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On The Case

Five big business litigation questions for 2021

(Reuters) - Yes, 2020 was a terrible year. And even after vaccinations quell the coronavirus and state and federal courts resume normal operations, it’s going to be a long time until the court system resolves all of the repercussions of the pandemic, from looming evictions to huge backlogs of criminal cases.

In the broader context of this unluckiest of years, business litigators have been relatively unscathed. No doubt discovery has been more challenging than usual and arguing by Zoom or on the phone took some getting used to. But judges have generally managed to keep civil dockets moving. When the country locked down in March, I began writing a series of columns on how the pandemic had wreaked abrupt change on lawyers’ practices and work lives. By late April, those changes felt like old news. I resumed covering business litigation as I have for years because business litigation itself returned to an approximation of normalcy.

Even in November and December, as President Donald Trump and his allies tested the resolve of state and federal judges in Trump’s unprecedented fight to overturn his defeat in the election, courts and litigators plowed on with their usual work. Business litigation may not have been on the front page, but there was been no shortage of news on my regular beat.

So, with the end of the pandemic and the Trump presidency in sight, I reflected on some of the big questions I’ll have in mind at the beginning of 2021.

Will judges continue to allow court proceedings to be publicly accessible via live video or audio streams?

COVID-19 forced courts to adopt procedures that have opened their proceedings to member of the public who would otherwise not have been able to see or hear them. Before COVID, if you wanted to cover a live oral argument at the U.S. Supreme Court, for instance, you had to be at the court. Since COVID, I’ve listened live to a half-dozen Supreme Court arguments at the C-SPAN website. I’ve dialed in to Delaware Chancery Court. I’ve watched a hearing in San Francisco. I have a Reuters colleague who routinely observes three or four bankruptcy court hearings a day.

And it’s not just reporters who have taken advantage of court livestreams. Law360 reported in late December that class members have been turning out in record numbers for settlement hearings on Zoom to tell judges what they think of cases that, after all, affect their rights. Tens of thousands of people listened to audio streams of election cases in federal court in Pennsylvania and Georgia, giving listeners a chance to make up their own minds about the evidence and legal arguments presented by the president and his allies.

I don’t think it’s an accident that U.S. Judicial Conference announced a two-year pilot program in December to offer live audio streams of proceedings from 13 federal district courts. Not every case will be live streamed – the pilot excludes jury trial and proceedings with witnesses, and parties have to consent to have their cases broadcast – but the program is a step in the right direction. I hope the Supreme Court similarly realizes that the value of live audio of oral arguments before the justices outweighs the cost.

Courts have generally managed in a time of unparalleled challenge to maintain the trust of the public. Open court proceedings are a great way to prove that faith is deserved.

Will the Justice Department and the Federal Trade Commission remain a major force in business litigation?

The Trump administration’s antitrust suits against Google and Facebook are two of the biggest cases in the U.S., seeking sweeping relief from gigantic, worldwide companies and spawning follow-on private litigation affecting hundreds of millions of consumers and smaller businesses.

The federal government is not alone, of course. Both Republican and Democratic state AGs are also pursuing the tech giants. And President-elect Biden’s transition team has given no indication that the Biden administration will pull back from suits launched by Trump lawyers. But it’s going to be interesting to see whether new government lawyers take over the suit and, if so, whether the cases stay on the same course.

The Justice Department has become more aggressive in the last four years about policing private class action settlements and pre-packaged bankruptcies that create trusts for asbestos claimants. DOJ also stepped up efforts to squelch what it considered unwarranted False Claims Act suits by whistleblowers acting on behalf of the government. The business lobby has welcomed DOJ’s actions, but I don’t know if the Biden administration will be similarly motivated to dedicate DOJ resources to, for instance, filing statements of interest in small class actions or opposing the appointment of particular lawyers to serve as representatives of future claimants in asbestos bankruptcies.

Will the threat of shareholder derivative suits affect corporate conduct?

In September, Google parent Alphabet and members of its board agreed to put up $310 million to settle a shareholder derivative suit claiming that the board allowed a corporate culture of sexual harassment and discrimination. Alphabet said the money would be used to support global initiatives to improve hiring and retention of “historically underrepresented talent” and to foster “a respectful, equitable, and inclusive workplace culture.”

The Google derivative litigation grew out of news reports about the company’s handling of specific instances of alleged sexual misconduct. But this year has brought a spate of derivative suits seeking similar acknowledgment of cultural shortcomings from a number of high-profile companies including Oracle, Facebook, Cisco, The Gap and Qualcomm. These suits typically accuse corporate boards of breaching their duties by failing to promote diversity even among their own ranks.

