Civil Procedure & Federal Courts Blog

Spencer on Class Actions and Heightened Commonality

A. Benjamin Spencer (Washington & Lee) has posted Class Actions, Heightened Commonality, and Declining Access to Justice to SSRN.

A prerequisite to being certified as a class under Rule 23 of the Federal Rules of Civil Procedure is that there are “questions of law or fact common to the class.” Although this “commonality” requirement had heretofore been regarded as something that was easily satisfied, in Wal-Mart Stores, Inc. v. Dukes the Supreme Court gave it new vitality by reading into it an obligation to identify among the class a common injury and common questions that are “central” to the dispute. Not only is such a reading of Rule 23’s commonality requirement unsupported by the text of the rule, but it also is at odds with the historical understanding of commonality in both the class action and joinder contexts. The Court’s articulation of a heightened commonality standard can be explained by a combination of its negative view of the merits of the discrimination claims at issue in Dukes, the conflation of the predominance requirement with commonality, and the Court’s apparent penchant for favoring restrictive interpretations of procedural rules that otherwise promote access. Although an unfortunate consequence of the Dukes Court’s heightening of the commonality standard will be the enlivening of challenges to class certifications that otherwise would never have been imagined, this Article urges the Court to reject heightened commonality and read Rule 23 in a manner that remains true to the language and history of the common question requirement.

RJE

McShane et al. on Predicting Securities Fraud Settlements

The latest issue of the Journal of Empirical Legal Studies contains an article by Blakeley B. McShane, Oliver P. Watson, Tom Baker, and Sean J. Griffith entitled Predicting Securities Fraud Settlements and Amounts: A Hierarchical Bayesian Model of Federal Securities Class Action Lawsuits (Volume 9, Issue 3, Page 482, September 2012).

Abstract:

This article develops models that predict the incidence and amount of settlements for federal class action securities fraud litigation in the post-PLSRA period. We build hierarchical Bayesian models using data that come principally from Riskmetrics and identify several important predictors of settlement incidence (e.g., the number of different types of securities associated with a case, the company return during the class period) and settlement amount (e.g., market capitalization, measures of newsworthiness). Our models also allow us to estimate how the circuit court a case is filed in as well as the industry of the plaintiff firm associate with settlement outcomes. Finally, they allow us to accurately assess the variance of individual case outcomes revealing substantial amounts of heterogeneity in variance across cases.

--PM

Civ Pro Professor Beth Thornburg on Twitter

SMU Dedman School of Law Professor Beth Thornburg is tweeting about civil procedure, legal education, higher education, and other topics of interest.  Follow her on Twitter at @btSMU.

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Issacharoff on Assembling Class Actions

Samuel Issacharoff (NYU) has posted Assembling Class Actions to SSRN.

Five times in the past two years, the Supreme Court has engaged the propriety of class actions. Taken together, these cases revisit certain core issues in class action law, all turning on the need and justification for treating individuals as part of a collective entity for litigation purposes. When examined from the perspective of legal treatment of individuals as part of a collective – assembling the class action, in the terminology of the title – three distinct aspects of class organization stand out. First, the existence of the litigation entity requires that someone be in charge, and that in turn raises the problem of how to ensure the faithfulness of the appointed agent. Second, the decision to forge a litigation entity necessarily empowers one side of the dispute, and that requires some justification. And, finally, even when litigation entities exist, class action law must come to terms with the range of individual autonomy that should still be recognized, including the ability to contract out of collective representation. As developed in the difficult recent class action cases, the questions of leadership, underwriting, and autonomy help define how modern class action practice endeavors to provide equality of treatment and predictability in the interaction between the individual insults of aggrieved citizens and the undiscriminating consequences of mass society.

RJE

Burch on Governing Securities Class Actions

Elizabeth Chamblee Burch (University of Georgia) has posted Governing Securities Class Actions to SSRN.

This short essay, written for a symposium on The Principles and Politics of Aggregate Litigation: CAFA, PSLRA, and Beyond, decouples due process from a proceduralist’s intuition and explains why it matters in securities class actions. It begins by exploring several analytical models that shed light on the representative relationship in class actions, including a public law analogy to the administrative state, a private law analogy to corporate law, and another, more modern public law analogy to political governance. After finding that the political-governance model best addresses both sources of inadequate representation in securities class actions — rifts between class members and class counsel, and between class members and their lead plaintiff — this Essay argues that incorporating qualified class members into securities class action governance will improve due process and legitimacy in securities litigation just as it does in the political sphere.

