How To Avoid Stepping On A Rake In The Early Stages Of Defending A Consumer Class Action

David E. Sellinger and Aaron Van Nostrand

I was sitting in my thirty-eighth floor office admiring its majestic view over midtown Manhattan and my own status as the youngest-ever litigation partner at Killum & Winnum.  The phone rang quietly, interrupting my thoughts.  It was Alan Able, the General Counsel of Tech Effect Corp., one of the firm’s most promising clients.  Tech Effect’s new Virtual Widget was the hottest product in its market space.  The Virtual Widget interfaced with other products to make them more interactive and user-friendly.  Two years ago, no one had heard of it; now, it was viewed by its enthusiastic users as a “can’t do without” utility gadget.  Virtual Widgets were flying off the shelves, and the big-box department stores could not place orders for them fast enough.  It seemed like there was hardly a twenty-something who didn’t own one.

“I need to talk to you.  We’ve just been sued.  This is a totally bogus lawsuit, but it’s a big one -- a consumer class action.”  Able sounded nervous, practically shouting out the last two words.

“What’s it all about?”  I asked softly, doing the best I could to calm his fears.

“The plaintiffs are claiming consumer fraud, based on the marketing of our Virtual Widgets.  They’re seeking $100 million in damages, and punitive damages on top of that.”

Able told me that the suit had been filed that morning in federal court in New York.  The putative class was being represented by the Phyle Furst law firm, the biggest plaintiffs’ class action firm in the country.  K&W had successfully litigated against Phyle Furst in several cases.  But Phyle Furst was, by far, the best plaintiffs’ firm around, known for its full bench of talented former AUSAs, backed-up by a seemingly limitless supply of young associates fresh off clerkships.  The firm’s mere presence on a pleading was enough to ruin any corporate GC’s day.

"This could not have happened at a worse time,” said Able.  “We’re planning our IPO, and the Virtual Widget is the company’s crown jewel.  We need this case dismissed, and right away.  We want you to handle this case, personally.  It’s very important to us,” he said, almost pleading.

I couldn’t meet the next day as he wanted.  But as luck would have it, I was scheduled to leave that night for a court appearance in California, where Tech Effect was headquartered, so we arranged to meet several days later.  He said he’d email me the complaint, and I promised that we’d review and analyze it and develop a preliminary game plan before the meeting.

No sooner had Able hung up then I called Vera Smart, my best and brightest young associate, who worked in K&W’s San Francisco office, asking her to review the complaint and to analyze the claims, potential defenses and class issues.

The district court in which the case was filed was practically our home court.  I have been back in the courtrooms there many times since I finished my clerkship with the former chief judge.  I was excited about the prospect of the new case, and of doing battle again with Phyle Furst. 

Two days later, after my hearing was over, I rushed back from court to K&W’s San Francisco office so I would have time to go over the new case before our meeting with Able the next morning.  But I had barely put my litigation bag down in the office and taken off my jacket when Able called to tell me that a second class action had been filed — this time in federal court in California.  It made the same allegations as in the first suit. 

Early that evening, Able called again.  “Its gone from bad to worse.  We just got sued again.”

“What’s worse about this case?”  I asked.

“This time, they sued us in Hamilton County, West Virginia.”  Now I heard real panic in his voice.  Of course, I knew about Hamilton County, West Virginia¹, and so did everyone else who read The Wall Street Journal or any one of numerous legal and business publications.  The Hamilton County, West Virginia court system was notorious for supposedly being one of the worst places in America for a corporation to get sued.  Runaway juries and staggering damage awards were widely-reported to be the order of the day for a corporate defendant sued there.

“Not to worry,” I assured him.  “We’ll have an action plan when we meet tomorrow.”

“Tomorrow won’t be here soon enough,” he said.  “And don’t forget --  it’s the IPO.  Our management team went through the roof when the Hamilton County complaint arrived.  We need to get this litigation behind us fast.”

