BABY STEPS OR
SEISMIC SHIFTS?
RECENT DEVELOPMENTS IN
TOXIC TORT LAW
CROWELL & MORING LLP
WASHINGTON, DC
THURSDAY, JUNE 9, 2011
Introduction & Welcome
2
Scott Winkelman
Scott Winkleman is a partner in Crowell & Moring LLP’s Washington, DC office,
where he is chair of the firm’s Torts Practice. He litigates class actions, multidistrict
proceedings, and other complex litigation nationwide in products and commercial
matters. His tort practice involves representations in a range of industry sectors,
including automotive, computer, aviation, food, alcohol, chemical, rail, and information
technology. Mr. Winkelman also co-chairs the firm's Product Risk Management
Practice, representing clients in proceedings before the National Highway Traffic
Safety Administration, the Consumer Product Safety Commission and related
regulatory bodies. Mr. Winkelman is a Six Sigma “black belt” and advises clients on
process improvements in the practice of law. Mr. Winkelman is co-author of “Recent
Developments in Toxic Torts and Environmental Law” to be published later this year
in the Tort Trial & Insurance Practice Law Journal.
3
Beth M. Kramer
Beth M. Kramer is a partner in Crowell & Moring LLP’s Torts Group. Her
environmental and toxic tort practice has developed over the past decade through her
defense of companies facing personal injury and property damage claims resulting
from alleged environmental and occupational exposures as well as through her
litigation of environmental insurance coverage claims. For the past several years she
has been defending neighborhood tort claims arising from groundwater contamination
at the site of a former beryllium machining plant in Florida as well as personal injury
and medical monitoring claims arising from alleged exposure to airborne beryllium
from the same site. Other environmental tort matters she has defended recently
include personal injury and property damage claims filed by neighbors of a former
wood-treating facility in Florida, medical monitoring claims brought by persons
alleging exposure to an air plume emanating from a train derailment fire in Ohio, and
a medical monitoring case brought under the Clean Air Act. Ms. Kramer is a Vicechair of the TIPS Toxic Torts & Environmental Law Committee and co-author of
“Recent Developments in Toxic Torts and Environmental Law” published in the
Winter 2010 Tort Trial & Insurance Practice Law Journal. She is co-author of an
article of the same title to be published later this year in the Tort Trial & Insurance
Practice Law Journal.
4
Gloria Martinez Trattles
Gloria Martinez Trattles is a counsel in Crowell & Moring LLP’s Torts Group. For
more than a decade, her torts practice has concentrated on representing companies
with respect to asbestos-related litigation. Her asbestos work has included
representation of companies facing premises liability and product liability claims and
insurance companies handling defense and indemnity of asbestos claims. She also
serves as national coordinating counsel for a multinational corporation in connection
with the company's national and international asbestos litigation docket. Ms.
Martinez Trattles is a co-author of “Recent Developments in Toxic Torts and
Environmental Law” published in the Winter 2010 Tort Trial & Insurance Practice Law
Journal. She is co-author of an article of the same title to be published later this year
in the Tort Trial & Insurance Practice Law Journal.
5
Jennifer E. Schlosser
Jennifer E. Schlosser is a counsel in Crowell & Moring LLP’s Washington, DC office,
where she practices in the Torts and Product Risk Management groups. Ms.
Schlosser represents clients involved in complex commercial and tort litigation in a
broad range of industries, including information technology, transportation, chemicals,
and consumer products. Ms. Schlosser counsels clients on issues involving
preserving privileged communications, negotiating contractual disputes, Consumer
Product Safety Commission (CPSC) compliance, and early litigation risk assessment.
Her litigation experiences include tort class actions, fraud and RICO litigation,
international arbitration, and defending personal injury cases alleging work-place
exposure to chemicals. Ms. Schlosser is co-author of “Recent Developments in Toxic
Torts and Environmental Law” to be published later this year in the Tort Trial &
Insurance Practice Law Journal.
6
AGENDA
I. Scientific Evidence
II. Medical Monitoring
III. Asbestos Household Exposure Cases and
Duty to Warn of Third Party’s Product
IV. Experts and Arbitration at the Class
Certification Stage
V. Class Action Fairness Act
7
Use and Admissibility of
Scientific Evidence
Recent Developments
Daubert: Developments
» 2011 Wisconsin Act 2
– Wisconsin, via statute, adopted a standard similar to
Daubert.
– Wisconsin Supreme Court had previously rejected Daubert
(and Frye).
– Wisconsin courts had been applying their own relevancy
standard for expert testimony:
• The testimony is relevant;
• The witness is qualified based on his or her
“specialized knowledge;” and
• The testimony will help the trier of fact in determining
an issue of fact.
» Act also added punitive damage cap
9
Daubert: Developments
» Arizona Rev. Stat. 12-2203
– By legislation, Arizona adopted a modified Daubert
standard of admissibility.
– Courts shall consider whether the expert’s testimony
or technique can be tested and has been subject to
peer review; the potential rate of error of the expert
opinion; and whether the opinion is generally
accepted in the field.
