1 Agenda for 32nd Class Name plates out Choice of Law Continued Introduction to Class Actions Joinder Assignments for next classes FRCP 23 Yeazell , Questions to think about / Writing assignments –Pp. 881ff. Qs 1, 2 –BadCorp manipulated the price of its stock by failing to disclose information that would cause share prices to fall. Would a class action alleging violation of federal securities law against BadCorp on behalf of all shareholders who purchased stock during the period when the information was being withheld be appropriate? –BadPharm supplied blood to hemophiliacs, but failed to screen adequately for AIDS. As a result, many hemophiliacs in dozens of states got AIDS and some died. Would a product liability class action against BadPharm on behalf of all hemophiliacs who contracted AIDS as a result of contaminated blood be appropriate?

2 Last Class -- Choice of Law Traditional rules Restatement (Second) –Find all states with contacts with dispute –Analyze the contacts What policies lie behind each state’s laws? How would they be affected if another state’s laws applied to the dispute Choose state with most significant relationship –E.g. whose policies would be least impaired by applying another state’s laws –Often indeterminate Laws have many policies –Bias toward applying forum law Judge likely to think her own state’s policies are important and impaired if other state’s laws are applied

3 Choice of Law Questions 7) Spend, a Nevada domiciliary, is completely irresponsible with money. Fortunately, he recognizes this fact and has set up a spendthrift trust. Under the terms of the trust, Spend cannot borrow money without the consent of Trustee, a friend he trusts. Spend goes to California and borrows money there from Sharkey to be repaid in one year at Sharkey’s place of business in California. When Spend doesn’t repay the loan, Sharkey sues Spend in Nevada. Under Nevada law, loans to someone who has set up a spendthrift trust are void. California law does not allow people to set up spendthrift trusts, so under California law, such loans are enforceable. The traditional rule for contracts was the law of the place the contract was formed governs disputes about contract validity. Under the traditional rule, what state’s law would apply? Under the Restatement Second, which state’s law should apply to the dispute? If the traditional rule and Restatement Second suggest different answers, which makes more sense? 8) Same as (7), except Sharkey sues in California state court. 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the money there, with repayment to be made to Sharkey when he returns to Nevada a year later.

4 Choice of Law Questions 10) Same as (7), except the loan contract includes the following clause: “This contract shall be governed by California law.” The traditional rule was not to enforce choice of law clauses. See also Restatement (Second) below § 187. Law Of The State Chosen By The Parties (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue. (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either –(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or –(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

5 Choice of Law Questions Plaintiff in Phillips brought the case in federal district court in Montana. Why is there a decision of the Supreme Court of Montana? In Phillips, the Montana Supreme Court observes that “applying the law of the place of manufacture would be unfair because it would tend to leave victims under compensated as states wishing to attract and hold manufacturing companies would raise the threshold of liability and reduce compensation…. [A state with a high concentration of manufacturing] could enjoy all the benefits associated with liability laws which favored manufacturers in order to attract and retain manufacturing firms and encourage business within its borders while placing the costs of its legislative decision, in the form of less tort compensation, on the shoulders of nonresidents injured by its manufacturers’ products.” (p. 249). –Suppose Montana has a relatively low concentration of manufacturing. Would its citizens benefit by laws which raised the threshold of liability and reduced compensation? Or would its citizens benefit by laws which lowered the threshold of liability and increased compensation? If it lowered the threshold of liability and increased compensation, who would bear the increase in costs? What does this suggest about the fairness of applying Montana law?

6 Choice of Law Questions In Phillips, the Montana Supreme Court asserted that “we do not believe that the purpose of any potentially applicable Michigan product liability law would be to regulate the design and manufacture of products within its borders. The purpose of product liability law is to regulate interstate sales or sales to residents and to set the level of compensation when residents are injured. ” (p. 249) –If the plaintiffs in Phillips had filed the case in Michigan state court, do you think Michigan state judges would have agreed that its laws are inapplicable? What purpose might a Michigan judge ascribe to product liability law to show that Michigan law should apply? If you were a judge on the Montana Supreme Court, would you have retained the traditional lex loci commissi rule, or would you have voted (like the actual Montana Supreme Court) to adopt the Restatement (Second) most significant relationship approach? Why?

7 Class Actions I Class Action is super joinder device –Way of joining lots of plaintiffs (or defendants) –Single lawyer represents all –Consent from each plaintiff not required –“Class representative” is “named plaintiff” Usually chosen by class lawyer Advantages –Low cost as compared to lots of individual suits –Allows case to be brought where each plaintiff has stake that is too small to justify individual suit But where, in aggregate, significant wrong has been done Disadvantages –Class lawyer does not always act in interest of class May be more interested in fees for self than in relief for class –Large magnitude of potential liability may “coerce” defendants into settling weak claims

8 Class Actions II Class actions must be “certified” –Plaintiff’s lawyer first brings regular (non-class-action) case on behalf of named plaintiff(s) –Plaintiff’s lawyer then petitions judge to certify class Prerequisites for class action –1. Numerosity. Class is so large that joinder (under Rule 20) is not practical. 23(a)(1) –2. Commonality. There are questions of law or fact common to all class members. 23(a)(2) –3. Typicality. The class representative(s) have claims which are typical. 23(a)(3) –4. Adequacy. The class representative(s) can adequately represent class. 23(a)(4) Technically about parties. In reality, about class lawyers. Also, no conflicts of interest. –5. Case must fit into one of 23(b) categories See next page

9 Class Actions III 23(b) categories –(b)(3). Primarily for money damages E.g. mass tort Common issues must “predominate” Class action must be “superior to other available methods for fairly and efficiently adjudicating the controversy” –(b)(2). Injunctive or declaratory relief appropriate for whole class E.g. desegregation, prison conditions –(b)(1). Risk of inconsistent litigation E.g. limited fund or conflicting injunctions Not very common Interlocutory appeal of certification decision. 23(f) –Grant or denial –Discretionary with court of appeals

10 Class Actions IV Notice and Opt-Out. 23(c)(2) –Only (b)(3) requires “best notice that is practical under the circumstances” –Only (b)(3) requires the class members be given the opportunity to “opt out” Settlement with court approval only. 23(e)

11 Joinder Rules start from assumption that suits may involve a single plaintiff suing a single defendant on a single claim –Multiple parties and claims are allowed ONLY if explicitly permitted by a rule Proper joinder does NOT mean case properly in court, still need: –Personal jurisdiction –Subject matter jurisdiction –Venue

12 Joinder Questions Pp. 816 Q5 Pp. 818ff. Qs 1-2