Friday, April 30, 2010

Supreme Court Bars Class-Action Arbitration Absent Contract Agreement

Per the ABA Journal:

The U.S. Supreme Court has barred class arbitration of a price-fixing claim in an opinion that scolded an arbitration panel for proceeding as if it had common-law authority.

The Supreme Court ruled in a 5-3 opinion that class arbitration may not be imposed on parties who did not agree to it in their arbitration contracts, SCOTUSblog reports. Justice Samuel A. Alito Jr. wrote the majority opinion (PDF).

An arbitration panel had concluded that the arbitration contract governing commercial maritime shippers allowed for class arbitration, although it was silent on the issue. The U.S. Supreme Court disagreed.

The case is Stolt-Nielsen S.A. v. Animalfeeds International Corp.

An arbitration contract alone should not support an inference to authorize class-action arbitration, Alito said.

Thursday, April 29, 2010

SCOTUS Approves FRCP Amendments

Yesterday, the Supreme Court approved the most recent federal civil rules amendments. You can view the transmittal letter by visiting Thanks to Prof. Brad Shannon (Florida Coastal) for this tip.

Wednesday, April 28, 2010

Davis & Cramer Post Article on Antitrust Class Certification on SSRN

Professor Joshua Davis (San Francisco) and Eric Cramer (Berger & Montague) have recently posted an article entitled Antitrust, Class Certification, and the Politics of Procedure on SSRN. Here is the abstract:

This Article develops two arguments against a possible trend in federal appellate courts toward imposing a new, heightened standard for class certification in antitrust cases. Recent case law can be read to imply that trial judges may make findings of fact on the merits in deciding class certification, including about whether plaintiffs will be able to show with class-wide evidence that every class member was harmed by allegedly anticompetitive conduct. The first argument is that the potential new standard would require a showing at class certification on an issue – whether all class members were injured – that plaintiffs need not, and typically do not, address at trial. Under the traditional understanding of Rule 23, and specifically the predominance prong of Rule 23(b)(3), requiring plaintiffs to show they can prove something with class-wide evidence that they need not prove on the merits is artificial and conflicts with the logic of class certification. The second argument is that courts applying the potential new standard may find facts in a way that violates the Seventh Amendment. The avowed policy rationale behind this possible legal innovation is a concern that class certification coerces large corporate defendants into settling meritless cases, a concern that finds an insufficient basis in theory or empirical evidence. Without that basis, courts risk distorting class certification law and Seventh Amendment doctrine in a way that is political in the pejorative sense.

This article may be downloaded by visiting

Tuesday, April 27, 2010

SCOTUS Permits Vioxx Suit to Go Forward


The US Supreme Court on Tuesday allowed a suit to proceed against drug maker Merck & Co. over the safety record of its painkiller Vioxx. The court ruled unanimously in Merck & Co. v. Reynolds that the statute of limitations in a securities fraud lawsuit begins to run once the plaintiff actually discovered or a reasonably diligent plaintiff would have discovered the violation - whichever comes first. Investors brought the class action suit against Merck in 2003, alleging that it had deliberately concealed information about Vioxx. The case was dismissed by a federal judge in April 2007 after he determined that investors were on "inquiry notice" of the alleged fraud in September 2001 when the Food and Drug Administration (FDA) released a warning letter about the painkiller. The US Court of Appeals for the Third Circuit reinstated the case in September 2008, finding that the district judge had "acted prematurely in finding as a matter of law that [the investors] were on inquiry notice of the alleged fraud." [The Supreme Court affirmed]

Monday, April 26, 2010

Ninth Circuit Issues Opinion in Dukes v. Wal-Mart

Thanks to Professor Laura Hines (Kansas) for the following case update:

The Ninth Circuit issued its opinion in the Dukes v. Wal-Mart class action this afternoon. The 6-5 majority affirmed the district court’s Rule 23(b)(2) class certification of current employees seeking injunctive and declaratory relief, as well as back pay. The court remanded, however, with respect to the class claims for punitive damages (“so that the district court may consider whether to certify the class under Rule 23(b)(2) or (b)(3)”), and also remanded the claims of putative class members who no longer worked for Wal-Mart when the complaint was filed (so that the trial court could consider whether to certify separate (b)(3) class(es) for those former employees.

