidence or procedure at this point 7. But might need to look into merits a. Inquiry of timeliness and validity of claims might be necessary b. Some courts look beyond pleadings to see if litigation is “mature” (prior trials and verdicts that provide help) J. Specialized Issues 1. Court’s Obligation to Rule / Class Actions by Implication a. Judge has an obligation to rule – you have every right under the Rule to this ruling b. If court never rules, but proceeds, we imply that the class was certified (P brought discrimination suit for himself and “all others similarly situated,” asking for injunction against discrimination – DC rendered class-wide relief, but never certified – CoA implied cert – Bing, p. 291) i. This is a problem for D – you don’t want to bring up certification, but don’t want the case to go on 2. Conditional Certification and Certification of Specific Issues a. Conditional certification was removed from the rule b. This change favors Ds (as do most of the 2003 amendments) c. Rule expressly allows for decertification d. BUT R 23(c)(1)(C) allows court to alter or amend a certification order (before final judgment) 3. Subclasses and Specific Issues a. Court can approve conditional certification of specific issues (asbestos suit – DC ok to certify limited number of issues, then use subclasses for trial – Central Wesleyan College, p. 294) b. Mass tort case can be sub classed – 6 different subclasses – probably going into settlement (Pruitt, p. 301) II. Alternatives A. Permissive Joinder 1. Rule 20(a) a. Allows joinder to Ps as parties, if: i. They assert right to relief jointly, severally, or arising out of same transaction, and ii. Any question of law or fact common to the parties b. Also permits joinder of Ds under same standard (exercised by P) 2. Courts have wide discretion – can allow even if claims just arise out of single transaction (ex-employees of sheriff joined and claimed being fired due to election & discrimination – joinder ok – Guedry, p. 1018) 3. Benefits Ps – can all get in front of jury, save transaction costs 4. D? – could bring in less culpable D and confuse the jury, split the burden 5. CA? – Ps incur costs locating everyone and joining them B. Compulsory Joinder 1. Rule 19 a. Is additional party necessary? b. Is joinder of the party feasible? c. Should action go forward without this missing party? 2. Mostly a D’s rule – opens possibility of terminating the lawsuit C. Impleader Flusche 7 of 17 1. Rule 14 a. D (or P, subject to counterclaim) can implead a person not involved in action who may be liable for all or part of claim 2. Might arise in indemnification or subrogation instances 3. CA? – no affect D. Interpleader 1. Allows individual who confronts multiple claims on particular fund to group together 2. Rule interpleader (R 22) a. Stakeholder must have bona fide concern about multiple claims (but not imminent liability) b. Must be at least two adverse claimants 3. Statutory interpleader (28 U.S.C. § 1335) a. Applies when “[t]wo or more adverse claimants … are claiming or may claim to be entitled to … money or property” in the custody of the stakeholder 4. Person to be D goes to court and asks for interpleader a. D is trying to avoid responsibility and minimize transaction cost b. But D has to admit they might owe a lot of money 5. Ps don’t like – removes ability to try cases twice 6. CA? – cheaper, simple, takes liability out of it E. Intervention 1. Rule 24 a. Nonparty can intervene in action to protect its interests – becomes a full party b. Intervention as of right i. Conferred by federal statutes ii. R 24 also allows if 4 requirements met c. Permissive intervention 2. No difference for the party, once intervention granted 3. No right of intervention for merchants in suit trying to prevent city from enforcing ordinances against homeless people (Johnson, p. 1078) 4. Neither P nor D is enthusiastic a. P plans litigation b. Intervener runs up the cost & time (bad for Ps) 5. Rarely successful – almost never successful when your case is “please let us in” F. Consolidation 1. Rule 42(a) a. Cases can be consolidated b. Permitted if there is common question of law/fact c. Court can have joint hearing or trial on any of the matters at issue 2. Rule 42(b) a. Court can separate for trial 3. Favors P 4. Can be an effective tool (two people suing about exact same contract – determining liability for shipwreck – Daybrook, p. 1110) 5. But doesn’t help much for complex cases (asbestos – 600 consolidated, 48 tried, damages first – reversed, due to prejudicial error of consolidation – Malcom, p. 1112) 6. Everyone remains a party – every attorney demands right to participate 7. Judge will usually appoint a lead counsel – looks more like CA G. MDL Transfer (28 U.S.C. § 1407) 1. Enacted in 1968 – response to first mass litigation issue in federal court a. Created “Judicial Panel on Multi-District Litigation” – appointed