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The NLJ and Columbia Law School co-sponsored a roundtable on April 28 called “The Class Action Fairness Act of 2005: The Right Fix for a Broken System or ‘A Bad Idea Whose Time has Come.’ ” The moderator was Catherine Sharkey, and the panelists were John Beisner, Elizabeth Cabraser, Gregory Joseph and Samuel Issacharoff. Excerpts of the discussion appear below. Full Webcast. John Beisner: . . . I think if you look at the legislative history, there are really four issues that Congress was concerned about. The first was a concern about what Congress viewed as bad class action settlements. If you look in both the Senate and House reports on the legislation, look at the testimony in the hearings, a lot of it focused on a concern that there were many class action settlements that were occurring in which the counsel in the case ended up with most of the money. The consumers or the individual class members who were supposed to benefit from the lawsuit in the estimation of those committees were not receiving any real benefits from these cases . . . . A second concern, if you look in the legislative history, was the concept of magnet state courts, the fact that there were certain state courts that had become magnets for numerous nationwide class actions. They were the place to go if you wanted to file a class action of national significance. The concern about those magnet state courts was that from the defendants’ perspective many of them were the source of a denial of due process rights. There were a number of courts that engaged in what became known in the industry as drive-by class certifications. Those were class certifications where the defendant was not notified that the action had even been filed but the first word that they got that the action had been filed was an order in the lawsuit that a class had been certified, which for those of you who are familiar with class actions is the most significant event in the case . . . . A third concern was a subject of copy-cat class actions, the fact that when you have a major controversy, an issue, a product defect, whatever the case may be, that hits the newspapers, you not only get one class action filed but in many instances you get, I think, the records are up in the 150 to 200 category on the same subject. Now, I’m not talking about 200 different people filing their own lawsuit. I’m talking about several hundred people who are asserting the same claims on behalf of the same people against the same defendants. They are identical or virtually identical lawsuits. The problem with that is that when they’re filed in state courts as opposed to federal courts there is little mechanism out there-in fact, there is no mechanism out there-to coordinate those cases. So, from the defendants’ perspective it’s the movie Groundhog Dayover and over again. Every day you’re in a different state court doing the same thing, but you’re before a different judge. That is really the only difference . . . . The fourth concern, I think, that Congress had was a federalism concern. There were a number of class actions, nationwide class actions, certified by state courts in which the state court found a way to certify the class by, in essence, ignoring the laws of the states in which the class member is residing, so that if New York had passed a very aggressive consumer protection statute, for the convenience of certifying the class the court may say, no, I’m going to apply a single state’s law to the entire controversy and I’m going to choose a state law, often the state of the forum, where the court was making this decision, in order to facilitate class certification . . . .
The participants Catherine Sharkey (moderator) Columbia Law School professor, torts and products liability. John Beisner Partner, Washington office of O’Melveny & Myers, class action defense. Elizabeth Cabraser Partner, Lieff Cabraser Heimann & Bernstein, San Francisco, plaintiffs’ civil litigation. Gregory P. Joseph NLJ columnist; Gregory P. Joseph Law Offices, New York, complex financial and corporate litigation. Samuel Issacharoff Columbia Law School professor, civil procedure, specializing in complex litigation.

Elizabeth Cabraser: I’m going to try and talk about this without having a full-blown tantrum because on a number of levels I was and am opposed to this specific bill. I think for a long time there has been some level of consensus that it would be appropriate for there to be expanded federal jurisdiction over class actions, that it ought to be concurrent jurisdiction, but I also have to say that, in part because of the long history of this bill, many of the supposed abuses that led to certain of its provisions, if these ever existed, have long since been resolved in the state court systems . . . . It wasn’t really an anti-federal court animus that led most of us who opposed CAFA [the Class Action Fairness Act] to oppose it. It really was more of a concern with federalism and a concern with preserving the functional aspects of our dual federal-state court system in an arena in which much of the substantive law is state law. Most class actions don’t involve federal statutes or federal claims. They involve tort claims or consumer claims or state employment claims. These can have nationwide implications, but nonetheless the substantive law that needs to be made or developed is state law. It seemed to create a disconnect between procedure and substance to have the federal courts given now the primary role in most of the class actions that are filed in our courts. The other concern was a concern of resources and access to the courts. There are under 1,000 trial-level federal judges. There are approximately 700 federal district judges in the entire country. The Class Action Fairness Act doesn’t provide for any additional judgeships and it doesn’t provide for additional staffing or resources for federal judges who will now have an expanded workload. By contrast, there are many thousands of state court courtrooms and judges. There are 51 state appellate systems. Most of the states have