The Illinois Trial Practice Weblog

Class Actions, Post-CAFA

This month's Trial magazine has news from a March conference at the Benjamin Cardozo School of Law called "Justice and the Role of Class Actions." A quick summary--

• Class actions are "evolving, not dying." If the Class Action Fairness Act (CAFA) was supposed to bring an end to class actions, it hasn't.
• Class actions "should not be regarded as ideological battles" between the plaintiffs' lawyers and big business, since companies can use class actions to "shut down future litigation and control costs."
• Cases about arbitration continue to work their way toward the Supreme Court, which so far hasn't accepted cert on the issue of whether companies can force consumers to "waive [their] right to participate in class actions."
• Another way to frame the same issue: can states prohibit companies from banning class actions in their contracts, or does the Federal Arbitration Act preempt such state laws?
• According to a representative of the defense bar, plaintiffs' lawyers have been creative in trying to "circumvent Rule 23 preponderance of the evidence requirements," for example, by submitting statistical proof "to try and get around the fact that each case is different."

For more, see page 78 of Trial magazine, which isn't available online without a membership. Or see an old post from Legal Underground, free without a membership: "Thinking Out Loud About the Federal Class-Action Bill."

The Effect of the Internet on Class-Action Settlements

In "Create a Game Plan From Notable Class Actions," commercial litigator Barry B. Cepelewicz comments about two recent class-action settlements that were scuttled by organized Internet opposition:

Businesses should remember that the Internet has given consumers a powerful voice to share everything from recommendations to boycotts. In the process, it has also given potential plaintiffs an effective tool for organizing. When calculating the PR value of settling versus litigating, a corporate defendant should carefully consider that some kinds of settlements may be more valuable than others.

The Netflix and Netgear settlements, for example, have been criticized as clever marketing ploys disguised as consumer redress. Under the Netflix settlement as initially proposed, after customers got their month of free upgraded service, they would be automatically enrolled in an upgraded program and charged an additional monthly fee unless they unsubscribed.

Objectors organized an impressive resistance and developed an alternative settlement, expected to be approved shortly, with terms far more favorable to consumers.

In my experience, organized Internet opposition to class-action settlements is the exception, not the rule. Its likelihood increases in proportion to the precentage of class members who are Internet-savvy. The two examples that Cepelewicz cites, both involving two Internet-dependent companies, demonstrates this point.

In cases involving Internet-savvy class members, lawyers for both sides must be prepared to respond on the Internet to any opposition that develops there. As the Netflix case demonstrates, such opposition can swiftly take on a life of its own. In the Internet age, ignoring a tidal wave of online criticism is an extremely bad policy that may lead to a rejection of the settlement by the court.

Rather than ignore online criticism, lawyers should set up a website to address it. The website can be used not only to respond to speficic criticism, but also to explain why the settlement is beneficial to the class as a whole. This is the same issue lawyers will be required to address later at the preliminary and final approval hearings.

If lawyers use the Internet to respond publicly to criticism, they will be communicating their message in a format that Internet-savvy class members can best understand. Even better, if those Internet-savvy class members are writing about the settlement online, online etiquette will compel them to link to the lawyers' online response, guaranteeing that the lawyers' message will be heard. There's no better way to correct misinformation in the online age.

An Audio Update on the Class Action Fairness Act from Coast to Coast

At Coast to Coast, Bob Ambrogi and J. Craig Williams do a well-produced radio-style talk show that's available as a podcast. A recent show, "The Class Action Fairness Act," provides an interesting update about some of the issues surrounding the new class-action law that are either currently being litigated in appellate courts or are on the horizon. Howard Bashman of How Appealing was one of the guests.

When the law was passed more than a year ago, I made some predictions about how the new law might affect law firms and businesses. One of the things that made the Coast to Coast show enjoyable was that I could find out how my predictions were holding up. All things considered, I think I'm doing pretty well.

In addition to that, the panel was fairly balanced and the discussion didn't go on too long. Overall, it was a very good show.

Two from Other Weblogs: the Basics of Class Actions, and the Constitutionality of Summary Judgment

Have you been wondering about the basics of class-action litigation under Rule 23 of the Federal Rules of Civil Procedure? If so, take a look at the series of podcasts on this issue by Neil Wehneman, the hardest-working law student in podcasting--

Class Actions 1

Class Actions 2

Class Action 3

Have you been wondering whether summary judgments are constitutional in light of the fact that the plaintiff might be deprived of a jury trial? At Crime & Federalism, Mike Cernovich posts about a new law-journal article that concludes that summary judgments are, in fact, unconstitutional--a point which you should feel free to preserve for appeal in opposing your next summary judgment, but which I guarantee you'll lose at the trial court level.