*    *    *

Smart and I ordered carry-out sushi and worked late into the night reviewing the case and strategizing about what to do.  This is what we were facing:

The first case was a putative nationwide class action, filed by a New York resident, as named plaintiff, against Tech Effect.  Tech Effect was a Delaware corporation with its principal place of business in Menlo Park, California.  The plaintiffs asserted claims under the state consumer fraud statutes of each of the fifty states and the District of Columbia and unjust enrichment, and, as Able had reported earlier that week, the plaintiffs were seeking $100 million in compensatory damages as well as punitive damages.  The suit alleged that Tech Effect marketed its Virtual Widget as able to download files from the Internet but failed to tell purchasers that the Virtual Widget would not be able to download files without a $50 dollar plug-in.  I understood from my daughter that downloading files from the Internet was one of the key features of the Virtual Widget.

The second case was, sure enough, a “copycat” lawsuit filed two days after the first case.  The California case also was filed in federal court by a California resident as named plaintiff.  The plaintiffs’ law firm in that case even copied the typos from the first complaint.

The third case, unlike the other two lawsuits, was filed in Hamilton County, West Virginia.  That was no surprise.  But unlike the other two lawsuits, it was pled as a statewide class action brought only under the West Virginia consumer fraud statute and West Virginia common law.  The case presented essentially the same theory as in the other two cases, arguing that plaintiffs were defrauded within the meaning of the West Virginia consumer protection statute and were also entitled to unjust enrichment relief in the amount of $50 dollars each.  As with the plaintiffs in the other cases, the West Virginia plaintiff claimed that he would not have bought the Virtual Widget at that price had he known that it would require the $50 plug-in to download files from the Internet.  The lawsuit also named a West Virginia distributor as a defendant.

*       *       *

At the meeting with Able over breakfast the next morning, I outlined our proposed strategy on a set of powerpoints projected on a flatscreen monitor.  I told Able that we were prepared to discuss the case, including the forum issues, class issues and our initial thoughts about the merits, although those thoughts were only preliminary.

“Let’s start with the Hamilton County case,” Able said, with a shudder.  “Our CEO has heard about the courts there from some guys he knows from the Executive Triathlon Challenge.  And he’s read about the Hamilton County justice system in the business media.  How are we ever going to deal with that one?”

“Well, to be candid with you, state court in Hamilton County is bad news for a corporate defendant.  The case is assigned to a judge who recently handled a class action in which the jury awarded the plaintiffs over $1.5 billion in damages.  And a couple of years ago, this judge sat in another case involving a so-called product defect in which the plaintiff was awarded $10 million in punitive damages, even though he was unharmed and had no actual damages that we can understand.  That case went all the way to the Supreme Court before being reversed on appeal.”  Able only groaned.

“How are we going to do the IPO with this matter hanging over our heads?”  he pleaded.

“The short answer is that were not going to litigate the case in Hamilton County,” I said.

“Huh?”  he asked.  “I know about the two federal cases.  They’re in federal court based on diversity jurisdiction.  But this is a state case.  No federal claim.  We can’t settle.  Not a penny in tribute.  What can you do?  Aren’t we just cooked?” 

“Ten years ago, I would have said ‘yes’.  But, that’s no longer true,”  I answered.  I looked up and saw the color begin returning to Able’s face.  “We can remove the case to federal court.  Under the Class Action Fairness Act -- CAFA, as it’s called -- you don’t need complete diversity and you don’t need to have the named plaintiff satisfy the $75,000 jurisdictional amount in order to remove the case to federal court.”

“What do you do?”

“Under CAFA, you don’t need complete diversity if the putative class has at least 100 members, so long as there is a single named plaintiff who is a citizen of a state that is different than the state of which any defendant is a citizen.  The jurisdictional amount for CAFA jurisdiction is $5 million, but you can aggregate all of the plaintiffs’ claims, exclusive of interest and costs, to satisfy the limit.  There is, however, an exception to CAFA jurisdiction when more than 2/3 of the proposed class are from the forum state and one of the primary defendants is from that state.  We have to see if that’s a problem.” 

