Presented on June 13, 2013, at the 2013 Carlton Fields Class Action Forum in New York, NY. Download the full Class Action Survey at http://classactionsurvey.com/. "The 'Rigorous Analysis' Overlay On Current Class Action Jurisprudence" by D. Matthew Allen. "Class Action Waivers: The World From Concepcion to Oxford" by M. Derek Harris. "Other Recent Hot Topics in Class Action Jurisprudence – Removal, Coupon Settlements and Cy Pres Awards" by Amanda Arnold Sansone.

1. Class Action Jurisprudence
D. Matthew Allen
M. Derek Harris
Amanda Arnold Sansone

2. The “Rigorous Analysis”
Overlay On Current Class
Action Jurisprudence
D. Matthew Allen
2

3. Rule 23(a) Requirements
• Numerosity - the class is so numerous that
joinder of all members is impracticable.
– and
• Commonality – there are questions of law or fact
common to the class.
– and
• Typicality – the claims of the representative
parties are typical of the claims of the class.
– and
• Adequacy – the representative parties will fairly
and adequately protect the interests of the class.
3

4. Rule 23(b) Requirements
• Rule 23(b)(1)(A) – separate actions will create incompatible
standards for the defendant.
– OR
• Rule 23(b)(1)(B) – limited fund; individual adjudication would
substantially impair the interests of other parties.
– OR
• Rule 23(b)(2) – injunctive/declaratory relief; the defendant has
acted or refused to act on grounds that apply generally to the
class.
– OR
• Rule 23(b)(3) – damages class; common questions
predominate and class action relief is superior to alternatives.
4

5. Four Phases of Class Actions
• Phase 1: The Innovative Phase (1966-
early 1970s)
• Phase 2: The Realistic Phase (mid-1970s
to early 1980s)
• Phase 3: The Formalistic Phase (early
1980s to 1995)
• Phase 4: The Rigorous Analysis Phase
(1995 to present)
5

6. Phase 1: Innovative Phase
• 1966 to early 1970s
• Judicial positive outlook toward the class
device as:
– Exciting and innovative tool to efficiently
manage and resolve complex cases
– Empowering courts to do social justice
6

7. Judicial Attitudes In
The Innovative Phase
• “The complete overhaul of Rule 23 significantly
expands the scope of class actions ... [T]he district
court unhampered by traditional classifications is
given a large measure of discretion in balancing
conflicting interests.” Siegel v. Chicken Delight
• “The social desirability of consumer class actions
was to insure that a David plaintiff has a Goliath
capability against the Goliath propensities of his
adversary.” Katz v. Carte Blanche Corp. (3d Cir.;
Aldisert, J. dissenting).
7

8. Judicial Attitudes In
The Innovative Phase
• “Class actions serve an important function in
our judicial system. By establishing a
technique whereby the claims of many
individuals can be resolved at the same
time, the class suit both eliminates the
possibility of repetitious litigation and
provides small claimants with a method of
obtaining redress for claims which would
otherwise be too small to warrant individual
litigation.” Eisen v. Carlisle & Jacquelin (2d
Cir. 1974)
8

9. The Innovative Phase
• Any device which is workable only because it utilizes
the threat of unmanageable and expensive litigation to
compel settlement is not a rule of procedure – it is a
form of legalized blackmail. If defendants who
maintain their innocence have no practical alternative
but to settle, they have been de facto deprived of their
constitutional right to a trial on the merits. The
distinctions between innocent and guilty defendants
and between those whose violations have worked
great injury and those whose have done little if any
harm have become blurred, if not invisible. The only
significant issue becomes the size of the ransom to be
paid for total peace.
– Milton Handler, 71 Colum. L. Rev. 1, 9 (1971).
9

10. The Realistic Phase
• Mid-1970s to early 1980s
• Characterized by:
– Cautions against certification based on legal
presumptions.
– Repudiation of use of device for social
activism purposes.
– Emphasis on close application of factual
record to elements of cause of action to
determine predominance.
10