very well developed class action jurisprudence, and so these are the courtrooms that are going to go dark on class actions as a large number of class actions is going to be funnelled through a much smaller federal system. In the mass tort arena, although the dual system causes challenges and problems, it also enabled federal and state judges to work together to coordinate their activities so that mass torts could be processed, including mass torts with a class action component. I think that we are going to have at least a short-term problem of federal courts having an almost exclusive role in many cases that were previously under the dual system. I think while we can’t quantify the change, the concern is that in the short term and perhaps the long term, we’re going to see reduced access to the courts, a reduced number of courts that have to do with the same amount of litigation, and the resulting increase in cost and delay. This may be something that those on the defendant side are willing, ready and able to absorb and to put up with. On the plaintiff side, any increase in cost and delay can be deadly. That is a major concern . . . because federal judges now know there is no state court safety valve for most of these cases. Federal judges that in the past could deny certification or simply not consider it, confident this would be worked out in the state court system, no longer have that fallback position. I think that the notion that there were class action abuses that cried out for the geographic or jurisdictional cure of transfer from state court to the federal court system will be exposed as basically baseless . . . . In the years since the class action bill was introduced, the federal rules of civil procedure themselves were changed to deal with many of the concerns about class action settlements and attorneys fees. So what happened out in the field through the rule-making process at the state level was that perceived abuses were addressed and the need for the class action legislation was reduced over time . . . . The final disconnect that does concern me on, if not a constitutional level, certainly a substantive level, is that the notion that class actions that involve multistate classes were of nationwide import and ought to be handled by the federal courts makes some sense. It makes some common sense but it ignores the fact that most of these cases are cases against corporate defendants, and the federal government does not regulate corporations, states do. Corporations are state-chartered entities. They are recognized as legal persons as long as they comply with the terms of their charters, and states and states’ rules, and states should have a continuing role in regulating corporations. That role is largely subsumed into the federal system now, for good or bad, I don’t know . . . . Gregory Joseph: Let me start by saying that I disagree with my friend Elizabeth to the extent that I do think there was a problem. Let me also say that this legislation could most charitably be described as something that addresses yesterday’s problems but creates tomorrow’s problems, and probably more accurately can be described as a train wreck . . . .There are a lot of issues here and a lot of problems that really highlight why things like this ought to go through the rule-making process even if minimal diversity were to be adopted, which is all the federal judiciary and the American Bar Association ever said; minimal diversity makes some sense. Nobody ever approved this legislation other than the Congress, not noted legal solons. But if you think about the jurisdictional issues, we all know the basics. The one-third, two-thirds test. If it’s under one-third, it’s going to remain in federal court. If it’s between one-third and two-thirds, there is some discretion. This is one-third of the class members being citizens of the state in which a case is first brought. If it’s more than two-thirds, then the case may remain in state court. It’s rather uncertain what that criterion is. But let’s talk about the count itself. You have to determine as of a point in time where the class members are citizens. A consumer class action, nobody knows where they are. People buy things at the office, they go across state lines, they have things shipped to a vacation home. Nobody knows where consumers are. So then it becomes a matter of class definition but when do you have to count? . . . Then you look at: What is the test? Now you’ve got between one-third and two-thirds of the plaintiffs are defined to be in the state . . . . We’re satisfied it’s going to be a large number that are here. If the primary defendants are citizens of this state, the primary defendants, then it has to be remanded to state court. There is no definition of what a primary defendant is in the legislation. That would seem to turn on what the claim is defined to be. If it is a tortious interference claim, the primary defendant would be the interferer. If it’s a breach of contract claim, broken merger case, for example, which a class may want to pursue, it would be the breacher. But if you put them together, then you’ve got a different class of primary defendants than if you just have one claim or the other. If it’s more than two-thirds and you have only significant defendants in the state, then it’s discretionary as to whether or not it’s going to remain because it depends on, first of all, determining that significant defendants, which are undefined, are in the state . . . . Is it enough-to be significant-that there is joint and several liability? Or if significant conduct has to have occurred in the state, where is significant conduct occurring when there are things that are electronically transmitted by wire? Is it where it’s received? Is it where it’s sent? Principal injuries have to be occurring in the state. What happens if it’s an injunctive relief claim or claim for equitable relief? Is it just where the plaintiffs are? Or is it where the relief is going to be effected? What is the difference between a primary and a significant defendant? Presumably, a primary defendant has to be