St. John's University Law Faculty Blog

Professor Michael Perino‘s article, Class Action Chaos? The Theory of the Core and an Analysis of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L. J. 85, 97 (1997), was cited in by the U.S. Supreme Court in a securities law case decided earlier this week, California Public Employees Retirement Sys. v. ANZ Securities, Inc., No. 16-373 (June 26, 2017).   

California Public Employees Retirement Sys. v. ANZ Securities, Inc. addresses whether the three-year statute of repose under the Securities Act of 1933 was tolled when a class action complaint against the plaintiffs was filed. The Court held that it was not, in part because allowing tolling might create incentives for strategic opt outs. Here is the relevant passage, which appears at p. 13 of the majority opinion:

If the number and identity of individual suits, where they may be filed, and the litigation strategies they will use are unknown, a defendant cannot calculate its potential liability or set its own plans for litigation with much precision. The initiation of separate individual suits may thus increase a defendant’s practical burdens. See, e.g., Cottreau, Note, The Due Process Right To Opt Out of Class Actions, 73 N. Y. U. L. Rev. 480, 486, and n. 29 (1998) (“A defendant’s transaction costs are likely to be reduced by having to defend just one action”). The emergence of individual suits, furthermore, may increase a defendant’s financial liability; for plaintiffs who opt out have considerable leverage and, as a result, may obtain outsized recoveries. See, e.g., Coffee, Accountability and Competition in Securities Class Actions: Why “Exit” Works Better Than “Voice,” 30 Cardozo L. Rev. 407, 417, 432–433 (2008); Perino, Class Action Chaos? The Theory of the Core and an Analysis of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L. J. 85, 97 (1997). These uncertainties can put defendants at added risk in conducting business going forward, causing destabilization in markets which react with sensitivity to these matters. By permitting a class action to splinter into individual suits, the application of American Pipe tolling would threaten to alter and expand a defendant’s accountability, contradicting the substance of a statute of repose. All this is not to suggest how best to further equity under these circumstances but simply to support the recognition that a statute of repose supersedes a court’s equitable balancing powers by setting a fixed time period for claims to end.

On June 2-3 Professors Anita S. Krishnakumar and Elaine Chiu participated in the annual Northeast People of Color Legal Scholarship Conference.  Professor Krishnakumar spoke on a Professional Development Panel on Friday morning. Her presentation focused on scholarship tips for junior faculty.

Professor Chiu helped organize the event and also introduced Saturday evening’s keynote speaker, former St. John’s Law School Professor Janai Nelson, now the AssociateDirector-Counsel of the NAACP Legal Defense Fund.

Clinical Professor Christine Lazaro was quoted in the Wealth Management article, “Other States Considering Their Own ‘Fiduciary’ Rules After Nevada’s Becomes Law.”  

Nevada recently passed a statute which categorizes brokers as “financial planners” and imposes fiduciary obligations when the broker provides advice.  Professor Lazaro commented on Nevada’s action:

Christine Lazaro, a law professor at St. John’s University and the Director of the Law School’s Securities Arbitration Clinic, said the Nevada law was “formalizing at the state level what’s already in motion at the federal level.”

Professor Kate Levine presented a working draft of her paper, tentatively titled “Discipline and Policing,” at the Crimfest/AALS Criminal Justice Section midyear meeting on June 13, 2017.   

The event brings together criminal law scholars throughout the country and at all stages in their career.  Kate’s paper focuses on the privacy/transparency tradeoffs of publicizing police disciplinary records and the potential lessons that can be drawn from this debate for the broader issue of publicizing the records of formerly incarcerated persons.

On May 4-5, 2017, Professor Levine also was an invited participant / moderator at the Criminal Law Roundtable, an invitation-only yearly event hosted at Columbia, Harvard, or Yale.  This year’s roundtable was hosted by Jeffrey Fagan, Bernard Harcourt, and Daniel Richman at Columbia Law School.

Vice Dean Larry Cunningham presented on assessment developments in legal education at the ExamSoft Assessment Conference in Denver.

He is the author of a blog on assessment practices in law schools. In addition, he has been interviewed recently about high-profile criminal cases by NPR, People magazine, USA Today, and Agence France-Presse.

Professor Goldweber moderated a panel discussion entitled “Improving Elder Justice Using Technological Innovations.”  The Honorable Deborah A. Kaplan, Statewide Coordinating Judge for Family Violence Cases, and Audrey Stone, Chief Counsel to the Office of the Statewide Coordinating Judge for Family Violence Cases, were the panelists.

The presenters discussed the new law allowing abuse victims to apply for temporary orders of protection electronically and appear in court via video conference from a remote location. This law will allow elderly abuse victims to stay at a secure location without traveling to court. The Panel also discussed other technology designed to provide court services and resources to seniors. Judge Kaplan also chairs the New York State Judicial Committee on Elder Justice, of which Professor Goldweber is a member.

Professor Lazaro was quoted in Bloomberg’s article by Ben Steverman, “Why You Still Can’t Trust Your Financial Adviser; With the Fiduciary Rule in doubt, seeking professional advice on your money remains a dangerous proposition.”