The Class Action Fairness Act: Two Confusing Rulings About When to Appeal an Order on a Motion to Remand

Following a removal from state to federal court based on the Class Action Fairness Act, the plaintiffs will normally test the removal with a motion to remand. Once the motion to remand is ruled on, CAFA allows the losing party to appeal. But what's the deadline for the appeal? The statute seems to make the answer clear:

[A] court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the state court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.

According to this language, the losing party must wait at least 7 days to file a notice of appeal. Recently, however, both the 9th and 10th Circuits have interpreted this language to mean exactly the opposite: the notice of appeal must be filed within 7 days.

These confusing rulings create a problem for practitioners. Anyone interested in the problem should read Howard Bashman's detailed analysis in his article, "Less Is More: When Courts Decide a Law Means the Opposite of What It Says," which also contains a link to the two recent court decisions.

Class Actions: Adding New Plaintiffs Does Not Commence a New Lawsuit for Purposes of CAFA

In Phillips v. Ford (consolidated with Boxdorfer v. DaimlerChrysler) (pdf), the Seventh Circuit issued a ruling about the Class Action Fairness Act that should come as no surprise to anyone who has been following the Seventh Circuit's other CAFA rulings.

While the Seventh Circuit has issued other rulings denying a defendant's attempt to remove pre-CAFA state-court class actions to federal court based on events that happened in the case after CAFA was enacted, there has not been a specific ruling on the question  of whether adding new class representatives amounted to the "commencement" of a new case under CAFA.

After Phillips, the answer is no. In Phillips, the Seventh Circuit ruled that amending a state-court class action to add or substitute new plaintiffs does not "commence" a new case under CAFA. If the state-court class action was filed before CAFA was enacted, the addition of the new plaintiffs will not trigger a CAFA-sanctioned removal to federal court.

For other Seventh Circuit CAFA rulings, see the "class action" category of this weblog, as well as the excellent CAFA Law Blog published by McGlinchey Stafford PLLC.

The Illinois Supreme Court on Forum: Was Yesterday's Gridley Decision Really All That Dramatic?

"Supreme Court slams forum shopping," said one headline about yesterday's Gridley decision. But the case really wasn't all that dramatic. The term "forum shopping" doesn't even appear in the opinion.

Gridley began when a plaintiff from Louisiana brought a putative nationwide class action against State Farm in an Illinois state court. Though itself a resident of Illinois, State Farm filed a motion to dismiss based on forum non conveniens. Its motion was denied. In Gridley, the Illinois Supreme Court ruled that the denial was in error: because most of the events occurred in Louisiana, Louisiana was a more convenient forum for the action. Even if State Farm's principal place of business was in Illinois, that was only "one factor to be considered" in the forum non conveniens analysis.

In ruling against the plaintiff, the Supreme Court said it was unimportant whether the class, if certified, might include Illinois residents. Prior to a ruling on class certification, the residence of unnamed class members is irrelevant to the forum non conveniens issue. While the Gridley decision will come in handy for defendants facing an Illinois class action by an out-of-state plaintiff, such cases are rare. Based on my own experience, it is almost always true that at least one of the named plaintiffs resides in the forum county. That's why I don't think the Gridley decision is as dramatic as some newspapers want you to believe.

A New Weblog about the Class Action Fairness Act

Written by lawyers at McGlinchey Stafford, CAFA Law Blog promises "information, cases, and insights regarding the Class Action Fairness Act of 2005."

Already, it's a great resource. If the authors continue do their jobs right, it's where you'll see all the new CAFA cases first.

A New Class-Action Resource for Defense Lawyers

The following announcement appeared today at the weblog Point of Law--

The Civil Justice Reform Group and the Institute for Legal Reform have jointly launched a resource center with educational materials on the new federal class action law. The target audience is defense lawyers, but many of the materials are likely to be of interest to others as well.

The new site features "practice documents" and a "practice library."

Meanwhile, at this website, I've tried to keep up with the case law interpreting the new Class Action Fairness Act in posts I've collected in the "class action" category. Anyone who has information about new cases is always welcome to email me.

A Long-Awaited Illinois Supreme Court Ruling

I have a post about today's ruling in Avery v. State Farm at Legal Underground. If you want to skip the background, the court's summary of its decision in Avery v. State Farm sums it up well: "All of the awards made by the circuit court now stand reversed."