2021 was year of retrenchment in business litigation

Irina Baranova

Dec 20 (Reuters) – For litigators in big-ticket cases, 2021 was a year of a restoration after the pandemic stretched the bounds of normalcy in 2020.

There were still plenty of glitches – just ask inadvertent cat impersonator Rod Ponton — but courthouses reopened, juries returned and litigators learned to cope with mask requirements. To borrow what has become a hotly-debated phrase in post-Covid Delaware M&A cases, 2021 still wasn’t exactly the ordinary course of business. It was a lot more ordinary, though, than 2020.

COVID also seems to have subsided as a source of commercial litigation, though we’re still in the midst of crucial litigation over the power of state and federal governments to respond (or not) to COVID-19. Litigation over business interruption insurance claims is ongoing, but federal appellate courts have sided with insurers. Securities class action observers, meanwhile, shifted their attention from COVID-19, which didn’t engender the predicted tsunami of lawsuits, to SPACs.

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The tentative resurgence of normalcy is an apt description for the most significant trend I detected this year in high-stakes business litigation: Corporate defendants continued to chip away at plaintiffs’ ability to sue them, especially en masse. The U.S. Supreme Court’s ruling last June in TransUnion LLC v. Ramirez is the most obvious example. The court held, as you know, that the risk of injury is insufficient to establish plaintiffs’ constitutional right to sue. The decision leaves consumers without a way to prosecute many statutory violations of federal consumer laws in federal court.

In an ominous portent for California workers, the Supreme Court granted review in December to a challenge to the state’s Private Attorney General Act, after years of declining to opine on whether PAGA suits are subject to mandatory arbitration provisions.

Both the California Supreme Court and the 9th U.S. Circuit Court of Appeals have ruled that companies cannot compel arbitration of PAGA claims, in which employees stand in the shoes of the state to enforce California employment law. The U.S. Supreme Court’s review of those precedents will be one of the biggest business cases of 2022.

And looming on the horizon is the question of whether classes can be certified if they contain more than a handful of uninjured members. The Supreme Court explicitly declined to answer that question in TransUnion – but the very mention of the issue is a warning.

Class action lawyers are ever-resilient. There’s always state court, as Justice Clarence Thomas suggested in his TransUnion dissent. And there’s mass arbitration, which in the last few years has solidified as an alternative to class actions, killed by the Supreme Court’s pro-arbitration precedent. (Georgetown University Law Center professor Maria Glover wrote a fantastic analysis of first-wave mass arbitration for the Stanford Law Review.)

In 2021, we saw corporations diverge in their responses to mass arbitration campaigns. Amazon.com Inc, facing tens of thousands of arbitration demands by Echo users, changed its terms of service last summer to allow consumers to sue in class actions. But Uber Technologies Inc, which paid more than $146 million in 2019 to resolve workers’ mass arbitration demands, sued the American Arbitration Association Inc in September to block AAA from charging nearly $100 million in fees in 31,000 new cases.

Shareholders, meanwhile, continue to dodge bullets at the Supreme Court. In June, the justices ruled in Goldman Sachs Group, Inc v. Arkansas Teachers Retirement System that trial judges weighing class certification in securities fraud cases should consider a wide range of evidence, including the nature of a defendant’s alleged misrepresentations. Defense lawyers told me the ruling would help them contest class certification, but shareholders avoided a potential catastrophe when the Supreme Court said defendants bear the burden of disproving a link between alleged misstatements and a drop in share price.

So far, the Supreme Court ruling hasn’t even helped Goldman. In December, the Manhattan federal judge who has been overseeing the securities class action against the bank for more than a decade once again certified the shareholder class.

The number of new multidistrict litigation proceedings plunged in 2021 to 17, down from 26 in 2020, though that didn’t deter defendants from continuing to push for early screening of plaintiffs’ claims. We saw both plaintiffs and defendants try to use MDL leverage to their advantage in 2021, with mixed results. I doubt that Johnson & Johnson and three pharmaceutical distributors, for instance, would have agreed to a $26 billion opioids settlement with state AGs if it hadn’t been for the nationwide MDL by local and tribal governments. Bayer AG, meanwhile, made a second stab at buying global peace from future claims over the herbicide Roundup through a proposed class action in an MDL. That attempt failed last spring, in one of the most notable litigation setbacks of the year.

The first-ever study of plaintiffs’ perception of MDLs was a powerful call for change. Law professor Elizabeth Burch of the University of Georgia surveyed more than 200 plaintiffs in mass tort MDLs. More than 75% said they didn’t even understand what was happening in their cases.

Burch suggested that opening up MDL proceedings through courtroom technology could be a way to alleviate plaintiffs’ sense of alienation. Lawyer cat aside, I agree. But technology definitely had a downside in 2021 when it came to jurors and internet research. I told you last summer about a New Jersey federal court juror who was smacked with an $11,000 fine after telling fellow jurors about his Google research on a witness in the criminal case they were hearing. In October, another Googling juror nearly caused a mistrial in the opioids MDL. The federal court system advises judges to remind jurors at least twice a day not to conduct their own research. That may not be enough.

Finally, I want to celebrate judges’ proactive commitment in 2021 to diversity in the leadership of complex litigation, at least on the plaintiffs side. We learned in December that there’s still an enormous gender gap in arguing appeals at the 7th Circuit, especially in complex civil cases. Let’s hope that gap closes as more judges get serious about expanding leadership ranks.

Opinions expressed here are those of the author. Reuters News, under the Trust Principles, is committed to integrity, independence and freedom from bias.

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.


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