Class settlements under attack

University of Pennsylvania Law Review

Volumn 156, Issue 6, 2008, Pages 1649-1722

  Issacharoff, Samuel ^a   Nagareda, Richard A ^b  

^a NEW YORK UNIVERSITY SCHOOL OF LAW   (United States)

^b VANDERBILT UNIVERSITY LAW SCHOOL   (United States)

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EID: 54849403960     PISSN: 00419907     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (247)

1. See ROBERT H. KLONOFF ET AL., CLASS ACTIONS AND OTHER MULTI-PARTY LITIGATION 415 (2d ed. 2006) ("Relatively few class actions actually go to trial; most settle, either after the certification decision or as trial approaches.").
2. See Symposium, The Vanishing Trial, 1 J. EMPIRICAL LEGAL STUD. 459 (2004) (documenting and analyzing data on the decreasing number of civil trials).
3. FED. R. CIV. P. 23(b) (3).
4. For discussion of certification battles post-Amchem, see Richard A. Nagareda, Autonomy, Peace, and Put Options in the Mass Tort Class Action, 115 HARV. L. REV. 747, 752-54 (2002)
5. (discussing John C Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 COLUM. L. REV. 370 (2000);
6. Bruce Hay & David Rosenberg, "Sweetheart" and "Blackmail" Settlements in Class Actions: Reality and Remedy, 75 NOTRE DAME L. REV. 1377 (2000);
7. Samuel Issacharoff, Governance and Legitimacy in the Law of Class Actions, 1999 SUP. CT. REV. 337;
8. George L. Priest, Procedural Versus Substantive Controls of Mass Tort Class Actions, 26 J. LEGAL STUD. 521 (1997);
9. Charles Silver & Lynn Baker, I Cut, You Choose: The Role of Plaintiffs' Counsel in Allocating Settlement Proceeds, 84 VA. L. REV. 1465 (1998)).
10. 521 U.S. 591, 620 (1997) ("Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, . . . for the proposal is that there be no trial.").
11. Pub. L No. 109-2,119 Stat 4 (codified as amended in scattered sections of 28 U.S.C).
12. Due process challenges might also encompass the adequacy of notice afforded to the class.
13. But see infra text accompanying notes 175-177 (discussing the dramatic difference between the modern class action and Illinois equitable procedures at the time of the Supreme Court's landmark 1940 decision in Hansberry v. Lee, 311 U.S. 32 (1940)).
14. See, e.g., FED. R. CIV. P. 23(a)(4) (conditioning class certification on a judicial determination that "the representative parties will fairly and adequately protect the interests of the class"); 23(g)(1)(B) (requiring judicial appointment of class counsel who will "fairly and adequately represent the interests of the class").
15. See, e.g., Epstein v. MCA, Inc., 179 F.3d 641, 64849 (9th Cir. 1999) (Epstein III) (O'Scannlain, J.).
16. See, e.g., Wolfen v. Transamerica Home First, Inc., 439 F.3d 165, 172 (2d Cir. 2006) ("[I]f, in the class action, a defendant opposing class certification or an objector to the settlement had made a serious argument that a sub-class was required because of claims substantially similar to hers, and that argument had been considered and rejected by the class action court, it would not be unfair to preclude collateral review of that ruling and relegate [the collateral attack plaintiff] to her direct review remedies."); In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 146 (3d Cir. 2005) ("Once a court has decided that the due process protections did occur for a particular class member or group of class members, the issue may not be relitigated."); Epstein III, 179 F.3d at 651 (Wiggins, J., concurring) (focusing on whether "the adequacy of representation issue was fully and fairly litigated and necessarily decided" by the rendering court).
17. See, e.g., Epstein III, 179 F.3d at 655 (Thomas, J., dissenting) (arguing that "none of the [rendering court's] findings address the claim of the plaintiffs before this court today: namely, that the . . . plaintiffs were inadequately represented before the [rendering] court, and that, consequendy, a decision to bind them to the terms of the setdement would violate their rights to due process"); Epstein v. MCA, Inc., 126 F.3d 1235, 1244 (9th Cir. 1997) (Epstrin II) (Norris, J.) (contending that to disallow collateral attack "would be to require absent class members to monitor the proceedings [in the rendering court] in order to secure their rights to adequate representation," something they "are not required" to do), rev'd on reh'g, 179 F.3d 641 (9th Cir. 1999).
18. For commentary advocating relatively broad latitude for collateral attacks, see, David A. Dana, Adequacy of Representation after Stephenson: A Rawlsian/Behavioral Economics Approach to Class Action Settlements, 55 EMORY L.J. 279 (2006);
19. Susan P. Koniak, How Like a Winter? The Plight of Absent Class Members Denied Adequate Representation, 79 NOTRE DAME L. REV. 1787 (2004);
20. Henry Paul Monaghan, Antisuit Injunctions and Preclusion Against Absent Nonresident Class Members, 98 COLUM. L. REV. 1148 (1998);
21. Patrick Woolley, The Availability of Collateral Attack for Inadequate Representation in Class Suits, 79 TEX. L. REV. 383 (2000).
22. For commentary advocating more circumscribed parameters, see, for example, Marcel Kahan & Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of' Epstein v. MCA, Inc., 73 N.Y.U. L. REV. 765 (1998);
23. Marcel Kahan & Linda Silberman, Matsushita and Beyond: The Role of State Courts in Class Actions Involving Exclusive Federal Claims, 1996 SUP. CT. REV. 219 [hereinafter Kahan &: Silberman, Matsushita and Beyond];
24. Richard A. Nagareda, Administering Adequacy in Class Representation, 82 TEX. L. REV. 287 (2003).
25. The latest addition to this literature seeks to chart a "middle-ground approach." See William B. Rubenstein, Finality in Class Action Litigation: Lessons from Habeas, 82 N.Y.U. L. REV. 790, 829 (2007) (concluding that "a resort to policy" does not "easily resolve[] the adequacy question in either direction").
26. See Stephenson v. Dow Chem. Co., 273 F.3d 249 (2d Cir. 2001), cert. granted, 537 U.S. 999 (2002), aff'd by an equally divided Court, 539 U.S. 111 (2003). On the background of the Agent Orange class setdement, see PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS TOXIC DISASTERS IN THE COURTS (enlarged ed. 1987).
27. Dow Chem. Co. v. Stephenson, 539 U.S. 111 (2003). Justice Stevens recused himself. Id. at 112.
28. See infra Part II.C (discussing exit rights as a component of due process in Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985)).
29. Martin v. Wilks, 490 U.S. 755, 771 (1989) (Stevens, J., dissenting) ("Persons who have no right to appeal from a final judgment . . . may nevertheless collaterally attack a judgment on certain narrow grounds.").
30. 311 U.S. 32 (1940).
31. See Nagareda, supra note 13, at 298-309 (discussing the Hansberry decision and the confusion it creates in determining adequacy of class representation).
32. On the meager guidance provided by CAFA direcdy on class settlements, see Robert H. Klonoff & Mark Herrmann, The Class Action Fairness Act: An Ill-Conceived Approach to Class Settlements, 80 TUL. L. REV. 1695, 1697 (2006), noting that "[o]n the settlement front, . . . Congress lacked any clear understanding of what it was trying to fix . . . [and] passed a series of unrelated provisions that . . . raise more questions than they answer."
33. Other articles for this Symposium explore the political rhetoric behind CAFA. See Stephen B. Burbank, The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View, 156 U. PA. L. REV. 1439 (2008);
34. Richard L. Marcus, Assessing CAFA's Stated Jurisdictional Policy, 156 U. PA. L. REV. 1765 (2008);
35. Edward A. Purcell, Jr., The Class Action Fairness Act in Perspective: The Old and the New in Federal Jurisdictional Reform, 156 U. PA. L. REV. 1823 (2008).
36. See Samuel Issacharoff & Catherine M. Sharkey, Backdoor Federalization, 53 UCLA L. REV. 1353, 1416 (2006) ("The congressional response was to open up the federal forum as a bulwark against improper or opportunistic state-court oversight of the national market.").
