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A Return to First Principles: Class Actions & Conservatism

Brian T. Fitzpatrick, The Conservative Case for Class Actions (2019). 

For decades, most opposition to class actions in the United States has come from the political right. Corporations on the receiving end of class action lawsuits have hired lobbyists and lawyers to restrict the availability of class actions, through legislation such as the Class Actions Fairness Act and by successfully arguing for narrow judicial interpretations of Federal Rule of Civil Procedure 23. If the pendulum has swung toward ‘killing’ the modern class action in the United States, it is conservatives who have pushed it.

For this reason, Brian Fitzpatrick’s The Conservative Case for Class Actions offers a unique contribution to political debates over class actions. A self-described card-carrying member of the Federalist Society and former clerk to Justice Antonin Scalia, Fitzpatrick argues that “class action lawsuits are not only the most effective way to hold corporations accountable; they are also the most conservative way to hold them accountable.” This contention rests on two basic premises: what is “good for conservative principles may be bad for big corporations” and “the private sector is better at doing most everything than the government is.” He persuasively supports the first premise as a matter of principle and history: Republicans acknowledge that some rules are necessary (like laws against fraud or anti-competitive behaviour), and conservative principles have not always aligned perfectly with the interests of big business. He defends the second premise by exploring the options for enforcement and empirically showing that the conservative preference for private enforcement is justified: the private sector is better than the government at detecting misconduct and enforcing the law.

After recounting the ironic history of Rule 23 in chapter 1, which includes an attempt by Democrats to curb class actions in favour of government enforcement, Fitzpatrick explains in chapter 2 that a preference for limited ex ante regulation and greater reliance on ex post regulation by private lawyers is consistent with long-standing conservative political and economic theory. There is little public enforcement in the U.S. compared to “large central bureaucracies that dominate governance in high-tax, activist welfare states,” a fact made more true in the past three years of deregulation by the Trump Administration. If all but the most radical conservatives accept that some rules are necessary (for the protection of the capital markets, for example), then all but the most radical conservatives must accept enforcement of these rules. Pointing to such prominent conservatives as economist, law professor, and former judge Richard Posner, Fitzpatrick states that “for most of our history, conservatives preferred legal enforcement by private lawyers.”

Fitzpatrick then explains why conservatives should prefer private enforcement by private lawyers to public enforcement by government lawyers. He cites six reasons the private bar is preferable to government lawyers, but the most persuasive is that private lawyers have better incentives and better resources to detect misconduct. Quoting civil rights scholar Myriam Gilles, “The massive government expenditures required to detect and investigate misconduct are no match for the millions of ‘eyes on the ground’ that bear witness to … violations.” If conservatives accept that some regulation is good, then better and more efficient enforcement of those regulations in a manner that reduces the size of government and avoids the risks of crony capitalism and agency capture should be embraced by conservatives. In other words, just as conservatism is not to be conflated with big business interests, an aversion to government enforcement should not be conflated with support for impunity.

Fitzpatrick addresses the main arguments against class actions in chapter 4: class-action lawyers select only lucrative cases to pursue; class-action lawyers bring frivolous lawsuits when there has been no wrongdoing; and the private bar is not accountable to the political process as compared to government enforcers. He responds to each criticism with data and arguments based on conservative first principles. For example, the data do not show that the private bar pursues less meritorious cases than the government does. Unlike their government counterparts, class action lawyers are not subject to agency capture. They also represent a decentralized form of regulation. And since when do conservatives have a problem with the profit motive?

If private enforcement is better than government enforcement, then class-action attorneys should be the private enforcers of choice. Private enforcement of small harms can only occur if aggregated in representative litigation. Quoting libertarian legal scholar Richard Epstein, Fitzpatrick posits that “without the class action, the ‘real risk is that serious wrongdoing at the corporate level will go unchecked for want of a champion to respond to a common problem.’” Opposing class actions in order to immunize corporations from such wrongdoing is neither principled nor consistent with conservative values.

Fitzpatrick then tackles the two most frequent conservative arguments against class actions: that they are usually meritless and that lawyers get all of the money. Even if is true that some class actions are without legal merit, defendants have an inexpensive way to combat them: motions to dismiss. More importantly, the majority of class actions do have merit. Entrepreneurial lawyers working on contingency fee have every incentive to file meritorious and strong cases. Empirical studies show that motions to dismiss are successful in less than one-third of cases and that most settlements are for amounts far greater than their nuisance value (the cost of defending the action)—both of which show the underlying merit of the lawsuit. Similarly, studies do not support the view that class members get nothing while class attorneys get everything; while class members are rarely made whole, statistically class actions are still better than government enforcement at compensating victims.

Fitzpatrick spends considerable time in chapter 8 addressing whether class actions deter wrongdoing. The argument that they do not “flies in the face of decades of economic theory that was pioneered by conservative academics.” Fitpatrick’s empirical studies revealed that 25% of all settlements include a provision requiring the defendant to change its behaviour in some way, usually by way of injunctive relief; in other cases, defendants changed offending practices as soon as lawsuits were commenced.

Fitzpatrick concludes with a series of proposed amendments to the class action regime that would make it more palatable to conservatives, most radically to limit class actions to certain types of wrongs or to require that plaintiffs share defendants’ discovery expenses to dissuade defendants from settling to avoid the expense of discovery. And with Republicans in charge of the Senate and the Presidency, he writes that now is the time to negotiate such amendments.

Fitzpatrick’s writing is crisp, accessible, and intended for a lay audience, but with hundreds of dense footnotes that will appeal to lawyers and academics. Published in November 2019, the book’s provocative argument has attracted criticism from the right. The U.S. Chamber of Commerce rejects Fitzpatrick’s argument that class actions promote accountability and the rule of law, labelling the plaintiffs’ bar “the storm troopers of the anti-free-enterprise agenda” and arguing that because the majority of class-action settlements do not compensate class members but enrich lawyers, class actions actually undermine democratic accountability. The argument is unconvincing, given that the data cited in the book dispels the Chamber’s assumption that most settlements pay nothing to class members. Moreover, in light of its central mission to lobby for the eradication of regulations that protect consumers and the environment (among other constituents), the Chamber’s complete rejection of the role for private enforcement suggests a preference for corporate unaccountability.

Martin Redish makes a similar argument against class actions, but in the name of liberalism. He writes that “certain types of modern class actions [are] fundamentally inconsistent with process-based liberalism” because a settlement that includes large cy pres awards “transforms a compensatory statute magically into a form of civil fine or qui tam action” through undemocratic means. Redish has argued that cy pres settlements are unconstitutional. Fitzpatrick anticipated this charge, arguing, with empirical support, that most courts now scrutinize cy pres settlements more closely and that while “[t]hese settlements may have been a problem at some point, …they are not today.” In any event, opposition to a minority of settlements that include cy pres relief does not justify wholesale opposition to class actions.

That Fitzpatrick is under fire by different sides of the political spectrum is the best advertisement for his book. On a topic so easily dominated by partisanship, he makes a principled argument for the modern class action. The Conservative Case for Class Actions is a persuasive defense of this form of litigation, at a time in its history when it needs it.

Cite as: Jasminka Kalajdzic, A Return to First Principles: Class Actions & Conservatism, JOTWELL (February 24, 2020) (reviewing Brian T. Fitzpatrick, The Conservative Case for Class Actions (2019). ), https://courtslaw.jotwell.com/a-return-to-first-principles-class-actions-conservatism/.

The Forest, the Trees, and Lone Pine Orders

Nora Freeman Engstrom, The Lessons of Lone Pine, 129 Yale L.J. 2 (2019).

