Price

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Agenda for 22nd Class
• Admin
– Handouts
– Name plates
• Review of fee shifting
• Intro to 2nd half of class
• Joinder
• Intro to class actions
• Midsemester feedback
1
Class Actions Assignment
• FRCP 23
• Yeazell 859-61, 877-93
• Questions to think about / Writing assignments
– Pp. 881ff. Qs 1, 2
– BadCorp manipulated the price of its stock by failing to disclose
information that would cause share prices to fall. Would a class
action alleging violation of federal securities law against BadCorp
on behalf of all shareholders who purchased stock during the
period when the information was being withheld be appropriate?
– BadPharm supplied blood to hemophiliacs, but failed to screen
adequately for AIDS. As a result, many hemophiliacs in dozens of
states got AIDS and some died. Would a product liability class
action against BadPharm on behalf of all hemophiliacs who
contracted AIDS as a result of contaminated blood be
2
appropriate?
Fee Shifting
• Advantages of British Rule
– Allows plaintiffs to bring meritorious (high probability) cases, even
when litigation costs are high. See Example 11.
– Discourages plaintiffs from bringing frivolous (low probability)
suits. See Examples 15.
• Disadvantages of English Rule
– Public interest litigation to change the law may be deterred,
because it has a low probability of succeeding, even though it is
not “frivolous.”
– Risk averse plaintiffs may not bring even meritorious suits.
Example 14.
– Because of the way the English Rule magnifies optimism, it may
discourage settlement. See Example 16.
• Although risk averse parties may be more likely to settle under
British rule
3
Introduction to Second Half of Class
– First half of class -- Stages of simple lawsuit
• Service of process, pleading, discovery, trial, post-trial motions, appeals
• SJ, settlement, ADR
– 2nd half of course
• Complex litigation
– Multiples parties and claims -- Joinder, class actions
– Multiple suits– Collateral Estoppel & Res Judicata
• What court?
– Subject matter jurisdiction
» Federal or state court?
– Personal jurisdiction
» If state court, which state’s court?
» If federal court, federal court in which state?
– Venue – what district within a state?
• What law?
– Choice of Law
» If applying state law, which state’s law?
– Erie
» When apply state law in federal court in diversity case?
4
Joinder
• Rules start from assumption that suits may involve a single plaintiff suing a single
defendant on a single claim
– Multiple parties and claims are allowed ONLY if explicitly permitted by a rule
• Proper joinder does NOT mean case properly in court, still need:
– Personal jurisdiction
– Subject matter jurisdiction
– Venue
• Note that joinder expands possible pleadings. FRCP 7
– 3rd party complaint
– Answer to counter claim
– Answer to cross-claim
– Answer to 3rd party complaint
5
Joinder of Claims
Claim 1
Plaintiff
Defendant
Claim 2
• Joinder of claims always allowed. FRCP 18(a)
– But judge can, in discretion, always sever.
• Joinder is compulsory, if arises out of same transaction or occurrence
– Not in FRCP, but part of res judicata
– If related claim is brought in later action, defendant can have the case
dismissed by raising the defense of res judicata
Counterclaims (FRCP 13(a) &(b))
Original Claim
Original
plaintiff
Original
defendant
Counterclaim
• Counterclaims are always allowed. FRCP 13(a) and (b)
• Counterclaims are “compulsory” if they arise out of the same “transaction or
occurrence” as the original claim. FRCP 13(a)
– If compulsory counterclaim is not asserted, cannot be asserted in separate suit
7
Joinder of Parties
Defendant 1
Plaintiff 1
Claim 1
Plaintiff
Claim 1
Defendant
Claim 2
Claim 2
Defendant 2
Plaintiff 2
• Joinder of parties allowed, if claims arise out of the
same transaction or occurrence AND there is a question
of law or fact in common. FRCP 20
• FRCP19 addresses compulsory joinder of “necessary
parties,” but not part of this course
Crossclaims
Original claim 1
Original
plaintiff
Defendant 1
Crossclaim
Original claim 2
Defendant 2
• Crossclaims are allowed only if they arise out of the
same transaction or occurrence as the original action.
FRCP 13(g)
• Crossclaimant can join unrelated claim(s). FRCP 18(a)
3rd Party Claims
Original
plaintiff
Original claim
Original Defendant
3rd party plaintiff
3rd party claim
3rd party defendant
• 3rd party claims allowed only if 3rd party plaintiff claims that 3rd party defendant is
liable to 3rd party plaintiff for some or all of liability that original defendant may
owe to original plaintiff. FRCP 14(a)(1)
– Indemnity – Contract in which one party (e.g. parts supplier) agrees to
reimburse another party (e.g. final manufacturer) for liaiblity (e.g. liability final
manufacturer may incur to consumer)
– Contribution – Part of tort law which allows jointly liable defendants to sue one
another to apportion liability
• Different from cross-claim, because 3rd party defendant wasn’t sued by original
plaintiff
3rd Party Claims (cont.)
Original
plaintiff
Original claim
Original Defendant
3rd party plaintiff
3rd party claim
3rd party defendant
• 3rd party plaintiff may join any claims it has against the 3rd party defendant. FRCP
18(a)
• 3rd party defendant can assert any counterclaim against 3rd party plaintiff.
14(a)(2)(B)
• 3rd party defendant can assert claim against original plaintiff, if it arises out of the
same transaction or occurrence as the plaintiff’s claim against third-party plaintiff.