a significant defendant in some respect, but is a significant defendant the same or is it some lesser subset of what a primary defendant is? What about principal injuries having to occur in the state? If it’s monetary relief, is that a majority of the damages or a plurality of the damages? It’s a great statute. We will be litigating this forever . . . . Of course, the way the class action bill is written it’s not unlikely you would end up with a class of plaintiffs, say, a New York class of plaintiffs against a primary defendant here, which would be in state court, and every other claim would end up going into federal court because they would only have significant defendants, and then one of the tests is: Has there been any other action in the prior three years?, which by definition there has been. So rather than simplifying things, we end up now in federal court with, say, six state class actions. Can those be consolidated? What happens to the doctrine in federal court that you don’t have a manageable class if you have to apply the law of more than one state? Is that now abolished by this statute, which has as one of its purposes to restore the intent of the framers of the Constitution by providing for federal court consideration of interstate cases of national importance? The beauty of this statute is there is no end to it . . . . Samuel Issacharoff: . . . There are going to be a lot of transitional issues . . . .This bill now has a fundamental redirection from the basic premise that we have had in the American court system for over 100 years-I would say since 1875-that federal courts are for federal law and state courts are for state law. We have now for the first time provided a mechanism for bringing significant bodies of state law into the federal court system. Think about it. Consumer cases involving products set out in the national marketplace or services that are brokered on a nationwide basis are now guaranteed to be brought into federal court. That means federal courts are going to be the initial arbiters of broad swaths of market conduct in our society. I think that [this may be] a good thing. I think that Justice Story had it basically right in Swift v. Tysonin thinking that a national market needs national law. This is a country that has one market with a constitutional commerce clause to keep its pathways open. Story argued that in order to develop its identity, in order to prevent the autarchic pressures that threatened us under the Articles of Confederation, we needed national law. Story almost had it right. Story couldn’t get around one problem, which was the two-courts problem. That is what gave rise to cases where you had state courts determining one code of conduct and federal courts determining another code of conduct. People didn’t know how to behave because they had two sovereigns. It was messy and it was unpredictable, and then something terrible happened in 1938. We had a terrible decision, Erie v. Tompkins. I know it’s supposed to be sacred law but it’s a dreadful decision. The idea that you are going to run a national market by these 50 little fiefdoms and they are going to say, “Oh no, the product has to have two red lights on it,” “No, it has to have three red lights,” and we are going to assign liability on that basis. Well, Eriewas the response to the fact that Swift v. Tysondidn’t work, and we had no way of getting around the two-court problem. Now we do. Now we’re going to bring consumer law into the federal courts, where I think it actually belongs. National markets require national law. Now we are going to have a court system capable of developing national law. One small problem. Congress created the procedural mechanism for this; it didn’t create the substantive law mechanism for this. So now we are in a new kind of difficulty because we’re going to have federal courts hearing broad areas of consumer law with Erieoddly still in place and federal courts being told, “You can do this, you can hear these cases, just don’t try to develop common law, federal common law. That’s a no-no.” But what are federal courts going to do? Let’s look forward 10 years from now. Let’s think about some new Internet defamation tort or something that the state courts haven’t seen yet. Let’s try to figure out where a federal class action court is going to look to figure out whether this is the kind of case that should be certified and under what standards of law. It’s going to look to what other federal courts have done with comparable cases in the past. Guess what? That is federal common law. This is Swift v. Tysonall over again. So I think that one of the great unintended consequences of this statute is that it picked up on a peculiar manifestation of state law governing national market conduct. It picked up on some of the excesses of class action practice, some real, some imagined, some apocryphal, but nonetheless all brought together in this wonderful legislative endeavor. In the process of doing so, I think that we have now created a mechanism for more systematic, more coherent, more reasonable national law applied to national market behavior and it took only 170 years since Swift v. Tysonto get there. But maybe we’re there. Catherine Sharkey: . . .John . . . you mentioned some opposition from attorneys general. Of course, the New York attorney general, . . . Elliot Spitzer, said that the act was misnamed, and was anything but fair to injured citizens . . . .Who does lose out under this act? Beisner: . . . There have been some class action settlements in state courts that have provided benefits, but . . . because so many of these class actions are focused in magnet state courts that really are not focusing on protecting consumer rights, I think that Attorney General Spitzer is absolutely wrong . . . .I don’t think there is much evidence out there that consumers were getting much benefit from class actions. I sit at home day in and day out with all these notices that come to me-I don’t know why I am the victim but I seem to get more than my fair share of these-if you spend the time to try and understand the