11. 11

12. The Formalism Phase
• 1980s to 1995
• Decisions characterized by formalistic
appeal to legal principles:
– The court cannot prejudge the merits.
Commercial Tissue Prods. (N.D. Fla. 1998).
– The court must accept the facts in the complaint
as true. In re Potash Antitrust Litig. (D. Minn.
1995).
– Doubtful cases should be certified. Cumberland
Farms (E.D. Pa. 1988).
12

13. The Formalism Phase cont’d
– Liability is the overriding issue over causation and
damages. In re Flat Glass Antitrust Litig. (W.D.
Pa. 1999).
– The parties’ interests are best served by resolving
differences in a single action. Commercial Tissue
Prods. (N.D. Fla. 1998).
– Plaintiff’s expert testimony should be given
deference. Carbon Dioxide Antitrust Litig. (M.D.
Fla. 1993).
– Presumptions that make it easier to prove
common elements are often used.
13

14. The Rigorous Analysis Phase
• 1995 to the present (in the federal system)
• Repudiation of class certification of large
product liability or employment
discrimination cases:
– In re Rhone Poulenc (7th Cir. 1995)
– In re Am. Medical Systems (6th Cir. 1996)
– Castano v. Am. Tobacco Co. (5th Cir. 1996)
– Valentine v. Carter Wallace (9th Cir. 1996)
– Jackson v. Motel 6 (11th Cir. 1997)
14

15. 15

16. 16

17. 17

18. 18

19. 19

20. 20

21. 21

22. 22

23. 23

24. 24

25. Class Action Waivers: The World
From Concepcion to Oxford
M. Derek Harris
25

26. Class Action Waivers
What are they?
Class Action Waivers are
often found in arbitration
agreements. Companies
often require that people
settle their issues through
arbitration.
Where are they found?
– Consumer Contracts
• Credit Card Agreements
• Cell Phone Agreements
• Service Agreements
• Financing Agreements
– Employment Agreements
26

27. Sample Waiver
CLASS ACTION WAIVER. YOU AND MICROSOFT
AGREE THAT ANY PROCEEDINGS TO RESOLVE
OR LITIGATE ANY DISPUTE, WHETHER IN
ARBITRATION, IN COURT, OR OTHERWISE,WILL
BE CONDUCTED SOLELY ON AN INDIVIDUAL
BASIS, AND THAT NEITHER YOU NOR
MICROSOFT WILL SEEK TO HAVE ANY DISPUTE
HEARD AS A CLASS ACTION, A
REPRESENTATIVE ACTION, A COLLECTIVE
ACTION, A PRIVATE ATTORNEY-GENERAL
ACTION, OR IN ANY PROCEEDING IN WHICH
YOU OR MICROSOFT ACTS OR PROPOSES TO
ACT IN A REPRESENTATIVE CAPACITY.
27

28. AT&T Mobility LLC v. Concepcion
• On April 27, 2011, the U.S. Supreme Court
held 5-4 that a state law requiring the
availability of classwide arbitration
interferes with the “fundamental attributes
of arbitration” and creates a scheme
inconsistent with the Federal Arbitration
Act.
28

29. History of Concepcion
• Plaintiffs initiated a lawsuit in a
federal district court in
California seeking to recover
$30 in taxes they were
charged for phones advertised
as free. Their suit was
consolidated with a class
action.
• The Plaintiffs’ wireless service
agreement with AT&T included
an arbitration provision waiving
the right to proceed with
dispute resolution through
class arbitration.
• AT&T filed a motion to compel
arbitration, which the district
court denied.
• The district court held the class
action waiver provision of the
arbitration agreement was
unconscionable under
California law, and that
California's unconscionability
law was not preempted by the
Federal Arbitration Act.
• The U.S. Court of Appeals for
the Ninth Circuit affirmed
finding the class action waiver
was unenforceable.
• The U.S. Supreme Court
reversed and remanded the
case.
29

