Background Reader: Class Actions 101

 Posted by Scott  Judicial System, Legal Reform, U.S. Politics  3 Responses »
Feb 282005
 

(Interested in what this is background for? Click on the title to head to the original post…)

So, Danny wants a bit of background and explanation on class actions and the reforms just passed, and can’t get a straight answer from the media and/or the politicians. That’s a fair request, and since I’m not at work, I can get into it a bit more extensively. (Not that I composed the original post at work! Not at all! Pay no attention to that timestamp! These are not the droids you’re looking for!) This is not to say that I want to limit discussion to class action reform in particular — if you’ve got strong feelings about, say, medical malpractice reform (as do a lot of med students and nurses I meet who feel compelled to tell me about their views when they find out what I do for a living — I happen to agree with most of them, fortunately), go ahead and chat about that.

Short answer is this: Congress made it easier for class actions to get into federal court from state court, and also rejiggered the rules for calculating attorneys’ fees in certain kinds of settlements. If you want more details, read on for the long answer.

[Wow. This got a lot longer than I thought it would... But even though the changes themselves are relatively simple, to give you an idea of how they worked I felt like I had to give more background than I would normally. So this contains the basics of a Complex Civil Litigation class you might take at law school, and a good dose of the basic Civil Procedure class and the more advanced Federal Courts class, too. Lucky you.]

Alright — Class Action 101. If you know what’s going on here, then feel free to skip ahead to the part about the reforms.

Right, so, say you’re the customer of a big company who bills you on a monthly basis. And you go through your bill, and you notice that you’re getting dinged for a couple extra bucks every month for services you didn’t order or surcharges for something that doesn’t apply or whatever. Now, all told, this might run you under $50 a year, but if the company’s got enough customers, they might be making hundreds of millions of dollars a year on whatever these charges may be.

Now, it’s not worth it for you to sue to get your money back — the filing fee for the lawsuit is probably upwards of $50, plus there are those nasty attorneys’ fees and such. But it also doesn’t seem fair that the big bad business is able to get away with taking all that extra money just because they’re able to take small amounts from large groups of people. So Congress and the Courts cooked up the rules on class actions to deal with this very problem.

The gist is this: a couple people are able to stand in as representatives for everyone else who has had that sort of thing happen to them. This means that the legislation is essentially broken into two main parts — first, you determine whether the folks that are bringing the lawsuit are proper representatives. This is called class certification. There are lots of hoops to jump through here, and this is where most of the fighting takes place in class actions. You have to make sure that there are a sufficient number of potential class members, that common issues of law and fact exist between the named representative and all the other potential class members, that the claims of the named representatives are typical of the claims of the other class members, and that the named representatives are adequate (they know what’s getting into as class reps, and that they don’t have any unique defenses particular to them). It boils down to a simple question: are the claims made by the class rep going to be the same as the claims made by any other class member? Of course, there are tons of complexities wrapped up in answering that simple question, which is why people hire folks like me (well, folks like my bosses, anyway, who in turn hire folks like me…).

So, if all the hoops are correctly jumped through, the class is certified, which has one very important impact: the outcome of the lawsuit now binds every member of the class, in some cases whether they know about it or not. So if the class reps win, the whole class wins, and can get relief from the defendant. If the class reps lose, then the whole class loses, and none of them can sue the defendant on that issue again. This is why certification is so important — it raises the stakes immensely, or makes the whole thing go away immediately. It’s often the difference between a multi-million dollar lawsuit or a lawsuit over a couple hundred bucks.

If the class gets certified, then the case progresses on to its second main part, which is just like a normal civil trial, with one main difference — these cases nearly always settle. There are the odd handful that actually go to trial, but it’s generally much better for both sides not to risk the trial with so much money at stake, and class-wide settlements are reached. More about the settlement process in a bit…

That’s what class actions are in a nutshell, and they can be really effective tools for resolving the kind of consumer complaints I described above. They’re also really nifty tools for handling discrimination claims, and can be very powerful and useful in products liability actions and toxic torts (chemical spills, that sort of thing), because you only have to prove that the chemical spill happened — for example — in one trial, rather than in hundreds of small trials. Convenient for the courts, the plaintiffs, and the defendants — a good thing all around, as conceived in theory.