– Arizona Supreme Court had not adopted Daubert,
and instead continued to adhere to the Frye standard.
10
Daubert: Developments
BUT WAIT . . .
» Lear v. Fields, 245 P.3d 911 (Ariz. Ct. App.
2011)
– The standard on admissibility of expert evidence is a
procedural rule and within the Arizona Supreme
Court’s jurisdiction.
– § 12-2203 invalid on separation of powers grounds.
» The Arizona Supreme Court has yet to rule.
11
Daubert: Developments
Tamraz v. Lincoln Electric Co.,
620 F.3d 665 (6th Cir. 2010)
» 6th Circuit overturned a $20.5 million jury verdict
upon concluding that the testimony of a medical
expert for plaintiff should have been excluded.
» The expert had testified that manganese
exposure caused plaintiff’s Parkinson’s disease.
12
Daubert: Developments
» 6th Circuit: expert’s differential diagnosis
“suffers from a lack of foundation both for why
manganese could cause Parkinson's Disease
and why manganism caused this case of
Parkinson's Disease.”
– Too many “speculative jumps” in the “chain of
causation”
– Expert’s “efforts to ‘rule in’ manganese exposure as a
possible cause or to ‘rule out’ other possible causes
turned on speculation, not a valid methodology.”
» Remanded
13
Daubert: Developments
Pluck v. BP Oil Pipeline, No. 09-4572,
2011 WL 1794293 (6th Cir. May 12, 2011)
» Toxic tort case alleging benzene exposure
» Plaintiff appealed district court’s exclusion of his
specific-causation expert, who had opined that
the benzene caused plaintiff’s Non-Hodgkin's
lymphoma (“NHL”).
14
Daubert: Developments
» 6th Circuit: Daubert requires an inquiry to
determine whether the testimony is reliable, and
“whether the reasoning or methodology
underlying the testimony is scientifically valid.”
» Differential diagnosis is an “appropriate method”
for determining causation for an “individual
incidence of disease.”
– Differential diagnosis: “‘a standard scientific technique
of identifying the cause of a medical problem by
eliminating the likely causes until the most probable
one is isolated.’”
15
Daubert: Developments
» 6th Circuit rejected expert testimony because:
– Expert could not “reliably ‘rule in’ benzene as the
cause of [Plaintiff's] NHL”
• Did not determine or know level of benzene
exposure, or
• Whether exposure levels exceeded EPA safety
regulations
– Not enough to show existence of toxin; must offer
“proof that level of exposure could cause . . .
symptoms.”
– Failed to “rule out” alternative causes for the NHL
(differential diagnosis requirement)
16
Scientific Evidence
Lone Pine
Lone Pine
» Derives from Lore v. Lone Pine Corp., a 1986
New Jersey Superior Court case
» In Lore, state court required that plaintiffs
provide (1) evidence of exposure, and (2)
medical expert evidence showing that the toxins
caused the injury at the outset of the case.
– Plaintiffs unable to provide information
– Court dismissed
» Used as case management tool to require a
prima facie showing of injury, causation, and/or
damages.
18
Lone Pine
Avila v. Willits Environmental Remediation Trust,
633 F.3d 828 (9th Cir. 2011)
» Trial court required – as part of its case
management order – that plaintiffs who never
lived in the town where the defendant operated,
or who lived there after the machine shop
ceased operations make a prima facie showing
of exposure and causation.
19
Lone Pine
» Ninth Circuit finds Lone Pine order permissible:
– District courts have “broad discretion to manage
discovery and to control the course of litigation.”
– Rule 16(c)(2)(L): courts can adopt “‘special
procedures for managing potentially difficult or
protracted actions that may involve complex issues,
multiple parties, difficult legal questions, or unusual
proof problems.’”
20
Lone Pine
» Upheld the use of this Lone Pine order
– Order narrowly tailored
– Case raised difficult issues of proof on exposure and
causation
– Case had been pending for 5 years
» Upheld district court’s dismissal of plaintiffs who
did not complete Lone Pine requirements by
extended deadline.
21
Medical Monitoring
Typical Elements of
Medical Monitoring
(1)
(2)
(3)
(4)
exposure greater than normal background levels
to a proven hazardous substance
caused by defendant's tortious conduct
as a proximate result of the exposure, plaintiff has a
significantly increased risk of contracting a serious latent
disease
(5) a monitoring procedure exists that makes early detection
of disease possible
(6) the prescribed monitoring regime is different from that
normally recommended absent exposure
(7) the prescribed monitoring regime is reasonably necessary
according to contemporary scientific principles
23
Injury or No injury?
» Jurisdictions generally permitting medical monitoring
claims absent injury
– AZ, CA, CO, DC, FL, GM, MA, MO, NJ, OH, PA, UT, VT, WV
» Jurisdictions not permitting medical monitoring claims
absent injury
– Federal common law, AL, AR, CT, GA, KS, KY, LA, MI, MN, MS,
NE, NV, NC, ND, OK, OR, RI, SC, TN, TX, VA, VI, WA
» Jurisdictions with no apparent decisions or unclear/
divided decisions
– AK, DE, HI, ID, IA, IL, IN, ME, MD, MT, NH, NM, NY, PR, SD,
WI, WY
24
The Realpolitik of Medical Monitoring
» Lawsuits without injury
» Monitoring happens all the time – but should it
be court-ordered?