The article examined the need for heightened fiduciary standards. The Department of Labor’s fiduciary duty rule, which applies to retirement advice, is set to go partially into effect on June 9. Professor Lazaro commented on the misimpressions by investors:

Christine Lazaro, director of the free Securities Arbitration Clinic at St. John’s University in New York, said people who came to her just assume “the broker was doing what was appropriate.”

“They are always very surprised,” she said, especially by what advice was costing them. “The broker leads them to believe they’re not paying any fees at all.”

Vice Dean and Professor of Legal Writing Larry Cunningham co-authored a piece in the Washington Post entitled, The legal profession is failing low-income and middle-class people. Let’s fix that.  

Co-authored with Jennifer Bard, former dean of the University of Cincinnati College of Law, the op-ed argues that unmet legal needs of the poor and middle class should be met by diversifying the types of practitioners that can provide legal services. Drawing on an analogy to medicine—where pharmacists can administer vaccines and nurse practitioners can be on the front line of diagnosing and treating ailments—Cunningham and Bard argue that we should have legal practitioners who can also exercise independent judgment within the scope of their training.

Professor Lazaro was quoted in the MarketWatch article, “How to find out what your broker is charging you.”

The article examines the model fee disclosure for brokerage firms developed by the North American Securities Administrators Association (NASAA). Professor Lazaro commented on the usefulness of the model disclosure:

“The model fee disclosure is certainly helpful for investors by providing consistency in how account related fees are disclosed, and by informing investors of the types of fees they may be charged,” says Christine Lazaro, an associate professor of clinical legal education at St. John’s University School of Law and director of the Securities Arbitration Clinic.

Professor Lazaro also commented on the shortcomings of the disclosure:

“Account-related service charges are a small portion of the overall fees an investor may pay when investing,” she says. “The majority of the fees paid are a result of commissions, mark-up and mark-downs, advisory fees and investment related expenses. Other than a disclaimer at the top, that this does not include most of these fees, there is no further information provided about the most substantial fees an investor will pay.”

Lazaro further noted that NASAA’s fee table does not disclose that investments may have significant internal expenses which may never be disclosed by a firm. “For example, when an investor purchases shares in a non-traded REIT, the investor may pay $10 per share,” she says. “The investment is then listed on the person’s account statement as having a value of $10 per share.”

Unfortunately, she says, $1.50 of that may have been diverted to cover the REIT’s initial expenses, meaning it is probably worth no more than $8.50 — at least that is how much is actually being invested by the REIT). “The investor is not made aware of this until the REIT is revalued, perhaps a year or more into the investment,” Lazaro says. “At that point, the investor may see a substantial drop in the value of the investment, which is primarily related to funds being used to cover expenses. With the cases I have seen dealing with non-traded REITs, I have never seen a case where the broker explained how the internal expenses of the investment worked.”

Finally, Professor Lazaro commented on investor expectations:

Many arbitration claims will focus on the fact that the investment sold was inappropriate for the investor or the broker failed to provide relevant information so the investor can make an informed decision, according to Lazaro.

“Investors expect that their brokers are recommending investments that are appropriate for them and often times also that are in their best interest although, of course, there is not always a fiduciary relationship that would require the broker to act in the investor’s best interest,” she says. “Investors are rarely entering conversations with their broker thinking that they have to verify the information they are given by their broker, or even feeling competent to do so.”

Of course, if there is any information an investor does not understand, Lazaro says the investor should ask questions and ensure that the questions have been answered to their satisfaction.

“This does not mean they can avoid arbitration if the broker acted improperly, and to some extent, investors should be permitted to rely on the information they have received from their brokers,” she says.

The American Banker ran an op-ed by Professor Jeff Sovern on May 25, titled “Would Wells scandal have come to light with a defanged CFPB?”

Jeff Sovern

Wells Fargo’s opening of millions of phony accounts using the names of its customers was perhaps the most significant bank scandal to come to light since the financial crisis. But [Congressman Jeb] Hensarling’s Financial Choice Act, which passed the House Financial Services Committee, would have weakened federal regulators’ ability to publicize the scandal and punish Wells. * * *

If the bill had been enacted — and the consumer bureau were just a shell of the agency it is today — it is a fair question to ask whether Wells Fargo would have been held accountable for its actions.

Professor Sovern was also quoted in a Snopes.com fact check, titled “Can Ancestry.com Take Ownership of Your DNA Data?”  Snopes wrote:

Jeff Sovern, a law professor at St John’s University in New York City and an expert in consumer law, told us the circumstances under which Ancestry.com might share your DNA data with others could be wider than they first appear. * * *

Jeff Sovern said that the privacy statement’s use of examples, rather than an exhaustive list of scenarios in which user’s information can be shared, makes him “nervous”:

That means the list is not complete, and there could be circumstances in which Ancestry could disclose the data that are not included in the list. Here’s an analogy: if someone says “examples of things I do when I go out are to see a movie or a show,” it doesn’t mean the person doesn’t also go out to get drunk.

In addition, Professor James Kwak of Connecticut Law School wrote an essay for The Baseline Scenario blog about Professor Sovern’s most recent law review article, Free-Market Failure: The Wells Fargo Arbitration Clause Example, 70 Rutgers Law Review (forthcoming 2017) titled “Economism and Arbitration Clauses.”