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The Implementation of “Balanced Diversity” Through the Class Action Fairness Act

Jacob R. Karabell

In 2005, Congress passed the Class Action Fairness Act (CAFA), which gave federal courts jurisdiction over class actions with both minimal diversity and an amount in controversy exceeding $5 million. In the wake of CAFA, federal courts have struggled to formulate appropriate standards of proof when the defendant removes a class action to federal court and the plaintiff seeks to remand the case to state court. This Note argues that if a defendant looks to remove such a class action, it should have to demonstrate that the amount in controversy is met by a preponderance of the evidence—regardless of whether the plaintiff’s complaint requests a specific amount of damages. In addition, if a plaintiff wants to utilize either of CAFA’s “federalism exceptions” to federal jurisdiction, it should have the benefit of a rebuttable presumption that a class member’s state of residence is her state of citizenship. This two-part approach comes closest to effectuating the “balanced diversity” that Congress intended in CAFA.

Class Certification in the Age of Aggregate Proof

Richard A. Nagareda

Few pretrial motions in our civil justice system elicit as much controversy as those for the certification of class actions. This Article offers the first account of the challenges courts face today in light of an important series of federal appellate decisions that direct the district courts to resolve competing expert submissions on the class certification question during the pretrial stage, even when the dispute overlaps with the merits of the litigation.

Across broad swaths of class action litigation today, plaintiffs rely on aggregate proof—evidence, typically of an economic or statistical nature, that presupposes the cohesiveness of the aggregate unit for litigation and, from that perspective, seeks to reveal quantitatively a common wrong attributable to the defendant. Debates over the proper role of aggregate proof arise in what otherwise might seem disparate disputes over class certification across securities, antitrust, Racketeer Influenced and Corrupt Organizations Act (RICO), and employment discrimination litigation. Too often, however, courts have taken at face value the evidentiary form that aggregate proof assumes in motions for class certification.

This Article urges a new conceptualization of the challenges in class certification facing courts today. The real question about aggregate proof in class certification is not one that speaks to the relationship between the court and the factfinder in the (usually hypothetical) event of a class-wide trial. Rather, the institutional relationship that really matters is the one between the court and the legislature as expositors of governing law. Properly understood, aggregate proof frequently offers not so much a contested view of the facts but, more fundamentally, a contested account of governing law—one eminently suited for judicial resolution and appellate correction de novo, without concern about possible intrusion into the role of the factfinder.

This Article exposes how renewed attention to the judicial duty to “say what the law is” can lend coherence to the law of class certification, offering the first extended assessment of such controversial recent litigation as the civil RICO class action against the tobacco industry in connection with its marketing of light cigarettes and the employment discrimination class action—the largest certified class in history— against Wal-Mart concerning the pay and promotion of its hourly female employees. The Article concludes by relating the analysis of class certification tolarger changes in the civil justice system that seek in various ways to address the reality of settlement, rather than trial, as the endgame of litigation.

Pleading in the Information Age

Colin T. Reardon

The Supreme Court’s recent decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal have rejected notice pleading and have embraced instead a “plausibility” standard for pleading, which requires a plaintiff’s complaint to present facts suggestive of liability. A recurring criticism of the plausibility standard is that it will weed out many meritorious cases in which the plaintiff was unable to gain access to information relevant to liability prior to the commencement of the lawsuit. This Note argues that these criticisms have largely ignored historical and technological changes in how information is regulated and accessed—changes that mitigate the impact of the plausibility standard. Information asymmetries between plaintiffs and defendants are, for the broad run of cases, less severe today than they were seventy years ago when notice pleading was created. Search costs for information are now lower because of new technologies like the Internet. Laws forcing or facilitating the disclosure of information to the public have also proliferated in recent decades, making building a case easier for plaintiffs. While serious information asymmetries remain in certain types of cases, this Note argues that the best strategy for dealing with such cases is not to return wholesale to notice pleading but to create a “safety valve” mechanism modeled on Rule 56(f) to test whether plaintiffs had access to significant amounts of information concerning the defendant’s conduct.

