A year after the Seventh Circuit ruled that fewer than 40 workers in an overtime suit may be enough for class certification, attorneys told Law360 the decision highlights other factors to consider when assessing whether a class action meets a key requirement in a category called numerosity.
In Anderson v. Weinert Enterprises Inc., the appeals court denied class certification for a group of 37 roofing company employees because all but two of them lived near the courthouse. The workers’ geographic proximity indicated that the suit was amenable to ordinary group litigation procedures, rather than class action status.
But as the three-judge panel rejected class certification, they noted that a class with fewer than 40 individuals may pass muster if “joinder of these employees in a single lawsuit (with multiple named plaintiffs) would be impracticable.” The comment echoed Rule 23 of the Federal Rules of Civil Procedure, which governs class actions and specifies that an individual may sue as a representative on behalf of others if “the class is so numerous that joinder of all members is impracticable.”
Joinder is the standard method of conducting a case with multiple plaintiffs, in which they operate as co-plaintiffs. A class action is an exception for situations where letting one person act as a class representative would be more manageable.
Christine Webber, a partner at Cohen Milstein Sellers & Toll PLLC, said the key question is whether it’s feasible to litigate with a bunch of individuals, rather than how many of them there are. She represents workers in class actions as co-chair of the firm’s civil rights and employment practice group.
“Forty is the rule of thumb, but I think I’ve seen courts say as low as 20,” she said. The circumstances of the case and the plaintiffs guide the analysis, she said.
For example, cases involving guest workers from another country who come to the United States temporarily for seasonal agriculture work are more likely to be certified with a small number because of the difficulty in contacting each of them, she said.
“Those present some significant logistical hurdles to people all just joining in the case as individual plaintiffs,” she said. Certifying the case as a class action makes it easier for a few individuals to provide representative testimony and evidence on behalf of the group, she said.
When the proposed class includes current employees who fear retribution for speaking out, courts may certify a class action as a way to let them avoid the spotlight, she said.
A split Seventh Circuit panel said Friday that Boeing can’t use its bylaws to prevent shareholders from bringing federal derivative claims alleging its board directors and officers issued false and misleading statements concerning the 737 Max jets in the years leading up to two fatal crashes.
The 2-1 appellate panel revived a shareholder derivative suit that the Seafarers Pension Plan had filed in Illinois federal court alleging current and former board members and executives of The Boeing Co. issued false and misleading proxy materials about the development and operation of the 737 Max from 2017 to 2019.
The Seventh Circuit majority overturned a Northern Illinois district court’s June 2020 decision dismissing the suit based on a forum selection clause in Boeing’s bylaws establishing that the Delaware Chancery Court is the “sole and exclusive forum” for any derivative action or proceeding brought on behalf of the corporation. Boeing’s headquarters are in Chicago, but it’s incorporated under Delaware law.
The panel’s majority concluded Friday that Boeing’s forum selection bylaw is unenforceable in this case because it runs afoul of Delaware corporation law and federal securities law.
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Seafarers alleges that Boeing’s false and misleading proxy statements hurt the company by “enabling the improper re-election of directors who had for years tolerated poor oversight of passenger safety, regulatory compliance, and risk management during the development of the 737 Max airliner.”
Seafarers also alleges that the false and misleading statements were used to obtain shareholder votes to reelect and entrench the very board members whose oversight failures led to the 737 Max disasters, as well as to approve executive compensation packages and reject shareholder proposals that sought to separate the roles of the CEO and the board chairman, according to court documents.
The 737 Max was involved in two fatal overseas crashes in five months: the October 2018 crash of Lion Air Flight 610 in the Java Sea, which killed 189 people, and the March 2019 crash of Ethiopian Airlines Flight 302, which killed 157.
What followed was an unprecedented 20-month global grounding of the jets, multiple investigations targeting Boeing’s missteps in the jet’s development and the Federal Aviation Administration’s oversight lapses, and scores of lawsuits from crash victims’ families, shareholders, airline customers and others accusing Boeing of shortcutting safety in its pursuit of profits. The FAA in November 2020 cleared the 737 Max to return to service.
Seafarers launched this suit in December 2019, and Boeing invoked its forum bylaw to get the action dismissed. The Seventh Circuit heard oral arguments in November 2020. The panel’s majority said Friday that the bylaw completely eliminates shareholders’ right to assert derivative claims under the Securities Exchange Act, in violation of Congress’ mandate that federal courts retain exclusive jurisdiction over those claims.