37. See 28 U.S.C. § 1404 (2000) (authorizing transfers "[f]or the convenience of parties and witnesses, in the interest of justice").
38. See id. § 1407 (authorizing a "Judicial Panel for Multidistrict Litigation" to consolidate actions in federal courts "for the convenience of parties and witnesses and . . . [to] promote the just and efficient conduct of such actions"); Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998) (enforcing § 1407(a)'s requirement that actions "shall be remanded by the panel at or before the conclusion of . . . pretrial proceedings to the district from which it was transferred").
39. See Samuel Issacharoff, Governance and Legitimacy in the Law of Class Actions, 1999 SUP. CT. REV. 337, 385 ("The key is that a supervising court must be assured at the threshold stage of the litigation that there are no structural allegiances of class counsel that would create incentives to favor one part of the class over another, or be biased against seeking the best possible return to a defined subset of claims.").
40. On the analogy to ineffective assistance claims in habeas corpus litigation, see Rubenstein, supra note 13, at 858 tbl., which summarizes the standard for ineffective assistance in terms of "[s]ubstandard performance of counsel resulting in prejudice to petitioner."
41. The potential for shirking, apart from any conflict of interest on class counsel's part, remains a staple of the economic literature on class actions. See infra text accompanying notes 151-154.
42. Throughout this Article we use the terms "rendering court" or "court of first instance" to refer to the court that initially approved a class action setdement.
43. 472 U.S. 797, 812 (1985).
44. For a transcript of this comedy sketch, see Saturday Night Live Transcripts, http://snltranscripts.jt.org/75/75ishimmer.phtml (last visited Apr. 15, 2008).
45. FED. R. CIV. P. 60(b) (concerning relief from all manner of civil judgments in the federal system).
46. For an argument in favor of expanded use of malpractice liability with regard to class counsel misconduct, see Susan P. Koniak & George M. Cohen, Under Cloak of Settlement, 82 VA. L. REV. 1051, 1074-89 (1996).
47. U.S. 1 (2002) (reversing the circuit court's ruling that an absent class member lacked standing to appeal from district court approval of a class setdement for lack of intervention).
48. Perhaps the leading case law articulation appears in Reynolds v. Beneficial National Bank, 288 F.3d 277, 279-80 (7th Cir. 2002) (Posner, J.). See also Chris Brummer, Note, Sharpening the Sword: Class Certification, Appellate Review, and the Role of the Fiduciary Judge in Class Action Lawsuits, 104 COLUM. L. REV. 1042, 1062-67 (2004) (detailing the elements of judicial fiduciary scrutiny).
49. See infra text accompanying notes 190-192.
50. As to the effects on the plaintiffs' bar, we find ourselves in broad agreement with the assessment offered in Howard M. Erichson, CAFA's Impact on Class Adion Lawyers, 156 U. PA. L. REV. 1593, Part III (2008), which suggests that CAFA has encouraged class action attorneys to "alter[] both the nature of their lawsuits and the places where they bring them."
51. CAFA requires the federal courts to provide notice concerning proposed class setdements to appropriate public regulatory bodies, enabling them to comment on the fairness of the deal. 28 U.S.C. § 1715(b) (Supp. V 2005). CAFA also speaks to judicial review of proposed class settlements in the form of coupon distribution to consumers in the class. See id. § 1712.
52. For an excellent historical treatment of the roots of the modern class action, see STEPHEN C. YEAZELL, FROM MEDIEVAL GROUP LITIGATION TO THE MODERN CLASS ACTION (1987).
53. See also Robert G. Bone, Personal and Impersonal Litigative Forms: Reconceiving the History of Adjudicative Representation, 70 B.U. L. REV. 213 (1990) (reviewing YEAZELL, supra).
54. Mayor of York v. Pilkington, (1737) 25 Eng. Rep. 946.
55. 311 U.S. 32 (1940).
56. 347 U.S. 483 (1954).
57. Gebhart v. Belton, 91 A.2d 137 (Del. 1952), aff'd sub nom. Brown v. Bd. of Educ., 347 U.S. 483 (1954).
58. On the intellectual tension between the plaintiffs' bar and supporters of the New Deal administrative state, see JOHN FABIAN WITT, PATRIOTS AND COSMOPOLITANS ch. 4 (2007).
59. On the array of difficulties presented today by the parallel existence of class action litigation and public administrative regulation, see Richard A. Nagareda, Class Actions in the Administrative State: Kalven and Rosenfield Revisited, 75 U. CHI. L. REV. (forthcoming 2008), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1014659.
60. For more extensive discussion of the problems presented by national markets for choice of law analysis, see Samuel Issacharoff, Settled Expectations in a World of Unsettled Law: Choice of Law after the Class Action Fairness Act, 106 COLUM. L. REV. 1839 (2006).
61. The various state rules are compiled in LINDA S. MULLENIX, STATE CLASS ACTIONS: PRACTICE AND PROCEDURE (2000).
62. The familiar requirements of commonality and typicality in Rule 23(a) embody this notion. FED. R. CIV. P. 23(a)(2)-(3).
63. 472 U.S. 797, 812 (1985).
64. See 28 U.S.C. § 1332(d) (2) (Supp. V 2005) (providing for federal diversity jurisdiction over class actions with more than $5 million in controversy and minimal diversity of citizenship).
65. See id. § 1332 (d)(3)-(4) (carving out from the broadened grant of diversity jurisdiction those class actions of local concern).
66. The Senate Judiciary Committee Report discusses the strategies of removal-proofing used under the pre-CAFA federal diversity statute and cites examples of state court class certifications described as out of line with the prevailing approach of the federal courts. See S. REP. NO. 109-14, at 10-27 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 11-27. The Committee Report, however, was written after the bill had been signed into law, a feature that compromises the utility of the Report as a guide to congressional thought processes in the pre-enactment debates. See, e.g., Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 683 (9th Cir. 2006) (noting that the Senate Report was "issued ten days after CAFA's passage into law").
67. The mechanism here consists of the combination of CAFA (to get the various competing class actions into federal court) and the existing authority of the Judicial Panel on Multidistrict Litigation (to consolidate related federal-court actions in a single district). See Myriam Gilles & Gary B. Friedman, Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. PA. L. REV. 103, 162 (2006) (predicting that "the enactment of CAFA will reduce the incidence of . . . [reverse auctions in class settlements] by forcing many class actions into federal courts, where the Judicial Panel on Multidistrict Litigation will consolidate like claims in a single jurisdiction").
68. CAFA supporters accurately observed that: The reason for th[e] dramatic increase in state court class actions cannot be found in variations in class actions rules; after all, the rules governing the decision whether cases may proceed as class actions are basically the same in federal and state courts - and, of course, they are the same within states, i.e., the same in "magnet" jurisdictions such as Madison County and St. Clair County, Illinois, as they are in more easily accessible jurisdictions such as Cook County, Illinois. S. REP. NO. 109-14, at 13, reprinted in 2005 U.S.C.CA.N. 3, 13.
69. 20 = 0.122)." Id. at 767. The problem of the anomalous court explains why observations about the lack of "empirical evidence supporting the belief that state and federal court differ generally in their treatment of class actions" are largely beside the point with respect to CAFA. Thomas E. Willging & Shannon R. Wheatman, Attorney Choice of Forum in Class Action, Litigation: What Difference Does It Make?, 81 NOTRE DAME L. REV. 591, 593 (2006). For present purposes, we put aside the debate prompted by Bridgestone/Firestone concerning the authority, if any, that a federal court has to enjoin in state court the same proposed nationwide class action that the federal court has declined to certify under Rule 23. Other courts have concluded that no such authority exists under current law, reasoning that the federal court's decision to decline certification is not properly regarded as issue preclusive with respect even to the same proposed class in a state court. Rather, the state court retains discretion, within the wide berth of federal constitutional due process, to apply even an identically phrased state class action rule in a manner different from the federal court. See, e.g., In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 134 F.3d 133, 146 (3d Cir. 1998) ("[O]ur interpretation of Rule 23 is not binding on the Louisiana courts."); J.R. Clearwater, Inc. v. Ashland Chem. Co., 93 F.3d 176, 180 (5th Cir. 1996) ("While Texas Rule of Civil Procedure 42 is modeled on Rule 23 of the Federal Rules, and federal decisions are viewed as persuasive authority regarding the construction of the Texas class action rules, . . . a Texas court might well exercise this discretion in a different manner.").
