DRI 2013 Class Action Seminar

Posted on May 10, 2013 by Wystan M. Ackerman

I’ve had the pleasure of serving on a committee of the Defense Research Institute (DRI) that has put together another blockbuster national class action seminar, being held on July 25, 2013 at the Willard Intercontinental Hotel in Washington, D.C (see the seminar website for details and the brochure). I attended DRI’s last class action seminar in July of 2011, which was excellent.  As some of you may recall, I did several blog posts about that one (see Part 1, Part 2, Part 3).  This year’s program will be even better, with a star-studded lineup focusing on the major developments in class action law this year, including the numerous Supreme Court decisions.

Miguel Estrada, who argued for Comcast in Comcast v. Behrend, will discuss the Supreme Court’s key ruling this year in that case involving Rule 23(b)(3)’s predominance requirement (see my blog post on Comcast).  Ted Boutrous, who argued Standard Fire Ins. Co. v. Knowles (I had the pleasure of being his co-counsel in that case), will discuss the Supreme Court’s key ruling on the Class Action Fairness Act in that case (see my blog post on Knowles).  Noah Levine, who represented the defendant in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, will discuss the Supreme Court’s new decision in that case, which held that a plaintiff in a Rule 10b-5 case need not prove materiality at class certification.  The Court’s decision also has significant potential implications beyond the securities context with respect to merits inquiries at the class certification stage (see my blog post on Amgen).  Michael Kellogg, who represents AmEx in American Express Co. v. Italian Colors Restaurant, will discuss the Supreme Court’s forthcoming decision in that case on arbitration clauses with class action waivers (see my blog post about the AmEx oral argument).

And there will be much more.  The seminar also features a panel of in-house counsel from Coca-Cola, Pfizer and LP Building Products addressing class actions from the client’s perspective; and programs on trials of class actions; lessons learned from the Toyota MDL; international class actions; and more.

I will be there, plan to blog about it, and hope to see you there.  The attendance roster is looking strong and space may be limited, so sign up soon.  If you plan to attend, please let me know so I can be sure to look for you there.

Are Insurance Class Action Filings Down After Wal-Mart v. Dukes? Available Data Reflects Only A Small Decrease

Posted on August 29, 2012 by Wystan M. Ackerman

One question I’ve received from readers is whether class action filings against the insurance industry have decreased after the Supreme Court’s decision in Wal-Mart v. Dukes, which was issued in June of 2011.  Anecdotally some people in the industry seem to have perceived a decrease in filings, at least against their companies.  Interestingly, however, the available data does not really bear that out industry-wide. 

The only available data I’m aware of is for federal cases that are either filed initially in federal court or removed to federal court.  The civil cover sheets used in federal court require a plaintiff who is filing a case, or a defendant removing a case, to select a particular category and there is one category – “Contract - Insurance (110)” – that clearly encompasses insurance.  There is also a box to be checked off for class actions, so data is maintained on the number of class actions that fit within this category.  Using this data, the total filings from 2008 to 2012 have been as follows, through July 13, 2012: 

                        Year                                        Number of Class Actions Filed

                        2008                                                    95

                        2009                                                    106

                        2010                                                    108

                        2011                                                    84

                        2012                                                    49 (98 if annualized)

Credit and thanks go to Terence Ridley of Wheeler Trigg O’Donnell LLP, who collected this data and presented it at a program on class actions at the recent annual meeting of the Federation of Defense and Corporate Counsel (FDCC), which was my first meeting as a member of the FDCC.

The 2011 number, which for about half of the year includes post-Wal-Mart filings, is down significantly (about 23%) from 2010.  But if you annualize the 2012 number by extrapolating it out for the rest of the year, it becomes slightly higher than 2008, and only 10% below the 2010 filings.  If you look at insurance filings as a percentage of all class action filings, the insurance filings have been in the 19% to 24% range throughout the 2008-2012 period.

Of course, this data has its limitations.  The extrapolation for 2012 may not bear itself out if there are fewer filings later this year.  Also, attorneys do not always check the correct box on the civil action cover sheet, and there are class actions filed against insurance companies that might better fit into some other category.  Attorneys also sometimes do not properly check off the “class action” box on the form when a case is a class action.  But one might expect that this kind of human error would not vary substantially over the years.  This data obviously does not tell us anything about state court class action cases that are never removed to federal court, and I’m not aware of available data on state court filings (if you are, I’d love to share that with readers of this blog too).  

Insights from the ABA National Institute on E-Discovery - Part 2

Posted on May 24, 2012 by Wystan M. Ackerman

Here is the second installment of insights I gleaned from the ABA National Institute on E-Discovery: 

  • Federal Rules Amendment Process:  Judge Koeltl of the Southern District of New York led a panel that provided a thorough update on potential amendments to the Federal Rules of Civil Procedure.  Consideration is being given to making the proportionality requirement of rule 26(b)(2)(c)(iii) more prominent.  Judge Koeltl noted that in his view lawyers are not focusing on that as much as they could be and he tends to raise that rule more than the lawyers practicing before him do.  It is a strong tool for judges to limit the scope of discovery where the burden and expense outweighs its benefit.  Also under consideration are proposals to shorten the time to serve a summons and complaint, limit depositions to 5 per side and to 4 hours instead of 7 hours, limit interrogatories to 15, limit requests for production to 25, and limit requests for admission to 25 except for admissions with respect to the genuineness of documents.  (Judges would retain discretion to modify these limits where necessary and appropriate.)  In my view, requiring both sides to employ more limited, focused discovery instead of the “uncover everything” mindset that some lawyers (and clients) have is probably the only way to significantly restrain litigation costs and allow more cases to be tried.  But it requires a real culture change among many civil litigators.  Another rule change under consideration would amend Rule 34 to require that responses to requests for production be made with more specificity and prohibit evasive responses.  Other proposals include a requirement that the parties discuss and agree on the scope of preservation of documents at the outset of a case, and a formal requirement in Rule 1 that counsel cooperate with each other.  Also under consideration is a change to Rule 37 that would prohibit sanctions for a failure to preserve evidence (except in exceptional circumstances) unless a failure to preserve evidence was willful or in bad faith and caused prejudice.   
  • Predictive Coding:  As explained in my March 9, 2012 blog post, new software is now enabling computers to cull through a set of electronic documents and, based on an experienced lawyer’s review of a sample of documents, the computer will make determinations on whether documents in the remainder of the set are likely to be responsive or non-responsive.  The consensus of a panel of lawyers who have used this software is that it works well, what the computer does is really quite similar to what a team of junior or contract lawyers attempts to do, and studies consistently have shown that the computer review is more accurate than human eyes.  The consensus seemed to be that this is the wave of the future, will bring substantial cost savings to complex litigation, and lawyers and judges should get comfortable with it.  There was also some interesting discussion about whether the opposing party needs to be provided with more access to information regarding this type of review (e.g., being provided with a sample of “nonresponsive” documents) that is not provided when lawyers are performing the same type of work that the computer will do.