1986 wasn’t just a big year for Mets fans. It was a big year for civil procedure. The Supreme Court decided the summary judgment trilogy—Anderson, Celotex, and Matsushita—two of which would go on to become the most frequently cited Supreme Court cases in history. Earlier that year—but with considerably less fanfare at the time—Monmouth County Superior Court Judge William Wichmann issued an unusual order in a case about alleged contamination from the Lone Pine Landfill in Freehold Township, New Jersey. He set a deadline by which the plaintiffs had to provide documentation supporting their exposure to substances from the landfill and the injuries that were caused as a result. Later that year—just three weeks after Jesse Orosco struck out Marty Barrett for the final out of Game 7—Judge Wichmann found the plaintiffs’ submissions inadequate and dismissed their claims with prejudice.

Judge Wichmann’s order would come to bear the name of that case (and that landfill) and it spawned a revolution in civil procedure—particularly in the mass-tort context. As Nora Freeman Engstrom’s excellent article explains at the outset, Lone Pine orders have featured in a “Who’s Who” of mass-tort cases—including “Love Canal, asbestos, Vioxx, Fosamax, Rezulin, Celebrex, Zimmer NexGen knee implants, Baycol, Avandia, Fresenius, and the Deepwater Horizon oil spill.” Her must-read piece is a comprehensive dive into the use of Lone Pine orders, their advantages and disadvantages from a practical and theoretical perspective, and the lessons that can be drawn for civil litigation more broadly.

This topic prompts an important definitional question: what exactly is a Lone Pine order? Although Engstrom describes considerable variation on the details of particular orders in particular cases, she defines it as an order requiring a plaintiff to make an early evidentiary showing regarding three issues: (1) her exposure to the defendant’s product or contaminant; (2) the impairment she has suffered as a result; and (3) specific causation, typically supported by qualified experts. As in the eponymous New Jersey litigation, failure to provide sufficient information on these issues can result in dismissal of a plaintiff’s claim with prejudice.

From a policy standpoint, Lone Pine orders are viewed as a solution to the problem of nonmeritorious mass-tort claims. Of course, the weight of the evidence indicates that groundless tort claims are the exception rather than the rule. But Engstrom identifies five conditions that characterize tort claims where nonmeritorious suits are more likely to be a concern. These conditions are: “(1) injuries are hard to discern; (2) specific causation is contestable; (3) defendants have a diminished incentive or capacity to scrutinize claims prior to payment; (4) filing rates are unusually high; and, perhaps most importantly, (5) restraints typically imposed by the contingency fee are relaxed or altogether inoperative.” With respect to the last condition, Engstrom notes how the sheer mass of mass torts affects the economics of litigation: “once the mass tort is in full swing, costs are essentially fixed, while rewards depend largely on claim volume—meaning, bluntly, the more the merrier.”

Engstrom recognizes that Lone Pine orders, when properly used, can “promote judicial economy, preserve defendant and judicial resources, safeguard the integrity of trial processes, and allay concerns that MDLs (or their state-court counterparts) are a repository of—or breeding ground for—dubious filings.” They can also facilitate the processing of claims, as well as their ultimate resolution and settlement. That said, Engstrom identifies several problems with Lone Pine orders. Insofar as they require costly expert reports at an early stage in the litigation, they impose significant burdens on plaintiffs. They are hard to square with the structure of the Federal Rules of Civil Procedure, particularly the summary judgment process set forth in Rule 56, the obligations imposed on plaintiffs by Rule 11, and Rule 37’s regime for imposing sanctions for noncompliance with discovery orders. Engstrom also highlights a trend in MDL cases of issuing “twilight” Lone Pine orders to plaintiffs who decline to opt into a settlement program negotiated during the MDL proceedings; such orders impose added pressure on plaintiffs to accept the settlement rather than assert their right to litigate their individual claims in the courts where they initially filed suit.

In light of these concerns, Engstrom argues that Lone Pine orders should be “exceptional,” employed only when two conditions are met. First, “other procedures explicitly sanctioned by rule or statute are practically unavailable or patently insufficient.” Second, it must be the case that “substantial evidence casts doubt upon some or all plaintiffs’ entitlement to relief and/or some or all plaintiffs have displayed a marked and unjustifiable lack of diligence in pursuing the action.” This would give Lone Pine orders a more limited role than some courts currently allow, but Engstrom proposes that plaintiff fact sheets can be used to achieve some of the goals of Lone Pine orders in a less costly fashion. The distinction between Lone Pine orders and plaintiff fact sheets is an important one, although as Elizabeth Burch argues in her response essay (which is worth a read in its own right), practice regarding such fact sheets varies widely—in some instances, courts have insisted on fact sheets that are no less burdensome than a typical Lone Pine order.

Engstrom concludes with several lessons we can draw from Lone Pine, situating the use of Lone Pine orders in the broader evolution of civil litigation over the past several decades. One lesson involves managerial judging, a trend Judith Resnik identified in the 1980s,which has been further amplified by the MDL process—particularly the tendency of the Judicial Panel on Multidistrict Litigation to choose managerially active judges to supervise MDL pretrial proceedings. Another is the general anti-access shift in civil procedure, as chronicled by Steve Burbank and Sean Farhang’s work on the retrenchment of private enforcement of substantive law in federal court and Arthur Miller’s critique of the myriad “procedural stop signs” that have metastasized throughout the federal pretrial process. Lone Pine orders also exemplify the increasing customization of procedure, which not only flouts the Federal Rules’ ostensibly transsubstantive nature but can evade institutional constraints that might otherwise police inappropriate procedural “ad hocery.”

When it comes to the past, present, and future of Lone Pine orders, it is crucial to see both the forest and the trees. Engstrom’s terrific article does precisely that. She lays a sophisticated foundation for better appreciating the advantages and disadvantages of such orders and provides a coherent framework for evaluating their use going forward.

Cite as: Adam N. Steinman, The Forest, the Trees, and Lone Pine Orders, JOTWELL (February 7, 2020) (reviewing Nora Freeman Engstrom, The Lessons of Lone Pine, 129 Yale L.J. 2 (2019)), https://courtslaw.jotwell.com/the-forest-the-trees-and-lone-pine-orders/.

Attention Supplicants

Ryan Copus, Statistical Precedent: Allocating Judicial Attention , __ Vand. L. Rev. __ (forthcoming 2020), available at SSRN.

Courts of Appeals in the United States are busy and, as numerous commentators and judges have pointed out, are unable to give many cases the attention they deserve. Attention supply and demand are currently grossly misaligned. Worse, there is little realistic hope of reducing the number of appeals or increasing the number of appellate judges. Appellate courts have responded by enlisting attention aids (e.g., more staff attorneys, more clerks), reducing attention commitments (e.g., fewer oral arguments, short and unpublished opinions), and reallocating attention from some types of cases to others.

These moves create numerous practical and normative problems. Perhaps most serious is that appellate judges systematically shortchange some types of cases (e.g., pro se, immigration, social security, and prisoner appeals) and lavish attention on other cases that have superficial markers of importance. Courts of appeals allocate their precious attention according to a cobbled-together set of proxies, heuristics, norms, historic practices, and shortcuts. None of this is to fault appellate judges; many seem unhappy with the current state of affairs and try their best with the limited resources that they have. But it is difficult to avoid the impression that the current hodgepodge of solutions is neither transparent nor efficient nor evenhanded.

Ryan Copus’ article is not the first to consider how courts can improve their ad hoc attention-triage systems, but he creatively pushes methodological boundaries to attack old problems from a fresh angle. He combines machine learning with an impressive dataset to answer how frequently appellate courts have reversed a particular type of case. Cases with low or high probabilities of reversal represent “easy” cases that typically merit little attention and are good candidates for a first look by staff attorneys. Cases in the middle represent “hard” cases that present opportunities to develop law and enhance predictability in the future. The article also uses traditional indicators of error to boost our confidence in the ability of the machine-learning-generated model to usefully predict error.

