Filing a Class Action

• Pages: 9-41

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CHAPTER II

FILING A CLASS ACTION

The filing of the complaint in an antitrust class action requires a

significant amount of pre-complaint research—both factual and legal—

as well as numerous strategic decisions that will have far-reaching effects

as the case progresses. This chapter explores many of the issues that

counsel face in considering and crafting an antitrust class action

complaint. These include deciding whether to file a class action,

selecting an advantageous venue, determining the representative parties

consistent with Rule 23, identifying the defendants to sue, and defining

the class. This chapter also addresses a host of related strategic decisions

for counsel, such managing the impact of the Class Action Fairness Act

of 2005 (CAFA) and the Judicial Panel on Multidistrict Litigation

(JPML) on antitrust class actions and considerations for handling class

actions after filing the complaint.

A. Whether and Where to File a Class Action

Deciding whether to file a class action, rather than an individual one,

and where to bring the case, are two of the most important threshold

issues in any case. This section addresses considerations bearing on

whether a case should be filed individually or as a class action, whether

to file in federal or state court, and which venue is appropriate.

1. Whether to File a Class Action

One preliminary strategic decision is whether to file a contemplated

case as an individual claim or as a putative class action. This is often a

complex decision for clients and counsel, and one often driven by the

realities of litigation costs, potential case recoveries, and willingness to

commit to pursuing class claims.

One consideration is whether the litigation is feasible from an

economic standpoint on a basis other than as a class action. A consumer

allegedly injured by an antitrust conspiracy, for example, often does not

have sufficient damages to justify the costs of prosecution of an antitrust

case on an individual basis.

10 Class Actions Handbook

Even relatively straightforward antitrust theories customarily cost

millions of dollars to prosecute due in large part to the necessity of

discovery and expert analysis. As a result, unless the likely recovery

would exceed costs of this magnitude, it often would be impractical to

prosecute antitrust cases on an individual basis.1

A similar consideration is whether a contemplated case would be

feasible even as a class action. Modern class certification proceedings

routinely involve long evidentiary proceedings preceded by massive

discovery efforts, expert economists, and Daubert2 motion practice.

Filing an antitrust case as a class action and properly following through

with a motion to certify with any reasonable chance of success is a

multiyear, multimillion dollar proposition. Some cases, even if they are

susceptible to proceeding as a class, simply may not present the damages

necessary to cover the investment of cost and time. Counsel proceeding

on a contingency case should be particularly mindful of the investments

and potential recovery for contemplated class cases.

Some cases with modest potential recoveries might be feasible to

prosecute as class actions, however, given the prospect of statutory fee

awards. These circumstances arise where there is clear liability and a fee

shifting statute for a prevailing party.3 Even under these circumstances,

prosecuting an antitrust class action with modest recovery potential is

risky for both counsel and the client. The Supreme Court continues to

raise the bar in other contexts on what qualifies as a “prevailing party” to

be eligible for an award of attorneys’ fees, which may leave counsel and

client responsible for substantial expenses and fees.4

Another threshold consideration is whether there are legal

impediments to pursuing an antitrust case as a class action. In recent

years, contractual provisions that require claims to be arbitrated and

1. As Judge Posner stated, “[t]he realistic alter native to a class action is not

17 million individual suits, but zero individual suits, a s only a lunatic or a

fanatic sues for $30.” Carnegie v. Household Int’l, 376 F.3d 656, 661 (7th

Cir. 2004).

2. Daubert v. Merrill Dow Pharm., 509 U.S. 579 (1993).

3. See, e.g., D.C. CODE § 28-4508(a)(2).

4. Buchannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health and Human

Res., 532 U.S. 598, 600 (2001) (prevailing party for purposes of fee

shifting statute doe s not “includ[e] a party that has failed to secure a

judgment on the merits o r a court-ordered consent decree,” even though

“the lawsuit brought a bout a voluntary cha nge in the defendant’s

conduct”); Sole v. Wyler, 551 U.S. 74, 83 (2007) (party who prevails in

securing a preliminar y injunction is not a “prevailing part y”).

Filing a Class Action

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preclude class action claims have become common. Likewise, state laws

may preclude pursuing claims as class actions. One example is New

York’s Donnelly Act.5 The New York Court of Appeals has limited the

private enforcement mechanism of this statute by holding that the state

courts cannot certify a class of injured consumers under the New York

class action rule.6 In deciding whether to file a class action, careful

counsel should confirm the contemplated case is not prohibited by

contract or positive law from proceeding on a class basis.

There used to be significant pre-filing considerations prior to 2003

when settlement was reached before a case was filed or certified as a

class. Once a party filed a case as a class action, the counsel and class

representative were obligated to disclose the terms of settlements to the

presiding court and seek its approval. This requirement evaporated with

the 2003 amendment to Rule 23(e) that now only requires judicial

scrutiny of the settlement of claims of a “certified class.” While this

arguably gives named plaintiffs more flexibility in dismissing or settling

their own claims upon filing and before classes are certified,7 careful

consideration should be given to whether such dismissals or settlements

may moot the actions for the putative class members.8

Of course, counsel must consider above all else the willingness and

appropriateness of clients to sue in a representative capacity. If, after an

explanation of the commitments and burdens of pursuing representative

claims, clients do not have the stomach to represent a class, that should

end the inquiry. Even if a client is enthusiastic, the careful lawyer should

screen for potential adequacy problems as discussed below.

This non-exhaustive list is intended to give the practitioner threshold

issues to consider when contemplating whether to file an antitrust case as

an individual or class claim. These are general thoughts—every case is

different and likely will raise variants of these issues.

5. N.Y. G.B.L. § 340, et seq.

6. Sperry v. Crompton Corp., 8 N.Y.3d 204, 211 (2007).

7. Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1244

(10th Cir. 2011) (“[I]t is now clear that the procedural requirements

established by FED. R. CIV. P. 23 attach only after a class has been

certified.”).

8. As the Supreme Court no ted in Genesis Healthc are Corp. v. Symczyk,

133 S. Ct. 1523, 1529, n.4 (2013), the circuits are split, for example, on

whether an unaccepted Rule 68 offer of judgment that fully satisfies a

plaintiff’s claims will render the class claim moot.