Insights from the ABA National Institute on E-Discovery - Part 1

Posted on May 23, 2012 by Wystan M. Ackerman

Last week I attended the ABA National Institute on E-Discovery in New York.  Here is part one of my summary of some key insights from the conference: 

  • Use of Social Media by Company Employees:  When companies allow their employees to access social media websites from corporate computers and information regarding company business is posted on such sites (sometimes in violation of company policy), that can present significant problems when such information is requested in discovery.  The recommendation of one of the panelists was that companies should prohibit access from corporate computers and posting of corporate information by employees.  But it was also reported that some companies are allowing access and even forming their own internal “social media” intranet sites where employees can have online conversations, conduct seminars, create groups, etc.  That can sometimes present challenges for implementing litigation holds and preserving and collecting data from these sites when required in litigation. 
  • Obtaining Social Media Discovery from Plaintiffs:  This can potentially be a fertile ground for discovery from named plaintiffs in putative class actions (but keep in mind that this may spark requests for such information from the defendant, depending on what the company’s policy is regarding employee access to and use of such sites).  Magistrate Judge Kristen Mix of the District of Colorado gave a very thorough presentation on this subject.  She explained that Facebook tends to fight civil subpoenas, based on the Stored Communications Act and Electronic Communications Privacy Act, although courts sometimes order compliance.  Facebook’s formal written policy is somewhat vague regarding its response to subpoenas: 

Responding to legal requests and preventing harm

We may share your information in response to a legal request (like a search warrant, court order or subpoena) if we have a good faith belief that the law requires us to do so. This may include responding to legal requests from jurisdictions outside of the United States where we have a good faith belief that the response is required by law in that jurisdiction, affects users in that jurisdiction, and is consistent with internationally recognized standards. We may also share information when we have a good faith belief it is necessary to: detect, prevent and address fraud and other illegal activity; to protect ourselves and you from violations of our Statement of Rights and Responsibilities; and to prevent death or imminent bodily harm.

While Facebook reportedly tends to fight civil subpoenas, it provides a “button” whereby a user can download his or her entire content for purposes of responding to discovery requests (or other purposes).  Requesting that the opposing party do this in a document request and if necessary seeking a court order requiring them to download the content themselves is often a more expeditious route than serving a subpoena on Facebook.  But there can be technical issues – sometimes the “button” will not work effectively for users that post a large amount of content on Facebook.  There also could be concerns about material being deleted by the user, which may or may not be retained by Facebook.  Judge Mix emphasized that many judges are not that familiar with social media sites and how they work because, to avoid any appearance of impropriety in becoming “friends” with lawyers and others, many judges tend to eschew entirely participation in these sites.  That makes it important to explain these things thoroughly in discovery hearings and any motion practice, and not assume the judge knows the basics of how social media sites work.

Sedona Conference on Class Actions - May 2012

Posted on January 29, 2012 by Wystan M. Ackerman

The Sedona Conference on Complex Litigation this year is focusing on class actions and will be held on May 3-4.  I will be attending.  The faculty includes a number of prominent judges and plaintiffs’ and defense lawyers, see the program for more details.  The topics for discussion include the Class Action Fairness Act, MDLs, managing class litigation with individual litigation, coordination of US – Canada class actions, and more.  

It’s an invitation-only program of limited size to facilitate dialogue. There may be a few more slots available if you’re interested, but act quickly. 

ABA Premier Speaker Series Webinar on Class Actions

Posted on January 26, 2012 by Wystan M. Ackerman

Earlier this week I attended the ABA’s national webinar entitled “The Future of Class Actions,” part of its Premier Speaker Series.  The panelists were Paul Bland of Public Justice, Mark Perry of Gibson Dunn and Judge Lee Rosenthal of the Southern District of Texas.  Here is what I found most interesting: 

