This continues our series of blog posts on effective partnering between inside and outside counsel to defend against class action lawsuits. It begins our discussion of aspects of discovery unique to class actions.
Inside and outside counsel will face special issues in planning and managing discovery in class actions. As a threshold matter, outside counsel should research any particular requirements imposed by the law at issue in the litigation. For example, a securities reform statute provides for a stay of discovery when the defendant files a motion to dismiss a securities class action, but, importantly, the statute also imposes upon the defendant an attendant obligation to preserve discoverable information during the time discovery is stayed—which can be a lengthy period, especially if there is an interlocutory appeal.[1] Inside counsel will also want to have discussions with outside counsel about how the company will handle proprietary and confidential information, which may warrant the filing and entry of a stipulated protective order.
Bifurcation
In some jurisdictions, such as Alabama and Florida, the trial court is expected to bifurcate discovery, permitting discovery to go forward on the issue of class certification while staying merits discovery.[2] Even where this is not provided for by statute or case law, it may be in the company’s strategic best interests to seek such a bifurcation of discovery. Bifurcation may allow the defendant to avoid the cost and disruption of extensive merits discovery and also ensure that the court focuses on the crucial issue of class certification without plunging headlong into other aspects of the case as though class certification were a foregone conclusion. Nonetheless, Ford’s general practice is not to seek bifurcation, particularly if doing so might preclude moving for summary judgment on the named plaintiffs’ claims early on in the litigation.[3]
Focus on the Named Plaintiffs
Keep in mind that outside counsel will need to explore in discovery the nature of the named class representatives’ claims and how class counsel proposes to prove the merits of the class claims in order to test the adequacy of the representatives and to probe plaintiffs’ assertion that common issues predominate. Outside counsel also will want to serve interrogatories addressed to class counsel’s trial plan for the same reasons.
Properly understood, pressing ahead with discovery on the named plaintiffs’ claims is not at all inconsistent with postponing plaintiffs ’merits discovery into the defendants’ business practices until class certification is resolved. In actual practice, the company rarely will get an argument on this issue from class counsel. Class counsel almost always insist they do not need fact discovery to obtain class certification because the court should view the issue as cut and dried based on the allegations of the complaint, the law, and at most a very cursory examination of the facts.
Discovery into the circumstances of the class representatives may be the most important discovery the company will take in the case. As we have discussed, in previews posts in this series, inside and outside counsel should prepare for this by conducting a thorough internal investigation and review of public sources, including the Internet, to learn everything possible about the named plaintiffs’ dealings with the defendant, participation in other litigation, or other relevant matters. We have located publications written by class representatives that proved useful in the defense of the class action. In one case, the class representative was an economist who published economic analyses undercutting class counsel’s theory of damages. In another case, plaintiff was a stockbroker who published bulletins for his clients inconsistent with the allegations in his later-filed class action.
Ordinarily, outside counsel should serve a document request on plaintiffs and perhaps basic interrogatories asking for information relevant to the litigation. But counsel should take care not to provide a roadmap to class counsel of all the questions that may be asked of the named plaintiffs in deposition.
Our next post will discuss deposing the named plaintiff.
[1] See Private Securities Litigation Reform Act (“PSLRA”), codified in relevant part at 15 U.S.C. §§ 77z-1(b)(1) to (3), 78u-4(b)(3).
[2] See Ala. Code 1975 § 6-5-641; Policastro v. Stelk, 780 So. 2d 989 (Fla. Dist. Ct. App. 5th Dist. 2001).
[3] See a discussion of the pros and cons of bifurcating discovery in Federal Judicial Center, Manual for Complex Litigation § 21.14(4th ed.).
