Last month we posted about a class action decision from the Seventh Circuit, in which the court of appeals approved an injunction against copycat litigation once class certification was denied. Thorogood v. Sears, Roebuck & Co., No. 10-2407 (7th Cir., 11/02/10).
Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner, both because it involved class action litigation and because of the specific tactics employed by class counsel. 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 too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own. The defendant wants to minimize outflow of expenditures
and the class counsel wants to increase inflow of attorneys’ fees. “Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the
central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in this home dryer
litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.
The plaintiff appellee filed a petition for panel rehearing, and rehearing en banc. All the judges voted to deny the petitions, and typically that is the end of the appeal. But the court wrote an opinion about the denial, “in view of the accusations leveled in the petition by the plaintiff’s lawyer.”
On the merits, said the court, the petition ignored the principal reasons for enjoining the copycat class actions, and said virtually nothing about the All Writs Act, which was the very grounds for the prior decision. The petition also ignored the point that class certification was improper given the nature of the plaintiff’s claim, which did not present common issues that would support a class action. It ignored the panel’s criticism of the district court reasoning, and mischaracterized the scope of the injunction, as individual claims were not enjoined.
The petition’s main concern was with the language used in the opinion describing plaintiff counsel as pugnacious, pertinacious to a fault, and a “nuisance.” To which the panel responded that the petition ignored the facts and analysis that supported those characterizations, and the right of a court to and the duty of a court to note unacceptable tactics.
The petition claims the panel did not treat the counsel with respect, to which the court noted that the lawyer had compared Judge Posner to Simon Cowell.
What the panel had said is that the structure of class actions gives plaintiff lawyers an incentive to negotiate settlements that enrich themselves but give scant rewards to class members. With numerous citations, the panel noted that the criticisms in the prior opinion of the tactics employed by some class action lawyers are not criticisms made by judges alone, let alone judges of the panel or judges of the Seventh Circuit.
So far from retracting any criticisms or modifying any language, the court reaffirmed its key criticisms.