Allegedly “Biased,” “Intimidating,” and “Incompetent” State Court Judges

Digital Commons at St. Mary's University Faculty Articles School of Law Faculty Scholarship 2012 Allegedly “Biased,” “Intimidating,” and “Incompetent” State Court Judges and the Questionable Removal of State Law Class Actions to Purportedly “Impartial” and “Competent” Federal Courts—A Historical Perspective and an Empirical Analysis of Class Action Dispositions in Federal and State Courts, 1925-2011 Willy E. Rice St. Mary's University School of Law, [email protected] Follow this and additional works at: https://commons.stmarytx.edu/facarticles Part of the Law Commons Recommended Citation Willy E. Rice, Allegedly “Biased,” “Intimidating,” and “Incompetent” State Court Judges and the Questionable Removal of State Law Class Actions to Purportedly “Impartial” and “Competent” Federal Courts—A Historical Perspective and an Empirical Analysis of Class Action Dispositions in Federal and State Courts, 1925-2011, 3 Wm. & Mary Bus. L. Rev. 419 (2012). This Article is brought to you for free and open access by the School of Law Faculty Scholarship at Digital Commons at St. Mary's University. It has been accepted for inclusion in Faculty Articles by an authorized administrator of Digital Commons at St. Mary's University. For more information, please contact [email protected]. ALLEGEDLY “BIASED,” “INTIMIDATING,” AND “INCOMPETENT” STATE COURT JUDGES AND THE QUESTIONABLE REMOVAL OF STATE LAW CLASS ACTIONS TO PURPORTEDLY “IMPARTIAL” AND “COMPETENT” FEDERAL COURTS—A HISTORICAL PERSPECTIVE AND AN EMPIRICAL ANALYSIS OF CLASS ACTION DISPOSITIONS IN FEDERAL AND STATE COURTS, 1925–2011 WILLY E. RICE ABSTRACT Judges as well as members of plaintiffs’ and defense bars agree: a class action is a superior, efficient, and inexpensive procedural tool to litigate disputes that present similar questions of fact and law. To be sure, corporations and insurers have a long history of filing successful class actions against each other in state courts. Yet those corporate entities convinced Congress to embrace an uncommon view: continuing to allow allegedly “hostile” and “biased” state judges and juries to hear and decide everyday consumers’ “purely substantive state law class actions” is unfair and inefficient. Responding to the plea, Congress enacted the Class Action Fairness Act of 2005 (CAFA). Reading CAFA’s purpose and findings, one discovers several questionable assumptions: (1) Out-of-state corporate defendants are more likely to lose consumer-initiated class actions in state courts, (2) allowing multinational insurers and corporations to remove consumers’ “purely state law class actions” to federal courts will increase efficiency between states’ and the federal judiciaries, and (3) federal judges are more “im- Professor of Law, St. Mary’s University School of Law San Antonio. M.A., Ph.D.—University of North Carolina at Chapel Hill; Postdoctoral Fellow—The Johns Hopkins University; J.D.—The University of Texas at Austin; and an American Bar Foundation Scholar. The author is forever indebted to Hubert M. “Tad” Blalock, David R. Heise, Donald E. Muir, Forrest W. Young, Francis A. Bottini, Jr., and Eugene R. Anderson for sharing their statistical and legal expertise with the author for numerous years. To be sure, their unselfish guidance and insight improved the Article. The author also thanks two audiences of practitioners, judges and colleagues who submitted invalua- ble comments and suggestions at forums in San Antonio and San Diego. Any errors or omissions are the author’s alone. 419 420 WILLIAM & MARY BUSINESS LAW REVIEW [Vol. 3:419 partial” and significantly less likely to allow extralegal factors to influ- ence the dispositions of class actions. To determine whether reformers’ assumptions were sound, the author sampled, read, and coded 2,657 federal and state court class actions and ordinary decisions. This Article discusses the historical and empirical findings and provides evidence that refutes reformers’ assumptions about class action litigation in state and federal courts. Also, this Article questions the rationality of Congress’s sweeping removal reforms, which find no sound support in law or in fact. Moreover, this Article highlights several unintended consequences of class action reforms, which insurers and corporations are likely to regret. Finally, given that CAFA’s removal provisions are likely to undermine traditional principles of judicial federalism, this Article encourages the Supreme Court or, preferably, a more enlightened Congress, to address the concerns raised here as soon as the opportunity arises. 2012] ALLEGEDLY “BIASED,” “INTIMIDATING” 421 TABLE OF CONTENTS INTRODUCTION ........................................................................................ 