This is an impressive contribution in its own right. But Copus does not situate his article as the final word on appellate attention-triage systems. Instead, he posits that it is a “proof of concept” that merits further development. The courts have better and more detailed data that they could feed into machine-learning algorithms. Similarly, machine learning is not one thing but an opulent smorgasbord of approaches. Copus argues that, like corporations and other government agencies, courts could sponsor annual competitions to find models that maximize pre-specified, publicly communicated, up-to-date criteria.

As such, Copus’ article also helps us think about responsible and palatable uses of the riveting advances in machine learning. Copus’ proposal does not recommend or automate outcomes on appeal. Instead, it supports deliberate and informed attention-allocation decisions. Such a proposal is subtly mindful of the tendency of many experts to overestimate their ability to allocate efficiently and the capacity of machine learning to assist human decisions. Rather than handing our fate to the robot overlords or the corporations that built them, the article advises that we leverage machine learning to boost, not replace, human decision-making.

Despite these strengths, there are moments when I wish Copus was more diplomatic (e.g., when the current draft calls out a host of judges by name for frequent use of unpublished decisions in cases that the model identified as having high error estimates). Treading circumspectly might increase the likelihood of institutional buy-in. Relatedly, even though Copus presents only a “proof of concept,” a more detailed account of the data collection and model creation would enhance interested readers’ ability to identify features to keep and reject in designing future attention-triage systems.

On the whole, the article is an elegant celebration of innovation and iteration, carefully building on prior doctrinal work and preparing rich ground for further inquiry. There are, of course, many other areas of law where attention is in short supply and might currently be systematically misallocated. Entire classes of high-volume litigation and agency adjudications could benefit from transparent, principled, experience-driven attention-allocation systems.

Beyond exploring this approach in different settings, Copus’s article points to foundational questions about the role of attention in the law that have long-standing analogues in philosophy and psychology and that deserve further inquiry. How does attention and distraction shape who we are as lawyers and judges? Does and should law/lawyers/law schools prioritize some modes of attention over others? Is attention gendered and culturally specific? Is full attention a precondition for just adjudication? If we are what we pay attention to, then do judges change as their attention shifts? Does just adjudication require moments of mutual understanding of the fact that attention is shared by multiple people and trained on the same object? Those are questions well worthy of our attention.

Cite as: Roger M. Michalski, Attention Supplicants, JOTWELL (January 21, 2020) (reviewing Ryan Copus, Statistical Precedent: Allocating Judicial Attention , __ Vand. L. Rev. __ (forthcoming 2020), available at SSRN), https://courtslaw.jotwell.com/attention-supplicants/.

Procedural Law, the Supreme Court, and the Erosion of Private Rights Enforcement

Stephen B. Burbank & Sean Farhang, Rights and Retrenchment in the Trump Era, 87 Fordham L. Rev. 37 (2018).

A slow, insidious creep of procedural law has been systematically eroding the private rights enforcement regime. For years, many of us proceduralists have sounded a clarion call over this unrelenting, incremental attack on private enforcement of substantive rights. Rights and Retrenchment in the Trump Era by Stephen Burbank and Sean Farhang unpacks this troubling phenomenon and offers us a cogent way for understanding how we got here. Burbank and Farhang do an excellent job of unearthing the history and future prospects of this entrenchment, illuminating through archival research, data, and theory how various institutions have taken a swipe at private enforcement.

The authors explore how Congress, the federal court rulemakers, and the Supreme Court have strategically sought to undermine substantive law, with varied success. Burbank and Farhang ultimately conclude that the Supreme Court is the winner in rights retrenchment—the most successful player in the counterrevolution against federal litigation vis-à-vis the other branches of government—for reasons of competency, opportunity and lack of democratic accountability. In pinpointing the Court as the victor, Burbank and Farhang focus our attention and effort toward resurrecting precious substantive rights in jeopardy. Their work is not only critical to understanding the problem, but represents an important step toward designing prescriptive measures. For those of us invested in protecting the rule of law—whether it be civil rights, environmental protection, consumer safety, or immigration policy—this article is essential reading for understanding the complexity, dynamism, and relentless way in which process (shrouded in neutrality and legalese) can quietly undercut democracy and more fundamentally humanity.

The article grows out of the authors’ prior book, Rights and Retrenchment: The Counterrevolution Against Federal Litigation. The new work not only summarizes the salient points of the book, but builds from this solid foundation and offers predictions about what lies ahead in an increasingly partisan and unpredictable political landscape. Unfortunately, Burbank’s and Farhang’s conclusion is troubling; they “expect that the Court’s anti-private-enforcement posture will be sustained, if not deepened, in the foreseeable future.” What accounts for this longevity, resilience and growth? The authors offer much food for thought.

They start by explaining how this all started—with the rise of the litigation state in the 1960s.  Democrats, disillusioned with the American Administrative state’s lack of capacity or interest in social and economic regulation, set out directly to enforce legislative mandates through private lawsuits and statutory rules. With Congress increasingly controlled by a different party than the White House, tension increased between Congress and the President, giving birth to a greater private enforcement regime. The Democratic-controlled Congress enacted statutes establishing private rights of action with fee-shifting provisions and damages enhancements. Burbank and Farhang demonstrate that these litigation incentives worked, tracking a steady rise in the federal private statutory litigation rate from 1933 to 2014.

But the rise of the litigation state would not go unchallenged. The authors describe an orchestrated counterrevolution on the part of Congress, the federal rulemakers, and the Supreme Court to leave untouched the substantive law, but to destabilize the tools used for their enforcement. Each branch had varying success.

Congress failed at its attempt. Retrenchment legislation advocated in the 1980s by John Roberts (yes, that John Roberts, then in the Justice Department) and Antonin Scalia (yes, you guessed it, then a law professor) failed. Republican support for anti-litigation measures was largely unsuccessful, from the Reagan era and beyond, even with unified control of Congress in the 1990s. Republicans succeeded at enacting the Private Securities Litigation Reform Act (“PSLRA”) and the Prison Litigation Reform Act (“PLRA”) with Democrat Bill Clinton in the White House and the Class Action Reform Act (“CAFA”) with President George W. Bush in the White House.  But they were unable to do more because of the “endowment effect”—people’s disdain for advocating for rights removal. While Republican legislators have largely abandoned their rights-retrenchment program, a new wave began in 2014 with unified control of Congress and has continued into the Trump era. However, with deterrents like the endowment effect and the filibuster, Burbank and Farhang doubt the beginning of a revolutionary litigation retrenchment coming from Congress. Their doubt may be even more justified today, given that the Democrats recaptured the House in the 2018 elections since this article was written. In fact, Burbank and Farhang flag an interesting twist—the growth of Republican-led bills to create private rights of action (complete with attorneys’ fees) for those seeking to enforce a traditionally conservative agenda.

The federal rulemakers have not fared much better in the counterrevolution. The authors analyzed original data from 1960 to 2014, seeking to understand the behavior of the Civil Rules Advisory Committee. Few rules proposals have limited private enforcement, but the ones that have been adopted have steadily disfavored plaintiffs. The authors conclude that anti-enforcement efforts by the Committee have not been very successful because of checks and balances (including public transparency and participation by stakeholders) added to the rulemaking process in the 1980s. They do flag one marked exception—the influence of Chief Justice Roberts on the amendment of the discovery rules in 2015. But class action reform efforts have not followed suit. The rulemakers did not take the bait—passing on many controversial proposals aimed at issue certification, ascertainability, and “picking off” plaintiffs. The authors give a shout out to the rulemaking process—its “restraint, thoroughness, and inclusiveness”—and the Advisory Committee members themselves when explaining why this institution has played a more limited counterrevolutionary role.

