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A Well-Pleaded Argument

Lonny Hoffman, Plausible Theory, Implausible Conclusions, 83 U. Chicago L. Rev. Online 143 (2016).

I should start by putting my own bias on the table: I think the changes to pleading standards brought about by Twombly and (especially) Iqbal are a really bad idea. Procedural systems that turn on early pleading of factual detail have failed for centuries to provide either accurate or efficient results. Rather, gatekeeping based on pleadings encourages and rewards pleading disputes, leads to wasteful motion practice about degrees of particularity, and, worse, the dismissal of meritorious claims under conditions of information asymmetry. Even if I did not hold these views, however, I would find much to admire in Lonny Hoffman’s elegantly structured response to William H.J. Hubbard’s article, A Fresh Look at Plausibility Pleading, an article that doubts that “plausibility” analysis has much impact and suggests that plaintiffs with weak cases are better off losing quickly.

Hubbard’s piece is a fascinating thought experiment: what if there were no pleading standards, so that decisions about what cases to bring and how to plead them were entirely in the hands of plaintiff-side lawyers? It is generally agreed that lawyers play a gatekeeping role in litigation. In fact, lawyer gatekeeping itself represents only a tip of the no-lawsuit iceberg, since studies consistently show that most people with a potential justiciable claim do not even consult an attorney. (American Bar Association, Legal Needs and Civil Justice: A Survey of Americans, Major Findings of the Comprehensive Legal Needs Study (1994); Hazel Genn, Paths to Justice: What People Do and Think About Going to Law (1999).) Nevertheless, Hubbard’s article contributed to the discussion by updating and attempting to quantify this effect.

Hoffman describes the way in which Hubbard combines economic theory with data from the Federal Judicial Center about median case values and litigation costs. As a result of this cost/benefit calculus, most meritless and very weak cases will not be brought at all. One might conclude from this that an additional rigorous screening mechanism is unnecessary (Hoffman) or unlikely to make a difference (Hubbard).

Hoffman’s article proceeds to tackle important flaws in Hubbard’s descriptive and normative conclusions, starting with the problem of information asymmetry. Hoffman concisely describes the problem:

How do information imbalances that favor the defendant (such as those in cases that turn on the defendant’s state of mind or on wrongful conduct that occurred in private) interact with a strict pleading filter? And the answer, as many scholars have noted, is that, when relevant information is primarily in the possession of the defendant, plausibility pleading can create a catch-22: the plaintiff needs access to information to plead sufficiently, but a pleading stage dismissal denies her the information that would have enabled her to plead a nonconclusory, plausible claim.

Hubbard recognizes that there may be many meritorious cases in which a lack of information at the outset leads to dismissal in the “plausible” pleading regime, but argues that those cases are doomed to lose in any case – that it is a lack of “facts” rather than the pleading rules that defeat such a plaintiff. As Hoffman’s article points out, however, this is just wrong. It is not that there are no facts to support this type of claim, but that without discovery the would-be plaintiff has no access to those facts. We should not assume that case-supporting information would not be discovered. The problem is exactly that a pleadings-based dismissal prevents the equalizing of information, not that the information must forever remain asymmetric.

Further, the pleading barrier might skew the lawyer-gatekeeping process so that fewer claims are even filed – the lack of discovery forces the lawyer to evaluate the probability of success based solely on facts known to the potential plaintiff, unaided by discovery. This is true not because a loss at trial would be inevitable, but because the lawyer knows that the pleading rule will allow no discovery. Because of the combined effects of dismissals and gatekeeping, the pleading filter will mean that private enforcement of civil norms will fail when it should have succeeded.

Hoffman’s article also points out that pleading-based regimes increase cost and decrease accuracy. In order to understand why this is so, one must understand that Iqbal requires a two-step inquiry. First, judges are instructed to go through the complaint to identify and consider only allegations of facts, ignoring things that are conclusory. In cases in which the plaintiff knows, and can plead, direct evidence of the defendant’s liability, there will likely be no motion to dismiss filed.

Many cases, however, will turn on circumstantial “facts,” and ultimately on the question of whether those facts support the inference needed to prove liability. The tricky and unpredictable task of separating facts from conclusions may well lead judges to discard as “conclusory” allegations that explicitly draw those inferences, leaving only isolated nuggets of information. The question is often not “no facts” versus “conclusive facts.” It is “some facts” that are within the plaintiff’s knowledge at the pleading stage. Consider an employment discrimination example. Suppose that the complaint states that the plaintiff’s supervisor called her an “ugly bitch” on two occasions, but did not do so when explaining why the plaintiff was not promoted. That namecalling is a “fact,” but an allegation that the plaintiff was denied a promotion based on sex might be disregarded as conclusory. (I’d disagree with calling it conclusory, but it’s certainly possible that a judge would do so.)

The analysis thus turns to the second step: do the non-conclusory nuggets of information plausibly support the needed inference? Iqbal provides little guidance on what this test means or what the judge may consider, but does suggest that the inference must be at least as plausible as competing inferences (fifty percent or better?), and that the judge should use his “experience and common sense” in making this decision.

Not surprisingly, this sketchily explained, fact-dependent analysis makes it very difficult to predict how a judge would rule on a Rule 12(b)(6) motion in any particular case. Consider, again, the employment example. Does the judge’s experience suggest that the use of such language supports an inference that the supervisor’s attitudes toward women affected the promotion decision? Does the judge’s experience suggest that the language is meaningless locker room talk? If the motion to dismiss is denied, the plaintiff will have the opportunity to do discovery to try to unearth additional circumstantial evidence of discrimination, which could strengthen the basis for an inference of discrimination. If the motion is granted, the plaintiff will never have the opportunity to learn what information available only to the defendant might reveal. With nothing more than the sexist epithets, the plaintiff might lose even on summary judgment under substantive Title VII law; but the summary judgment decision would not be made until after an opportunity to do discovery, while the 12(b)(6) decision is based on only those “facts” available to the plaintiff at the outset.

Given this process, I find interesting two of Hoffman’s points about early merits decisions mandated by pleading practice. First, the newly invigorated motion to dismiss comes with a cost to the court system. The existence of a high-reward-low-risk motion to dismiss has increased the frequency with which such motions are filed. Why would a rational defendant not routinely file such a motion – given the fuzziness of the law, such motions will not violate Rule 11, will cost plaintiffs time and money, will reveal much about what the plaintiff knows (and does not know), and may even result in dismissal. As I have written previously, this is consistent with the experience of countries whose civil justice systems continue to use pleadings as a tool for screening and issue-narrowing – the energy that U.S. lawyers spend on discovery disputes is, in those countries, poured into fights about pleading.

Because the rate of pleadings-motion practice has increased, the cost to courts and parties of those motions has also increased. In assessing systemic impact, that cost must be subtracted from whatever savings might result from the early dismissal of a small number of cases (as Hoffman reminds us, Hubbard contends that since lawyers already avoid filing weak cases in most situations, this number will be small). Unsuccessful motions will take more time and result in no cost savings to the court or the parties. A 12(b)(6) dismissal, if without prejudice, allows the plaintiff a second chance to plead more “facts,” and in some situations the plaintiff might have access to the necessary information. But those motions that result in a more detailed amended complaint but not dismissal are also unlikely to save costs, unless the amended complaint limits the issues (and thus discovery) in a way that the original would not have done. For example, it seems unlikely that the amended complaint in Branham v. Dolgencorp (in which the court dismissed as insufficient a complaint that clearly met the requirements of the then-existing negligence form pleading) saved any expense that would have been incurred under the original bare-bones slip-and-fall complaint. Even successful motions to dismiss on the pleadings will vary in the marginal cost savings of foregone case management and dispute resolution prior to settlement (court) plus foregone discovery expense (parties). And while some parties and courts might save costs, it will come at the expense of increased costs for other courts and litigants.

Second, early pleadings-based decisions require an undesirable change in judicial role. Hubbard argues that early dismissal is better for plaintiffs, even in the case of the intentionally biased judge. It is still better, he suggests, to lose sooner than later. But, Hoffman argues, this straw-man image of judicial malice ignores the real problem: the common combination of sparse facts and implicit bias causes even well-meaning judges to make worse decisions. It is becoming increasingly clear that all of us, including judges, perceive the world through a set of attitudes and stereotypes – implicit biases – that arise out of precisely the factors that Iqbal directs judges to use in making plausibility decisions, our “experience and common sense.” While judges can make an effort to become more aware of, and try to counteract, their own biases, doing so is much more difficult in situations in which information is sparse. Returning to the problem of information asymmetry, the information-poor plaintiff may not be able to provide a rich enough body of “facts” to convince a judge, perhaps against his experience and common sense, that a needed inference is plausible.