» A task better suited to legislatures?
» Balancing benefits and risks
» Scaring the community
» Court supervision -- for decades
» The exercise of equitable discretion
25
A Claim v. A Form of Relief?
» Some jurisdictions recognize medical monitoring
as a stand-alone claim
– Bower v. Westinghouse Elec. Corp., 522 S.E.2d 424, 431 (1999)
(“We . . . conclude that a cause of action exists under West
Virginia law for the recovery of medical monitoring costs . . .)
– Redland Soccer Club, Inc. v. Dep't of the Army & Dept. of Def. of
the U.S., 696 A.2d 137 (1997) (Pennsylvania law) (same)
– Hansen v. Mountain Fuel Supply Co., 858 P.2d 970 (Utah 1993)
(Utah law) (same)
26
A Claim v. A Form of Relief?
» Others recognize medical monitoring as form of
damages available upon proof of negligence or
other tort
– Potter v. Firestone Tire & Rubber Co., 863 P.2d 795, 823 (Cal.
1993) (“Recognition that a defendant's conduct has created the
need for future medical monitoring does not create a new tort. It
is simply a compensable item of damage when liability is
established under traditional tort theories of recovery.”)
– Ayers v. Jackson Twp., 525 A.2d 287, 312 (N.J. 1987) (“[W]e
hold that the cost of medical surveillance is a compensable item
of damages . . . .”)
– Meyer ex rel. Coplin v. Fluor Corp., 220 S.W.3d 712 (Mo. 2007)
(a form of damages)
27
A Claim: Massachusetts
» Medical Monitoring as Stand-Alone Claim
– Donovan v. Philip Morris USA, Inc., 914 N.E.2d 891
(Mass. 2009)
• Massachusetts, for first time, recognizes claim of
medical monitoring
– “When competent medical testimony establishes that
medical monitoring is necessary to detect the potential
onset of a serious illness or disease due to physiological
changes indicating a substantial increase in risk of harm
from exposure to a known hazardous substance, the
element of injury and damage will have been satisfied
and the cost of that monitoring is recoverable in tort.”
» Id. at 901.
28
A Claim: New York (?)
» Caronia v. Philip Morris USA, Inc., No. 06-CV224, 2011 WL 338425 (E.D.N.Y. Jan. 13, 2011)
– EDNY predicts New York would recognize standalone medical monitoring claim
• “The Court is persuaded that the New York Court
of Appeals, given the opportunity, would likely
permit asymptomatic plaintiffs to recover the sort of
medical monitoring that the plaintiffs are requesting
here: a defendant-created and maintained
comprehensive monitoring program.”
– Id. at *7.
29
Medical Monitoring & Punitives
» Perrine v. E.I. du Pont de Nemours and Co., 694
S.E.2d 815 (W. Va. 2010)
– Punitive damages not available in West Virginia in
connection with medical monitoring claim
• “‘Because the respondents have not asserted
personal injury claims, as they have not suffered
any actual, present physical injuries from their
alleged exposure to petitioners' products, punitive
damages simply should not be available . . . .’”
» Id. at 880.
30
Medical Monitoring & Punitives
» One other jurisdiction, E.D. Pa, has addressed
the issue specifically
– Hess v. A.I. DuPont Hospital for Children, No. 080229, 2009 WL 595602, at *13 (E.D. Pa. Mar. 5,
2009) (punitive damages unavailable for medical
monitoring claim); Guinan v. A.I. duPont Hospital for
Children, 579 F. Supp. 2d 517, 540 n.10 (E.D. Pa.
2009) (same)
• But see Carlough v. Amchem Products, Inc., 834
F. Supp. 1437, 1460 (E.D. Pa. 1993) (suggesting
that punitive damages are available for medical
monitoring claims).
31
As Equitable Relief?
» Xavier v. Philip Morris USA, Inc., No. C 1002067, 2010 WL 3956860 (N.D. Cal. Oct. 8,
2010)
– ND CA refused to allow stand-alone medical
monitoring claim where purely equitable relief was
sought
• Plaintiffs tried to distinguish California Supreme
Court decisions denying stand-alone claims by
arguing plaintiffs in those cases sought only money
for monitoring
32
As Equitable Relief?
» The court said this misconstrued applicable law
– “Plaintiffs ask too much. With Potter, California joined
the minority of jurisdictions endorsing recovery in tort
without present physical injury. . . . True, the Court did
not rule out equitable medical monitoring as a standalone claim. But there is no indication that it was the
legal nature of the lawsuit in Potter that prevented the
Court from characterizing its decision as one creating
a new tort.”
• Id. at *3
33
How Much Risk Is “Significant”?