So we discussed numbers for a while.  Able got his sales department on the phone, and, after a few calls back and forth, we learned two pieces of information that sounded very promising for a CAFA removal strategy.

First, it turned out that a high percentage of West Virginia customers of the Virtual Widget were students at the University of West Virginia.  Many of them presumably resided in other states but purchased their Virtual Widgets while at school.  Second, the fulfillment center of one of the biggest national retail chains was located in the Northern District of West Virginia, the judicial district in which the case was filed.  Based on the customer registration database of Virtual Widget owners, it appeared that almost all of the telephone and email sales for Virtual Widgets were handled by the West Virginia fulfillment center.  

Based on these numbers — which Able was confident we could support with affidavits, if necessary -- it appeared that first, more than one-third of the class members were not from West Virginia.  Second, based on the numbers in the complaint, the class-wide damages would clearly total way more than $5 million, as the putative class numbered approximately 140,000 people.  Based on the clear roadmap provided by the statute, it looked like we had a principled -- indeed,  a winning -- argument for removal of the case under CAFA to the federal district court for the Northern District of West Virginia.  This was not a matter of clever lawyering.  CAFA was intended to provide a federal berth for this very situation. 
Able was starting to look like a happy client.

“Assuming all these cases now would be in federal court,”  Able asked, “we can definitely get these ridiculous claims dismissed, right?”

I hesitated, wanting to explain our thinking without deflating Able’s confidence in the strategy.  I knew from our review of the three complaints that I could file a solid motion to dismiss the statutory consumer fraud claim for failure to state a claim, but that if I did so, I might give up a good potential argument for defeating class certification down the road.  Whatever Able was thinking was important now, and I understood the pressures he was operating under, I was absolutely certain that the single most important step in defending against this case was to defeat class certification, if possible.  I also knew that even if we chose not to file a motion to dismiss instead of an answer, this motion was preserved and could be made later in the case in a time and manner that would be most advantageous to Tech Effect. 

Sensing my hesitation, Able said, “We’ve talked to a couple of other firms.  Each of them told us plaintiffs are dead in the water in California and West Virginia on their statutory consumer fraud claim because of some pleading deficiencies.  These other firms seem to think we can win a 12(b)(6) motion and at least take some of the wind out of plaintiffs’ sails.  If we can get rid of that, all plaintiffs have left is an unjust enrichment claim.  I always thought unjust enrichment was just something a plaintiff threw against the wall if he had no real legal cause of action.  Why wouldn’t we file that motion? It would help a lot to get beyond the IPO even with a preliminary victory.”

I knew I had a hard sell, but thought it was important that I try.  “Alan, we’ve looked at the complaints and identified potential theories for dismissal.  For example, in the California and West Virginia cases, where the only named plaintiffs are from those states, the plaintiffs did not provide Tech Effect with notice and the opportunity to cure any violation, which is required under the consumer fraud statutes in those states.”

“Sounds good so far,” said Able eagerly.  “Let’s go for  motions to dismiss at least those counts,” said Alan Able eagerly.

“Alan, I am very sensitive to the fact that this is a critical time for the company and that you want these class actions off your radar screen.  Rest assured we will look for other opportunities to achieve quick demonstrable victories in the case.  But, if you move to dismiss now, even if you succeed in knocking out all the claims, plaintiffs will just file amended complaints that are stronger.  More important, while we may be successful in dismissing the consumer fraud claims, the unjust enrichment claim in each complaint will likely survive a motion to dismiss, and this is a claim that may get certified as a class.  I can’t have you winning the battle just to lose the war.”

“So what are you recommending?”  Able was starting to turn pale again.  “That we settle?  Absolutely verboten.  Or that we have to spend millions on further litigation, when there might be a way to get out now on a relatively cheap threshold motion?”  

“Alan, based on our legal analysis, this is a case that really isn’t appropriate for class action treatment.  We think we may have valid grounds to defend against the class down the road, and we’ll talk about that in a little while.  If we can defeat class certification in each of these cases, that will be an important victory that will eliminate much of the pressure that class counsel are able to wield when they file a lawsuit as a class action,” I said.  “If we leave in the consumer fraud count, which alleges a violation of the consumer fraud act of each one of the states, that may be of real help to us when it comes time for opposing class certification.”