70. But see Tobias Barrington Wolff, Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action, 156 U. PA. L. REV. 2035 (2008) (urging recognition of federal injunctive power in this scenario) ; cf. ALI DRAFT PRINCIPLES OF AGGREGATE LITIGATION, supra note ††, § 2.11 cmts. b, d (urging state courts to afford comity to the federal class decertification decision, but also noting special situations in which that decision might have issue-preclusive effect).
71. S. REP. NO. 109-14, at 22, reprinted in 2005 U.S.C.CA.N. 3 at 22; see also John H. Beisner & Jessica Davidson Miller, They're Making a Federal Case Out of It . . . in State Court, 25 HARV. J.L. & PUB. POL'Y 143, 155 (2001) (describing how "class action lawyers are bringing a large number of cases in a small number of state courts that have become 'magnets' for interstate class actions and that thus exercise a widely disproportionate role in adjudicating national disputes").
72. Roundtable, Class Action Fairness Act, NAT'L L.J., May 16, 2005, at 18, 20 (remarks of Samuel Issacharoff). One topic yet to be explored systematically in the empirical literature concerns the relationship between the anomalous-court problem and the use in pertinent state systems of elected, rather than appointed, judges.
73. To be sure, the federal forum favored by CAFA does not eliminate entirely the potential for divergent results on class certification. Federal courts can disagree over the interpretation and application of Rule 23, just as they can for any other source of federal law. Still, CAFA supporters plausibly regarded the degree of divergence within the federal system as substantially less than the divergence across all trial-level courts in the nation. See S. REP. NO. 109-14, at 53-54, reprinted in 2005 U.S.C.C.A.N. 3 at 49-51 (asserting that the levels of abuse are not even comparable). In addition, the authority of the Judicial Panel on Multidistrict Litigation to consolidate in a single federal district court civil lawsuits of all sorts concerning the same underlying matter, 28 U.S.C. § 1407 (Supp. V 2005), reduces dramatically the prospect for multiple shots at class certification across different federal districts.
74. See Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 283 (7th Cir. 2002) (over-turning the approval of a class settlement by a federal court in an alleged reverse auction).
75. Pub. L. No. 104-67, 109 Stat. 737 (1995) (codified in 15 U.S.C. §§ 77-78 (2000)).
76. See Stephen J. Choi & Robert B. Thompson, Securities Litigation and Its Lawyers: Changes During the First Decade After the PSLRA, 106 COLUM. L. REV. 1489, 1515 tbl.3 (2006) (noting that Milberg Weiss enjoyed a 27.4% share of the market for representation of plaintiffs in securities class actions during the immediate post-PSLRA period).
77. See 28 U.S.C. § 1453(b) (2000) (cross-referencing the usual statute for removal, 28 U.S.C. § 1446).
78. See Wolff, supra note 53, at 2126 ("The excision of absent-plaintiff removal. . . eliminated the most direct mechanism by which class members could have sought protection from collusion . . . .").
79. See John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 COLUM. L. REV. 1343, 1354 (1995) (describing a tendency toward "structural collusion" in mass tort class actions).
80. As the Supreme Court has noted, The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)).
81. See, e.g., Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (2000).
82. See Matsushita Elec. Indust. Co. v. Epstein, 516 U.S. 367, 381-82 (1996) (holding that the exclusive grant of subject matter jurisdiction to the federal courts over "actions . . . brought to enforce any liability or duty created by" the Securities Exchange Act of 1934, 15 U.S.C. § 78aa (2000), does not warrant the withholding of full faith and credit from a Delaware state court judgment approving a class settlement that encompassed such claims, along with Delaware corporate law claims).
83. For arguments in favor of liberalized collateral review, see sources cited supra note 13.
84. For a summary of the arguments between "preclusionists" who favor the conclusiveness of initial court review and " constitutionalists" who support a broad individual right to collateral challenge, see Rubenstein, supra note 13, at 828-41.
85. As the Supreme Court has explained, Congress designed the federal habeas statute precisely to disable a search for the anomalous court to overturn a state criminal conviction: Congress added the limiting clause - "within their respective jurisdictions" - to the habeas statute [28 U.S.C. § 2241] in 1867 to avert the "inconvenient [and] potentially embarrassing" possibility that "every judge anywhere [could] issue the Great Writ on behalf of applicants far distantly removed from the courts whereon they sat." . . . Accordingly, with respect to habeas petitions "designed to relieve an individual from oppressive confinement," the traditional rule has always been that the Great Writ is "issuable only in the district of confinement." Rumsfeld v. Padilla, 542 U.S. 426, 442 (2004) (quoting Carbo v. United States, 364 U.S. 611, 617-18 (1961)).
86. See Nagareda, supra note 13, at 347 (drawing on case law to illustrate "the potential for the law to unleash competitive forces to discipline the adequacy of class representation and, for that matter, the oversight afforded by the courts themselves").
87. As a technical matter, the injunction flows from the authority of the federal court to issue "all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a) (2000). The general prohibition in the Anti-Injunction Act against federal court injunctions of state court proceedings is turned off by the exception in the Act for injunctions to "protect or effectuate" a federal judgment. 28 U.S.C. § 2283 (2000). See, e.g., In re Corrugated Container Antitrust Litig., 659 F.2d 1332, 1335 (5th Cir. Unit A Oct. 1981) ("Since there are federal judgments that approve some of the settlements and that control the further litigation of the appellants' cause of action, . . . the injunction was and is not precluded by 28 U.S.C. § 2283.").
88. See Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 525-26 (1986) (holding, in a non-class action case, that even a mistaken rejection by a state court of a claim-preclusion defense predicated on an earlier federal judgment is entitled to full faith and credit). The quoted language stems from the Full Faith and Credit Clause of the Constitution, U.S. CONST. art. IV, § 1, with regard to the effect of a state court judgment in the courts of a sister state, and from the Full Faith and Credit Act, 28 U.S.C. § 1738 (2000), with respect to the effect in federal courts.
89. After canvassing the case law on this question, the Ninth Circuit recently declined to enjoin state court litigation. The court noted that none of the considerations that have induced courts to issue injunctions de-spite the strictures of the Anti-Injunction Act was present. This was not an MDL case; discovery was not complete; no class settlement was imminent, in fact, as far as the record shows no serious setdement progress has been made; and, finally, there was no evidence of collusive procedures, reverse auction, or otherwise, even assuming that the existence of those would justify an injunction of state proceedings. Negrete v. Allianz Life Ins. Co. of N. Am., No. 07-55505, 2008 WL 1868993 (9th Cir. Apr. 29, 2008).
90. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985) (holding that absent class members must "receive notice plus an opportunity to be heard and participate in the litigation"). Some areas of law are subject to nationwide jurisdiction in federal court. For example, the Federal Circuit has exclusive jurisdiction to hear all patent appeals, as well as appeals from the Court of International Trade and the Court of Federal Claims. United States v. Souffront, 338 F.3d 809, 827 n.9 (7th Cir. 2003). Other statutes vest federal authorities with the power to issue nationwide service of process, effectively extending their jurisdictional reach nationwide, as with the securities laws. See 15 U.S.C. §§ 77v, 78aa (2000). Finally, several statutes create exclusive federal court subject matter jurisdiction, although that is independent of the notice issue. See, e.g., 28 U.S.C § 1333 (2006) (admiralty and maritime jurisdiction), § 1338 (patents and copyrights), § 1346(b) (United States as defendant in tort actions), § 1351 (foreign consul or member of foreign mission as defendant), & § 1355 (action for recovery of fine, penalty, or forfeiture under federal legislation).