settlements, invariably you don’t get anything in these settlements. I leave aside securities class actions, which I think are a different set of issues and which are not addressed by this bill. Those were addressed by separate legislation some years ago. But the idea that having these claims adjudicated by federal courts is somehow going to result in consumers receiving no benefits just makes no sense whatsoever, particularly when relative to what was going on in the current system where identifying benefits consumers was so difficult . . . . Joseph: I think we should clarify, John. When you say this bill doesn’t apply to the securities actions, you are not talking about the settlement provisions because those do apply to all class actions. Beisner: No. I’m talking about the jurisdictional provisions of the bill. I think discussing Attorney General Spitzer was talking about not that provision but the idea that cases would be moved to federal court. Joseph: Let me ask a question, because there are some companies that actually think coupon settlements can provide value. A company that actually has customers that they provide a service to year in, year out. I’ll say a phone company, but that is probably not a good example because they’re all going bankrupt anyway. But they actually want to provide it by way of a coupon settlement. There is no way anybody in their right mind is going to bother to go through federal court with a coupon settlement. Plaintiffs’ lawyers aren’t going to see enough money out of it. What do you think the prospects are? If you take an interweaving of this statute and the Rule 23 amendment, if you really want to do a coupon settlement, you’re going to have to go to state court. So what you’re going to want to do is not certify the class because if you don’t certify you can dismiss the federal case without getting court approval and go back to state court. On the other hand, as a defendant, normally you want to litigate certification because that is where you chop down the value of the settlement. How do you see that kind of tension working out? Beisner: Those who supported the bill understood the ramifications for coupon settlements. I don’t think the bill outlaws coupon settlements. It basically says, though, that when you have settlements like so many of the settlements that are out there, where the consumer is coming and saying, “I bought a defective widget” and the settlement is, “Well, we’ll give you a 5% discount on buying the next defective widget,” that is the settlement and the attorney walks off with $5 million. I mean, that is what was happening out there in many of these cases. If you are talking about a coupon where the consumer is being given the capacity to get a different product with the coupon or a different product that does not manifest the same issue as the earlier one, yes, I think that is a different type of settlement. But that is not banned by the legislation. Cabraser: You know, consumer groups didn’t support CAFA. They opposed CAFA. Maybe they were all misguided. But I don’t think in the consumer rights and consumer protection communities there was a sense that the state courts were doing things that were horribly wrong. In fact, the public interest groups were ready, willing and able to oppose those few class action settlements in federal or state court that they thought were not providing sufficient consumer benefits or were unfair or imperfect. For example, Public Citizen was a frequent objector to class action settlements. Trial Lawyers for Public Justice had a class action abuse process. They were very effective to the extent that when anyone ever asks for specifics about precisely which cases these were where these abusive coupons were being issued, no one was ever able to come up with any specific examples. I think there was one example that was used over and over again that was actually a bad class action settlement, the Bank of Bostoncase. Everybody knew that was a bad settlement. But one bad settlement does not justify upending a dual system of class action litigation. So a lot of this is urban legend. I think really what was up was that many, not all, but many financial and corporate defendants and many, not all, of their lawyers were profoundly uncomfortable litigating and defending their suits in state courts. The courthouses weren’t so grand. They were in out-of-the-way places. That was a concern. I think that suggests an arrogance and suggests perhaps misguided preference for large sophisticated federal jurisdictions in metropolitan centers as the sole temples of justice in this country. So I think on a lot of political levels we’ve got a battle between the elite and populists over what justice has to look like, how expensive the building has to be, and whether or not the people in the courtroom are speaking with an accent that sounds strange to your ears. Let’s face it. Corporate America was not sufficiently cosmopolitan to deal with the dual system. So we have a preference for the marble courthouses, and I think a lot of mythology about state courts’ class settlements was used to get there. Sharkey: . . . If we move from the coupon settlement abuses to the alleged abuses in forum shopping . . . we do have a little bit of empiricism. I found there is a study by John Beisnercoincidentally that showed the number of class actions filed in Madison County, Ill., steadily increased from 1998 until 2001. President Bush, when he was recently in Madison County, called it the No. 1 place in the country for trial lawyers to sue. It’s also been called plaintiffs’ paradise, although I couldn’t find the attribution for that one. Other hot spots have, of course, been identified in Alabama, Texas, Mississippi. Elizabeth, you mentioned in your opening remarks that most of these abuses have been corrected, but it seemed, or at least there were reports on the day that the bill was being signed, there was a sudden attempt to file as well in Madison County. I wonder if you could speak about that particular abuse of forum shopping. Cabraser: Sure. This is a very interesting phenomenon and I