by Chief Justice b. No two judges from the same circuit c. When any common issues of fact are pending in different courts, cases can be transferred Flusche 8 of 17 d. Motion from either party 2. Limitation to pretrial proceedings a. Statute says transferee judge only does pretrial b. Pretrial judge may rule on all motions, even ones that reach the merits c. If case is to be tried, must go back to original court 3. DC has no authority to transfer the case to itself for trial (transferee judge not allowed to use 1404(a) convenience transfer to give himself the case – Lexicon, p. 1136) 4. Transferee judge usually finds at least one case from his court before the transfer, or even invites someone to file a new action – then gets a national class 5. No one case closes out any other case until judgment (res judicata) 6. P response? – accepting – lowers cost, lose a bit of control, lose chosen judge 7. D response? – prefer to move case away from P’s choice judge – but it moves P’s case along 8. CA? – fairly high costs – some discovery savings, but not much H. Convenience Transfer (28 U.S.C. § 1404(a)) 1. No discussion about limitation to pretrial 2. Allows transfer for convenience to another DC where case might have been brought 3. Case can be transferred only when personal jurisdiction, subject jurisdiction, and venue could’ve been met in transferee district (SC – strictly construe the language – Hoffman) 4. Difficult to obtain 5. Ps probably like more than Ds 6. Congress favors CA I. MMT Transfer (28 U.S.C. § 1369(a)) 1. Multi-Party Multi-Form Trial Jurisdiction Act 2. Gives federal DC original jurisdiction of any civil action with minimal diversity where 75+ people have died in accident, and any of these is met: a. D resides in state and substantial part of accident took place in another state b. Any two Ds reside in different states c. Substantial parts of accident took place in different states 3. Carve-out – DC shall abstain from hearing any civil action otherwise covered by act when substantial majority of Ps are residents of state of which Ds are also citizens J. Bankruptcy 1. Focused on insolvency – open the door to a financial future 2. Most important – reorganization – Chapter 11 – tries to rehabilitate the business to pay its debts 3. § 105, 362 – filing of bankruptcy petition stays all lawsuits against debtor in state and fed courts 4. After entry of stay, DC may require transfer to itself of all the stayed cases a. Allows transfer of “related cases” (indemnification, etc) 5. DC can collect and discharge future claims 6. Ps don’t like – lose choice of court, claims might be estimated lower, lower fees awarded, but save some costs 7. Ds – don’t seek out bankruptcy 8. D can’t fashion its own bankruptcy device by bringing limited fund CA against people who claim against original D (company tried to get mandatory D class certified, of all people asserting asbestos claims against it – no luck – Joint Eastern and Southern District Asbestos Ligitation, p. 1169) 9. If settlement falls through due to opt outs, D can get Chapter 11, get litigation transferred, including “related to” cases (implants – Dow, p. 1159) III. Pretrial A. Is discovery necessary? 1. No, not strictly necessary 2. Sometimes court will certify on the pleadings 3. Initial clash between P and D is usually on discovery issues Flusche 9 of 17 4. In case claiming illegal contracts, might need discovery to see how many people used the contract & how similar they were (rent-to-own - # of contracts used, how long been in use, similarity – Fogie, p. 309) 5. Some courts certify the class, on the condition that discovery doesn’t turn up contrary evidence B. Scope of discovery 1. Judge has discretion to bifurcate discovery (common practice) 2. Standard practice = bifurcate – can do so, even though it might cost a little now (discrimination case – Ps wanted to commence general discovery – court bifurcated – might save money later, can decide cert sooner – American Nurses’ Assn, p. 316) 3. D can object to extent of class, claiming no discovery needed – court might still compel limited discovery for smaller class (Ps alleged failure of medical pumps, seek cert and discovery for national CA – discovery compelled for LA class only – Borskey, p. 322) 4. Practice is to bifurcate (Manual supports this) – if certification is granted, money and time is saved 5. Limitations (np. 117): geographic and time, number of people, defined class, financial issues IV. Trial A. Settlement 1. Almost impossible to avoid conflict of interest between P’s attorney and class members a. Attorney typically has largest financial interest in (b)(3) class b. Sometimes the stake of individual member is tiny c. If P’s attorney has another case in the wings, incentive is to settle and move on d. Attorney is not likely to stick with a case to increase small yield to class members 2. SC rejected cert for