The full opinion can be downloaded at:

Prof. Seiner Posts Article on Disparate Impact

Professor Joesph Seiner, along with co-author Benjamin Gutman, recently posted an article entitled The New Disparate Impact on SSRN. Here is the abstract:

Federal law has long prohibited not just intentional discrimination by employers, but also practices that have an unintentional disparate impact on minorities. A cryptic passage at the end of the Supreme Court’s recent decision in Ricci v. DeStefano, 129 S. Ct. 2658 (2009), signals a sea change for this disparate-impact doctrine. Ricci, a lawsuit about a civil-service exam for firefighters, received widespread attention as a case about intentional discrimination. We show that the opinion has also created a new affirmative defense for employers facing claims of disparate impact. This Article marks the first time that this new defense has been identified and explained in the legal literature.

Before Ricci, disparate impact was a purely no-fault doctrine. An employer was liable if its employment practice had an unlawful disparate impact, even if the employer did not know about the impact or intend to subject its employees to an unlawful practice. The focus of litigation was not on the employer’s state of mind, but rather on the aspects of the employment practice. After Ricci, however, in a broad category of disparate-impact cases liability now turns on what the employer knew when it took the challenged action. If the employer had no reason to think that the practice would have an unlawful disparate impact, it is immune from liability for its past actions.

This is a dramatic development, and it suggests that the Court sees disparate impact as not fundamentally different from intentional discrimination. Beyond its doctrinal importance for disparate-impact claims - which itself is considerable - the Ricci affirmative defense reflects an entirely new direction for this area of law. In this Article, we parse the language of Ricci to derive the new affirmative defense. We explain its significance for disparate-impact theory and discuss the limited safe harbor it has created for employers. We also situate the new defense within the broader context of federal employment-discrimination law, including other affirmative defenses that the Court has created for policy reasons. We thus explain how Ricci heralds a new disparate impact.

This piece may be downloaded by visiting

Thursday, April 22, 2010

SCOTUS Issues Attorney's Fee Ruling

The Supreme Court recently decided Perdue v. Kenny, a case in which they held that a reasonable attorney's fee in civil rights actions must be based on the lodestar and may only be enhanced in extraordinary circumstances, leading them to reject the performance bonus granted to counsel in the case below. Here is an excerpt from the Syllabus:

Title 42 U. S. C. §1988 authorizes courts to award a “reasonable” attorney’s fee for prevailing parties in civil rights actions. Half of respondents’ $14 million fee request was based on their calculation of the “lodestar,” i.e., the number of hours the attorneys and their employees worked multiplied by the hourly rates prevailing in the community. The other half represented a fee enhancement for superior work and results, supported by affidavits claiming that the lodestar would be insufficient to induce lawyers of comparable skill and experience to litigate this case. Awarding fees of about $10.5 million, the District Court found that the proposed hourly rates were “fair and reasonable,” but that some of the entries on counsel’s billing records were vague and that the hours claimed for many categories were excessive. The court therefore cut the lodestar to approximately $6 million, but enhanced that award by 75%, or an additional $4.5 million. The Eleventh Circuit affirmed in reliance on its precedent.

Held :

1. The calculation of an attorney’s fee based on the lodestar may be increased due to superior performance, but only in extraordinary circumstances. Pp. 5–12.* * *

2. The District Court did not provide proper justification for the 75% fee enhancement it awarded in this case. * * *

532 F. 3d 1209, reversed and remanded.

Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia, Kennedy, and Thomas, JJ., joined. Kennedy, J., and Thomas, J., filed concurring opinions. Breyer, J., filed an opinion concurring in part and dissenting in part, in which Stevens, Ginsburg, and Sotomayor, JJ., joined.

The opinions in this case are available from Cornell's Legal Information Institute.

