The following series of blog posts were excerpted from the class actions chapter of Successful Partnering Between Inside and Outside Counsel, a multi-volume treatise that is a joint project of West and the Association of Corporate Counsel. The segments reprinted here, with slight modifications to make them better suited to this format, were written by Carlton Fields shareholders Gary Sasso and Matt Allen, and David Leitch, general counsel of Ford Motor Company.
This continues our series of blog posts on effective partnering between inside and outside counsel to defend against class action lawsuits. Here we discuss strategies in class action engagement, focusing on elements that defeat predominance.
The company may have opportunities to show that individual issues predominate even in cases that appear superficially to treat liability as a perfunctory classwide issue. For example, Carlton Fields has opposed class certification in actions where named representatives have asserted that defendants violated plaintiffs’ statutory rights protecting the privacy of agency records that class counsel characterized as a matter of strict liability, meaning that the statute imposed a specific statutory penalty automatically for each act of noncompliance with the statute. The defendants successfully contended, however, that in order to get a recovery under the statute, plaintiffs had to show that they suffered an actual injury. Actual injury often cannot be proven on a classwide basis by simply using the evidence that the named representatives will adduce in support of their personal claims. Whether any person suffered an actual injury necessarily involves considerations of facts and circumstances peculiar to that individual, and is not usually susceptible to classwide proof. By the same token, it would deny due process to the company in such a case to deny it the right to have a trial against each class member to explore whether, how, or to what extent he or she ostensibly was injured.
In this connection, the United States Supreme Court has recently made clear that plaintiffs in a securities class action must show they suffered actual economic losses that are actually caused by the defendants’ alleged misrepresentations and that this requirement is not satisfied by the presumption of reliance arising where defendants allegedly commit a fraud against the whole market for the securities. This raises the specter of individual issues in such litigation.
In some cases, not only are the factual issues not susceptible to being shown through proof common to the class, but the substantive legal standards that apply also may be individualized. For example, in a products liability context involving a prescription drug, questions of legal (i.e., “proximate”) causation will be highly individualized and turn on medical testimony specific to each particular patient. Class counsel cannot prove legal causation on a common, classwide basis even though common proof may be available to show that the drug is generally capable of causing injury (i.e., general causation). Additionally, with regard to nationwide products liability class actions, if the applicable legal doctrines differ from state to state, then class certification is likely improper because the putative class members are not governed by the same legal standards.
To illustrate further, Ford has defended consumer fraud class actions by contending successfully that plaintiffs must prove actual reliance on the alleged misrepresentation. In one such case, a federal district court refused to certify a class centered on state deceptive trade practices legislation because the required proof involved “[i]ndividual issues of causation, like issues of reliance.” In so holding, the court recognized that “[d]enial of class certification is appropriate where individual issues of causation predominate.” Again, reliance typically must be proven plaintiff-by-plaintiff and cannot be demonstrated on a classwide basis through common proof. And if the class reaches across many states with differing substantive laws (e.g., regarding reliance or causation), variations in those laws will provide still additional grounds for arguing that individual legal questions predominate over common questions and class treatment is inappropriate.
Our next post will discuss the complimentary roles of inside and outside counsel.