I don’t know if suits that lack the specifics of the Google allegations have much of a shot, but it’s fascinating to watch shareholders and their lawyers repurpose derivative litigation to demand corporate governance practices that usually get more lip service than action.

What will be the next innovations in mass tort litigation?

Two potentially seismic innovations in mass tort litigation died this year. In July, U.S. District Judge Vince Chhabria of San Francisco squelched a class action settlement that would have provided a mechanism to resolve all future claims that Bayer’s Roundup weed killer causes lymphoma. The proposed class action, designed by Bayer and plaintiffs lawyers, would have established a panel of scientific experts to issue a binding determination on threshold causation questions about the link between Roundup and cancer. As I wrote at the time, that novel idea could have changed the way corporations resolve liability for future mass tort claims. But Judge Chhabria – like some of the mass torts scholars I talked to about the proposal – was worried about the prospect of taking causation out the hands of jurors, especially when science is constantly evolving.

A couple of months later, in September, the 6th U.S. Circuit Court of Appeals overturned the certification of a so-called negotiating class in the vast multidistrict litigation over opioids. Plaintiffs lawyers representing city and local governments that have sued drug manufacturers and distributors over the cost of the opioids epidemic proposed the creation of a class of all of the local governments that might receive money in settlements with the opioids defendants. The mechanism would have given all of the class members a say in whether to accept the settlement and how the money would be allocated. (It also would have given defendants reassurance about how many local governments intended to opt out and pursue individual claims.) The 6th Circuit held that the Federal Rules of Civil Procedure make no mention of such a device, rejecting the proposition that litigators and trial courts can invent a mechanism that’s not explicitly endorsed by the federal rules.

The Judicial Panel on Multidistrict Litigation also shied away from the prospect of a sweeping resolution of huge litigation when it declined in October to create a single MDL to determine insurers’ liability for small businesses’ claims that they’re owed coverage for losses incurred during COVID-19 shutdowns. Thousands of suits have been filed by businesses denied coverage, and some of the plaintiffs lawyers who have brought cases argued that the fairest, quickest way to decide if insurers should pay out would be a single proceeding. The MDL panel, however, mostly agreed with insurers that there are too many differences in state insurance law and the individual policies written by scores of different companies to justify a single MDL. (The panel did consolidate some cases on an insurer-by-insurer basis.)

Judges are understandably leery of innovations that purport to address the rights of hundreds or thousands of plaintiffs. Novelty is not usually a selling point in litigation. But thoughtful lawyers backed this year’s rejected innovations, so I wouldn’t be surprised if some of the ideas pop up again. Even failed innovation is good for the process.

Will defendants retreat from unilateral arbitration provisions in the face of mass arbitration campaigns?

When the food delivery service DoorDash filed its disclosure statement with the U.S. Securities and Exchange Commission in advance of its IPO in November, the company said it had come to realize that arbitration can be “costly and burdensome.” DoorDash learned the hard way: Thousands of DoorDash delivery workers have filed demands for arbitration of their claims for unpaid wages, putting the company on the hook for tens of millions of dollars in fees to the American Arbitration Association. And when DoorDash tried to stay individual arbitration cases, U.S. District Judge William Alsup in San Francisco refused to allow it. “This hypocrisy will not be blessed,” he chided the company in February.

In its IPO filing, DoorDash said the mandatory arbitration provision and class action waiver that the company forced its workers to accept were under “increasing public scrutiny” and that, in order to “minimize these risks to our reputation and brand,” the company might not enforce the provisions.

DoorDash is hardly alone in regretting the consequences of its mandatory arbitration policies. Plaintiffs firms have learned to amass thousands of clients to file individual demands for arbitration. They’ve targeted gig-economy companies like Uber, Lyft and Postmates and consumer companies like Intuit, FanDuel and Chegg. And though defense lawyers have raised a stink about plaintiffs lawyers’ client-acquisition and screening practices, the federal judges who have overseen their attempts to shut down mass arbitration have, like Judge Alsup, mostly reminded the companies that they’re the one who forced workers and consumers into arbitration.

In mid-December, U.S. District Judge Charles Breyer of San Francisco denied approval of a class action settlement Intuit reached in the face of a mass arbitration campaign that has already generated more than $30 million in AAA fee demands. The judge reminded the company that it had imposed arbitration on its customers and had previously litigated to enforce its arbitration provision. That, he said, was its own petard. And now, Breyer told Intuit, it was being hoisted.

If the mass arbitration trend continues, and companies can’t find a way to shut down demands for individual arbitration by thousands of claimants, defendants are going to rethink their insistence on class action waivers. It’s one thing to ban workers and customers from bringing a class action if the alternative is that they won’t bring claims at all. But when employees and consumers file thousands of individual arbitration demands – exposing companies to tens of millions of dollars in fees – class actions start to look pretty good.

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