January 14, 2011
Fitzpatrick on Class Action Settlements and Fee Awards
Prof. Brian Fitzpatrick (Vanderbilt) has posted on SSRN his article, An Empirical Study of Class Action Settlements and Their Fee Awards, 7 Journal of Empirical Studies 811 (2010). Here’s the abstract:
This article is a comprehensive empirical study of class action settlements in federal court. Although there have been prior empirical studies of federal class action settlements, these studies have either been confined to securities cases or have been based on samples of cases that were not intended to be representative of the whole (such as those settlements approved in published opinions). By contrast, in this article, I attempt to study every federal class action settlement from the years 2006 and 2007. As far as I am aware, this study is the first attempt to collect a complete set of federal class action settlements for any given year. I find that district court judges approved 688 class action settlements over this two-year period, involving nearly $33 billion. Of this $33 billion, roughly $5 billion was awarded to class action lawyers, or about 15 percent of the total. Most judges chose to award fees by using the highly discretionary percentage-of-the-settlement method, and the fees awarded according to this method varied over a broad range, with a mean and median around 25 percent. Fee percentages were strongly and inversely associated with the size of the settlement. The age of the case at settlement was positively associated with fee percentages. There was some variation in fee percentages depending on the subject matter of the litigation and the geographic circuit in which the district court was located, with lower percentages in securities cases and in settlements from the Second and Ninth Circuits. There was no evidence that fee percentages were associated with whether the class action was certified as a settlement class or with the political affiliation of the judge who made the award.
January 13, 2011
Seiner on Twombly/Iqbal and Affirmative Defenses
Prof. Joseph Seiner (South Carolina) has posted on SSRN a draft of his article, Twombly, Iqbal, and the Affirmative Defense. Here’s the abstract:
In Twombly v. Bell Atlantic Corp., 550 U.S. 644 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), the Supreme Court announced a new plausibility standard for a plaintiff’s allegations. The decisions may have even broader implications, however, as many federal district courts have already applied this pleading standard to a defendant’s affirmative defenses. This Article attempts – for the first time in the legal literature – to make sense of Twombly and Iqbal in the context of the affirmative defense.
This Article addresses the two possible readings of Twombly and Iqbal for a defendant’s responsive pleadings. The first reading is a narrow case-specific approach, and concludes that the decisions are inapplicable to defendants and must be limited to a plaintiff’s civil complaint. The second approach is much broader, and concludes that a defendant must comply with the Supreme Court’s plausibility standard by pleading enough facts to sufficiently state an affirmative defense. This Article explains why a close textual review of the Federal Rules of Civil Procedure, combined with numerous policy and practical considerations, support the broader second reading of Twombly and Iqbal for affirmative defenses.
What it actually means to plausibly plead a defense is a much more complicated question. This paper closely examines this issue through the lens of one of the most complex and important defenses in all civil case law – the affirmative defense to a claim of sexual harassment. By way of this example, this Article explains how the plausibility standard would apply more broadly to defendants in all civil cases. This Article does not attempt to answer the normative question of whether the plausibility standard was properly established by the Supreme Court. Instead, this Article assumes the validity of the Court’s approach, and describes what this standard would look like if applied to the affirmative defense. The question of whether the plausibility standard should apply to defendants – and if so how it should apply – is likely to create significant controversy in the coming years. This paper establishes a foundation for that debate, and fills the current void in the academic scholarship on this issue.
January 11, 2011
SCOTUS Oral Argument in Personal Jurisdiction Cases
We covered earlier the Supreme Court’s grant of certiorari in two cases on personal jurisdiction (the first such cases the Court has taken in two decades). The cases were argued today.
Goodyear Dunlop Tires Operations, S.A. v. Brown (No. 10-76) presents the question:
Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.
J. McIntyre Machinery, Ltd. v. Nicastro (No. 09-1343) presents the question:
Does a "new reality" of "a contemporary international economy" permit a state to exercise, consonant with due process under the United States Constitution, in personam jurisdiction over a foreign manufacturer pursuant to the stream-of-commerce theory solely because the manufacturer targets the United States market for the sale of its product and the product is purchased by a forum state consumer?
Here are links to the oral argument transcripts:
Here are links to SCOTUSblog’s casefiles, where you can find the briefs in these cases:
January 10, 2011
Goff and Bales on Orders to Compel Arbitration
Melanie Goff and Richard Bales (Northern Kentucky University) have posted An Analysis of an Order to Compel Arbitration? To Dismiss or to Stay? to SSRN.
The Federal Arbitration Act makes arbitration agreements judicially enforceable. Often, however, one party to a dispute would prefer to litigate, and files suit on the underlying claim. The party preferring arbitration may then file a motion to compel arbitration. If the court grants the motion, the court must then decide whether to stay the suit during the pendency of the arbitration proceedings, or whether to dismiss the suit outright. Though this issue has arisen thousands of times, in probably every federal district court in the country, there is no clear answer as to whether courts should stay or dismiss. This article argues that courts should stay a case when some points of dispute between the parties fall outside the arbitration agreement and cannot be resolved by the arbitrator, and that otherwise courts should have the discretion to dismiss the case in favor of arbitration.
SCOTUS Cert Grant of Interest: Erica P. John Fund v. Halliburton
(1) Whether the Fifth Circuit correctly held, in direct conflict with the Second Circuit and district courts in seven other circuits and in conflict with the principles of Basic Inc. v. Levinson, 485 U.S. 224 (1988), that plaintiffs in securities fraud actions must satisfy not only the requirements set forth in Basicto trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery.
(2) Whether the Fifth Circuit improperly considered the merits of the underlying litigation, in violation of both Eisen v. Carlise & Jacquelin, 417 U.S. 156 (1974), and Federal Rule of Civil Procedure 23, when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption even though reliance and loss causation are separate and distinct elements of security fraud actions and even though proof of loss causation is common to all class members.
Links to the lower court opinion and the cert. stage briefs can be found at SCOTUSblog’s casefile.
The extent to which a court must consider the merits of class claims at the certification stage is an area of considerable uncertainty, and it is a significant issue in Wal-Mart v. Dukes (now pending before the Supreme Court). Although the merits-at-certification issue is not mentioned explicitly in Wal-Mart’s questions presented, it figures prominently in the en banc Ninth Circuit’s discussion of Rule 23(a)’s commonality requirement in that case (see 603 F.3d 571, 580-598), and the Supreme Court directed the parties to brief whether the Wal-Mart class action satisfies Rule 23(a).