  • Paul Bland, the plaintiffs-side member of the panel, argued that Wal-Mart, as an employment case, is distinguishable in many consumer class action contexts.  His example was where cases are based on identical contract documents and a common practice by the defendant.  That almost describes to a tee what plaintiffs typically argue in seeking to certify insurance class actions, which suggests we may see more focus on insurance.  But when you dig into the details, frequently the policy language for the proposed class is not identical and the “common practice” is really nothing more than a guideline with plenty of case-by-case exceptions to it, making the case much more analogous to Wal-Mart. 
  • There seemed to be a general consensus among the panelists that, post-Wal-Mart, more evidentiary hearings (essentially mini-trials) are being held on class certification in federal courts, and we are likely to see more of that.  I think that’s a good thing regardless of which side of the case you’re on, such a hearing tends to focus a busy judge more intently on the evidence on class certification.  It also gives class action lawyers more opportunities to conduct evidentiary proceedings, given the very few class actions that go to trial. 
  • Mark Perry made an interesting point about a sometimes overlooked part of the class action rule requiring that courts certifying a class “must define the class and the class claims, issues, or defenses . . . .”  Fed. R. Civ. P. 23(c)(1)(B) (emphasis added).  He made the point that under this rule and in light of Wal-Mart, district courts should be carefully examining each element of the plaintiffs’ causes of action and each defense, and determining whether they can be tried on a classwide basis.  I thought that was a great point.  Some decisions fall into the trap of looking at the issues in the case too broadly without digging into the details of each cause of action and each defense.  The need for individual proof of defenses can be critical in defending against class certification. 
  • Judge Rosenthal pointed out that there is a significant open question after Wal-Mart as to whether a Rule 23(b)(2) class can recover an award of relatively small penalties on each class member’s claim, which, when aggregated, amount to a very large penalty that can potentially cripple a defendant, particularly a smaller company.  This is an issue the insurance industry needs to be paying very close attention to because insurance claim-handling statutes sometimes provide for these types of penalties.  The Louisiana Supreme Court’s recent decision in Oubre v. Louisiana Citizens Fair Plan, No. 2011-C-0097, 2011 La. LEXIS 3014 (La. Dec. 16, 2011) is a good example of how this type of aggregation of small penalties can result in a huge potential exposure for an insurer (see my recent blog post on Oubre for more).  The latest word on Oubre is that the Louisiana Supreme Court denied rehearing and that Louisiana Citizens intends to petition for certiorari in the U.S. Supreme Court, as recently reported on Property Casualty 360.  I wouldn’t hold your breath for that petition to be granted, but you never know.   
  • On AT&T v. Concepcion, Paul Bland took the position that if Concepcion results in enforcement of arbitration provisions barring class action arbitrations even in circumstances where it is not financially viable for an individual to pursue an arbitration (as the Eleventh Circuit has held), then consumer class actions will disappear except in circumstances where there is no contract between the putative class members and the defendant.  Mark Perry pointed out that the Consumer Financial Protection Bureau will have the power to bar the use of arbitration clauses by lenders within its jurisdiction, and that the NLRB has recently ruled that it is an unfair labor practice for employers to ban class arbitrations (this is on appeal).  They didn’t mention insurance, but, as I’ve noted here before, that is another area where state regulators and state legislatures have power to regulate the use of arbitration provisions (see my August 22, 2011 and December 14, 2011 blog posts for more on this).  One risk I see here is that if the insurance industry does not pursue greater use of arbitration post-Concepcion and most other industries do, that could make the insurance industry a more prominent target of the plaintiffs’ class action bar. 
  • There was an interesting discussion about the Fifth Circuit’s opinion in In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004), a case involving allegations of racial discrimination in the sale and administration of low-value industrial life insurance policies.  In a 2-1 decision, the majority reversed a denial of class certification, holding that damages potentially could be obtained under Rule 23(b)(2).  The majority accepted the plaintiffs’ argument that damages, although individualized, could be calculated in an across-the-board way through the use of the insurer’s rating practices and data, and thus were proper under Rule 23(b)(2).  The court also suggested that, although notice and opt out procedures are not required under Rule 23(b)(2), they can be used in (b)(2) cases, and might be appropriate in that case.  Judge Rosenthal suggested that there are open questions as to whether these holdings survive Wal-Mart. 

ABA Insurance Coverage Litigation Committee CLE Seminar in Tuscon -- March 2012

Posted on January 13, 2012 by Wystan M. Ackerman

I thought I’d let you know about an upcoming CLE seminar sponsored by the ABA Insurance Coverage Litigation Committee, to be held in Tuscon, Arizona from March 1-3, 2012. In years past, this seminar has had very strong attendance by in-house and outside counsel handling insurance litigation on both sides, and I’m told this year will be no exception.  The brochure lists the wide array of programs available, covering numerous areas of coverage litigation.  I heard the hotel rooms are filling up quickly.

I will be moderating a program on “Class Actions on Insurance Coverage” on Friday, March 2 at 10:30.  The panelists will be Raoul Cantero of White & Case LLP in Miami (formerly a justice of the Florida Supreme Court), Barbara Frederick, Senior Counsel and Second Vice President of Travelers and Jeff Leon, a plaintiffs-side national class action lawyer with Complex Litigation Group LLC (formerly with Freed & Weiss) in Chicago.

I hope to see some of you there.  Please drop me a note if you plan to attend.

FDCC Insurance Industry Institute 2011

Posted on November 22, 2011 by Wystan M. Ackerman

I recently attended the Federation of Defense and Corporate Counsel’s 2011 Insurance Industry Institute.  Insurance class actions were not a significant focus of the program, but there were a few points worthy of mention:

  • The Insurance Regulatory Landscape: There was a panel discussion on the changing regulatory landscape impacting the industry.  The panelists included representatives of the insurance departments in New York, Missouri and DC, as well as representatives of AIA and PCIAA.  The focus was on the new Federal Insurance Office and whether federal regulation of insurance will expand in the coming years.  The consensus was that this will be a slow, gradual process.  I asked, if insurers were to move towards increased use of arbitration following AT&T v. Concepcion, how the panel thought regulators might view that.  It appeared that this was not an issue they had given much thought to yet.  One panelist suggested that some insurance departments may not be comfortable with insurers forcing individuals into arbitrations.  Another panelist noted that arbitration may not be what insurers want given the potential for increased cost and less ability to predict outcomes.
  • Microinsurance:  There was an interesting discussion on microinsurance, including an effort by SwissRe to sell low-cost, small-value agricultural insurance to low income consumers in Africa.  Companies may see this as a way to do some good for impoverished people as well as develop and grow a new insurance market.  (For more on microinsurance, see a recent Oxfam press release as well as the Microinsurance Centre.)  It seems clear that there is a huge potential untapped market for selling insurance to individuals in underdeveloped countries, and this may help people improve their livelihoods, but there are various regulatory and cultural obstacles to selling microinsurance.  The countries where these products can be sold can have unstable governments and difficult regulatory systems, as well as consumers who have a general distrust for insurance companies.  From the litigation perspective, it seems critical to understand the legal system in the country where an insurer is contemplating selling these policies.  Given that the amounts at stake on claims necessarily would be small, an insurer likely would have serious litigation risk only if the courts have a class action mechanism, or bad faith law that could allow for recoveries in lawsuits much larger than the amount of insurance.
  • Attorney-Client Privilege Outside the U.S.:  David Steiger gave a very interesting presentation about how the law on the attorney-client privilege varies widely outside of the United States.  Many other countries do not have a privilege as robust as ours, particularly with respect to recognizing a privilege between in-house counsel and businesspersons at a company.  Some countries also may not recognize any cross-border privilege between businesspersons in one jurisdiction and in-house or outside lawyers from other countries who are not licensed in the applicable jurisdiction.  For insurers with global operations, this can potentially create significant issues where, for example, U.S.-based and U.S.-admitted lawyers are managing issues or litigation overseas.  Steiger suggested that this might also create issues if electronic files pertinent to U.S. matters are being stored overseas due to outsourcing.    
  • Data Breach Class Actions:  A panel discussion on privacy laws and cyber-related coverages for data breaches highlighted in my mind how that is a significant new area of class action exposure for insurers, in two different ways.  First, insurers that suffer a loss of electronic personal data regarding their insureds could face class actions brought against them, although I am not aware of any significant ones to date.  Second, insurers that provide insurance coverage for data breaches could find themselves defending a significant number of class actions brought against their insureds.  These are cases in which, due to the nature of the event, class certification seems potentially more likely, although there may be statutory defenses as well as defenses based on a lack of injury, or whether there was injury may depend on a case-by-case analysis.  This is an area in which insurers (and their insureds) may be able to take proactive steps to reduce class action exposure by ensuring that they are up to date on the law in all applicable jurisdictions and ready to respond swiftly to these events when they occur.  It also may be worth thinking about what steps can be taken to reduce the likelihood of class certification in the event that this type of class action is brought.  For more on this, see a recent piece on the Lexblog Network and the blog posts cited therein discussing a recent First Circuit decision.

