Thursday, April 29, 2010
Tony Sebok (Cardozo) has posted his piece "The Inauthentic Claim" to SSRN. This is a very important paper arguing against the usual rule limiting types of litigation financing. The implications of the thesis for mass torts is significant. If people could sell lawsuits the landscape of aggregate litigation would change in significant ways. Here is the abstract:
This Article argues that third parties should be able to invest in lawsuits to a much greater degree than is currently permitted in most jurisdictions in the United States. The laws of assignment and maintenance limit the freedom of litigants to sell all or part of their lawsuits to strangers. I argue in the Article that the foundation of both doctrines is based on something I call the theory of “the inauthentic claim.”
The theory of the inauthentic claim asserts that there is a quality, separate and in addition to legal validity, which confers “authenticity” to a lawsuit. It does not presuppose that “inauthentic” lawsuits are more likely to be spurious, fraudulent, or frivolous than “authentic” lawsuits. It holds, instead, that the mere fact that a third party involved him or herself in the suit for the wrong reasons (either by taking an assignment in the suit or supporting the suit), is proof that the suit is against public policy.
This Article examines two arguments that might be used to defend the theory of the inauthentic claim, one from history and one from jurisprudence. I conclude that neither argument is persuasive. I conclude the Article by sketching a research agenda based on empirical evidence that would help policymakers and judges choose the socially optimal set of rules for third party investment in litigation.
(h/t Chris Robinette at Torts Prof Blog)
Monday, April 26, 2010
In a long awaited decision, the Ninth Circuit finally issued its en banc opinion in Dukes v. Wal-Mart Stores, Inc. Although I haven't yet had a chance to read the 137 page opinion (though it does provide a nice diversion from exam grading), the Ninth Circuit affirmed class certification of the largest class action to date. For a smattering of commentary, see here, here, and here. For those interested in the decision, I've put together a panel at this year's Law and Society Annual meeting in Chicago, IL. The panel will be on Sunday, May 30, and the topics range from procedural class certification aspects to substantive employment-discrimination aspects.
Update: After an admittedly quick skim, here are a few things about the class-certification standard in the opinion worth noting:
After giving what it sees as a spectrum of circuit court opinions (p. 6156-62) on the inquiry into and resolution of mixed questions of law and fact, the Ninth Circuit observes that "A district court must sometimes resolve factual issues related to the merits to properly satisfy itself that Rule 23's requirements are met, but the purpose of the district court's inquiry at this stage remains focused on, for example, common questions of law or fact under Rule 23(a)(2), or predominance under Rule 23(b)(3), not the proof of answers to those questions or the likelihood of success on the merits." (Op. at 6169). The Ninth Circuit then notes that the greater willingness to inquire into the facts during certification has evolved largely through securities class actions, in particular, in fraud-on-the-market cases. Based, in part, on that observation, the court then clarified its standard as follows:
1. "[W]hen considering a class certification under Rule 23, district courts are not only at liberty to, but must, perform a rigorous analysis to ensure that the prerequisites of Rule 23 have been satisfied, and this analysis will often, though not always, require looking behind the pleadings to issues overlapping with the merits and underlying claims." (Op. at 6176-77).
2. "[D]istrict courts may not analyze any portion of the merits of a claim that do not overlap with the Rule 23 requirements. Relatedly, a district court performs this analysis for the purpose of determining that each of the Rule 23 requirements has been satisfied." (Op. at 6177).
3. "[C]ourts must keep in mind that different parts of Rule 23 require different inquiries. For example, what must be satisfied for the commonality inquiry under Rule 23(a)(2) is that plaintiffs establish common questions of law and fact, and answering those questions is the purpose of the merits inquiry, which can be addressed at trial and summary judgment." (Op. at 6177).
4. "[D]istrict courts retain wide discretion in class certification decisions, including the ability to cut off discovery to avoid a mini-trial on the merits at the certification stage." (Op. at 6177).
5. "[D]ifferent types of cases will result in diverging frequencies with which the district court will properly invoke its discretion to abrogate discovery." (Op. at 6177).