91. The one narrow exception consists of state court class judgments concerning a limited fund, by analogy to the well-established authority of state courts in proceedings in rem to enjoin litigation elsewhere concerning the res. See Donovan v. City of Dallas, 377 U.S. 408, 412 (1964) (noting that, for in rem or quasi in rem proceedings, "the state or federal court having custody of such property has exclusive jurisdiction to proceed"); Toucey v. N.Y. Life Ins. Co., 314 U.S. 118, 136 (1941) (noting that "where a state court first acquires control of the res, the federal courts are disabled from exercising any power over it, by injunction or otherwise").
92. See Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 388 (1996) (Ginsburg, J., concurring in part and dissenting in part) (emphasizing that a "state-court judgment generally is not entided to full faith and credit unless it satisfies the requirements of the Fourteenth Amendment's Due Process Clause").
93. See Rubenstein, supra note 13, at 796 ("Habeas therefore can serve as a foil for the class action finality debate.").
94. FED. R. CIV. P. 60(b).
95. This argument is developed at length in Issacharoff & Sharkey, supra note 22.
96. See Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008) (declaring the preemptive effect of Food and Drug Administration (FDA) premarket approval of a Class III medical device); Good v. Altria Group, Inc., 501 F.3d 29 (1st Cir. 2007) (analyzing the preemptive effect of Federal Trade Commission regulation of "light" cigarettes), cert. granted, 128 S. Ct. 1119 (2008) (No. 07-0562); Desiano v. Warner-Lambert & Co., 467 F.3d 85 (2d Cir. 2006) (discussing the relationship between FDA regulation of prescription drug labeling and the fraud exception to state regulatory compliance defense in tort), cert. granted sub. nom. Warner-Lambert Co. v. Kent, 128 S. Ct. 31 (2007) (No. 06-1498); Levine v. Wyeth, No. 2004-384, 2006 WL 3041078 (Vt. 2006) (discussing the preemptive effect of FDA approval of prescription drug labeling), cert. granted, 128 S. Ct. 1118 (2008) (No. 06-1249).
97. See Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 28 (1998) (holding that a district court cannot itself try a case transferred to it by the Judicial Panel on Multidistrict Litigation).
98. See Hansberry v. Lee, 311 U.S. 32, 42-13 (1940) ("[M]embers of a class not present as parties . . . may be bound by the judgment where they are . . . adequately represented by parties who are present.").
99. See Rubenstein, supra note 13, at 805 (describing the array of lower court decisions as "rais[ing] as many questions as they answer").
100. Stephenson v. Dow Chem. Co., 273 F.3d 249 (2d Cir. 2001), aff'd by an equally divided Court, 539 U.S. 111 (2003).
101. FED. R. CIV. P. 23(a)(4).
102. See David L. Shapiro, Class Actions: The Class as Party and Client, 73 NOTRE DAME L. REV. 913, 918-24 (1998) (articulating an "entity" model of class actions).
103. 521 U.S. 591 (1997).
104. Id. at 599-601.
105. Id. at 626-27.
106. Id. at 602-03.
107. Id. at 604.
108. 151 F.3d 297 (5th Cir. 1998) (overturning a trial plan for consolidated treatment of more than three thousand asbestos cases).
109. Amchem, 521 U.S. at 600-01. This is a topic we have both addressed before. See RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT (2007);
110. Samuel Issacharoff, "Shocked": Mass Torts and Aggregate Asbestos Litigation After Amchem and Ortiz, 80 TEX. L. REV. 1925 (2002).
111. See Fairness in Asbestos Compensation Act of 1999: Hearing on H.R. 1283 Before the H. Comm. on the Judiciary, 106th Cong. 134 (1999) (statement of Maura J. Abeln, Senior Vice President, General Counsel, and Secretary, Owens Corning) (describing a private setdement process involving contractual agreements with prominent asbestos plaintiffs' law firms as an alternative to proposed federal asbestos legislation).
112. 11 U.S.C. § 524(g) (2000) (describing the requirements for an injunction that would channel asbestos claims against the debtor and related entities to a juridically separate trust fund for payment).
113. For a more detailed discussion of the strategic dynamics behind the Amchem class settlement, see NAGAREDA, supra note 92, at 76-80.
114. Faced with a spate of asbestos-related bankruptcies in the post-Amchem period and spurred by language in the Court's opinion, see Amchem, 521 U.S. at 628-29, Congress went on to consider seriously proposed asbestos reform legislation that largely would track the central tradeoff of the Amchem class setdement. See Fairness in Asbestos Injury Resolution Act of 2006, S. 3274, 109th Cong. (2006) (proposing a $140 billion trust fund to resolve all asbestos claims). Writing some years after Amchem, one prominent plaintiffs' lawyer lamented that "the multibillion-dollar settlement, rejected by the Supreme Court, was lost forever, and thousands of claimants who would gladly have traded their pristine due process rights for substantial monetary compensation have been consigned to the endless waiting that characterizes asbestos bankruptcies.Elizabeth J. Cabraser, The Class Action Counterreformation, 57 STAN. L REV. 1475, 1476 (2005).
115. See Amchem, 521 U.S. at 621 (noting that class certification standards "serve to inhibit . . . class certifications dependent upon the court's gestalt judgment or over-arching impression of the settlement's fairness").
116. See id. at 607 (summarizing the district court's reasoning).
117. For a thoughtful response to the ad infinitum quality of some claimed conflicts, see Petrovic v. Amoco Oil Co., 200 F.3d 1141, 1146-48 (8th Cir. 1999).
118. See FED. R. CIV. P. 23(c)(5) (allowing for classes to be divided into subclasses). Prior to the 2007 restyling of the Federal Rules of Civil Procedure, the portion of Rule 23 concerning subclasses appeared as subsection 23(c) (4) (B).
119. See, e.g., In re Bridgestone/Firestone, Inc., Tires Prods. Liab. Litig., 288 F.3d 1012, 1018, 1021 (7th Cir. 2002) (decertifying a nationwide class action upon a choice of law determination that the governing law would be that found in each class member's respective home state). Though fifty-one nominally different bodies of state law rarely amount to fifty-one different laws in substance, even a smaller number of substantive variations may defeat class certification. See MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.222, at 271 (2004) (noting that the need to keep the variations distinct may make a single class-wide proceeding unmanageable).
120. For an argument that choice of law analysis in class actions seeks awkwardly and indirecdy to assess the maturity of the underlying litigation, see Sue-Yun Ahn, CAFA, Choice-of-Law, and the Problem of Legal Maturity in Nationwide Class Actions, 76 U. CIN. L. REV. 105 (2007).
121. But see Sun Oil Co. v. Wortman, 486 U.S. 717, 722 (1988) (allowing the law of the forum state to provide the statute of limitations for the entire class).
122. As currently understood, Erie principles require a federal court sitting in diversity' to apply the same choice of law principles as would a state court in the same location. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). But, like the application of commonly shared class action rules, choice of law analysis-particularly, under widely used methodologies that call for multifactor balancing - can entail the exercise of wide discretion by the court. See Issacharoff, supra note 44, at 1844-51 (criticizing the "most significant relationship" standard used in the Restatement (Second) of Conflicts of Laws). The anomalous court might be inclined to conduct its choice of law analysis so as to select a single body of substantive law, thereby facilitating certification of a nationwide class. Cf. S. REP. NO. 109-14, at 25 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 25 (describing state courts' interference with the laws of other jurisdiction, as in Ysbrand v. DaimlerChrysler Corp., 81 P.3d 618 (Okla. 2003)).
123. See infra Part II.C (discussing Phillips Petroleum Co. v. Shutts, and its aftermath).
124. The discussion here generalizes from the contention of the collateral attack plaintiff in Wolfert v. Transamerica Home First, Inc., 439 F.3d 165 (2d Cir. 2006). In Wolfert, a California state court certified a class action with respect to a California statutory claim concerning the defendant lender's marketing of reverse mortgages. The class settlement, however, released all claims concerning such mortgages, whatever their source in substantive law. Id. at 168. The collateral attack plaintiff then sought to bring various claims under New York law against the settling defendant, alleging inadequate representation in the class proceedings. See id. at 169-70. See generally Patrick Woolley, Choice of Law and the Protection of Class Members in Class Suits Certified under Federal Rule of Civil Procedure 23(b)(3), 2004 MICH. ST. L. REV. 799, 825-32 (2004) (discussing strategic decisions by class counsel regarding choice of law as a potential basis for inadequate class representation).