Hubbard may be correct that we will not soon have conclusive empirical evidence about the impact of Twiqbal on access to justice. Unfortunately, Hubbard’s Fresh Look discounts the ability of the civil procedure process to counter other problems. Information asymmetry? That is the problem, not the pleading rule (even though a different pleading rule could allow information exchange). Biased judges? That is the problem, not a pleading rule that helps empower and disguise that bias (when a different pleading rule would deter bias-based outcomes). As Hoffman’s article demonstrates, information matters and reliable process matters. The world prior to Iqbal was different in important ways, and we should not assume away its effects.

Cite as: Elizabeth G. Thornburg, A Well-Pleaded Argument, JOTWELL (April 24, 2017) (reviewing Lonny Hoffman, Plausible Theory, Implausible Conclusions, 83 U. Chicago L. Rev. Online 143 (2016)), https://courtslaw.jotwell.com/a-well-pleaded-argument/.

Erie and Equity

Michael T. Morley, The Federal Equity Power (March 1, 2017), available at SSRN.

Michael Morley has many skills we admire in a scholar: he is doggedly productive; he has an easy command of the established authorities; and he typically identifies sources that shed new light on the problem he has chosen to tackle. Perhaps best of all, Morley has a canny eye for the kind of project that has become ripe for careful exploration. His new article on the federal equity power confirms this.

We have enjoyed something of an equity renaissance in recent years. The Supreme Court has been busy, fashioning a body of federal equity law for application to a diverse array of problems. To be sure, the Court’s handiwork has drawn its share of criticisms, perhaps most pointedly from John Langbein. But it also has its share of defenders. In an elegant piece of writing (reviewed in JOTWELL), Sam Bray celebrated the Court’s new equity jurisprudence as a flexible body of principles drawn from the days of the divided bench. While Bray recognized that the Court’s equity might not pass muster as good history, he argued that it might nonetheless provide the foundation for a supple body of law.

Understanding the nature of federal equity power has become more pressing in the wake of the Court’s decision in Armstrong v. Exceptional Child Center. There, the Court refused to treat an action to compel state compliance with a cooperative state-federal spending program as an entailment of the Supremacy Clause; instead, the Court explained that the right to seek an injunction to compel state official compliance with federal norms was a creature of federal equity. While such remedies were ordinarily available to enforce certain federal rights (as in Ex parte Young and its progeny), they were displaced in the particular case by a federal Spending Clause statute that appeared to place remedial control in the state’s overseers at the federal agency level. Private enforcement had been displaced.

Along comes Morley to make sense of the federal equity power. While he does not set out to solve the Armstrong problem, his paper possesses an admirable clarity. He would extend Erie to issues of remedial power that some federal courts continue to view as governed by the equity power of the federal forum. His approach would significantly curtail the availability of a freestanding body of federal equity in cases otherwise governed by state law. By contrast, when the substantive right traces to a foundation in federal law, Morley would recognize broader federal equity power.

In doing so, Morley marshals a good deal of common sense, pointing out that equitable remedies create the outcome disparities that ordinarily bring the Erie Doctrine into play. He also shows that one cannot fairly link the federal equity power to any positive source in the federal rules of civil procedure or in applicable federal jurisdictional statutes, thus leaving it exposed as a body of judge-made law to which the Erie doctrine (the “relatively unguided Erie choice”) applies with full force. Morley echoes conclusions that Steve Burbank also reached in a different context, arguing against the Court’s reliance on federal (rather than state) equitable principles in assessing the availability of Mareva injunctions in Grupo Mexicano.

One might fairly ask how much difference it will make if a federal court were to evaluate the propriety of preliminary injunctive relief under a federal or state standard; after all, most standards consider such matters as irreparable harm and likelihood of success on the merits. And a federal judge, sitting in diversity, will evaluate likelihood of success by looking at the merits of the claim under applicable state law. To the extent that equity calls for the exercise of judicial discretion in weighing matters of more or less, the way one frames the standard may matter less than the proverbial size of the chancellor’s foot. But where state law speaks in more absolute terms, either requiring or forbidding injunctions in specific settings, the choice of state or federal remedial law can make all the difference. In those settings, remedial choices have a more dramatic impact on outcomes and on forum preferences, thus triggering the concerns that continue to underpin Erie. When a state says no to an equitable remedy on matters governed by state law, federal courts should pay attention; after all, we would expect a state court to refrain from equitable enforcement of the federal norms that the Armstrong Court said were a matter for federal agency enforcement.

Morley teaches another important and subtle lesson. By describing the world of pre-Erie, free-wheeling federal equity and contrasting it with the more circumscribed perception of federal common law authority today, Morley helps us understand nineteenth-century perceptions of federal equity as a system of remedies. He also shows that it can be quite difficult to account for the particular content of much of the old doctrine. Sometimes equity took its cues from English practice, sometimes from perceptions of remedial adequacy at common law, sometimes from more localized considerations. In the welter of doctrines, one has difficulty distilling an essence of equity that readily translates to our very different world of litigation today, after the merger of law and equity. This offers a cautionary tale for a Court apparently devoted to dusting off the old books and plucking equity doctrines of old for use as the measure of federal equity today.

Cite as: James E. Pfander, Erie and Equity, JOTWELL (April 4, 2017) (reviewing Michael T. Morley, The Federal Equity Power (March 1, 2017), available at SSRN), https://courtslaw.jotwell.com/erie-and-equity/.

Do Claims About Claims to Claims Matter?

J. Maria Glover, A Regulatory Theory of Legal Claims, 70 Vand. L. Rev. 221 (2017).

Oftentimes when we call a thing someone’s “property,” we do so to invoke a very specific picture of the owner’s rights to that thing. To call something “property” often entails significant limits to what one can do to regulate the thing. The Due Process Clause and Takings Clause both enter the picture. Even outside of legal discourse, the term “property” has a rhetorical power that brings to mind what Blackstone called the “sole and despotic dominion” one can exercise over the thing. That is why “[m]ine is often one of the first words toddlers learn.” To quote an old American Express commercial, ownership, like membership, “has its privileges.”

So one would think that conceptualizing a thing as “property” would have an important effect on how we think about the thing. But what if it doesn’t? What if it actually leads to inconsistent, irreconcilable views in different contexts? What if it turns out that thinking about something as “property” does not provide much analytic clarity at all?

This is the bold thesis of J. Maria Glover’s A Regulatory Theory of Legal Claims, where Glover takes on longstanding debates about the conceptual status of the legal claim. Civil procedure scholars continue to debate whether the legal claim is a party’s “property,” as opposed to an aspect of procedure that is subject to the discretionary regulation of the court. Glover’s goal is not to resolve the debate but to dissolve it, as a debate that does not have the significance that the debaters give it.

Her technique is quite clever. She examines the state of the debate in different procedural contexts to show that conceptualizing the claim as property can lead to different, often inconsistent views depending on the context.

Take, for example, the class action context. The class action has often been criticized because it takes away a class member’s control over her claim, and thus takes away an important stick in the property rights bundle. In fact, a class attorney can sell the class member’s property in a settlement without the class members’ consent. For that reason, courts and scholars have been wary of certifying class actions in many contexts. Consider, for example, Justice Scalia’s throwaway line in Wal-Mart Stores, Inc. v. Dukes, that class actions for injunctive relief “rightly or wrongly” do not require notice of the class action for the class members or provide an opportunity for the class members to opt out.

But if the class action can be understood as a “taking” of the party’s control over her claim, then a party should obviously have the power to sell the claim to whomever he or she wants. Not so fast. For example, recently there has been a rise in “alternative litigation finance,” understood as attempts to finance litigation by selling shares in a claim’s recovery. At the same time, there has been a rise in lobbying efforts to change the laws of champerty and maintenance, which prohibit such claim selling. One would think that, given the paternalistic bent of the class action, plaintiffs’ attorneys would work hard to preserve champerty and maintenance laws to protect the naïve interests of the claimholders. Similarly, one would think that the defendants’ bar, as champions of the property rights of the claimholders, would push for greater opportunities to sell claims. But the opposite is true, as Glover points out – plaintiffs’ attorneys love litigation finance and the defense bar hates it.

Glover’s point is not to identify hypocrisy in the debate over the status of the claim. Her point is to question the very debate itself. As property scholars have long understood, property rights in a thing are never absolute and are frequently regulated depending on the objectives of the law. I may own the land where my residence is located, but I may have to grant an easement to allow public access to the beach. Consequently, calling something “property” does not negate the ability of courts and legislators to restrict an owner’s use of it.

Glover seeks to import that property-law insight into procedure, not by settling whether the claim is property, but by looking at the objectives of the claim. Moving in a more functionalist direction, Glover argues that the extent of a claimholder’s control rights over her claim depends on the objectives that litigation of the claim is meant to achieve. As I have argued in my own work, if protecting control rights in a claim can lead to worse compensation and deterrence in certain contexts, we should not protect them. But if protecting control rights would help (or at least not impede) underlying substantive rights, then, by all means, protect those rights. These positions are not inconsistent because they are unified by the same objective of property law in general—that the regulation of one’s control over a thing should depend on what the law, and by extension society, wants to achieve.