» Element 4: “as a proximate result of the exposure,
plaintiff has a significantly increased risk of contracting a
serious latent disease”
» [A] plaintiff must not only show exposure, but must prove
that he was exposed beyond what would normally be
encountered by a person in everyday life, so that the
plaintiff's risk of being injured from the exposure is
greater, in some way, than the normal risks all of us
encounter in our everyday lives.
• Redland Soccer Club, Inc. v. Dep't of Army of U.S., 55 F.3d
827, 846 (3d Cir. 1995)
34
How Much “Risk” Is “Significant”
» Is 1-in-1 million “significant”?
35
How Much Risk Is “Significant”?
» Thus, even assuming there were a million members in
this class who had been exposed to this level of dioxin
over their entire lives, and assuming causation,
presumably only one of them would develop cancer
because of the exposure. Plaintiffs seek to commence
medical monitoring based on this one in a million risk.
While Plaintiffs, without citing any authority, contend that
whether the risk is significant is a question for the jury,
courts have found risks higher than in the instant matter
to be insignificant as a matter of law.
– Mann v. CSX Transp., Inc., No 1:07-CV-3512, 2009
WL 3766056 (N.D. Ohio Nov. 10, 2009)
36
How Much Risk Is “Significant”?
» Other courts reach similar conclusions
– O’Neal v. Dep’t of the Army, 852 F. Supp. 327, 336
(M.D. Pa. 1994) (finding 0.3% increased risk
insignificant)
– Pohl v. NGK Metals Corp., No. 733, 2003 WL
24207633 (Pa. Com. Pl. July 9, 2003) (rejecting risk
that 1% of population of 200,000 might develop future
disease)
37
Asbestos
Household Exposure Cases and
Duty to Warn of Third Party’s
Product
Asbestos – Household Exposure
Premises Owner’s or Employer’s Duty in
Household Exposure Cases
Does a premises owner have a duty to warn its
contractor’s employees about the dangers of
household exposure to asbestos?
Does an employer owe a similar duty to warn its
own employees of hazards posed to household
members?
39
Asbestos – Household Exposure
– High courts of 7 states have ruled
• Delaware, Georgia, Iowa, Michigan, New Jersey,
New York, Tennessee.
– The majority (Delaware, Georgia, Iowa, Michigan and
New York) held no duty.
– Tennessee held an employer had a duty to prevent
household contamination by its employees.
– New Jersey held a duty runs from premises owner to
family members of contractor employees.
40
Asbestos – Household Exposure
State Legislation
Ohio and Kansas have enacted legislation that appears
to bar all household exposure claims against premises
owners in asbestos cases. Ohio Rev. Code
2307.941(A)(1) (2004); Kan. Stat. Ann. 60-4905(a)
(2006).
In 2010, the Ohio Supreme Court confirmed that its
legislation completely bars all household exposure
claims against a premises owner, regardless of the
theory of liability. Boley v. Goodyear Tire & Rubber Co.,
929 N.E.2d 448 (Ohio 2010).
41
Asbestos – Household Exposure
Courts tend to divide into two camps:
 Camp 1: Foreseeability of harm as dominant
consideration
 Camp 2: Relationship between premises
owner/employer and plaintiff is dominant
 Concerned by possibility of limitless liability
42
Asbestos – Household Exposure
DELAWARE
Delaware Supreme Court is revisiting the question in Price v. E. I.
du Pont de Nemours & Co.
The court is to decide whether such a claim stated as a claim of
misfeasance (affirmative misconduct), as opposed to nonfeasance,
is viable.
This question was left open by the court’s prior decision in Riedel v.
ICI Americas, Inc., 968 A.2d 17 (Del. 2009), in which the court found
that an employer did not owe a duty to warn of household exposure
dangers when the claim was stated as one of nonfeasance – that is,
a claim grounded on the employer’s failure to act.
43
Asbestos – Household Exposure
ILLINOIS
The Illinois Supreme Court is addressing the issue for the first time
in Simpkins v. CSX Corp.
The court is reviewing a 2010 decision of the Fifth District appellate
court that held that an employer did owe a duty. Simpkins v. CSX
Corp., 929 N.E.2d 1257 (Ill. App. 2010).
Simpkins is in conflict with the decision of the Second District
appellate court in Nelson v. Aurora Equipment Co., 909 N.E.2d 931
(Ill. App. 2009), which held that the employer, lacking a “special
relationship” with its employee’s wife, owed no duty. The Illinois
Supreme Court denied review of Nelson.
44
Asbestos – Manufacturer Duty to Warn
Does a manufacturer of equipment (e.g., a valve
or pump) have a duty to warn of hazards posed
by asbestos-containing products manufactured
by another party that might be used in
conjunction with or as a component of the
manufacturer’s product?
45
Asbestos – Manufacturer Duty to Warn
Washington State Supreme Court
Braaten v. Saberhagen Holdings, 198 P.3d 493 (Wash. 2008)
Simonetta v. Viad Corp., 197 P.3d 127 (Wash. 2008)
In a pair of cases, the Washington court holds there is no duty,
under either negligence or strict liability principles, where the
manufacturer did not “manufacture, sell, or supply the asbestos[containing product]” used by the purchaser in conjunction with the
manufacturer’s product.