That last phrase should probably set some mental alarm bells a-ringing. The devil, as always, is in the details, and practice in reality is slightly different as it was conceived. There are assumed to be several problems with the system as it existed prior to the reforms. I believe these problems to be true, but feel free to quibble with the base assumptions if you’d like. The main problems were:

  • Some state courts are much more friendly to plaintiffs in making their decisions regarding class actions than they are to defendants. Essentially, everything got decided in favor of the people bringing the lawsuits, regardless of the facts or the law (or at least that’s how it seemed to us in the defense community). Interestingly, these districts have shifted geographically over the last couple decades, starting out in Texas and Louisiana, and then moving to Mississippi and Alabama. The most notorious locales currently are in West Virginia and Southern Illinois (Right across the river from me! Convenient, wot?).
  • This has encouraged a practice called forum shopping, where (to take a silly but not far from the truth example), someone from Missouri who gets overbilled by a Delaware company who sent the bill from Wisconsin will sue in Illinois to take advantage of the friendly judges there. Essentially, it makes no sense for an Illinois court to deal with the dispute, but sometimes they do (see the earlier part about deciding everything for the plaintffs), and the defendant gets nailed with a much higher judgment than they would have received if the lawsuit had been filed elsewhere.
  • Federal courts are perceived to be much less amenable to plaintiffs and certification in general (I might call this applying the law in a fair and balanced manner, but I also might be biased here…). Accordingly, plaintiffs’ attorneys do everything they can to keep these kind of cases out of federal court, while we defense attorneys do everything we can to get them into federal court. Many technical procedural games are played. If you want details, lemme know — I’m pretty sure they’re stultifyingly boring to most folks, and they’re not really necessary for this backgrounder…
  • Settlements weren’t necessarily fair for class members. A lot of times, they’d look like this: Acme Appliance Co. gets sued because their stoves have a tendency to explode on a relatively frequent basis. Acme loses the certification fight and decides to settle their lawsuit with the class, which consists of everyone who has ever bought the Acme ExplodoStove. The settlement has three parts: a nice cash settlement for the class reps that actually brought the suit, coupons for the rest of the class entitling them to $100 off the next Acme Appliance they buy in the next 12 months, and some hefty attorneys’ fees paid to the class representatives’ lawyers, based on the total of the cash payments and the face value of the coupons. As a result of the lawsuit, you — a class member — would have a stove that might explode, a coupon to aid you in purchasing another appliance from the company that made the exploding stove, and no ability to sue if the stove exploded and you were hurt. And the lawyers would be rolling in the cash. Big win for justice, huh? (there are a couple procedural outs here that make the problem slightly less bad, but only slightly so. Again, ask, and I’ll yak on about them until I’m blue.)

There are plenty of other problems with the system, but those are the ones that Congress decided to address. The reforms fall into two main categories: making it easier to get into federal court, and changing the way attorneys’ fees are calculated in those coupon settlements.

First background note: Federal courts can only hear cases in two contexts — if a question of federal law is the main issue in the case, or if there is something called diversity. Traditionally, for a federal court to have jurisdiction, there had to be at least $75,000 in dispute, and none of the people suing could be from the same state as the people being sued. That is, if a guy from Missouri sues a company from Illinois and a gal from Iowa for $400K, then federal jurisdiction exists. If gal is also from Missouri, though, then the federal court can’t hear the case.

Second background note: Plaintiffs generally get to choose whether they want to file their cases in state court or federal court. But, if a federal court would have jurisdiction over the case, defendants can whisk the case away out of state court and put it in federal court in a process called removal. As with everything else, these background notes are actually a lot more complicated than I’m making them out to be, so ask me if you’ve got questions…

In its first major set of changes, Congress loosened up those rules for class actions with more than 100 class members. Under the new rules, if the class action involves more than $5,000,000 and at least one of the plaintiffs is from a different state from at least one of the defendants, then federal jurisdiction exists over the case. Which means it will now be easier for defendants to remove cases to federal court, where the odds are more in their favor, from state court, where the odds aren’t.

Not content to leave well enough alone, Congress created three exceptions to this, which I’ll be happy to get into upon request, as they’re kind of complicated. (Yeah, more so than the rest of this stuff…) There are also lots of other minor changes to help facilitate this — which, again, ask.

The second major set of changes involves how you calculate fees in the coupon settlements like in the Acme Appliance example above. When attorneys’ fees are calculated now, the amount will be based on the value of the coupons actually redeemed, rather than the value of coupons that were actually issued. So if Acme Appliance issues $10MM in coupons, but only $3MM are redeemed, the attorneys’ fees will be based on the $3MM figure, not the $10MM figure that used to be used. I love this solution, by the way — it’s so elegant that I have a hard time believing that Congress came up with it…

There are other minor things going on in the Act, but those are the main two reforms that Congress passed. No one’s really sure what the effects will be, but that’s the nominal problem and the notional solution.