14(a)(2)(D)
• Plaintiff may assert claims against 3rd party defendant that arise out of the same
transaction or occurrence as the original claim
– Then 3rd party defendant may then assert any counterclaims. FRCP 14(a)(3)
• Including permissive counterclaims, not part of same transaction or occ.
Joinder Questions
– Pp. 816 Q5
– Briefly summarize Price
– Pp. 818ff. Qs 1-2
12
Class Actions I
• Class Action is super joinder device
– Way of joining lots of plaintiffs (or defendants)
– Single lawyer represents all
– Consent from each plaintiff not required
– “Class representative” is “named plaintiff”
• Usually chosen by class lawyer
• Advantages
– Low cost as compared to lots of individual suits
– Allows case to be brought where each plaintiff has stake that is too small to
justify individual suit
• But where, in aggregate, significant wrong has been done
• Disadvantages
– Class lawyer does not always act in interest of class
• May be more interested in fees for self than in relief for class
– Large magnitude of potential liability may “coerce” defendants into settling
weak claims
13
Class Actions II
• Class actions must be “certified”
– Plaintiff’s lawyer first brings regular (non-class-action) case on behalf of named
plaintiff(s)
– Plaintiff’s lawyer then petitions judge to certify class
• Prerequisites for class action
– 1. Numerosity. Class is so large that joinder (under Rule 20) is not practical.
23(a)(1)
– 2. Commonality. There are questions of law or fact common to all class
members. 23(a)(2)
– 3. Typicality. The class representative(s) have claims which are typical. 23(a)(3)
– 4. Adequacy. The class representative(s) can adequately represent class.
23(a)(4)
• Technically about parties.
• In reality, about class lawyers.
• Also, no conflicts of interest.
– 5. Case must fit into one of 23(b) categories
• See next page
14
Class Actions III
• 23(b) categories
– (b)(3). Primarily for money damages
• E.g. mass tort
• Common issues must “predominate”
• Class action must be “superior to other available methods for fairly and
efficiently adjudicating the controversy”
– (b)(2). Injunctive or declaratory relief appropriate for whole class
• E.g. desegregation, prison conditions
– (b)(1). Risk of inconsistent litigation
• E.g. limited fund or conflicting injunctions
• Not very common
• Interlocutory appeal of certification decision. 23(f)
– Grant or denial
– Discretionary with court of appeals
15
Class Actions IV
• Notice and Opt-Out. 23(c)(2)
– Only (b)(3) requires “best notice that is practical under the circumstances”
– Only (b)(3) requires the class members be given the opportunity to “opt out”
• Settlement with court approval only. 23(e)
16
Class Action Questions
– Yeazell pp. 881ff. Qs 1, 2
• 1) BadCorp manipulated the price of its stock by failing
to disclose information that would cause share prices
to fall. Would a class action alleging violation of federal
securities law against BadCorp on behalf of all
shareholders who purchased stock during the period
when the information was being withheld be
appropriate?
• 2) BadPharm supplied blood to hemophiliacs, but
failed to screen adequately for AIDS. As a result, many
hemophiliacs in dozens of states got AIDS and some
died. Would a product liability class action against
BadPharm on behalf of all hemophiliacs who
contracted AIDS as a result of contaminated blood be
appropriate?
17
Introduction to Subject Matter Jurisdiction
– Federal courts have limited jurisdiction
• Can hear only cases allowed by Constitution and statute
– 2 principle categories
• Diversity
– Plaintiff and defendant are citizens of different states
– Complete diversity rules
» No plaintiff is citizen of the same state as any defendant
– Alienage
» One party is US citizen, other party is foreign citizen
• Federal question
– Cases arising out of federal statute or constitution
18
Class Actions I
• Class Action is super joinder device
– Way of joining lots of plaintiffs (or defendants)
– Single lawyer represents all
– Consent from each plaintiff not required
– “Class representative” is “named plaintiff”
• Usually chosen by class lawyer
• Advantages
– Low cost as compared to lots of individual suits
– Allows case to be brought where each plaintiff has stake that is too small to
justify individual suit
• But where, in aggregate, significant wrong has been done
• Disadvantages
– Class lawyer does not always act in interest of class
• May be more interested in fees for self than in relief for class
– Large magnitude of potential liability may “coerce” defendants into settling
weak claims
19
Class Actions II
• Class actions must be “certified”
– Plaintiff’s lawyer first brings regular (non-class-action) case on behalf of named
plaintiff(s)
– Plaintiff’s lawyer then petitions judge to certify class
• Prerequisites for class action
– 1. Numerosity. Class is so large that joinder (under Rule 20) is not practical.
23(a)(1)
– 2. Commonality. There are questions of law or fact common to all class
members. 23(a)(2)
– 3. Typicality. The class representative(s) have claims which are typical. 23(a)(3)
– 4. Adequacy. The class representative(s) can adequately represent class.
23(a)(4)
• Technically about parties.
• In reality, about class lawyers.
• Also, no conflicts of interest.
– 5. Case must fit into one of 23(b) categories
• See next page
20
Class Actions III
• 23(b) categories
– (b)(3). Primarily for money damages
• E.g. mass tort
• Common issues must “predominate”
• Class action must be “superior to other available methods for fairly and
efficiently adjudicating the controversy”
– (b)(2). Injunctive or declaratory relief appropriate for whole class
• E.g. desegregation, prison conditions
– (b)(1). Risk of inconsistent litigation
• E.g. limited fund or conflicting injunctions
• Not very common
21
Midsemester Feedback
22
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