As to the Daubert issue, i.e., whether courts should subject experts to a Daubert examination when their testimony speaks to class-certification issues, the Ninth Circuit seems to apply a full Daubert standard to Dr. Bielby, one of the plaintiffs' experts. It notes that Wal-Mart challenged only whether inferences could be drawn from the expert's data. "But because Daubert does not require a court to admit or exclude evidence based on its persuasiveness, but rather requires a court to admit or exclude evidence based on its scientific reliability and relevance . . . testing Dr. Bielby's testimony for 'Daubert reliability' would not have addressed Wal-Mart's objections." (Op. at 6191). Consequently, it concludes that Wal-Mart's argument for excluding that testimony during class certification wasn't warranted because the argument was misplaced. Thus, "[a]t the class certification stage, it is enough that Dr. Bielby presented scientifically reliable evidence tending to show that a common question of fact . . . exists." (Op. at 6193).
If you're principally interested in the Rule 23(b)(2) issues, you might start at page 6214. I'll try to provide a better overview once I've had a chance to read the opinion in more detail.
Friday, April 23, 2010
In an April 7, 2010, decision, American Honda Motor Co. v. Allen, the Seventh Circuit held that "when an expert's report or testimony is critical to class certification, . . . a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class is the situation warrants." (Opinion at p. 6) This is not a surprise given the recent push by the Second, Third, Fifth and Seventh Circuits to delve further into the merits during class certification and to resolve mixed issues of law and fact that are relevant to class certification by a preponderance of the evidence (See, e.g., In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311-12 (3d Cir. 2008); Oscar Private Equity Investments v. Allegiance Telecom., Inc. 487 F.3d 261, 268 (5th Cir. 2007); In re IPO Securities Litig., 471 F.3d 24, 40 (2d Cir. 2006); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001).
On the whole, this is a positive development. As I wrote in a law review comment in 2004, "Most courts faced with evidentiary concerns during certification evade Daubert challenges by claiming that this asks them to travel into the prohibited area of 'merit inquiry.' Courts have not uniformly applied the restriction against an inquiry into the merits, which has produced a hodgepodge of discretionary decisions that lack a principled justification. When conducting a rigorous analysis in complex cases, district courts must often examine more than just the pleadings to understand the claims, defenses, facts, and applicable substantive law before 'mak[ing] a meaningful determination of the certification issues.' This examination does not stop when the court encounters an expert opinion." (at p. 1080) Although I have some concerns about the move toward a merits inquiry at class certification (particularly when discovery is curtailed), when an expert is used to support the Rule 23(a) or 23(b) requirements, it makes sense to subject that expert to a full Daubert analysis particularly given all that rides on the class certification decision.
Wednesday, April 21, 2010
Catherine Sharkey (NYU) has posted "The Exxon Valdez Litigation Marathon: A Window on Punitive Damages" on SSRN.
It looks like one of the things Sharkey discusses in the paper (which I haven't read yet but looks fascinating and important) is the fact that the Exxon case was a punitive damages class action. Notably, it was a punitives class sought by the defendants not plaintiffs. The plaintiffs actually opposed the class certification (and lost). It seems to me that from an economic point of view punitive damages classes make perfect sense because punitives are all about defendants' conduct, not plaintiff's, so individual issues should not predominate. We only start to get concerned about the relationship between plaintiff's harm and defendant's punitive exposure when we know that many other cases are going to come about seeking punitive damages (in other words, the defendant faces duplicative awards for the same conduct). For contrary views see Nagareda, Punitive Damages Class Actions and the Baseline of Tort and Sheila Scheuerman, Two World Collide: How the Supreme Court's Recent Punitive Damages Decisions Affect Class Actions.