46
Asbestos – Manufacturer Duty to Warn
Issue has been addressed by a handful of trial and intermediate
appellate courts in asbestos cases around the country, including
courts in Delaware (applying Idaho law), New York, Ohio,
Pennsylvania, and the Texas MDL court.
Majority have held that there is no duty to warn where . . .
 The manufacturer did not place the asbestos-containing product in the stream of
commerce in any way
 The manufacturer did not specify or require that asbestos-containing
components be used with its product
 The manufacturer’s product did not need an asbestos-containing component in
order to function for its “intended purpose” (i.e., other non-hazardous products
could have been used)
 The manufacturer did not know that components used in conjunction with its own
product would “necessarily be made from asbestos”
47
Asbestos – Manufacturer Duty to Warn
California Supreme Court to Address the Issue
Four cases are currently on appeal before the court:
Merrill v. Leslie Controls, Inc., 101 Cal. Rptr. 3d 614 (Ct. App. 2009)
O’Neil v. Crane Co., 99 Cal. Rptr. 533 (Ct. App. 2009)
Hall v. Warren Pumps LLC, 2010 WL 528489 (Cal. Ct. App. Feb. 16, 2010)
Walton v. William Powell Co., 108 Cal. Rptr. 3d 412 (Ct. App. 2010)
Supreme Court to consider and decide O’Neil first. O’Neil is at odds
with an earlier appellate decision – Taylor v. Elliot Turbomachinery
Co., 90 Cal. Rptr. 3d 414 (Ct. App. 2009) – in which the Supreme
Court denied review.
48
Asbestos – Manufacturer Duty to Warn
Taylor v. Elliot Turbomachinery
The plaintiff sued several manufacturers of valves and pumps used
in the propulsion system of the Navy ship on which he served. At
the time of the plaintiff’s exposure, the valves and pumps contained
asbestos components (e.g., gaskets and packing) manufactured and
sold/supplied by third parties.
The plaintiff argued that a manufacturer should have a duty to warn
of all hazards arising from foreseeable uses of its own product,
including hazards of incorporated products that, although
manufactured and supplied by a third party, are part of the normal
and intended use of the manufacturer’s own product.
Asbestos – Manufacturer Duty to Warn
Taylor v. Elliot Turbomachinery
The First District disagreed, holding that the defendant manufacturers had
no duty to warn under strict liability or negligence principles.
Strict liability would not attach because
 Manufacturers have no duty to warn unless they are in the “chain of distribution”
of the hazardous product.
 Manufacturers have no duty to warn of defects in products supplied by others
and used in conjunction with the manufacturer's product unless the
manufacturer's product itself causes or creates the risk of harm.
 Manufacturers or suppliers of nondefective component parts bear no liability
when they simply build a product to a customer's specifications but do not
substantially participate in the integration of their components into the final
product.
Asbestos – Manufacturer Duty to Warn
Taylor v. Elliot Turbomachinery
The court likewise rejected the contention that the manufacturers
should bear a duty to warn under negligence principles because the
use of asbestos-containing materials with their equipment was both
foreseeable and anticipated.
The court noted that foreseeability, standing alone, is not sufficient
and was outweighed by policy considerations. It further challenged
the plaintiff’s view of what was foreseeable, asking:
“[C]an a manufacturer reasonably be expected to foresee the risk of latent
disease arising from products supplied by others that may be used with the
manufacturer's product years or decades after the product leaves the
manufacturer's control?”
Asbestos – Manufacturer Duty to Warn
Taylor v. Elliot Turbomachinery
As to the policy considerations,
 Little moral blame can be attached to the manufacturer’s failure to warn two
decades after they sold their valves and pumps to the Navy.
 Imposing liability on the valve and pump manufacturers would not serve to
prevent future harm.
 The manufacturers and suppliers of the asbestos products with which the plaintiff
came into contact were in the best position to investigate and warn of the
dangers posed by their own products.
 Imposing liability would burden the valve and pump manufacturers with a duty to
warn persons “far outside the distribution chain” of their products.
Merrill, Hall and Walton (all issued by the Second District) followed
Taylor.
Asbestos – Manufacturer Duty to Warn
O’Neil v. Crane Co.
Plaintiff sued Crane alleging exposure to asbestos gaskets and packing that
were not manufactured by Crane, but were incorporated in Crane’s valves.
Commenting that “Taylor misses the mark,” a different division of the
Second District held that “a manufacturer is liable in strict liability for the
dangerous components of its products, and for dangerous products with
which its product will necessarily be used.”
Crane was therefore liable for exposures to the asbestos components
supplied with its valves, even though it had not manufactured them.
Asbestos – Manufacturer Duty to Warn
O’Neil v. Crane Co.
Crane further argued that, putting aside whether it could be held liable for
asbestos components (gaskets, packing and insulation) sold with its valves,
it could not be liable for the plaintiff’s exposure to replacement asbestos
components that were later incorporated into the valves during routine
maintenance because Crane had neither manufactured nor sold/supplied
those replacement asbestos components.