Topic: Congressional Pastry Reform

 Posted by Scott  Judicial System, Legal Reform, U.S. Politics  2 Responses »
Feb 282005
 

Well, sorta. Like I alluded to earlier, Congress passed some Class Action Reform legislation about a week and a half ago. Proponents say it’s going to get rid of (some of? most of?) the inequities in the class action system, while opponents say it’s going to cause all sorts of bad things to happen and that Congress has sold out to Big Business.

Now, full disclosure time here: I’m employed as a lawyer doing class action defense work, and for a very brief period of time I was my firm’s expert on the legislation. Scary, huh? Fortunately/Thankfully, someone more senior than me likely has that title now. In any case, here’s the thing: I can’t see the other side’s point of view on this one.

For most controversial positions, there’s relatively well-reasoned arguments for either side. I may disagree with some of the arguments, but I can at least get my head around why they’re arguing the way they are. I can’t do that with the folks that oppose tort reform — in particular wth class action reform. (Caveat: one group’s position I do get — plaintiffs’ lawyers. That one’s easy… But if someone doesn’t have a stake in the situation, I don’t know why they’d oppose those kinds of measures.) I’m freely willing to concede that I’m probably too close to the situation for that kind of analysis.

So I thought I’d throw it out to you guys. If this was an exam question, it’d probably be phrased like: “Tort reforms: Discuss.” I’ve got no particular agenda here — make your comments as general or as specific as you’d like. I’d just like some non-class action defense lawyer takes on the situation, assuming that you’re probably a little bit more sane and reasoned about the whole thing than we are…

What Are They Fighting For?

 Posted by Mike  Abortion, Creation and Evolution, Education, Homosexuality, Issues, Religion  8 Responses »
Feb 282005
 

Perhaps never in the history of the United States has there been so many people mobilized in such a large, organized and systematic way, to do so little. Most analysts believe that the religious right is the group most responsible for President Bush’s reelection and the Republican Party’s solid victory. And yet they elected these people to go into office with very little mandate. The big issues for the religious right are abortion, gay marriage, public displays of religion, teaching evolution in schools, and euthanasia. This list comes mostly from personal experience, and also by visiting some of the Focus on the Family and Christian Coalition websites to see what issues they were talking about most. I also chose to ignore the Christian Coalition’s non-Christian (note that I did not say un-Christian) positions, like supporting Bush’s tax and Social Security reform plans. (Side note: visiting their website, I was shocked at the extent to which the Christian Coalition has become a partisan mouthpiece for the Republican party, supporting conservative positions without even giving a modest go at supporting those positions Biblically.) So, one by one let’s look at these issues:

  • Abortion: Whether you are pro-life or pro-choice, I think most people would agree that too many abortions are performed in the United States. Look at most of the pro-life suggestions, however, and they really focus on changing society’s stance regarding abortion without actually making a significant dent in the number of abortion procedures. Peruse the aforementioned websites, and you will learn that the important abortion battles are parental notification, partial birth abortion, and the recognition of a fetus as a life in criminal court. Parental notification is fine and all, but I’m not sure if it will actually prevent more than a handful of abortions. Partial birth abortion is a purely symbolic issue; it outlaws only one of several possible procedures. And fetus recognition is all about some vague goal of “changing societies perception with regards to the unborn” or something like that. Again, pure symbolism that doesn’t actually save anyone’s life (though it does arbitrarily raise the sentences of certain murderers). But even more than that, almost all of the important parts of these issues are being fought in courts and not in legislatures. They’ve already passed most of these laws, the question now is whether those laws are unconstitutional.

    To be fair, I should mention two things. First, the pro-life movement is fighting, in the long-run, to legally ban all abortions. This is a major goal and certainly would have a tremendous impact on society, although I am a bit skeptical that a legal ban will have a positive effect on society unless you also change the underlying social forces which drive women to want abortions in the first place. Also, of course, a legal ban on all abortions is not on the horizon anytime soon (overturning Roe v. Wade, which is remotely possible in the next few years, would simply throw the issue back to the states, and then you get all sorts of nastiness like Kentucky passing laws to keep Planned Parenthood from busing women to Ohio to have abortions). Besides which, voting for a Congressmen because you want the Supreme Court to change stances on an issue is completely absurd. Second, there are many ways of reducing the number of abortions that these conservative Christian groups don’t even consider (like, say, mandating affordable healthcare for all pregnant women and young families).