Here is the abstract of Sharkey's paper:
The Exxon Valdez litigation marathon - a protracted, two-decade-long battle over the propriety and constitutionality of the jury’s $5 billion punitive damages award - provides a window into the past, present, and future of punitive damages. Acting akin to a common law court under federal admiralty jurisdiction, the U.S. Supreme Court provided a template for lower courts to follow. Free of constitutional constraints, the Court diagnoses the problem with punitive damages - unpredictability - and propose a solution: a 1:1 ratio of punitive to compensatory damages. The flaws in the Court’s statistical analysis provide a reminder that those “unsophisticated in statistics” should proceed with caution. The Court’s single-minded focus on unpredictability almost inexorably drives it to embrace and reinforce an exclusively retributive rationale for punitive damages. The Court invokes the analogy of the sentencing guidelines as a model for achieving greater predictability; once enamored with this model, the linkage between the guidelines and criminal retribution spills over to punitive damages as civil retribution. There is, moreover, an uncanny coincidence between the Court’s common law, policy-laden analysis, and the heavy-handed direction its constitutional excessiveness decisions had been taking.
Three issues loom large on the horizon of punitive damages doctrine and policy. First, the Court’s fixation on unpredictability can be linked with a broader trend in the Court’s jurisprudence of circumscribing the role of the civil jury in the name of certainty, predictability, and efficiency. Second, the Court had before it a case in a unique procedural posture: the plaintiffs were part of a “limited fund,” mandatory, non-opt out class action for resolution of punitive damages only. Because that element of the case was not appealed to the Court, the Court left for another day resolution of the classwide determination of punitive damages. Third, the Court’s quest for a national solution to the punitive damages problem and its equation of punitive damages and criminal fines presage impending federalism battles. By elevating a single punitive damages goal - that of retributive punishment - the Court sets the stage for a clash with state courts and legislatures who might be inspired to define their legitimate state interests in punitive damages differently.
Monday, April 19, 2010
American Conference Institute will be hosting a conference on Chemical Products Liability and Environmental Litigation on April 28-29, 2010 in Chicago, IL. I will be speaking on mass torts and ethics, with particular attention to the ethics of mass settlements. Here's the brochure (Download ACI Brochure).
April 19, 2010 in Aggregate Litigation Procedures, Conferences, Environmental Torts, Informal Aggregation, Mass Tort Scholarship, Pharmaceuticals - Misc., Products Liability, Settlement | Permalink | Comments (0) | TrackBack (0)
Thursday, April 15, 2010
The City has filed a notice of appeal from Judge Hellerstein's finding against the settlement in the WTC Disaster Site litigation and his role in policing the settlement. The NY Law Journal has the story. Mark Hamblett reports:
Attorneys for the city and its contractors, led by James Tyrrell Jr. of Patton Boggs, claim that Judge Hellerstein does not have the power to interfere with a settlement reached among private parties, although the money for the settlement will come from the $1.1 billion WTC Captive Insurance Co. established with federal funds to help meet insurance costs stemming from the response and cleanup of Ground Zero.\
Plaintiffs liaison counsel Paul Napoli of Worby Groner & Napoli Bern, whose interests are for once aligned with those of the city's, said he would weigh in at the circuit either as a respondent or with an amicus brief backing the appeal.
The sides are meeting with the experts in the case but haven't reached a new settlement so far. It appears the sticking point is future claims:
But the two sides have made no progress on the amount of money to be paid in the settlement, with the city, its major contractors and WTC Captive insisting that any more money paid to the plaintiffs today would jeopardize recovery for people who contract illnesses in the future.
Is the filing of the notice of appeal just posturing or is there really an issue here? It seems to me, if the lawyers want to settle the cases individually then they can still do it. But once they decide they want the judge's blessing on an aggregate settlement, well, then they should expect the judge to weigh in and be more than a rubber stamp. If futures are really the issue, they ought to raise that before the judge.
Monday, April 12, 2010
Thursday, April 1, 2010
HB Litigation Conferences will be hosting a teleconference on Mass Torts & Bankruptcy on Wednesday, April 7, from 2:00 p.m. to 3:40 p.m. EST. I'll be speaking along with Steven C. Bennett (Jones Day), Sander Esserman (Stutzman Bromberg), and Mark Plevin (Crowell & Moring).