This is why Glover calls her theory a “regulatory” theory of the claim, and in the latter part of the article Glover discusses the implications of taking this approach to contexts such as Rule 68 offers of judgment, alternative litigation finance, and, finally, the class action. Indeed, one important takeaway of the article is that courts are empowered to regulate claims consistent with substantive goals and institutional constraints.

Glover’s article makes her point in a very persuasive and fun way. Because it is theoretical, it differs somewhat from the articles that I have liked lots in the past. But it does share with those prior articles a sensitivity to how procedure works on the ground. Glover does not talk about theory for theory’s sake, but really looks at the practical implications of theory, bringing such abstractions down to earth. For that reason, Glover makes a significant contribution to the literature.

Cite as: Sergio J. Campos, Do Claims About Claims to Claims Matter?, JOTWELL (March 23, 2017) (reviewing J. Maria Glover, A Regulatory Theory of Legal Claims, 70 Vand. L. Rev. 221 (2017)), https://courtslaw.jotwell.com/do-claims-about-claims-to-claims-matter/.

The Impact of Wal-Mart v. Dukes on Employment Discrimination Class Actions Five Years Out: A Forecast That Suggests More a Wave Than a Tsunami

Michael Selmi & Sylvia Tsakos, Employment Discrimination Class Actions After Wal-Mart v. Dukes, 48 Akron L. Rev. 803 (2015).

The Supreme Court’s decision in Wal-Mart v. Dukes set off a groundswell of concern among many scholars, lawyers, and legal commentators about its potential impact on employees’ capacity to collectively pursue relief, particularly for systemic intentional discrimination claims. As one of those concerned parties, I enjoyed reading the five-year retrospective by Michael Selmi and Sylvia Tsakos, which seems to suggest that Wal-Mart’s impact on such claims has been more of a wave than a tsunami. Selmi and Tsakos recognize the ways in which the Court’s ruling has taken its toll, but they highlight how much Wal-Mart’s impact is a matter of degree rather than kind. Pre-Wal-Mart, the class action landscape was characterized by skepticism toward nationwide class actions, greater merits-focused class certification, and jurisdiction-dependent class treatment. Post-Wal-Mart, those trends have expanded to the detriment of civil rights claims. While this expansion is normatively problematic, this article makes an important contribution to the literature by situating Wal-Mart historically and putting it into a broader perspective. In addition, Selmi and Tsakos identify a forward trend of class certification jurisprudence involving certain kinds of subjective employment practices, which have been found to satisfy Rule 23’s commonality requirement even under current class action jurisprudence.

The authors’ sobering observation that employment discrimination class actions alleging subjective practices have been struggling, combined with their positive observation that some of these class actions remain viable post-Wal-Mart, lead the authors to conclude that Wal-Mart’s effect thus far has been modest.

As an initial matter, the article establishes that Wal-Mart has changed the litigation landscape to the detriment of employees. For example, fewer plaintiffs have filed employment discrimination class actions, and those that have must incur substantial additional costs if they seek damages under Rule 23(b)(3). Moreover, emboldened by the ruling, more defendants are seeking to dismiss employment cases even before the class certification determination. (P. 804.)

The authors make no bones about their impression that the Supreme Court – and certainly its “conservative wing” – is hostile to class litigation in general and in particular to the kind of class action pursued in the Wal-Mart case. This hostility stems from the common-yet-unsupported perception that defendants are unfairly subjected to immense pressure to settle given the high costs and potential widespread liability class actions present. They argue that this overlooks the absence of evidence of potential blackmail, the availability of alternative tools for curbing settlement pressure, and the reality that plaintiffs face significant costs and risks too.

Initially, systemic challenges to facially discriminatory employment policies seeking injunctive relief made class certification straightforward. But as workers started to challenge subjective employment practices and to seek significant monetary damages (and a jury trial) for intentional discrimination pursuant to the Civil Rights Act of 1991, their capacity to unite under the umbrella of one lawsuit waned. Federal appellate courts split over the propriety of class certification under Rule 23(b)(2) — the traditional injunctive class action for civil rights cases. Some courts continued to allow employees to litigate collectively, while others rejected such routine certifications where employees sought monetary relief. This schism and differing judicial philosophies about aggregation naturally led to forum shopping.

The article contends that barriers to aggregation that existed prior to Wal-Mart, not surprisingly, have bled into the post-Wal-Mart era. This means that Wal-Mart is like its predecessors — a product of judicial hostility toward aggregation of employment claims that dates back at least a couple of decades. At the same time, the particular facts of Wal-Mart are distinct from typical employment class actions. The plaintiffs attempted to sew together the claims of 1.5 million women nationwide in a single suit on the ground that decentralized excessive subjective personnel decision-making was a policy that harmed women; this was a bridge too far for the Court. Although plaintiffs’ liability theory did not cover new ground, the size and scope of the case did. Consequently, no amount or type of evidence could satisfy the Wal-Mart majority that there existed a policy of systemic gender discrimination here.

Selmi and Tsakos pivot from establishing the fertile ground from which Wal-Mart swelled to how employment discrimination class actions have since fared. They conclude that for cases not alleging the identical theory pursued in Wal-Mart, there has not been a “death knell” of employment discrimination class actions.1 Given Wal-Mart’s unique facts, courts have been able to distinguish the case, thereby permitting certification or denying decertification.2 Some noteworthy appellate cases have breathed new life into the possibility of class certification for discriminatory subjective decision-making in the workplace. For example, in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., Judge Posner distinguished Wal-Mart and reversed denial of class certification where low-level managers exercised discretion but did so pursuant to two companywide policies that had an adverse disparate impact on African-American brokers. Another example is Scott v. Family Dollar Stores, Inc., where the court clearly delineated Wal-Mart’s strictures and permitted certification of a class action alleging discretionary employment practices. The Fourth Circuit concluded that commonality was satisfied where there existed a uniform corporate policy and higher-level managers were the ones making discretionary decisions that had a disparate impact on female workers or that revealed a pattern or practice of intentional gender discrimination. These appellate decisions demonstrate that the ambit of Wal-Mart’s reach may not be as wide as anticipated.

In sum, Selmi and Tsakos do a great job of making sense of a complex area of law by putting Wal-Mart into a broader context for analysis. Granted, their conclusion that Wal-Mart has not greatly diminished class certification for employment discrimination cases because it was already difficult to begin with is not good news for plaintiffs. This observation speaks only to Wal-Mart’s relative impact, and the certification bar was already high before the Wal-Mart decision. More encouraging is the jurisprudence emanating from lower courts that define the contours of Wal-Mart and forecast potentially viable employment discrimination class actions.

Selmi and Tsakos have made a compelling case for why Wal-Mart has not marked the “death knell” of collective actions challenging workplace discrimination. This is crucial. It also leaves a question: Is this good enough? Teeing up this question is an equally important contribution of this article. I look forward to our answering this next fundamental question in the future.

  1. The authors, however, rightly struggle to explain why plaintiffs’ subsequent smaller regional versions of the parent Wal-Mart case have not been certified if size explains the Supreme Court’s rejection of a national class action. []
  2. The authors note, however, that on the district court level, some courts have seemed to reflexively apply Wal-Mart to deny class certification, even in cases where the facts could not be more distinct from those in Wal-Mart. []
Cite as: Suzette M. Malveaux, The Impact of Wal-Mart v. Dukes on Employment Discrimination Class Actions Five Years Out: A Forecast That Suggests More a Wave Than a Tsunami, JOTWELL (March 7, 2017) (reviewing Michael Selmi & Sylvia Tsakos, Employment Discrimination Class Actions After Wal-Mart v. Dukes, 48 Akron L. Rev. 803 (2015)), https://courtslaw.jotwell.com/the-impact-of-wal-mart-v-dukes-on-employment-discrimination-class-actions-five-years-out-a-forecast-that-suggests-more-a-wave-than-a-tsunami/.

(Almost) Everything You Wanted to Know About Class Actions

With the advent of the new administration, aggregate litigation is under attack again. As of this writing new legislation aimed at limiting class actions has been introduced in Congress. This is the perfect time for Congresspersons and their aids to read John C. Coffee’s book, Entrepreneurial Litigation: Its Rise, Fall, and Future – both friends and enemies of the class action will benefit from reading this fair-minded and nuanced analysis.