423 I. A BRIEF OVERVIEW : THE FRAMERS OF THE CONSTITUTION AND JUDICIAL FEDERALISM ......................................................................................... 431 II. ALLEGEDLY “B IASED ” STATE COURT JUDGES AND “C ORRUPT STATE COURT PROCEEDINGS ” VERSUS THE REAL PERILS OF LITIGATING IN STATE AND FEDERAL COURTS .............................................................. 436 A. In-State and Out-of-State Litigants’ Actual and Imaginary Risks of Litigating Civil Actions in State and Federal Courts ...................... 439 1. Proven and Perceived Perils in State Court Proceedings .......... 439 2. Proven and Imaginary Perils in Federal Diversity Proceedings ..................................................................................................... 442 B. Proven and Unproven Risks of Litigating Class Actions in Federal and State Courts .............................................................................. 444 1. A Brief History of Class Action ................................................... 444 2. Proven Class Action Perils in Federal Courts ........................... 451 3. Proven Perils of Litigating Class Actions in State Courts .......... 459 4. Imaginary Risks of Litigating Class Actions in Federal and State Courts .......................................................................................... 463 III. THE CLASS ACTION DEBATE —I NSURED CORPORATE ENTITIES , NATIONAL INSURERS AND “B RIGHT LINE ” JUDICIAL FEDERALISM ...... 468 A. National and Multinational Insurers and Corporate Entities’ Mission: Eradicating Allegedly “Biased” State Court Class Action Proceedings, or “Turning 200 Years of Judicial Federalism on Its Head”? ............................................................................................ 470 B. Brief Overview—The Class Action Fairness Act of 2005 .............. 480 1. Findings and Purpose of CAFA .................................................. 480 2. The Scope of Federal Courts’ Diversity Jurisdiction to Certify and Decide Class Actions of “National Importance” ........................ 480 IV. CLASS ACTION REMOVALS FROM ALLEGEDLY “B IASED ” STATE COURTS TO FEDERAL COURTS —A RGUABLY NEWLY CREATED PERILS UNDER CAFA FOR CORPORATIONS AND INSURERS AS PLAINTIFFS AND DEFENDANTS ........................................................................................ 483 A. Allegedly “Biased” State Courts, Class Action Removals Under CAFA and the Erie Doctrine—Arguably a Catch-22 for Corporations and Insurers Who Are Plaintiffs in Federal Courts ........................ 486 422 WILLIAM & MARY BUSINESS LAW REVIEW [Vol. 3:419 B. CAFA’s “Minimal Diversity” and “Cases of National Importance” Rules—“Trojan Horses” for Insurers as Defendants in Federal Courts? ............................................................................................ 491 1. Class Action Lawsuits, CAFA’s “Minimal Diversity Rule” and Potential Unintended Consequences for Corporate Defendants ..................................................................................................... 493 2. CAFA’s “Cases of National Importance” Rule and Some Potential Unintended Consequences for Insurers as Defendants in Class Actions ......................................................................................... 497 V. AN EMPIRICAL STUDY : THE DISPOSITION OF CONSUMERS ’ CLASS ACTION AGAINST MULTINATIONAL CORPORATIONS AND INSURANCE COMPANIES IN PURPORTEDLY “B IASED ” AND “H OSTILE ” STATE COURTS AND IN ALLEGEDLY “U NBIASED ” AND “M ORE COMPETENT ” FEDERAL COURTS , 1925–2011 ............................................................................ 508 A. Data Sources and Sampling Procedures ........................................ 511 B. Background Characteristics of Class Action Litigants in State and Federal Courts, 1925–2011 ............................................................ 512 C. Bivariate Relationships Between Litigants’ Characteristics and the Disposition of Class Actions in Allegedly “Biased” State Courts and in Purportedly “Impartial” Federal Courts ................................... 517 D. Choice of Law Questions—The Bivariate Relationships Between Litigants’ Theories of Recovery and the Disposition of Class Actions in State and Federal Courts ............................................................ 527 E. Two-Stage Multivariate Probit Analysis of the Relationship Between Litigants’ Characteristics and the Disposition of Class Actions in State and Federal Courts of Appeals .............................................. 542 CONCLUSION ............................................................................................ 551 APPENDIX ................................................................................................ 568 A Comparison of Non-Class Action and Class Action

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