Class Actions: Rethinking the Class Actions Strategy

For example, demonstrating to the named plaintiffs (and even more importantly, their counsel) that you are preparing for trial can help a defendant reach a more favorable settlement. It essentially sends plaintiffs a message that the company is confident and willing to take the case all the way, which can strengthen the defendant’s negotiating position. Trials present substantial risks for plaintiffs as well as defendants, especially with appeals courts being increasingly inclined to question large awards and large attorneys’ fees. Thus, class plaintiffs (and their attorneys) may decide that settling for a lower amount is their best option.

While litigation involves risk for defendants, so too does settling. Individual settlements are often followed by copycat cases, and the more a defendant pays to settle one, the more the next plaintiff wants. And class action settlements are often followed by litigation from class members who have opted out of the settlement. “There are always law firms out there whose business model is recruiting class members to opt out of settlements to pursue later follow-on actions,” Romano points out. “So an early settlement may end up being just a short-term, temporary solution.” In addition, settling—especially for large amounts—sends the plaintiffs’ bar a message about having deep pockets or being unwilling to go the distance. That can lead to a company becoming a “serial defendant” that is constantly in the crosshairs of the plaintiffs’ bar.

Preparing for Trial: Take Action Early

Every case is different, of course, but there are some important strategies to keep in mind when preparing a class action trial strategy.

For example, the traditional playbook may call for the defense to conduct only a narrow merits investigation early on and instead focus on class certification issues, such as whether all class member claims share common issues of fact and law. However, just as they would in other important commercial litigation, class action defendants should consider broadening their early case investigation and client interviews to focus on how they will defend the case on the merits. This includes not only discovery directed to the class representatives, but all discovery to defend the claim. For example, says Gilbert, “Though it may seem premature, defendants can prepare an initial version of an order of proof even before serving initial discovery requests and responses. This forces defendants to think through their defenses and trial themes, enabling them to tailor discovery responses and requests accordingly.”

Similarly, defendants should consider a more robust approach to early written discovery of documents and data. As mentioned earlier, class action defendants will typically try to limit the scope of early discovery. That’s because class action discovery tends to be somewhat “one-sided.” For the plaintiffs, it may involve the deposition of just the named plaintiff and production of a limited number of documents, while defendants may well need to turn over large numbers of documents spanning many years, as well as have numerous employees deposed. Limiting the discovery burden for a defendant makes sense, but it should be tempered with an eye toward going to trial. Plaintiffs cannot be expected to request the documents that will be most helpful to a defense, and defendants are likely to be precluded from relying on such evidence at summary judgment and trial if it is not produced during discovery. That means that defendants should determine early on what story they want to tell at trial and then permit enough discovery to allow them to tell that story and challenge plaintiffs’ claims and arguments.

For example, in a consumer products false advertising case, the defendant’s initial inclination may be to disclose as little data as possible about each putative class member’s purchasing decisions and communications with the defendant. But that data may be helpful in showing the differences among the class members and that some class members were not misled or injured. “When defending against a class action, narrowing discovery too much can cause defendants to shoot themselves in the foot,” says Romano. “You have to think through the full strategy to assess what evidence and data may be helpful when you get to trial.” She points out that defendants have at times gone so far as to waive attorney-client privilege to voluntarily produce privileged documents that were critical to their defense. While such a strategy usually would not be advisable, it illustrates the point that early and open-minded analysis of the scope of discovery can lead to much broader voluntary productions than are typical when following the traditional defense playbook.

 

Shaping the Witness List

Preparing for trial calls for a different approach to witnesses as well. Early on, plaintiffs will typically want to depose a corporate designee on various topics. In deciding whom to disclose for these requests, defendants should consider not only the individual’s expertise in the subject matter, but also how well they will perform in a deposition and, especially, a trial—that is, how effective they will be at telling the story the defense wants to tell.

Defendants should also think creatively about potential witnesses outside the company. It can be especially valuable to identify putative class members who can testify to counter a plaintiff’s claims. This could mean people who have individualized circumstances that undercut the plaintiff’s commonality argument. Or it could mean people who support the defendant’s story. For example, in an antitrust case, some putative class members might testify that they actually have significant bargaining power when dealing with the defendant. “In looking for putative class members who can support your story, it is important to act early—before the class is certified and before restrictions on contacting them kick in,” says Gilbert.