 

RJE

Oregon Law Review Symposium Dedicated to Arthur Miller

Now in print is the Oregon Law Review’s symposium issue: Miller’s Courts: Media, Rules, Policy, and the Future of Access to Justice, covered earlier here. From Mary Kay Kane’s Foreword:

It is most appropriate that the Oregon Law Review is dedicating this Symposium, which is focused on questions relating to access to justice in our civil courts, to Professor Arthur R. Miller, because his entire career has been dedicated to trying to preserve and increase public access to justice. His voice on these questions can be heard in multiple venues. Through his work on rulemaking, legislative drafting, treatise writing, CLE seminars, public television, public speaking, litigation, and writing law review articles and popular books, Arthur Miller has contributed to collaborations among the academy, the bench, and the bar in ways that have enriched both the legal community and civil society in deep and profound ways.

Contents and links below:

• Mary Kay Kane, Foreword, 90 OR. L. REV. 913
• Hon. Jack B. Weinstein, Some Memories of Arthur Miller, 90 OR. L. REV. 919
• Hon. Ronald M. Gould, A Student’s Tribute to Arthur R. Miller, 90 OR. L. REV. 923
• Elizabeth J. Cabraser, The Procedural Vision of Arthur R. Miller: A Practitioner’s Tribute, 90 OR. L. REV. 929
• Alan B. Morrison, A Tribute to Arthur Miller, 90 OR. L. REV. 937
• David Hartman, A Journalist’s Tribute to Arthur R. Miller, 90 OR. L. REV. 941
• Michael Moffitt, Arthur Miller Scared the Hell out of Me, 90 OR. L. REV. 945
• Edward H. Cooper, King Arthur Confronts TwIqy Pleading, 90 OR. L. REV. 955
• Alan B. Morrison, The Necessity of Tradeoffs in a Properly Functioning Civil Procedure System, 90 OR. L. REV. 993
• Hon. Diarmuid F. O’Scannlain, Access to Justice Within the Federal Courts—A Ninth Circuit Perspective, 90 OR. L. REV. 1033
• Harvey I. Saferstein and Nathan R. Hamler, Location, Location, Location: A Proposal for Centralized Review of the Now Largely Unreviewable Choice of Venue in Federal Litigation, 90 OR. L. REV. 1065
• Danya Shocair Reda, The Cost-and-Delay Narrative in Civil Justice Reform: Its Fallacies and Functions, 90 OR. L. REV. 1085
• Alex Kozinski and Stephanie Grace, The (Continued) Assault on Privacy: A Timely Book Review Forty Years in the Making, 90 OR. L. REV. 1135
• Brooke D. Coleman, What If?: A Study of Seminal Cases as if Decided Under a Twombly/Iqbal Regime, 90 OR. L. REV. 1147
• Jennifer W. Reynolds, Epilogue: On Miller, Mini-Fujis, and the Meaning of Access, 90 OR. L. REV. 1181

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Walker on Kalajdzic on Ethics and Class Actions in Canada

Now available on the Courts Law section of JOTWELL is an essay by Prof. Janet Walker (York University – Osgoode Hall) entitled Ethical Lawyering in the Clientless World of Class Actions in Canada. It reviews a recent article by Prof. Jasminka Kalajdzic (University of Windsor), Self Interest, Public Interest, and the Interests of the Absent Client: Legal Ethics and Class Action Praxis, 49 Osgoode Hall L.J. 1 (2011). The review begins:

It is surprising what you can learn by watching the next generation coming of age. In this way, lawyers in the United States can gain much from following the experiences of the Canadian legal community as it climbs the steep learning curve needed to formulate the parameters and protocols for complex litigation.

Civil litigation and the structure of the legal profession in Canada do not pretend to challenge American exceptionalism. There are important differences between the two legal systems. But they have enough in common that academics and others in the U.S. can gain useful insight into class actions practice by hearing how Canadians are currently struggling to meet the kinds of challenges that have long been the subject of debate in the U.S. In this fine article, Jasminka Kalajdzic explores a new subject, at least for Canadian lawyers: the special ethical concerns that arise for counsel in class actions.

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SCOTUSblog Online Symposium on Kiobel v. Royal Dutch Petroleum

SCOTUSblog has started an online symposium discussing Kiobel v. Royal Dutch Petroleum, which will be reargued in the Supreme Court this fall. Here’s a brief introduction by Kali Borkoski. To keep track of the new contributions as they get posted, head here. The guest contributors include:

• Donald Childress – Pepperdine School of Law
• Sarah Cleveland – Columbia Law School
• Anthony Colangelo – SMU Dedman School of Law
• Susan Farbstein – Harvard Law School
• Meir Feder – Jones Day
• Oona Hathaway – Yale Law School
• Eugene Kontorovich – Northwestern School of Law
• Julian Ku – Hofstra Law School
• Michael Ramsey – University of San Diego Law School
• Beth Stephens – Rutgers School of Law
• Ingrid Wuerth – Vanderbilt Law School

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Magistrate's Imposition of Sanction for Violating Margin and Font Requirements Reversed

            In Kornhauser v. Commissioner of Social Security, No. 11-10291 (11th Cir. July 2, 2012), plaintiff challenged a denial of disability benefits.  The case was referred to a magistrate, briefs were filed, and the magistrate recommended that the Commissioner's denial be vacated.  Nonetheless, the magistrate observed that plaintiff's brief had used smaller margins and smaller type in the footnotes than authorized by local rule (which required that margins be 1-1/4 inches wide and footnotes be in no smaller than ten-point type).  Calling these "intentional violations," the magistrate proposed that "when plaintiff's counsel seeks attorney's fees, that the typical request for a cost-of-living increase be denied."