Before delving into the reason for this recommendation, a bit of background. In the scholarly literature on class actions there have been two big ideas. The first was that class actions can have a deterrent effect on large institutions by permitting the enforcement of laws when many people suffer a wrong too small to merit bringing a suit. It is easy to forget that this is in large part what class actions are about. The earliest statement of this idea that I know of was in 1941 in a law review article by Harry Kalven, Jr. and Maurice Rosenfeld. The second big idea was the observation that the class action separates ownership of claims from control of claims, much like the corporate form separates ownership from control of the firm, giving rise to agency costs. John C. Coffee, Jr. has long championed this formulation, first presenting it in 1986.

All subsequent work on class actions has built on, refined, and criticized these two big ideas. A prominent and important strand of scholarship on class actions, for example, demonstrates that given the diagnosis of agency costs, class actions must be thought of as posing problems of governance. Another similarly important strand looks at class actions as problems akin to those solved by the administrative state.

Coffee has now published the sum of his work on class actions in this new book, covering almost everything you wanted to know about class actions in clearly written and engaging prose, from the history of attorney’s fees to the European experiment with the device. (I say almost because there is one omission in the book—an omission I will get to at the end of this review.) Coffee promises a “warts and all” look at the class action and he delivers on this promise. The book is critical of plaintiffs’ attorneys, defense attorneys, and judges in class actions; it sees the strengths, weaknesses, and incentives of each of these actors with a clear eye.

This is a minor miracle. Even though they constitute only one percent of the federal docket, and probably less of the state court docket after the Class Action Fairness Act, class actions are a perennial object of attack. They are what political scientists call a “condensation symbol” – a rallying or focal point for our collective anxieties about morality, politics, and the economy. Perhaps for this reason, or perhaps reflecting the general poverty of discourse on difficult policy issues, the debate over class actions has largely generated more heat than light. Either class actions are “blackmailing” corporations into settling meritless cases or they are the only mechanism for the little guy to assert his rights. Coffee presents a balanced account of both the costs and benefits of collective litigation, rightly focusing on the main issue of lawyer incentives to bring and maintain suits. He recognizes that class-action attorneys both realize the public goals of deterrence and benefit from litigation: “No simple epithet – private attorney general or bounty hunter – adequately captures the plaintiffs’ attorneys’ role in high stakes litigation.” He writes, “In truth, the plaintiffs’ attorney does not simply supplement public enforcement but extends and drives the law’s development, sometimes pushing it in directions public enforcers would not have gone.”

The book begins with a history of entrepreneurial lawyering. The insight here is that fee structures drive the structure of the legal profession—had we regulated attorney’s fees, for example, we might have a very different legal system in the United States. As it was, early on the states rejected English limitations on fees and accepted contingency fees and other innovations that encouraged lawyers to find clients and allowed clients who might not be able to afford representation otherwise to hire lawyers. That was the birth of entrepreneurial litigation and it occurred not in 1966 with the promulgation of Federal Rule of Civil Procedure 23, but in the 1850s with the adoption of contingency fees. You might say it is an American tradition. As Coffee puts it, refining his original agency thesis, “the plaintiff’s attorney in large class actions [is] less an agent than a risk-taking entrepreneur, with the class members serving as largely passive partners.”

Especially fascinating is Coffee’s history of the derivative suit. Here he tells stories that I have not seen told elsewhere, such as that of Clarence Venner, a non-lawyer who was a key player in orchestrating campaigns against public corporations as a plaintiff in the early twentieth century, and Abraham Pomerantz, a lawyer who revolutionized plaintiff’s side corporate litigation after the Great Depression. This historical narrative provides a new view of the class action, not as an inflection point in the history of American law between the New Deal regime founded on administrative expertise to a mixed regime that increasingly relied on private enforcement, but instead part of a longer history of individual activism in the courts dating back to Jacksonian populism.

Coffee addresses four types of class actions: derivative suits, securities suits, merger-and-acquisition class actions, and mass-tort class actions. When I first read the book, I thought giving mass-tort class actions a chapter was a mistake, because they were defunct. But reports of the death of the mass-tort settlement class action have been greatly exaggerated, as the NFL Concussion and Deepwater Horizon cases demonstrate. His analysis of each of these areas of the law focuses on incentives – those of the defendant, plaintiff, and, importantly, judges. These include the defendant’s side desire for global peace, the plaintiff’s attorney’s incentives created by the structure of fee awards, and judges’ incentives to avoid protracted litigation or a flood of cases. Coffee describes a dynamic of one step forward and a half step back – a cycle in which attorneys succeed, overreach, and face a counter-reaction.

After reviewing the problems in class actions, Coffee sets the stage for considering reforms. Overall, the problems he focuses on can be put into three categories: (1) structural problems, such as overlapping multiple jurisdictions permitting duplicative litigation; (2) incentive problems, such as the size of the lawyer’s fee in class actions, which can lead to overzealous prosecution of class actions, and the creation of limits such as the “loser pays” rule adopted by some corporations in their bylaws, which can lead to under-prosecution; and (3) accountability problems, including the fact that private attorneys general are not democratically accountable as public attorneys general are. These observations tie with common themes in discussions of litigation and politics in the U.S. more generally: the tension between the establishment and the people, between centralization and decentralized decision-making, and between regulation and deregulation. In the final chapter, Coffee proposes greater public/private partnerships in the prosecution of civil cases – not giving public agencies veto power, but perhaps adding some greater regulation of private lawyers than merely the existence of a substantive legal regime provides.

It is not surprising that Coffee describes class actions the way that he does, as an entrepreneurial enterprise with a long American tradition, given that he is a corporate law scholar in his other life. His description is convincing, novel, and important to current policy debates that present entrepreneurial litigation as an anomaly in our history. He focuses on sectors that are important not only financially but also in American political life. As Lizbeth Cohen demonstrated convincingly in The Consumer’s Republic: The Politics of Mass Consumption in Postwar America (2003), after the Second World War the country took a turn from understanding citizenship as a political act to understanding it as an economic one: the best thing we can do for our country is buy more.

Bringing the insights of corporate law to class action litigation is Coffee’s strength, but also a weakness, because it ignores how the class action, and the controversy surrounding it, extends beyond corporate litigation. Derrick A. Bell, Jr. originated the analysis of agency costs and of the lawyer having his own agenda (the core of the idea of the “entrepreneur”) in his 1976 article Serving Two Masters: Integration Ideals and Client Interests in School Desegregation Litigation. Thurgood Marshall and the NAACP Legal Defense Fund, about whom Bell wrote, might be described as ideological entrepreneurs. And like the rest of the class action regime Coffee describes so well, civil rights class actions are under threat. Here a public/private partnership will cure little, as the whole point of many civil rights actions is to sue the government itself on behalf of those with limited political power: those denied the right to vote, the homeless, foster children, and prisoners, to name but a few groups. (The government ought to have a role in enforcing civil rights, but an independent bar is a necessary watchdog.) It is important to remember that overreaching limitations on civil rights class actions are at least as dangerous to civil society as too harsh limits on consumer and corporate suits.

Coffee, who was for many years a colleague of the civil rights pioneer Jack Greenberg, is no doubt aware of this omission and it does not diminish the importance of this book.  His insights into the costs and benefits of the class action device will continue to be crucial for anyone thinking about the class action: legislators, judges, lawyers, students, and academics.

Cite as: Alexandra D. Lahav, (Almost) Everything You Wanted to Know About Class Actions, JOTWELL (February 21, 2017) (reviewing John C. Coffee, Jr., Entrepreneurial Litigation: Its Rise, Fall, and Future (2015)), https://courtslaw.jotwell.com/almost-everything-you-wanted-to-know-about-class-actions/.

Eight Is Enough

In February 2016, shortly after the death of Justice Antonin Scalia, progressives, including progressive law professors, salivated at the prospects for the Supreme Court. President Barack Obama would fill a vacancy (the third of his presidency and the same number Reagan had appointed), shifting a 5-4 conservative Court to a 5-4 liberal Court. And with the expected election of Hillary Clinton to potentially replace three Justices who were 78-years-old or older, a 6-3 liberal Court—unseen since the 1962-68 heyday of the Warren Court—seemed possible. Visions of vigorous liberal constitutionalism, especially on “Culture War” issues, danced in the heads of constitutional scholars and advocates.

It was not to be, of course. Those dreams died in stages, with first the success of Senate Republicans’ 300-day inaction on President Obama’s nomination of Merrick Garland, then Donald Trump’s unexpected election in November 2016, then his January 2017 nomination of Tenth Circuit Judge Neil Gorsuch to fill the vacancy.

Although a self-described progressive, Eric Segall spent this interregnum attempting to steer the conversation and the political process in a different direction. In Eight Justices Are Enough (a paper I read and commented on in draft), the culmination of a series of op-eds, blog posts, and talks, Segall argues that Congress should permanently establish the status quo since Scalia’s death that may continue for the duration of the current Term: An eight-Justice Court, evenly divided between Democratic and Republican appointees. Each seat would be designated (or at least understood) as “belonging” to that party and to be filled by a nominee of that same party, regardless of the appointing President. In essence, Segall argues, the Supreme Court should be staffed the same way as the Federal Election Commission or the Court of Appeals for the Armed Forces (a non-Article III court).