think it’s in large part a self-fulfilling prophecy. If you are told that there is a magnet jurisdiction that is paradise for class actions and you don’t know any better, you might decide that you have to file there. There was an increasing number of class actions filed in Madison County. What you don’t see, though, are statistics about an increasing number of certified classes that went to trial or to settlement in Madison County. There is not much evidence that anything horrible happened as a result of that rush. There have been very few places in the country that defendants have been able to identify as supposed magnet or target jurisdictions. What tends to happen is that when there is a gold rush or perceived gold rush to file there, the local court systems or the state system, whether it’s the supreme court or the legislature, deals with the problem. That happened in Alabama. That happened in Louisiana. Those two states now have the strictest class action statutes. It also has happened in Illinois, where the supreme court, as I mentioned, has promulgated a rule that mandates an appeal from a class certification ruling, so that in Illinois, whether it’s in Madison County or any other county, if a class is certified at the trial level it goes up on appeal . . . . But partly what is happening here is what’s happening in all areas of litigation, and that is that we have forum choices in this country. Everybody involved in litigation is trying to figure out where to best file their cases . . . .This notion of magnet jurisdictions has gotten a little out of hand. If you want to know where the judicial hellholes are, you can look at the American Tort Reform Association’s Web site and they list judicial hellholes, which means courts that are supposedly good for plaintiffs. Los Angeles, the whole place, is a judicial hellhole. The entire state of West Virginia is a judicial hellhole. Very conservative states or localities that you might not have thought were excellent for plaintiffs, and I certainly didn’t know about, turn out to be on the judicial hellhole list . . . . Beisner: Elizabeth is right that some jurisdictions that have had difficulties with class actions have addressed the issue. She’s absolutely right about Alabama . . . .Elizabeth’s point about Madison County, again, one of things that concerns me here is that I’m not sure there has been a reading of the legislative history because it is full of examples from Madison County alone of consumers raising great complaints about the settlements approved by that court. There is one, for example, I was noting picked out in the legislative history, and there are a number in here of class actions about faulty television sets. The settlement was that you could get a $50 rebate off the purchase of another several thousand- dollar television set from the same company. That was the settlement. But you had to have all kinds of receipts in order to get it, and the class counsel got $22 million in fees and costs, and it’s unclear that anything really got to the class. Twenty-five hundred class members protested the settlement, and the court went ahead and approved it anyway. That I will tell you from litigating in Madison County was an everyday event. This is not mythology . . . . Issacharoff: I think that the best rendition of the magnet-forum charge is: If you’re a defendant, you want to stay away from any county named after a president that’s by a body of water. And that takes in all the Madison, Jefferson, Jackson counties up and down the country . . . . I think one can rehash the debates about how significant was the problem, should Congress have gotten involved, and what were the bona fides of the legislation. I think that it’s important to note two things about this. First, to the extent that coupon settlements were the real problem, and I think that there are real problems with coupon settlements, Rule 23 has already been amended to get at that for the cases in the federal system. This statute does nothing for cases that are collusive cases from the beginning to the end, because the defendant and the plaintiff can agree to go forward in state court. And so it doesn’t necessarily cure that problem. But we’ll get at that problem sooner or later by making sure that attorneys get paid for the benefits they actually confer, and not for some artificially inflated number. I think that bringing this into federal court has another effect, which should be mentioned, which is that with the filing of a serious class action in the United States today-and it doesn’t matter whether it’s filed in federal or state court-if it’s widespread conduct, there will be tagalong cases. These tagalong cases are filed, oftentimes not in the magnet jurisdictions that you knew about beforehand, but in jurisdictions where an ambitious lawyer-oftentimes somebody that nobody’s ever heard of, but who happens to be a cousin of a local judge-files a lawsuit, and all of a sudden has a nationwide class certified or a statewide class certified-it doesn’t really matter. Because then there is a holdup problem; there is a raid on the potential settlement; there is the chance of being a partner in a reverse auction. There’s all these things that follow. So, intended or not, this bill, by creating a broader range of federal jurisdiction, and with it, federal injunctive powers, doeshave the effect of cleaning up some of the worst problems in class action practice. And it’s not just a problem on the defense side. This is something that has plagued plaintiffs’ lawyers, the quality plaintiff’s lawyers, who have a good case in federal court, or in state court, and can’t control the parasite wing of the bar. To put it neutrally. [Laughter.] Sharkey:OK, I’m going to switch over to Greg for a few minutes. I’m curious-it’s been said that this will lead to the demise of the state class action, that it will cease to exist . . . .