Posts Tagged ‘Class Action Fairness Act’

Supreme Court roundup

  • Court will hear case of mariner charged with Sarbanes-Oxley records-destruction violation for discarding undersized fish [Jonathan Adler, Eugene Volokh, Daniel Fisher]
  • SCOTUS goes 9-0 for wider patent fee shifting in Octane Fitness v. ICON and Highmark v. Allcare Health Management System Inc. [Ars Technica, ABA Journal, earlier]
  • Constitutional principle that Washington must not give some states preference over others could face test in New Jersey NCAA/gambling case [Ilya Shapiro, Cato]
  • Supreme Court grants certiorari in Dart Cherokee Basin Operating Co. v. Owens, a class action procedure case on CAFA removal [Donald Falk, Mayer Brown Class Defense Blog]
  • “Supreme Court’s Daimler decision makes it a good year for general jurisdiction clarity” [Mark Moller, WLF, earlier] Decision calls into question “the jurisdictional basis for this country’s litigation hellholes” [Beck]
  • How liberals learned to love restrictive standing doctrine [Eugene Kontorovich, more]
  • “California Shouldn’t Be Able to Impose Regulations on Businesses Outside of California” [Ilya Shapiro on cert petition in Rocky Mountain Farmers Union v. Corey (fuel standards)]

Supreme Court on civil procedure: calm and unanimous

One (Hood v. AU Optronics) went for plaintiffs, the other (Daimler AG v. Bauman) for defendants, but both were unanimous, in another indication that the work of the Justices rises well above the silly caricature offered by critics like Sen. Elizabeth Warren (“wholly owned subsidiary of Big Business,” etc.) I explain at Cato at Liberty. While Justice Sotomayor in a separate concurrence took a different approach to the problems of general jurisdiction, it arrived at the same place with respect to the unreasonableness of suing Daimler in California over faraway conduct.

For more on the Warren outburst, see Ramesh Ponnuru last September. Earlier links on the AU Optronics case here and here. Similarly: Josh Blackman.

More: While concurring in the result of Daimler v. Bauman, Justice Sotomayor sharply differed on the reasoning, which resulted in some unusually strong language directed at her from Justice Ginsburg writing for the other eight Justices [Blackman] Eugene Volokh considers the foreign-law angle. (& welcome Amy Howe/SCOTUSBlog readers)

John Beisner report on class actions

From the U.S. Chamber’s Institute for Legal Reform: “Authored by John Beisner of Skadden Arps, this paper introduces for discussion potential class action reforms to build on the highly-successful Class Action Fairness Act of 2005. Among the reforms suggested are measures to address cy pres class action settlements and to preserve the efficiency of federal MDL proceedings. The paper also considers other changes designed to address certain judicial misinterpretations of CAFA’s jurisdictional provisions, and identifies several additional areas of concern that may warrant reform as they develop.” [report; coverage, Washington Examiner, Daniel Fisher, Andrew Trask]

Class action roundup

  • Judge Alsup “shopping for new plaintiffs lawyers” for class action against Wells Fargo “because he isn’t happy with the team that brought suit”
  • “Sixth Circuit Rejects Class Settlement in Pampers Case” [Adler] More: William Peacock, FindLaw (“something stinks”)
  • Supreme Court to decide whether quasi-class-actions spearheaded by state attorneys general (“parens patriae”) can dodge CAFA’s mandate of removal to federal court [Deborah Renner, WLF]
  • Channeling Google settlement funds to the Google-favored Lawrence Lessig center at Stanford is already a dubious use of cy pres, but thanking the lawyers makes it worse [Ted Frank]
  • “Class actions ending in ‘ridiculous results’ continue to plague California, critics say” [Legal NewsLine]
  • Big Ninth Circuit win for Ted Frank big win in inkjet coupon class action [Recorder, PoL, more]
  • “Sixth Circuit Can’t Take A Hint From SCOTUS, Reinstates Whirlpool Smelly-Washer Case” [Daniel Fisher; earlier on Sears v. Butler, Business Roundtable; PoL, Fisher and our coverage]

Supreme Court applies stage hook to artful class action dodgers

The decision in Standard Fire Insurance Co. v. Knowles was 9-0, Justice Breyer writing for the Court, and signals’ Justices’ impatience with lawyerly gamesmanship intended to evade CAFA (the Class Action Fairness Act of 2005). I’ve got a short commentary at Cato, which filed an amicus brief on the side that prevailed [decision in PDF, background at SCOTUSBlog, earlier here etc., my new Cato post; more on stage hooks](& SCOTUSBlog, Ted Frank/PoL (“Miller County [Arkansas] trial lawyers had collected hundreds of millions of dollars of legal fees from forum-shopped class-action settlements; the class members whom they purportedly represented likely didn’t even get 10% as much.”))

