CAFA settlement notice provision: Optimal regulatory policy?

University of Pennsylvania Law Review

Volumn 156, Issue 6, 2008, Pages 1971-1999

  Sharkey, Catherine M ^a  

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

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EID: 54849410319     PISSN: 00419907     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (122)

1. Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C).
2. See, e.g., Symposium, Fairness to Whom? Perspectives on the Class Action Fairness Act of 2005, 156 U. PA. L. REV. 1439 (2008);
3. Symposium, Emerging Issues in Class Action Law, 53 UCLA L. REV. 1303 (2006).
4. 28 U.S.C. § 1715 (Supp. V 2005).
5. Id.
6. Id. § 1715(a)(1)(A).
7. Id. § 1715(a)(2). Only if there is no primary regulator of the activity does the state AG qualify: Thus, for example, in a case against an insurance company involving insurance practices, such as how premiums are calculated, notice would be required to the state insurance commissioner in each state where the company is licensed and where class members reside. If some class members reside in states where the company does not do business and therefore is not subject to regulation, then notice would be given to those states' attorneys general. Similarly, if the company at issue were a toy manufacturer, which is not licensed by a particular regulatory body, then notice would have to be given to the state attorney general of each state where plaintiffs reside. S. REP. NO. 109-14, at 34 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 33. However, as Robert Klonoff and Mark Herrmann have noted, § 1715(e) binds class members to the settlement only when the required notice under § 1715(b) is directed either to the state AG or to the person that has primary regulatory authority. See Robert H. Klonoff & Mark Herrmann, The Class Action Fairness Act: An Ill-Conceived Approach to Class Settlements, 80 TUL. L. REV. 1695, 1709 (2006). It remains unclear whether a defendant must serve both the primary regulator and the AG, or whether one of the two suffices. See id. at 1708 ("Given the severity of the punishment, defendants should err on the side of over-notifying state officials.").
8. 28 U.S.C. § 1715(b).
9. Id.
10. Id.
11. Id. § 1715(d). The ninety-day period was chosen as "consistent with the period normally needed to provide notice to class members and allow parties to opt-out, intervene, or otherwise respond." John Beisner & Jessica Davidson Miller, Litigating in the New Class Action World: A Guide to CAFA's Legislative History, 6 CLASS ACTION LITIG. REP. 403, 414 (2005).
12. 28 U.S.C. § 1715(e)(1). Given the draconian penalty, mere "technical" violations may be forgiven: The Committee wishes to make clear that [§ 1715(e)(1)] is intended to address situations in which defendants have simply defaulted on their notification obligations under this provision; it is not intended to allow settlement class members to walk away from an approved setdement based on a technical noncompliance (e.g., notification of the wrong person, failure of the official to receive notice that was sent), particularly where good faith efforts to comply occurred. S. REP. NO. 109-14, at 35, reprinted in 2005 U.S.C.C.A.N. at 34.
13. S. 254, 105th Cong. sec. 2, § 1711(g)(1) (1997).
14. S. REP. NO. 109-14, at 32, reprinted in 2005 U.S.C.C.A.N. at 32.
15. Id. at 5, 2005 U.S.C.C.A.N. at 6.
16. The legislative history does not disclose which parties or interest groups favored such a provision. On one view, it was urged by the defense bar as a shield against further challenges to proposed setdements. Telephone Interview with Representative from State A's AG's office (Feb. 8, 2008). The provision, however, gives little to defendants as a legal matter, as it neither grants immunity nor alters rules of preclusion. Members of the defense bar, moreover, have complained about the potentially onerous burden it places on them, in addition to the drastic consequences it creates should they fail to provide the requisite notice. See Anthony Rollo & Gabriel A. Crowson, Mapping the New Class Action Frontier - A Primer on the Class Action Fairness Act and Amended Federal Rule 23, CONSUMER FIN. L. Q. REP., Spring-Summer 2005, at 11, 17 ("Perhaps the most far-reaching aspect of CAFA's 'Consumers' Class Action Bill of Rights' from the defense perspective is its new onerous notification duty in class action settlements."). On another view, the provision reflects Congress's view that having AG input on prospective class action settlements is valuable and in the public interest. Then again, the provision was resisted by nearly one-third of the state AGs. See infra notes 20-22 and accompanying text.
17. S. REP. NO. 109-14, at 35, reprinted in 2005 U.S.C.C.A.N. 3, 34; see also 151 CONG. REC. S450 (daily ed. Jan. 25, 2005) (statement of Sen. Kohl) ("The Attorney General review is an extra layer of security for the plaintiffs and is designed to ensure that abusive settlements are not approved without a critical review by one or more experts."); 147 CONG. REC. 22740 (2001) (statement of Sen. Grassley) ("To address the problem where class members get nothing and attorneys get millions, the Class Action Fairness Act of 2001 provides that notification of any proposed setdements must be given to the State attorneys general or the primary regulatory or licensing agency of any State whose citizens are involved."); 143 CONG. REC. 1292 (1997) (statement of Sen. Kohl) (exhorting officials to "intervene in cases where they think the settlements are unfair").