Segall’s proposal seizes on an unprecedented political moment: An even number of Justices with an even ideological divide adhering to the party affiliations of their appointing Presidents and, presumably, of the Justices. That last part is important, because previous sharply divided Courts have not followed partisan lines. The four-Justice “liberal” wing from 1994-2009 consisted of two Republican appointees. So did the liberal majorities on the Warren Court. One of the “Four Horsemen” voting to declare New Deal legislation invalid was a Democratic appointee, while three of the regular dissenters were appointed by Republicans Presidents.

This proposal also reflects Segall’s scholarly approach to the Supreme Court, which he has long labeled a political rather than judicial institution in his own writing and his work with Judge Richard Posner. If a Justice’s politics dominates how she decides cases, Segall suggests, it is better to bring party affiliations into the open and make them an explicit part of the Court’s structure.

The change could be implemented deceptively easily and immediately. Congress determines the size of the Court and can reduce the number of seats from nine to eight by ordinary legislation; Article III does not command a minimum or maximum size for the Court, nor that there be an odd number of Justices. The trickier piece is ensuring same-party nominees. One way is through legislation, like that establishing the FEC, providing that “no more than four members of the Court may be affiliated with any particular party.” Although Segall does not mention it, this would not be without constitutional uncertainty, going to whether Congress can legislate limits on eligibility for a seat on the Court. Article III famously does not establish eligibility qualifications or limitations for a federal judge, not even that she be a lawyer. Alternatively, the Senate could enact an internal rule that it may confirm only a nominee from the same party as the prior holder of the seat and must refuse to confirm a nominee not of the same party, ensuring that there are never more than four Justices from one party. Segall does allow for possible confirmation of an independent, or someone who refuses to disclose party affiliation, by a supermajority.

Segall does not require the President to nominate a member of a particular party, which would trigger sticky constitutional questions about the scope of the President’s Article II appointment powers and congressional power to limit presidential prerogatives. But the President would know that if he nominates a Republican to replace Justice Ginsburg (or if President Clinton would have nominated a Democrat to replace Justice Kennedy), the Senate would not confirm.

Segall identifies three broad benefits in his proposal. First, it ensures at least a minimum of bipartisan support for any significant constitutional decision, since at least one Justice from the other party is necessary to create a majority. While an excess of constitutional decisions from a closely divided Court can be troubling, the problems of perception are exacerbated when the divide tracks partisan lines. Instead, Justices will work harder to avoid ties and to achieve some bipartisan agreement, perhaps by rendering narrower (“minimalist,” in the parlance) decisions. Second, the proposal removes incentives for partisan gamesmanship in timing retirements. A Democratic Justice has no incentive to time her retirement for when a Democrat is in the White House (or to hold on until a Democrat returns to the White House) if her successor on the Court will be a Democrat, regardless of the appointing President. Third, Segall rebuts arguments that the proposal would be detrimental to the uniformity of federal law. Because only a small portion of the Court’s decisions are 5-4, it is likely the eight-Justice Court would be evenly divided and unable to decide only on a similarly small number of cases. More importantly, having an evenly divided Court devolves decisionmaking power to the lower courts, which include a larger number of judges, who are politically, educationally, socially, geographically, and experientially more diverse.

Segall’s proposal creates some downstream effects that may prevent it from achieving its purposes. It theoretically could produce more moderate nominees, as a Republican President will appoint the most moderate (i.e., least liberal) Democrat he can find for a Democratic seat (and vice versa, for a Democratic President with a Republican seat). Segall regards this as a long-term benefit, a way to reduce the role of partisanship in the Court’s decsionmaking by getting less-partisan Justices. But that also means Justices will not entirely lose the incentive for gamesmanship in timing their retirements. Justice Ginsburg still may try to hold on to allow a Democratic President to replace her with a similarly liberal Democrat, rather than allowing a Republican President to replace her with a moderate Democrat. The difference is merely one of degree. Segall addresses this concern by requiring that any nominee be approved by a majority of that party’s members on the Senate Judiciary Committee. In theory, this forces a Democratic President to appoint, and Senate Democrats to vote to confirm, someone who is “Republican enough” to satisfy the Senate GOP caucus. That, of course, may undermine the goal of appointing moderate Justices.

The proposal also creates some perverse incentives for actors to avoid or delay acting to fill a vacancy for a lengthy period. If the new status quo is an evenly divided eight-person Court, a vacancy necessarily produces a seven-person Court with a 4-3 partisan advantage for one side. And partisan actors on that side might prefer to keep that edge for some period of time. Thus, President Trump might leave Justice Ginsburg’s seat unfilled to maintain a 4-3 Republican Court, rather than appoint a new (even moderate) Democrat. Or he can strip the force from the Democratic veto on the Senate Judiciary Committee—if they do not go along with his conservative-Democrat nominee, he is happy to leave the seat vacant. Or a Democratic Senate majority might refuse to confirm a Republican nominee to fill Justice Kennedy’s seat, leaving a 4-3 Democratic Court. Or a Democratic Senate minority might filibuster Kennedy’s replacement, producing the same result (or forcing Republicans to eliminate the filibuster). The Justices themselves might prevent this manipulation by conditioning their resignations on confirmation of a replacement. But that option disappears with an unexpected vacancy created by death, illness, or incapacity.

Finally, the proposal places downward political pressure on lower-court appointments. These have become nearly as politicized as Supreme Court appointments, as demonstrated by Republicans’ deliberate strategy to leave more than 100 unfilled vacancies for President Trump. Segall’s plan could exacerbate the problem. If SCOTUS’s inability to get a majority empowers lower courts to resolve more national issues within their geographic regions, each political party wants to increase the likelihood of favorable decisions being affirmed by that evenly divided Court. Both parties thus must maintain and strengthen majorities on lower courts, as appointment obstruction and gamesmanship trickle down to the lower courts. The new system also may prompt those lower-court judges to flex their powers, as by issuing and affirming universal (or nationwide) injunctions, binding the federal government to the decision of a single local court and essentially creating nationwide law, never to be reviewed or resolved by SCOTUS. Whether these are features or bugs, and whether as bugs they outweigh the merits of Segall’s proposal, is a matter for political debate.

Segall’s is only the newest among numerous proposals to alter the makeup and selection of the Supreme Court, both to fix the broken confirmation process and to depoliticize the Court as an institution (as perceived, if not in reality). The Paul Carrington Proposal would establish de facto eighteen-year term limits by statutorily providing for regular biennial appointments to the Court, with cases heard by the nine junior-most Justices. Others have proposed constitutional amendments to eliminate life tenure in favor of term limits. Others propose eliminating permanent Justices, staffing the Supreme Court with randomly selected rotating judges assigned from lower courts. Segall’s proposal has the benefit of simplicity in enactment—it involves small sub-constitutional changes, codifies the Court’s familiar status quo from the past year, and does not alter the terms or conditions of any sitting Justice’s appointment. It also is the most honest—reappropriating the partisanship that Segall argues exists in the Court and incorporating it into formal institutional structures.

The political reality, of course, is that none of these proposals is likely to be enacted. It would require unilateral disarmament by one party at the height of power (in this case, Republicans, who control the Senate and the White House and, but for the filibuster, can put anyone they want on the Court). That power might shift in two or four years will not affect that calculus. And the window for Segall’s plan is especially narrow, tied as it is to the Court’s current partisan moment. If Gorsuch is confirmed and the next vacancy comes via a retiring Justice Breyer, the resulting eight-person Court would not contain an even partisan divide for Congress to codify.

On the other hand, legal scholars must not run from bold ideas simply because other legal institutions are not on board. And Segall’s proposal is unique enough to look attractive should the current appointment stalemate continue. Senate Democrats have murmured about filibustering any Trump nominee, payback for Republicans’ having “stolen” the appointment from President Obama. If Senate Democrats are serious and committed enough to maintain that stance for several years, Senate Republicans may face a choice—either eliminate the filibuster (as Democrats previously did for lower-court appointments) or look for a solution that accepts the stalemate and finds benefits in retaining it.

Cite as: Howard M. Wasserman, Eight Is Enough, JOTWELL (February 3, 2017) (reviewing Eric J. Segall, Eight Justices Are Enough: A Proposal to Improve the United States Supreme Court (2017)), https://courtslaw.jotwell.com/eight-is-enough/.

Infusing Civil Rulemaking with Economic Theory

Paul Stancil, Substantive Equality and Procedural Justice, Iowa L. Rev. (forthcoming), available at SSRN.

For the most part, civil procedure teachers are dedicated doctrinalists. Nothing wrong in that, especially if well done.