LexisNexis Names Top Insurance Blogs for 2011

Posted on November 15, 2011 by Wystan M. Ackerman

I am honored that my blog, launched earlier this year, was selected by LexisNexis as a Top Insurance Blog for 2011.  Here is the announcement.  Many thanks to those readers who recommended my blog, and to the LexisNexis staff and its Insurance Law Community Advisory Board.  The list of top blogs includes a number of other high-quality insurance blogs that I read regularly.   

Due Process Issues in State Court Insurance Class Action Are Raised By Petition for Certiorari in Farmers Insurance Company of Oregon v. Strawn

Posted on October 31, 2011 by Wystan M. Ackerman

Back in June, I posted about the Oregon Supreme Court’s decision in Strawn v. Farmers Insurance Company of Oregon.  This class action involved payments for personal injury protection (PIP) coverage under auto insurance policies.  Farmers used software to analyze claimed medical expenses in comparison with a database of charges for particular medical services in the region.  It selected a particular percentile (at different times it chose the 80th, 90th and 99th percentiles) as a cutoff for what it would pay for a particular service (although it claimed that adjusters were authorized to override this in appropriate circumstances).  The plaintiffs’ claim was that this process was arbitrary and a breach of the contractual obligation to pay “reasonable and necessary” medical expenses, as well as fraud.  A class was certified and the case was tried to a jury.  A judgment in favor of the class was entered for approximately $900,000 in compensatory damages and $8 million in punitive damages.  The Oregon Supreme Court affirmed the verdict, rejecting Farmers’ arguments that it was denied the ability to present individualized defenses and that the plaintiff failed to prove class-wide reliance.  The court also held that Farmers had waived its constitutional challenge to punitive damages because it had failed to adequately preserve a challenge to a waiver ruling by the trial court in its appeal to the Oregon Court of Appeals. 

On October 5, 2011, Farmers filed a petition for certiorari in the U.S. Supreme Court (No. 11-445; e-mail me for a copy of the petition).  This case presents the Supreme Court with an opportunity to decide what limitations the federal Due Process Clause places on state court class actions.  Specifically, Farmers contends that the Due Process Clause bars a state court from ruling that individualized reliance on a fraud claim need not be proven on an individual basis in a class action, even though individual proof would be required in an individual case.  In other words, a class action should not be able to alter substantive law.  Farmers also argues that the Oregon Supreme Court, in finding that Farmers had waived its constitutional challenge to the punitive damages award, effectively created a new rule of state procedural law in a manner that violated due process.  (There were also some interesting issues raised post-decision about some ex parte communications between plaintiff’s counsel and members of the Oregon Supreme Court.  On reconsideration, after a recusal of the justice most directly implicated in some of the ex parte communications, the court reaffirmed its earlier decision.  This is discussed in the cert petition, perhaps to give some flavor and background, but this issue is not expressly raised as a question presented.) 

The cert petition was filed by Ted Boutrous, who argued Wal-Mart v. Dukes.  The petition focuses in part on that decision, and seeks to extend the prohibition on “Trial by Formula” that was adopted by the Court in Dukes, chiefly based on the federal Rules Enabling Act, so that this principle would become a due process requirement in state court class actions.  There was a petition for certiorari last term filed by Philip Morris involving somewhat similar due process issues in state court class actions.  Justice Scalia granted a stay, but the Court ultimately denied certiorari (see my prior blog post about the Philip Morris case). 

This is definitely a petition to follow for those keeping an eye on insurance class actions, and I will continue to follow it on this blog.  Because this is a rare class action that actually went to trial, it provides the Supreme Court a relatively rare and unique opportunity to weigh in on due process issues.  But at the same time it is clearly a case that is complicated factually and procedurally (as almost any class action would be by the time it gets through a trial and state court appeal).  I expect the response to the petition will try to argue that the Oregon Supreme Court had some other independent grounds for its rulings on pertinent issues and that, in light of the facts, procedural history and nuances involved in the case, the constitutional issues are not “cleanly” presented in a way conducive to Supreme Court review.  That is a typical tactic in opposing cert, especially where, as here, a case is likely to have some appeal on its merits.  It will be interesting to see whether the Court takes this case up.  If it does, the insurance industry and insurance lawyers will want to follow it closely.

Insights from the ABA 2011 National Institute on Class Actions - Part 3

Posted on October 27, 2011 by Wystan M. Ackerman

Here is the third and final installment of my insights from the recent ABA conference.  

