Andrew Trask is the co-chair of the Securities Class Action Group at McGuireWoods LLP. He’s the co-author of The Class Action Playbook (OUP 2010), and discusses class-action strategy at Class Action Countermeasures.
The Supreme Court had a busy Term for class action practice, perhaps its busiest ever. It heard an unprecedented five cases that had significant effects on class action practice:
In advance (and then in the wake) of these decisions, many, many (many) commentators predicted the “end of the class action.” I love a dramatic headline as much as the next legal blogger, but let me assure you: the class action is far from dead.
Class actions are big business for plaintiffs’ lawyers, who can win multi-million-dollar paydays from settling even a single case. As a result, since the passage of the 1966 Amendments to Rule 23, class-action lawyers have been progressively more “adventuresome” in their tactics to get classes certified. So far, none of the Court’s opinions have dampened plaintiffs’ sense of adventure.
Still, the Court's class-action decisions this term do seem to lie all over the map. Of the two certification decisions, one (Dukes) makes it harder to certify a class, and one makes it easier (Halliburton). Two (Smith and Concepcion) make it harder to bring a class action in the first place, but one (Matrixx) makes it easier. Do these cases have anything common? Is there any way of determining where, given this Court, the class action goes from here? Judge Easterbrook, in his recent opinion in In re Aqua Dots Products Liability Litigation, identifies one common theme: that Rule 23 means what it says:
A district court is no more entitled to depart from Rule 23 than it would be to depart from one of the Supreme Court's decisions after deeming the Court's doctrine counterproductive. Rule 23 establishes a national policy for the Judicial Branch; individual district judges are not free to prefer their own policies. The Court made this point twice in its most recent Term. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011); Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (2011).
If anything, I’d quibble with Judge Easterbrook's statement that the Court only made this point “twice.” Smith and Concepcion line up with Dukes and Halliburton, albeit in slightly subtler ways. Smith held that Rule 23 expands the scope of preclusion only after a class has been certified, not before. And Concepcion held that an arbitration clause can waive a customer's option to bring a class action because a class action is a procedural device rather than a substantive right. In short, both of these rulings declined to read either extra powers (such as the implicit ability to trump an arbitration clause) or extra requirements (such as loss causation) into Rule 23. Instead, the Court has made clear that the Rule is a way of joining claims, not of expanding substantive rights.
Given the Court's emphasis on the text of Rule 23 and the adventuresome nature of class action lawyers, it seems there are two ways to divine the future of the class action. One is to look at where there may be gaps between Rule 23’s text and its application (that is, where the Rule is over- or under-enforced). The other is to look at how class-action lawyers (an inventive lot on both sides) and courts are already reacting to these changes in the law.
When we do that, several trends reveal themselves. Among them:
Expert battles. Plaintiffs often file expert reports that they argue show how the case could be tried on a classwide basis. Predictably, defendants challenge these reports on Daubert grounds. Some courts have allowed these challenges; others have not. While Justice Scalia’s majority opinion in Dukes strongly hinted that a full Daubert inquiry was necessary when certifying a class, the Eighth Circuit (and now a split panel from the Third) have since ruled that his hint was merely dicta. It's possible these courts have decided to politely ignore the Court's hint as a way of allowing plaintiffs to meet the now-more-rigorous commonality requirement. Regardless, I'd expect more expert battles at class certification. And I wouldn't be surprised if the Supreme Court hears a case on this issue in the next few years.
Fiercer, earlier fights over certification. Rule 23(c)(1) explicitly requires a decision on certification at an “early practicable time.” While motions to strike class allegations have been around since at least the 1970s, defendants have become more aggressive in filing them over the past two years. (This trend may have begun with the Ninth Circuit's ruling that a defendant need not wait for the plaintiff to file a motion for certification. It's certainly fueled by the rising cost of discovery, especially e-discovery.) A few jurisdictions (like the Eastern District of Pennsylvania) will simply deny motions to strike as "premature," but many others grant them where appropriate. Given the increasing pressure on defense counsel to minimize litigation costs, expect more of these.
Greater focus on superiority. Superiority (the requirement that a class action be “superior” to other forms of adjudication) has received less attention than other requirements, but has already been the subject of two appellate decisions post-Dukes. The Sixth Circuit has held that class actions that may harm the public at large (by, for example, driving up insurance premiums for non-class members) are inferior to individual lawsuits. And, in In re Aqua Dots, the Seventh Circuit ruled that voluntary private recalls are not "adjudications," and so can't influence a superiority analysis.
Greater focus on adequate representation. Another area that has traditionally been under-enforced is the Rule 23(a)(4) adequacy requirement. Defense counsel have begun to press courts to enforce it. As a result, appellate courts in the past month have already ruled that adequate class members don’t file class actions that duplicate voluntary recalls (In re Aqua Dots), and that subclasses require independent class counsel to be adequately represented.
More international class actions. Morrison may have held that American lawyers can't bring "foreign" class actions in American courts, but it did not forbid lawyers from bringing these suits in foreign courts. That is exactly what plaintiffs' lawyers have begun to do. Canada has become a popular destination for American class-action lawyers. And with new class action rules in countries like Italy, it's likely we'll see the export of American class action expertise to Europe as well.
These are hardly the only trends in class-action litigation after the Supreme Court's 2010-11 Term, but they should be enough to show that reports of the class action’s demise are greatly exaggerated.