The court rejected that line of defense as well. The court reasoned that
Crane had incorporated asbestos products into its valves, which needed
those asbestos products to function. Liability attached because the
plaintiff’s injury was caused by the operation of the valves with replacement
asbestos products which Crane knew would be used with its valves and
which had the same dangerous propensities as the original parts.
Experts and arbitration
at the class certification
stage
Experts At the Class Stage
» Must/can a court determine the admissibility of
an expert’s testimony before class certification?
» How about when that testimony is essential to
certification?
56
Historically
» Qualms about tackling or touching expert
questions
–
–
–
–
–
–
class v. merits
deferring to class proponents
class decisions are conditional, “provisional”
ducking hard questions
a ton of work
the “gatekeeper” function kicks in later
57
The result: uncertainty
» 7th Circuit grants review given the “uncertainty
surrounding the propriety of conducting a
Daubert analysis at the class certification stage
. . . .”
– American Honda Motor Co. v. Allen, 600 F.3d 813 (7th
Cir. 2010)
58
Illustrative:
Honda v. Allen (N.D. Ill. 2009)
» Allen seeks certification of class of motorcycle
owners, alleging “wobble” design defect
produces shaky steering
» Allen proffers Dr. Ezra to establish (b)(3)
predominance
» Honda moves to strike Ezra report at the class
stage under Daubert
59
Honda v. Allen (N.D. Ill. 2009)
» District court
– proper to decide admissibility at the class stage
– finds “reservations” regarding Dr. Ezra’s wobbly
decay standard
– yet declines to exclude report “at this early stage of
the proceedings”
– certifies the Allen classes
» 264 F.R.D. 412, 425–437
60
Sister courts similarly equivocal
» “The Eight Circuit does not appear to expressly
require district courts to engage in a full Daubert
inquiry at the class stage.”
– In re Zurn Pex Plumbing Products Liability Litigation,
267 F.R.D. 549, 556 (D. Minn. 2010)
» Dukes v. Wal-Mart, 509 F.3d 1168, 1174, 1179
(9th Cir. 2007) (withdrawing prior opinion holding
that Daubert finding should not be made at class
stage)
61
A Break In the Wall:
Allen v. Honda (7th Cir. 2010)
» Trial court “must conclusively rule on any
challenges to the expert’s qualifications or
submissions prior to ruling on a class
certification motion”
– including “a full Daubert analysis” if need be
– courts must reach “a conclusion” about reliability,
admissibility
– 600 F.3d 813, 815–820
62
Allen v. Honda (7th Cir. 2010)
» “early stage” beside the point
» “provisional” approach rejected
» even where class and merits considerations
“overlap”
» so long as expert evidence is “integral to the
plaintiff’s satisfaction of Rule 23’s requirements”
63
Sher v. Raytheon (11th Cir. March 9, 2011)
» Trial court certifies class, declines to resolve
Daubert challenge
» 11th Circuit:
– “We consider [Allen v. Honda] persuasive”
– “It was error for the district court to decline to declare
a proverbial, yet tentative winner” on expert challenge
– “Tough questions must be faced and squarely
decided” (quoting Allen)
– 2011 WL 814379
64
And yet:
» In re Zurn Pex Plumbing (D. Minn. 2010)
– class proponents urge a quick look: is proffered
expert testimony “so flawed it cannot provide any
information as to whether the requisites of class
certification have been met”
– trial court collects cases in 8th Circuit declining to
“engage in a full Daubert analysis at the class
certification stage”
– rejects Allen v. Honda
– court proceeds with “at this stage” analysis
– denies motions to strike (for now)
65
The State of Play
» Unclarity remains
– Will Allen v. Honda become law of the land?
» No definitive split in the circuits
» The “can” and “must” questions –
• permissive?
• mandatory?
– both remain in play in most circuits
66
Whither Class Arbitration?
67
Whither Class Arbitration?
» The issue: class action waiver provisions in
consumer contracts
– mandating arbitration
– mandating bilateral proceedings – i.e., barring class
arbitration
» Class action waivers as between commercial
entities long upheld, enforced
– Even where contract waiver is silent on the class question
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp, 130 S.Ct.
1758 (2010)
» What about as to consumers?
68
The Tensions
» State authority v. Federal Arbitration Act
» Class action benefits v. public policy favoring
arbitration
» Differential bargaining power (contracts of
adhesion) v. sanctity of contracting and free will
» Unconscionability doctrine v. a favored form of
dispute resolution
» Choice v. paternalism
69
AT&T Mobility LLC v. Concepcion
» The merits question: Could AT&T charge
consumers sales tax on phones it allegedly
advertised as free?
» The class question: Is the AT&T contractual
class waiver enforceable?
