The Securities and Exchange Commission was pretty darn pumped about its $200 million settlement Thursday with JPMorgan Chase, part of the bank’s $920 million resolution of regulatory claims stemming from losses in the notorious “London Whale” proprietary trading. And why not? As George Cannellos, the co-director of enforcement, said in a statement, JPMorgan’s $200 million civil penalty is one of the largest in SEC history. The agency also showed that it’s serious about its new policy of demanding admissions of liability from some defendants. For those of us accustomed to the SEC’s “neither admit nor deny” boilerplate, it’s startling to see the words “publicly acknowledging that it violated the federal securities laws” in an SEC settlement announcement. So let’s permit Cannellos some chest-thumping: “The SEC required JPMorgan to admit the facts in the SEC’s order – and acknowledge that it broke the law – because JPMorgan’s egregious breakdowns in controls and governance put its millions of shareholders at risk and resulted in inaccurate public filings.”
In the last few months, the victims of supposed overseas human rights atrocities have begun to feel the impact of the U.S. Supreme Court’s ruling last April in Kiobel v. Royal Dutch Petroleum. As you know, the Supreme Court held that Alien Tort Statute cases cannot proceed in U.S. courts unless they have a significant connection to the United States. As a result, ATS claims by foreign citizens accusing international corporations of abetting torture and murder on foreign soil have since been dismissed against Daimler, Arab Bank, Rio Tinto and KBR. Some ATS cases have survived post-Kiobel scrutiny, as my friend Michael Goldhaber reported for The American Lawyer in August, and alleged victims can still assert claims under Other U.S. laws that specifically apply to conduct abroad. But without a doubt, Kiobel has extinguished the jurisdiction of U.S. courts over a wide swath of human rights litigation.
This much is uncontested: In December 2008, Initiative Legal Group filed a wage-and-hour class action against Starbucks in federal court in Los Angeles. Lawyers at Initiative and, later, Capstone Law dedicated more than 8,000 hours to the case, which settled in May 2013 for $3 million. About 13,000 current and former Starbucks employees in California have made claims in the case, which resolves the coffee chain’s alleged failure to provide adequate meal breaks to workers when only two employees were on duty, as well as class assertions that Starbucks didn’t publish overtime rates on workers’ pay statements.
It’s no secret that one of the most active and successful friend-of-the-court participants at the U.S. Supreme Court in recent years has been the U.S. Chamber of Commerce, otherwise known as the lobbying arm of corporate America. Last term, according to the website of the National Chamber Litigation Center (the U.S. Chamber’s legal wing), the group filed amicus briefs addressing the merits of 22 business-related cases before the Supreme Court. The Chamber was in the fray in all of the big cases involving class actions against businesses, including American Express v. Italian Colors, Amgen v. Connecticut Retirement, Comcast v. Behrend and, of course, Standard Fire v. Knowles. In all of those cases, the Chamber advocated positions that would make it tougher for claimants to file and litigate class actions; in three of them – Italian Colors, Comcast and Standard Fire – the Chamber and pro-business interests prevailed.
In July, the justices of the Delaware Supreme Court entertained oral arguments on a question the 9th Circuit Court of Appeals asked them to answer: Can shareholders maintain post-merger derivative claims against officers and directors whose alleged misconduct drove their company into a disadvantageous deal? In ordinary circumstances, shareholders lose the right to assert derivative breach-of-duty claims on behalf of the corporation when a merger ends their stock ownership. There’s only one exception to that rule of continuous ownership, under 30-year-old Delaware precedent, for sham mergers undertaken specifically to end the threat of liability against the board. But shareholders in a Los Angeles federal court case against Countrywide persuaded the 9th Circuit that the Delaware Supreme Court, in dicta in a separate but related Countrywide case, may have widened the exception. The federal appeals court asked the state court to clarify its position.
Reading opinions by Judge Richard Posner of the 7th Circuit Court of Appeals is like jumping waves in a calm ocean. You bob along in the buoyancy of Posner’s ideas until you turn around to face shore and wonder how you drifted so far from where you started. So it is in an 11-page ruling Tuesday, addressing whether a class of ATM users may be certified to seek statutory damages under the Electronic Funds Transfer Act for a tiny defendant’s failure to post stickers notifying users of ATM fees. As you know, these are more turbulent waters than they first appear, roiled by uncertainty about constitutional standing and appropriate classwide relief. Posner’s prose nevertheless carries you along so forcefully that you don’t even notice until you’re done that he has deposited you in a land where all the rules are Posner-made.
I’m on record as a skeptic of BP’s doomsday predictions about the impact of ballooning claims in its settlement with alleged victims of the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. I still don’t buy BP’s argument that future mass disaster defendants will shy away from group settlements because BP’s agreement was open to what the oil company contends is misinterpretation by claims administrator Patrick Juneau. Nor do I think the 5th Circuit Court of Appeals should permit BP to argue that the settlement it once asked U.S. District Judge Carl Barbier of New Orleans to approve should now be undone. BP is a sophisticated defendant ably represented by Kirkland & Ellis in the long negotiations that produced the settlement agreement proposed to Barbier in March 2012. The oil company says the deal has been warped by Barbier’s endorsement of Juneau’s overly expansive reading of the terms for business and economic losses. But it bargained hard for the language in the settlement agreement and should have to abide by the deal it struck.
Millions of American consumers over the last decade purchased high-end, front-loading washing machines with an unfortunate propensity to develop a moldy odor. The vast majority of those machines didn’t end up emitting the objectionable scent, or, at least, not noticeably enough to prompt their owners to register complaints with manufacturers and sellers of the machines. Nevertheless, lawyers representing washing machine buyers all over the country sued Whirlpool and other manufacturers in dozens of class actions claiming violations of various state consumer statutes. One of those consolidated cases, involving 10 class actions comprising about 4 million purchasers of Whirlpool washing machines, is one of the biggest class proceedings in American history. Consumers say – and appellate judges in two federal circuits agree – that they’re entitled to a classwide determination of whether the washing machines were defectively designed. Manufacturers, on the other hand, contend it’s impossible to lump consumers into classes because their individual experiences with the machines vary too widely.
The high point, at least so far, of securities class action filings in Canada was in 2011, when, according to NERA Economic Consulting, shareholder lawyers filed 15 new class actions. In 2012, the number of new filings declined to nine. And unless there’s a surge in class action complaints in the next few months, 2013 will show a steep decline even from last year’s total, NERA’s Bradley Heys told me Thursday.