  • Gay Marriage: The important thing here is to mobilize people in Alabama, Florida, and Virginia because there might be gay marriages performed in Massachusetts, New York City, and San Francisco. Oh, but wait, they do have to ensure that those marriages won’t be recognized, so they passed that law. And, it always helps to pass redundant laws and redundant amendments to state constitutions, right? And, you know, we could amend the federal constitution, cause that’s a good idea. The only way that such an amendment might pass is to forbid marriage but allow civil unions, at which point the entire amendment becomes semantic (you can give access to all legal rights of marriage, but can’t call it marriage). Again, it all strikes me as political mobilization to do very little.
  • Public Displays of Religion: Because the most important thing we can do for our children is allow them to listen to their teachers pray in school and to have them see the Ten Commandments on display at courthouses! These issues affect the well-being of millions of people! Well, or maybe it just makes us feel better as we horde our possessions and gossip with our neighbors to think that at least we are fighting the good fight for God somewhere, right? And again, these are currently battles for the courts and not for the legislatures.
  • Teaching Evolution: Already hit that one, but it basically comes down to much ado about very little. Because it isn’t like kids read their textbooks or pay that much attention to their teachers anyway, and all we’ve done is scared teachers away from actually teaching good science, into teaching one side or the other’s dogma, or just skipping the subject all together. Besides which, this is an issue for local school boards, not for national elections.
  • Euthanasia: This seems to be the next big debate, right now in Florida and Oregon, but soon coming to a statehouse near you. Still, I’m not sure that any of the national Republican leadership was elected to do anything about this.

So, in other words, it seems that this well-organized, extremely mobilized group sent the Republicans to Washington in order to possibly appoint a couple conservative judges, and to give good speeches about a lot of issues they can’t, or won’t, affect. And we wonder why the neo-conservative hawks and the Wall Street financial brokers are running the country.

Sometimes It’s The Instrument, Sometimes It’s The Musician

 Posted by Scott  Foreign Policy, U.S. Politics  2 Responses »
Feb 262005
 

Now, see, Mike — this is why you don’t write well-reasoned and largely correct posts to start off a debate — nuthin’ happens! Hard to have a discussion when the main point of contention is just how much I agree with you… *grin*

That said, I do think I have a slightly different spin on the issue. I’m generally in favor of a strong and big military — both as a way of making sure we can back up our threats and protect our friends and as an avenue of upward social mobility.

On that latter point: a couple of my more naive friends were shocked — shocked! — to find out in Fahrenheit 9/11 that military recruiters target folks from poor areas. (Full disclosure: I’ve never seen F9/11, because I think it would enrage me and cause me to lose all respect for Michael Moore. I’m not drinking his Kool-Aid — I generally approve of his role, because we need instigators. I just wish he wasn’t such a sleazeball about it.) Armies — and the US Army in particular — have always drawn upon the less-advantaged portions of our society to swell their ranks. And this is a good thing — the military provides economic opportunities perhaps not available in rural or urban areas, can provide a rewarding and respected career, and can offer easy opportunities to advance in society after serving your time (GI Bill, social networks, etc.). So in my book, anyway, a big military is a good thing.

Which isn’t to say that an inefficient military is a good thing. Mike says that he was hoping for a streamlined military with Dubya (foolish hope, in my humble opinion — Rumsfeld was a giant proponent of missile defense before he took office, so I’ve disliked him since well before he spearheaded the Iraq thing. But anyone willing to throw billions of dollars into actually implementing a system which has never ever worked (and stands no chance of working in the near- to medium-future) isn’t the guy who would cut all the chaff from the military…). In a lot of respects, Rumsfeld and Co. did that: we’ve got a fairly fearsomely efficient military machine with which to break things. It’s just not as good as it could be about building things back up again.

And why not? Poor political leadership, in my opinion. One of the most striking things to come out of the Frontline on Rumsfeld and the military (which you can evidently watch online in its entirety! Absolutely worth your time if you’ve got a spare hour and a good internet connection…) is the degree to which our current political leadership was willing to disregard and deride military opinions that disagreed with their preconceived notion of how things should work — which is a pretty accurate critique of the administration in general: it ignores reality when it’s inconvenient or conflicts with prior beliefs. The military is a wonderful tool for advancing American geopolitical interests, but you have to have someone who can actually use it. If the people in charge don’t have a clear idea of what to do and how to go about doing it, then bad things happen (see: Iraq II, Somalia, Vietnam, etc.).