125. As colorfully put by Judge Posner, this became the "serendipity theory" of doctrinal evolution. In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1300 (7th Cir. 1995).
126. The Federal Rules capture this difficulty through the use of the ill-defined term "predominate" in Rule 23(b)(3). The Rule does not require an identity of issues among class members, only that the common issues predominate in the litigation. In our work as Reporters for the ALI, we have been critical of the predominance requirement as creating an acontextual minefield for litigants. At its most basic level, however, the term captures the sense that aggregate litigation can rarely be expected to have a perfect identity of interests among all affected participants.
127. See Coffee, supra note 4, at 374-75 (fearing the "Balkanization" of the class "into a loose-knit coalition of potentially feuding enclaves that could seldom litigate effectively as an organization").
128. 527 U.S. 815, 832 (1999).
129. Id. at 857.
130. Even here, the division is not absolute. Many members of the class would have had exposures before and after 1959 and likely would have been unable to trace the harmful exposure to any specific time period.
131. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624 (1997) (quoting the Third Circuit opinion, 83 F.3d 610, 626 (1996)).
132. On the operations of the joint-defense entity, see generally Lawrence Fitzpatrick, The Center for Claims Resolution, LAW & CONTEMP. PROBS., Autumn 1990, at 13.
133. 273 F.3d 249 (2d Cir. 2001).
134. 309 F.3d 978 (7th Cir. 2002).
135. In re "Agent Orange" Prod. Liab. Litig., 597 F. Supp. 740 (E.D.N.Y. 1984), aff'd, 818 F.2d 145 (2d Cir. 1987).
136. See Stephenson, 273 F.3d at 253. The ten-year cutoff for cash compensation was far from arbitrary and surely would not have been invalidated as such had an administrative agency adopted it as part of a public compensation plan for Vietnam veterans. See Nagareda, supra note 13, at 322. At the time of the class settlement, formidable uncertainty existed as a scientific matter concerning the causal relationship, if any, between Agent Orange and the various diseases of concern to the plaintiff class. See In re "Agent Orange" Prod. Liab. Litig., 818 F.2d at 172-73. (For that matter, evidence of disease pathology for the exposed population of Vietnam veterans appears still to be lacking.) The lapse of time - the ten-year cutoff came more than twenty years after the last alleged exposure to Agent Orange, see Stephenson, 273 F.3d at 252 - made a causal connection increasingly implausible. Indeed, Judge Weinstein - again, with the appellate endorsement of the Second Circuit - went so far as to grant summary judgment for the defendants for lack of a triable issue on the causation element in individual cases brought in the immediate aftermath of the class settlement by diseased veterans who had opted out of the Rule 23(b)(3) class. See In re "Agent Orange Prod. Liab. Litig., 611 F. Supp. 1223, 1229 (E.D.N.Y. 1985) ("Plaintiff Vietnam veterans do suffer. Many deserve help . . . . They cannot obtain aid through this suit."), aff'd, 818 F.2d 187 (2d Cir. 1987).
137. We thus find ourselves in disagreement with commentators who characterize the Agent Orange class settlement as one in which class members effectively settled their tort claims in exchange for an arrangement whereby some would receive nothing. See Dana, supra note 13, at 282 (arguing that the strong aversion to uninsurable risk posited by behavioral economics suggests that no reasonable group of people would agree to a settlement in which some would receive "no relief whatever" ex post); Koniak, supra note 13, at 1821 (asserting that "[Stephenson's] group got nothing"). Such a view does not account for the present-day dollar value of any term insurance policy, something that ordinary consumers routinely regard as valuable in such arrangements as life insurance. That some commentary in praise of Stephenson should ground itself in behavioral economics, see Dana, supra note 13, at 283-84, thus strikes us as ironic, at thie very least.
138. See SCHUCK, supra note 14, at 145 (describing Special Master Feinberg's plan to allocate the settlement fund).
139. Stephenson, 273 F.3d at 260.
140. See id. at 260-61 n.7 (distinguishing earlier cases that held that class members manifesting disease after the settlement, but before the ten-year cutoff, were adequately represented in the class proceedings on the ground that those class members were still eligible for compensation from the settlement fund). In a decision rendered prior to Amchem but before Stephenson, the Second Circuit had held that the difference between veterans with and without disease at the time of the class judgment did not present an intraclass conflict. See In re "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425, 1433-38 (2d Cir. 1993) (holding that class members who manifested disease after the time of the class settlement were properly within the Agent Orange class).
141. 309 F.3d 978 (7th Cir. 2002).
142. Id. at 980-81.
143. Id. at 986.
144. The court accurately observed that the Uhl class representative stood in a position broadly akin to what political philosopher John Rawls envisions as a decision maker behind the "veil of ignorance" as to how she will fare ex post. See id. (noting that the class representation would be a "concrete working example of John Rawls' celebrated theory of the 'veil of ignorance'"); cf. JOHN RAWLS, A THEORY OF JUSTICE (1971). We thus find misplaced the invocation of Rawls in support of the radically different conception of adequate class representation that animates Stephenson. See Dana, supra note 13, at 282-83 (building an argument upon the Rawlsian notion of fairness).
145. In the end, the collateral attack in Stephenson was unsuccessful quite apart from the preclusive effect of the class settlement. Judge Weinstein ultimately dismissed the case based on the government-contractor defense interposed on the merits by Dow Chemical, and the Second Circuit affirmed. In re "Agent Orange" Prod. Liab. Litig., 344 F. Supp. 2d 873, 874-75 (E.D.N.Y. 2004), aff'd, 517 F.3d 76 (2d Cir. 2008). This, too, was a point of uncertainty at the time of the class setdement. See SCHUCK, supra note 14, at 61-62 (discussing the government contractor defense raised in the Agent Orange litigation).
146. Between the time of the Agent Orange class settlement and the Stephenson litigation, a major government study noted the emergence of at least some scientific evidence of a quasi-relationship between Agent Orange and the particular diseases - multiple myeloma and non-Hodgkins lymphoma - suffered by the collateral attack plaintiffs. See INST. OF MED., VETERANS AND AGENT ORANGE: HEALTH EFFECTS OF HERBICIDES USED IN VIETNAM 6 (1994); Stephenson v. Dow Chem. Co., 273 F.3d 249, 255 (noting Daniel Stephenson's diagnosis with multiple myeloma and Joe Isaacson's diagnosis with non-Hodgkins lymphoma). Tort litigation on the merits would have enabled the plaintiffs to draw on this subsequent evidence.
147. We find unconvincing an attempted defense of the reasoning in Stephenson in terms of the adage "better late than never." It is not as if the reasoning embraced in Stephenson enabled the settling defendants to recoup the $180 million already distributed to the class during the ten-year period.
148. Professor Issacharoff has served as counsel to the claimant class for the past ten years. The discussion herein is taken exclusively from publicly available documents and court decisions.
149. The Court in Ortiz so described the necessity of division along these lines per Amchem. See Ortiz v. Fireboard Corp., 527 U.S. 815, 854-59 (1999) ("[I]t is obvious after Amchem that a class divided between present and future claims . . . requires division into homogenous subclasses under Rule 23(c)(4)(B), with separate representation to eliminate conflicting interests of counsel.").
150. See Brown v. Am. Home Prods. Corp. (In re Diet Drugs Prods. Liab. Litig.), No. 99-20593, 2000 WL 1222042, at *14 (E.D. Pa. Aug. 28, 2000) (discussing research indicating significandy elevated risk of valvular heart problems for persons who used fenphen for more than three months), aff'd without opinion, 275 F.3d 34 (3d Cir. 2001).
151. See id. at *49 n.22. On the procedural legitimacy of this price, as distinct from others that a class setdement might set, see Richard A. Nagareda, Autonomy, Peace, and Put Options in the Mass Tort Class Action, 115 HARV. L. REV. 747, 805-22 (2002).
