Wednesday, February 27, 2013
Today the Supreme Court issued its decision in Amgen v. Connecticut Retirement Plans (No. 11-1085), covered earlier here. The basic issue is whether, in a securities fraud case, proof of “materiality” is required in order to certify a class action. The Court splits 6-to-3, with Justice Ginsburg writing the majority opinion (joined by Roberts, Breyer, Alito, Sotomayor, and Kagan). Here’s an excerpt from the first few paragraphs of Justice Ginsburg’s opinion (Slip Op. 2-3):
The issue presented concerns the requirement stated in Rule 23(b)(3) that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” Amgen contends that to meet the predominance requirement, Connecticut Retirement must do more than plausibly plead that Amgen’s alleged misrepresentations and misleading omissions materially affected Amgen’s stock price. According to Amgen, certification must be denied unless Connecticut Retirement proves materiality, for immaterial misrepresentations or omissions, by definition, would have no impact on Amgen’s stock price in an efficient market.
While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The alleged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors composing the class. As vital, the plaintiff class’s inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members’ securitiesfraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.
Essentially, Amgen, also the dissenters from today’s decision, would have us put the cart before the horse. To gain certification under Rule 23(b)(3), Amgen and the dissenters urge, Connecticut Retirement must first establish that it will win the fray. But the office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather, it is to select the “metho[d]” best suited to adjudication of the controversy “fairly and efficiently.”
Justice Alito writes a concurring opinion. Justice Scalia writes a dissenting opinion. And Justice Thomas writes a dissenting opinion (joined by Kennedy and partially by Scalia).
Federal Rule of Civil Procedure 54(d)(1) gives district courts discretion to award costs to prevailing defendants“[u]nless a federal statute … provides otherwise.” The Fair Debt Collection Practices Act (FDCPA), 91 Stat. 881, 15 U. S. C. §1692k(a)(3), provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” This case presents the question whether §1692k(a)(3) “provides otherwise” than Rule 54(d)(1). We conclude that §1692k(a)(3) does not “provid[e] otherwise,” and thus a district court may award costs to prevailing defendants in FDCPA cases without finding that the plaintiff brought the case in bad faith and for the purpose of harassment.
Justice Sotomayor dissents, joined by Justice Kagan.
Tuesday, February 26, 2013
Suzanna Sherry (Vanderbilt) has posted A Pox on Both Your Houses: Why the Courts Can't Fix the Erie Doctrine to SSRN.As Erie Railroad Co. v. Tompkins celebrates its 75th anniversary, it is becoming more apparent that it is on a collision course with itself. The Court keeps trying – and failing – to sort out the tensions within the Erie doctrine and between it and the Federal Rules of Civil Procedure. The Court’s latest Erie decision, Shady Grove, was yet another attempt to separate substance from procedure and navigate the strait between the Rules of Decision Act and the Rules Enabling Act. It was a disaster, in large part because of the internal incoherence of the Erie doctrine itself and its profound incompatibility with the guiding principles of the Federal Rules of Civil Procedure. Shady Grove thus brings to the forefront the need for a normative choice between federal procedural uniformity and transsubstantivity on the one hand, and state authority on the other. I suggest that instead of filtering that normative choice through the convoluted and self-contradictory Erie doctrine, judges should confront it directly as they do in other contexts (including most prominently preemption doctrine). This suggestion in turn has implications far beyond the narrow Shady Grove issue.
Today the Supreme Court decided Clapper v. Amnesty International (No. 11-1025), covered earlier here. By a 5-to-4 vote, it found that the plaintiffs lacked Article III standing to challenge the 2008 amendments to the Foreign Intelligence Surveillance Act.
Justice Alito wrote the majority opinion (joined by Roberts, Scalia, Kennedy, and Thomas) and Justice Breyer wrote the dissent (joined by Ginsburg, Sotomayor, and Kagan).
The trial in the BP Oil Spill case began yesterday in New Orleans federal court, before U.S. District Judge Carl Barbier. Coverage at…
- AP (Michael Kunzelman)
- NPR (Mark Memmott)
- NY Times (Clifford Krauss & Barry Meier)
- Times-Picayune (Mark Schleifstein)
Monday, February 25, 2013
Here’s some more coverage of last week’s Supreme Court decision in Gunn v. Minton, which addresses Grable and federal question jurisdiction:
- Prof. Josh Blackman (South Texas)
- Prof. Rodger Citron (Touro), Justia
- Prof. Ronald Mann (Columbia), SCOTUSblog