Defendants can also look at similarly situated non-class members. For example, in a class action claiming that the defendant failed to fully disclose information about how a retirement plan worked, it was beneficial for the defendant to find non-class member employees who did understand the instructions from the company, which showed that the company did in fact provide sufficient information to satisfy its duties. Or, in an employment class action alleging that a defendant did not pay female employees as much as similarly situated male employees, non-class member women employees might provide evidence and testimony showing that they were paid at least as much as their male counterparts. These non-class member witnesses can be especially valuable because the defense is not limited in talking to them and preparing them for trial or deposition, which is not the case with class members.

When it comes to discovery from named plaintiffs, it can help to be aggressive and to take depositions early. Even though a class representative may have little information to share, this discovery often is critically important. Information from named plaintiffs may show ways in which class members are not similarly situated, undermining commonality arguments. Or it may show that the named plaintiffs were not actually harmed by the alleged conduct. Often, unsophisticated plaintiffs are not strong testifiers and may make key admissions during depositions. And because named plaintiffs often have been solicited by plaintiffs’ counsel, they often are unprepared for the inconveniences of discovery. “We have seen many instances where named plaintiffs became less interested in prosecuting their case or even withdrew their claims entirely after they experienced the realities of litigation,” says Gilbert.

Strong expert testimony—from class experts, merits experts, and damages experts—is critical to success in class actions. But an expert’s effectiveness depends on the strength of the evidence they can draw on. Thus, they should be retained early and involved in discovery. This helps ensure that defendants are requesting and/or producing the documents and data necessary to support expert opinions. Often, experts have deep knowledge of the relevant industry or market and can assist in developing the strategy for third-party discovery.

Ideally, expert opinions are informed by real-world case studies that juries can understand and relate to, not just dry and complex calculations and predictions. “Most importantly, when selecting an expert, don’t just focus on experience or technical knowledge—the expert needs to be able to appeal to a jury by explaining complicated concepts in a way that is both interesting and accessible,” says Gilbert.

Targeting Key Trial Advantages

The preparations outlined above can help defendants win on the merits—and take advantage of some of the key differences between the pretrial and trial stages. For example, to obtain class certification, plaintiffs typically work hard to simplify the case to show the court that it will be easy to use “common answers” to prove their arguments in litigation. However, once the court has certified a class, the plaintiff has the burden to prove each element of the case, including harm and a model for class-wide damages, using the common evidence.

“Sometimes, this is harder for the plaintiff than it initially appeared, because the oversimplification used for class certification may not stand up to the rigors of the courtroom. Here, defendants may have an opportunity to demonstrate that the common evidence presented by the plaintiff is insufficient to prove each element of the case,” says Romano.

That reality may cause class plaintiffs to broaden the evidence they introduce at trial, which can open the door to individualized issues that then support decertification of the class. Defendants can bring a motion to decertify a class at any time during trial, or even later. “Succeeding with that can be more likely than many would think, because a trial forces a plaintiff to prove all elements of a claim for the plaintiff and for every class member,” says Romano. During a trial, she explains, plaintiffs will need to go into more detail about their case than they did in the early motions stage to demonstrate to the trier of fact that that they are entitled to relief. That can be a challenge, because doing so may force them to rely on individualized evidence and experiences, opening the door to class decertification. Thus, a win by an individual plaintiff may become a win only for that plaintiff, not an entire class. Or to avoid that problem, plaintiffs may underplay their hand and use only a limited amount of evidence, thereby narrowing their case and increasing their risk of losing on the merits.

Overall, focusing on trial rather than looking to quickly settle requires some significant departures from the traditional class action playbook. Companies considering this strategy should take a comprehensive view of the potential benefits, as well as the risks. In the right circumstances, they may find that a more aggressive approach to class actions has the potential to pay off—not only in the case at hand, but in helping to head off tomorrow’s class actions as well.