18. William B. Rubenstein, The Public Role in Private Governance: Some Reflections on CAFA's Early Experience 3-4 (Nov. 19, 2007) (unpublished manuscript, on file with author) ("CAFA's AG-notice provision may occasion the awakening of a sleep ing giant - state enforcement authorities - much as the Private Securities Litigation Reform Act of 1995 . . . spurred many large investors to engage in the governance of securities class actions in new and surprising ways."). This Article began as a critical response to Rubenstein's draft, which highlighted "the public role in private governance" as embodied in the CAFA settlement notice provision. As I will explore below, Rubenstein's public versus private dichotomy is a significant - albeit partial - lens through which to evaluate CAFA as regulatory policy.
19. Compare Klonoff & Herrmann, supra note 6, at 1707 ("As a regulatory mechanism . . . the notice provisions are unlikely to yield much benefit."), with Laurens Walker, The Consumer Class Action Bill of Rights: A Policy and Political Mistake, 58 HASTINGS L.J. 849, 854 (2007) ("[A]ctive participation by State Attorneys General in response to Bill of Rights notices is likely.").
20. See 151 CONG. REC. S451 (daily ed. Jan. 25, 2005) (statement of Sen. Kohl) ("We do not require that State attorneys general do anything with the notice they receive.").
21. Letter from Eliot Spitzer, N.Y. Attorney Gen., et al., to Senators Bill Frist & Harry Reid (Feb. 7, 2005), reprinted in 151 CONG. REC. H644-45 (daily ed. Feb. 16, 2005).
22. Id.
23. Id.
24. See Samuel Issacharoff & Catherine M. Sharkey, Backdoor Federalization, 53 UCLA L. REV. 1353, 1415-20 (2006).
25. See id. at 1359; infra Table 1.
26. CAFA expands the scope of federal diversity jurisdiction over class actions bearing on national market conduct. See CAFA § 2(b)(2), (a)(4), 28 U.S.C. § 1711 note (Supp. V 2005) (stating that in enacting CAFA, Congress sought to "restore the intent of the framers of the United States Constitution by providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction" and to stem "[a]buses" that were "keeping cases of national importance out of Federal court"). Some have argued, however, that the overinclusiveness of the bill's jurisdictional provisions allows cases where one state's interests dominate to be situated in federal court nonetheless. See, e.g., Stephen B. Burbank, The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View, 156 U. PA. L. REV. 1439, 1542 (2008) ("CAFA's exceptions should be amended now to restore the balance of power between plaintiffs and defendants in class actions where a state's interest in regulation through litigation is intense and where the argument for federal jurisdiction relies on the fictions of corporate citizenship and the gathering powers of federal courts.").
27. Issacharoff & Sharkey, supra note 23, at 1418.
28. See Catherine M. Sharkey, Products Liability Preemption: An Institutional Approach, 76 GEO. WASH. L. REV. 449, 480 (2008); infra Table 2.
29. Other representative examples include the Texas Department of Licensing and Regulation, which oversees more than twenty types of businesses and agencies, including electricians and talent agencies, see http://www.license. state.tx.us/ (last visited Apr. 15, 2008);
30. the Oklahoma Corporation Commission, which regulates public utilities, oil and gas, and transportation, see http://www.occ.state.ok.us/ (last visited Apr. 15, 2008);
31. and the Hawaii Office of Consumer Protection, which undertakes various consumer protection functions, see http://hawaii.gov/dcca/quicklinks/ consumer_resource_center (last visited Apr. 15, 2008).
32. See, e.g., Arizona Department of Insurance, http://www.id.state. az.us/ (last visited Apr. 15, 2008);
33. Florida Office of Insurance Regulation, http://www.floir.com/(last visited Apr. 15, 2008);
34. see also Jonathan R. Macey & Geoffrey P. Miller, The McCarran-Ferguson Act of 1945: Reconceiving the Federal Role of Insurance Regulation, 68 N.Y.U. L. REV. 13, 14 (1993) ("Among major financial institutions in the United States, only insurance firms are subject to plenary state regulation.").
35. See, e.g., California Gambling Control Commission, http://www.cgcc.ca.gov/(last visited Apr. 15, 2008);
36. Pennsylvania Gaming Control Board, http://www.pgcb.state.pa.us/ (last visited Apr. 15, 2008).
37. Howard Erichson deserves credit for helping me sharpen the focus of Table 3.
38. It bears emphasizing that, while private litigation occupies the sphere of ex post regulation, it nonetheless imposes ex ante incentives on actors in the system. See infra notes 102, 107, and accompanying text.