30. Supreme Court Rationale
J. Scalia (Majority Opinion)
• “When state law prohibits outright the arbitration of a
particular type of claim the analysis is straightforward:
The conflicting rule is displaced by the FAA.”
• “The overarching purpose of the FAA, evident in the
text of 2, 3, and 4, is to ensure the enforcement of
arbitration agreements according to their terms to
facilitate streamlined proceedings.”
• The California state law on which the Ninth Circuit’s
decision was based “stands as an obstacle to the
accomplishment and execution of the full purposes
and objectives of Congress,” therefore, it is preempted
by the FAA.
30

31. Circuits Split After Concepcion
• The Third Circuit, in Homa v. American
Express Co., held that a class action waiver
must be enforced even if a plaintiff shows
that a claim cannot be effectively prosecuted
in an individual arbitration.
• The Second Circuit has held that, even after
Concepcion, high costs of litigation and low
recovery available for individual claims, may
render a class action waiver provision
unenforceable.
31

32. In re American Express
Merchants’ Litigation
• AmEx I (2d Cir. 2009)
– Class action waiver held unenforceable because high
costs of litigating antitrust claims meant individual
claims would not be pursued and without a class
action plaintiffs would not have a remedy.
• AmEx II (2d Cir. 2011)
– Class action waiver unenforceable under FAA
because enforcement would preclude vindication of
plaintiffs’ statutory rights.
• AmEx III (2d Cir. 2011)
– Class action waiver unenforceable because costs of
individual arbitration would be prohibitive, which
would prevent plaintiffs from pursuing antitrust claims.
32

33. AmEx III Sets the Stage
• In its Opinion in AmEx III, the Second Circuit noted
that Concepcion and other Supreme Court cases
did not address the issue presented in the AmEx
cases, which is:
Whether a class-action arbitration waiver clause is
enforceable even if the plaintiffs are able to
demonstrate that the practical effect of
enforcement would be to preclude their ability to
vindicate their federal statutory rights.
• After the AmEx III ruling, American Express filed
petition for certiorari, which was accepted by the
U.S. Supreme Court
33

34. Supreme Court Set to Rule Again
• On February 27, 2013, the U.S. Supreme
Court heard oral argument in American
Express Co. v. Italian Colors Restaurant.
• The Supreme Court has yet to issue its
Opinion
34

35. Oxford Health Plans LLC v. Sutter
• Supreme Court holds language authorizing a
“civil action” in arbitration allowed the
arbitrator to rule that the parties intended for
class arbitration to be maintained because a
class action is a “civil action.”
• Indicates a retreat from Stolt-Nielsen where
the Supreme Court held that parties cannot
be compelled to submit to class arbitration
unless they agree to it.
35

36. Lessons Learned
• In light of the recent Supreme Court decisions
enforcing class action waivers, companies should
consider implementing class action waiver
provisions into their contractual agreements with
consumers, employees, vendors, shareholders, an
d others.
• Companies using or implementing class action
waivers be to be sure to include clear prohibitions
of class arbitrations in their contracts. Otherwise
, as the court noted in its decision, the “potential
for those mistakes is the price of agreeing to
arbitration.”
36

37. Other Recent Hot Topics in Class Action
Jurisprudence – Removal, Coupon
Settlements and Cy Pres Awards
Amanda Arnold Sansone
37

38. Class Action Fairness Act of 2005
(“CAFA”) - Original Jurisdiction
• More than 100 members of class
• Parties are minimally diverse
• Matter in controversy for aggregate of
claims of individuals exceeds the sum or
value of $5 million
38

39. Post-CAFA Removal of Class
Actions
The Standard Fire Insurance Company v.
Knowles, -- S. Ct. --, 2013 WL 1104735
(2013)
• Arkansas citizen sues on behalf of Arkansas
residents with Arkansas-law-based claims in
Arkansas state court
• With his complaint, Knowles served a
stipulation that the class would never accept
damages exceeding $5 million
• Standard Fire removed
39

40. Post-CAFA Removal of Class
Actions cont’d
• District court remanded to state court because of
the stipulation while also recognizing that the case
would otherwise meet the amount-in-controversy
threshold
• 8th Circuit declined motions to hear interlocutory
appeal, for rehearing and for rehearing en banc
• Supreme Court accepted review due to a circuit
split
• Supreme Court held that Knowles and his counsel
did not have authority to stipulate away damages
claims of absent putative class members in a class
that has not been certified
40