Departing from this norm, Paul Stancil’s Substantive Equality and Procedural Justice is a highly ambitious piece that strives to anchor civil procedure and the rulemaking process in a theoretical construct, largely moored in sophisticated economic analysis.

As such, this piece is part of a subset of academic literature that suggests that the field of civil procedure lacks theoretical heft. Since the enactment of the Federal Rules of Civil Procedure more than seventy-five years ago, intellectually inclined academics periodically have called attention to a lack of “theory” undergirding civil procedure. Typically, this is accompanied by a call for rulemakers to infuse the rulemaking process with the author’s proposed theoretical construct. Stancil’s article is part of this genre; as he states, “Civil procedure has been too long without a theory” – a lacuna he intends to remedy.

In essence, Stancil’s article is a criticism of the foundational transsubstantive norm of the Federal Rules of Civil Procedure, that one set of rules should apply to all cases under all substantive law. Simply stated, he points out that the “homogeneous” nature of the civil case that pervaded rulemaking in 1938 has been rendered inequitable by the reality of “heterogeneous” cases on the modern civil docket. Consequently, the prevailing norm of transsubstantive rules and rigid formal equality fails to promote substantive equality. Each new generation of procedural scholars periodically arises to question the prevailing transsubstantive rulemaking norm. This is an old and recurring debate in the procedural arena.

In advancing his thesis, Stancil first anchors his paper in the scholarly work of other critical academics (Matsuda, Delgado, Crenshaw, and West) who have advanced similar theories arguing that formal equality is not the same as substantive equality. Stancil argues that this same critique should be applied to civil procedure. Surveying historical and theoretical accounts of formal and substantive equality derived from Aristotle, he arrives at a working definition of procedural justice to advance his construct. Stancil extensively relies on the recent scholarly contributions of David Marcus and Larry Solum, whose work centers on grand theories of procedural justice and the transsubstantive norm of the federal rules.

Stancil’s article rehearses an historical account of the origins of the transsubstantive rulemaking norm, the substance-procedure dichotomy in civil procedure, and the federal rulemaking process. He further canvasses the reasons why the transsubstantive norm currently works a substantive unfairness and inequality on litigants.

This discussion lays the groundwork for his proposal that federal civil rulemaking ought to be grounded in economic theories of civil litigation. The nub of his argument states:

For committee rulemakers genuinely committed to the creation of a procedurally just system, the most important moving parts are the merits of the parties’ claims and defenses and the intra-economic incentives that influence parties’ litigation behavior apart from the merits. In very general terms, a procedurally just system will maximize the effects of the parties’ merits positions upon the outcome of litigation, and it will minimize the effects of unrelated economic incentives upon the result.

Expanding on his economic theories, Stancil attempts to demonstrate that formal equality, absent sound economic analysis, leads to disastrous results, citing to recent Supreme Court pleading decisions and the newly amended proportionality rules.

Finally, Stancil concludes his article with a series of recommendations, largely directed at the federal rulemaking process and its constituent committees. He urges rulemakers to adopt an Aristotelian concept of the equality/justice relationship, and to pay careful attention to intra-case economic incentives. Perhaps Stancil’s most striking recommendation is a proposal to create a new federal agency to provide independent economic analysis to rulemaking committees as they undertake their rulemaking functions.

As indicated at the outset, Stancil’s article is a highly ambitious work that attempts, along with a small cohort of procedure scholars, to infuse this arena with “theory.” The article canvasses the work of academics engaged in this same conversation (critical scholars in other disciplines, proceduralists, and law-and-economics scholars), and does a yeoman’s job of setting forth historical context and descriptive material about the rulemaking process. Stancil obviously has leveraged his law-and-economics/antitrust background into his thinking about procedural law. And he offers both a theoretical construct for replacing the transsubstantive rulemaking norm and institutional suggestions for concretely implementing his proposals.

Stancil is writing for the small academic audience that places a high value on “theory” pieces, but he seeks to influence the rulemakers as well. This article is to be admired for its ambition and interdisciplinary approach. In a procedural world largely populated by very good doctrinalists – our dominant mode of scholarship – Stancil seeks to set himself apart as a higher-order thinker and is to be commended for his recommendations.

How this piece might be received by actual rulemakers, however, is another question altogether. For those who have attended rules-committee meetings deliberating on pending rule amendments, I can report that Aristotle does not come up. Indeed, the lack of a “theory of civil procedure” does not come up – which is precisely Stancil’s point. Nonetheless, he argues that these deliberations should be infused with theory to mitigate the deleterious consequences of the prevailing transsubstantive rulemaking norm. Better theory (law-and-economics version), in his view, would result in substantive equality.

Ever the realist, I can only suggest that this not going to happen. Given my understanding of how the federal rulemaking process works, proposals to infuse the rulemaking process with law-and-economics theory, or any other high-level theory (let alone create a new independent federal agency to do this) are unlikely to be adopted in practice.

But it is a case worth making, and Stancil makes it well.

Cite as: Linda Mullenix, Infusing Civil Rulemaking with Economic Theory, JOTWELL (January 23, 2017) (reviewing Paul Stancil, Substantive Equality and Procedural Justice, Iowa L. Rev. (forthcoming), available at SSRN), https://courtslaw.jotwell.com/infusing-civil-rulemaking-with-economic-theory/.

Comparative Avoidance

I’ll start this essay just as Erin Delaney starts her article—with a shout-out to Alexander Bickel. In The Least Dangerous Branch, Bickel extolled the “passive virtues”—deciding not to decide the merits of contentious constitutional issues—in order to preserve the Supreme Court’s institutional legitimacy in the face of the judicial branch’s “counter-majoritarian difficulty.” Strategic avoidance, the argument goes, can enable further dialogue over such issues, allowing resolution through the political branches rather than through judicial intervention.

As it turns out, the United States is not the only place where the judicial branch holds the title of least dangerous. So it is not surprising that other systems have developed devices by which judicial institutions avoid conflict with coordinate branches of government or with popular opinion more generally. As Delaney puts it: “Avoidance is everywhere.” To be clear, Delaney’s article takes no position on whether this sort of strategic avoidance is normatively desirable or whether courts do, in fact, enhance their legitimacy when they engage in such avoidance. But she argues that this assumption appears to influence the behavior of courts across the globe. Her focus in this article is on strategic avoidance by the Supreme Court of the United States (SCOTUS), the European Court of Human Rights (ECtHR), the Constitutional Court of South Africa (CCSA), and the Supreme Court of Canada (SCC).

Delaney’s analysis of these systems emphasizes two variables that affect how avoidance operates. The first is timing: when during the course of a case does the court make the avoidance decision? Ex ante avoidance occurs before the court weighs in on the substantive merits of a particular issue. In medio avoidance occurs in the midst of the court’s consideration of the case, after the arguments on the merits have been aired but without directly deciding the merits. And ex post avoidance occurs at the remedies phase, after the court has rendered a decision on the merits. The second variable is candor: how openly does the court admit that it is engaging in strategic avoidance? Delaney provides a brief but insightful summary of the costs and benefits of judicial candor, emphasizing the core values of public reason-giving and trust while acknowledging the pragmatic, strategic, and normative considerations that might counsel toward less candor rather than more.

Delaney’s discussion of SCOTUS targets its ex ante methods of avoidance—justiciability doctrines (standing, ripeness, and mootness), as well as the Court’s unique agenda-setting prerogatives that come with the certiorari process. She recognizes, however, that the Court also relies on in medio avoidance (including constitutional avoidance, deference doctrines, and governmental immunities) and ex post avoidance (such as the Court’s “all deliberate speed” remedial instruction in Brown II). With respect to candor, Delaney argues that the Court’s ex ante avoidance methods score quite low. Certiorari denials (as well as DIGs, which dismiss a prior cert grant as “improvidently granted”) are typically accompanied by no explanation at all. In addition, justiciability doctrines (which Bickel might have viewed as paradigmatic tools of strategic avoidance) have developed into independent areas of constitutional law. Delaney uses the Court’s decision in Hollingsworth v. Perry—in which the majority found a lack of Article III standing and therefore did not decide whether bans on same-sex marriage were constitutional—to illustrate how difficult it is to tell whether a particular decision was strategic avoidance or simply “a sincere holding on the standing issue.”

Delaney then turns to the ECtHR, which has jurisdiction over claims by individuals seeking to enforce rights provided by the European Convention on Human Rights. For the ECtHR, ex ante avoidance methods are not generally available because of mandatory jurisdiction. Accordingly, the primary avoidance method is the in medio “margin of appreciation.” This doctrine—although lacking textual support in the Convention itself—gives nations a “margin” within which their regulations will avoid judicial second-guessing. The ECtHR is quite candid with respect to the avoidance function the margin of appreciation performs in the European system. It is only when there is consensus regarding the content of a particular right that the ECtHR will find laws flouting that consensus to exceed the margin of appreciation.