39. Attorneys general are charged with investigating claims and bringing actions in the public interest. Such cases typically are brought pursuant to the AGs' parens patriae authority under consumer protection or antitrust statutes. See, e.g., Richard P. Ieyoub & Theodore Eisenberg, State Attorney General Actions, the Tobacco Litigation, and the Doctrine of Parens Patriae, 74 TUL. L. REV. 1859, 1860-61 (2000) (suggesting that states' parens patriae actions against tobacco companies aided plaintiffs in private cases). Parens patriae suits were the subject of much congressional debate over CAFA. CAFA permits defendants to remove "mass actions" (or class-action-like lawsuits) from state to federal court, but it contains an exception for parens patriae actions. 28 U.S.C. § 1332(d)(11)(B)(ii)(III) (Supp. V 2005); 151 CONG. REC. S1164 (daily ed. Feb. 9, 2005) (statement of Sen. Hatch) ("Th[e] statutory definition makes it perfectly clear that the bill applies only to class actions, and not parens patriae actions."). But the absence of a parallel exception for traditional class actions brought by AGs irked several congressmen opposing the bill; it also spurred the National Association of Attorneys General (NAAG) to write a worried letter to Congress. See Letter from NAAG to Senators Bill Frist and Harry Reid (Feb. 7, 2005), reprinted in 151 CONG. REC. H740 (daily ed. Feb. 17, 2005); see also 151 CONG. REC. S1158, 1159 (daily ed. Feb. 9, 2005) (statement of Sen. Pryor) ("It is my concern, as well as those of 46 attorneys general, that certain provisions in S. 5 might be interpreted to hamper their ability to bring such actions, thereby impeding one means of protecting their citizens from unlawful activity and resulting harm.").
40. See, e.g., Martha Graham Sch. & Dance Found, v. Martha Graham Ctr. of Contemporary Dance, Inc., 380 F.3d 624, 631 (2d Cir. 2004) (noting intervention by the New York AG's office in support of the defendant's claim that the dances, songs, and costumes in dispute belonged to the defendant and not the plaintiff estate); Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 162 (5th Cir. 2004) (noting intervention by the Louisiana AG as plaintiff in a class action brought by consumers against wireless service providers, alleging deceptive trade practices and breach of contract); Balbuena v. IDR Realty LLC, 845 N.E.2d 1246, 1251 (N.Y. 2006) (explaining the intervention of New York's AG on behalf of an undocumented alien plaintiff seeking to recover lost earnings under the state's labor law). See generally Arthur F. Greenbaum, Government Participation in Private Litigation, 21 ARIZ. ST. L.J. 853 (1989) (discussing myriad ways in which government can participate in private litigation, including Rule 19 compulsory joinder, intervention via Rule 24 or specific statutes, consolidation of a government action with a private action, and participation as an amicus curiae). Of particular relevance to this Article, Greenbaum tentatively recommended a precursor to CAFA's notice provision, namely a statute that required notifying the federal government of a private lawsuit "whenever a case raises issues of general importance involving federal interests or has the potential to impair or impede the Government's interests as a practical matter." Id. at 872.
41. It is beyond peradventure that "[t]he powers and duties of the state attorney general have 'dramatically expanded' over time." Trevor W. Morrison, The State Attorney General and Preemption, in PREEMPTION CHOICE: THE THEORY, LAW, AND REALITY OF FEDERALISM'S CORE QUESTION (William Buzbee ed.) (forthcoming 2008) (manuscript at 4), available at http://ssrn.com/abstract=1088136.
42. See Rubenstein, supra note 17 (manuscript at 31-32) (discussing the "four sets of ways in which public enforcement may intertwine with private class action lawsuits"); see also Jody Freeman, The Private Role in Public Governance, 75 N.Y.U. L. REV. 543, 672 (2000) ("We cannot think creatively about the role of the state without first breaking free of the hierarchical image of government power to which most of administrative law theory now adheres."). As illustrated in Table 3, the role of private actors in government proceedings (as grievant, witness, intervenor, or counsel) offers a counter-point to the sort of government involvement in private litigation envisioned by the CAFA settlement notice provision.
43. In this respect, a comparison might be drawn to another public-private action: qui tam actions, such as those pursued under the False Claims Act, 31 U.S.C. §§ 3729-3733 (2000), and analogous state statutes. Qui tam relators can sue on behalf of the government only after providing notice to the government. The relator's suit is also subject to being taken over by the government and then to being settled or even dismissed over the relator's objection. The qui tam regulatory scheme - comprising front-end governmental notice regime, accompanied by formal governmental takeover power - can be distinguished from the CAFA settlement notice regime, which calls for notice at the back end of the process and does not formally grant state AGs any takeover power.
44. For a review of pre-CAFA state-AG involvement in the class action settlement process, see Frank A. Hirsch, Jr., Pre-CAFA AG Interventions Provide Guidance on the Impact of the Act's Regulatory Notification Requirement (Jan. 17, 2007), http://www.nelsonmullins.com/news/nelson-mullins-articles-speeches- detail.cfm?id=98, describing Milkman v. American Travelers Life Insurance Co., No. 3775 (Pa. Ct. Com. Pl.); Cummins v. H&R Block, Inc., No. 03-134 (W. Va. Cir. Ct.); and Roller-Edelstein v. Wyndham International, Inc., No. 02-04946 (Tex. Dist. Ct.), cases also discussed below. I am grateful to Frank Hirsch and Joseph Dowdy, attorneys at Nelson Mullins Riley & Scarborough, LLP, for providing me with primary materials for the latter two cases. Nor have state AGs been passive on the more general battleground of private litigation. See, e.g., Howard M. Erichson, Coattail Class Actions: Reflecting on Microsoft, Tobacco, and the Mixing of Public and Private Lawyering in Mass Litigation, 34 U.C. DAVIS L. REV. 1, 34 (2000) ("The fundamental danger in allowing government lawyers to use private claims as a bargaining chip is that negotiating parties will often prefer to resolve their dispute by shifting costs to absent third parties if possible.");
45. Jason Lynch, Note, Federalism, Separation of Powers, and the Role of State Attorneys General in Multistate Litigation, 101 COLUM. L. REV. 1998, 2003-07 (2001) (describing reasons underlying the rise in coordinated litigation by state AGs that began in the early 1980s).