Class Action Trials:  There was a very interesting panel discussion on class action trials with some lawyers and a judge who have tried class actions.  The panel included Andrew McGuiness, Judge Weinstein of the Eastern District of New York, James Donato, David Sanford, Ned Searby and Thomas Sobol. Here are my takeaways from this: 

  • From the defendant’s perspective, a big concern at trial is often addressing the potential preconception that jurors may have that because so many people are in the class, it must have some merit.  The defense panelists suggested starting with voir dire to educate people regarding what a class action is.  There are people who have received checks in the mail for tiny sums as a result of a class action and will recognize that some of these cases can have little value.  Judge Weinstein suggested that he probably would allow some attorney voir dire in a class action trial. 
  • Another big issue identified by the panelists is the extent to which the named plaintiffs will be part of the trial.  The plaintiffs’ trial strategy is typically to keep the focus entirely on the defendant’s conduct.  They often argue that because a class has been certified, the class should be treated like a corporate entity, and the named plaintiffs should not have relevant individual issues.  Although it is a challenge for them, they often call adverse defense witnesses as their lead witnesses at trial.  They need to call the named plaintiffs, but they often try to keep their testimony as short as possible.  The defense lawyers on the panel offered different viewpoints on how to handle the named plaintiffs.  One of them suggested that there is often little cross-examination that is appropriate, and the defense strategy should really focus on the details of the company’s practices and convincing the jury that the defendant acted appropriately.  Another defense panelist suggested that a long cross-examination of the named plaintiffs, to the extent possible, will be helpful to try to make a record for decertification or an appeal of the certification decision, and to demonstrate the lack of involvement that the named plaintiffs have in the class action process. 
  • Another key issue is whether any absent class members will testify and, if so, how they will be selected.  Often this arises in disputes over whether absent class members will be deposed because if they are not deposed it is unlikely the court will allow them to testify at trial.  Judge Weinstein suggested that in some cases interrogatories to absent class members may be more appropriate but he might allow both sides to select some absent class members to be deposed and to testify at trial. 
  • Another important question is whether the jury will decide the class issues or the individual issues first (a chicken and egg type of question).  If not all the named plaintiffs are allowed to testify, that tends to answer the question as the jury will not be able to decide all of the individual issues first.

The new Consumer Financial Protection Bureau (CFPB):  This new federal bureau was established by the Dodd-Frank Act and will have some regulatory oversight in areas that impact class actions.  The CFPB is currently operating without a director because the Senate has not acted on President Obama’s nomination of Richard Cordray due to a Republican filibuster.  David Gossett of the CFPB spoke at the ABA conference.  He said the bureau is interested in receiving notices of proposed class action settlements, although it is not expressly required by the Class Action Fairness Act.  The CFPB has the statutory authority to consider the propriety of and potentially ban mandatory arbitration clauses in certain types of consumer contracts, or impose conditions or limitations on them by regulation.  The bureau first has to conduct a study on arbitration, and it will not make any determination until after the study is completed.  It appears that formal action cannot be taken until a director of the bureau is confirmed.  If the CFPB issues regulations on arbitration clauses, an interesting question will arise as to whether those regulations will govern insurance contracts, given the McCarran-Ferguson Act’s preference for state regulation of insurance.

Insights from the ABA 2011 National Institute on Class Actions - Part 2

Posted on October 26, 2011 by Wystan M. Ackerman

This is the second installment of my insights from the recent ABA conference.  

Concepcion:  During the discussion of the Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, which upheld the use of arbitration clauses with class action waivers, Paul Bland of Public Justice (who filed an amicus brief in support of the plaintiffs) made some interesting points.  He suggested that the Supreme Court might rule differently in a case coming up from a state supreme court instead of a federal court of appeals, because Justice Thomas has taken the view that the Federal Arbitration Act does not apply in state court, and thus might vote with the Concepcion dissenters in a state court case.  (Although is it really the lower courts’ role to try to count how justices might vote in the Supreme Court in a yet-to-be-decided case, as opposed to following the precedent that exists?)  Bland also noted that the plaintiffs in Concepcion might have strengthened their case had they developed a factual record on the extent to which AT&T’s arbitration provision is actually used by consumers.  Bland suggested that AT&T’s provision is hardly ever used, but Andy Pincus, who argued for AT&T in Concepcion, pointed out that part of the reason for the relatively small number of arbitrations that have gone forward is that AT&T imposes a substantial incentive on itself to settle individual disputes.  Paul Bland also suggested that, in seeking to avoid application of Concepcion, plaintiffs can argue that they cannot effectively vindicate statutory rights in arbitration because, where cases involve complicated legal issues and small amounts at stake, it is not practical to pursue arbitration.  He cited the Supreme Court’s decision in Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) as potentially supporting that result if the right kind of factual record is developed by the plaintiffs.  The Eleventh Circuit recently rejected an argument along these lines, however, in Cruz v. Cingular Wireless, LLC, No. 08-16080, 2011 U.S. App. LEXIS 16811 (11th Cir. Aug. 11, 2011).  The speakers agreed that the Second Circuit’s forthcoming decision in In re American Express is one to watch on this issue.  In insurance class actions, if the use of arbitration by insurers is expanded, I expect it will be difficult for plaintiffs to contend that they cannot effectively vindicate statutory rights, such as bad faith claims or other violations of insurance statutes, in individual arbitrations.  Typically the penalties available are more than adequate to provide an incentive to arbitrate.  We might see this argument made in insurance class actions involving de minimus statutory violations with small penalties, but so far the courts seem disinclined to allow this type of argument by plaintiffs as a way around Concepcion. 

Wal-Mart v. Dukes:  Joe Sellers, who argued for the plaintiffs in Wal-Mart v. Dukes, suggested that, with respect to the Supreme Court’s holding that “Trial by Formula” is impermissible and defendants must be allowed to prove up their affirmative defenses on an individual basis in class actions, we may see arguments by plaintiffs that this holding should be limited to Title VII and other statutory claims.  He noted that Title VII expressly provides a statutory right to assert individualized defenses.  Professor Coffee in his discussion of Dukes did not read it as potentially limited in this fashion.  Mark Perry, who was on the team representing Wal-Mart in Dukes, said this argument was unlikely to succeed because this part of the decision was unanimous and was compelled by the Rules Enabling Act, under which a procedural rule cannot change substantive law.

Insights from the ABA 2011 National Institute on Class Actions - Part 1

Posted on October 25, 2011 by Wystan M. Ackerman

I recently attended the ABA’s 2011 National Institute on Class Actions.  I will try to highlight here what I saw as key points that either I had not heard before or provided an interesting new twist on an important issue.  I’ll split this up into several posts because there is a fair amount to discuss. 

