The Challenges Facing The Class Action Defense Bar

Tuesday, November 2, 2010 - 01:00

Editor: Please describe your practice area, particularly in the realm of class actions. What are your key areas of representation?

Bloom: Mark and I both practice in the employment law space, but of late we've devoted a substantial amount of our time to focusing on class and collective actions. In that area, our key areas of focus have been wage and hour class actions and collective actions (which would include misclassification claims), off- the-clock claims, and commission claims. We've also done substantial work in the area of independent contractors where government and/or plaintiffs' attorneys challenge independent contractor status. Finally, we both have our own share of traditional discrimination class actions.

We also have a robust ERISA class action presence that is led by Myron Rumeld and Howard Shapiro and is housed in our New Orleans and New York City offices.

Editor: Making its debut this fall is the firm's newest blog, Proskauer on Class and Collective Actions (http://classactions.proskauer.com/). What prompted you to launch a blog devoted to this topic? What kind of issues have you highlighted in the initial posts?

Batten: The basic motivation for the blog is that while there is an interesting conversation already on the Internet about topics of interest to both practitioners and clients, particularly with respect to employment and wage and hour class actions, we felt that there is a bit of a gap in information that we may be able to fill. A number of the blogs that exist (although not all) tend to be reportorial in nature, telling the viewer that cases have been filed, not going much beyond that. Or they provide statistics about what kinds of cases are being filed but don't discuss their implications. We're hoping with our blog to offer some insights and analyses not otherwise provided. There are some really good blogs available already, although they tend to be more general class action blogs - not really focusing on class actions in the employment area. We're hoping to be able to provide some practical tips for client companies who may face class actions or have concerns about preventing class actions but don't have a lot of time or need to focus on class actions in particular. We plan to distill the news of developments on these increasingly relevant subjects so that readers of the blog can learn what they need to know about this area without having to become class action experts.

Editor: Have you seen an increase in employment class action cases since the recession began? Have they occurred in any particular substantive areas of employment law? In any particular industries?

Bloom: We have seen an increase in the number of employment class actions, which we think to be just a trend, not one that is necessarily tied to the recession. The areas where we've seen an uptick are wage/hour and also same-sex discrimination pay cases. The industries where we've seen greater focus are: call center, retail and construction. Financial services remains a target of class actions as well.

Editor: Where do you see the next wave of cases in your practice area coming from?

Batten: We think it's basically going to be more of the same. Wage and hour cases have exploded in recent years, and we don't see any signs that that is slowing down. Another area where we see the beginning of a real explosion in litigation is in the independent contractor area. Plaintiffs' attorneys are beginning to discover the significant amount of disputes that are possible in that area. The whole issue of misclassification has received such attention recently from state governments and - to a lesser extent - the federal government; and plaintiffs' attorneys, who may not earlier have seen this as a lucrative area, are now beginning to follow in the government's steps. While there has been a lot of litigation in this area, not unlike wage and hour cases, we think that what we are seeing is probably just the tip of the iceberg.

Our ERISA group has seen an uptick in stock drop cases that often are collateral to securities class actions.

Editor: What factors do you think have attributed to the uptick in wage and hour class and collective actions?

Bloom: We think, first and foremost, they are just an easy target for plaintiffs' lawyers, particularly the FLSA-related cases, because the standard for obtaining conditional cert, the first stage certification allowing the getting of permission from the court to send out notices to putative class members, is so low in most jurisdictions that it's easy prey for plaintiffs' lawyers. Very often this step can then induce a Rule 23 certification of an accompanying state law claim. Another consideration is that plaintiffs' attorneys get their automatic fees if they win, even if they win on a small violation, as well as liquidated damages. Because these types of cases are attractive to the plaintiff bar, it's a significant factor to us acting on behalf of defendants because of the low threshold for an FLSA notice and an FLSA conditional cert that very often will drive an early settlement in a case before the defendant can even get to the hard questions on a Rule 23 certification and/or on the actual underlying merits.