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Seafarers’ attorney Carol V. Gilden of Cohen Milstein Sellers & Toll PLLC said in a statement to Law360 on Monday that they are eager to present their arguments in federal court.
“We are pleased with the Seventh Circuit’s thorough and well-reasoned opinion. We look forward to proceeding with the litigation of the Seafarers derivative 14(a) claims,” Gilden said.
Seafarers Pension Plan is represented by Carol V. Gilden, Richard A. Speirs, Amy Miller, and Steven J. Toll of Cohen Milstein Sellers & Toll PLLC.
A federal judge in Washington on Monday wrestled with whether ex-President Donald Trump is immune from civil lawsuits filed over last year’s Jan. 6 riots at the U.S. Capitol.
U.S. District Judge Amit Mehta of the District of Columbia, who is simultaneously presiding over criminal prosecutions stemming from the Jan. 6 violence, pressed an attorney for the former president as well as those representing the lawmakers and U.S. Capitol Police officers suing Trump about comments the ex-president made at a rally ahead of the violence, and if they fell under the scope of his official duties.
A handful of civil lawsuits have been filed over the Jan. 6 riots, targeting Trump and others who spoke at the Jan. 6 events. Mehta on Monday heard arguments for five hours over several motions made in the cases, including multiple motions to dismiss.
Jesse Binnall, Trump’s attorney, failed to come up with an example of an act a president could commit while in office that would result in him having to face a civil lawsuit. He told the judge to not consider what Trump said at the rally, and instead view a president making public remarks as part of his official duties.
Mehta seemed skeptical of that sweeping view of immunity, He raised Trump’s call to the Georgia Secretary of State Brad Raffensperger, in which the then-president asked the official to “find” more votes in the state in his favor, and asked Binnall how that would fall under the scope of Trump’s duties as president as elections are run by states.
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Joseph Sellers, a partner with Cohen Milstein Sellers & Toll who is representing several Democratic members of Congress in one of the lawsuits, told Mehta that Trump’s comments on Jan. 6 should be considered campaign activity and not part of his official duties.
The judge asked how Trump’s remarks about the Electoral College certification vote wouldn’t fall under a president’s responsibilities. Sellers replied that Trump had “no legitimate role” in that process.
WHAT TO KNOW:
- Seventh Circuit revives case after it was sent to Delaware
- Boeing bylaw would require waiver of unwaivable claims
Boeing Co. and its board must face federal securities litigation in Chicago over claims they misled investors about its 737 Max 8 jetliner before two high-profile crashes that killed 346 people, a federal appeals court ruled Friday, reversing a novel decision that had sent the case to Delaware.
A divided U.S. Court of Appeals for the Seventh Circuit revived the lawsuit, saying Judge Harry D. Leinenweber shouldn’t have deferred to a company bylaw requiring certain shareholder lawsuits to be filed in Delaware Chancery Court, widely considered the country’s top forum for business disputes.
The ruling comes about two months after Boeing’s board agreed to a $237.5 million settlement resolving parallel investor litigation in Delaware, where shareholder claims against Boeing were consolidated after Leinenweber dismissed the federal case in June 2020.
Judge David F. Hamilton, writing for the Seventh Circuit, said Leinenweber misread the Delaware law authorizing companies headquartered in the state—most major U.S. corporations—to require that derivative cases, a type of governance litigation, be heard there.
The statute refers to courts “in” the state, not courts “of” the state—meaning it includes federal courts—and it’s also limited by the caveat requiring the bylaws to be applied “consistent with applicable jurisdictional requirements,” Hamilton noted.
Because the Securities Exchange Act “gives federal courts exclusive jurisdiction” over federal securities fraud claims, applying the Boeing bylaw would mean the investor claims “may not be heard in any forum,” the judge wrote. “That result would be contrary to Delaware corporation law.”
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The pension fund is represented by Cohen Milstein Sellers & Toll PLLC. Boeing and its board are represented by Kirkland & Ellis LLP.
The employer vaccinate-or-test rule has been particularly contentious, even amongst business and labor groups.
As the U.S. Supreme Court prepares to hear arguments over the Biden administration’s vaccine mandates, there is not just a familiar division between business and workers in the amici briefs, but division within their own ranks as well, over the legal and social policy issues.