46. It bears mention that these roughly hewn categories bleed into one another and are by no means mutually exclusive. See infra text accompanying note 89.
47. See Glass v. UBS Fin. Servs., Inc., No. 06-4068, 2007 WL 221862, at *1-2 (N.D. Cal. Jan. 26, 2007) (noting the appearance of the New York AG as amicus curiae).
48. See Proposed Amicus Curiae Memorandum of Law of New York Attorney General at 1-2, Glass, No. 06-1068 (N.D. Cal. Nov. 28, 2006), 2006 WL 3851912.
49. See Glass, 2007 WL 221862, at *17.
50. See In re Rio Hair Naturalizer Prods. Liab. Litig., MDL No. 1055, 1996 WL 780512, at *15 (E.D. Mich. Dec. 20, 1996) ("Overlooked by the Attorney General is the obvious fact that a full trial, with the attendant costs of pre-trial discovery, would further deplete the assets available for settlement and could just as likely result in a finding of no coverage whatsoever leaving absolutely nothing for the injured claimants."); id. at *2 n.3 ("The Court has been advised that as of the date of this Order, 52,436 claims have been submitted.").
51. See In re Managed Care Litig., No. 00-1334, 2003 WL 22850070, at *3 (S.D. Fla. Oct. 24, 2003). Despite the AG's objections, the court approved the settlement. Id. at *7.
52. No. 00-7233, 2001 WL 1622015 (S.D. Fla. Oct. 31, 2001).
53. See Complaint at 2-7, Access Now, No. 00-7233 (S.D. Fla. Aug. 5, 2000), 2000 WL 34461959.
54. See Objections of Attorney General Amicus Curiae of the State of Florida to Proposed Class Action Settlement Agreement at 2, Access Now, No. 00-7233 (S.D. Fla. Oct. 11, 2001), 2001 WL 34700858.
55. See Access Now, 2001 WL 1622015, at *1.
56. Milkman v. Am. Travellers Life Ins. Co. (Milkman I), No. 3775, 2001 WI, 1807376, at *4 (Pa. Ct. Com. Pl. Nov. 26, 2001).
57. Amicus Curiae Brief of the Attorney General at 3-7, Milkman I, No. 3775 (Pa. Ct. Com. Pl. Sept. 5, 2001), 2001 WL 34136843.
58. Id. at 2.
59. See Milkman v. Am. Travellers Life Ins. Co. (Milkman II), No. 3775, 2002 WL 778272, at *1 n.2 (Pa. Ct. Com. Pl. Apr. 1, 2002).
60. Milkman I, 2001 WL 1807376, at *10 (refusing to impose an "opt-in" requirement on Texas plaintiffs because "[t]here is no evidence that [special] circumstances exist here").
61. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1018, 1028 & n.3 (9th Cir. 1998). Incidentally, this class action lawsuit followed closely on the heels of a NHTSA investigation, providing support for the "piggyback" theory, where private litigation follows in the wake of regulatory action. See infra notes 109-111 and accompanying text.
62. Hanlon, 150 F.3d at 1028.
63. Id. For yet another example of a futile coordinated AG effort, see In re Real Estate Title & Settlement Servs. Antitrust Litig., MDL No. 633, 1986 WL 6531 (E.D. Pa. June 10, 1986). There, the AGs from Montana, New Jersey, Ohio, Pennsylvania, and Wisconsin filed a joint memorandum opposing the settlement of an antitrust class action alleging that the defendant fixed the price of tide search, title examination, and settlement services. Id. at *6. Notwithstanding the states' objections, the court approved the settlement, noting the "almost insurmountable difficulties that the plaintiffs would have faced in obtaining any relief had they continued with this litigation." Id. at *22.
64. 148 F.3d 283 (3d Cir. 1998).
65. Id. at 298. Judge Scirica also drew support for the settlement from the participation of the thirty states that comprised the "Multi-State Task Force": [W]e are cognizant that the original framework of this settlement resulted from the efforts of the Multi-State Task Force. The involvement of the various state insurance regulators, with their vast experience and expertise, provides great support in favor of the fairness of the settlement. In addition, we are impressed by the seal of approval this settlement has received from the insurance regulators of each of the 50 states and the District of Columbia. Id. at 329.
66. Objecting before final approval of a settlement seems well advised. Alternatively, an AG also could institute a parens patriae action collaterally challenging a settlement approved in another forum, though any challenge would be subject to applicable preclusion principles. See Samuel Issacharoff & Richard A. Nagareda, Class Settlements Under Attack, 156 U. PA. L. REV. 1649, 1719 (2008) (contending that, post-CAFA, collateral challenges to the terms of a federal-court-approved settlement should only succeed if plaintiffs did not have "[a] full and fair opportunity to raise performance defects" in the rendering forum).