Prof. Jack Coffee of Columbia Law School (who taught me when I was there) has spoken at this conference every year, providing an annual review of key developments in class action law.  He  focused on the impact of the three Supreme Court cases this year.  Here is what I saw of particular interest: 

  • Prof. Coffee predicted that we will see an increase in injunctive-only class actions under Rule 23(b)(2), with plaintiffs lawyers seeking attorneys’ fees for winning an injunction.  He noted that settling these cases can raise serious conflicts of interest because the fee award may come at the price of a reduced recovery to the class.  It is also unclear whether, after an injunctive-only class action goes to final judgment, the class members can still sue separately for damages – Rule 23(b)(2) does not provide for any opt out right, and claim splitting rules might apply.  There may be questions about whether class counsel can provide adequate representation if, in this type of case, the class members will lose their right to seek damages.  In insurance class actions, I don’t see this as a major area of likely exposure for insurers because most insurance class actions are really seeking damages and any injunctive relief is really a request for damages in disguise.  The Seventh Circuit’s opinion in Kartman v. State Farm (see my prior blog post) explains this.  But there may be some circumstances where injunctive relief can be sought in an insurance case without it being a request for damages in disguise, if the injunction does not relate to claim adjustments or premium calculation.
  • Prof. Coffee suggested that, in response to Wal-Mart v. Dukes’s holding that defendants must have the opportunity to prove their individualized affirmative defenses, plaintiffs’ attorneys may use three tactics.  First, they may try to use Iqbal and Twombly to challenge affirmative defenses that are not pled with particularity.  It is not clear that these decisions apply to affirmative defenses, and in my mind a defendant in a class action cannot be expected to investigate, at the time of filing its answer, all of the putative class members’ claims to be able to plead individualized defenses with particularity -- that is completely impractical and courts should recognize that.  Second, Prof. Coffee suggested that plaintiffs may seek only partial certification on a general liability issue, leaving the affirmative defenses to be resolved in a separate individual lawsuit after adjudication of the class action (he cited Engle v. Liggett Group, Inc., 945 So.2d 1246 (Fla. 2006) as an example of this approach).  I think the ALI Principles of Aggregate Litigation, if followed with respect to partial certification, will make partial certification more challenging for plaintiffs (see my prior blog post on this).  Where the common issues on which certification is sought are intertwined with the individual issues that are the subject of the affirmative defenses, the ALI Principles would counsel against certification.  Third, Prof. Coffee suggested that in a 23(b)(2) injunctive case, the defendants will not have a Seventh Amendment right to a jury trial on equitable relief claims, and thus affirmative defenses could be assigned to a magistrate for individual hearings.  Whether that is practical, of course, depends on the size of the case.
  • In discussing Smith v. Bayer Corp. (which held that the Anti-Injunction Act barred a federal court from enjoining a state court class action after denial of certification in federal court on the same issue), Prof. Coffee noted that there is an open question about whether a federal court can enjoin a state case while the federal court decides whether to approve a proposed class action settlement.  He noted that it is unclear whether the federal court has jurisdiction over absent class members or opt outs in this context, and that this is an issue the Supreme Court may need to take up.  In my mind, if an injunction were not allowed this would create some significant practical problems – the federal court settlement requires significant time to provide notice and conduct the hearing, and if the state court judge refuses to stay the state case and pushes it towards certification that creates a race between the federal and state systems (and a waste of resources in one of them).  Class action notice is also expensive, and defendants may be unwilling to incur that cost while continuing to be subjected to state court litigation.        
  • With respect to class action settlements, Prof. Coffee said we should all keep our eyes out for the Third Circuit’s forthcoming en banc opinion in Sullivan v. DB Investments, Inc.  This decision is expected to address the propriety of a nationwide settlement on state law claims in the post-Wal-Mart era.  It potentially could have a major impact on class action settlements going forward.

 

ABA Class Action Seminar in New York on October 14, 2011

Posted on October 03, 2011 by Wystan M. Ackerman

The ABA Class Actions and Derivative Suits Committee is holding its annual National Institute on Class Actions on Friday, October 14, in New York City.  This one-day seminar is chock full of timely and interesting presentations on the 2011 Supreme Court decisions (with a panel including lawyers who litigated Wal-Mart and Concepcion), the future of class action litigation, class action trials, objectors to class action settlements, and the new Consumer Financial Protection Bureau. 

I’ll be there.  I hope to see some of you there -- if you’re going please drop me a note.  If you’re still considering attending, it’s not too late to sign up here.  For those of you who can’t make it, you can expect to see my “takeaways” from it on my blog, probably the week after the seminar.

Insights from DRI Class Action Seminar - Part Three

Posted on July 27, 2011 by Wystan M. Ackerman

This third and final part of my takeaways from the DRI seminar will focus on the presentations on threshold dispositive motions in class actions, class action settlements, and responding to class actions in the press and on the Internet. 