The justices on Friday will hear expedited arguments in challenges to the administration’s vaccine requirement for health care workers at federally-funded Medicaid and Medicare facilities, and its vaccinate-or-test rule for employers with 100 or more employees.
The employer vaccinate-or-test rule has been particularly contentious and so it is probably not surprising that business and labor struggle to project united fronts before the justices.
On the morning of Jan. 7, the justices are set to hear arguments first in two employer mandate cases in which the National Federation of Independent Business and its business allies and Ohio, along with 26 Republican-led states and varied employers, ask the high court to block the employer rule while their appeals proceed in the U.S. Court of Appeals for the Sixth Circuit. The appellate court refused to impose an injunction halting the mandate.
The National Federation of Independent Business has been a party in many Supreme Court cases, perhaps most famously, NFIB v. Sebelius, its unsuccessful challenge to the Affordable Care Act in 2012. Along with a number of national and regional business associations, its counsel, Steve Lehotsky and Scott Keller of Lehotsky Keller, argue the employer rule exceeds the authority of the Occupational Safety and Health Administration.
But the division within the business community is particularly pronounced in their views of whether the mandate causes harm. The potential for irreparable harm is one of the key factors in weighing the request for a stay.
The employer rule “will inflict irreparable harm upon hundreds of thousands of businesses across the retail, wholesale, warehousing, transportation, travel, logistics, and commercial industries that collectively employ millions of Americans,” Lehotsky contends. “It will impose substantial, nonrecoverable compliance costs on those businesses.”
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But the Small Business Majority and the American Independent Business Alliance, which, they say, represent “tens of thousands of small businesses,” and their small business allies, support the employer mandate in their amicus brief by counsel, Richard Koffman of Cohen Milstein Sellers & Toll.
“Amici are concerned that a stay would endanger small and independent businesses in three ways,” Koffman wrote. “First, those businesses which have at least 100 employees lose the direct protection of the ETS (Emergency Temporary Standard). Second, businesses that have fewer than 100 employees lose the indirect protection of having larger businesses abide by the ETS. Third, states would remain free to prevent employers from voluntarily implementing vaccination and/or testing requirements to protect their employees and customers.”
Koffman contends that businesses and business organizations opposing the employer mandate “do not represent the views of most American businesses.”
Some of the financial sector’s hottest trends and flashpoints in 2021 lie at the center of lawsuits that securities attorneys will have their eyes on in the coming year, from a challenge to the legality of the largest-ever special purpose acquisition company to multidistrict litigation against the controversial Silicon Valley titan of online trading.
The new year marks the next chapter in a highly anticipated test of the U.S. Securities and Exchange Commission’s jurisdiction over crypto assets and 2022 could be the year that a decade-old securities suit against Goldman Sachs, which raised key questions about class certification in the U.S. Supreme Court last summer, comes to a close.
Here, Law360 breaks down five securities cases to watch in the year ahead.
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Goldman Rolls On
Goldman Sachs and a class of its shareholders have tangled in court for more than a decade now over allegations the bank misled investors about conflicts of interest in a financial crisis-era transaction it underwrote.
Now back from a trip to the U.S. Supreme Court, the class action appears is finally pushing forward in New York federal court, though Goldman recently teed up a third challenge to the class’ certification.
The shareholders claim that Goldman’s assertions in corporate filings about avoiding conflicts of interest were misrepresentations used to keep the bank’s stock price artificially inflated until an SEC action, settled in 2010 for $550 million, revealed that Goldman helped a client short a collateralized debt obligation while simultaneously selling it elsewhere.
After the class won certification in 2015, lost it in January 2018 and regained it later that year, Goldman launched a second appeal over class certification, this time claiming it had successfully rebutted the presumption of classwide reliance — established under the 1988 Supreme Court case Basic v. Levinson — by showing that the allegedly misleading corporate statements were too generic to have affected the bank’s stock price.
A Second Circuit majority found in April 2020 that alleged corrective disclosures about these conflicts revealed new information and moved Goldman Sachs’ share price, but with the concerns of one dissenting judge in hand, the bank asked the Supreme Court to weigh in on whether defendants could point to the generic nature of alleged misstatements when attempting to rebut the so-called Basic presumption.