Patentography

Jeanne C. Fromer

Many critics have noted that patent litigation’s institutional structure is riddled with shortcomings that lead to unjust and inefficient outcomes and decrease public faith in the legal system. This Article relies on theory and empirical data to propose that the patent litigation system can be improved by harnessing patentography—the geography of patent disputes. There are three principal concerns with patent litigation’s institutional structure: widespread forum shopping in district court patent cases, district courts’ typically poor factfinding and lawmaking in these cases, and insufficient deference by the Federal Circuit—the court hearing nearly all patent appeals—to district courts’ factual findings. Harnessing patentography by restricting venue in patent litigation to the principal place of business of one of its defendants will help repair each problem. It will clamp down on forum shopping. Contrary to conventional wisdom, it will also improve district courts’ patent decisionmaking. As industries tend to cluster stably in discrete geographic areas, my proposed rule will tend to cluster patent cases by technology in particular districts, such as software cases in the Northern District of California and pharmaceutical cases in the District of New Jersey. Clustering together large numbers of an industry’s patent cases in a limited number of district courts will develop those courts’ proficiencies in patent law and in the underlying industry-specific facts critical to sound legal determinations. Under my proposal, this clustering will occur in districts in which judges and juries already tend to have background industry knowledge, given the associated industry cluster. An empirical review of patent cases filed in district courts in 2005 confirms that harnessing patentography as I propose would intensify patent litigation clusters. Finally, improving district courts’ decisionmaking ought to encourage the Federal Circuit to defer more appropriately to district courts’ factual findings.

Aggregate Reliance and Overcharges: Removing Hurdles to Class Certification for Victims of Mass Fraud

Shawn S. Ledingham, Jr.

Victims of consumer fraud often struggle to bring their claims as nationwide class actions under traditional state fraud laws due to (1) the application of many states’ laws to potential class members’ claims and (2) the fact that fraud claims generally raise a significant individual factual issue—whether the claimant personally relied on the defendant’s misrepresentation. The civil remedy provisions in RICO offer an attractive alternative. RICO overcomes the first hurdle by providing plaintiffs with a single federal law under which to file suit. This Note demonstrates that RICO allows plaintiffs to overcome the second hurdle as well. Rather than showing that they incurred harm when they purchased products in reliance on a misrepresentation, plaintiffs can achieve class certification by framing their injury as a harm common to all purchasers of a product: specifically, an increase in the price of the product due to artificially increased demand. Recently, several classes have moved successfully for certification using this approach. This Note provides a theoretical framework to justify this method. Rather than committing the same error as most courts and commentators by viewing this approach as an extension of the fraud-on-the-market presumption of reliance from securities fraud cases, I argue that there is no need to presume reliance because the Supreme Court’s holding in Bridge v. Phoenix Bond & Indemnity Co. makes clear that individual, personal reliance is not necessary to prove causation in RICO claims. Instead, plaintiffs can satisfy RICO’s causation element through statistical analyses that prove aggregate reliance—reliance on the fraud by a large enough number of individuals to increase the price of the product above the price that it would have been absent the fraud. As all purchasers of the product experience the same price differential, the statistical analyses provide common proof of causation of identical harm, eliminating problematic individual inquiries and opening the door to certification of nationwide consumer fraud class actions.

Blind Expertise

Christopher Tarver Robertson

The United States spends many billions of dollars on its system of civil litigation, and expert witnesses appear in a huge portion of cases. Yet litigants select and retain expert witnesses in ways that create the appearance of biased hired guns on both sides of every case, thereby depriving factfinders of a clear view of the facts. As a result, factfinders too often arrive at the wrong conclusions, thus undermining the deterrence and compensation functions of litigation. Court-appointment of experts has been widely proposed as a solution, yet it raises legitimate concerns about accuracy and has failed to gain traction in the American adversarial system.

Drawing on the notion of blind research from the sciences and on the concept of the veil of ignorance from political theory, this Article offers a novel and feasible reform that will make it rational for self-interested litigants to present unbiased experts to factfinders. The idea is to use an intermediary to select qualified experts who will render litigation opinions without knowledge of which party is asking. The result will be greater accuracy of both expert opinions and litigation outcomes compared to both the status quo and litigation with court-appointed experts. A game theory analysis shows that the current attorney work-product protections make this “blind expert” procedure a low-cost and no-risk rational strategy for litigants. This Article argues that blind expertise is a worthwhile reform for the system of medical malpractice liability in particular and may have wider application wherever laypersons
must rely upon the advice of potentially biased experts.