The Supreme Court has been the most successful at retrenching rights enforcement.  Unlike Congress and the federal rulemakers, the Court is immune from politics and largely free from public scrutiny and participation respectively. The Court thus has achieved through interpretation (some would say rewriting) of the Federal Rules what others could not do through legislation or rule amendment. With an increasingly conservative Supreme Court, plaintiffs’ probability of successfully litigating private enforcement issues has declined over the last 40 years, to the point where “by 2014 they were losing in the vast majority of cases.” Burbank and Farhang share some gripping statistics:

By 2014 . . . the pro-private-enforcement side was losing an estimated 86% of the time, with conservative justices voting against private enforcement 90% of the time.  Over the same period, the probability of a pro-private-enforcement vote by liberal justices actually increased from 67% to 78%. The distance between liberals and conservatives grew from 30 percentage points in 1970 to 68 percentage points in 2014 . . . .

The authors contend that ideology has played a greater role in the justices’ votes over time and has created a greater schism among the justices when it comes to private enforcement rules than the substantive law itself.

The article concludes by offering insightful institutional justifications for why the Supreme Court has been most effective in the counterrevolution. First, the Court can more easily take unilateral action by a simple majority vote in controversial cases. Second, as a branch of government not chosen by the electorate, the Court is more immune from political influence. Third, the Court is more free to make policy-oriented decisions safe from a congressional course correction because of party polarization and congressional gridlock. Finally, the Court’s relative obscurity allows it to make retrenchment decisions that fly largely under public radar. These institutional attributes create the perfect storm for effective backlash to the 1960s rise of the litigation state.

Burbank and Farhang end on a sobering note, concluding that given the Court’s current and potential future composition, it will continue to lead the private rights retrenchment movement. Rights and Retrenchment in the Trump Era challenges us to think about this state of affairs. Given the ongoing violation of constitutional norms that characterize the Trump Administration, it behooves us to consider the role of all government institutions, particularly the Court, and to hold them accountable to protect the rule of law.

Cite as: Suzette M. Malveaux, Procedural Law, the Supreme Court, and the Erosion of Private Rights Enforcement, JOTWELL (January 9, 2020) (reviewing Stephen B. Burbank & Sean Farhang, Rights and Retrenchment in the Trump Era, 87 Fordham L. Rev. 37 (2018)), https://courtslaw.jotwell.com/procedural-law-the-supreme-court-and-the-erosion-of-private-rights-enforcement/.

Due Process and National Injunctions

Mila Sohoni, The Lost History of the “Universal” Injunction, 133 Harv. L. Rev. __ (forthcoming 2020), available at SSRN.

National and universal injunctions have been in the news. In the wake of an outpouring of scholarly interest in decrees that offer non-party protections, especially in litigation with the federal government, the Supreme Court has taken notice. Invoking Sam Bray’s view of the national injunction as “unthinkable” by standards of “traditional equity,” Justice Clarence Thomas argued in a concurring opinion in Trump v. Hawaii that such injunctions “appear to be inconsistent with longstanding limits on equitable relief and the power of Article III courts.” The Trump Department of Justice has issued guidance to its civil litigators, encouraging them to contest the proposed issuance of universal decrees. And members of Congress have considered legislative fixes that would narrow federal equity power.

Many fixes have been proposed and some will no doubt be adopted, particularly as federal courts grow more cautious about issuing such decrees. But as Mila Sohoni argues in The Lost History of the “Universal” Injunction, it may not make sense to frame any restrictions as constitutional limits on the remedial authority of federal courts. Adjusting the exercise of equitable discretion is one thing; curtailing equitable authority on constitutional grounds is quite another.

In suggesting that the absence of historical support from equity’s past placed the national injunction beyond the constitutional limits of federal judicial power, Justice Thomas adopted an interpretive approach to federal judicial power that one might term equitable originalism. Such an approach defines the power of the federal courts by reference to the “days of the divided bench,” when courts of law and equity administered separate remedial forms. On such a view, federal courts would refer to the practice of the High Court of Chancery, circa 1789, to define equitable power today.

One might contest such an approach to defining judicial power on any number of grounds. For starters, times change, and the remedial demands of modern life change with them. Since the Supreme Court’s decision in Brown v. Board of Education, the remedial needs of modern constitutional litigation have pressed the federal courts to grant forms of structural relief that one might struggle to analogize to the practice of the High Court of Chancery. Chancery administered complex remedies in appropriate situations, but it largely steered clear of public law matters. One might also observe that focusing on the practice of the High Court of Chancery in isolation might slight the package of judicial remedies that were administered in law and equity. In truth, much of eighteenth-century judicial oversight of government activity occurred in the common law courts in suits for damages and by way of writs of mandamus and certiorari. To the extent one looked only at equitable remedies in public law, one might too narrowly define the range of remedies that citizens (of the United States) or subjects (of Great Britain) could invoke at the relevant moment in history.

Sohoni offers another basis on which to question judicial power on the lessons of history. She documents a collection of non-party protective orders that date from well before the heyday of the Warren Court. Through a careful sifting of historical sources, Sohoni has located many early decrees and mandates, including the terms of the actual injunctions. She demonstrates that the Supreme Court and many lower federal courts granted non-party protective orders as early as 1913. Sometimes these broad remedies ran against the federal government and federal officials, sometimes against state officials. But their operation outside of formal class litigation blocked government officials as a more general matter, thus conferring benefits on parties not before the court.

Needless to say, the Supreme Court occupies a place in the Article III hierarchy different from that of the lower federal courts. As a result of their finality and nationwide application, orders issuing from the Court have the quality of settling questions of law and of conferring a species of non-party protection on all affected individuals within the United States. One can thus argue that the Court’s power to issue broad orders does not necessarily establish a similar power in lower federal courts to settle questions on a national basis. And before the rules governing class certification were amended in 1966 to allow for injunctive civil-rights classes, federal courts applied rather less formal rules for the provision of class-wide relief than they do today. Some early non-party protective relief may have issued where the plaintiff, although appearing alone on the pleadings, was viewed as representing a class of claimants.

On the other hand, national injunctions undermine both the rule barring non-mutual preclusion against the government and the desire for limited decisions that allow for the percolation of important issues of constitutional power in the lower courts. Some modesty and rectitude in the issuance of non-party protective orders should commend itself to all levels of the Article III judiciary.

But Sohoni argues that it does not make sense to frame operational concerns with the administration of relief in terms of Article III judicial power. As she observes, “[t]here is only one ‘judicial power,’ and that power includes the power to issue injunctions that protect those who are not plaintiffs.” Sohoni would invite the participants in the debate to reframe the issue in policy and prudential terms and take the threat of Article III invalidation off the table. Such an approach would leave a series of constitutional protections in place, protections attending to the due process interests of those whose claims have been jointly presented in the form of a class action. Defendants may have a due process right to bind class claimants who join together, just as plaintiff class members have a due process interest in adequate representation and in avoiding litigation that lumps them unfairly together with folks who do not share their interests. Class action law has evolved to account for these due process concerns, growing more punctilious over time.

Sohoni’s lost history suggests that those who propose to articulate constitutional limits on the scope of injunctive relief might better frame their concerns in due process rather than in Article III terms. Such an approach would have the added advantage of binding the state courts in their administration of non-party relief and would thereby encourage the Supreme Court to consider, from a somewhat broader perspective, the consequences of any constitutional adjustments.

Cite as: James E. Pfander, Due Process and National Injunctions, JOTWELL (December 11, 2019) (reviewing Mila Sohoni, The Lost History of the “Universal” Injunction, 133 Harv. L. Rev. __ (forthcoming 2020), available at SSRN), https://courtslaw.jotwell.com/due-process-and-national-injunctions/.