settlement, saying class must meet R 23 requirements 3. Inherent conflicts in D’s side – strong interest in settling early at a cheap value 4. D’s attorneys may informally contact P’s attorneys and bargain on settlement before suit is filed 5. What can fix this? a. Try the cases b. If there is a trial, ultimate award is fixed by jury c. This takes attorneys and court out of the picture 6. How do we get more jury verdicts? – difficult to try huge CAs B. Four techniques 1. Intro a. Could combine these to furnish a way to try any case i. Each party has 2 that they like ii. P – sampling (cuts cost, burden of proof easier), distribution plan (dampens payment problems) iii. D – polyfurcation, future claims – opens door to quick decisions, can bind future b. 7th A – reexamination clause – what was going on at CL in England in 1789? c. 5th A – due process – trial must be fundamentally fair 2. Polyfurcation a. Chopping up a trial b. Why controversial? i. CL trial was a unitary process – everything heard at once ii. SC allowed deviation – can reverse a case and have new trial regarding only a particular part, if the issues are “distinct and separable” (Gasoline Products 1931) iii. Polyfurcation first used in CA – In re Beverly Hills Fire Litigation – birth defects from anti-nausea drug (1982) – causation & damages c. Bifurcation (Mullen, p. 365) i. Claim – former employees of casino – respiratory illness from bad ventilation ii. Liability issues common to all members iii. 5 members at a time: causation, damages, comparative negligence iv. Court – ok – comparative negligence won’t reconsider 1st jury’s work v. 7th A – no 2 nd jury at CL – didn’t do this in England vi. DP – issues will bleed back and forth between juries – division is fundamentally unfair Flusche 10 of 17 d. Trifurcation (Hilao, p. 371) i. Claim – human rights abuses by Marcos ii. Liability, punitive damages, compensatory damages iii. All three heard by same jury iv. 7th A – might be a problem that special master compiled law and data, handed it to jury v. DP – exemplary damages came before compensatory vi. Court – ok – compensatory award was related close enough to exemplary e. Trifurcation (In re Fibreboard Corp., p. 803) i. Jury trial regarding certified issues ii. Jury makes special verdict for damages among Ds AND determines lump sum for each disease iii. Damages distributed on individual basis iv. Court – turned this into Erie case – TX law contemplates a certain process (P must prove causation and damages) v. Court – finds problems with all three things 3. Sampling a. Process of collecting information from fewer than all potential sources (most common) b. Example: Hilao, 9th Cir, p. 810 i. Judge employed special master ii. Computer randomly selected 130 out of 10,000 people to depose iii. Special master testified about depositions, described data collection, gave opinion to the jury regarding total compensatory damages iv. Judge asked jury to name damages award for each deponent AND give total figure for the rest v. Jury didn’t follow recommendations vi. Judgment entered for 137 people individually and the group vii. Jury can do what it wants with the numbers c. Opposite: Cimino, 5th Cir, p. 817 i. Parker randomly selected 160 cases out of 3,031 – several judges tried them ii. After 160 verdicts, judge extrapolated to all other cases – determined gross amount of damages iii. Entered judgment against D for sum of 160 verdicts + extrapolated verdict iv. Deviation from census of every member of class – 95% v. Fifth Circuit – reversed – contrary to TX substantive law, violated right to trial by jury, probably DP – jury must determine damages of each P d. Walker – when it is too costly to collect individual evidence, sample without apology – but still let the jury decide on amounts on their own – only use one jury e. If sample is accurate, gross extrapolated figure will be about the same as if all cases are litigated and added up f. Disparity will be between Ps – people with larger claims don’t get enough, smaller claims get too much 4. Deciding future claims a. Probably most controversial b. Proposal to decide claims of exposure only Ps (people who later become symptomatic) 5. Distribution trust a. Using trust for individual distributions in mass torts b. Idea is to tailor distributions to moderate concerns about aggregated proof and gross damage amounts c. Damages paid into hands of trustees, who develop techniques to funnel money in more appropriate manner V. Notice and Opt-Out A. Characteristic of (b)(3) – requirement of notice and ability to opt out 1. Must give best notice practicable, including individual notice to everyone reasonably identifiable 2. Must advise: court will exclude you if respond by X date, judgment will bind everyone not excluded, nonexcluded members can appear with counsel Flusche 11 of 17 B. Rule – must notify everyone whose name and address can be easily identified (millions of buyers & sellers of small amounts of securities – must notify 2.25 million members who can be identified – Eisen, p. 379) C. Methods 1. Generally = first-class mail; occasionally = bulk mailings – might not have to receive it 2. Unidentifiable – publication, ads, etc D. Money-saver = postpone certification until settlement 1. 