            The district court adopted the magistrate's recommendation and entered final judgment for the plaintiff, who then petitioned for fees under the Equal Access to Justice Act in the amount of $5,935.  The Commissioner then stipulated that plaintiff's attorney was entitled to $5,000 in fees. The fees request was referred to the magistrate, who recommended a reduction in the stipulated figure by $963 as a sanction for the earlier-noted violation of local rules.

            Plaintiff objected to the recommendation, stating that the violation was not "intentional" but an "honest mistake" and that she had not been given the opportunity to correct the brief before the sanction was imposed.  The district court overruled the objection and awarded fees of $4,037, as the magistrate had recommended.

            Finding abuse of discretion, the Eleventh Circuit vacated.  It found no procedural rule that sanctioned the conduct involved and thus that the sanction was based on the court's inherent power under Chambers v. NASCO, which requires a finding of bad faith and compliance with due process.  No show-cause order had issued before the finding of "intentional" violation. 

            The district court was instructed to grant plaintiff EAJA attorney's fees of $5,000.

PM

SCOTUS Decision in the Health Care Cases: The Anti-Injunction Act Issue

Most of the post-decision analysis and commentary has focused on other aspects of the NFIB v. Sebelius decision (the constitutional authority of Congress, the palace intrigue surrounding whether Chief Justice Roberts changed his vote, the presidential election, etc). Readers of this blog may be clamoring for... the Anti-Injunction Act, which provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” 26 U. S. C. §7421(a). Below is an excerpt from Chief Justice Roberts’ majority opinion [pp.12-13]:

The Anti-Injunction Act applies to suits “for the purpose of restraining the assessment or collection of any tax.” §7421(a) (emphasis added). Congress, however, chose to describe the “[s]hared responsibility payment” imposed on those who forgo health insurance not as a “tax,” but as a “penalty.” §§5000A(b), (g)(2). There is no immediate reason to think that a statute applying to “any tax” would apply to a “penalty.”

Congress’s decision to label this exaction a “penalty” rather than a “tax” is significant because the Affordable Care Act describes many other exactions it creates as “taxes.” See Thomas More, 651 F. 3d, at 551. Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. See Russello v. United States, 464 U. S. 16, 23 (1983).

Amicus argues that even though Congress did not label the shared responsibility payment a tax, we should treat it as such under the Anti-Injunction Act because it functions like a tax. It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional purposes simply by describing it as one or the other. Congress may not, for example, expand its power under the Taxing Clause, or escape the Double Jeopardy Clause’s constraint on criminal sanctions, by labeling a severe financial punishment a “tax.” See Bailey v. Drexel Furniture Co., 259 U. S. 20, 36–37 (1922); Department of Revenue of Mont. v. Kurth Ranch, 511 U. S. 767, 779 (1994).

The Anti-Injunction Act and the Affordable Act, however, are creatures of Congress’s own creation. How they relate to each other is up to Congress, and the best evidence of Congress’s intent is the statutory text. We have thus applied the Anti-Injunction Act to statutorily described “taxes” even where that label was inaccurate. See Bailey v. George, 259 U. S. 16 (1922) (Anti-Injunction Act applies to “Child Labor Tax” struck down as exceeding Congress’s taxing power in Drexel Furniture).

He concludes [p.15]:

In light of the Code’s consistent distinction between the terms “tax” and “as­sessable penalty,” we must accept the Government’s in­terpretation: §6201(a) instructs the Secretary that his authority to assess taxes includes the authority to assess penalties, but it does not equate assessable penalties to taxes for other purposes.

The Affordable Care Act does not require that the pen­alty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.

As most know by now, of course, the Supreme Court ultimately upheld the Affordable Care Act based on Congress’s taxing power [Part III-C of the opinion] because the “requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax.” [p.44] Chief Justice Roberts recognized the tension there – here’s what he had to say [p.33]:

It is of course true that the Act describes the payment as a “penalty,” not a “tax.” But while that label is fatal to the application of the Anti-Injunction Act, supra, at 12–13, it does not determine whether the payment may be viewed as an exercise of Congress’s taxing power. It is up to Con­gress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Con­gress’s choice of label on that question. That choice does not, however, control whether an exaction is within Con­gress’s constitutional power to tax.

For more, here’s a recap of the Anti-Injunction Act issue from Tejinder Singh (SCOTUSblog).

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PS: Since everyone else who predicted the outcome is touting their forecasting prowess… What can personal jurisdiction teach us about the upcoming SCOTUS health care ruling?