By the time the high court heard the case in March, the justices found that the dispute over whether a statement’s generic nature is relevant to price impact had “largely evaporated” since both sides agreed that courts could consider expert testimony and “use their common sense” when assessing a generic statement’s price impact.
The justices remanded the case with a directive for lower courts to include the generic nature of alleged misstatements as one of the many factors considered during a price impact analysis, leading the Second Court to kick the case back to U.S. District Judge Paul A. Crotty for clarification on whether he had indeed factored in the “genericness” of the alleged misstatements.
After reviewing the case with “fresh guidance” from the upper courts, Judge Crotty again certified the class, writing in his December order that the bank had still failed to prove its corporate statements were too generic to have kept its share price artificially inflated. Goldman claims that the judge got it wrong again, and has asked the Second Circuit to take its third look at the case.
Cohen Milstein Sellers & Toll PLLC partner Laura Posner said Judge Crotty was right to find that some of the alleged misstatements weren’t generic in nature and that others “that could, in a vacuum, potentially be seen as generic, were not in the specific context of the facts at issue in this case.” Posner added that “it would be a mistake” for Goldman to aim for yet another appeal.
“While I certainly cannot predict whether Goldman will continue to otherwise litigate the case, the facts appear to be quite strongly in support of the plaintiffs — as further supported by the $550 million penalty it paid to the SEC for related actions — and I believe the plaintiffs will succeed on the merits if the case does go to trial,” she told Law360.
While the economic fallout of the coronavirus pandemic is still front of mind for real estate attorneys, a diverse range of legal challenges are expected to take the spotlight in 2022, touching on everything from fair housing law to eminent domain.
Here, Law360 looks at three real estate-related disputes lawyers will be watching in 2022.
Tenant Screener Faces Discrimination Claims
A federal lawsuit in Connecticut headed to trial in March aims to establish that third-party tenant screening services that landlords use to assess a prospective renter must adhere to federal anti-discrimination law.
The suit, targeting CoreLogic Rental Property Solutions – now SafeRent Solutions and no longer affiliated with CoreLogic – was filed in 2018 by Connecticut Fair Housing Center and Carmen Arroyo, the mother and conservator of a young man who saw his application for an apartment rejected in 2016 based on “disqualifying” criminal records.
The plaintiffs argue that SafeRent violates the Fair Housing Act because its CrimSAFE product can disqualify a renter simply based on the existence of a criminal charge or conviction, disproportionately impacting Black and Latino renters.
The defendant has argued that the FHA applies to housing providers, not background screeners, and that landlords are the ultimate decision makers when it comes to choosing a tenant. And, that landlords are justified in screening out certain tenants to protect their property and the safety of other residents.
Eric Dunn, director of litigation for the National Housing Law Project, is co-counsel for the plaintiffs. He pointed to 2016 U.S. Department of Housing and Urban Development guidance that urges property owners to contextualize an individual’s criminal history.
“What we would like to see is that landlords don’t just use computers and have some kind of automated decision,” he said.
In the case of Arroyo, her son’s shoplifting charge was ultimately dropped and pre-dated a traumatic brain injury that limited his ability to walk or speak, according to the suit.
Thomas Silverstein, associate director of the Fair Housing & Community Development Project at the Lawyers’ Committee for Civil Rights Under Law, said the suit is a good test for advocates.
“It is responsive to the challenges posed by widespread adoption of new technology in the housing industry, and making sure that … advocates can keep up with the pace of change and still secure effective remedies,” he said.
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Cohen Milstein’s Christine E. Webber, co-chair of the firm’s Civil Rights & Employment practice, is the lead trial counsel in this case: Connecticut Fair Housing Center v. CoreLogic Rental Property Solutions LLC, case number 3:18-cv-00705, in the U.S. District Court for the District of Connecticut.
Google‘s $13 million class settlement resolving claims over personal data collected by its Street View vehicles remains intact after the Ninth Circuit rejected arguments Monday it unfairly benefited charitable groups at the expense of consumers.
Settlements that provide monetary relief only in the form of cy pres payments to third parties may be appropriate where there is a “direct and substantial nexus” to class members’ interests, Judge Bridget S. Bade said.
Bade signed off on the distributions to a number of internet privacy-protection organizations on behalf of the U.S. Court of Appeals for the Ninth Circuit, but she also wrote separately about her concerns over the court’s precedent on charitable awards.