Decision-Making in the Dark

Merritt E. McAlister, “Downright Indifference”: Examining Unpublished Decisions in the Federal Courts of Appeals, 118 Mich. L. Rev. __ (forthcoming 2020), available at SSRN.
Ryan Azad

Ryan Azad

Among the hallmarks of our federal court system are judicial opinions. Federal judges do not just bang their gavels and declare a winner—their decisions are memorialized in published opinions that recount the facts of the case, lay out the relevant legal framework, grapple with the parties’ arguments, and explain why the law supports one side’s contentions over the other’s. These opinions are released not just to the parties, but to the public—allowing law students, legal commentators, and appellate courts alike to scrutinize and critique the court’s reasoning.

At least that is how it used to be. As Merritt McAlister highlights in “Downright Indifference, the vast majority of federal cases today are decided in “unpublished opinions.” That term describes any opinion that a court deems nonprecedential. But the distinguishing feature of unpublished opinions is their brevity. Because these cases involve routine issues resolved by settled precedent, the theory goes, courts need not expend resources to issue reasoned opinions that respond to the parties’ arguments. Instead, unpublished opinions succinctly explain—often in just a few sentences—who won and who lost.

Unpublished opinions have received no shortage of criticism in recent years. Some have argued that courts strategically issue unpublished opinions in qualified immunity cases to avoid establishing federal constitutional rights, thereby perpetually shielding officers from civil rights suits. Others have criticized unpublished opinions—many of which are unavailable on legal research databases—as undermining the transparency of courts.

McAlister adds a new criticism to the mix: Unpublished opinions deprive litigants—pro se litigants, especially—of a reasoned decision that is essential to procedural justice. Plaintiffs of course care about the substantive outcome of their cases. But independent of that outcome, McAlister contends, plaintiffs also care about the process they receive—about whether a decisionmaker acknowledges their concerns and meaningfully addresses their arguments. And unpublished decisions, by deciding disputes with terse (if any) reasoning, fail to further procedural justice values that litigants yearn.

It was not always this way. Unpublished decisions are a relatively new phenomenon. Federal courts of appeals began issuing them in the 1960s in response to an exponentially increasing caseload. So one would think that the sharp rise in the percentage of cases decided in unpublished opinions—from 11% in 1981 to nearly 89% in 2016—corresponds with an increase in caseload volume. But that would be wrong. McAlister digs up the numbers and demonstrates that, while the number of appeals in most circuits has decreased, the number of unpublished opinions has continued to go up.

The rise in unpublished opinions does, however, correlate with another figure: the rise in the number of appeals filed by pro se litigants. And this gets to McAlister’s provocative thesis: By deciding so many cases in unpublished opinions largely devoid of reasoning, courts implicitly suggest that pro se litigants and their problems are not worth judicial time. Indeed, McAlister characterizes unpublished opinions as the bedrock of a two-tier justice system in which courts resolve most cases—all but the “important” cases brought by “elite” counsel—with cursory, nonprecedential decisions that receive little judicial oversight.

So unpublished opinions, when properly understood, are perhaps part and parcel of a phenomenon discussed in previous jots: A concerted effort by federal courts to close the courthouse doors on litigants and to constrict the relief provided to those who manage to sneak their way in. Unpublished opinions routinely affirm lower court judgments against pro se litigants, immigrants, and prisoners. And because these opinions largely lack independent reasoning—they often reject the petitioner’s arguments solely because the appellate court finds “no reversible error”—courts can insulate their decisions from scrutiny by an en banc panel or by the Supreme Court of the United States. Unpublished opinions, therefore, allow courts to systematically shun certain litigants’ claims and deprive them of a path for recourse.

What is the solution to this troubling trend? McAlister offers a practical, if limited, suggestion to judges: Show your work. The article argues that unpublished opinions should at least explain the basis for the court’s conclusions and demonstrate that the judges understood and considered the parties’ arguments. Such a move wouldn’t solve all the concerns associated with unpublished decisions, but it would improve what has become the dominant method of judicial decision-making.

Most importantly, reason-giving would demonstrate more respect for pro se litigants and others who may feel marginalized by the justice system’s handling of their disputes. By responding to the parties’ arguments and offering reasoning independent of the lower court’s decision, judges would demonstrate that they have heard the litigants and meaningfully assessed their claims. But the perks of reason-giving do not stop there—it would also promote judicial candor and perhaps even ensure greater accuracy in decision-making. McAlister cites Welch v. United States to illustrate her point. There, in an unpublished order, the Eleventh Circuit denied a certificate of appealability to a pro se litigant on the ground that “he ha[d] failed to make a substantial showing of the denial of a constitutional right.” The Supreme Court reversed, explaining in a 15-page opinion why the Eleventh Circuit ought to have granted Welch a certificate of appealability. One may wonder how many other unpublished decisions reached results that were not as straightforward as their conclusory reasoning would suggest. At least a few—last term the Court summarily reversed and vacated an unpublished Ninth Circuit opinion denying officers qualified immunity, and it recently granted cert in another unpublished Ninth Circuit opinion addressing whether the Securities and Exchange Commission can obtain disgorgement as a remedy for securities violations.

McAlister provides a valuable contribution by criticizing unpublished opinions from the perspective of those for whom these opinions are written: the litigants. And she offers a practical solution that would not require courts to overhaul their prevailing method of decision-making. Whether federal courts will implement McAlister’s proposal—issuing reasoned opinions for every case that comes before them—remains to be seen.

The views set forth herein are the personal views of the author and do not necessarily reflect those of his employer.

Cite as: Ryan Azad, Decision-Making in the Dark, JOTWELL (November 27, 2019) (reviewing Merritt E. McAlister, “Downright Indifference”: Examining Unpublished Decisions in the Federal Courts of Appeals, 118 Mich. L. Rev. __ (forthcoming 2020), available at SSRN), https://courtslaw.jotwell.com/decision-making-in-the-dark/.

The Negotiation Class Action

Francis E. McGovern & William B. Rubenstein, The Negotiating Class: A Cooperative Approach to Class Actions Involving Large Stakeholders, Duke L. Sch. Pub. L. & Legal Theory Series No. 2019-41 (June 13, 2019), available at SSRN.

A common criticism of modern academic legal writing is its lack of usefulness in the real world of practice. A common criticism of writing directed toward solving workaday legal problems is its lack of theoretical sophistication. Neither of these criticisms can be levied against the new paper by Francis McGovern, a Special Master in the National Prescription Opiate Litigation multidistrict litigation (MDL), and William Rubenstein, a consulting expert to the MDL court. The paper is dazzlingly conceived, and Judge Dan Polster, who is presiding over the Opiate MDL, has employed the proposal and its reasoning to find a solution to one of today’s most intractable mass torts.

The proposal harnesses Rule 23 to a new purpose: to create a class action designed specifically to negotiate a settlement. Today class actions are certified to litigate claims and, more controversially, to settle them. But this proposal is different. It forms a class around a specific settlement structure, in advance of negotiating the settlement itself; in effect, without knowing whether the defendants will settle or for how much, the class agrees about how the proceeds of a possible settlement will be distributed among class members. Class members have a right to opt out once the structure is known, so those dissatisfied with the proposed distribution plan may exit and the defendants may know in advance of negotiations what the binding effect of the settlement will be. Should a settlement be achieved, class members, who at this point will know what their share of the settlement will be, then vote to approve or reject the settlement, with approval requiring the favorable vote of a supermajority. Class members also retain rights to object to the settlement before the judge decides whether to approve it.

This new form of class action is designed specifically for what they coin “heterogeneous classes.” In a “homogeneous class,” all class members have small claims. No class member has an incentive to opt out and pursue separate litigation because individual litigation would cost more than the claim is worth; as a result, the defendant can be confident that, in negotiating a settlement, there will be no opt outs and no knock-on litigation. In a heterogeneous class, some individual claims are large enough to be worth pursuing. Hence, when a defendant negotiates a settlement with the class, the defendant must hold back some money or negotiate escape clauses to hedge against class members with valuable claims opting out. That dynamic prevents the class from harvesting the “peace premium:” the extra amount that a defendant would be willing to pay to make the entire litigation go away once and for all.

