A number of courts recently have weighed in on a question we’ve blogged before—whether lawsuits by state attorneys general seeking restitution on behalf of private citizens are subject to removal under the Class Action Fairness Act of 2005 (pdf) (“CAFA”). These rulings have broad implications for the litigation of these quasi-class actions. They also are of substantial importance to determining whether securities fraud actions filed by state attorneys general are precluded by the federal Securities Litigation Uniform Standards Act of 1998 (pdf) (“SLUSA”). Continue Reading Are Quasi-Class Action Suits By State AGs Removable Under CAFA (Or, For Securities Fraud Cases, Barred By SLUSA)?
Although the class action bar in general is eagerly awaiting the Supreme Court argument in Comcast Corp. v. Behrend (No. 11-864)—which will be argued November 5th—antitrust practitioners in particular have a keen interest in the case. The issue presented is whether a district court may certify a class action without first resolving whether an expert witness’s testimony that the case can be tried on a class-wide basis passes muster under Daubert, the standard for admissibility at trial.
Continue Reading Comcast Corp. v. Behrend: Upcoming Supreme Court Case Is Critical to Antitrust Class Actions
Antitrust class actions differ in a number of respects from the ordinary run of consumer class actions. Perhaps most notably, they frequently involve classes made up, not of individual consumers, but of highly sophisticated businesses with potentially enormous sums of money on the line. These class members sometimes take an active role in the litigation, using innovative tactics to advance their individual interests within the broader context of the class action.
It doesn’t always work. In Precision Associates, Inc. v. Panalpina World Transport (pdf), a class action under Section 1 of the Sherman Act, several large class members intervened and filed an objection to an early proposed settlement agreement with one of the many defendants named in the action. These objectors didn’t challenge the substance of the agreement—under which the defendant’s relatively modest payment to the class was offset by its agreement to cooperate with class counsel in pursuing claims against the other defendants —but instead to the opt-out provision of the agreement. That provision required class members to opt out not only from the settlement but also from the action as a whole “for all purposes,” including any further settlements with or judgments against any of the other defendants. Several class members argued the all-or-nothing opt-out provision was unfair, and they should not be forced to opt out of the entire litigation just because they wish to opt out of an early settlement with a single defendant, at least not without first knowing what benefits future settlements may hold.
Judge Gleeson of the Eastern District of New York rejected that argument, holding that class members “do not have an independent right to pick-and-choose” which elements of a class action to join and which to exclude themselves from. He noted that the intervenors can challenge the one-off settlement on fairness grounds if they think the settlement sum insufficient, but he would not “second-guess” the litigation strategy of class counsel, who are “charged with a fiduciary duty to litigate the action in the best interests of the class.”
Practical considerations cut both ways. One the one hand, a rule contrary to the one adopted by Judge Gleeson both risks complications for district courts charged with managing complex class actions and creates a serious challenge for defendants, who would face uncertainty concerning the categorical finality ordinarily provided by final judgments and settlements class actions. On the other hand, sophisticated corporate class members may have legitimate reasons to opt-out on a defendant-by-defendant basis from overly-expansive class actions involving numerous defendants. Allowing them to do so would promote judicial efficiency by permitting them to pursue individual actions to vindicate their potentially unique interests vis-à-vis particular defendants, while at the same time permitting them to take advantage of the class device with respect to the remaining defendants.