– AT&T consumer contracts in question
• mandate arbitration
• bar class arbitration
– claims must be brought in “individual capacity, and not as
a plaintiff or class member in any purported class or
representative proceeding”
70
AT&T v. Concepcion (cont’d)
» The arbitration agreement at issue: decidedly
consumer-friendly
–
–
–
–
simple initiation of arbitration
AT&T pays all costs of non-frivolous claims
venued in customer’s county
proceeds by phone or on paper at consumer’s
election
– AT&T cannot seek fees
– prevailing consumer gets fees minimum $7500 and
2x fees (if award greater than AT&T’s last written
settlement offer)
71
The courts below
» District court: arbitration clause unconscionable,
barred by California’s Discover Bank rule
– Discover Bank: waiver in consumer contract of
adhesion unconscionable when allegation is cheating
of large numbers of consumers out of small sums
each
• 36 Cal. 4th 148, 113 P. 3d 1110 (2005)
» 9th Circuit: agrees
72
AT&T v. Concepcion
130 S.Ct. 3322 (2011)
» “California’s Discover Bank rule is preempted by
the FAA”
» FAA favors arbitration
» State law must not frustrate FAA objectives
» State law must not disfavor arbitration
» Class action waivers are to be enforced
73
The majority’s reasoning
» Arbitration agreements, with consumers and
otherwise, must be on same footing as other
contracts
» FAA’s savings clause (§2) preserves “generally
applicable contract defenses,” but
– cannot disfavor arbitration
– does not bar class action waivers that foster arbitration
» Class arbitration, unless chosen by parties,
interferes with “fundamental attributes of
arbitration”
74
An exercise in realpolitik
» Discover Bank applied only to contracts of
adhesion
– “but the times in which consumer contracts were
anything other than adhesive are long past”
» Discover Bank applied only to small-$$ claims
– this limiting principle “toothless and malleable”
» Individual arbitration works well – and better
than class proceedings
» Arbitration of consumer claims won’t occur
unless provisions enforced as written
75
Questions In the Wake of Concepcion
» Less consumer-friendly clauses?
» Complex claims?
» Has an agreement to proceed individually in fact
been formed?
– click-through agreements
– purchases through retailers
76
What the future holds
» How slender is the Concepcion majority?
» Will states adopt Concepcion workarounds?
– “Of course States remain free to take steps
addressing the concerns that attend contract of
adhesion – for example, requiring class-action-waiver
provisions in adhesive arbitration agreements to be
highlighted”
» Might the FAA be amended?
77
Class Action Fairness
Act
Recent Developments
CAFA: Overview
» Expands diversity jurisdiction
– Action filed as a putative class action
– Amount in controversy (aggregated) exceeds $5
million
– Minimal diversity
• E.g., “Any member of a class of plaintiffs is a
citizen of a different state from any defendant.” 28
U.S.C. 1332(2)(A).
» In certain circumstances, court may decline
jurisdiction.
79
CAFA: Overview
» Key Diversity Jurisdiction Carve Outs
– Aggregated amount in controversy less than $5
million
– Class actions with under 100 members
– Local disputes
– States, state officials, or certain other government
entities are “primary defendants”
– Certain claims that pertain to securities and fiduciary
claims
– Relates to “internal affairs or governance” of a
business/corporation
80
CAFA: Overview
» Removal made easier
– Any defendant can remove without consent of other
defendants
– Forum state citizenship restrictions removed
– Eliminates one-year removal limitation
» Appellate review of remand order permitted and
expedited
81
CAFA: Overview
» When remand is required
– Home state exception
• 2/3 or more of members of proposed plaintiff
class AND
• “primary defendants”
Are citizens of the forum state.
82
CAFA: Overview
» Local controversy exception
– More than 2/3 of members of proposed plaintiff
classes are citizens of forum state;
– At least one defendant from whom “significant relief”
is sought and whose alleged conduct forms a
“significant basis for the claims asserted” is a citizen
of the forum state;
– The principal injuries were incurred in the state where
the action was filed; and
– No other class action “asserting the same or similar
factual allegations on behalf of the same or other
person” has been filed in the past 3 years.
83
CAFA: Recent Developments
Cunningham Charter Corp. v. Learjet, Inc.,
592 F.3d 805 (7th Cir. 2010)
» After the district court denied class certification, it
remanded the case.
» Seventh Circuit held that CAFA jurisdiction does
not depend on class certification and did not
eliminate subject-matter jurisdiction under the Act.
–
–
Avoiding CAFA circumvention: Seventh Circuit concerned
that a case could be remanded to a state with different
class action rules, allowing it to proceed as a class action.
Exception for obviously frivolous class action claims:
Unless class claims are deemed frivolous, federal
jurisdiction will survive denial of a motion for class
certification.
84
CAFA: Recent Developments
» Cunningham added to growing split of federal
circuit courts
– Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268
n.12 (11th Cir. 2009) (CAFA jurisdiction does not
depend on certification); see also USW, AFL-CIO,
CLC v. Shell Oil Co., 602 F.3d 1087, 1089 (9th Cir.
2010) (same).
– In re TJX Cos. Retail Sec. Breach Litig., 564 F.3d
489, 492–93 (1st Cir. 2009) (CAFA jurisdiction
depends on class certification and in the absence of
certification, remand is appropriate).
