Posts Tagged ‘Class Action Fairness Act’

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.

Filed under: Cato Institute, Class Action Fairness Act, Eighth Circuit, Supreme Court

“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.

Filed under: Class Action Fairness Act, class actions, federalism, forum shopping, harmless lawsuits, Oklahoma, Ted Frank

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.

Filed under: Barack Obama, Class Action Fairness Act, politics, Ted Frank, tort reform

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.

Filed under: attorneys general, Class Action Fairness Act, class actions, coupon settlements

CAFA: One plaintiff’s-side view

Victor M. Diaz, Jr., who has served as vice-chair of ATLA’s aviation section among other honors in representing the plaintiff’s bar, writes in Florida’s Daily Business Review taking issue with some of his colleagues’ doomsaying about the Class Action Fairness Act, which he says has proved “no calamity after all“:

More than two years after President Bush signed CAFA into law, these concerns are proving to be greatly exaggerated. CAFA should not be feared by the plaintiffs bar.

While the days of cases filed in remote, plaintiff-friendly state court venues may be over, CAFA has led to better representation of classes by plaintiffs attorneys and better outcomes for class members. On the whole, the potential shift of nearly all class actions to federal court has elevated the class action bar and meant better quality judicial review of corporate class-wide abuses.

As with Congress’s earlier reform of shareholder suits, the major effect seems to be not to choke off litigation, but to improve its average quality (cross-posted from Point of Law).

Filed under: Class Action Fairness Act, class actions

The Class Action Fairness Act Two Years Later

The latest AEI Liability Outlook, which has my take on two years of CAFA, is on-line.

Filed under: Class Action Fairness Act, class actions, Liability Outlook, Ted Frank

February 8 Roundup

New Jersey Supreme Court won’t touch appellate court reversal of $105M dram-shop verdict against Aramark Corp. Not noted in our earlier coverage: Aramark was held liable as a deep pocket through illegitimate piercing of the corporate veil, adding yet another problem to an appalling series of problems with the trial. [New Jersey Law Journal; earlier on Overlawyered; Point of Law]
Half-trillion-dollar class certified against Wal-Mart in lawless Ninth Circuit decision. [Point of Law]
Court papers show direct link to Lerach in Milberg probe. Most entertaining: a letter by Lerach saying “Dr. Cooperman’s reputation and character are impeccable.” Cooperman has since pled guilty to taking kickbacks, and Milberg Weiss now says he has no credibility. [National Law Journal; WSJ Law Blog]
Slip and fall worth $5.7M [Atlantic City Press]
Cardiologists doing Brazilians: “Graduating med students aren’t blind; they see established physicians with busy practices dropping out. Looking ahead they see more headaches–more controls and regulations, more scrutiny, more liability, less money.” [TIME via Kevin MD]
Florida law may allow men to get out of paying fraudulent paternity when DNA shows they’re not the father. [Miami Herald; see also Parker v. Parker; earlier on Overlawyered]
Editorial: Alabama Supreme Court ruling on illegal multi-billion-dollar punitive damages award in Exxon contract dispute can prove state is no longer tort hell. [Press-Register]
Update to earlier Overlawyered post: Danny Cuesta pleads guilty, sentenced to fifteen months; Melissa Cuesta, whose claim we covered, arrested for perjury, pleads not guilty. [EmpireStateNews.net via Teacher trash blog]
Incomes and inequality: what the numbers don’t tell us. [Marginal Revolution]
India and the drug patent wars. [AEI]
I (along with John Beisner, Michael Hausfeld, and John Stoia) am speaking on a panel on the Class Action Fairness Act at the National Press Club February 14. [Federalist Society]

Filed under: Alabama, Aramark, Bill Lerach, child support, Class Action Fairness Act, class actions, deep pocket, Exxon, jackpot justice, Michael Hausfeld, Milberg Weiss, New Jersey, Ninth Circuit, Ted Frank