2003 amendments allow people a 2 nd chance to opt out 2. Everyone gets to evaluate individual claim against actual settlement value E. R 23(c)(2) – provides specification of what should be in notice F. Cost – party seeking certification is obliged to pay cost of (b)(3) notice (P tried to reduce size of class, D resisted – DC certified original class, giving D cost of notice – SC reversed – Oppenheimer Fund, p. 386) 1. D might have to shoulder some burden, if it has easy capability, access to records, etc G. Timing – not specified, in discretion of judge, but should be given before final judgment H. Notice in (b)(1) and (b)(2) 1. Not required by Rule (but is required for settlement, under R 23(e)) 2. In 2, good policy case for not providing notice that might allow opt out – potential for coercion 3. DC has discretion to order notice – usually if there is related damages claim 4. DC might permit opt outs – most likely if considerable damage option is present 5. Might certify “hybrid” class, allowing opt out class for monetary claims I. Settlement Provisions – R 23(e)(1) 1. Court must direct notice in reasonable manner to all class members who would be bound by proposed settlement 2. Applies to all cases 3. Content of notice is left to judge’s discretion VI. Communications with Class A. Two bodies of law: 1. Professional responsibility – ethics – Model Rules of Professional Responsibility 2. Structured discretion of DC B. Two questions to ask: 1. What sort of motivation do the players have in communicating with class members? 2. What is the rule? C. Mechanics (overall, favors P) 1. Pre-Filing (favors Ds – can seek out and contact potential class members) a. P – wants support, help to pay cost – YES b. Atty – gather clients, generate fees – yes, subject to ethics (no button-holing) c. D – get information and discourage participation – YES d. Atty – advance interests of D – yes, subject to ethics 2. Post-Filing, Pre-Cert (about even) a. Class members are still not represented b. P – same incentives – yes, subject to DC (Gulf Oil – court must make findings and limit speech as little as possible) c. Atty – same – yes, subject to ethics and Gulf Oil d. D – bit more focused – yes, subject to Gulf Oil e. Atty – yes, Gulf Oil 3. Post-Cert (Ps have advantage) a. P – keep people in class – YES (1st A outweighs DC) b. Atty – obliged – they are all clients (big advantage) c. D – push opt outs – no, subject to ongoing business (college can’t coerce athletes – Haffer) d. Atty – same incentives – no, subject to ethics VII. Multi-Jurisdictional Class Action A. Jurisdiction + Venue (P class) Flusche 12 of 17 B. Subject Matter 1. State = general 2. Federal = limited a. Federal question (28 U.S.C. § 1331) – antitrust laws, federal civil rights laws b. Diversity i. Diversity is measured between named parties ii. All parties on one side must be of different citizenship than opposing parties iii. Amount in controversy - $75k amount applies to every proposed rep and every class member iv. Can be a major roadblock here c. Supplemental jurisdiction (A and B sections) i. Seems possible to construe this to permit supplemental claims to be asserted by and on behalf of class members ii. Provided that reps qualify under general diversity iii. Limitation of B applies to diversity & only to parties added pursuant to named rules (R 23 isn’t named) iv. Not all circuits agree with this d. CA Fairness Act diversity i. Section 4 provides a diversity option – 100+ members, $5+ million, minimal diversity ii. Exceptions (Feinstein amendments) (a) Doesn’t apply for state officials or govt. entities (b) Home-state exception – governs CAs filed in home state of all primary Ds (1) Class assessed by dividing into thirds (2) If 2/3 or more of members in D’s home state, not subject to fed jurisdiction (3) DC has discretion for middle third (4) If less than 1/3 are citizens of home state, automatically subject to fed jurisdiction (c) Local controversy – governs specified group of CAs in which more than 2/3 of proposed class members are citizens of state, but not all Ds are citizens C. Personal 1. State a. D – must be mechanism whereby individual can be brought to participate, sufficient contacts b. Bring (b)(3) class – won’t be a Shutts problem 2. Federal a. D – must be mechanism whereby individual can be brought to participate, sufficient contacts b. 5th A 3. P class members have a claim in DP protection, but it is satisfied in (b)(3) class, because of opt out ability (Shutts, p. 431) D. Venue 1. State – follows its own