Finally, Delaney details how the CCSA and the SCC rely on ex post methods of avoidance. Like the ECtHR, both courts lack the sort of ex ante tools that are commonly used by SCOTUS. Instead, avoidance comes by limiting or delaying the remedies that will be imposed in the event of a counter-majoritarian ruling. The CCSA is constitutionally required to “declare that any law or conduct that is inconsistent with the Constitution is invalid to the extent of its inconsistency,” but the Constitution also grants it the ability to suspend or delay such a declaration of invalidity—and the CCSA has invoked this authority frequently. Canada’s Constitution Act similarly mandates that laws found to be inconsistent with the Constitution “have no force or effect” to the extent of the inconsistency. Although the Act does not explicitly allow the SCC to delay that invalidity in the event of such a finding, delayed declarations of invalidity and legislative remands have become preferred remedies in the Canadian system. As with their European counterparts, the South African and Canadian avoidance tools score well in terms of candor. By ruling on the merits of constitutional claims without ordering a remedy to correct violations, these courts are overtly “self-effacing” about their own “judicial weakness.”

Delaney recognizes that, ultimately, the key normative question is which approaches to timing and candor are most effective in accomplishing the institutional goals that strategic avoidance purports to serve. Although she does not provide a comprehensive proposal, she makes a number of important observations. For example, one downside of the ex ante avoidance methods employed by SCOTUS is that the Court is largely left on the sidelines when it comes to the dialogue that avoidance is supposed to facilitate. As Delaney puts it, the Supreme Court “can only eavesdrop.” The foreign courts’ in medio and ex post avoidance methods allow those courts to participate more directly in that dialogue. However, those methods carry with them the risk that the political branches will openly reject the judiciary’s position regarding the very rights that the courts have been tasked with enforcing.

The global export of Bickelian passive virtues is unlikely to bring the U.S. trade deficit into balance. But it does provide a rich opportunity for exploring comparative-law perspectives on a topic that has long fascinated federal courts scholars. I hope Delaney’s article is just the beginning.

Cite as: Adam N. Steinman, Comparative Avoidance, JOTWELL (January 5, 2017) (reviewing Erin F. Delaney, Analyzing Avoidance: Judicial Strategy in Comparative Perspective, 66 Duke L.J. 1 (2016)), https://courtslaw.jotwell.com/comparative-avoidance/.

Discovery Costs and Default Rules

Brian T. Fitzpatrick & Cameron T. Norris, One-Way Fee Shifting After Summary Judgment (2016), available on SSRN.

In One-Way Fee Shifting After Summary Judgment, Brian Fitzpatrick and his student, Cameron Norris, address what has been the dominant impulse in federal procedural reform for the past thirty-five years: reducing cost and delay in civil litigation.

The most recent effort to curb litigation expense — the 2015 amendments to the Federal Rules of Civil Procedure that, among other things, sought to invigorate the concept of proportional discovery expenditures that had first found its way into the Rules in 1983 — has been widely criticized as feckless. Switching the proportionality requirement from (principally) Federal Rule 26(b)(2) to (principally) Federal Rule 26(b)(1) and then eliminating “subject matter” discovery seem to be little more than moving the deck chairs on the Titanic, given that judges have no more tools in 2016 to determine whether discovery is proportional than they had in prior years, and “subject matter” discovery was minimal at best.

One fundamental difficulty with requiring that discovery be proportional to the needs of the case — as alluring as this principle is in theory — is its informational demand. Neither the parties nor the judge can quantify with any certainty the most relevant proportionality variables: how much the case is worth, how much discovery will cost, or how much the information will affect the likelihood of recovery (including how much follow-on discovery might affect this calculus). Equally problematic is that the parties often have a private incentive to engage in discovery that, from society’s viewpoint, is disproportionate.

Take a simple example in which all the variables are known. The plaintiff has a 50% chance of winning a $100,000 claim. The plaintiff seeks discovery costing $7,000 that will increase the odds of victory to 60%. But the defendant will then seek to obtain discovery to discredit the new information, and at a cost of $4,000, can successfully minimize the impact of the discovery, reducing the plaintiff’s chances of recovery to 55%.

As an initial matter (and without regard for who pays for the discovery), the plaintiff’s discovery seems proportional: a $7,000 expenditure increases the expected value of the case by $10,000 (from $50,000 to $60,000). When the defendant’s countermeasures are considered, however, this discovery is not justified. Looked at in total, the plaintiff’s discovery request has triggered $11,000 in expenses (the original $7,000 in response to the plaintiff’s request, plus an additional $4,000 for countermeasure discovery) but moved the value of the case by only $5,000. To the extent that proportionality is judged in cost-benefit terms, this discovery is not proportional.

Confounding the calculation in some cases is the American approach to paying for discovery: as a rule, the requesting party bears the burden of making the request (a burden that is often fairly minimal), while the responding party bears the burden of providing the discovery. On the assumption that the defendant bears the $7,000 cost of providing the initial discovery while the plaintiff bears the $4,000 cost of providing the countermeasure discovery, this “responder pays” approach gives the plaintiff an incentive to ask for the initial discovery: a $4,000 expense yields a $5,000 increase in case value (from $50,000 to $55,000). And the defendant has an incentive to ask for the countermeasure discovery: at an expense of $0, the value of the case falls by $5,000.

If each party bore its own costs — and another 2015 reform hinted that judges should consider this “requester pays” approach more broadly — then an omniscient plaintiff would not have requested the initial discovery: the plaintiff would expect to expend $7,000 to yield a benefit of $5,000. But on facts that were styled differently, it could be shown that the requester-pays approach (as well as the loser-pays approach adopted in countries other than the United States) would also lead to inefficient discovery. The sad reality is that the private incentive to invest in litigation often diverges from the public goal, represented inter alia in the proportionality principle, of cost-effective action by the parties.

But the most immediate problem with proportionality is the improbability that the parties and the judge have access to information of the precision that the hypothetical provides. The parties and judge may have some sense of the cost of the discovery itself, but the value of the claim, the likelihood of winning, and the impact of countermeasure discovery on the value and likelihood are dimly graspable at best, and simply unknowable in most cases. Any proportionality rule that asks the judge to engage in a case-by-case cost-benefit analysis regarding the cost of discovery sounds great as an aspirational matter but is unenforceable in practice — as our thirty-three-year history with proportionality shows.

For that reason, default rules become attractive. Such rules may not offer finely tuned balancing of costs and benefits in each case. But a default rule that, in the main, leads to a more efficient outcome may yield more benefit in the long run than a more tailored approach that is unwieldy in practice. Fitzpatrick and Norris propose a new kind of default rule to deal with excessive discovery expenditures. It is ingeniously simple: require the plaintiff to pay the difference between the plaintiff’s discovery expenses and the defendant’s discovery expenses — but only when the plaintiff loses a motion for summary judgment. This modified requester-pays rule does not kick in if the plaintiff prevails in whole or part on the motion for summary judgment, or if the plaintiff settles or voluntarily dismisses the case before summary judgment is entered.

The authors argue that this rule is better than pure producer-pays, requester-pays, or loser-pays regimes, including the present producer-pays approach with a proportionality principle. A lose-summary-judgment-and-pay-the-discovery-cost-differential rule particularly targets the problem of asymmetric discovery, in which one party (typically a defendant) has access to far more information than the other party (typically the plaintiff). In a producer-pays world with asymmetric information, the plaintiff has an incentive to ask the defendant for significant amounts of information as a means of driving up settlement values. To recur to the example above, if we assume that the plaintiff’s discovery requests would require the defendant to spend $60,000 to respond, the defendant has an incentive to settle even a frivolous case for substantial value. By shifting the differential between the plaintiff’s and the defendant’s discovery costs (in other words, the measurable extent of the asymmetry) to the plaintiff when the plaintiff persists in prosecuting the case despite the lack of a “genuine dispute as to any material fact,” a plaintiff’s incentive to engage in “impositional discovery” (discovery so costly that it shakes a defendant down to settle a meritless case) is vastly reduced.

As a stand-alone way to limit discovery costs, the authors’ proposal seems insufficient. To the extent the problem is excessively costly discovery, the solution is overinclusive in one way. There are well-known empirical analyses (here, here, and here) that the cost of discovery is not excessive, except in a small subset of cases. The authors dispute the validity of some of this data, but perhaps they need not. Even if the data are correct, the “problem cases” involving excessive discovery expenditures are also likely to be cases with vigorous summary-judgment practice; therefore, the proposal could make headway to contain discovery costs in the cases in which containment is most needed.