Senate passes Class Action Fairness Act

By a 72-26 vote, with 18 Democrats and Vermont’s Jeffords joining a unanimous roster of Republicans, the Senate has approved this bill, which would 1) move most interstate class actions from state into federal court and 2) regulate various practices such as the use of coupon settlements. House approval and a Presidential signature are expected in short order, giving the returning Bush administration its first major legislative victory and dealing a rare defeat to the Association of Trial Lawyers of America. Such defeats have been so rare that CAFA, though hardly radical and not a little watered down from earlier versions, probably constitutes the most ambitious tort-reform measure to pass at the federal level in recent decades. (New York Times).

For some of this site’s past posts on the bill, see Apr. 25-27, Jun. 12-15 and Jun. 25, and Sept. 28, and Oct. 21, 2003. Jim Copland and others have wall-to-wall coverage of the new developments at Point of Law, including posts on the roll call; background (including links to four past Manhattan Institute studies on the issue); the “magnet-court” problem; and last but not least, a new Manhattan Institute study by Yale law prof George Priest taking a closer look at some widely circulated statistics about class settlements, and opining that CAFA would be a useful if limited first step in addressing the problems raised by such litigation.

Elsewhere on the web, some plaintiff’s-side observers are pointing out that the new rules ushered in by the bill will likely be actively beneficial to the practice of some lawyers who specialize in filing such suits (though detrimental to others’), and that some businesses that get sued are likely to find their position worsened (not only may they find it harder to enter cheap coupon settlements, for example, but they may face a proliferation of one-state-only class actions). See, in particular, Evan Schaeffer and C. E. Petit (“Scrivener’s Error”). Meanwhile, Dwight Meredith perhaps surprisingly “do[es] not oppose the proposed reform of class action suits” but believes its GOP sponsors are being inconsistent, and Bill Childs wonders if there’s more to the debate besides money. Finally, Baseball Crank points out a possibly headache-making technical aspect of the bill.

Filed under: AAJ, baseball, Class Action Fairness Act, class actions, Manhattan Institute

Update: Class action reform

Recent news in class action reform (see Dec. 5 and links therein): Fox News on ATLA attempts to defeat the Class Action Fairness Act (Kelley Beaucar Vlahos, “Class-Action Lawsuit Reform Near but No Cigar Yet”, Feb. 18); the failings of coupon settlements, including of a coupon-trading service, to protect consumers (Ameet Sachdev, “Class-Action Coupon Settlements Draw Ire in Congress, Courts”, Knight-Ridder/Tribune, Feb. 29); the Kansas House of Representatives decide whether to join the federal courts in permitting interlocutory appeals of class certification decisions (Dan Margolies, “Proposed change in class-action law moves ahead”, Kansas City Star, Mar. 2).

Filed under: Class Action Fairness Act, class actions, politics

CAFA compromise contemplated

Reports from Capitol Hill indicate that Congress may be ready to pass a version of the filibustered Class Action Fairness Act (Oct. 21, Sept. 28, etc.) early next year after alterations to bring aboard three Democratic Senators who had supported the filibuster, Chris Dodd of Connecticut, Mary Landrieu of Louisiana and Chuck Schumer of New York. We haven’t had a chance to check the details of how good the resulting bill is, but one circumstance speaks strongly in its favor: Ralph Nader is really upset. (Charles Hurt, “Revised lawsuit-reform bill wins Democratic converts”, Washington Times, Nov. 27; Joseph Straw, “Nader slams Dodd?s class action reform act”, New Haven Register, Dec. 3; Bruce Alpert, “House, Senate avoid gridlock” (Landrieu), New Orleans Times-Picayune, Dec. 1). See also John Godfrey, “US Senate Democrats Seek To Revive Class-Action Bill”, Dow Jones/Yahoo, Nov. 17 (Sen. Jeff Bingaman, D-N.M., also said to be open to compromise).

Filed under: Class Action Fairness Act, class actions, Ralph Nader