41. Removal Case(s) to Watch
Abeid-Saba et al. v. Carnival Corp, et al. and Scimone et al v.
Carnival Corp. (S.D. Fla.)
• Both cases are actions of passengers of the Costa Concordia
cruise ship
• In February, 2013, the federal district judge remanded these
two cases to state court after Carnival tried to remove
because neither case separately met CAFA’s 100-plaintiff
requirement and counsel had not asked suits to be tried
together
• District judge said there was “no doubt” that these two suits
were structured this way to avoid removal, but that CAFA
permits artful pleading to get around removal in mass action
cases
• On May 21, 2013, the Eleventh Circuit granted Carnival
permission to appeal so stay tuned
41

42. Post-CAFA Settlement of
Class Actions
• Congress concerned with coupon
settlements
• CAFA codified Congress’s intent to
regulate coupon settlements
• increased judicial scrutiny ( 1712(e))
• series of specific rules governing award of
attorney’s fees in class actions containing coupon
settlements ( 1712(a)-(d))
42

43. In re HP Inkjet Printer Litigation
(9th Cir. May 15, 2013)
• District court noted that a weak case and approved the
coupon settlement
• Class members to receive $5 million in online coupons
only redeemable at www.hp.com
• Center for Class Action Fairness filed objections and
the district court approved over those objections
• Class counsel submitted a $7 million lodestar but
requested an award of $2.3 million in fees and
$600,000 in costs. District court awarded $1.5 million
in fees and $600,000 in costs (looked at lodestar and
then looked at settlement value as a cross check)
43

44. In re HP Inkjet Printer Litigation
(9th Cir. May 15, 2013) cont’d
• Ninth Circuit reversed the district court because class
members paid out in coupons, not cash, so fees
should be considered in light of redemption value of
coupons instead of face value
• Ninth Circuit also said that the parties invited error
because the coupons were not to be issued until
appeals are resolved so there is no redemption value
data for the district court to consider
• Stay tuned . . .
44

45. The Controversy of Cy Pres Awards
• An option for settlement funds that either
cannot be distributed or remain unclaimed
following distribution
• Parties typically attempt to find the “next
best use”
• Wide range of organizations have
benefitted
• Have been criticized by many courts
though
45

46. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)
(9th Cir. 2012) (S.D. Cal May 3, 2013)
• Kellogg’s advertisements suggested that
their frosted mini-wheats were scientifically
proven to improve children’s cognitive
functions for several hours after the
children ate the cereal
• Kellogg sued on grounds that
advertisements were allegedly deceptive
46

47. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)
(9th Cir. 2012) (S.D. Cal May 3, 2013) cont’d
• 1st Proposed Settlement
– Negotiated by a mediator with JAMS
– $2.75 million to be made available for claims
by class members with remainder donated to
unspecified charities that feed the indigent
– $5.5 million “worth” of donated food to
charities that feed the indigent
– Class counsel sought $2 million fee
– Ninth Circuit rejected settlement & fee
47

48. Dennis v. Kellogg Co. (Frosted Mini-Wheats Case)
(9th Cir. 2012) (S.D. Cal May 3, 2013) cont’d
• 2nd Proposed Settlement:
– May 3, 2013, district judge preliminarily approved
new settlement
– Kellogg to establish a $4 million cash fund for
class members on a claims made basis
– Remaining funds will be distributed equally to
Consumers Union, Consumer Watchdog and the
Center for Science in the Public Interest
– Attorney fees will be deducted from the
settlement fund and are capped at 25% of the
fund plus costs
– To be continued . . .
48

49. Three Tips for Cy Pres Awards
• Have cy pres beneficiary with a nexus to the
claims in the case (required in many
jurisdictions)
• Specifically name the cy pres beneficiary in
the settlement (and, if possible, even
specifically provide permitted use of the cy
pres funds)
• Discount amount of “credit” class counsel
receives for the cy pres award when
calculating fee award
49

50. Download the 2013 Carlton Fields
Class Action Survey at
www.ClassActionSurvey.com