Complex Civil Litigation Outline

Complex Civil Litigation
Dodge
Fall 2012
 
 
 
Purpose of Rule 23; Class Action Lifecycle
§  1-3 (optional: skim 25-41); Federal Rule of Civil Procedure 23
§  Originally, Rule 23 was motivated by a desire to create a vehicle for 23(b)(2) types of cases (especially civil rights) where injunctive relief like desegregation was sought, as well as the unique problem of limited funds (b)(1)
§  Today, Rule 23 is primarily used to combat negative value lawsuits; there are two primary types:
·         Small value claims (e.g. $1 consumer claims) no incentive, even if minimized litigation costs because of the time it takes.
·         High value claims with high generic asset costs (e.g. mesothelioma caused by asbestos); these are claims that are worth a good deal of money that plaintiffs would have an incentive to pursue, but which are so expensive that no one acting alone can reasonably pursue
o   Generic assets:  the proof accumulated to prove the class claims, which could be used in each individual claim – for example, scientific data and expert reports compiled to show a link between mesothelioma and cancer
o   Specific assets:  the evidence needed to prove a specific plaintiff’s claim, typically his particular damages or unique defenses
§  Information cost, litigation cost asymmetries:  without class actions, defendants would have a greater incentive to invest in developing generic assets because they could use them in multiple single plaintiff cases – so it would make sense to hire the very best expert, commission studies, because they can spread the cost over all the cases whereas for plaintiffs they would invest less (for the econ folks in the class only, this is because the differential in expected outcome resulting from the slightly better evidence would not be great in a single case, but would be great enough to outweigh the cost across cases); for this reason, even if a case is not a negative value case, class actions still have the benefit of correcting these asymmetries that would otherwise systematically shift the verdicts in favor of defendants – in other words, to balance the investment incentive of counsel on both sides of the case 
§  Class action lifecycle:
§  Complaint – class action complaint filed, must exhaust administrative remedies, meet the requirements set forth for the case; the filing of the complaint tolls the statute of limitations for all putative class members (“American Pipe tolling”)
§  Discovery – theoretically limited to class certification; but as a practical matter the merits collapse in so discovery can be quite broad (Dukes)
§  Class certification or summary judgment – strategic decision given the different scope of preclusion
§  Interlocutory appeal – available after class certification under 23(f)
§  Settlement – typically mediated (if only for appearances), then plaintiff moves for preliminary approval, then notice/opt-out/object, then final approval, finally payment to class and counsel, dismissal of litigation with preclusive effect for all class members that do not opt out
§  Trial – if not settled, theoretically the case goes to trial, just like any other matter, but this never happens because of the settlement pressure
 