85
CAFA: Recent Developments
In re Burlington Northern Santa Fe Railway
Company, 606 F.3d 379 (7th Cir. 2010)
» After CAFA jurisdiction upheld, the plaintiffs
amended their complaint to omit class action
allegations. The district court remanded.
» The Seventh Circuit held that “jurisdiction under
CAFA is secure even though, after removal, the
plaintiffs amended their complaint to eliminate
the class allegations.”
86
CAFA: Recent Developments
Westerfeld v. Independent Processing, LLC,
621 F.3d 819 (8th Cir. 2010)
» The Eighth Circuit held that any doubt regarding
whether the local controversy exception applies
must be resolved against plaintiff and in favor of
removal.
» The party invoking the exception bears the burden
of proving its applicability.
– Congress “contemplated broad federal jurisdiction with
only narrow exceptions.”
– In making “significant defendant” determination all claims
in the action must be considered.
87
CAFA: Recent Developments
» Other circuit courts agree
– Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d
144, 153 (3d Cir. 2009) (burden shifts to party
challenging federal jurisdiction to show that local
controversy exception applies); see also Serrano v.
180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir.
2007) (same); Hart v. FedEx Ground Package Sys.
Inc., 457 F.3d 675, 680 (7th Cir. 2006) (same);
Frazier v. Pioneer Arms. LLC, 455 F.3d 542, 546 (5th
Cir. 2006) (same); Evans v. Walter Indus., Inc., 449
F.3d 1159, 1165 (11th Cir. 2006) (same).
88
CAFA: Recent Developments
Coleman v. Estes Express Lines, Inc.,
631 F.3d 1010 (9th Cir. 2011)
» Local Controversy Requirements: Interpreting the
requirements of 28 U.S.C. 1332(d)(4)A)(i)(II)(aa) &
(bb)
(II) at least 1 defendant is a defendant –
(aa) from whom significant relief is sought
by members of the plaintiff class;
(bb) whose alleged conduct forms a
significant basis for the claims asserted by
the proposed plaintiff class; and
(cc) who is a citizen of the State in which
the action was originally filed; and . . .
89
CAFA: Recent Developments
» Court concluded that based on the language in (aa)
– “sought – and in (bb) – “alleged” – that the district
court can only consider the complaint and not
extrinsic evidence to determine if these
requirements are met.
– Courts can permit plaintiffs to amend complaint to address
relevant CAFA criteria; and
– Ruling limited to sections (aa) and (bb).
» Other Circuit Courts
– 10th and 3d Circuits agree
– 11th considered using extrinsic for (bb), but issue not
properly before it.
– Some district courts have concluded extrinsic evidence
can be used if (aa) and (bb) requirements are met.
90
CAFA: Recent Developments
Blomberg v. Services Corp. Int’l, No. 11-8009, 2011
WL 1405144 (7th Cir. April 14, 2011)
» Party opposing jurisdiction based on amount in
controversy must prove jurisdictional facts by a
preponderance of the evidence.
» A good-faith estimate is acceptable if it is plausible
and adequately supported by the evidence.
– 7th Circuit concerned that plaintiffs could undervalue
damages to avoid jurisdiction
– It is a pleading requirement, not a demand for proof.
» Court held that defendant demonstrated (through
extrinsic evidence) a plausible, good-faith estimate
of $5 million in controversy.
91
CAFA: Recent Developments
Back Doctors v. Metropolitan Property and Casualty Ins.
Co., 637 F.3d 827 (7th Cir. 2011)
» Amount in controversy: “unless recovery of an amount
exceeding the jurisdictional minimum is legally
impossible, the case belongs in federal court.”
» When removing, the defendant is entitled to present its
own estimate and is not bound by the plaintiffs’ estimate.
» Plaintiffs cannot identify any case showing punitive
damages are impossible
– Punitive damages common in Illinois fraud actions
– Juries can award damages not requested
– Plaintiffs did not file a limiting document when it filed its
complaint (subsequent statement cannot be considered)
» Amount in controversy possible and requirement satisfied
92
CAFA: Recent Developments
Westwood Apex v. Contreras, No. 11-55362, 2011
WL 1744960 (9th Cir. May 2, 2011)
» The defendant filed class action counterclaims
against the plaintiff/counterclaim defendant, and
newly-added counterclaim defendants. The
additional (newly-added) counterclaim
defendants then removed per CAFA.
» Ninth Circuit had to determine whether
counterclaim defendants are “any defendant”
under 29 U.S.C. 1453(b).
93
CAFA: Recent Developments
The Ninth Circuit answered NO:
“While CAFA eliminated several important roadblocks
to removal of class actions commenced in state court,
we hold that 28 U.S.C. 1453(b) did not change the
longstanding rule that a party who is joined to such an
action as a defendant to a counterclaim or as a third
party defendant may not remove the case to federal
court.”
The only other court of appeals to address the
issue, the Fourth Circuit, AGREES
Palisades Collections LLC v. Shorts, 552 F.3d 327,
328 (4th Cir. 2008) (counterclaim defendant may not
remove under CAFA)
94