Untangling the Twombly-McDonnell Knot: The Substantive Impact of Procedural Rules in Title VII Cases

Angela K. Herring

Lower courts are still sorting out the consequences of the Supreme Court’s decisions
in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, which together
heralded a heightened factual pleading standard. Though many have focused on
the impact of the new standard on plaintiffs facing significant information asymmetries,
this Note focuses on the potential substantive impact on federal civil rights
claims resulting from application of the Iqbal standard. Specifically, this Note
argues that, when strict interpretations of the evidentiary standards used in claims
based on the McDonnell Douglas framework clash with a stronger factual pleading
standard, the effects can be distortive, closing out theories of discrimination for
which there was relief before Iqbal.

Reviewing potential solutions, this Note concludes that the most significant source
of the distortion is in the evidentiary standards themselves and argues that a more
practical and less rule-oriented approach can keep the civil rights laws broad in
reach while requiring a reasonable level of factual pleading.

Distributing Justice

Adam S. Zimmerman

This Article explores the procedural concerns that arise when regulatory agencies mimic class actions by collecting big monetary judgments on behalf of victims. Over the past decade, agencies have collected over $10 billion to compensate people hurt by massive frauds, false advertising, and defective drugs, using proceeds from penalties levied against regulatory violators. Today, the Securities and Exchange Commission regularly seeks awards against large public companies and distributes the money to injured investors through “Fair Funds.” The Federal Trade Commission similarly seeks restitution against parties profiting from unfair trade practices and distributes awards to consumers. Even the U.S. Postal Service distributes the ill-gotten profits of scam artists to victims of mail fraud. However, unlike private lawsuits, agencies afford few safeguards for the victims they compensate. Agencies lack adequate procedures to hear victims’ claims, identify conflicts between different parties, or coordinate with other kinds of lawsuits. I argue that agencies should continue to play a role—albeit a limited one—in compensating victims for widespread harm. However, when agencies compensate victims, they should adopt rules similar to those that exist in private litigation to resolve differences between victims, improve judicial review, and coordinate with private lawsuits. I propose three solutions to give victims more voice in their own redress, while preserving an agency’s flexibility to enforce the law: (1) that agencies involve representative stakeholders in settlement discussions through negotiated rulemaking; (2) that courts subject agency decisions to hard look review; and (3) that courts and agencies coordinate overlapping settlements before a single federal judge.

The Federal Rules of Civil Settlement

J. Maria Glover

The Federal Rules of Civil Procedure were originally based upon a straightforward model of adjudication: Resolve the merits of cases at trial and use pretrial procedures to facilitate accurate trial outcomes. Though appealing in principle, this model has little relevance today. As is now well known, the endpoint around which the Federal Rules were structured—trial—virtually never occurs. Today, the vast majority of civil cases terminate in settlement. This Article is the first to argue that the current litigation process needs a new regime of civil procedure for the world of settlement.

This Article begins by providing a systemic analysis of why the Federal Rules inadequately prevent settlement outcomes from being distorted relative to the underlying merits—as defined by reference to substantive law—of a given dispute. It then explains how the Federal Rules can actually amplify these distortions. Indeed, notwithstanding the well-worn adage that settlement occurs in the “shadow of the law,” scholars have shown that non-merits factors exert significant influence on settlement outcomes. However, these insights have not been considered together and combined with a systemic focus on the ways in which the influence of these factors on settlement outcomes is actually a product of the basic structural features of the Federal Rules. This Article takes these next steps to explain that the “shadow of the law” that is cast on settlements is fading. Further, this Article discusses a new phenomenon in the current litigation environment—namely, that litigants’ increased reliance on prior settlements as “precedent” for future settlement decisions may move settlement even further out of the “shadow of the law” and into the “shadow of settlement” itself.

This Article then traces these problems to three foundational assumptions underlying the Federal Rules of Civil Procedure, all of which have become outmoded in a world of settlement. In rethinking these assumptions, it provides a new conceptual account that contextualizes previously isolated procedural reform proposals as challenges to these foundational assumptions. It also explains how these reformefforts ought to be refined and extended with a specific view toward systematically redesigning the basic model and operation of the Federal Rules for a world of settlement. Lastly, it sets forth new proposals that seek to reorient current rules expressly toward the goal of aligning settlement outcomes with the merits of underlying claims.

What emerges is a new vision of procedure—one in which the application of pretrial procedural rules do not merely facilitate trial but are designed to provide litigants with guidance regarding the merits of claims and are used to align settlement outcomes more meaningfully with the dictates of the substantive law. In describing this vision, this Article lays the groundwork for the design of a new Federal Rules of Civil Settlement.