[T]here’s been a recent academic study, for example, that’s shown that the majority of shareholder litigation there is, in fact, class action litigation. What do you say to the future of the state court class action [apart from securities actions]? Joseph: I think that it’s actually secured by this statute. I think that with every major kind of claim-putting aside securities, fiduciary duty, the kinds of things that are carved out-you have a way of defining a class, assuming that you’ve got the primary defendants in a major state, which is common. Remember, every corporation has two citizenship locales. So, if you’ve got a major corporation that is in California, New York, Texas, Florida, Pennsylvania-a major state-and you can define a class of plaintiffs that are just of that state-citizens of that state-and you’ve got the primary defendants in that state so that you can secure a vibrant class action, which leads to the anomaly that in every other state, where you’re only going to have significant defendants, and you’ll already have a primary class action in place, they’ll all end up in federal court. So, we will end up with a series of vibrant class actions in major states. Maybe you can take a little state next door, you know. I mean, you could do maybe New York and Vermont-I don’t know if Connecticut may be too big-but you want to make sure you’ve got two-thirds that are going to be in the forum state. And then you’ll have a series that are going to be in federal court, because they’ll all be removed. And then they’ll be multidistrict litigations, perhaps, or, if they’re not, there may be some attempt to consolidation. You may have competing national class actions simultaneous with this one state court action, and a series of separate state court actions, which are removed. And there’s a separate issue also, Cathy, that we should focus on. There are some states that defendants like to be in for class actions. New York is a good state court to be in if you’re a defense lawyer. Plaintiffs’ lawyers would rather be in federal court than in state court for certification. So, in some senses, this backfires, because it moves cases out of those states where plaintiffs would rather not be, into a federal forum, which may be more hospitable. Cabraser: . . . [T]he bill might have the effect of cleaning up the interjurisdictional races or disputes that sometimes complicate class actions. But in another sense, there’s still going to be a race between the federal and the state courts. And you may have the strange situation where the core class actions-what would formerly have been a nationwide class action is now a series of three or four core state class actions that are essentially not removable, or certainly remandable, and a federal court left with everything else, attempting to rely on its injunctive power to stop the state court class actions in their tracks. I think that’s a somewhat unusual circumstance, but I think that we’re going to face that problem. We’re going to face battling jurisdictions. We’re going to face: Is this really a federal, nationwide class action, or is this a series of statewide class actions? And there is still going to be competition. The only thing I can say about that is that perhaps the statute has emboldened and empowered the federal courts to be more assertive about using their all writs act injunctive powers to step in. Beisner: I think if you look at the legislative history on this, there was a recognition that you would have some activity going on in state courts. I mean, it’s in part because, under diversity jurisdiction, if someone chooses to sue somebody in their state of citizenship, there is no diversity, and you’re not going to be able to remove that case. And so, I think it was a recognition from the outset that there would be state course class actions out there. But bear in mind the two pictures that we’re talking about here. You have a situation now where in a major controversy you have class actions going on in a number of federal courts. As everyone has been correctly saying, those are drawn together before one MDL [multidistrict litigation] court. But that court is then, when it comes to class actions, faced with a challenge of often dealing with 20 or 30 state courts that have exactly the same case. And it’s not like two different people being injured by the same product in litigating their claim. We’re talking about people who are bidding to represent the same clients in different courts. As Elizabeth said, it truly is a race at that point. And, under this bill, I think Greg is exactly right, that there will be state court cases, but it’s going to be a manageable number. And if given controversy, you may have a federal MDL court that needs to coordinate with one or two state courts where these actions are brought . . . . But I think a lot of these issues are going to be resolved by the fact that the plaintiff is going to control the complaint. He’s going to be able to make some decisions about what the jurisdictional strategy he wants to employ, and will use it. Now there’ll be contests in some cases, but there are ways to plead a case in state court if you want to. It may not be as broad as it used to be, but there are ways to plead that. But on the other point you made about the future of class actions in state court, leaving aside ways in which people plead under the statute to keep cases in state court, one thing I’d note is: We took a look in a study that we published at six state court systems, where you can get reasonably complete data on the class actions that are filed, actually look at opinions from the case, get a sense of what those cases were about. Most of them [were] Northeastern states, that, for whatever reason, managed to get most of the trial court record onto LexisNexis. And we took a look at the class actions that had been filed over a five-year period in these six states, and did our best to assess: Were those removable to federal court? Where we couldn’t tell, we assumed that they would be removable. And the conclusion was that about 40% of the cases filed in state courts in those jurisdictions would be removable under the class action bill, but 60% would not be. Which means that, irrespective of the pleading practices that might occur under this statute with respect