statutory scheme 2. Federal a. Measured according to Ds b. Maybe in reference to P rep c. Don’t look at class members E. Does this favor national CAs? 1. Federal actions are encouraged, with respect to Shutts – could’ve required that every member has sufficient minimum contacts 2. State law cause of action for (b)(3) is easy 3. State law cause of action in federal court – much harder (diversity problems) 4. Differences between state and federal a. Jury – in state court, you know all your jurors are coming from the county in which you file b. Character of CA rule – about half of states have rule modeled on R 23 – some states make cert easier i. Not all states have a rule (Mississippi, Virginia) Flusche 13 of 17 5. General concerns articulated: a. Some cases inappropriate for nationwide treatment (SC, upheld nationwide CA regarding social security benefits – Califano, p. 422) b. Fifth Circuit acted on presumption against national classes, even though there was evidence of some proof of conspiracy claim (court held that conspiracy evidence didn’t go beyond Alabama – Blue Bird Body Co., p. 426) F. Concerns: 1. Are claims in fact national? (Blue Bird Body) 2. Would national class frustrate other ongoing litigation? VIII. Choice of Law A. Limits on applying forum state’s law (Shutts, p. 431) 1. In cases regarding gas leases, could not simply apply Kansas law 2. Most class members had no relationship with Kansas (97% of members and 99% of leases) 3. Kansas law differed materially from laws of various other states 4. Considerations: location of leases, Ps, Ds 5. Law of forum could be applied, if it doesn’t conflict with any other jurisdiction connected to the suit 6. When in conflict, forum’s substantive law can only be applied if the forum has significant contacts B. Cannot ignore differences in law of each state in question – no federal CL (nationwide class of hemophiliacs decertified – differences in negligence law among states ignored by DC, In the Matter of Rhone-Poulence Rorer, Inc., p. 440) C. Choice of law doesn’t necessarily make class unmanageable, if laws of states are largely the same (national products liability cert upheld – one D, one product, manufactured safely by others – In re Copley Pharmaceutical, Inc., p. 445) D. Might be able to use subclasses, grouping state laws into categories (four subclasses – In re School Asbestos Litigation, np. 177) E. DC must actually analyze and respond to choice of law issues (nationwide class of nicotine-dependent people – decertified because “variations in state law may swamp any common issues and defeat predominance” – Castano, p. 448) F. Court might be willing to apply law of D’s principal place of business (unlike Firestone) G. Presumption against nationwide classes 1. Error to certify national class where information about national material is lacking – Blue Bird Body 2. Nationwide class is unwise – forecloses reasoned consideration of issues by other courts – Califano H. Reform 1. Class Action Fairness Act of 2005 – wanted to remove cases to federal court (state courts favored Ps) 2. Proposed Amendment – trying to overcome choice of law roadblock a. DC shall not deny class cert on ground that law of more than one state will apply b. DC shall require each party to submit recommendations for subclasses based on similar state laws 3. ALI – complex litigation study – proposed two solutions a. Congress could pass substantive law in select grouping of multi-state problems b. Congress could enact choice of law rules IX. Res Judicata A. Claim preclusion 1. Rule (generally) – members of certified class will be bound by result of judgment in CA, provided they are properly identified in class a. Two exceptions (required for DP): notice required AND representation must be adequate 2. Presumption – parallel litigation allowed – first to judgment is binding 3. Nonparties may be bound, if they are in privity with a party (but apply cautiously) 4. Adequacy of counsel does not mean pursuing every appeal a. (b(1) class of veterans, challenging reduction in benefits, settlement entered – members of class went to another forum and sued for benefits – claim precluded – McDowell, p. 500) 5. Don’t apply claim preclusion if class rep omitted a predominant damages claim in b(2) class Flusche 14 of 17 a. (CA seeking injunctive relief to end employment discrimination – J individually sues for monetary damages – not precluded – Johnson, p. 508) 6. If damages claim is truly minor, apply res judicata for b(1) and b(2), even though no notice B. Issue preclusion (collateral estoppel) 1. Considerations: a. Issue is identical b. Final judgment on the merits c. Target was a party or in privity with a party in prior litigation d. Would not cause unfairness 2. Cannot assert against class members who opted out (In re Corrugated Container Antitrust Litigation, np. 199) 3. Opt out class members cannot assert offensive collateral