152. See In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 149-50 (3d Cir. 2005) (denying collateral review of adequacy of representation with respect to class members who had exercised opt-out rights); In re Diet Drugs Prods. Liab. Litig., 89 F. App'x 314, 318 (3d Cir. 2003) (upholding the rejection of a challenge to the adequacy of notice as to opt-out rights); Brown v. Am. Home Prods. Corp. (In re Diet Drugs Prods. Liab. Litig.), No. 99-20593, 2002 WL 32067308, at *5 (E.D. Pa. 2002) (discussing the flood of setdement claims). See generally Alexandra D. Lahav, The Law and Large Numbers: Preserving Adjudication in Complex Litigation, 59 FLA. L. REV. 383, 413-16 (2007) (discussing the aftermath of the fen-phen settlement).
153. In re Diet Drugs Prods. Liab. Litig., 226 F.R.D. 498 (E.D. Pa. 2005).
154. This proposition takes its most salient form in the framework that determines the procedural protections required for deprivations of government-created property rights without close analogues in the common law. See Mathews v. Eldridge, 424 U.S. 319, 335 (1976) (calling for calibration of the process due based on the "the private interest that will be affected[,] . . . the risk of an erroneous deprivation . . . and the probable value . . . of additional or substitute procedural safeguards[,] . . . [and] the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail").
155. As expressed by Judge Posner, "[t]he less that is at stake, . . . the less process is due." Van Harken v. City of Chicago, 103 F.3d 1346, 1353 (7th Cir. 1997). For an ealier suggestion of this point in connection with the fen-phen class settlement, see Coffee, supra note 4, at 432-33.
156. Am. Home Prods. Corp, 2002 WL 32067308, at *25. The court only recently finalized its fee award. See Brown v. Am. Home Prods. Corp. (In re Diet Drugs Prods. Liab. Litig.), No. 99-20593, 2008 WL 942592 (E.D. Pa. Apr. 9, 2008).
157. See 28 U.S.C. § 1712(a) (Supp. V 2005) ("[A]ttorney's fee award to class counsel . . . shall be based on the value to class members of the coupons that are redeemed."). On the problems presented by coupon setdements, see Christopher R. Leslie, A Market-Based Approach to Coupon Settlements in Antitrust and Consumer Class Action Litigation, 49 UCLA. L. REV. 991, 996-97 (2002) (arguing that, because class counsel are paid in cash, they do not have an adequate incentive to ensure that class members receive meaningful compensation rather than restrictive coupons);
158. Geoffrey P. Miller & Lori S. Singer, Nonpecuniary Class Action Sdtlements, LAW & CONTEMP. PROBS., Autumn 1997, at 97, 130-31 (summarizing a theoretical and empirical analysis of coupon and other nonpecuniary settlements to identify the benefits and costs of these arguments);
159. Protecting Consumer Interests in Class Actions, Panel 1: The Use of "Coupon" Compensation and Other Non-Pecuniary Redress, 18 GEO. J. LEGAL ETHICS 1161 passim (2005) (discussing at a Federal Trade Commission Workshop whether coupon settlements provide adequate relief to consumers).
160. See James D. Cox & Randall S. Thomas, Letting Billions Slip Through Your Fingers: Empirical Evidence and Legal Implications of the Failure of Financial Institutions to Participate in Securities Class Action Sdtlements, 58 STAN. L. REV. 411, 424 (2005) (investigating the frequency with which financial institutions submit claims in settled securities class actions and finding that less than thirty percent of institutional investors perfect their claims).
161. This, too, has a due process pedigree in keeping with the operation of many class settlements as privatized administrative compensation regimes. The process that constrains rulemaking by public administrative agencies consists not of the kind of individual autonomy for affected persons found in conventional civil litigation, but rather, primarily of measures that hew the administrators' interests in retaining their governing powers to the welfare of those affected by their actions. See Bi-Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441, 445 (1915) (holding, as to agency rule-making, that affected individuals have no due process right to an individualized hearing because they may hold decision makers accountable through the political process).
162. Ortiz v. Fibreboard Corp., 527 U.S. 815, 824 (1999); Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 601 (1997).
163. Ortiz, 527 U.S. at 819; Amchem, 521 U.S. at 601.
164. These aggregate settlements consisted of settlements for nominally separate tort cases brought on behalf of individual plaintiffs, albeit represented by the same law-firm within the asbestos plaintiffs' bar. On the variety of ways in which aggregate settlements might be structured, see Howard M. Erichson, A Typology of Aggregate Settlements, 80 NOTRE DAME L. REV. 1769 (2005).
165. See, e.g., Georgine v. Amchem Prods., Inc., 157 F.R.D. 246, 294-96 (E.D. Pa. 1994) (providing a list of the settlements of inventory claims).
166. See, e.g., id. at 292 (noting that inventory cases were settled in exchange for full releases by plaintiffs, whereas class members without present-day disease could seek compensation under the class settlement in the event of disease manifestation in the future).
167. See Ortiz, 527 U.S. at 852: In this case . . . any assumption that plaintiffs' counsel could be of a mind to do their simple best in bargaining for the benefit of the settlement class is patently at odds with the fact that at least some of the same lawyers representing plaintiffs and the class had also negotiated the separate settlement of 45,000 pending claims . . . . Class counsel thus had great incentive to reach any agreement in the global setdement negotiations that they thought might survive a Rule 23(e) fairness hearing, rather than the best possible arrangement for the substantially unidentified global settlement class.
168. As Justice Breyer noted in dissent: Of course, class counsel consisted of individual attorneys who represented other asbestos claimants, including many other Fibreboard claimants outside the certified class. Since Fibreboard had been setding cases . . . for several years, any attorney who had been involved in previous litigation against Fibreboard was likely to suffer from a similar 'conflict.' So whom should the District Court have appointed to negotiate a setdement that had to be reached soon, if ever? Should it have appointed attorneys unfamiliar with Fibreboard and the history of its asbestos litigation? Where was the District Court to find those competent, knowledgeable, conflict-free attorneys? The District Court said they did not exist. Id. at 878.
169. See Brown v. Am. Home Prods. Corp. (In re Diet Drugs Prods. Liab. Litig.), No. 99-20593, 2000 WL 1222042, at *19 (E.D. Pa. Aug. 28, 2000) (noting that the fen-phen class complaint "was filed as a vehicle for combining the claims of class members asserted in pending federal and state diet drug litigation throughout the country into a single complaint to facilitate class action treatment of those claims for settlement purposes"), aff'd without opinion, 275 F.3d 34 (3d Cir. 2001).
170. 288 F.3d 277, 284-85 (7th Cir. 2002); see also id. at 285 ("Determining [the net expected value of continued litigation to the class] would require estimating the range of possible outcomes and ascribing a probability to each point on the range.").
171. We consciously bracket the question raised by some commentators as to whether a method for fee calculation other than those long established might make the risk of an inadequate class settlement something less than an inherent feature of class litigation. See generally Hay & Rosenberg, supra note 4 (focusing on the post-Amchem context).
172. For an overview of the literature, see Charles Silver, Class Actions - Representative Proceedings, in 5 ENCYCLOPEDIA OF LAW AND ECON. 194 (Boudewijn Bouckaert & Gerrit De Geest eds., 2000).
173. The lodestar method, by contrast, calculates the fee award by multiplying the hours reasonably devoted to the litigation by class counsel by a reasonable hourly rate. Empirical research nonetheless documents that, as applied by judges, fee awards under the percentage-of-recovery and lodestar methods correlate remarkably closely with one another. See Theodore Eisenberg & Geoffrey P. Miller, Attorney Fees in Class Action Settlements: An Empirical Study, 1 J. EMPIRICAL. LEGAL STUD. 27, 47-72 (2004) (presenting data on client recovery and fee awards).
174. This shows, within the class action setting, the general point in the economic literature that no principal-agent relationship ever aligns the interests perfectly. Some do better; some do worse. Although contingency-fee arrangements in ordinary litigation better incentivize counsel to maximize the recovery and to do so swiftly, they do not align perfectly the interests of lawyer and client. See, e.g., Hugh Gravelle & Michael Waterson, No Win, No Fee: Some Economics of Contingent Legal Fees, 103 ECON. J. 1205 (1993) (identifying potential conflicts of interest between the client and lawyer).
