Spencer Weber Waller Professor and Director

Institute for Consumer Antitrust Studies Loyola University Chicago School of Law

“The class action is one of the most socially useful remedies in history.”

Abraham J. Pomerantz, New Developments in Class Actions: Has the Death Knell Been Sounded?, 25 Business Lawyer 1259, 1259-60 (1970).

“A form of legalized blackmail”

Milton Handler, The Shift from Substantive to Procedural Innovations in Antitrust Suits, 71 Columbia Law Review 1, 9 (1970).

Class Actions in Federal Court Governed by Rule 23, Federal Rules of Civil Procedure as Amended in 1966

Almost all U.S. States Have Some Form of Class Actions, most Modeled after FRCP 23 with Many Different Variations

Basic Notion is that one or more Class Representatives sue on Behalf of all Persons Similarly Situated

All Class Actions Must Satisfy All Four Prongs of FRCP 23(A) ◦ Class Must be So Numerous that Joinder of All Members

would be Impractical ◦ There must be Questions of Law and Fact Common to all

Members of the Class ◦ The Claims and Defenses of the Class Representatives

Must be Typical of the Rest of the Class ◦ The Class Representatives Must Fairly and Adequately

Protect the Interests of the Class Members No Conflicts of Interest Have Capability to Adequately Conduct the Litigation

Even After Satisfying FRCP 23(a), the case must fall within one of three categories listed in FRCP 23(B) ◦ “Automatic” ◦ Injunctive ◦ Catch-All

Rule 23(b)(1) Allows Class Actions where ◦ There is a Risk of Inconsistent Outcomes or ◦ As a Practical Matter, the Case Will Dispose of the Claims of Others Similar Situated or Will Impair their Ability to Protect their Interests

Examples: ◦ Whether a Borrower has Defaulted on the Terms of

a Loan or Bond ◦ Where There is a Limited Fund of Assets to Cover

Many Claims Arising out of the Same Incident

Where the Party Opposing Claim has Acted or Refused to act on Grounds Applicable to the Whole Class and Relief sought is Primarily Injunctive, FRCP 23 (B)(2)

Probably the Main Reason Rule 23 was Amended in 1966

Examples: ◦ Civil Rights ◦ Environmental ◦ Institutional Reform

FRCP 23(b)(3) allows Class Actions where ◦ Common Questions of Law and Fact Predominate over Individual

Issues and ◦ Class Action is Superior to other Available Means

The court must consider ◦ Interests of Class Members in Individually Controlling the Case ◦ Any other Pending Litigation Relating to the Same Issues ◦ Desirability of Concentrating Litigation in one Forum ◦ Difficulties in Managing the Litigation ◦ Examples: Large Number of Small Claims

Price Fixing Statutory Specified Damages

Statutory Torts Antitrust Securities Fraud Consumer Protection

For 23(b)(3) Class Actions Notice and Opportunity to Opt Out is Required to all Potential Class Members at all Key Stages ◦ Certification ◦ Settlement

For the Other Types of Class Actions no Opt Out Available, but Court has Power to Require Notice where Appropriate

Plaintiffs Normally Responsible for Handling Notice and Paying Costs of Notice ◦ Traditional 1st Class Mail ◦ More Recent Media, Electronic, and Social Media

For 23(b)(3) Cases Parties have the right to opt out and pursue claim on their own ◦ More Frequent for Corporate Buyers in Antitrust Cases ◦ Unusual for Individuals or for Small Claims Cases

If Party Opts Out They are not Bound by Anything that Happens in the Case but also Cannot take Advantage of the Judgment or Settlement Obtained for the Class

Would Have to Bring their own Claim if They Wish to Pursue

If They do not Opt Out, the Party is bound by Outcome or Settlement

Still has Right to Object to Any Proposed Settlement or Opt Out of Settlement

Supposed to Occur as Early as Possible in the Litigation

Prior to Motion to Certify the Case is Just the Named Plaintiffs versus the Defendants

After Certification Case Becomes Entire Class of Persons Certified by the Judge Versus the Defendant

Can Also Certify Sub-Classes and Certain Issues for Class Treatment

Risk of Mini-Trials of the Merits of the Case

While Technically a “Procedural” Motion, Certification has a “Substantive” Impact on the Case

More at Stake for the Defendant if Certified All Members of the Class Bound by Outcome Rarely Worth it for Plaintiff to Pursue as Individual

Case if Certification Denied Settlement After Certification Can Provide Global

Piece for Defendants and All Class Members Either Side Can Immediately Appeal the

Certification Decision

Fear of Coercing Settlements Increasing Requirement of Establishing Merits of

Claims at Much Earlier Certification Stage ◦ Hydrogen Peroxide Antitrust Litigation ◦ Walmart v. Dukes

Increased Emphasis on Predominance of Common Issues ◦ Walmart v. Dukes

Increasingly Strict Requirements of Showing Class Wide Proof of Liability, Damages, and Expert Opinions ◦ Comcast Corp. v. Behrend

Approval of Settlements by Courts Necessary Because All Members of Class Who do Not Opt Out are Bound by the Settlement Once Approved

Court Must Approve Fairness of Settlement, Attorneys Fees, and Costs

Question for Court is Ultimate Value to Plaintiff and Class Members ◦ Analysis of Risks of Litigation and Work of Counsel ◦ Preference for Cash to Plaintiffs rather than Coupons or

Discounts ◦ Risk of Collusive Settlements ◦ Concern When Class Recovery is Small and Fees are High

The U.S. Supreme Court Extremely Supportive of Arbitration Clauses in both Merchant and Consumer Contracts

Courts will Enforce Commercial Arbitration under Federal Arbitration Act even if State Law would otherwise Bar Arbitration ◦ CompuCredit

Courts will Only Require Class Arbitration if Arbitration Clause Clearly Allows ◦ Stolt-Nielsen

Supreme Court has Enforced Arbitration Clauses Which Forbid Class Arbitrations even when Contained in Fine Print in Consumer Contracts ◦ ATT v. Concepcion

Supreme Court Has Enforced Waiver of Class Arbitrations even Where Plaintiffs Show that Statutory Rights Cannot be Meaningfully Enforced in Individual Arbitration ◦ American Express Merchant Antitrust Litigation

Tyson Foods Upheld Employees’ Reliance on “representative evidence” to Determine the Number of Additional Hours that each Employee Worked, when the Employer had Failed to Keep Adequate Records.