estoppel against D in individual action a. (party opted out of settlement, but tried to make use of ruling from CA – Seventh Cir, doesn’t work – don’t want people to wait and see – Premier Elec. Constr. Co., p. 522) 4. Certification decisions are preclusive, but only to narrow set of particular circumstances (if same class, same court, etc) a. (certification denied by DC, class brings new request for cert in state court, correcting flaws – Fifth Cir, not a judgment on the merits AND the issue is not identical – J.R. Clearwater, p. 532) 5. Class members can be barred on the merits from relitigating issues that class reps litigated individually in other courts a. (Ps filed CA, alleging sex discrimination, in federal court – dropped state law claim & filed suit in state court – federal court certified as class, but state court did not – state court = D victory – federal CA barred because of state court verdict – Sondel, p. 535) X. Federal/State Relations A. Binding effect of prior federal denial of class certification upon later state court class action 1. Third and Fifth Cir – district court won’t enjoin state court from certifying class – order denying class cert isn’t a final order – it is a discretionary order a. 5 – J.R. Clearwater – action removed to federal court, where class cert denied – attorney brought suit in another state court, defining class in same way – federal courts would not enjoin state court from cert b. 3 – In re General Motors Corp. Products Liability Litigation, p. 538 – MDL transferred cases certified in PA for settlement (coupon based), but reversed by Third Cir – attorneys filed suit in LA, reworked settlement, state court certified – federal courts would not enjoin state court 2. Seventh Cir – will enjoin state court from certifying class a. 7th Cir previously held class not certifiable because of manageability problems – P’s counsel filed suits in state courts, seeking certification of same class – DC denied injunction, but CoA reversed (In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, np. 203) B. If final settlement negotiations are underway in federal court, DC might enjoin state court 1. (national class action underway in S.D. of TX – some people repaired to South Carolina, filed competing national CA – most people wanted settlement to continue, it was bearing fruit – Corrugated Container Anti-Trust) C. CAFA of 2005 1. § 1712 – strictly limits coupon settlements 2. § 1713 – protection against loss by class members a. Judge can’t approve settlement when attorneys fees will result in net loss to members b. Unless judge writes that the benefits will exceed monetary loss (ex: getting inju nction) D. Presumption of concurrency 1. Litigation about the same problem can proceed in both fed and state courts at the same time 2. Litigation continues until there is a final judgment on the merits, such that it would be recognized in the jurisdiction entering judgment as invoking res judicata E. Full Faith and Credit (Const. and 28 U.S.C. § 1738) 1. Each state is obligated to recognize judgments of other states Flusche 15 of 17 2. Analogous federal statute makes sure every judgment that allows res judicata is binding 3. Federal court can’t withhold full faith and credit from state court judgment approving CA settlement simply because settlement releases claims within exclusive jurisdiction of federal courts a. (stockholders brought federal CA under securities law – another group proceeded in DE state court, exclusively state law claims – DC declined to certify fed CA, entered summary judgment against – DE case settled both state and federal claims – D invoked full faith and credit – SC, state court had jurisdiction over subject matter, so it could settle all claims, Matsushita – 9th Cir, under full faith and credit Act, federal courts can’t pass judgment on adequacy of rep in state court if the state court decided it, Epstein) F. Anti-Injunction Act 1. Federal court can’t enjoin state court, unless: a. Authorized by Congress b. Necessary in aid of its jurisdiction (used when state judge continues with removed case) i. Might be invoked when federal CA is near settlement (a) (exception applies when settling complex matter and state court could undermine it – In re Joint Eastern and Southern District Asbestos Litigation, np. 205) c. Necessary to protect or effectuate its judgments (state court might enter judgment when DC has) 2. Exceptions are narrowly construed G. Rooker-Feldman doctrine 1. Only US SC can exercise appellate review over determinations of state courts XI. Settlement A. R 23(e)(1) 1. (A) – court must approve any settlement 2. (B) – court must provide notice to all class members who would be found by settlement 3. (C) – court may approve settlement only after hearing, determining that it is fair, reasonable, and adequate a. Put judge in posture of assessing case for his client  value = (potential