to interstate class actions that might be subject to removal, there will remain a very viable class action practice in those state courts. Issacharoff: Let me disagree on this with, I think, everybody on the panel. Because it is true that the bill leaves room for state court class actions. But let’s also be clear on what this bill also does, which is to expand the scope of initial federal court jurisdiction. And this is significant because of the unleashing of the all writs act power of the federal courts. When you have multistate class actions at present . . . personal jurisdiction over the out-of-state plaintiff does not attach until you’ve given them notice and the ability to opt out. In virtually all class action cases, that’s a long way down the road, because you’re not going to get to notice and the ability to opt out until a class has been certified, the Rule 23(f) appeals have run, you’ve come back [to the district court], you’ve litigated the form of notice, you’ve litigated who gets the notice, and then, somewhere down the line, you’re going to send [out the notice.] People usually get notices in the context of settlement, but [occasionally they do get them] for litigation purposes. During the interim period, there is a significant issue in federal courts as to how to protect themselves against raids from other courts-most notably from tagalong cases in the state courts. And the federal courts have been slowly expanding their self-proclaimed jurisdictional power by saying, “well, we are close to giving notice, and therefore, we need to protect our ability to give notice.” . . . They’ve been doing so for the best of reasons, which is [that] they’re trying to protect the real litigants and the real parties from raids from the state courts. What this bill does is it gives federal courts jurisdiction from the day [a class action is] filed. This means that, all of a sudden, the all writs act exception to the anti-injunction act, which is triggered by [a federal court] acting in preservation of its jurisdiction . . . kicks in immediately. So we don’t have these difficult questions of what the injunctive authority of the federal court is. So, regardless of the space that might be carved out on the substance of the bill, the effect of expanding the injunctive capacity of the courts may well lead federal courts, for perfectly defensible, well-intentioned reasons, to begin the process of atrophying the state courts, because there’s just no room for them. Joseph: Well, Sam, that raises the question of whether or not one can protect one’s jurisdiction over a class action over which one mandatorily must decline to assert it. Because, where two-thirds or more of the class and the primary defendants are in the state, a New York state class action against IBM . . . is one over which the federal court mustdecline jurisdiction if it’s a class of New York state citizens. Now, for the rest of the country, they may be able to pursue it. I mean, I assume IBM is probably a Delaware company; that’s going to be the hard issue in those kinds of cases. Issacharoff: But here’s what I envision, which is: OK, that case goes back to state court. But in the meantime, the 15 other states where you do meet the CAFA requirement, are MDL’d somewhere, waiting for assignment some place. That judge enjoins the New York state action because, perhaps, it’s better developed by the high-quality lawyers who are in the MDL practice. There’s a lot of federal-state tension here that we’re going to have to work out, and what I do believe is that this is a significant enhancement of the injunctive power of federal courts. Beisner: But Sam, just to make sure I understand, that tension is there under the current system, right? I mean, I understand the balance is different in terms of what the federal court may be able to do. But that’s a tension that’s there now. Issacharoff: That tension is there now, and I’m not condemning this. I’m saying, this is the reality. We have now given federal courts a lot more injunctive powers that, before, they were trying to figure out how to get, and had only been sort of playing at the margins. Now, it’s from the get-go. You can enjoin anything. It’s great to be a federal judge. Sharkey: Sam, I have a couple of questions related for you. First, though, the Senate minority leader, Harry Reid [D-Nev.], said that CAFA “turns federalism upside down by preventing state courts from hearing state law claims.” Now I understand, I think, fully-he just doesn’t understand that we need to overrule Erie, and then, we have no problems [Laughter] with federalism . . . .So what I really want to ask you about, actually, are two things. First, what do you predict in terms of how federal courts will handle these cases? In particular, Elizabeth mentioned the fact that California, for example, has two times as many trial judges as the entire federal court system. So one question is: Just how federal courts are going to be able to handle this. The second is: As a practical matter, who’s really going to benefit from removal to the federal courts? Greg kind of mentioned, or he alluded, at least, to the possibility that in New York, defendants might prefer to be in [state] court . . . .So, plaintiffs would prefer to be up in federal court, and I’ve often heard it actually asserted that class certification is somewhat bi-coastal. So for example, the 2d [U.S. Circuit Court of Appeals] and the 9th Circuit might be hospitable toward granting certification, whereas the 7th Circuit [might not]. Maybe you’ll come up with a water metaphor-that if you’re by the ocean, you’re more likely to be [Laughter] sympathetic toward class certification. But in any event, what’s your sense about who’s really going to win or lose on this certification question in federal court? Issacharoff: Well, I think there’s no question that the bill realigns some major federalism concerns . . . .But I think that basically, the federal judges were none too thrilled with this bill, and largely for docket reasons. I mean, there are no additional judgeships created, they don’t get more clerks, they