“Huh?” he asked.  “If  we can knock out the claim now on pleading grounds, how can it help us on class certification to leave it in?”

“Here’s how,” I began. “Under Rule 23(b)(3), in a class action where the plaintiffs are seeking money damages, the court has to find that common issues of law and fact ‘predominate’ over individual issues.  In addition, the court must find that  class action treatment is the ‘superior’ method of resolving the litigation.  These two class action requirements – predominance and superiority -- are going to be the cornerstones of our opposition to class certification.” I said.

“How can you be so sure that that’s the way it will play out?” he asked.

The reason was that the law was strong on our side.  In developing our game plan over the prior few days, I reflected on the way the law has developed over the years under Rule 23.  The strategy I was recommending was based on my longstanding view of the principles that federal courts are supposed to apply when confronted with class certification motions.

I knew that the court would be sensitive to protecting the rights of absent class members as well as the rights of the defendant.  Rule 23, the class action rule, strikes a balance that protects the rights of a corporate defendant confronted with the prospect of having to defend a case filed as a class action.  Class counsel gain enormous settlement pressure over a company once a class is certified, even if the case is defensible on the merits.  Therefore, the plaintiffs have to satisfy the Rule 23 requirements in order for a class to be certified.   

“In a case like this, where the plaintiffs’ claims are based on the laws of the different states, the differences between the laws of the various states are one of the major reasons that the federal courts most often deny class certification.  We need to be in a position to argue that the differences between the various states’ laws create individual issues, and that the common issues do not predominate over them.  We also want to be able to show that it would be impossible to instruct a jury in this case, with so many different state legal standards, and therefore the case would be unmanageable.  If the case is unmanageable, then plaintiffs can’t meet the superiority requirement.”

“That sounds kind of theoretical to me,” he said.  “All of these complaints are basically making the same essential allegations.” 
So I put up a slide listing some of the differences in the states’ laws governing the statutory consumer fraud claims.  We’d use this in our motion papers on class certification.  It showed, for example, that there were multiple differences in how states treated omissions.  In some states, such as Louisiana and Massachusetts, omissions are actionable regardless of whether or not they were intentional, while in other states, such as Kansas, any omission must be intentional.  Moreover, in some states, such as California, the omission must contradict an affirmative statement made by the defendant.  There were also differences in the scienter requirement for affirmative misrepresentations under various consumer fraud statutes.  Some states, such as Kansas and Georgia, require intent to deceive; other states, such as Tennessee, require negligence; and other states, like New Jersey, find defendants liable even if they acted in complete good faith.  Another example is the states’ treatment of reliance.  Some states, like Georgia, require reliance; some states, such as Connecticut and New Jersey, do not; some states, like Michigan, require that reliance be reasonable; some states, like Arizona, do not. 

“Now play out that analysis over fifty states. How could you ever instruct a jury on all those different permutations of the same claims?” asked Vera.  “You can’t.  This case, if certified as a class action, would be a litigation nightmare for the trial court because of all the individual issues.  That’s one very important reason why class certification should be denied.” 
“That’s a good point.  But can plaintiffs get around this by creating sub-classes by states or groups of states with similar laws?” he asked.  “For example, the plaintiffs in the Hamilton County case allege a West Virginia-only class.  Isn’t there a chance that the two federal courts would just set up sub-classes?”

“Excellent question.  That’s one of the tactics that plaintiffs’ lawyers are likely to try if we argue that this case cannot be certified based on differences between the laws of the different states.  Plaintiffs will also likely attempt to create subclasses for groupings of states with similar statutes.  But federal courts that have looked at cases like this have often had the same reaction:  why should I certify a nationwide class if I’m going to end up with multiple different trials?  If the judges in these New York and California actions look at the case that way -- that they can’t certify a case with numerous or perhaps as many as  50 subclasses -- then the nationwide class is not a superior method for trying the case.  Therefore, no class action.” 