  • Initial Dispositive Motions:  John Beisner of Skadden (where I started my career) had some good thoughts on motions to dismiss and to strike class allegations:  Motion to dismiss briefs should explain how a motion to dismiss in a putative class action relates only to the named plaintiff’s claims – new judges and those who have had few class actions may not realize that.  One thing to be careful about in deciding whether to file a motion to dismiss is whether the outcome might narrow the case to one that is more likely to be certified.  On motions to strike class allegations, one advantage defendants do not always recognize is that plaintiffs may have filed a complaint alleging an overly broad class to try to achieve the broadest tolling possible under American Pipe.  An early motion to strike that at least narrows the class will limit tolling.  Beisner said one hot issue on motions to strike is ascertainability, where the class is a failsafe class (i.e., the class is improperly defined as limited to persons to whom the defendant is liable) or a hard-to-pinpoint class (i.e., it is evident from the complaint that class members could not be even identified without individual adjudication).  I’ve seen both of these in insurance class actions.  He also suggested that, after Wal-Mart, one approach defendants may want to take in some cases is to challenge commonality on a motion to strike and save predominance for the opposition to class certification.
  • Class Action Settlements:  John Dougherty of DLA Piper highlighted several trends in class action settlements.  In assessing attorneys’ fees, more courts are looking at a percentage of the class recovery (which sometimes does not include a cy pres award) together with a cross-check based on a lodestar calculation.  In claims-made settlements, more courts are basing attorneys’ fees on the actual payout to the class instead of the gross potential settlement fund.  Some objectors are arguing that if the proposed attorneys’ fees are not proportional to the benefit to the class, the class benefit should be increased rather than attorneys’ fees being reduced.  He has not yet seen courts approving Internet-only or e-mail notice programs, but some solution is necessary where the class is so large that a mailing is prohibitively expensive. 
  • Responding to Class Actions in the Press and on the Internet:  Richard Levick of Levick Strategic Communications gave a great presentation on how unfavorable information about a company moves so quickly on the Internet today, and how companies should be prepared in advance to respond to publicized new class action filings and communications crises that may lead to litigation.  Companies should be ready to use SEO (search engine optimization) and SEM (search engine marketing, or paid advertising) to respond immediately to a crisis, so that when people type into Google seeking information about a crisis issue, they will also find positive information and explanation from the company.  He highlighted how Taco Bell did this effectively when word spread that it was using filler in its taco meat, and the plaintiffs’ bar dropped a class action lawsuit.  Joseph Suarez, in-house counsel at Procter & Gamble, also discussed, in the context of the Pampers DryMax class action litigation, how important it is for companies to engage negative voices on blogs, Twitter, etc., quickly, before incorrect information about a company’s product spreads.  He talked about how P&G effectively used senior management and pediatricians to post comments online, although in retrospect they should have moved more quickly.  P&G previously had a policy of not commenting on litigation, but more recently changed its stance.  Adam Litpak, the New York Times’ Supreme Court reporter, talked about how companies should not refuse to comment on litigation.  Instead they should come up with a sentence or two early on, and then talk further somewhat off the record, to open the line of communication with the reporter.  It’s much easier for reporters to write negative things about a company and take the plaintiffs’ attorneys’ view when the company will not talk to them or allow its lawyers to do so. 

Insights from DRI Class Action Seminar - Part Two

Posted on July 26, 2011 by Wystan M. Ackerman

Here is part two of my takeaways from the seminar.  I’ll focus here on appeals under Rule 23(f) and CAFA, the new ALI Principles of the Law of Aggregate Litigation, and federal constitutional issues in state court class actions. 

  • Rule 23(f) and CAFA Appeals:  Judge Southwick of the Fifth Circuit made some helpful suggestions here.  First, parties might want to ask the district court to explain why an appeal might be helpful, as the advisory committee notes to Rule 23(f) suggest, and analogous to what is done in § 1292(b) interlocutory appeals.  Second, he stressed (although it comes as no surprise) that the most important section of petitions seeking review is the section on why review should be granted.  The fact that an unresolved issue is likely to arise in other cases is often more important than the likelihood of an error below, although most cases where review is granted result in reversal.  Third, the 60-day deadline to issue a decision under CAFA puts pressure on the court of appeals.  One way they might deal with that would be to leave the question of whether review should be granted as an open question until after briefing and argument on the merits (since the 60-day time period does not start running until review is granted).
  • The New ALI Principles of the Law of Aggregate Litigation:  Judge Carolyn Kuhl of the California Supreme Court, who was on the ALI drafting committee, talked about the ALI’s new Principles of the Law of Aggregate Litigation.  Everyone who does class action and mass action work should study them.  The Supreme Court cited them with approval in Wal-Mart and Smith v. Bayer.  Several important areas are:  (1) the ALI opines that issues classes under 23(c)(4) are appropriate where they materially advance the resolution of cases and are superior to other alternatives, but the issue(s) must not be intertwined with other issues that would need to be litigated in individual cases; (2) the ALI recommends that Rule 23 be amended to require court approval when a putative class action is dismissed or settled before certification, and suggests that notice to the putative class might be appropriate (I think this is inappropriate and impractical; it would unnecessarily complicate resolution of frivolous class actions, and who would pay the cost of such notice?); (3) the ALI recommends that attorneys’ fees be calculated as a percentage of the actual value received by a class in a claims-made settlement, not the projected value if everyone in the class made a claim, which has been implemented in California state court (I think this is a very good idea).
  • Federal Due Process Issues in State Court Class Actions:  Paul Clement, who represented Philip Morris in its certiorari petition in Philip Morris v. Jackson (see my prior blog post on that), believes this is an issue on which certiorari will be granted in the relatively near future.  He suggested that certiorari might not have been granted in Jackson because the state appellate court did not sufficiently grapple with the due process issue and the issue may not have been postured in a way that appealed to at least four justices.  He stressed that the Court is much more interested in reviewing legal issues than correcting even outrageous errors below.  What does a defendant need to do to have a better chance of getting the Court to consider whether state court class action rules (and the application thereof) meet federal due process standards?  Clement suggested making the federal due process issue a lead or central argument to the state appellate and supreme courts.  He said the best chance will come where the state supreme court has squarely addressed the federal due process issue.   

Insights from DRI Class Action Seminar - Part One

Posted on July 25, 2011 by Wystan M. Ackerman

The DRI Class Action Seminar I attended last week provided a wealth of insights.  It was great to meet some readers of this blog there.  On the blog I will highlight what I saw as key takeaways and their specific application to the insurance industry.  In this first part, I’ll discuss some further insights on the three Supreme Court cases from this term, and the subject of coordination of litigation and regulatory inquiries. 

