Class Actions and Mass Tort Litigation in a Global Context P rofessor Linda S. Mullenix

1. Class Actions and Mass Tort Litigation in a Global ContextProfessor Linda S. Mullenix Saipan Peonage Litigation

2. Saipan Peonage Litigation • Questions: • What was the Saipan peonage litigation? • Who were the plaintiffs? Defendants? • Where was this litigation brought? • What was the basis for the court’s jurisdiction? • What was the basis for the claims?

3. Saipan Peonage Litigation • Questions: • Is this litigation suitable for class action treatment? • Should the court certify a class action? • Pursuant to what class category? • What remedies are the class members seeking? • What problems was there with a proposed class? • What objections to class certification do the Defendants raise? Do those objections have merit? • Should the court approve a settlement class?

4. Saipan Peonage Litigation • Questions: • How does this proposed class litigation compare to: • American mass tort cases? • The Hilao-Philippine Marcos litigation? • The Karadzic litigation? • The Austrian fire litigation? • The worldwide tainted blood products litigation? • The Holocaust era litigation?

5. Saipan Peonage Litigation Does I v. The GAP, Inc., 2002 WL1000073 (D.N.Mariana Islands 2002)

6. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Factual background: • Plaintiffs: Saipan garment factor workers • Class on behalf of 30,000 workers • Workers are non-resident (many from multiple Asian countries) • Defendants: multiple contractor Ds; 19 settling Ds • Brylane, Cutter & Buck, Donna Karan, Gymboree, J. Crew, Jones Apparel, May Department Stores, Nordstrom, Oskosh, Phillips-Van Heusen, Polo Ralph Lauren, Sears Roebuck, Tommy Hilfinger, Warnaco, Calvin Klein, Brooks Brothers, Woolrich

7. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Factual background: • Legal Basis for litigation (statutes): • RICO (Racketeer Influenced and Corrupt Organizations Act) • Alien Torts Claim Act • Anti-Peonage Act

8. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Factual background: • Allegations: • Ds conspiracy to dominate foreign garment work force • Conspiracy to deprive garment workers of basic human rights and protections • Peonage and involuntary servitude • Exploitation of P class for Ds’ profit • Ds conspiracy and common course of conduct

9. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Factual background: • Forum: U.S. fed. Dist. Court Northern Mariana Islands • Procedural posture: • Consolidated cases under Rule 42(a) • Motion for class certification • Motion for preliminary approval of settlement

10. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Class Action procedure: • Ps seek certification under Rule 23(a) • Ps seek certification under Rules 23(b)(1), (b)(2), and (b)(3) – all class categories • Remedies sought: • Damages, punitive damages • Plaintiffs propose damages proven on aggregate basis • Damages by expert testimony, representative sampling, polling, statistical analysis • Independent monitoring program to prevent future violations of law

11. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Ds arguments against class certification: • Lack of commonality • Different plaintiffs • Different factual backgrounds; different experiences • Voluntary hours, recruitment fees, threats, housing and living conditions, restrictions on freedom of movement • Different employers • Different injuries • Different factories

12. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Ds arguments against class certification: • Lack of typicality: • Highly individualized fact circumstances • Different injuries • Different defenses to individual class members • Lack of adequacy: • Intra-class conflict between current and former garment workers as to form of relief • Lack of knowledge and understanding of lawsuit • No role in decision-making • Insufficient knowledge of duties and obligations in lawsuit

13. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Ds’ arguments against class categories: • Rule 23(b)(1) category not suitable for damage class actions • Rule 23(b)(2) only for injunctive relief; not suitable for damage class actions • Rule 23(b)(3): • Common issues do not predominate • Claims require individualized proof and inquiry into Ps mental states, alleged injuries, causes of alleged injuries

14. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Ds’ arguments against class categories: • Rule 23(b)(3): • Lack of superiority: • Numerous individual issues need to be tried on case-by-case basis • 30,000 class members/28 different factories/ different departments/different supervisors/ 13 year period – class unwieldy • Aggregation into single action makes matters of proof difficult & unwieldy • Reasonable alternatives to class certification: • Action under Fair Labor Standards Act

15. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Court’s decision on class certification: • Class certification approved • All Rule 23(a) pre-requisites satisfied: • Numerosity • Commonality • Typicality • Adequacy

16. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Court’s decision on class certification: • Commonality (satisfied): • Differences among class members do not defeat commonality • All injuries stem from same alleged conspiracy among Ds • Lawsuit challenges system-wide practice or policy that affects all putative class members

17. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Court’s decision on class certification: • Typicality (satisfied): • Alleged injuries all similar to class reps. • Alleged injuries all flow from same alleged common scheme, conspiracy, course of conduct • Injuries are similar: allegation of economic and other damages as result of Ds alleged pattern of racketeering, conspiracy, violation of constitutional, statutory and international human rights

18. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Court’s decision on class certification: • Adequacy (satisfied): • Doe representatives had sufficient knowledge and understanding of case to represent class • Class counsel adequate • No conflict between current and former class members because action is not for damages for unpaid wages, but for injunctive and declaratory relief

19. Saipan Peonage Litigation • Does I v. The GAP (N.D. Mariana Is. 2002): • Court’s decision on class certification: • Rule 23 class categories: • Grants certification under Rule 23(b)(1)(a); proper because fundamental purpose is to establish independent monitoring program • Grants certification under Rule 23(b)(2); proper because primary relief is monitoring program, not damages • Grants certification under Rule 23(b)(3); proper because common questions predominate and class action is superior means to resolve

20. Saipan Peonage Litigation • Questions: • Is the court’s analysis of the Rule 23(a) requirements sound? Has the court persuasively answered the Defendants’ arguments? • Can a court certify a class action under all three class categories? • Does this present a contradiction? • Is this really a class action for damages, or injunctive relief? • How would such a class be tried? • Does the court comment sufficiently on the damages portion of this case? How would damages be resolved in this class action? • Does the judge need more information at class certification about how damages will be tried?

21. Saipan Peonage Litigation Preliminary Approval of the Class Settlement

22. Saipan Peonage Litigation • Questions: • Is it unusual for a judge to certify a class and preliminarily approve the settlement in the same decision or order? • Do all the Ds agree to the settlement? • Do the dissenting, non-settling Ds have a right to object to the settlement? • What problems do the court’s approval of the settlement present for the non-settling Ds?

23. Saipan Peonage Litigation • Preliminary approval of class settlement: • Two groups of Ds emerge: • Settling Ds • Non-settling Ds • Settling Ds deny engaging in or condoning unfair labor practices • Settling Ds deny liability for claims in the complaint

24. Saipan Peonage Litigation • Preliminary approval of class settlement: • Terms of the settlement (4): • Creation of code of conduct with garment suppliers • Establishment of independent workplace and living quarters monitoring • Establishment of fund to pay for monioring program and to compensate class members for harms • 10% to cy pres fund to finance California litigation • Payment of Ps’ costs and attorney fees, costs of administration and notice program

25. Saipan Peonage Litigation • Objections of Non-Settling Ds: • Selection of Verite (D) to monitor program unfair; will not act as neutral, impartial body • Conflicts of interest within the class • Creation of cy pres fund to finance California litigation unfair & unreasonable; diverst funds to non-parties • Opt-out notice plan is inadequate because it leaves many class members without effective notice

26. Saipan Peonage Litigation • Preliminary approval of class settlement: • Court finds settlement fair, adequate, & reasonable • Relies on settlement class decision in In re Holcaust Victims Assets Litigation, 105 F. Supp. 2d 139 (E.D.N.Y. 2000)(settlement standards)

27. Saipan Peonage Litigation • Court’s Preliminary Approval of Settlement (5 reasons): • Settlement not negotiated in haste • Settlement negoitations begun 3 years earlier • Dozen draft agreements • Settlement agreement entered into in good faith • Arm’s-length negotiations • Experienced counsel on both sides

28. Saipan Peonage Litigation • Court’s Preliminary Approval of Settlement (5 reasons): • Allegations against Verite as program monitor unsupported • Settlement provisions for checks and controls on program moitor • No evidence in record of collusion • No evidence in record of conflicts of interest

29. Final Questions: • Is this an approiate class certification? • Is this an appropriate exercise of judicial authority to approve the preliminary settlement? • Does the court do an adequate job of assesing whether the proposed settlement is fair, adequate, and reasonable? • Is the GAP case a good model for resolving group harms?

30. Fine