175. See generally Alon Harel & Alex Stein, Auctioning for Loyalty: Selection and Monitoring of Class Counsel, 22 YALE L. & POL'Y REV. 69, 72-78 (2004) (listing several models which denote the agency problems in class representation);
176. Elliott J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L.J. 2053, 2074-79 (1995) (noting the potential for plaintiffs' attorneys' opportunistic behavior).
177. Stephenson v. Dow Chem. Co., 273 F.3d 249, 257-61 (2d Cir. 2001) (reviewing both collateral attack and due process considerations).
178. Id. at 255, 259-61.
179. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (setting forth the familiar "minimum contacts" requirement for personal jurisdiction over defendants).
180. 472 U.S. 797 (1985) (citing Hansberry v. Lee, 311 U.S. 32 (1940)).
181. Id. at 810.
182. Id. at 809.
183. See infra Part III.A (discussing the holding in Devlin v. Scardelletti, 536 U.S. 1 (2002), that absent class members may not take a direct appeal from the approval of a class settlement absent objection in the district court fairness hearing).
184. See 472 U.S. at 809 (noting, for example, that there is no threat of a default judgment if a plaintiff fails to appear).
185. See, e.g., Issacharoff, supra note 4, at 341-42; Coffee, supra note 4, at 376.
186. 472 U.S. at 812. We bracket the lingering debate over the capacity of a mandatory class action to encompass in any fashion claims for damage relief in light of the right to opt out prescribed in Shutts. See Brown v. Ticor Title Ins. Co., 982 F.2d 386, 392 (9th Cir. 1992) (withholding preclusive effect from the mandatory class settlement, at least as to damage claims raised via collateral attack); In re Real Estate Title & Settlement Serv. Antitrust Litig., 869 F.2d 760, 768 (3d Cir. 1989) (withholding, in an earlier decision in the Brown litigation, injunctive power from the rendering federal court for the mandatory class vis-à-vis state court collateral attack).
187. 472 U.S. at 812.
188. See, e.g., Woolley, supra note 13, at 388 ("The argument for limiting collateral attack contradicts two fundamental principles: first, a court has no jurisdiction over absent class members who have not been adequately represented; second, a judgment entered without jurisdiction may be collaterally attacked if the party bound by the judgment did not appear and had no obligation to do so.").
189. 472 U.S. at 812.
190. Id. at 809.
191. See generally Woolley, supra note 13, at 392 n.24 (citing Harold L. Korn, The Development of Judicial Jurisdiction in the United States: Part I, 65 BROOK. L. REV. 935, 970 (1999) (distinguishing between direct and indirect jurisdiction related to judgment enforceability);
192. FLEMING JAMES, JR. ET AL., CIVIL PROCEDURE § 2.3, at 53 (4th ed. 1992) ("The exercise of judicial jurisdiction implies the authority to enter legally binding judgments and to use the coercive powers of executive agencies (for example, the sheriff) to compel compliance with those judgments.").
193. See, e.g., Monaghan, supra note 13, at 1173 ("F1's in personam jurisdiction . . . is not permanendy established by a class member's failure to opt out. That jurisdiction is conditioned upon adequate representation 'at all times,' such that jurisdiction is lost when representation is inadequate. . . . It is not finally established until the F1 proceedings have been concluded in accordance with due process.").
194. The Shutts Court noted that the individual damage claims of class members amounted to only one hundred dollars on average. 472 U.S. at 801; cf. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) ("'The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.'" (quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)).
195. At the time, the rendering Kansas court had not undertaken a "thoroughgoing treatment" of the choice of law question, even though nearly all of the underlying contractual agreements and the absent class members otherwise had no connection to the state. 472 U.S. at 814-15, 818. On remand, the Kansas court persisted in applying Kansas law, but this time, based on a choice of law analysis that, in the court's view, deemed any nominal differences in substantive law as between Kansas and other contending states to present a false conflict. See Shutts v. Phillips Petroleum Co., 732 P.2d 1286, 1312-13 (Kan. 1987). The U.S. Supreme Court ultimately upheld this determination as a matter of the full faith and credit owed by Kansas to the laws of the other contending states. See Sun Oil Co. v. Wortman, 486 U.S. 717, 730-31 (1988) (holding that it is "not enough" for a state to "misconstrue the law of another State" in the course of finding a false conflict and that a constitutional violation occurs only when such a construction "contradict[s]" the law of the other state "that is clearly established and that has been brought to the court's attention").
196. See Stephen C. Yeazell, Overhearing Part of a Conversation: Shutts as a Moment in a Long Dialogue, 74 UMKC L. REV. 779, 781 (2006) (suggesting that the Kansas forum was chosen, in all likelihood, to position class counsel to pursue application of what was thought to be the atypically pro-plaintiff law of Kansas concerning natural gas leases).
197. See Hansberry v. Lee, 311 U.S. 32, 44 (1940) ("[I]t is evident that those signers or their successors who are interested in challenging the validity of the agreement and resisting its performance are not of the same class in the sense that their interests are identical so that any group who had elected to enforce rights conferred by the agreement could be said to be acting in the interest of any others who were free to deny its obligation.").
198. Jay Tidmarsh, The Story of Hansberry: The Foundation for Modem Class Actions, in CIVIL PROCEDURE STORIES 217, 253 (Kevin M. Clermont ed., 2004); see also Kahan & Silberman, Matsushita and Beyond, supra note 13, at 266 (commenting on the lack of formal procedures for class certification under Illinois equity practice at the time).
199. Tidmarsh, supra note 175, at 253.
200. We accordingly find overstated arguments that invoke Hansberry as well-nigh controlling precedent in the modern debates over collateral attacks. See, e.g., Woolley, supra note 13, at 384 ("May an absent class member who has been inadequately represented attack the class judgment in subsequent litigation? The traditional answer, enunciated by the Supreme Court in Hansberry v. Lee, has been a clear 'yes.'" (internal footnotes omitted)).
201. 536 U.S. 1 (2002).
202. Abram Chayes, The Role of the Judge in Public Law Litigation, 89 HARV. L. REV. 1281, 1286 (1976).
203. See, e.g., Richard L. Marcus, Public Law Litigation and Legal Scholarship, 21 U. MICH. J.L. REFORM 647, 668-82 (1988);
204. Jonathan T. Molot, An Old Judicial Role for a New Litigation Era, 113 YALE L.J. 27, 35-36 (2003).
205. Judith Resnik, Money Matters: Judicial Market Interventions Creating Subsidies and Awarding Fees and Costs in Individual and Aggregate Litigation, 148 U. PA. L. REV. 2119, 2127-29 (2000).
206. Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 280 (7th Cir. 2002); see also In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 805 (3d Cir. 1995) (Becker, J.) (noting the "fiduciary responsibility" of the court in class-settlement review).
207. See Brummer, supra note 34, at 1064 ("Judges are not agents of plaintiffs, traditionally conceived. There is neither a contract nor a pledge of loyalty to plaintiffs; if anything, they act on behalf of the state and larger civil society.").
208. Devlin v. Scardelletti, 536 U.S. 1, 10 (2002).
209. Id. at 7 (noting the general principle that "'only parties to a lawsuit, or those that properly become parties, may appeal an adverse judgment'" (quoting Marino v. Ortiz, 484 U.S. 301, 304 (1988))).
210. See id. at 10 ("The label 'party' does not indicate an absolute characteristic, but rather a conclusion about the applicability of various procedural rules that may differ based on context").
211. Id.
212. See id. at 14 (rejecting the argument that "the structure of the rules of class action procedure requires intervention for the purposes of appeal"). An objector nonetheless might find it strategically advantageous to seek intervenor status from the court, as that would make the objector a "party" in the ordinary sense and thereby position her to seek limited discovery regarding the proposed deal. See FED. R. CIV. P. 24 (describing standards for intervention); FED. R. CIV. P. 26 (confining discovery to those with "party" status).
213. Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 279 (7th Cir. 2002).