Understanding that the court would be concerned about where this result would leave plaintiffs, we intended to try to alleviate this concern by reminding the court that plaintiffs would not be left helpless.  Plaintiffs could file single-state class actions in state court that would not raise the spectre of the trial court’s having to deal with the differences between the laws of all the different states.  Or, the plaintiffs could petition their state Attorney General to take action under their state’s consumer protection statute.  Because the state Attorneys General are empowered to enforce their states’ consumer protection laws, there would be an alternative remedy to protect the class members. 

I explained to Able how the court needed to take these considerations into account in making the superiority determination.  “Combined with the unmanageability of this lawsuit as a class action, the availability of the state Attorney General enforcement remedy only underscores why a class action would not be a superior method for resolving this litigation.”   I told him we would cross the single-state class action bridge when we came to it.

He started to look troubled again. “What about the Hamilton County case?  This ‘legal variation’ theory doesn’t help me there.  Also, what good does all this do me if I end up with a state case in every state in the country?” 

“We’re working on that, but we need your help.”  I told him.  “Even if the court concludes that the differences between the laws of the various states do not prevent a finding of predominance, if we can show that there are factual differences between the various plaintiffs, that also will prevent the plaintiffs from establishing predominance.  Think about it.  If there are individual issues that distinguish the plaintiffs factually from one another, then the common issues don’t predominate over the individual issues.  That defense strategy can work just as well in a single-state class action as in a nationwide class action.”  Here, again, our recommendation was based on my understanding of settled law under Rule 23 and my sincere belief  as to  how that law should and would be applied  in these circumstances to reach the proper outcome on a class certification motion, if we could just make our points persuasively.

Able was silent for a minute and he looked a little depressed.  “Where’s any of that going to get us?” he asked.  “As I read the three complaints, they each allege factually that plaintiffs were misled because Tech Effect failed to disclose the $50 cost to download from the Internet. What’s individual about that?” 

“That depends,” I responded.  “Sure, the basis for their claim is that there was consumer fraud by an omission.  But these suits are all alleging, necessarily, that each class member would not have purchased the Virtual Widget  had they known that they would have to pay an extra $50 to download from the Internet.”

“Well, that’s a crock,” Able replied quickly.

“How so?” I asked.

“When this product first came on the market, it was not even compatible with most Internet sites.  It was only with Version 2.6, which was released about a year ago, that the downloading function of the Virtual Widget became widely accepted.”
“That’s it!” said Smart, jumping to her feet.  “The customers vary.  The people who purchased prior to Version 2.6’s coming on the market can’t have a claim that they wouldn’t have purchased had they known about the $50 plug-in.  Back then, most potential customers didn’t even know they could download files from the Internet with the Virtual Widget!”

I had a feeling that this specific factual variation was only the tip of the iceberg.  But beating class certification in this matter meant we would have to go beyond the complaints to understand the facts in this particular market.  And Able, who knew this market a lot better than we ever would, may have just provided the key.

I took out my blackberry and dashed off this email to the other attorneys in the litigation group at K&W:  

“I’m sending this e-mail hoping that some of you may be able to help me answer a question concerning a new client matter.  Would those of you who own Virtual Widgets please tell me what you like to do with your Virtual Widget and what functions on it you use?”

The answers came in fast and furiously. I read them out loud to Able and Smart:

 “It’s great because I can download files from the Internet and I use that function all the time now.  When I first bought it, I didn’t even know about that feature.”

“I used it for studying for the Bar exam two summers ago.”

“My wife bought me one for my anniversary last year.  She’s a style nut.  The twenty-somethings in her office carry their Virtual Widgets around in that sleek shiny purple case it comes in.  Remember the scene where Matt Damon uses his in his new movie?  My wife thought it would make me feel ‘with it’ if I had one.  But I have to confess, I’ve never taken it out of the case.”

“I use it when I’m doing CLE on the treadmill when I need the credits.  I have the materials  mailed to the office.  The Virtual Widget makes it very painless to get through the programs.  I finish the credits and in the drawer it goes until CLE time the next December.”
 