The proposal is also underinclusive in some ways. There are data (here and here) about how frequently summary judgment is sought and how frequently it terminates an entire lawsuit; summary-judgment termination occurs in fewer than 10% of federal civil cases (6 to 7% seems to be about right in most district courts). So the authors’ solution would not affect discovery costs in most cases, unless the proposal has an outsized in terrorem effect. On the positive side, however, the proposal might affect cases in which the cost of discovery is greatest (on the reasonable assumption of a substantial overlap between cases involving high discovery costs and cases in which summary-judgment motions are filed). It also fails to address situations in which the asymmetry in discoverable information favors the defendant, who can force the plaintiff to expend substantial amounts on discovery. Like Federal Rule 68, this proposal is a one-way ratchet that operates only in favor of defendants. But it is not clear that many cases feature such asymmetries. Even if their proposed rule is underinclusive, therefore, it takes a small bite out of the problem of discovery cost — and could do more if joined with proposals to curb excessive discovery in other cases.

Of course, it is in the nature of default rules to be over- and underinclusive, so these concerns do not doom the idea of making plaintiffs pay the differential in discovery costs when they lose a summary-judgment motion. The greatest drawbacks to the proposal are its untoward side effects. As the authors acknowledge, defendants have an incentive to run up their discovery-response costs, precisely to keep risk-averse plaintiffs from pressing their claims. Moreover, the proposal may make some defendants less willing to settle litigation and more willing to play the case out through summary judgment precisely to recoup discovery costs, thus increasing overall litigation costs.

More generally, as Samuel Issacharoff and George Loewenstein have shown, any toughening of summary-judgment standards for plaintiffs suppresses settlement values for plaintiffs’ claims across the board; the same effect seems likely under the authors’ proposal. As the authors acknowledge, judges who realize the consequences to plaintiffs when summary judgment is granted (that they must pay the discovery cost differential) may become less willing to do so, thus defeating the purpose of the proposal. Finally, the proposal would add to the perception that federal courts are pro-defendant, which might drive some plaintiffs into state courts that did not adopt this proposal, or, more problematically, discourage them from bringing meritorious suits at all.

My preference is for a broader approach to litigation costs (about which I have written in a prior post and elsewhere): require the parties to establish, and live within, litigation budgets (including a budget for discovery). Such an approach is perhaps too radical for most, although litigants in England have been faring reasonably well under a variant of this method for nearly four years. Fitzpatrick and Norris’s proposed rule is perhaps more politically palatable: less sweeping and more targeted at cases susceptible to disposition on summary judgment. In the end, however, its side effects seem sufficiently grave and its reach sufficiently narrow that implementing the proposal without first trying it out on a pilot or experimental basis is probably a mistake.

But the impulse behind the proposal — to find simple, workable solutions that allow us to abandon an amorphous proportionality inquiry — is exactly right. May many more such proposals blossom in the years to come.

Cite as: Jay Tidmarsh, Discovery Costs and Default Rules, JOTWELL (December 19, 2016) (reviewing Brian T. Fitzpatrick & Cameron T. Norris, One-Way Fee Shifting After Summary Judgment (2016), available on SSRN), https://courtslaw.jotwell.com/discovery-costs-and-default-rules/.

Time to Say Goodbye to Forum Non Conveniens?

Maggie Gardner, Retiring Forum Non Conveniens, 92 N.Y.U. L. Rev. (forthcoming 2017), available at SSRN.

The doctrine of forum non conveniens is a mainstay in the modern defendant’s procedural arsenal in transnational cases. Under this common law doctrine, which the Supreme Court first recognized at the federal level in 1947, a judge may consider a number of private and public factors to decide whether a lawsuit over which it otherwise has jurisdiction should be dismissed and (at the plaintiff’s initiative) relitigated in another, non-U.S. forum. In her thorough and thought-provoking article, Maggie Gardner goes beyond the multitude of scholars who have called for the doctrine to be refined, reformed, or limited, and instead calls for its retirement from federal procedural law altogether.

Gardner recognizes the enormity of this task, and suggests jettisoning forum non conveniens only after presenting a careful history of the doctrine and a thorough canvassing of the critiques and reform proposals that have dotted the lower-court and scholarly landscapes over the past few decades.

Gardner identifies several problems with forum non conveniens, both in the doctrine and the proposed reforms. She argues that the doctrine, once rooted in notions of international litigation and principles of comity, was refashioned for the domestic context before it mutated again to its current role in transnational litigation. This meandering doctrinal path has left forum non conveniens with an odd assortment of vestiges of domestic and international concerns that are no longer meaningfully relevant to modern transnational litigation. In addition to these doctrinal mismatches, Gardner argues that the doctrine focuses an outsized lens on the issue of availability of evidence in long-distance situations – a problem that does not plague modern litigation, where the feasibility of access to evidence is facilitated by modern technology and ease of travel. The doctrinal difficulties are linked to the problems with proposed reforms. Because reform efforts take the doctrine’s existence and multi-factored test as their starting point, they tend to only add more complexity to the doctrine. But as Gardner ably shows, it is the layers of complexity that created the problems in the first place.

Other difficulties stem from forum non conveniens’ status as a common law doctrine. Forum non conveniens became an exclusive tool of transnational litigation because its more general domestic application was edged out by statutes such as 28 U.S.C. § 1404(a), which allows for transfer of venue within the federal system. The changing nature of litigation, and particularly transnational litigation, makes the general test for forum non conveniens, as adopted in 1947 and reconfigured for the transnational context in 1981, an awkward fit. One would think that a discretionary common law doctrine would be precisely what this situation calls for – that the evolutionary nature of common law reasoning would provide the necessary adaptability to a new litigation landscape and that the discretionary nature of the doctrine would allow judges to use it as a flexible backstop. But Gardner convincingly argues that the standard itself is the wrong test and that reforms, which should be easy to generate within a common law doctrine, are “partial, inconsistent, and generally unsuccessful.” Due to the awkward fit of well-intentioned but inconsistent reforms with the wrong test, a true reform of forum non conveniens becomes “difficult, perhaps impossible.”

I am skeptical, however, that retiring forum non conveniens would ameliorate many of the doctrinal problems she identifies. One of Gardner’s insights is that forum non conveniens analysis is redundant in light of the inquiries made under several other procedural doctrines such as personal jurisdiction, the presumption against extraterritoriality, and the enforcement of forum-selection clauses. With the “safety valve” of forum non conveniens gone, courts would rely more on these other doctrines for policing the outer boundaries of transnational litigation in U.S. courts. There is no guarantee that the sloppiness of forum non conveniens would not simply reappear as problematic inconsistencies in their new doctrinal homes. Personal jurisdiction is already notorious for its lack of clarity. And because personal jurisdiction carries the weight of constitutional due process, the boundaries of the availability of an American forum for transnational litigation might become simultaneously more unforgiving and more unpredictable. Gardner recognizes this objection and argues that the redundant focus of comity and “exorbitant” exercises of jurisdiction in transnational cases in both forum non conveniens and personal jurisdiction is part of what has enabled the Supreme Court to keep generating imprecise and inconsistent opinions in both arenas. Narrowing the inquiry to one doctrine might nudge the Court towards a more narrowly tailored and coherent personal jurisdiction doctrine in both international and domestic cases.

But it may be that forum non conveniens is more rhetorical flourish than anything else, and that the difficulties and vagaries of personal jurisdiction, particularly as applied to foreign defendants, will continue even without the doctrinal distraction of forum non conveniens. Moreover, relocating to personal jurisdiction many of the doctrinal fights over the propriety of the use of American forums for resolution of transnational disputes may have some unfortunate consequences for personal jurisdiction doctrine. Many of the doctrines that govern ordinary access by ordinary parties to ordinary U.S. courts already are driven by outlier fact patterns and defendants, frequently foreign or remote defendants. When this fight must now occur almost entirely within the boundaries of personal jurisdiction doctrine, I fear that the contours and rhetoric of personal jurisdiction will be further driven by an outsized focus on the transnational, rather than an orderly and measured focus on the typical.

Gardner’s article concludes with the suggestion that the most promising way to retire forum non conveniens is through legislative intervention. Gardner suggests that the federal government pursue reinvigorated negotiations for a harmonized judgments treaty, which would then be implemented by statute into domestic law. She envisions that such legislation would limit forum non conveniens to “exceptional circumstances” and would focus exclusively on a refined private-interest analysis. I believe that she is correct in identifying this as the strongest path forward, and would suggest that its success would be bolstered by simultaneous legislative intervention into the doctrines of personal jurisdiction and forum selection clauses. Without a holistic legislative approach, the problems that Gardner so aptly identifies will only live to see another day as residents of new doctrinal arenas.

Cite as: Robin Effron, Time to Say Goodbye to Forum Non Conveniens?, JOTWELL (December 8, 2016) (reviewing Maggie Gardner, Retiring Forum Non Conveniens, 92 N.Y.U. L. Rev. (forthcoming 2017), available at SSRN), https://courtslaw.jotwell.com/time-to-say-goodbye-to-forum-non-conveniens/.