214. William B. Rubenstein, The Fairness Hearing: Adversarial and Regulatory Approaches, 53 UCLA L. REV. 1435, 1452-67 (2006) (describing four approaches: devil's advocate, bonds, labels, and marks).
215. Financial incentives might range from, say, a bond posted by the settling parties from which the court might make a fee award to objectors who improve the deal, see id. at 1456-59, to outright replacement of incumbent class counsel by objectors who succeed in showing that the proposed deal is unfair, see Geoffrey P. Miller, Competing Bids in Class Action Settlements, 31 HOFSTRA L. REV. 633, 633 (2003); Nagareda, supra note 13, at 365. On the idea of a devil's advocate, see Rubenstein, supra note 190, at 1453-56.
216. See Rubenstein, supra note 190, at 1460-67 (creating a system of "labels" similar to nutritional labels to evaluate class action settlements).
217. Rubenstein himself notes this additional approach in his separate article on collateral attacks. See Rubenstein, supra note 13, at 840 ("Conceivably, the ready availability of collateral review could act like a sword of Damocles hanging over the initial proceedings, forcing the participants in those proceedings to act in accord with the requirements of adequate representation.").
218. Kamilewicz v. Bank of Boston Corp., 100 F.3d 1348, 1352 (7th Cir. 1996) (Easterbrook, J., dissenting from denial of rehearing en banc).
219. See In re Diet Drugs Prods. Liab. Litig., 369 F.3d 293, 304 (3d Cir. 2004) (discussing an injunction issued to "protect the setdement against guerilla warfare" from dissenting lawyers).
220. See FED. R. CIV. P. 60(b).
221. Id.
222. See supra text accompanying notes 70-72.
223. See Koniak & Cohen, supra note 32, at 1069-80 (discussing prospects for malpractice actions in the class settlement context).
224. Id. at 1084.
225. See Kamilewicz v. Bank of Boston, 100 F.3d 1348, 1351 (7th Cir. 1996) (Easterbrook, J., dissenting from denial of rehearing en banc) (noting that class members' malpractice claim against class counsel "takes the [class] judgment as a given - indeed, it is only so long as the judgment stands that the litigant has a compensable loss").
226. A collateral attack immediately prompts the defense that claim preclusion from the class judgment extinguished all claims arising from the disputed "transaction." RESTATEMENT (SECOND) OF JUDGMENTS § 24(1) (1980) (noting that a "valid and final judgment" extinguishes "all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of transactions, out of which the action arose"). On the prospects for rendering courts to limit the preclusive effect of their own judgments in class actions, see Tobias Barrington Wolff, Preclusion in Class Action Litigation, 105 COLUM. L. REV. 717, 770-76 (2005).
227. See FED. R. CIV. P. 23(c) (1) (C) (providing that a class certification order "may be altered or amended before final judgment").
228. Rule 23(c)(2) requires notice to class members only with respect to certified class actions. FED. R. CIV. P. 23(c) (2) (A)-(B).
229. As to structural defects, we find ourselves broadly in accord with William Rubenstein's recent call for a "nuanced, middle-ground approach" for collateral attacks. Rubenstein, supra note 13, at 829. Rubenstein, however, grounds his analysis in a comparison of collateral attacks to habeas litigation involving claims of ineffective assistance, a comparison that puts aside consideration of forum selection, see supra note 26, and tends to cast the representational defect as one of deficient performance rather than structural conflict of interest. We see a middle solution as suited for structural defects but less so for the kinds of performance defects most closely analogous to ineffective assistance of counsel in a criminal trial. See supra Part III.C.2.
230. See In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 149 (3d Cir. 2005) ("All three sets of Appellants . . . have already raised and litigated [before the rendering court] the challenges they argue here."). One of us represented class counsel in this case and thereafter defended the
231. See RESTATEMENT (SECOND) OF JUDGMENTS § 27 (summarizing conventional principles of issue preclusion).
232. For insistence on such an understanding, see Epstein II, 126 F.3d 1235, 1242 (9th Cir. 1997) ("The individual objectors who voluntarily appeared at the fairness hearing were not authorized by the absentees to represent their interests, nor were they certified by the [rendering court] to do so.").
233. See Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 52 (1983) (emphasizing that the agency "must explain the evidence which is available, and must offer a 'rational connection between the facts found and the choice made'" (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962))). For an elaboration of die analogy to administrative-law arbitrariness review, see Nagareda, supra note 13, at 357-59.
234. See 18 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4420, at 516-18 (2d ed. 2002) (discussing the allocation of burden).
235. In re IPO Secs. Litig., 471 F.3d 24, 40 (2d Cir. 2006). IPO Securities is the most recent in a series of federal appellate decisions that lend greater content to the Supreme Court's cryptic admonition in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974), that trial-level courts lack "authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action." In IPO Securities, the Second Circuit underscored this point: "the fact that a Rule 23 requirement might overlap with an issue on the merits does not avoid the court's obligation to make a ruling as to whether the requirement is met." 471 F.3d at 27. Accord, e.g., Oscar Private Equity Invs. v. Allegiance Telecomm., Inc., 487 F.3d 261, 268 (5th Cir. 2007) ("A district court . . . must give full and independent weight to each Rule 23 requirement, regardless of whether that requirement overlaps with the merits." (internal citation omitted)); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001) ("[I]f some of the considerations under Rule 23(b)(3) . . . overlap the merits[,] . . . then the judge must make a preliminary inquiry into the merits."). One prescient commentator largely anticipated the approach now adopted in IPO Securities. See Geoffrey P. Miller, Review of the Merits in Class Action Certification, 33 HOFSTRA L. REV. 51, 87 (2004) (recommending that courts "investigate the merits provided diat doing so is convenient and useful to analyzing the [applicable class] certification requirements").
236. IPO Securities, 471 F.3d at 41.
237. See FED. R. CIV. P. 23(c)(2) (A)-(B) (requiring notice only as to certified class actions).
238. See FED. R. CIV. P. 23(e) (1) (B) (requiring notice of a proposed class setdement to "all class members who would be bound by a proposed settlement").
239. See supra text accompanying notes 175-176.
240. The Senate Report on CAFA expressed concern over "drive-by class certification cases." S. REP. No. 109-14, at 22 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 22.
241. FED. R. CIV. P. 23(c)(2)(B).
242. In dicta, the Amchem Court expressed concern over the adequacy of the extensive notice campaign contemplated there with respect to asbestos-exposed workers' family members who might not know of their exposure. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 628 (1997). By contrast, the concern voiced in Amchem for persons who do not know their ultimate medical fate at the time of the class judgment, id., has not rendered inadequate notice campaigns for mass tort class setdements where the fact of exposure is known. See Brown v. Am. Home Prods. Corp. (In re Diet Drugs Prods. Liab. Litig.), No. 99-20593, 2000 WL 32067308, at * 39 (E.D. Pa. 2002) (emphasizing that "there are no class members unwittingly exposed to the diet drugs, which were available only through a doctor's prescription and had to be consciously ingested").
243. For an illustration in state law of a more flexible approach to notice, by comparison to Rule 23, see CAL. CIV. R. 3.766(f) which notes that, "[i]f personal notification is unreasonably expensive or the stake of individual class members is insubstantial, or if it appears that all members of the class cannot be notified personally, the court may order a means of notice reasonably calculated to apprise the class members of the pendency of the action - for example, publication in a newspaper or magazine; broadcasting on television, radio, or the Internet; or posting or distribution through a trade or professional association, union, or public interest group.".
244. See supra text accompanying notes 71-72.
245. This effect is righdy highlighted in Erichson, supra note 36.
246. This proposal cures a defect in CAFA's jurisdictional grant carefully identified in Wolff, supra note 53, by which the right of removal is reserved to the defendant but not to absent class members who may wish to challenge a settlement being "parked" in a friendly state court.
247. For further discussion of the implications of increased federal oversight, see David Marcus, Erie, the Class Action Fairness Act, and Some Federalism Implications of Diversity Jurisdiction, 48 WM. & MARY L. REV. 1247, 1296-1304 (2007), which argues that CAFA operates in tension with Erie's principles concerning federal-state relations.