CLASS ACTIONS IN THE UNITED STATES: OVERVIEW AND RECENT DEVELOPMENTS For Presentation at the British Institute of Comparative Law June 27, 2005 Joseph K. Hetrick, Esquire Partner

A BRIEF HISTORY OF U.S. CLASS ACTIONS Prior to 1938, class actions were available only in equity. Between 1938 and 1966, class actions existed only in certain limited categories. In 1966, U.S. Federal Rules were amended to the current form.

Rule 23 Requirements Rule 23A – ALL subparts must be satisfied: (1) Numerosity (2) Common Questions of Law and Fact (3) Typicality of Claims and Defenses (4) Adequate Representation

Rule 23(b) – Only one part only must be satisfied: 1(a) Incompatible Standards 1(b) Multiple Claims to a Limited Fund 2 Injunctive Relief 3 Commonality, Predominance, and Superiority

Reporters Notes to the 1966 Rule Changes Fraud may be unsuited: Representations made and reliance issues. “Mass accidents” are ordinarily not appropriate – differences in damages, liability and defenses. Mass tort cases are “so personal and important that plaintiff’s have a real interest in pursuing the case on their own”.

The Early Cases – 1970’s and 1980’s The Love Canal IUD Litigation Asbestos Agent Orange Class Certification Denied in all Cases

If Not Personal Injury, What Then? Civil rights lawsuits: Injunctions Negative value lawsuits: excessive credit card fees airline tickets CDs

The Tide Turned – Rule 23(c)(4) DES Asbestos Agent Orange (settlement class) Tobacco

Example Class Actions Class A Class B Nationwide Class Action Against McDowells Strict Liability, Negligence, Fraud Obesity/Addiction Compensatory and Punitive Damages Class B Statewide Class Action Against McDowells Consumer Fraud and Protection Acts Cost of Big n’ Healthy Reimbursement of All Amounts Paid for Big n’ Healthy

Where We Are (or Were) To obtain class certification, all of the Rule 23(a) and one of the Rule 23(b) requirements must be met. Claimants wanted all mass torts to be class actions; defendants wanted no mass tort to be a class action. The courts became increasingly frustrated with their inability to handle the volume of cases – thus became likely to certify classes, at least as to some common issues. (Rule 23(c)(4))

Classes in the New Millennium The trend was away from nationwide class actions. The trend was away from classes that depended on reliance or specific causation. The trend was toward statewide class actions using consumer protection statutes and the like.

The Class Action Fairness Act of 2005 Signed into law by President Bush on February 18, 2005. The Act applies to any civil action commenced on or after the date of enactment.

Major Implications of the Act Expands federal jurisdiction to cover most class actions – and even some “mass actions”. Changes removal practice and appellate procedures. Changes settlement procedures for all class actions. Regulates settlements involving coupons, out of pocket costs to class members, and geographic favoritism.

Federal Jurisdiction is Much More Expansive Under the New Act Only “minimal diversity” is required. The amount required is “aggregated claims exceed 5 million dollars”. With some exceptions, federal jurisdiction is mandatory. 1/3 – 2/3 Rule. Remand is required only when more than 2/3rds of the plaintiff’s are citizens of the original forum state. The Act tries to maintain the traditional American state/federal balance.

The Act Makes It Easier “To Remove The Case To Federal Court” An In-state defendant may remove the case to Federal Court. Any defendant may remove the case.

Appeals Appellate review appeal as of right within seven days after the entry of an order granting or denying a remand motion. Appeal shall be completed within 60 days. An affirmance automatically if no timely appellate judgment.

Settlements Notice required: government and class members. Court hearing required for final approval. Restrictions placed on “coupon settlements”. No “geographic favoritism”.