Class Action Fairness Act

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The Fair Debt Collection Practices Act (FDCPA), which regulates the conduct of debt collectors, authorizes plaintiffs suing over violations to recover statutory damages of up to $1,000. Because these amounts can rapidly add up to exorbitant numbers in a class action for very minor, technical violations, Congress capped the total amount of statutory damages that may be sought for the absent class members in a class action at the lesser of $500,000 or 1 percent of the debt collector’s net worth. 15 U.S.C. § 1692k(a)(2)(B).

Now imagine that you’re a plaintiff’s lawyer who has stumbled across what appears to…
Continue Reading Can Plaintiffs Evade The FDCPA’s Cap on Total Statutory Damages in a Class Action by Filing Multiple, Gerrymandered Class Actions?

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)?

Some academics and commentators have been reading the tea leaves in Wal-Mart Stores, Inc. v. Dukes (pdf) and AT&T Mobility LLC v. Concepcion (pdf) as spelling doom for consumer and employment class actions. That’s overwrought; Dukes rejected an extremely adventuresome application of the class action rules by the Ninth Circuit, and Concepcion merely reminded courts that they can’t get around the Federal Arbitration Act by insisting that arbitration agreements permit expensive aspects of judicial litigation that are completely alien to arbitration in its traditional form. The continuing flood of class action filings is proof that the spigot hasn’t been shut off. But companies should pay attention to where the plaintiffs’ bar thinks they should move next if filing class actions stops being a viable business model.

In a recent article—After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion (pdf), 79 U. Chi. L. Rev. 623 (2012)—law professor Myriam Gilles and plaintiffs’ lawyer Gary Friedman shine the spotlight on state attorneys general:

In our view, the “private attorney general” role assumed by class action lawyers over the past several decades should give way to a world in which state attorneys general make broad use of their parens patriae authority—far greater use than they have in the past—to represent the interests of their citizens in the very consumer, antitrust, wage-and-hour, and other cases that have long provided the staple of class action practice.

And to tackle complex cases, we would hope to see underfunded AG offices making use of the lawyers who have acquired expertise in originating, investigating, and prosecuting class actions, as well as financing them.

The linchpin of this strategy is, of course, the money. If a state AG can’t give the deputized class action lawyers a big chunk of the money recovered for citizens, the model falls apart. Of course, money was one of the main problems with the biggest experiment with deputizing private lawyers as state AGs—the states’ lawsuits against the tobacco industry. Then-Texas AG Dan Morales was sentenced to four years in prison for attempting to steer millions of dollars from the proceeds of the tobacco settlement to a Houston lawyer.

So what should businesses do if they face one of these parens patriae lawsuits from a faux “acting AG”? Here are a few thoughts:
Continue Reading What’s Next for the Class Action Plaintiffs’ Bar? Getting Deputized by State Attorneys General

This morning I attended the oral argument before the Supreme Court in Standard Fire Insurance Co. v. Knowles, the first major case in which the Court will address the provisions of the Class Action Fairness Act of 2005 (CAFA).   For class-action lawyers on both sides, this case has been seven years in the making.   From where I sat, today’s arguments did not disappoint.

In a nutshell, the issue in Standard Fire is whether a named plaintiff may avoid removal to federal court of a putative class action that would otherwise satisfy CAFA’s $5 million amount-in-controversy requirement by stipulating that he or she does not seek to recover more than $5 million.  If the stipulation tactic were permissible, plaintiffs’ lawyers could avoid removal of class actions to federal court with ease.  That would allow a widespread evasion of CAFA, which was enacted in response to the massive abuse of the class-action device by a number of “magnet” state courts that were (and remain) hostile to out-of-state defendants.  (For a more extensive preview of the case, please see our earlier post.)

The oral argument (transcript (pdf)) focused on two disputed questions.Continue Reading CAFA Showdown in the Supreme Court: Today’s Oral Argument In Standard Fire Insurance Co. v. Knowles

According to an interesting student note that will soon be published in the Stanford Law Review, the answer to both questions is “yes.” Specifically, the would-be class counsel must “protect[] the substantive legal rights of putative class members . . . from prejudice” “resulting from the actions of class counsel.”

The implications for defendants opposing class certification are significant: If the plaintiff’s lawyers have prejudiced the rights of absent class members, then they have demonstrated that they will not “fairly and adequate protect the interests of the class,” as required by Federal Rule of Civil Procedure 23(a)(4). And…
Continue Reading Do Class Counsel Owe Fiduciary Duties to Absent Class Members Before Class Certification (and Should Defendants Care)?

In recent years, courts generally have cast a more skeptical eye on fee requests made by plaintiffs’ counsel who have negotiated a class action settlement. In the past, courts often rubberstamped outlandish fee requests. In fact, settlements awarding class counsel “excessive attorneys’ fees with little or no recovery for the class members themselves” were the very first “abuse” identified in the findings accompanying the Class Action Fairness Act (pdf).

But even today, courts do not always slash the fees requested by counsel for the settlement class. In one recent wage-and-hour class action, Lemus v. H&R Block Enterprises LLC (pdf) (N.D.
Continue Reading What Are Courts Doing With Fee Requests Made in Connection with Class Settlements?

The first step in defending a class action filed in state court is to check whether it may be removed to federal court. To some, removal may seem hopeless if the plaintiff asserts only state-law claims and the amount of potential actual damages at stake appears to be well below the $5 million amount-in-controversy threshold of the Class Action Fairness Act (CAFA). But that’s not always the case—especially when the plaintiff also seeks punitive damages or attorneys’ fees. Federal courts have confirmed that those amounts should be included when determining whether the amount in controversy is at least $5 million,…
Continue Reading District Court Confirms that Class Action Fairness Act Authorizes Removal when Request for Punitive Damages Causes Amount in Controversy to Exceed $5 Million

On September 26, California Superior Court Judge Kenneth Freeman rejected a proposed class settlement of allegations that Ticketmaster had misled ticket buyers by implying that fully disclosed charges for an Order Processing Fee and delivery by U.P.S. represented its actual costs.

Before commenting on the grounds for rejecting the settlement, though, I can’t resist observing that this is still another illustration of a lawyer-driven class action that attacks a practice that causes no actual harm to consumers. While at first blush it might appear unseemly to charge delivery fees that exceed the amount actually charged by UPS, it is a…
Continue Reading Schlesinger v. Ticketmaster: California Trial Court Rejects “Pure” Coupon Settlement As Well As “Clear Sailing” Agreement To Pay Class Counsel $15 Million In Attorneys’ Fees

The first question my colleagues and I ask when a client has been sued in a class action in state court is whether the case can be removed to federal court. Often, the only ticket out of state court is the Class Action Fairness Act of 2005 (“CAFA”), which authorizes removal of certain mass and class actions in which the “matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(2). Accordingly, plaintiffs who want to stay in state court are constantly looking for ways to prevent removal under CAFA. The…
Continue Reading Standard Fire Insurance Co. v. Knowles: Supreme Court To Decide Whether Plaintiffs May Evade Federal Jurisdiction Under CAFA By Stipulating That They Seek Less Than $5 Million In Damages