More: Andrew Trask (“The Supreme Court is envisioning the class action as a procedural aggregation device, rather than a corporate deterrent or a trust-like entity. This is good news for defendants.”); Alison Frankel, Reuters. And I’m quoted on the case in Alex Daniels’ account in the March 20 Arkansas Democrat-Gazette (sub-only).

Supreme Court roundup

Evading CAFA, class action lawyers also put ethics at risk

The Class Action Fairness Act of 2005 aims to steer all but relatively small nationwide class actions into federal court, in part because lawmakers wanted to prevent plaintiff’s lawyers from exploiting the system by forum-shopping cases into state courts that might be biased or ill-equipped to prevent abuse. It therefore allows defendants to remove cases to federal court where the aggregate claim exceeds $5 million. To evade that limit, plaintiff’s lawyers have been proffering stipulations that disclaim (at least temporarily) any intent to ask for more than that sum, even when plausible theories of the case would suggest a larger potential recovery. If the ploy works, they get to stay in the favored state court, and in later stages of litigation they sometimes succeed in using various further tactics to shuffle off the supposed limit and ask for more than $5 million after all.

Aside from the end run it does around the intent of the statute, this practice raises serious ethical issues arising from the lawyers’ duty toward clients, including absent class members who may not even be aware of the suit, let alone in a position to second-guess tactical choices. Disclaiming damages above $5 million, in particular, may be helpful to the lawyer (by obtaining less stringent oversight of the manner in which the suit is prosecuted) yet harm some clients’ interest in obtaining the best recovery.

The U.S. Supreme Court will take up this issue in the spring, and the Cato Institute has filed an amicus brief (PDF) urging the Court to recognize the ethical problem and direct lower federal courts to grant removal where appropriate. Ilya Shapiro has more. Ted Frank at the Center for Class Action Fairness also filed amicus briefs on behalf of certiorari and on the merits; related.

“The Inverted Federalism of Grider v. Compaq”

As good an argument for the Class Action Fairness Act as any: Trial lawyers sued Compaq in Texas over an allegedly defective disk controller, though none of the plaintiffs had ever suffered a malfunction or a loss of data, alleging a violation of Texas consumer fraud law on behalf of a nationwide class.  No dice: the Texas Supreme Court threw out the case, noting that Texas law did not permit the sort of nationwide class action contemplated by the plaintiffs.  End of story?  Nope: the same trial lawyers filed the same complaint again, this time in Oklahoma state court, and asked the Oklahoma state court to apply Texas law to a nationwide class.  “Sure thing!” the court rubber-stamped–applying an ersatz version of Texas law rejected by Texas courts.  The forum-shopping was able to extract $40 million in attorneys’ fees from a questionable coupon settlement, as an Overlawyered post noted August 6.  The Summer 2008 issue of State Court Docket Watch includes my essay discussing why this is a constitutionally problematic set of decisions by Oklahoma courts–written before, though published after, the Anthony Caso analysis for WLF.

Barack Obama and tort reform: is he really bipartisan?

In an interview of Senator Barack Obama on Fox News, Chris Wallace questioned Obama’s claims of being a post-partisan leader who reached across the aisle.  In response, Obama identified his support of the Class Action Fairness Act tort reform bill.  Is this persuasive evidence of bipartisan behavior?  I explore the question in today’s Examiner.

How is the Class Action Fairness Act working?

The Washington Legal Foundation announces a new paper by Brian Anderson and Mel Schwing: “Two leading class action defense
attorneys utilize a federal court judge’s recent rejection of a settlement as a case study of how CAFA can deter defendants’ ability to ‘buy peace’ through settlements” in cases where the claim is so meritless that it is only worth a small amount of money for the defendant to settle:

While CAFA surely benefited class action defendants more than plaintiffs by transferring more cases to federal courts that offer more fairness and predictability in the adjudication of class actions, it is not a “free-pass” for targets of class action lawsuits.

The quid pro quo of giving class action defendants greater access to federal courts is that CAFA expects defendants to vigorously litigate, not settle via coupon settlements, frivolous class actions. The message of Figueroa is that class action defendants in federal court who try to escape all litigation risk by proposing low-value coupon benefits in exchange for global releases of claims (especially where competing lawyers and attorneys’ general are involved in the controversy) will have a difficult time persuading the federal courts to approve such settlements.

Figueroa was the first time in the three-year history of CAFA that state attorneys general used their CAFA right to intervene in a settlement hearing. Last year, I also took a look at CAFA.