Which is a rambling and discursive way to get to Mike’s Hierarchy of Military Priorities, but I think it’s an important point to make — the best priorities in the world won’t mean squat if you botch their execution. So, most important to least:

  • Protection of US sovereignty and territory. Duh — though this comes with some discretion built into it, too. Clashes with Canada over fishing rights? Probably not worth fighting over. Floods of illegal immigrants from Mexico? Military response, sure (border patrols), but probably not worth breaking out the local militias.
  • Nuclear deterrence. Well, yeah, but there’s ways to do this and there’s ways not to do this. Pushing for the Nuclear Non-Proliferation Treaty is good, but you can’t seek to develop your own new nukes at the same time and refuse to ratify the Comprehensive Test Ban Treaty. And don’t even get me started about how we’ve botched the situation with North Korea…
  • Retaliation and conventional deterrence. I’m on board. Hit ‘em fast and make it hurt a lot.
  • Preemption. This is in a different place than it is in Mike’s Hierarchy. But I want a seriously high standard of proof on this one — at least actual credible imminent threats to US sovereignty or tangible US interests. Probably more than that. We get in quick and we get out having exacted enough damage to remove the threat. And then we publicly put all of our cards on the table justifying the attack. So that we don’t blow up a milk factory or something like that. So if preemption was really the reason we went into Iraq, we should have just taken out what was worrying us (like, say, the WMDs…), and then gotten out.
  • Alliance Commitments. Done. We protect our friends.
  • Collective Security. This is new, but it boils down to this: If you invade someone else, then we’re going to step in and restore the status quo. Think Kuwait and Iraq I. There’s a great deal of grey area here, I’ll concede — Kashmir, Sub-Saharan Africa (where borders appear to be more formality than actuality), etc. — but if a nation or a portion thereof gets wiped off the map due to military action, then we ought to step in.
  • Peacekeeping. Hm. I’m torn about this one. We ought to do it, but 1) we’re not all that great at it (Iraq, Somalia…), and 2) we’re not really structured for it militarily. Plus, with the UN, I kinda agree with the conservative argument that we’re contributing enough in other ways (mainly economically, if we ever get around to paying our dues…), that it’s not worth it for us to send troops. It’s hard to provide public support for these kinds of military action, and it might be one of those things where it’s better to let the sleeping giant lie — why risk either engendering hatred of US peacekeepers if we don’t need to and can help out in other ways (logistically, economically, technologically). It’s a good goal, but it’s incredibly tough for us to pull off successfully, so the odds had better be in our favor if we’re going to get involved… (Sense the critique of our post-invasion plans here? Good…)
  • Protecting general US interests. To the extent that US interests not contained in one of the prior categories are in play, I think the preemption rules apply — fast and quick with minimal damage done. I’ve got more sympathy for actions that protect US security interest or promote regional stability (Haiti, Panama, Grenada…), than those that protect our economic interests. Too much of a slippery slope there.
  • Being a good global citizen. This would be using the military to support humanitarian aid efforts. Tsunami or earthquake aid, facilitating evacuations, etc.
  • Wilsonianism. This is what Mike calls the Right Hand of God and what Prez Bush calls promoting liberty and freedom throughout the world. There’s a place for taking actions like this, but it’s usually an ancillary effect of one of the other categories in the hierarchy and a nifty rhetorical tool to sell the action. At their best, Wilsonian principles are a way to guide our foreign policy and a goal to aspire to. At their worst, Wilsonian principles are cheap and flimsy paternalistic excuse for imperialism.
  • Prevention of megacide. This is kind of an amalgam of peacekeeping, Wilsonianism, and being a good global citizen — we may well have a moral imperative to step in and prevent genocides and rampant human rights abuses. I’m close to believing that’s so, but I can’t for the life of me figure out how to do that practically. How do you choose where to intervene? How do you create an exit strategy that doesn’t leave everything the same or worse than it was when you began? Do other countries get to do it, too? How can you tell that apart from an imperial invasion? Just too many problems with it to work, I think. Which isn’t to say it’s not a good goal, and an added justification if action is being considered for some other reason…

Bottom line: Get our military better, get it bigger, and get it more lethal, but don’t use it unless you have to, and unless you can do so effectively.

This Just Made Me Laugh…

 Posted by Mike  East and S.E. Asia, Europe, Foreign Policy, Middle East  1 Response »
Feb 242005
 

Copied straight off of the front page of NYTimes.com:

“Bush Presses Putin on Rollback of Democratic Reforms By ELISABETH BUMILLER 4:21 PM ET: Both leaders also said today that they had agreed that North Korea and Iran should not have nuclear weapons. “

Does anyone else find this headline hilarious, or is it just me? Isn’t it fundamentally saying: “Elected Leader Assails Autocrat for Being too Autocratic: Both leaders also said today that they continued to agree on something about which they have always agreed.” I don’t know whether to be disappointed in the New York Times, the Bush Administration, the media in general, or all of the above…

 Older Entries
© 2012 leftfielder.org Suffusion theme by Sayontan Sinha