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Tuesday, November 02, 2010

Ind. Decisions - No Indiana cases today, but Judge Posner writes on class actions

In Thorogood v. Sears Roebuck, a 29-page opinion (including an Appendix beginning at p. 26) reversing and remanding a case out of ND Illinois, Judge Posner writes on "virtually identical class action suits." Some quotes, beginning at p. 12:

The class action is a worthwhile device for economizing on the expense of litigation and enabling small claims, illustrated by Thorogood’s claim, capped at $3,000, to be litigated at all (though when the claim is deceptive advertising, a proceeding before the Federal Trade Commission is a more economical alternative to a class action suit). But the device also lends itself to abuse. As Judge Friendly pointed out many years ago, class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily (and in the present case or cases) too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own. Saylor v. Lindsley, 456 F.2d 896, 900-01 (2d Cir. 1972). Defendants, wanting to minimize the sum of the damages they pay the class and the fees they pay the class counsel, are willing to trade small damages for high attorneys’ fees, especially since, as Judge Friendly put it in another case, “a juicy bird in the hand is worth more than the vision of a much larger one in the bush, attainable only after years of effort not currently compensated and possibly a mirage.” Alleghany Corp. v. Kirby, 333 F.2d 327, 347 (2d Cir. 1964) (dissenting opinion). These convergent incentives forge a community of interest between class counsel, who control the plaintiff’s side of the case, and the defendants, but may leave the class members out in the cold.
At p. 20:
Abuse of litigation is a conventional ground for the issuance of an injunction under the All Writs Act, e.g., In re Martin-Trigona, 737 F.2d 1254, 1262 (2d Cir. 1984), because without an injunction a defendant might have to plead the defense of res judicata or collateral estoppel in a myriad of jurisdictions in order to ward off a judgment, and would be helpless against settlement extortion if a valid such defense were mistakenly rejected by a trial court.

So Sears is entitled to an injunction. But we must be careful about precisely who and what are to be enjoined. Sears wants to enjoin all members of the class that was decertified pursuant to our decision in Thorogood’s case, plus their lawyers. The lawyers should indeed be included in the injunction, as has been done in other cases. See In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, supra, 333 F.3d at 769; Newby v. Enron Corp., 302 F.3d 295, 300-03 (5th Cir. 2002) (the “district court had authority under the All Writs Act to enjoin [the law firm] from filing future state court actions without its permission and did not abuse its discretion in doing so”); In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 271 F. Supp. 2d 1080 (S.D. Ind. 2003), on remand from 333 F.3d 763 (7th Cir. 2003) (“ ‘all members of the putative national classes . . . , and their lawyers,’ are hereby prohibited ‘from again attempting to have nationwide classes certified over defendants’ opposition with respect to the same claims’ ”) (emphasis added) (the interior quotation is from this court’s opinion in In re Bridgestone/Firestone); cf. Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 589 F.3d 835, 837 (6th Cir. 2009). If Krislov and the other class counsel are not enjoined, they will continue their state-bystate quest for certification and will doubtless be able to find at least one lead plaintiff in every state.

Posted by Marcia Oddi on November 2, 2010 11:14 AM
Posted to Ind. (7th Cir.) Decisions