Articles from March 2011

Dukes v. Wal-Mart: Possible Recusal of Scalia Adds Wrinkle to Supreme Court as Oral Argument Takes Place

Justice Antonin Scalia sat on the bench during this week’s oral argument in Dukes v. Wal-Mart, despite calls for him to recuse himself from the case owing to his son, Eugene Scalia, being a partner with Gibson Dunn & Crutcher LLP, which represents Wal-Mart in the appeal. Among those seated in the gallery watching the proceedings: Eugene Scalia.

Justice Scalia’s disqualification would be unusual, as Supreme Court Justices typically do not recuse themselves from cases involving a family member’s law firm. However, Scalia was one of seven justices who in 1993 signed a policy that said they would not withdraw from a case unless there was some “special factor,” such as a relative’s status as lead counsel.

While Eugene Scalia is not active in litigating the Dukes appeal, he does chair Gibson Dunn’s Labor and Employment practice group, which is at least conceptually connected to the case, because the plaintiffs allege workplace discrimination. As a practical matter, though, it is Theodore Bourtos’ appellate group that is principally in charge of the day-to-day Dukes case management.

Those calling for Justice Scalia’s recusal (including Wal-Mart Watch, a union-funded advocacy group) contend that Eugene Scalia stands to benefit financially should his partnership profits increase as a result of the firm’s success in its Wal-Mart representation. In response, Gibson has implemented a procedure to exclude revenues from the Wal-Mart representation from Eugene Scalia’s partnership distribution, effectively an accounting take on the “ethical wall” by which firms isolate an attorney from specified information or matters.

Court watchers speculate that Justice Scalia will likely vote to reverse the Ninth Circuit’s ruling that affirmed the trial court’s discretion in certifying the class of approximately 1.5 million current and former Wal-Mart employees.

Bank of America Agrees to $410 Million Overdraft Fee Settlement; Similar Litigation Pending Against Other Banks

In a settlement that illuminates the connection between major events that capture society-wide attention and the infusion of substantial value into class action settlements, Bank of America has agreed to pay $410 million to settle sprawling litigation stemming from allegations that consumers were charged unlawful overdraft fees. The numerous cases were consolidated into an MDL action in a Florida district court as In re Checking Account Overdraft Litig., No. 09-MD-02036-JLK (S.D. Fla. filed June 10, 2009).

The plaintiffs alleged that Bank of America processed transactions in a way that maximized the assessment of overdraft fees, which until recently had been a significant source of revenue for commercial banks. Specifically, the class alleged that, instead of declining debit card transactions when customers’ accounts had insufficient funds to cover a purchase, Bank of America would authorize the charges. Moreover, it was alleged that charges were posted out of chronological order, and in order of largest transaction to smallest, thereby maximizing overdraft-fee revenue.

If the settlement is approved, the average class member’s recovery will be a non-trivial $78 — a piece of evidence to counter the notion that class members only receive pennies while lawyers significantly benefit from class action settlements. While overdraft fees have long been the focus of consumer complaints, it is only now, in the wake of abuses in the financial industry attendant to the “Great Recession,” that the claims have acquired substantial settlement value. Indeed, overdraft litigation is also pending against U.S. Bank, Key Bank, and HSBC. Now that the Bank of America settlement has set a rough market price of approximately $78 per customer, it is unlikely that other banks will be able to negotiate a smaller settlement or be willing to face jurors who have been inundated with adverse news stories about banking practices and no doubt influenced by their own experiences with excessive overdraft fees.

Dukes v. Wal-Mart: Oral Argument Today, 10 a.m. (EST)

Following a record volume of amicus briefs and extensive mainstream media coverage recognizing it as a landmark-in-the-making, oral argument in Dukes v. Wal-Mart is finally here. Starting this morning at 10:00 a.m. EST, Wal-Mart’s appellate attorney, Theodore Boutros of Los Angeles-based Gibson Dunn & Crutcher, presented his oral argument (with frequent interruptions from the Justices, of course).

For those looking to the oral argument for indications of how the Court might rule, the transcript is available here.

For more background and briefing, see the blog sponsored by Goldstein, Howe & Russell, P.C. — bringing to bear the singular insights and analysis of attorneys from one of the country’s preeminent Supreme Court litigation specialty firms, with particularly trenchant and comprehensive coverage of Dukes.

For a brief analysis of this morning’s oral argument, see the Associated Press’ coverage here.

The Other Major Class Action Case This Term:
Smith v. Bayer

Along with Dukes v. Wal-Mart and AT&T v. Concepcion, class action practitioners are closely watching another key case during this term of the United States Supreme Court: Smith v. Bayer, 593 F.3d 716 (8th Cir.), cert. granted, 131 S. Ct. 61 (U.S. Sept. 28, 2010) (No. 09-1205), in which the Court will decide whether federal courts have the authority to enjoin state class actions. Specifically, the justices are considering whether the denial of class certification in a federal district court can be res judicata as to a class action in state court making the same substantive allegations, with a different named plaintiff.

Smith v. Bayer arises from respondent Bayer’s distribution of Baycol, a prescription cholesterol drug that gave rise to multi-district proceedings, including McCollins v. Bayer Corp., in which a West Virginia resident who had taken Baycol moved to certify a class under West Virginia’s consumer protection law. Certification was denied because individual questions predominated. Thereafter, a different named plaintiff (now the Smith v. Bayer class representative) moved for certification in West Virginia state court, asserting the same theory of liability as had been denied certification in McCollins v. Bayer. However, the McCollins court issued an injunction, holding that the attempted certification in West Virginia state court fell within the re-litigation exception to the Anti-Injunction Act. The court reasoned that the proposed class was identical to that in McCollins, West Virginia’s class certification rules are identical to Rule 23, and petitioners’ interests had been adequately represented in McCollins. The Eighth Circuit affirmed and the Supreme Court granted certiorari.

The petitioners argue that a federal court’s denial of class certification cannot collaterally estop a state class action, irrespective of whether the theory of liability is substantively identical and the basis for the denial of class certification was not unique to the prior named plaintiff. In turn, Bayer argues that there is no due process violation, as the petitioners can still bring individual actions, and are simply precluded from re-litigating the identical class certification issue.

The parties’ Supreme Court briefs are available here: Brief for Petitioners, Brief for Respondent, Supplemental Brief of Respondent, and Petitioners’ Reply Brief.