There is a split in the jurisdictions about what the thresholds should be, but most jurisdictions apply what they call a lenient standard. The plaintiff has to make a very basic showing that there are potentially other people that are similarly situated for the court to allow the plaintiff's attorney to be given access to names and addresses of potential class members and to allow the plaintiff's attorney to send them a notice of the pending class action. So it doesn't rise to the same level of a Rule 23 certification where the court is supposed to apply rigorous standards, and in many jurisdictions, like the Second Circuit, the plaintiff has to prove each element of Rule 23 cert by preponderance of the evidence. The conditional cert requires simply an articulation that there are other similarly situated people, which plaintiff's lawyers sometimes have been successful in doing with just a relative handful of declarations. However, there are some jurisdictions such as the Eleventh Circuit where plaintiff's counsel has to make a stronger showing.

Batten: There have been a number of cases, particularly in the Eleventh Circuit, where the courts have shown particular resistance to nationwide classes and have really focused on certifying only a class that may be statewide or even narrower than statewide, but that is the exception to the rule. In most jurisdictions the standard is so lenient that practically any showing will do.

Editor: Is there any effort to tighten those standards?

Bloom: That is one of the areas that is in need of reform because once you send out notice, there is a disruption to a company's business - not only because you are reaching out to current employees and asking them to join in a lawsuit but some judges actually order employers to post a copy of a notice in the workplace. Such an act not only induces conversation but is also a distraction for supervisors and managers.

Editor: The U.S. Supreme Court may grant certiorari in the Dukes v. Wal-Mart class certification case. What kind of issues will likely come up, and what is the potential impact on employers?

Bloom: The basis on which the plaintiff is trying to get the Supreme Court to accept certification is whether you can get monetary damages in a (b)(2) class action as opposed to a (b)(3) class action. If successful, a (b)(2) class action may become the route of choice, which is a significant issue because there is less need to show that common issues predominate. Equally significant is the fact that in the Wal-Mart case, a class was certified notwithstanding the fact that there was a lawful policy in place at Wal-Mart. The plaintiff could not point to any policy that Wal-Mart had implemented that violated the law. The plaintiffs obtained class treatment by arguing that because there was subjective decision making as to how the policies were applied, claiming there was anecdotal evidence demonstrating a consistent disregard of the lawful policy. The question that the courts won't answer in Wal-Mart and that will need to be answered is what kind of a showing is sufficient to override an employer's lawful policy and demonstrate through anecdotal evidence that there is a pattern of disregarding that policy. Potentially that makes virtually every case susceptible to class treatment.

Editor: How can employers address blogs and/or emails that solicit employees to join in an employment class action lawsuit?

Batten: The answers differ for both. Where the solicitation is coming from outside, e.g., plaintiffs' class action lawyers or from a former employee who is trying to step back into the workplace to attract other plaintiffs, there are some restrictions on what form those solicitations can take - restrictions that employers and defense attorneys don't take advantage of as often as they might. There are decisions that hold those kinds of solicitations cannot be misleading or contain factual inaccuracies, which are not protected by the First Amendment. Employers and their counsel should scrutinize very carefully outside solicitations to join employment class actions because they may have some opportunity to get judicial relief. The other kind of solicitation is from one employee to another inside the workplace . Those solicitations can be prevented during working time; however, one restriction on efforts to control these solicitations (and one that most non-union employers don't think about often enough) is that the National Labor Relations Board would likely say that some of those communications are protected under the National Labor Relations Act, which actually apply to any workplace to the extent that individual employees may be acting for what they call "mutual aid and protection." Even where there is no union, employers can violate the National Labor Relations Act if they are too aggressive about policing internal solicitation.

Editor: How have the demands of e-discovery in recent years changed the handling of employment class action lawsuits?