Enter the negotiation class action. Before commencing negotiations with the class, the defendant knows who is in the class and who will be bound if the court approves any ultimate settlement. As the authors argue, it behooves the putative class members and class counsel to establish a settlement structure that will keep class members with large-value claims from exercising their opt-out right. With those large-value claimants remaining in the class, the defendant can obtain global peace, while class counsel can negotiate from a position of strength, capture the peace premium, and divvy up the proceeds of any settlement according to the agreed-on distribution plan.

McGovern and Rubenstein bolster their proposal with insights from the academic class-action literature. Agency costs—the fear that the class’s agents (the representatives and counsel) will sell out the interests of the class to enrich themselves—represent one of the great concerns of class actions. The traditional responses to agency costs include enhancing the agent’s loyalty (by requiring adequate representation), giving the class members voice (by allowing them to intervene and object), and permitting them to exit (by providing an opt-out right). The authors suggest that the negotiation class action employs a novel, fourth approach to reduce agency costs: cooperation. At the same time, the negotiation class action relies on traditional mechanisms: exit (through the initial opt-out right) and voice (through the right to object to the settlement). The authors also offer a new voice mechanism, borrowed from the ALI’s Principles of Aggregate Litigation and from bankruptcy reorganization, of requiring supermajority class approval of the settlement.

The negotiation class action is both a brilliant and a brilliantly flawed proposal. Harnessing the ALI’s supermajority voting requirement to the class-action context, in which voting rights can be employed without doing violence to the principle of litigant autonomy that has otherwise doomed the ALI’s proposal, is a clever way to give class members more voice than the often-ineffective route of filing an objection to a settlement. At the same time, a voting-rights proposal generates more questions than it answers: What is the proper supermajority (66%? 75%? 90%?)? How are votes counted (one person, one vote? weighted based on claim value? weighted based on other considerations, such as a class member’s location or claim strength?)? And is the majority calculated on the basis of the votes cast or on the basis of the class size (an essential question when class members may not be easily found or when small-claim class members may not bother to return their ballots)? The devil of the proposal lies in such details, and the authors only advert to these issues without providing a framework for thinking about them.1

Some theoretical underpinnings of the proposal are also debatable. The existence of a peace premium has become an article of faith in some academic circles, despite only a modicum of evidence that it might exist in the real world of aggregate-settlement negotiation. Another academic difficulty is the argument that the concept of cooperation is a fourth strategy to deal with agency costs. It is not; cooperation assumes away agency costs or, at best, is a way to execute a loyalty strategy. A simple tell reveals the weakness of this cooperation strategy: to ensure that agency costs do not infect the initial intra-class negotiation on the proper settlement structure, the authors must rely on strategies of exit (opt-out rights) and voice (objections and supermajority voting).

These concerns are perhaps troubling only to an academic. More practically troubling is the idea of the heterogeneous class. Claims of class members may be heterogeneous along a number of vectors. One vector—on which the authors build their proposal—is differences in the amount of damages that a class member suffers. In this regard, the authors’ idea creates a new label (“heterogeneous claims”) for an old principle—existing case law recognizes that claims of different amounts do not necessarily create internal differences or conflicts sufficient to scuttle class certification.

But another vector is the comparable strength or weakness of claims, in light of differences in applicable substantive law, defenses, or evidence. Class certification of heterogeneous mass torts with these characteristics often founder against one or more of the elements necessary to attain certification (commonality, typicality, adequacy of representation, or predominance). What Richard Nagareda called the pre-existence principle, which seems to underlie the Court’s decisions in Amchem and Wal–Mart, provides that these elements cannot be satisfied by a common negotiation strategy or distribution plan. It becomes difficult to imagine that negotiation classes could be certified except in cases in which the only relevant differences among class members is the amount of damages they suffer. But these are the cases in which a novel negotiation class action is least needed, for certification of a litigation or settlement class action is already possible.

The advantage that the negotiation class may offer over litigation or settlement class actions is a means to keep large-scale claimants in the class. But these claimants will remain in the class, rather than opt out, only if they perceive that the distribution plan negotiated at the outset favors them—that they stand to gain more from the class action than from individual litigation. A negotiation class action might promise more gain for a number of reasons: because they share in a peace premium, because they can spread litigation costs among all class members, or because the settlement structure overcompensates them in relation to small claimants. The first possibility, on which the authors seem to hinge the proposal, is speculative—in no small part because, once the defendants know the distribution plan, they can game their negotiating strategy accordingly. Unable to use the possibility of large-claimant withdrawal as leverage to negotiate a sweeter deal, class counsel might be negotiating with one arm tied behind its back. The second possibility is not unique to negotiation class actions but is shared with litigation or settlement class actions. And the last possibility raises disqualifying conflicts of interest within the class—conflicts of the kind that cratered the settlement class actions in Amchem and Ortiz.

Given its conservatism on class actions, the Supreme Court would almost surely “disapprove th[e] novel project” of negotiation class actions, as it disapproved “trial by statistics” in Wal-Mart. At best, the device might find use in a narrow swath of class actions in which claims are heterogeneous only with respect to the amount of damages that class members suffered. Time will tell, and the early returns are coming soon—the order certifying the Opiate Litigation negotiation class action is on appeal.

It pains me to be skeptical. The need to create useful solutions to resolve the intractable problem of mass torts is palpable. And the authors’ proposal is one of the most promising and innovative developments to come along in a great while.

  1. In his opinion certifying the class of municipalities and counties seeking recovery from pharmaceutical companies for saturating their communities with opioids, Judge Polster contemplated that each governmental unit would cast one vote, which would then be weighted along three metrics on one scale and two on another, for a total of six voting classes. Approval for each voting class required a favorable vote from a 75% supermajority.
Cite as: Jay Tidmarsh, The Negotiation Class Action, JOTWELL (November 13, 2019) (reviewing Francis E. McGovern & William B. Rubenstein, The Negotiating Class: A Cooperative Approach to Class Actions Involving Large Stakeholders, Duke L. Sch. Pub. L. & Legal Theory Series No. 2019-41 (June 13, 2019), available at SSRN), https://courtslaw.jotwell.com/the-negotiation-class-action/.

Is Greed Good? Mega-Fees in Securities Fraud Class Action Mega-Settlements

Stephen J. Choi, Jessica Erickson, and Adam C. Pritchard, Working Hard or Making Work? Plaintiffs’ Attorneys Fees in Securities Fraud Class Actions, NYU Law and Economics Research Paper No. 19-31 (July 15, 2019), available at SSRN.

Stephen J. Choi, Jessica Erickson, and Adam C. Pritchard have authored a provocative empirical study of attorney fee awards in securities fraud class actions. Complementing an existing array of studies, they focus on the subset of mega-settlements—those in excess of  $100 million dollars—such as the $186.5 million fee award in a securities action against Petroleo Brasileiro SA, in which the plaintiffs’ attorneys claimed to have worked 324,307 hours on the litigation to obtain a $3 billion settlement. Their conclusions are certain to provoke discussion, if not strenuous dissent: namely, that the lure of mega-fees in certain securities cases induces many lead counsel to make work, rather than to work hard.

The authors situate their study in the reforms Congress envisioned in enacting the Private Securities Litigation Reform Act of 1995 (“PSLRA”). This legislation limited fee awards in securities class actions to a “reasonable” percentage of the settlement. The study included every securities class action filed in federal court between 2005 and 2016, a total of 1719 cases, comparing fee requests and awards in the highest-stakes cases with those in other securities class actions. The authors wanted to test whether attorneys were investing more time in high-stakes cases and if the needs of these cases drove the expenditure of additional time or merely rove the desire to justify a higher fee award.