Cambell-Ewald Holding That Offer of Full Settlement with the Class Representative Does Not Moot the Class Action

Spokeo Failed to Definitively Decide Whether there is Standing Where No Actual Damages

Current Docket Has Case Whether Waiver of Class Arbitration Violated National Labor Act

Death of Justice Scalia May Affect Cases Taken and Outcomes Depending on his Replacement

The Fairness in Class Action Litigation Act of 2017 proposes to prohibit federal courts from certifying class actions unless:

in a class action seeking monetary relief for personal injury or economic loss, each proposed class member suffered the same type and scope of injury as the named class representatives;

no class representatives or named plaintiffs are relatives of, present or former employees or clients of, or contractually related to class counsel; and

in a class action seeking monetary relief, the party seeking to maintain the class action demonstrates a reliable and administratively feasible mechanism for the court to determine whether putative class members fall within the class definition and for the distribution of any monetary relief directly to a substantial majority of class members.

The bill limits attorney's fees to a reasonable percentage of: (1) any payments received by class members, and (2) the value of any equitable relief.

No attorney's fees based on monetary relief may: (1) be paid until distribution of the monetary recovery to class members has been completed, or (2) exceed the total amount distributed to and received by all class members.

Almost All Brought Under Section 1 of the Sherman Act for Cartel Like Behavior

All Difficult Claims Brought by Traders on Markets Affected by the Cartel

Most Relate to Rigging of “Benchmark” Interest Rates ◦ Libor, Eibor, Forex, ISDA, Treasuries

Others Relate to Exclusion of New Entrants to Trading of Complex Financial Instruments ◦ Credit Default Swaps, Interest Rate Swaps

All Cases Hotly Contested Lengthy Litigation Several Settled for Over One Billion US Dollars

As Class Action Shrink in U.S., Many Jurisdictions Recognize the Need for Some Form of Collective Action

Vibrant Competition Class Action Bar in Canada Although no Trials to Date

Uneven Growth and Few Successful Outcomes in Antitrust Cases in Any Jurisdiction Outside US and Canada

Experimenting with Both Traditional Class (Collective) Actions and Alternatives ◦ Super Complaints ◦ Claims buying Models

Limitations ◦ General Private Litigation Issues ◦ Opt In Issues ◦ Contingent Fee Issues

Very Cautious Recommendations in EU Private Rights Initiative

In Book Five of Mexico’s Federal Code of Civil Procedure.

Limited to environmental claims and consumption of goods or services (includes Antitrust).

Three types: Diffuse actions, collective actions in the strict sense and homogenous individual actions.

Opt-in. At least 30 members in the group. Damages are cost-to-repair and attorneys’ fees.

NO punitive damages. No Competition Collective Actions so Far

Proposal in two pieces: A Recommendation and a

Communication. No numerical requirement. Opt-in. “Dissemination methods” (notice) must be wary

of the potential for ruining reputations of defendants.

Loser pays principle. Injunctions preferred, ADR Options, NO

contingency fees, NO punitive damages, NO treble damages.

Impose limits on attorneys’ fees.

Uk’s Department for Business Innovation and Skills (BIS) released consultation paper and impact assessment

Opt-out actions under limited circumstances for UK Plaintiffs Only

Expanded power of the Competition Appeal Tribunal (CAT), with discretion to allow class action and decide if it’s opt-in or opt-out.

NO treble or exemplary damages, loser pays principle, no contingency fees.

1st Opt-Out Collective Action Filed in 2016 Regarding RPM Case Involving Mobility Scooters

Differs among provinces. Quebec (civil law jurisdiction) had class-actions since

1978. Quebec: Class certification has four requirements: 1)

related questions of law or fact, 2) facts alleged justify conclusion sought, 3) action cannot more easily be brought as a joinder or by a representative, 4) the representative adequately represents the interests of the group.

British Columbia and Ontario: Similar, both under Class Proceedings Act of 1992, 1996 (respectively).

Certification: requires two or more persons w/ common issues and preferable method of trying the claims.

Opt-out generally. In B.C. opt-out only for residents, opt-in available for non-residents.

Class or Collective Actions Vital for Deterrence and Compensation of Small Claims Cases

U.S. Class Actions Still Most Robust in the World Canada has Shown How One can Have Class

Actions Without Treble Damages However, no one yet has Shown How You can

Have Effective Collective Actions Without Some Form of Opt-Out

Everything Else is Negotiable But Anything less is Just Joinder and Not a True

Collective Action

Spencer Weber Waller, The Fall and Rise of the Antitrust Class Action, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641867

Symposium: The Future of Class Actions and its Alternatives, 44 LOYOLA UNIVERSITY CHICAGO LAW JOURNAL (2012).

LITIGATING CONSPIRACY: AN ANALYSIS OF COMPETITION CLASS ACTIONS ( Irwin Press 2006).

Or Contact: Spencer Weber Waller Professor and Director Institute for Consumer

Antitrust Studies Loyola University Chicago

School of Law swalle1@luc.edu http://www.luc.edu/antit

rust