67. See, e.g., Press Release, Connecticut Attorney General's Office, Court Urged to Reject Publishers Clearing House's Proposed Settlement (Nov. 15, 1999) (quoting Attorney General Richard Blumenthal's assertion that "[t]his settlement proposal is artfully crafted to discourage thousands of consumers victimized by PCH from pursuing the refunds they deserve . . . ."), available at http://www.ct.gov/ag/cwp/view.asp?A=1774&Q=282822; Telephone Interview with Representative from State B's AG's office (Feb. 15, 2008) ("The settlement attempted to bar our claims as law enforcement, so we went into East St. Louis and registered our objection. . . . Ultimately, the court dismissed our objections . . . , and we proceeded in our litigation with Publishers Clearing House, and I don't believe the release language barred any of our claims."). In this instance, the AGs were attuned to the private settlement because "each of the 50 states had investigations, and a majority of states had filed lawsuits against Publishers Clearing House." Id.
68. See Sweepstakes Firm Faces Lawsuit from 16 States, Asociated Press, ST. LOUIS POST-DISPATCH, Jan. 25, 2000, at All ("[Sixteen] states filed the suits because the attorneys general feared an imminent settlement of a private class-action suit might preclude other suits. A hearing on that settlement will be held today in U.S. District Court in East St. Louis, Ill.").
69. Settlement Approved in Sweepstakes Suit, Asociated Press, SAN DIEGO UNION-TRIB., Feb. 21, 2000, at A10.
70. See LI's 100, NEWSDAY (New York), Sept. 17, 2001, at C16.
71. See Motion by State of Florida, Office of the Attorney General, Department of Legal Affairs' to Continue Hearing on Preliminary Approval of Settlement at 3-4, Roller-Edelstein v. Wyndham Int'l, Inc., No. 02-04946 (Tex. Dist. Ct. Dec. 29, 2004) ("The Attorney General is currently in litigation with Wyndham International, Inc. and has been since June, 2002 . . . . The lawsuit . . . is based upon facts substantially the same as those alleged in the instant proceeding, i.e., Wyndham's charging undisclosed resort fees and other add-on fees, and the deceptive representation of some of these fees . . . .").
72. See Application for Preliminary Approval of Proposed Settlement Class and Settlement, Roller-Edelstein, No. 02-04946 (Tex. Dist. Ct. Oct. 15, 2004).
73. See Emergency Motion by State of Florida, Office of the Attorney General, Department of Legal Affairs' to Continue Hearing on Preliminary Approval of Settlement, Roller-Edelstein, No. 02-04946 (Tex. Dist. Ct. Dec. 17, 2004). The Emergency Motion warned: "This Court's acceptance of a settlement may impact or even preclude the Attorney General from obtaining damages for consumers in the Florida suit." Id. at 2.
74. See Amended Memorandum of Law of State of Florida, Office of the Attorney General, Department of Legal Affairs' in Opposition to Preliminary Approval of Settlement at 6-11, Roller-Edelstein, No. 02-04946 (Tex. Dist. Ct. Jan. 19, 2005).
75. See Plaintiffs' Notice of Nonsuit, Roller-Edelstein, No. 02-04946 (Tex. Dist. Ct. May 10, 2005).
76. See Settlement Agreement, State v. Wyndham Int'l, Inc., No. 02-1296 (Fla. Cir. Ct. July 28, 2006), available at http:// myfloridalegal.com/webfiles.nsf/WF/KGRG-6S8QXF/$file/Wyndham_Settlement. pdf;
77. see also Peter Geier, State AGs Eschew Class Action Fairness Act Review, NAT'L L.J., Oct. 18, 2006, at 5 ("The settlement provided cash restitution for consumers and required the hotels change their business practice.").
78. See Frank Norton, States Criticize H&R Block, NEWS & OBSERVER (Raleigh, N.C.), Aug. 16, 2006, at ID. According to the article, H&R Block reported revenue of $182 million on refund loans in 2005, about 4 percent of total sales. It paid more than $100 million to settle related lawsuits. The company faces suits this year filed by California . . . and New York . . . . The California suit was filed on behalf of 1.5 million residents who took out refund loans. Id.
79. See Cummins v. H&R Block, Inc., No. 03-134 (W. Va. Cir. Ct. Dec. 23, 2005) (order preliminarily approving class action settlement); see also Press Release, H&R Block, H&R Block and Attorneys Propose Refund Loan Settlement to Court (Dec. 21, 2005), available at http://hrbmortgage.net/press/Article.jsp?articleid=1238 ("The proposed settlement was filed today in Cummins v. H&R Block, an action that has been pending in the Circuit Court of Kanawha County, West Virginia since 2003. It would also settle [the Ohio, Alabama, and Maryland] cases. Overall, the proposed settlement class would include more than 8 million consumers."). H&R Block had made several previous unsuccessful attempts to forge a nationwide settlement. See Memorandum of the California Attorney General as Amicus Curiae at 4, Cummins, No. 03-134 (W. Va. Cir. Ct. May 31, 2006) [hereinafter Memorandum of California AG] (noting such attempts by H&R Block in Reynolds v. Beneficial National Bank, 288 F.3d 277, 279 (7th Cir. 2002); Carnegie v. Household International., Inc., 371 F. Supp. 2d 954 (N.D. Ill. 2005); and Reynolds v. Beneficial National Bank, 260 F. Supp. 2d 680 (N.D. Ill. 2003)); id. at 12 ("H&R Block has now come to West Virginia, presumably seeking a friendlier reception for its proposed nationwide settlements than it has received in other jurisdictions."). Herschel Elkins kindly provided me with a copy of this memorandum.
80. Herschel Elkins confirmed that that the California AG's office was investigating H&R Block on these charges prior to the Cummins settlement. E-mail from Herschel Elkins, Special Asistant Att'y Gen. for Consumer Policy, Coordination, and Dev., Cal. Att'y Gen.'s Office, to author (Feb. 20, 2008) (on file with author).
81. See Memorandum of California AG, supra note 71, at 1-2 ("The Attorney General has currently pending in San Francisco Superior Court a civil law enforcement action . . . against H&R Block, Inc. and several related H&R Block entities, alleging among other things that Block violated California law in marketing its refund anticipation loans."); see also California Sues H&R Block, CONSUMERAFFAIRS.COM, Feb. 15, 2006, http://www.consumeraffairs.com/news04/2006/02/ca_hr_block.html ("California Attorney General Bill Lockyer today sued H&R Block alleging the tax preparation giant has violated 15 state and federal laws in marketing and providing high-cost refund anticipation loans (RALs), mainly to low-income families.").
82. Memorandum of California AG, supra note 71, at 16.
83. Id. at 14.
84. Cummins, No. 03-134 (order preliminarily approving class action settlement); H&R Block, Inc., 2007 Annual Report (Form 10K), at 25 (June 29, 2007) (describing the company's obligations resulting from settlement).
85. See David Twiddy, Taxing Times for H&R Block, HOUSTON CHRON., Mar. 27, 2006, at D6.
86. 517 F. Supp. 2d 1292 (S.D. Fla. 2007).
87. See Plaintiff's Class Action Complaint at 6-7, Sharper Image, 517 F. Supp. 2d 1292 (No. 05-21251), 2005 WL 1457853 (alleging claims for breach of contract).
88. See Renewed Joint Motion for Preliminary Approval of Settlement, Conditional Certification of the Settlement Class, Conditional Appointment of Settlement Class Counsel and Settlement Class Representatives, Providing for Notice, Enjoining the Prosecution of Released Claims, and Incorporated Memorandum of Law at 5-7, Sharper Image, 517F. Supp. 2d 1292 (No. 05-21251), 2007 WL 617117.
89. See Brief Amicus Curiae of the Attorneys General of Alaska et al. in Opposition to the Proposed Settlement Agreement, Sharper Image, 517 F. Supp. 2d 1292 (No. 05-21251).
90. Id. at 6-11. One state AG representative put it more forcefully: When we saw the CAFA notice, it was not ideal. It had the coupon aspects; the attorneys' fees were substantial. I don't know if the fees alone would have led us to object, but people would have paid hundreds of dollars for this unit and if [the complaint was accurate that] the units were worthless, if not outright harmful, you would receive less than a twenty-dollar coupon to go back to Sharper Image. Those are the kinds of cases that are going to get the attention of state AGs, especially when CAFA was supposed to, in some sense, restrict coupon settlements. Telephone Interview with Representative from State C's AG's office (Feb. 22, 2008).
91. Brief Amicus Curiae of the Attorneys General of Alaska et al. in Opposition to the Proposed Settlement Agreement, supra note 81, at 19.
92. See Sharper Image, 517 F. Supp. 2d at 1308.
93. Id. at 1328 ("What distinguishes this case . . . is the singular appearance of the Attorneys General of thirty-five states and the District of Columbia . . . ."). Of course, it is possible that the court would have reached the same conclusion absent the AGs' intervention.
94. E-mail from Herschel Elkins, Special Asistant Att'y Gen. for Consumer Policy, Coordination, and Dev., Cal. Att'y Gen.'s Office, to author (Nov. 27, 2007) (on file with author). It is worth noting that the quantity of informal intervention by the California AG's office could be atypical in comparison with other states. This type of active involvement, however, was echoed by another state AG representative: Another part of CAFA [apart from formal objections] is that we get notices and are able to get involved and improve the settlements without having to file an objection. . . . The fact that state attorneys general are noticed and have an opportunity to come into court and challenge provisions of a class action settlement they don't like can sort of give you additional leverage. Telephone Interview with Representative from State C's AG's office, supra note 82.
95. E-mail from Herschel Elkins to author, supra note 86. Recall that this is the concern raised by a group of AGs at the outset in response to the proposed settlement notification provision. See supra note 20 and accompanying text.
96. As one state AG representative explained, "If we can suggest certain improvements and the parties adopt them, I think that's ideal. . . . We try to get involved early on and steer things in [a positive] direction." Telephone Interview with Representative from State C's AG's office, supra note 82. This form of public participation in private litigation is reminiscent of state intervention in punitive damages cases, where part of the punitive damages recovery redounds to the state coffers. See Catherine M. Sharkey, Punitive Damages as Societal Damages, 113 YALE L.J. 347, 435 & n.343 (2003) (noting that staff in the Iowa Attorney General's office files appearances to protect the state's interest in punitive damages cases and also advises litigants in posttrial negotiations).