The authors investigated five hypotheses. First, courts rarely reject fee awards, but are more likely to reject fee awards in higher-stakes litigation than in low settlement values. Second, plaintiffs’ attorneys work significantly more hours in the top decile of settlements and receive significantly higher fees. Third, defendants mount more aggressive defenses in higher-stakes litigation, thereby raising the marginal benefit of more work by plaintiffs’ attorneys (the “work hard” hypothesis). Fourth, high-stakes litigation encourages plaintiffs’ attorneys to inflate their hours by doing work that is not necessary (the “make work” hypothesis). Finally, the authors posited that fee award multipliers would not track litigation risk.

Mega-settlements are not the norm: 90% of the actions resulted in a settlement under $50 million and attorneys’ fees under $10 million. The top decile however, differed considerably. The mean top decile settlement was $295.5 million and the mean attorney fee award was $39.5 million. The top decile of mega-settlements had the highest attorney hourly fee, at $938.30.

The authors reach a number of interesting–if not remarkable–conclusions. Plaintiffs’ attorneys put in far more hours in the top decile of settlements and are rewarded with higher fees. Some of the increased hours may have resulted from attorneys doing work that was not necessary, especially in cases with multiple lead counsel. For example, attorneys may engage in unnecessary or duplicative discovery and motion practice across numerous law firms, especially where the defendant’s egregious conduct was patently evident. The authors found evidence that attorneys may work less efficiently in cases with the largest stakes.

With regard to control of attorney fee awards, the judicial system assigns oversight to two actors: the class representative and the court. The PSLRA introduced the requirement that the largest institutional investor represent the class of shareholder claimants. The authors express skepticism–documented in previous studies—that institutional shareholders are the consistent, active watchdogs that Congress envisioned when enacting the PSLRA. But the authors conclude that judges do not serve as a meaningful check on fee awards, more often than not willing to sign off on mega-fee requests. If the plaintiffs’ attorneys accompanied their fee requests with a lodestar check, courts were less likely to reject the fee award. Generally, courts do not use a multiplier to reward plaintiffs’ attorneys for taking on riskier cases., although they do use a multiplier to reward attorneys for litigating more egregious securities violations, even though these cases pose less, not more, risk for them.

This study is worth reading because it carves out high-stakes, high-settlement cases from the universe of all securities settlements. As such, it seeks to identify and explain the agency costs entailed in these significant cases, ultimately with implications for shareholder claimants. Their general conclusions seem certain to provoke protests from the plaintiffs’ bar, as well as the judges who approve the fee requests. It additionally presents the tantalizing question whether mega-fees in other types of mega-settlements—mass tort litigation, for example—experience the same hydraulic forces that induce attorneys to “make work” for higher fees.

Cite as: Linda S. Mullenix, Is Greed Good? Mega-Fees in Securities Fraud Class Action Mega-Settlements, JOTWELL (October 30, 2019) (reviewing Stephen J. Choi, Jessica Erickson, and Adam C. Pritchard, Working Hard or Making Work? Plaintiffs’ Attorneys Fees in Securities Fraud Class Actions, NYU Law and Economics Research Paper No. 19-31 (July 15, 2019), available at SSRN), https://courtslaw.jotwell.com/is-greed-good-mega-fees-in-securities-fraud-class-action-mega-settlements/.

New Courts, New Perspectives

  • Matthew Erie, The New Legal Hubs: The Emergent Landscape of International Commercial Dispute Resolution, __ Va. J. Int’l L. __ (forthcoming 2020), available at SSRN.
  • Will Moon, Delaware’s New Competition, __ Nw. U. L. Rev. __ (forthcoming 2020), available at SSRN.

Fascinating developments are afoot in other countries’ courts. Recent articles by Matthew Erie and Will Moon offer terrific insights into a variety of innovative developments in foreign business courts. These articles have implications for those interested in procedural innovation, the development of legal institutions, transnational governance, the international development and influence of the common law, the role of courts in establishing and maintaining the rule of law, and the role of U.S. courts in transnational litigation and as an international judicial leader.

Erie’s article describes the rise of “new legal hubs” (NLHs) across “Inter-Asia,” including in Hong Kong, China, Singapore, Dubai, and Kazakhstan. Erie defines an NLH “as a ‘one-stop shop’ for cross-border commercial-dispute resolution, often located in financial centers, promoted as an official policy by nondemocratic or hybrid [democratic and authoritarian] states.” NLHs have been established over the past few decades—some as recently as earlier this year. These new institutions establish courts in combination with arbitration centers and mediation services, often housed in the same state-of-the-art buildings.

Erie, a legal anthropologist at Oxford, conducted extensive empirical research in five jurisdictions that are home to NLHs. The article contains a wealth of fantastic details and insights about the history, political economy, and functioning of these courts and legal centers. It explores the role of lawyers and legal culture in the creation of legal institutions and depicts procedural innovations. These courts tend to exclude the local law and local language in favor of common law procedural and substantive law and English language. The Dubai International Financial Center’s court, for example, allows its judgments to be converted into arbitral awards, potentially allowing for international enforcement as if they were arbitral awards.  Singapore is experimenting with merging arbitration and mediation into a procedure known as “Arb-Med-Arb” that allows, among other things, for consent awards to be accepted as an arbitral award. China offers “smart courts,” integrating artificial intelligence, big data, and machine learning into the adjudication process to minimize over-burdened court dockets and increase access to justice, particularly for online disputes. Courts in NLHs highlight the role of courts in relation to arbitration and other modes of dispute resolution.

In addition to these innovations, Erie’s analysis places NLHs in a global context that is important for understanding the role of courts and law on the international plane. As London and New York take themselves down a notch in global influence, they create an opening for other providers of legal services, such as Singapore and Hong Kong, to step into the market for international commercial dispute resolution. NLHs seem to catalyze globalization, facilitating cross-border commercial transactions. They also “exist in relation to one another . . . as a mainly decentralized network.” They enter non-binding agreements to enforce each other’s judgments and they contribute to our understanding of how judges in different jurisdictions engage in dialog.

But Erie’s central proposition is that despite the appearance that NLHs facilitate globalization, NLHs may conflict with their host states, creating thorny conflicts between the rule of law and nondemocratic governments. In part because NLHs operate in “exceptional zones”—carve-outs from the rules that generally apply to the rest of the country—they develop and apply “bespoke rules and institutions that differ from those of the host state.” “But their very exceptionality . . . can cause an array of conflicts with the host state, from institutional competition and jurisdictional turf wars to political rivalries and ideological dissonance.” Thus, “NLHs demonstrate the potential and fragility of ‘rule of law’ in nondemocratic states that promote globalization against trends in the West.”

This rich account of NLHs in Inter-Asia pairs well with Moon’s article, which focuses on specialized business courts in offshore jurisdictions such as the Cayman Islands, the British Virgin Islands, and Bermuda. Moon describes these foreign nations as “Delaware’s new competition.” Like Delaware, they offer permissive corporate governance rules and specialized business courts, attracting publicly traded American companies to incorporate there. Moon makes an important contribution to the corporate-governance literature, continuing debates about Delaware’s role started by Roberta Romano in the 1980s.

Most interesting to students of courts is Moon’s description of these offshore islands’ new specialized commercial divisions. Like the courts in NLHs, these courts have hired judges with business law expertise, often foreign individuals who are well respected judges in their home states (often the UK). Indeed, some people serve as judges for NLHs and offshore states and as international arbitrators. Also like NLH courts, offshore business courts incorporate a common law tradition and apply common law substantive and procedural law.