Thursday, April 08, 2010

Seventh Circuit Blocks Class Action from Returning to Kansas Court

The ABA Journal's Litigation News is reporting on a Seventh Circuit case involving an interpretation of the home-state exception to the Class Action Fairness Act:

In a decision further shaping the landscape for class action jurisdictional issues, the U.S. Court of Appeals for the Seventh Circuit recently overruled a decision by the U.S. District Court for the Northern District of Illinois that would have sent a class action back to Kansas state court. In re Sprint Nextel Corp. . . .

After receiving the case, the district court accepted the plaintiffs’ argument that the home-state exception required it be remanded. . . .

The Seventh Circuit reversed. . . . The Seventh Circuit agreed with Sprint Nextel—and disagreed with the district court—on the evidentiary issue. “Once Sprint Nextel established that CAFA jurisdiction exists, the burden fell on the plaintiffs, who were seeking remand, to show that the home-state exception applies,” the court said.

The plaintiffs had to establish by a preponderance of the evidence that two-thirds of the proposed class members were Kansas citizens, the court ruled. The plaintiffs did not submit any evidence regarding citizenship. Nevertheless, the district court held that the class definition itself—focusing on Kansas cell phone numbers and mailing addresses—made it more likely than not that two-thirds of the class were Kansas citizens.

Although the Seventh Circuit admitted that the district court’s approach “has some appeal,” the court ultimately disagreed with that analysis, characterizing it as ‘[s]ensible guesswork, based on a sense of how the world works, but guesswork nonetheless.”

Monday, April 05, 2010

Prof. Nagareda Posts Essay on Pre-Trial as Trial on SSRN

Professor Richard Nagareda (Vanderbilt) recently posted an Essay, for the DePaul Clifford Symposium, entitled 1938 All Over Again? Pre-Trial as Trial in Complex Litigation. Here is the Abstract:

This Essay for the Sixteenth Annual Clifford Symposium analyzes the transformation of the pre-trial process for complex civil litigation. Settlement, rather than trial, has emerged as the dominant endgame. As a result, in functional terms, the pre-trial phase effectively operates as the trial. Over the past quarter-century, doctrinal developments have shifted steadily backward within the pre-trial phase the major checkpoints for judicial scrutiny of claims. The key developments consist of the Supreme Court’s summary judgment “trilogy” (1986), the rise of Daubert scrutiny for the admissibility of expert testimony (1993), the elaboration of a distinctive law of class action certification (circa 2006) and, most recently, the invigoration of pleading standards in the Court’s Twombly and Iqbal decisions (2007 and 2009).

During the same period, an equally dramatic transformation has taken place with respect to litigation scholarship. Insights from economics, cognitive psychology, and finance – among other non-law disciplines – have broadened the vocabulary now available for analysis. Two big-picture points emerge from this literature: first, costs (especially, the ability to impose costs on one’s opponent) matter greatly to the choice whether to continue litigation or to settle; and, second, risk (or, more specifically, variance) matters in the pricing of civil claims via settlement, above and beyond calculations of expected value.

The emergence of judicial checkpoints in the pretrial phase has elicited considerable debate – most strikingly, today, over the Court’s pleading decisions. At one level, those decisions are rightly seen as pushing against the ethos of the 1938 reforms that put into place our modern notice-pleading regime. Yet, in a deeper historical sense, we actually find ourselves today in much the same position as the 1938 reformers. Today, as then, there is a lingering – but, often, undertheorized – sense that procedure itself is having an undue and even deleterious effect on the pricing of claims via settlement. It is just that the procedure now suspected to be distortive consists of the 1938 reforms. This Essay explains, in particular, how the Court’s attention to pleading standards in recent years marks a shift of emphasis from the regulation of variance in the litigation process to a concern over cost imposition.

The various pretrial checkpoints today exhibit a similar structural feature. They seek to manage variance or cost imposition by way of third-party judicial regulation – specifically, court rulings that signal “stop” or “go” on the road to trial. Evaluation of procedural doctrine as an enterprise of regulation opens up inquiry to the existence of other potential regulatory modes. This Essay concludes with examination of alternatives in the nature of first-party regulation (e.g., cost shifting) and regulation in the form of judicial action that would not be dispositive vis-à-vis trial but, rather, would seek to inform directly the pricing of claims in the settlement endgame.

This Essay may be downloaded at here.