It wasn’t feasible to distribute the money directly to the estimated 60 million people whose personal data was collected, given the difficulty of verifying their claims, Bade said.
Bade also noted that, despite objector David Lowery’s characterization of the settlement, it wasn’t really a “cy pres-only” deal in light of additional injunctive relief. The district court said the court-ordered relief went beyond measures Google was already required to implement pursuant to an earlier agreement to resolve related state-government investigations.
Lowery argued that the impracticality of distributing class funds should have precluded certification. But judicial oversight over the cy pres settlement provisions ensures that the settlement prioritizes class members’ interests, Bade said.
The court also rejected Lowery’s argument that the settlement amounted to compelled speech in violation of the First Amendment.
Without deciding whether a court’s approval of a settlement amounts to “state action” to trigger the constitutional argument, the court said the agreement doesn’t compel speech because class members can opt out.
The court also rejected Lowery’s arguments over counsel’s alleged conflicts of interests, and his challenge to the fee award. There’s no rule that courts have to discount the value of cy pres relief, Bade said.
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The class is represented by Cohen Milstein Sellers & Toll PLLC, Lieff Cabraser Heimann & Bernstein LLP, and Spector Roseman & Kodroff PC.
The consumers leading antitrust litigation over an alleged industrywide scheme to fix broiler chicken prices won final approval from a federal judge in Chicago for their $181 million class action settlement with Pilgrim’s Pride Corp., Tyson Foods Inc., and other poultry processors.
Judge Thomas M. Durkin signed off late Monday on six agreements resolving “indirect purchaser” claims in the U.S. District Court for the Northern District of Illinois.
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The deal includes a $99 million agreement with Tyson, a $76 million pact with Pilgrim’s, and four settlements with smaller poultry processors worth a combined $6 million. Durkin called it “fair, reasonable, and adequate” in light of the costs and risks of additional litigation.
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The consolidated proposed class actions, which began in 2016, are part of a wave of cartel cases involving livestock and protein, including beef, turkey, pork, tuna, salmon, and eggs.
Most of the lawsuits allege price-fixing schemes centering on unlawful exchanges of sensitive information through Agri Stats Inc., which compiles farm sector databases.
The broiler chicken industry has been particularly hard hit. Along with the main civil case and the criminal charges, top poultry processors and executives face claims they conspired to drive down pay for chicken farmers and their largely immigrant workforce.
Many of the companies have settled many of the claims against them over about the past year. Tyson and Pilgrim’s, a subsidiary of Brazilian meatpacking giant JBS SA, have agreed to pay more than $200 million each in total.
Durkin approved the consumer settlements after a court hearing Monday. He noted that the $181 million figure is larger than similar deals reached on behalf of wholesalers or restaurants, despite legal technicalities that limit the consumers to pursuing claims in “about half the states in the country.”
About 1.2 million consumers have filed claims already, while only three have objected, the judge said.
Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC are class counsel for the consumers.
An Illinois federal judge Monday gave a final signoff to settlements totaling $181 million that six chicken producers have agreed to pay to resolve claims that they conspired to fix the price of broiler chicken.
During a teleconference, U.S. District Judge Thomas Durkin granted final approval to the deals end-user consumer plaintiffs have reached with Fieldale Farms, Peco Foods, George’s, Tyson Foods, Pilgrim’s Pride, and Mar-Jac Poultry.
The settlements were reached with Tyson for $99 million, Pilgrim’s for $75.5 million, Peco for $1.9 million, George’s for $1.9 million, Fieldale for $1.7 million and Mar-Jac for $1 million, according to filings in the case. The end-user consumer plaintiffs are still pursuing claims against 12 remaining defendants, including Perdue Farms, Koch Foods and others.
Judge Durkin said Monday that the settlements were the best outcome for the end-user class plaintiffs, and that they’ve recovered more from the defendants than any other class. The cash form of compensation is better than any coupons that could expire, and they’ll have plenty of time to put in their claims, he said.
These six defendants have agreed to cooperate with the plaintiffs by authenticating documents and providing witnesses for trial, which may be significant as the case moves forward against other producers, the judge said.
He also praised the “fairly extraordinary” notice plan, noting the difficulty of reaching millions of class members who’ve purchased chicken in different states over multiple years. Still, it’s estimated direct email notice was delivered to more than 80% of email addresses, Judge Durkin said.
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The consumers are represented by Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC.