© 2005 Dechert LLP

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

2

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.

3

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

4

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

5

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”.

6

The Early Cases – 1970’s and 1980’s

• The Love Canal

• IUD Litigation

• Asbestos

• Agent Orange

• Class Certification Denied in all Cases

7

If Not Personal Injury, What Then?

• Civil rights lawsuits: Injunctions

• Negative value lawsuits:

– excessive credit card fees

– airline tickets

– CDs

8

The Tide Turned – Rule 23(c)(4)

• DES

• Asbestos

• Agent Orange (settlement class)

• Tobacco

9

Example Class Actions

Class A

• 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

10

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))

11

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.

12

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.

13

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.

14

Federal Jurisdiction is Much More Expansive Under the New Act

• 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.

15

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.

16

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.

17

Settlements

• Notice required: government and class members.

• Court hearing required for final approval.

• Restrictions placed on “coupon settlements”.

• No “geographic favoritism”.