  • Wal-Mart v. Dukes (see my prior blog post):  Ted Boutrous, who argued Wal-Mart, stressed the importance of the Court’s unanimous rejection of “trial by formula,” where the court rejected the use of statistical modeling to prove classwide damages.  The Rules Enabling Act bars the use of Rule 23 to alter substantive rights.   I think it is key for insurers to focus on what defenses they would have in individual cases and demonstrate them with examples from the putative class.  Boutrous predicted we will see more efforts from plaintiffs to stay in state court, and more mass joinders not brought as class actions but with similar exposure.  He said careful attention also should be paid to how Wal-Mart will impact approval of class settlements, which will need to present at least one common issue satisfying the new commonality requirement.  It’s also good to see that at least two state courts (in Florida and Michigan) have followed Wal-Mart.  See Tire Kingdom, Inc. v. Dishkin, 2011 Fla. App. LEXIS 10550, at *22 (Fla. 3d Dist. Ct. App. July 6, 2011) (following Wal-Mart on commonality); Henry v. Dow Chemical Co., Case No. 03-47775, slip op. (Mich. Cir. Ct., Saginaw County) (refusing to re-certify class).
  • Smith v. Bayer Corp. (see my prior blog post):  Phil Beck, who argued Smith, said the problem of serial relitigation of class certification likely will have to be solved by Congress.  He suggested affirmatively arguing stare decisis in a strong way once courts have repeatedly denied class certification in favor of the defendant on the same issue.  Where parallel cases are brought in state and federal court, the defendant might try to implead the state court named plaintiffs into the federal case.  I asked about a declaratory judgment action by the defendant against a putative class, seeking final resolution of the class certification issue.  He thought that might work but of course has significant risks.
  • AT&T v. Concepcion (see my prior blog post): Both Andy Pincus, who argued Concepcion, and Neal Berinhout, lead in-house counsel on the case, spoke at the seminar.  They talked about how AT&T designed its consumer-friendly arbitration provision because it was tired of the burden of class actions brought by the plaintiffs’ bar that had little merit but large defense costs, and it wanted to make its customers happy if they had legitimate disputes, and resolve them quickly.  There have been relatively few arbitrations because of AT&T’s self-imposed incentive to settle disputes (if they don’t, they can face an arbitration with a significant minimum damage award and double attorneys’ fees).  Insurers often have similar motivations to keep their customers happy and resolve disputes quickly, and may want to pursue this, but the regulatory environment and applicable insurance law is more complex – some states limit or prohibit arbitration provisions in insurance policies in some contexts, and there are issues regarding the interplay of the Federal Arbitration Act and the McCarran-Ferguson Act.  See Am. Bankers Ins. Co. v. Inman, 436 F.3d 490, 494 (5th Cir. 2006); McKnight v. Chicago Title Ins. Co., 358 F.3d 854, 858 (11th Cir. 2004).  To the extent insurers try to implement this, AT&T’s provision is certainly a model that comes with Supreme Court approval, although an insurer may not need to go quite as far as the AT&T provision does in being consumer-friendly, and disputes over insurance claims differ significantly from disputes AT&T has with consumers.  While there have been Congressional efforts started to overturn the Concepcion decision, they do not seem to be getting any traction yet, but should be monitored closely.
  • Coordination of litigation and regulatory inquiries:  Amanda Perez, in-house counsel at Pfizer, talked about how she has addressed situations where Pfizer is faced with an issue that leads to a regulatory inquiry and multiple fronts of litigation at the same time.  Insurers are sometimes faced with analogous circumstances where departments of insurance are making inquiries at the same time as class actions and other litigation is pending.  She made good points about how critical it is to think about the endgame for the entire issue upfront, and how discovery should be coordinated across multiple suits where possible, so that plaintiffs’ lawyers in multiple suits get only one deposition of company personnel.

 

Webinars on Insurance Industry Impact of 2011 Supreme Court Decisions on Class Certification; DRI Class Action Seminar in Late July

Posted on July 17, 2011 by Wystan M. Ackerman

My partner, Steve Goldman, and I were pleased to be invited to present webinars in late July and early August for the American Insurance Association and the National Association of Mutual Insurance Companies, discussing the insurance industry impact of the Supreme Court’s 2011 decisions on class certification (Wal-Mart v. Dukes, AT&T Mobility v. Concepcion and Smith v. Bayer Corp.).  If you would like further information, feel free to e-mail me. 

As a reminder, the Defense Research Institute (DRI) is putting on an excellent class action seminar on July 21-22 in Washington, DC, with panel discussions on the new Supreme Court decisions, a variety of other hot topics, and an all-star list of presenters.  I will be attending and hope to see some of you there.  If you are planning to attend and would like to meet while we’re there, please e-mail me or call me.

DRI Class Action Seminar in July Should Be A Hit

Posted on May 16, 2011 by Wystan M. Ackerman

The Defense Research Institute is planning a class action seminar for July 21-22, 2011 in Washington, DC.  That will come shortly after the Supreme Court issues its opinions in Smith v. Bayer (involving federal injunctions against state court class actions after a denial of certification in federal court) and Wal-mart v. Dukes (involving the commonality prong of Rule 23(a) and the scope of classes seeking injunctive or declaratory relief under Rule 23(b)(2)).  See my prior posts on the Bayer and Wal-mart cases, as well as on the Supreme Court decision in AT&T Mobility v. Concepcion, which already came down.  The DRI program will include panel discussions of the implications of these three new decisions for future class actions.  The presenters include counsel of record in each of the three Supreme Court cases, as well as judges from the Fifth and Seventh Circuits, and in-house counsel at leading companies.  Other topics include Rule 23(f) and CAFA appeals (with Judge Southwick of the Fifth Circuit presenting), federal constitutional issues in state court litigation (with former Solicitor General Paul Clement presenting), class action settlements (with leading mediator Eric Green presenting), and responding to class actions in the media (with presenters including New York Times reporter Adam Litpak).  Shaping up to be an all-star program in this area.

I plan to attend and hope to see some of you there. 

ABA Insurance Coverage Litigation Committee Program Well-Done

Posted on April 09, 2011 by Wystan M. Ackerman

I recently attended "Finding the Balance in the Shifting Sands of Insurance Coverage," put on by the Insurance Coverage Litigation Committee of the ABA Tort & Insurance Practice Section (TIPS).  A great opportunity to meet insurance lawyers from across the country, well-balanced between plaintiffs and defense lawyers, with a significant presence of in-house counsel, consultants, etc.  The program included a mock trial of an insurance coverage case and covered a number of hot-button issues including the Gulf oil spill, financial crisis, Chinese drywall, the attorney-client privilege in bad faith litigation, etc.  Great location also at the Arizona Biltmore.  I was honored to be invited to speak on insurance class actions at the "toolbox" lunch and breakfast sessions.  For a copy of my paper on recent developments in insurance class actions, email me.