don’t get more special masters out of this, and they’re going to have to figure out a way of handling this. I think the question of who’s going to win and who’s going to lose is a tough one, because, in the short run, this is clearly a big win for defendants. This is a major protection against the perceived Madison County threat. We can argue how real it was. But it’s a major win; it’s an ability to control the forum, it’s an expansion of removal jurisdiction, it’s the ability to secure more protection through injunctions. And I think it’s going to change class action practice. Now, when you change things, different players emerge. Congress thought that there was a real problem with [plaintiffs' securities class action firm] Milberg Weiss [Bershad Hynes & Lerach], and decided to pass legislation directed at Milberg Weiss. It was called the PSLRA-the [Private] Security Litigation Reform Act. It had the effect of concentrating the bar, providing different mechanisms for getting into federal court, providing for different kinds of institutional arrangements. And, as a result, Milberg Weiss’ share of the securities docket went from about 40% to 65%. In fact, it grew so large, they had to split it in two, and now have the twolargest plaintiff securities firms. I think that this bill is going to destroy class action practice for a lot of the small local practitioners whose expertise was knowledge of the local courts. And this will have, I believe, a comparable effect of concentrating class action practice in the experienced federal litigators who know, and are comfortable working in, MDL settings, who know and are comfortable working on largely paper records in front of sophisticated federal judges. And so, I think that it’s going to realign the bar. The third effect I think it’s going to have is it’s going to put a different kind of pressure on federal judges. Federal judges, up until now, have basically looked at state law-based class actions, and said, “What are they doing here?” And there was a tremendous hurdle for plaintiffs’ lawyers to overcome in these cases, because it didn’t seem like those cases really belonged there. You’ve got some Illinois claimants; you’ve got some California claimants. Go back to Illinois, go back to California, go back where you came from, to the courts that are designed to handle those. Well, now Congress has stepped in and said, “We want youto handle these cases.” And the expectation of the drafters and the promulgators of this bill, I think, is that those [federal] courts will bounce those cases, as they have in the past. But there’s going to be some sympathetic cases. You’re going to get some of the consumer equivalent of the WorldCom- and Enron-type meltdowns. It’s not just going to be the $50 toward the purchase of a new $2,000 television set [type of settlement]. And, all of a sudden, federal judges who sit there, day after day, hearing mandatory criminal sentences, hearing immigration cases, hearing the worst dreck imaginable, wondering, “This was supposed to be a great appointment. What happened?” Now all of a sudden, they get lawyers like the three of you coming into their court, and they’re going to say, “You want me to kick this out in favor of more Social Security appeals?! You’ve gotta be kidding!” Beisner: On the workload issue, there’s no question that the bill will result in additional cases coming into the federal court system. I don’t think I share the sense that it will be the tidal wave that’s being suggested here. I mean, given the fact that so many cases have been removed to federal court-it’s just sort of a standard practice that you try under the pre-CAFA system-federal judges were seeing enormous numbers of [Laughs] class actions anyway. They just didn’t keep them. But I think the model is really something like this: If you look at major controversies that are out there-the controversies that result in MDL proceedings or multiple class actions-the pattern typically is that a couple of those cases-if there are multiple cases-end up staying in federal court. So there is some federal judge having to deal with the controversy. And then you have five or six-or, in some cases, 20 or 30-state court judges out there, dealing with the same class action. And so, I think under this system, what happens now is that those 20 or 30 cases likely will be in federal court, and that one federal judge who had one or two class actions will now have a group of class actions, which are probably going to be largely overlapping, and [will] collapse into something that’s more in the one- or two-case category, such that the workload differential, I don’t think, is nearly as great as one might think. In short, the MDL process, which is available on the federal side, and is not available on the state court side, is a device of great efficiency that I think will address a lot of those workload problems here. Does it mean there will be no additional workload? No, I would never say that. But I don’t think it’s the tidal wave that people may be thinking about. On the point about who benefits here-I don’t think that the securities litigation act analogy fully works here . . . . [U]nder CAFA, the criteria for selecting lead counsel in those cases [are] basically dictated by the recently amended Rule 23, which has a number of factors you look at that have nothing to do with shareholder or size of the entity that you represented as a name plaintiff, or anything like that. And so, I think that will result in not the sorts of concentration that occurred on the securities side . . . . But if you’re talking about the sorts of class actions outside that arena, somebody has got to link up with a client, spot a problem, pursue it, develop it-and that’s one of the things that Rule 23 says the court’s supposed to take a look at in the . . . lead counsel. So, Sam, at some level, I agree with you. Yes, there will be some concentration, [but] . . . I don’t think it’ll have the dramatic effect that I think you quite correctly say resulted from the securities legislation.

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