Preclusion and its Limits (3-25)
o   If you have litigated an event before, you can’t bring suit against the same party again regarding the same transaction or series of transactions out of which the 1st cause of action arose.
o   A change of legal theory, a change of remedy does not revive your ability to bring suit
o   Even if you sued before and missed a claim, misunderstood the facts, you can’t sue again if you obtained a judgment
o   Factors: time/space, motivation, convenient trial unit or not, whether treatment as unit conforms to parties’ expectations or business
o   Elements of the rule
o   (1) Claim preclusion operates only between the parties and
o   (2) Only where there’s a final judgment
Plaintiff versus Defendant:
o   Judgment for P: claim extinguished and merged in judgment, and new claim may arise against D on judgment (this means that the judgment is the total of the P’s rights consisting of enforcement)
o   Judgment D: claim extinguished and judgment bars a subsequent action on that claim by other Ps
o   Applicability to class actions
o   Claim preclusion operates only against parties; class actions are a vehicle for doing just that
o   Only applies when final class settlement, and doesn’t apply to an opt outer.
Issue Preclusion: does not block an entire cause of action, just an element or particular finding; if the court has resolved the issue before it:
o   Has preclusive effect between the parties
o   May not have preclusive effect on the losing party if the non-party to the prior case (1) could not have easily joined the earlier action, and (2) applying issue preclusion would not be said to be unfair (i.e. – won’t apply if no reason to invest much in the first case, but now high stakes and incentive to invest in defense)
o   As case shows, because no preclusion between govt and private actions, piggybacking effect à huge source of litigation (e.g. antitrust)
o   Can’t use issue preclusion against someone who wasn’t in the prior action à one way system
o   Offensive collateral estoppel (P2 coming in using based on action of P1 v. D) is permissible based on trial ct discretion considering whether (1) full and fair opportunity to litigate fact/issue in 1st instance (2) whether plaintiff had easy opportunity to join in earlier action (if so less likely to apply) (3) whether procedural opportunities give extra boost to P in subsequent action unavailable in previous action and (4) whether generally unfair to defendant. Defensive estoppel is generally easier to allow because it promotes judicial efficiency
If first P loses à P2 litigates with no impediment
If first P wins à P2 relies on the win
So P just keeps litigating until a single win, then base the class on that win.
o   Example Parklane Hosiery: D previously lost suit against SEC for materially misleading in proxy statement (injunctive relief) and P sought to offensively preclude relitigation. Ct find allowable because (1) D had incentive to litigate vigorously against SEC previous (2) following action not inconsistent with previous deicions (3) P had no new procedural opportunities available in subsequent action. Conclusion: full and fair opportunity for defense in 1st action, off IP is allowed.
§  Note used Issue not Claim bc 1st was gov’t: Parklane allows mixed public/private enforcement with similar law.
Taylor case gives us four exceptions for when nonparties are precluded:
Nonparty agrees to be bound
§  Substantive legal relationship party/nonparty justified binding
Control over prior litigation assumed by nonparty
Proxy relationship/adequate representation
Proxy: nonparty cannot simply use a proxy in previous action and hope to not be bound by it.
Also statutory authorization:  bankruptcy, probate, and class actions, but note must go through DP process
o   Positive rule: adequate representation requires (1) interests of party and non representatively aligned (2) either party understood representation or original court took care to protect nonparty interests; and sometimes (3) notice to nonparty.
Problem with virtual representation: either lack of special procuedure (like class actions) to protect nonparty interest or an actual understanding of previous suit representation of P2, either sufficient.
Court says this will be balanced by stare decisis within a court, and the contingency system between courts
Application to summary judgment timing
Post-certification MSJ
Plaintiffs win on MSJ – defendant pays out damages set by court to all named plaintiffs plus all absent class members that did not opt out
Defendant wins on MSJ – all named plaintiffs plus all absent class members that did not opt out are bound, can’t sue again
Pre-certification MSJ
Plaintiffs win on MSJ – only applies to class reps; not yet certified to represent the rest
Defendant wins on MSJ – only applies to class reps; not yet certified to represent the rest
CLASS CERTIFICATION
Impact and Significance (42-67)
§  From the plaintiffs’ perspective: Hansberry v. Lee
§  Exception to the general rule of preclusion; stems from the same initial position – one is not bound by a judgment in personam in litigation in which he is not designated as a party or to which he has not been made a party by service.
§  But then it goes on to say that there is an exception where the judgment in a class or representative suit, such that some members of the class who are parties may bind members of the class or those represented who are not parties to it; the point of a class action is thus to bind the absent class members who don’t have party status
§  Just because parties all have the same interest (here a property interest), does not mean they have an alignment of interest for purposes of preclusion
§  In Hansberry purported class included those who wanted enforcement and those that didn’t
§  Adequate class representation is thus a due process requirement that must be satisfied before preclusion can be invoked
§  This is subsumed in the 23(a) adequate representation requirement
§  Nagareda says this is antiquated, not a problem today with damages classes – but I have defended a number of classes on this basis, including Dukes
§  From the defendants’ perspective…In re Rhone-Poulenc Rorer
·         Certification increases the variance of outcomes possible in litigation, more is at stake in this single bet the company case, versus single actions which will likely be split between guilt and innocence resulting in some fraction of the class recovering, and thus the likelihood of settlement
o   Posner – D will never risk classwide judgment; unlike consolidation, class actions are opt-out so they bring in cases not already in the system and which otherwise might never have been filed even if they are for good amounts of money (see Sept 11 fund, FLSA claims for wage/hour violations)
o   Rovner – that’s just one element (there negligence, not liability), so much more is needed before payout it isn’t creating a normatively disfavored amount of pressure
o   Posner suggests there would be a grid model for settlement eliminating the need for individual trials, we will see this idea that cases can be satisfied through grids as miniature privatized versions of the workers comp system (streamlined recovery, but a diminution in compensation) reoccur throughout the course
o   Nagareda also worries that the victims here were very sympathetic – ill people who had to take this blood, not people having elective surgery. 
§  As a result, little would be effectively standing between them and the judgment if breach