The new courts Erie and Moon describe raise difficult normative issues about the public accessibility of the dispute-resolution process. A classic divide between arbitration and litigation is that the former can be kept confidential, while courts and their judgments are open to the public. But the “open justice” principle, recently reaffirmed by the UK Supreme Court, has varying applications in different countries. These new business courts in NLHs and offshore nations are, by default, public. They are state-created courts. They often post decisions on their websites, such as the Dubai International Financial Centre Court’s and Bermuda’s. But NLH courts allow parties to opt into confidential proceedings and judgments and do not (and potentially never will) identify or clarify the standards for determining whether to grant parties’ requests for confidentiality. The offshore courts are more “transparent” in their secrecy—over 55% of Cayman Islands Financial Services Division opinions are sealed, and even that court’s “public” decisions are only available to registered users who have paid an annual fee. Even U.S. courts have been known to grant confidentiality requests when both parties agree, notwithstanding the possible public harm that results from such secrecy, as demonstrated by the recent opioid litigation. It stands to reason that international business courts, who may aim to please the parties before them, would grant such requests.

This secrecy stands in tension with another goal of NLHs and offshore business courts: to develop law. They thus raise fundamental questions about institutional design and legal development. If a state subsidizes dispute resolution in part to foster the development of precedent, how much publicity is enough? These courts may be able to proceed in secret to resolve the particular dispute between the parties, while ignoring the other purposes that courts serve.

NLHs and offshore business courts thus provide a window into the role of courts as creators and preservers of the rule of law domestically and internationally. All purport to promote investment and investment security in their local economies. They may do so by offering well-respected international jurists, a common law tradition, or confidentiality. But can these attributes make up for foreigners’ distrust of the host state? As Erie asks, can they generate positive legal developments in other aspects of domestic governance?

Moon’s paper also examines these foreign court developments from the perspective of U.S. courts, particularly Delaware. U.S. courts—whether Delaware for corporate disputes or federal courts for international human rights disputes—have traditionally thought of themselves as being inviting, even too inviting, to transnational litigation. They have helped develop international law and domestic law with far-reaching extraterritorial effects. But I have argued that these tides are changing because of rising barriers to transnational litigation in U.S. courts and rising competition abroad.

Erie and Moon provide deep dives into two different, important sources of that rising foreign competition. These perspectives should illuminate how we understand courts as international actors in a world with quickly changing global dynamics. These articles are significant contributions in their own right, and also provide a launching pad for important future work for these scholars and others interested in examining courts from a variety of angles.

Cite as: Pamela Bookman, New Courts, New Perspectives, JOTWELL (October 16, 2019) (reviewing Matthew Erie, The New Legal Hubs: The Emergent Landscape of International Commercial Dispute Resolution, __ Va. J. Int’l L. __ (forthcoming 2020), available at SSRN. Will Moon, Delaware’s New Competition, __ Nw. U. L. Rev. __ (forthcoming 2020), available at SSRN. ), https://courtslaw.jotwell.com/new-courts-new-perspectives/.

E-Notice and Comment on Due Process

Christine P. Bartholomew, E-Notice, 68 Duke L.J. 217 (2018).

As I have mentioned in previous jots, I am a big fan of scholarship that focuses on “on-the-ground-practice with a sensitivity to finding solutions.” Christine Bartholomew’s E-Notice fits that mold. Bartholomew reviews more than 2,700 federal district court decisions on notice in class actions to examine the openness of these courts to electronic methods of notice that take advantage of newer technologies, big data, and social media.

But the article is much more than that. It is one of those rare articles that uses on-the-ground practice to provide insights into one of the thorniest areas of the law—the law of due process.

The empirical project is impressive. Bartholomew searched legal databases to find every decision from 2005 (the year that the Class Action Fairness Act was enacted) to 2017 concerning notice in class actions, focusing on the notice provided to class members of pending class actions and class-action settlements pursuant to Rules 23(c)(2), Rule 23(d), and 23(e). She read each decision to determine whether the court addressed the use of what she calls “e-notice,” which she defines as “emails, text messages, website advertisements, banner ads, keyword ad campaigns, social media posts, and other digital-electronic communication.” Bartholomew analyzes the data to show a general reluctance by district courts to use such methods of notice, categorizing their concerns under three categories—fear of changing traditional notice, fear of new technologies, and fear of imprecision.

Bartholomew does a great job of toggling between the forest and the trees. She presents data and charts to support her claims, but always illustrates her claims with carefully selected examples. For example, she shows “the fear of imprecision” by singling out the Third Circuit’s use of e-notice for antitrust and consumer cases. The choice is apt—the Third Circuit has been one of the leading circuits in adopting an “ascertainability” requirement for class certification, requiring proof that the class members can be specifically ascertained or identified. It stands to reason that a preference for ascertainability goes hand in hand with an aversion to “constructive” methods of notice such as e-notice, which tends to not target specific class members but to use more indirect methods.

The data bears this out. Bartholomew focuses on antitrust and consumer cases because proof of ascertainability tends to be difficult given the lack of records of specific purchases, making e-notice a valuable means of “constructively” informing class members. Use of e-notice declines for antitrust and consumer cases in the Third Circuit after 2013 and 2014, when the court issued important opinions “doubling down” on the ascertainability requirement. There is even a bump up in 2015 when a new decision eased up a bit on that requirement.

3rd Cir E-Notice

Source: P. 254.

Bartholomew brings life to this data by quoting specific cases—for example, where a court was troubled with constructive notice being both “overinclusive and underinclusive,” one of the concerns that undergirds the ascertainability requirement.

But what I really like “lots” about the article is the subtle but persuasive argument it makes about due process. Rather modestly, Bartholomew includes an “intentionally abbreviated” discussion of the statutory and constitutional requirements surrounding class-action notice. The centerpiece of her discussion is Mullane v. Central Hanover Bank and Trust Co., a case I have analyzed in my own writings. Mullane is a masterpiece, containing a coherent theory of due process that focuses less on fixed procedural rights and more on using procedure functionally and flexibly to achieve important social objectives. Bartholomew does not discuss the implications of Mullane to the law of due process writ large, but observes, correctly, that Mullane is the law on the due process of class-action notice. Therefore, Rule 23 and cases interpreting it (particularly Eisen v. Carlisle & Jacqueline) must embody Mullane’s flexible approach. I found this very persuasive, particularly her focus on the terms of Rule 23(c)(2)(B), which expresses a preference for “individual notice” when possible, but only requires the “best notice that is practicable under the circumstances.”

Bartholomew’s main argument for a flexible, Mullane conception of due process arises from the courts’ misgivings about e-notice. The arguments against e-notice given by courts are especially unpersuasive, such as courts’ concerns that too much notice may (supposedly) harm defendants’ reputations. This is due, in part, to the reality that many district court judges do not spend much time critically examining notice plans, understandably so. There is so much to do, and sometimes it is easier to do what is tried and true than to venture into new territory. But the reader is left with a picture of due process as a cage, forever enshrining a preference for mailed notice, which was state-of-the-art when Mullane was decided in 1950. Courts repeat that “[t]he Supreme Court has consistently endorsed notice by first-class mail.” But the “spirit of Mullane” and significant due process precedent contemplate “changing modes of notice over time.” The contrast between what Mullane and e-notice can offer and what we actually have provides a powerful argument that we should rethink how we achieve due process.

It is a small and impressive miracle that Bartholomew achieves such great heights from digging into the earthy practice of class-action notice plans. And it is done with crisp, sparkling writing. Needless to say, I really like this article lots and I highly recommend it!

Cite as: Sergio J. Campos, E-Notice and Comment on Due Process, JOTWELL (September 23, 2019) (reviewing Christine P. Bartholomew, E-Notice, 68 Duke L.J. 217 (2018)), https://courtslaw.jotwell.com/e-notice-and-comment-on-due-process/.