 Lawdragon: Why do we see the ebb and flow of filings over the years? Jay Kasner: If you take a historical, expansive view of the decade to this point, class action filings seem to be driven by macroeconomic issues, stock market events and the actions of the plaintiffs’ bar. Statistical surveys show a marked increase over the last six months in class action filings – empirically that’s the case – and I think that increase is driven by those three factors. LD: How long will the subprime litigation last, and how are defense firms reacting? JK: I see it continuing for some time. A trade magazine quoted a plaintiff's class action lawyer as saying that the situation has at least a year to play out. Who knows whether that’s true? But one phenomenon we’re seeing is that you have different buckets of litigation arising from the subprime fallout: securities class action litigation, derivative litigation, ERISA class action litigation, consumer litigation. We’re also seeing new classes of plaintiffs, including municipalities such as the cities of Cleveland and Buffalo, which have begun to file lawsuits against financial institutions over the securitization of loans. It’s going to take a while for this to work itself out. A number of firms have created subprime litigation groups. That’s not something we’ve done because we already have an established, interdisciplinary approach that can be applied to this area of litigation. But this push by other firms does reflect recognition in the legal community of the amount of activity going on in this area right now. LD: Plaintiffs’ lawyers are pretty critical of recent Supreme Court decisions, starting with Dura. From your perspective, what’s the meaning behind them? JK: In 1995, Congress made a judgment for policy-based reasons that in securities class actions there was too much potential for plaintiffs and their lawyers to use these cases to extract settlements disproportionate to the merits of the case and that there had to be extra procedures put in place to allow the courts to more closely scrutinize the complaints that were being filed. I think there was also a concern about the impact on our global competitiveness as a result of these types of cases, so Congress passed the Private Securities Litigation Reform Act in 1995. The plaintiffs’ bar reacted by filing cases in state courts. So Congress acted again in 1998 with the Securities Litigation Uniform Standards Act, which was a response to the plaintiffs' bar strategy and barred class action securities suits from being filed in state court or under state laws. What we’re seeing now is that the appellate courts and the Supreme Court have put some teeth behind what Congress intended, which was to give district courts a more active role in deciding whether these cases could go forward. These cases reflect a trend of courts more carefully scrutinizing allegations and applying more rigorous standards to the complaints. LD: Is the impact obvious – fewer class actions? JK: We’re not going to see a decrease in the number of filings per se, but I suspect the plaintiffs’ bar is going to look at potential claims with more of an eye toward answering this question: Can they draft a complaint that will satisfy these additional burdens going forward? The motion to dismiss phase is critically important. If you get past it, you have discovery and the burdens attendant to that for Corporate America. The same is true for class certification. If cases cannot proceed as a class, plaintiffs will be reluctant to proceed. These are very important life events for these types of cases. I would expect the plaintiffs’ bar to respond by taking greater effort to survive this initial scrutiny. The landscape is changing a bit, but these standards certainly haven’t deterred the plaintiffs’ bar from jumping in with both feet in recent cases. LD: You made your own big contribution to this trend by winning the Dabit v. Merrill Lynch case before the Supreme Court. What are the practical implications of the victory? JK: In that case, the issue before the Supreme Court was whether holders of securities who refrained from selling based on misleading information could bring securities class actions in state courts. The court ruled that SLUSA preempts such claims. The practical implication of the case is that it shut down state law securities class actions. The number of filings has basically been eliminated, and it’s been a huge boon to Corporate America. Companies no longer have to simultaneously worry about federal law and the 50 different state laws that vary state-by-state. LD: Some people have told me that arguing before the Supreme Court was so intense that it was a complete blur – they remembered almost nothing of what they said. What was it like for you? JK: I remember everything in great detail, from the moment I walked in until the moment I walked out. No matter how many times I've appeared in both state and federal courts through the country, there is something unique about appearing before the highest court in the land. When you think of the history of the court, the remarkable individuals who served as justices and the milestone decisions that changed the course of history, it is awe-inspiring to be a part of the court's grand tradition. It's an experience I'll always treasure. LD: What’s your feeling about how the criminal matters involving Lerach and Milberg Weiss affected, if at all, the number of filings? JK: When the issue with respect to those firms first began to surface, I believe those circumstances did impact the level of activity on the plaintiffs’ side. But now, I think the plaintiffs’ bar has been able to pick up the slack. Bill Lerach’s old firm, now known as Coughlin Stoia, appears at least anecdotally and according to public sources, to be filing a large number of new cases. And among those firms active in subprime cases – and there are a wide range of firms -- it appears that those circumstances had only a temporary impact. But my impression is that the plaintiffs’ bar has been able to overcome any temporary impact. LD: Is Skadden taking on more associates and partners for securities litigation? JK: I think Skadden has defended clients against more class actions than any other firm in the country. But our philosophy is principally to grow internally and promote from within. Last year, we added partners to our group nationwide, but we don’t typically approach growth in securities litigation from a lateral hiring perspective. What makes us unique is to offer securities litigation in as many places as we do, including a very significant presence in Delaware, and across different types of cases as the definition of securities class actions changes. This allows us to bring an interdisciplinary approach to help our clients. And these are busy times for sure. LD: What is it about securities litigation that you like? JK: What has been most of interest to me in these kinds of cases is the ability to apply overarching legal principles and experience to different businesses in different industries with different problems. The functional principles on which these cases are based are essentially the same, even as the law changes over time. But the same core legal principles remain and now are being applied to the subprime area. Page: 1 of 1 pages for this article
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