“It’s amazingly versatile.  With its Internet downloading function, I’m always finding new things to do with it.”

“I use it when I’m working at home at night.  I just use the basic functions – ‘on,’  ‘off,’ those kinds of functions.”

Able substantiated what we earlier had only suspected.  My blackberry “survey” further demonstrated that the class members in this case varied widely in different ways, not only based on time of purchase but also based on their purchasing decisions.  Not all consumers would have even cared whether it cost extra to download files from the Internet.  

These factual variations could be huge for us in arguing against predominance and superiority.  We knew that, given the popularity of the downloading feature, class counsel would seek to present the consumers as a homogeneous class whose members all would have considered this cost as an important factor in their purchasing decisions.

“If we can show how individual consumers vary from one another in their purchasing decisions and in how they actually would rank Internet downloading -- if they would even care about it all -- based on the actual facts about this market, maybe we can poke a hole in plaintiffs’ theory,” I said.  “We’ll try to point out to the judge another reason that a class action would not be a superior method of adjudication and that individual factual issues predominate over any common issues.”

“Sounds great in theory.  But how are you going to show that?” he asked.

“One way is to take discovery of the individual plaintiffs. My hunch is that even the named plaintiffs – each of whom alleges that he or she would have cared about the $50 cost -- vary in their purchasing decisions, and that we’ll be able to show that.  There will be differences even between why different 21-year-old college students bought the Virtual Widget.  But I acknowledge that taking productive depositions of the named plaintiffs will be challenging.  They’re going to be horse-shed before their depositions by plaintiffs’ counsel.

“So how do we deal with that?”

“We’ve been thinking about that.  We want to see if there’s an expert, with good credentials, on how consumers make their purchasing decisions, who could look at the data concerning this market and find out whether or not there’s evidence that supports our position. If such an expert, after analyzing the data,  using reliable methodology, honestly believes that the evidence supports our position, that could really make the difference,” I told him.

 “Thanks to your comment about how the market changed, my gut tells me that factual variability as to the purchasers is going to be important in helping us show that common  issues do not predominate over individual issues,”  I added.

With that, Able told me that he had two more questions.  “One, am I going to have to pay your fees to litigate the same case three different times in three different courts?  Two, if not, where would be the best place, from Tech Effect’s perspective, to litigate a case like this?”

“Of course, these issues need to be evaluated,” I answered.  “But if we stay focused on the main event right now, which is defending against class certification, there are things we can do to enhance prospects for a successful outcome here.”

“Like?”  He asked.

“Like Multidistrict Litigation treatment -- MDL,” I answered.  “This situation cries out for MDL handling because of the danger of inconsistent rulings, particularly on the class-related issues, and because dealing with these cases in one MDL proceeding so clearly will be more convenient for the parties and the witnesses.”

“Is that going to be hard to do?” he asked.

“I frankly don’t think so.  Now that there are three filed cases, there are enough cases to qualify for MDL.”  Also, more cases could be filed if plaintiffs’ lawyers started to see this thing as a gravy train.  The basic argument, I told Able, would be that MDL treatment would eliminate duplicative discovery, avoid possible inconsistent rulings, reduce litigation costs and save the time and effort of the parties, the lawyers, the witnesses and the courts.  I felt we had pretty good arguments on our side.

“If you look at the complaints, they all arise out of the same operative facts and allege substantially similar claims, even though the common issues don’t predominate over the individual ones.  The discovery is going to be the same in each of these cases, too.  It really would be inefficient and wasteful of the judges’ time and the parties’ money to litigate each of these class actions separately, and the MDL Panel is likely to see that,” I explained.

“Also,  if we can persuade the MDL Panel to designate these cases for MDL treatment, we don’t have to worry about winning the class certification battle three different times, which is essential,” I added.   

“I understand all that,” said Able.  “But what does that mean about where we want the case to be?”

