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Standard Fire v. Knowles

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In a unanimous decision, the Supreme Court rejected the most notorious tactic for evasion of federal jurisdiction under the Class Action Fairness Act. More: Olson @ Cato; OL; earlier at POL.

Brian Wolfman complains that this is a "pro-defendant" decision and it will certainly be spun that way. But it's important to recognize that it's also a pro-consumer decision. The same hellhole judges that ignore due process concerns of defendants when refusing to rule on personal jurisdiction issues or countenancing abusive expensive discovery or improperly certifying classes (on which, see this great Roger Parloff article) go on to ignore due process concerns of absent class members when the defendants facing this barrage of litigation pay Danegeld to go away. Miller County trial lawyers had collected hundreds of millions of dollars of legal fees from forum-shopped class-action settlements; the class members whom they purportedly represented likely didn't even get 10% as much. We'll never know because judges approved these settlements without inquiring into that figure, and refused defendants' attempts to conduct discovery in that area. It was the pro-consumer aspect of CAFA that led the Center for Class Action Fairness to file an amicus brief. Defendants win and consumers win; the only losers are rent-seeking plaintiffs' attorneys that had been running roughshod over the rights of both.

Andrew Trask has good analysis and points out that the Supreme Court has once again rejected the entity theory of class actions. As I note in my MI white paper, the class action is a procedural device that can't be used to affect individuals' substantive rights. It makes a difference: given that the Supreme Court has repeatedly rejected an "entity" theory of class actions, it implies that class action settlements that favor third parties—i.e., cy pres recipients, or non-class-beneficiaries of future injunctive relief—over class members are inappropriate.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

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