Batten: Owing to the breadth of an employment class action, the number of employees who are affected by e-discovery demands, which can always be burdensome to the institutional party, is that much more burdensome. Multiply the difficulties in an individual case by however many employees are in the putative class and you get a sense of the size of the problem. The costs of maintaining and producing electronic materials has a material impact on an employer's assessment of the case - whether to settle or defend on the merits. If the defendant in a class action recognizes the e-discovery threat early on, systems that can be put in place to try to facilitate the production of information.

Bloom: We've developed some very sophisticated systems internally at Proskauer where we are able to work with the client to identify sources of potential e-discovery and then to help them collect and upload the information so that we can turn it around and produce it to the plaintiff. Because we've done so much of this, we have a very effective and efficient system down for preservation, collection and production.

Editor: What are some of the most challenging cases that you've handled?

Bloom: We were both fortunate recently to work on a case, Edwards v. Publishers Circulation Fulfillment, a class action in which we defeated class cert. In that case, the plaintiffs were a group of current and former newspaper deliverers who had accused PCF, the largest independent newspaper distribution company in the United States, of misclassifying them as independent contractors despite the fact that they were allegedly treated like company employees. The plaintiffs sought class status for all of the PCF drivers, who had each signed independent contractor agreements. The time period for their alleged class was May 2003 to May 2009 and encompassed nearly 2,000 people. We successfully opposed class certification in the Southern District of New York, and shortly thereafter the individual plaintiffs dropped their lawsuit, stipulating to a voluntary dismissal of prejudice. This was a very important decision not just for PCF but for employers generally on what has emerged as a very significant and hotly contested issue in class action litigation, i.e. the status and use of independent contractors. Our win hinged on our ability to convince the court that the plaintiffs' alleged proof of a reserved right to control was not the same as actual proof of PCF's control, and even assuming that PCF had the right to control its deliverers, the plaintiffs' evidence did not support their claim that the classification issue was subject to common proof but rather would be subject to individual issues. This was a tremendous result in a complex case with very significant implications for employers across industries and jurisdictions that utilize independent contractors.

Editor: What aspects of class action law are in need of reform, and why?

Batten: Clearly, there ought to be more rigor given by courts to the conditional certification phase of a Fair Labor Standards Act case so that the parties have a more realistic sense of whether the case is going to go forward before either side has to incur the expense and disruption that may not be warranted on the merits. Secondly, looking past conditional certification to the second step of certification under the FLSA or class certification under Rule 23, class action litigators would really benefit from more uniform rules, something that we are hoping we may get from the Supreme Court if it grants certiorari in the Dukes v. Wal-Mart matter. Although the text of Rule 23 is the same everywhere, the applications very widely by circuit and appear fairly unsettled. Whether a case is certified as a class depends to a not insignificant degree on where it's filed. This fact makes it more difficult for class action litigants to figure out which cases can be cited, which cases should be relied on and what the test is going to be. We're hoping that the Supreme Court will grant certiorari in Dukes not only to address the very interesting issues in that case about the prevalence of common issues but also do its own survey of the various approaches to certification, thus providing guidance that will clarify the correct approach.

The other reform needed is that when class certification is granted under Rule 23, the losing party has the opportunity to try to appeal to the circuit court for another look at that decision. Currently, under Rule 23(f) those appeals are purely discretionary with the circuit court A better way would be to give the right of appeal for both plaintiffs and defendants. Before either side undertakes the kind of commitment entailed in certification, it ought to have a very clear understanding that the class has been properly certified. The discretionary appeal undervalues the significance of such a decision because certification may be the death knell of the case. If certification is denied, there is usually not enough incentive for plaintiffs to continue to prosecute the matter; if class certification is granted, then there frequently is enormous settlement pressure on the defendant who doesn't want to bet the company on some multi-thousand plaintiff class action, even if the company is in the right.

Please email the interviewees at ebloom@proskauer.com or mbatten@proskauer.com with questions about this interview.