I knew that this was an important decision.  I understood where the client’s interests lay.  Before our meeting, we had reviewed the different potential options.  For a variety of reasons, the upshot of our analysis of the overall case -- the facts, the law, etc.  -- was that the federal court in New York would be the best place of the three courts where there were filed cases for Tech Effect to defend this particular litigation.  I knew that the most probable outcome under the cases interpreting the MDL statute coincided with my recommendation on what venue was likely to be best for Tech Effect.  Here’s the way things stacked up as I saw them: 

First, the Hamilton County case still had ominous overtones, even if we could remove it.  Plaintiffs would be likely to advocate for West Virginia as the MDL forum, as a number of class actions with pertinent similarities that had been filed there in the last several years had been certified or settled for hundreds of millions of dollars.  There was always the danger of remand. I didn’t like the West Virginia option very much.

The New York action was the first-filed case.  Neither of the other cases was more advanced, nor was either of the other two judges more  familiar with the case, at this initial stage of the litigation.  I explained to Able that in the MDL Panel’s determination on where the cases would be litigated if the Panel were to order an MDL proceeding, the location where the company was located and where its relevant conduct had occurred was going to be important, as was the location of the company’s documents and witnesses.  In comparison, I didn’t think that there was much nexus between the named plaintiffs’ places of residence and the claims in these class actions -- particularly  in the West Virginia case, where the university students and other purchasers came from many different states.  I knew that Tech Effect had no substantial links to West Virginia, and that the witnesses and documents on defendant’s side were certainly not going to be located there. 
Able told me that he had a preference for California, which is where the company was headquartered, and he explained his thinking on why California would work out best.

“We’re inclined to have all the cases transferred to New York,” I told him.  “Not necessarily for the whole case, but at least for MDL coordination purposes.” 

“You really think so?”  asked Able.

“I know that this is a critical litigation decision for us. I just feel that this court will follow the law on class certification.  As we told you, we think a class really shouldn’t be certified here, based on the predominance, manageability and superiority requirements.  If we can beat certification based on that law, the plaintiffs will lose much of their leverage,” I added.  “It would be really unfair for the court to give them that advantage in this case, where the Rule 23 factors cut against class certification.  Our job is to make sure that the judge understands that.” 

Able still looked a little concerned.  He told me that he’d heard that the Second Circuit has a relaxed standard for determining class certification motions.  I answered that the Second Circuit has issued several recent opinions that have distanced that circuit from its permissive class certification standard of the past and moved it toward a stricter standard that is more consistent with other circuits.

After thinking a moment or two, Able began to look accepting of the strategy.

I told him we still needed to do more factual due diligence to determine whether, under the case law on MDL transfers, the facts  would support getting the cases transferred to New York for MDL proceedings.  “Are all of the company’s documents and witnesses going to be at corporate headquarters in Menlo Park?”  I asked.

“This case is mostly going to be about Tech Effect’s advertising and marketing of the Virtual Widget, right?”  he asked.

“Right,” I answered.

Able smiled for the first time that day.  “Although Tech Effect is  headquartered in California, all of our advertising and marketing people are in our New York office.  Our marketing division’s there. All of the decisions about how the Virtual Widgets were marketed and sold were made in Manhattan.  That’s where the applicable Tech Effect  marketing and sales files would be found.  Does any of that help?”

“You bet it does!  The documents and employees located in New York are probably going to be the major source of discovery on the company’s side.  That’s going to be a critical factor in getting the federal court in New York selected as the transferee court on a motion for MDL transfer.  Although the company is incorporated and headquartered elsewhere, it’s also likely to be significant for the MDL decision here that all of the relevant conduct regarding Tech Effect’s marketing and sale of the Virtual Widget occurred in New York, based on what you just told me.   I think you’ve unlocked another door, Alan.”

“Still, this one I really need to take to the board,” Able said.

I hoped they’d see it our way.

FOOTNOTES:

1. Hamilton County is a fictitious place and is not based upon any location, jurisdiction or court system in West Virginia.

David E. Sellinger is Of Counsel  and Aaron Van Nostrand is an Associate at Greenberg Traurig, LLP.  They practice in the firm’s  New Jersey office.