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Not Just Alive, But Thriving: Recent Developments in Class Action Law
by Elizabeth J. Cabraser
October 1998
 
During the past year, the class action device has undergone increasing criticism and suffered potentially devastating attacks on three fronts -- judicial case law, judicial rule making and legislation. By now, it is clear that the class action is not just surviving, it is flourishing. The new case law guides but does not substantially narrow the availability of class actions. The proposed amendments to Rule 23 have largely ended up on the cutting room floor. And even modest legislation is languishing in Congress. The bottom line is more class actions overall and more class actions in substantive areas that were unimaginable just a few years ago.
II.   Class Certification and Decertification
Kopies, Inc. v. Eastman Kodak Company, No. C-94-0524 (N.D. Cal. 1998). (Copies available.)
In August 1994, within a few months of the filing of the complaint and upon limited discovery, Judge Caulfield conditionally certified a class of 15,000 end users of Kodak high volume copiers and Kodak copier service. Plaintiffs' principal claim was that Kodak had monopolized the market for Kodak copier service and that end users had been charged a supracompetitive price for service. After considerable discovery, plaintiffs' expert produced a damage report that set a "competitive benchmark price" for service. Kodak moved for decertification of the class under Rule 23(c)(1).
In April 1998, Judge Quackenbush, sitting by designation, denied Kodak's motion in a 35-page opinion. The decision is notable for at least four reasons: (1) prior antitrust class actions had been largely limited to price fixing cases where the "competitive" price was easily determined by the elimination of the fix; in this monopolization case, the Court validated plaintiffs' expert's selection of a single price for service in the context of highly complex variations in customers, discounts, products and equipment prices; (2) the 15,000 member class included most Fortune 500 companies and damages for many individual class members exceeded $1,000,000; (3) plaintiffs' competitive benchmark price was higher than the price charged about 2000 class members; the Court suggested that supplemental notice be given those members and an opt-out opportunity; and (4) the Court rejected Kodak's due process argument that, even though plaintiff had developed formulaic damages, Kodak could not be prevented from putting before the jury non-cumulative individual facts relevant to each member's purchases and lack of damage.
New Fed. R. Civ. Proc. 23(f)
Effective December 1, 1998, Subdivision (f) will be added to Rule 23:
"(f) Appeals. A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders."
Numerous other proposed amendments to Rule 23 were proposed but voted down by the Advisory Committee on Civil Rules in October 1997.
Proposed federalization of class actions
The Class Action Jurisdiction Act of 1998 (H.R. 3789) was introduced on May 5, 1998, by Rep. Hyde. The bill would grant the district courts original jurisdiction of all civil actions, regardless of the value of the amount in controversy, that are brought as class actions so long as there is diversity jurisdiction between any member of a proposed plaintiff class and any defendant. The bill was approved for full committee action in June 1998 by the House Subcommittee on Courts and Intellectual Property and currently sits in the House Judiciary Committee.
III. Notice
New modes of notice: internet notice, multi-media notice, and increasing use of notice by publication. (see Diet Drug MDL 1203 Order).
Settlement of Class Actions
Amchem Products, Inc. v. Windsor, ___ U.S. ___, 117 S.Ct. 2231 (1997)
In this landmark decision, the Court affirmed decertification of a settlement class consisting of all persons who were exposed to asbestos products manufactured by one or more of 20 companies. The proposed global settlement included both current and future (i.e. unrealized to date) claims and affected "perhaps millions" of class members. It was based on a complaint, answer, settlement agreement and joint motion for class certification that were all filed within a single day. 117 S.Ct. at 2239.
Unlike the Third Circuit below, the Court held that settlement is relevant class certification: it both eliminated the inquiry regarding the manageability of the action and heightened (or at least did not eliminate) other factors such as protection of absentee class members. id. at 2248. Specifically, the Court found that the class action did not meet the Rule 23(b)(3) predominance requirement and that the parties could not adequately represent the interests of the entire class due to inherent conflicts of interest, especially as to those with future claims.