97. Herschel Elkins confirmed that one of the ways in which the California AG's office learned of proposed settlements in the pre-CAFA period was by "being informed by one of the parties when we had a pending investigation or case." E-mail from Herschel Elkins to author, supra note 72. Other means mentioned by Elkins included "happening to see public notices" and "being informed by media inquiry." Id. In a telephone interview, a representative from State C's AG's office explained: A lot of times there's a class action, we may already have our own investigation going. Our goals in terms of how we want our investigation to finish - we have to take a look at the class action proceedings to make sure our options aren't limited by an inappropriate resolution of the class action. . . . A lot of times, if it's a big enough case that there's a CAFA class action case pending, there's probably an investigation by one state or several states. . . . Part of it [is] trying to make sure that interests of the attorneys general are recognized and that people don't think you can settle a class action and you're somehow done, especially if the class action is inappropriate. Telephone Interview with Representative from State C's AG's office, supra note 82.
98. A representative in one state AG's office confirmed that reviewing the materials submitted to comply with the CAFA settlement notice provision has "tipped us off" to bad business practices, which were then investigated by the AG's office. Telephone Interview with Representative from State A's AG's office, supra note 15. A representative from State C's office expressed similar thoughts: [Pre-CAFA] sometimes the defense counsel would slip up and talk about the class action. Certainly pre-CAFA we've gone into court and opposed class action settlements and had them stopped. But it was more a matter of chance and trying to pick up on clues and whether it was a parallel class action. Telephone Interview with Representative from State C's AG's office, supra note 82. It is worth remembering, however, that CAFA settlement notices are by no means the only - let alone the most significant - conduit of information to the AGs. As James Tierney reminds us. The truth is that AGs have always monitored class actions because disgruntled litigants are regularly appearing at an AG's doorstep! . . . All lawyers - including plaintiff lawyers - are in touch with their AGs these days and disgruntled litigants can easily attract the attention of an AG. Interest groups also weigh in pretty regularly. E-mail from James Tierney, Director of the State Att'y Gen. Program at Columbia Law-School and former Att'y Gen. of Me., to author (Feb. 19, 2008) (on file with author).
99. Recall that some AGs were not in favor of their enhanced regulatory role. See supra notes 20-22 and accompanying text (describing some AGs' opposition to the proposed settlement notice provision). One state AG representative echoed this view on the basis of his post-CAFA experience: I've sat here and collected that stuff; it is not useful to get this. I still object that we have to get this information. I think Congress was envisioning that the AGs would be so outraged that we would go into action on these things. Who are we to say that this is a grossly bad settlement? Telephone Interview with Representative from State B's AG's office, supra note 60.
100. With movement of more actions from state to federal court, CAFA itself already tips in this direction. For instance, whereas settlements in state court rarely see the light of day, information regarding federal class action settlements is available online via the Public Access to Court Electronic Records (PACER) system. It remains to be seen to what extent plaintiffs and public interest groups, in addition to state AGs, will take advantage of this new database.
101. NICHOLAS M. PACE ET AL., RAND INST. FOR CIVIL JUSTICE, INSURANCE CLASS ACTIONS IN THE UNITED STATES 99 (2007). RAND collected data from a survey of insurance companies in the United States that provided detailed information regarding their experiences with class actions over a ten-year period. Id. at iii.
102. See id. at 99-101 ("With no centralized clearinghouse for recording the fact that such cases have begun or for tracking their progress, regulatory administrators must rely on other, mostly indirect avenues to bring class actions to their attention.").
103. As one state AG representative complained: "Under CAFA, you only hear about the case once there's a preliminary settlement. It can be sort of late in the process as well. The case can be pretty far along." Telephone Interview with Representative from State C's AG's office, supra note 82. Precertification notification, however, would provide little solace to those who worry about so-called "collusive" lawsuits that are filed solely for settlement in order to preclude other suits. Cf. Tobias Barrington Wolff, Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action, 156 U. PA. L. REV. 2035. 2073 (2008). Moreover, to the extent that AGs met the existing notification requirement with dismay, see supra notes 20-22 and accompanying text, such an expansion to include notice of any filed case would likely meet even greater resistance.
104. Here, too, it is important to keep in mind that myriad other forces are simultaneously at work and may be contributing substantially to increased coordination among the AGs. See E-mail from James Tierney to author, supra note 90 ("Technology and personal relations - not to mention our work here at our [State Attorney General Program at Columbia Law School] - have made it much easier for AGs to coordinate on even thing - letters to Congress, public policy initiatives, litigation, etc.").
