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Transcript of © 2005 Dechert LLP CLASS ACTIONS IN THE UNITED STATES: OVERVIEW AND RECENT DEVELOPMENTS For...
© 2005 Dechert LLP
CLASS ACTIONS IN THE UNITED STATES: OVERVIEW AND RECENT DEVELOPMENTS
For Presentation at the British Institute of Comparative Law
June 27, 2005
Joseph K. Hetrick, Esquire
Partner
2
A BRIEF HISTORY OF U.S. CLASS ACTIONS
• Prior to 1938, class actions were available only in equity.
• Between 1938 and 1966, class actions existed only in certain limited categories.
• In 1966, U.S. Federal Rules were amended to the current form.
3
Rule 23 Requirements
• Rule 23A – ALL subparts must be satisfied:
• (1) Numerosity
• (2) Common Questions of Law and Fact
• (3) Typicality of Claims and Defenses
• (4) Adequate Representation
4
Rule 23(b) – Only one part only must be satisfied:
• 1(a) Incompatible Standards
• 1(b) Multiple Claims to a Limited Fund
• 2 Injunctive Relief
• 3 Commonality, Predominance, and Superiority
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Reporters Notes to the 1966 Rule Changes
• Fraud may be unsuited: Representations made and reliance issues.
• “Mass accidents” are ordinarily not appropriate – differences in damages, liability and defenses.
• Mass tort cases are “so personal and important that plaintiff’s have a real interest in pursuing the case on their own”.
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The Early Cases – 1970’s and 1980’s
• The Love Canal
• IUD Litigation
• Asbestos
• Agent Orange
• Class Certification Denied in all Cases
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If Not Personal Injury, What Then?
• Civil rights lawsuits: Injunctions
• Negative value lawsuits:
– excessive credit card fees
– airline tickets
– CDs
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The Tide Turned – Rule 23(c)(4)
• DES
• Asbestos
• Agent Orange (settlement class)
• Tobacco
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Example Class Actions
Class A
• Nationwide Class Action Against McDowells
• Strict Liability, Negligence, Fraud
• Obesity/Addiction
• Compensatory and Punitive Damages
Class B
• Statewide Class Action Against McDowells
• Consumer Fraud and Protection Acts
• Cost of Big n’ Healthy
• Reimbursement of All Amounts Paid for Big n’ Healthy
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Where We Are (or Were)
• To obtain class certification, all of the Rule 23(a) and one of the Rule 23(b) requirements must be met.
• Claimants wanted all mass torts to be class actions; defendants wanted no mass tort to be a class action.
• The courts became increasingly frustrated with their inability to handle the volume of cases – thus became likely to certify classes, at least as to some common issues. (Rule 23(c)(4))
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Classes in the New Millennium
• The trend was away from nationwide class actions.
• The trend was away from classes that depended on reliance or specific causation.
• The trend was toward statewide class actions using consumer protection statutes and the like.
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The Class Action Fairness Act of 2005
• Signed into law by President Bush on February 18, 2005.
• The Act applies to any civil action commenced on or after the date of enactment.
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Major Implications of the Act
• Expands federal jurisdiction to cover most class actions – and even some “mass actions”.
• Changes removal practice and appellate procedures.
• Changes settlement procedures for all class actions.
• Regulates settlements involving coupons, out of pocket costs to class members, and geographic favoritism.
14
Federal Jurisdiction is Much More Expansive Under the New Act
• Federal jurisdiction is much more expansive under the new act.
• Only “minimal diversity” is required.
• The amount required is “aggregated claims exceed 5 million dollars”.
• With some exceptions, federal jurisdiction is mandatory.
– 1/3 – 2/3 Rule.
• Remand is required only when more than 2/3rds of the plaintiff’s are citizens of the original forum state.
• The Act tries to maintain the traditional American state/federal balance.
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The Act Makes It Easier “To Remove The Case To Federal Court”
• An In-state defendant may remove the case to Federal Court.
• Any defendant may remove the case.
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Appeals
• Appellate review appeal as of right within seven days after the entry of an order granting or denying a remand motion.
• Appeal shall be completed within 60 days.
• An affirmance automatically if no timely appellate judgment.
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Settlements
• Notice required: government and class members.
• Court hearing required for final approval.
• Restrictions placed on “coupon settlements”.
• No “geographic favoritism”.