E. Cabraser, "Life After Amchem:  The Class Struggle Continues," 31 Loyola of Los Angeles Law Review 373 (1998). (Copies available.)
Hanlon v. Chrysler Corporation, 150 F.3d 1011(9th Cir. 1998)
The Ninth Circuit's first post-Amchem decision approved a nationwide class action settlement covering all owners of 1984-94 Chrysler minivans (over 4,000,000 members). The settlement obligated Chrysler to fix defective rear door latches, a remedy that had been previously imposed by the National Highway Traffic Safety Administration. The Court acknowledged that Amchem required "heightened scrutiny to cases in which class members may have claims of different strength" but distinguished it as concerning "settlement allocations decisions" that were absent in the minivan settlement. Notably, the Court approved consolidation in federal court of several state court actions (into a nationwide class action) and an order by the District Court to enjoin additional state class actions.
In re Prudential Ins. Co. American Sales Litigation, 148 F.3d 283 (3rd Cir. 1998)
In this 63-page opinion, the Third Circuit approved a nationwide class action settlement involving over 8 million claimants concerning Prudential's life insurance sales practices. The opinion is the most comprehensive recent analysis of class action settlements. The settlement was based on the terms of a Multi-State Life Insurance Task Force Plan, instigated by the New Jersey Insurance Commissioner. Significantly, the settlement improved upon the Task Force Plan. It provided for uncapped ADR resolution of claims with a guarantee of a minimum payment of $410 million and additional remediation of between $50 and $300 million. Among the key issues resolved were (1) the District Court had proper diversity subject matter jurisdiction and properly took pendant jurisdiction under 28 U.S.C. § 1367 of all state claims, (2) the settlement class was properly certified under Amchem standards, (3) the reliance issue related to various fraud claims did not defeat the predominance conclusion, (4) expansion of factors used to determine the fairness of a settlement (see 148 F.3d at 323), and (5) approval of the late amendment of the complaint to include all "other sales claims" and provide Prudential a broader release.
The Increasing Utilization of Court-Appointed Mediators, Settlement Masters and other ADR Techniques in Negotiating Class Settlements.
Linney v. Cellular Alaska Partnership, 151 F.3d 1234 (9th Cir. 1998)
In this case the Ninth Circuit continued its long-standing practice of affirming attorneys' fee awards in a unique factual setting. AT&T Wireless and plaintiffs reached a settlement agreement involving holders of minority interests in certain cellular telephone markets. The District Court found that while the settlement may be fair, attorneys' fees of $10 million, as awarded by a special master, were unreasonable and tainted by plaintiffs' counsels' engagement by AT&T to monitor the settlement. Plaintiffs then hired new counsel who conducted their own discovery and negotiated a new settlement that provided for substantial injunctive relief, a $6 million settlement fund and fees to be paid from the fund. The Ninth Circuit described its review as "very limited" and found no abuse of discretion despite the fact that previous class counsel, whose conflict of interest foiled the first settlement, continued to participate in the new settlement.
In re Prudential Ins. Co. American Sales Litigation, 148 F.3d 283 (3rd Cir. 1998)
This opinion, noted above, also reversed and remanded an attorneys' fee award of $90 million. The Court remanded for findings on the contribution of the state insurance commissioners' Task Force Plan to the ultimate settlement. It also suggested that the percentage recovery of 6.7% may be too high given the size of the recovery and asked the District Court to analyze the issue in more detail. Finally, the Court criticized the District Court's lodestar cross-check, which resulted in a multiplier of 5.1 and an average hourly rate of $1,148.70, amounts which were not justified on the record before the appellate court.
In re California Indirect Purchaser X-Ray Film Antitrust Litigation, No. 960886 (San Francisco Superior Court)
In re Estate of Marcos Human Rights Litigation (Hilao v. Estate of Marcos), 103 F.3d 767 (9th Cir.); Cimino v. Raymark, 151 F.3d 297 (5th Cir. 1998). Two Circuits take diverging views on the bifurcation or multifurcation of class action personal injury trials.