105. Two state AG representatives confirmed that their respective offices relied upon those summaries to keep track of the voluminous individual filings. Telephone Interview with Representative from State B's AG's office, supra note 60; Telephone Interview with Representative from State C's AG's office, supra note 82. In this latter interview, the representative explained: [E]very CAFA notice that we get comes to me. I take a look at it with an attorney, and we distribute it to the different parts of the office based on subject matter. If it's a consumer protection case, we send it to our economic crimes division. If it was an overtime case, we might send it to our employment division. We have a form where people have to say whether this is a case where it makes sense for the attorney general to become involved in and to actively try to improve the settlement. Id. The representative also stated, "I think it does help in a sense that all fifty states see the same notice." Id. Moreover, in at least a few instances, another state AG's office had flagged a particular settlement as inadequate and suggested that other state AG's offices review it. Telephone Interview with Representative from State B's AG's office, supra note 60. Herschel Elkins is more equivocal on this point: "Since the states have begun to share analyses, there could be greater activity by the states, but that is far from certain." E-mail from Herschel Elkins to author, supra note 86.
106. See supra note 85 and accompanying text; see also Telephone Interview with Representative from State C's AG's office, supra note 82 ("Obviously, when you can get together a substantial number of state AGs, you have a weight that can be very persuasive to a court.").
107. 28 U.S.C. § 1715(a)(2) (Supp. V 2005).
108. Cf. Christopher R. Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements, 59 FLA. L. REV. 71, 90-96 (2007) (rejecting the view that silence of absent class members should weigh in favor of approving settlement).
109. See Browning v. Yahoo! Inc., No. 04-01463, 2007 WL 4105971, at *12 (N.D. Cal. Nov. 16, 2007) ("Because numerous governmental agencies (including the FTC) were given notice of the settlement and have not objected, this factor weighs in favor of the settlement."). The irony here is that widespread adoption of this rationale could lead to lesser scrutiny by courts of class action settlements, at least in the absence of an objection by a state or federal AG. Moreover, given limitations on state AG budgets and resources, it is misguided to assume that the AGs' silence equals assent. As one representative in a state AG's office bluntly put it: "Every minute I spend reading these notices is taking away from busting on some scam artist making his way through the state." Telephone Interview with Representative from State B's AG's office, supra note 60; accord Telephone Interview with Representative from State C's AG's office, supra note 82 ("It's a tremendous amount of work. Just generally we probably see one hundred or so CAFA notices a year.").
110. Private enforcement of legal standards includes compensation of injured victims via private tort suits. It is worth reiterating here that tort law wears (at least) two hats: that of compensation and that of regulation (primarily deterrence). See Sharkey, supra note 27, at 459-71 (describing the "two faces of tort law" in the Supreme Court's products liability jurisprudence). Here, I acknowledge that I am privileging the regulatory role of torts; defense of this predilection goes beyond the scope of this Article.
111. Thomas W. Merrill, Preemption in Environmental Law: Formalism, Federalism Theory, and Default Rules, in FEDERAL PREEMPTION: STATES' POWERS, NATIONAL INTERESTS 166, 168 (Richard A. Epstein & Michael S. Greve eds., 2007).
112. See Sharkey, supra note 27, at 502-20 (assessing the comparative institutional advantage of agencies vis a vis courts in deciding whether to preempt state tort law).
113. Id. at 479.
114. Given the AGs' track record before the federal district courts (at least in the small sample surveyed in this Article), it is worth asking whether AG participation and input might be more effective before the relevant state or federal agency.
115. Here, again, I privilege the deterrence goal of regulation. See supra note 102. It may well be that an AG would be motivated to intervene on alternative grounds - for example, where the AG has no objection to the total amount the defendant is required to pay, but nonetheless objects to the design or distribution of remedies. A common objection heard by AGs (not to mention a driving force behind CAFA's scrutiny of coupon settlements) is that lawyers' fees are too high relative to the benefit to class members. Telephone Interview with Representative from State C's AG's office, supra note 82.
116. See, e.g., Steven Shavell, Liability for Harm Versus Regulation of Safety, 13 J. LEGAL STUD. 357, 365-66 (1984);
117. Steven Shavell, A Model of the Optimal Use of Liability and Safety Regulation, 15 RAND J. ECON. 271, 275-78 (1984);
118. see also Samuel Issacharoff, Regulating After the Fact, 56 DEPAUL L. REV. 375, 387 (2007) ("The question is not whether we abandon our ex post legal system, but whether we would tolerate the push for ex ante regulation that would likely be its substitute.").
119. Eric Heiland & Jonathan Klick, The Tradeoffs Between Regulation and Litigation: Evidence from Insurance Class Actions, 1 J. TORT L., Oct. 2007, at 5, http:// www.bepress.com/jtl/voll/iss3/art2.
120. Id. at 9.
121. Id. Helland and Klick were unable to determine whether private litigation follows public or vice versa. At least one AG representative, however, posits that the piggybacking is unidirectional, with private litigation feeding off of public investigation and prosecution. E-mail from Hershel Elkins to author, supra note 72 ("I know of no investigations post-CAFA which have thus far resulted from private class action settlements and I doubt there will be many, if any, in the future. However, there have been some private actions which have followed our actions.").
122. Moreover, as Howard Erichson has argued, given the symbiotic relationship between government and private proceedings, we should in fact expect a positive correlation between the two. See Erichson, supra note 38, at 5-16. According to Erichson, although we might expect an inverse relationship at the macro-level - for example, a country such as the United States combines scant ex ante regulation with a strong ex post litigation infrastructure - at the micro-level of specific instances of harmful conduct, we should instead expect to see mutually reinforcing ex ante and ex post actions. Id.