verdict * risk) – cost B. R 23(e)(3) – provides for 2 nd opt out opportunity C. Class members may appear and object – can appeal and voice concerns in appellate court D. Settlement Certification 1. Must give “heightened attention” to R 23 requirements, except for manageability a. (settlement of asbestos claims focused on futures – DC certified, finding settlement fair – Third Cir reversed, must apply the Rule – SC said must apply R with heightened attention, except for manageability – Amchem Products, Inc., p. 602) b. (in asbestos settlement, only “proof” of limited fund for (b)(1)(B) class was II’s agreement to pay $X – class mostly composed of futures – SC said must follow the rule, no proof of limited fund – Ortiz, p. 172) E. Three solutions: 1. Conduct auction of right to be named class counsel a. Has been done a few times – a bit complicated, but results are fairly good 2. Empower lead plaintiff a. Incorporated in private securities litigation b. Judge finds a class rep who can (and will) bear cost of monitoring class counsel 3. Auction the claim a. Never done, but interesting b. Eliminates monitoring problem F. To avoid settlement problems, ought to reintroduce trial as practical possibility 1. Bind futures 2. Use distribution trust 3. Sampling 4. Bifurcation XII. Attorneys’ Fees Flusche 16 of 17 A. Background 1. American rule – each party pays its own attorneys’ fees 2. R 23(h) – court “awards reasonable attorney fees and nontaxable costs” a. Request for attorneys’ fees must be made by motion – parties may object b. Hearing is permitted, but not required c. Judge must make findings of fact & conclusions of law B. Common Fund Cases 1. Money off the top of your fund is taken & paid to person who footed the bill 2. Percentage Method a. Same kind of measurement method as contingent fee b. P’s attorney would make agreement with class rep, specifying percentage of fees c. Money would come from fund to attorney to satisfy agreement 3. Lode Star Method a. Court acts as managing partner – gets records, hourly rates expenses – sends bill to common fund b. Supported, until judges became swamped in paperwork & hearings c. Judges noticed that some fees were recurring among types of cases d. 25% sort-of emerged e. 10 out of 13 CoA have expressed preference for the percentage method – now called “benchmark method” i. Start with a number, about 25% ii. Let DC exercise discretion to adjust C. Statutory Fee Cases 1. In about 150 situations, Congress has adopted fee-shifting – adopts English rule 2. Turns on concept of prevailing party – fees will generally shift to prevailing party 3. Actually different – equitable background not present 4. Near universal technique – Lode Star Method (judges request time records, billing rates, etc) XIII. Agent Orange A. Class certification 1. Implicit requirements: a. Definable class – might be hard to distribute proceeds b. Representative member – W doesn’t worry much about this c. Live claim – obviously 2. Explicit requirements (23(a)(1)) a. Numerosity – no problem b. Commonality – whether chemicals caused injuries, whether people were exposed, govt. contractor defense c. Typicality – depends upon level of generality d. Adequacy – lawyers are in terrible disagreement among themselves 3. (b)(3) a. Predominance i. Common question of law – govt. contractor defense ii. But everyone’s exposure is different b. Superiority i. High transaction costs, but some members have big claims c. Choice of law i. Case went up to Second Cir on federal CL theory – Cir sent case back ii. This easily implicates law of all 50 states iii. Second Cir grudgingly accepted under “national consensus” law theory 4. (b)(1) a. Net worth of Ds – some people might collect huge punitive damages and bankrupt companies b. Deter Ds, not bankrupt them Flusche 17 of 17 B. Settlement – W directed with a heavy hand – forced everyone to $180 million C. Futures 1. Families who claimed while settlement fund ongoing were dismissed – society has interest in closing the matter, outweighs individual notice and opt out rights 2. BUT P who came forward after fund was closed, won in Second Cir, but SC evenly split D. Appeal – Second Circuit 1. Approved, except for: a. Exact and detailed structure of foundations – restructured to provide more oversight b. Internal PMC fee agreement – invalidated multiplier for investors 2. Adequacy of notice – ok – if objectors can’t suggest something better, defer to DC 3. Adequacy of settlement – ok – all Ps faced formidable hurdles E. Alternatives 1. Tort – traditional outlook – no CAs – requires general/specific causation, trial, etc 2. Public law – shift to group based model – techniques of proof, normative causation standards – risk = harm 3. Non judicial – removes problems from courts to other branches XIV. Class Action Fairness Act of 2005 A. Seeks to remove CAs from state to federal courts B. Seems to favor Ds