Publications: Ungaretti & Harris Successfully Defends Class Action Claims

To read the original and full Client Update in PDF format, please click the Related Files link.

Healthcare Company Defeats Multi-Million Dollar Class Action
Court Imposes Strict Limits On Class Action Pleading

On November 15, 2007 Judge Peter Flynn of the Circuit Court of Cook County dismissed a comprehensive class action against Alden of Waterford, an Illinois healthcare facility. The decision is important because it makes clear what the limits are on “extortionist” claims – namely, claims with modest or non-existent damages prosecuted through the class action device to extract a settlement because of the in terrorem effect of the allegations and the costs of defense. Judge Flynn’s decision is a useful prism through which to view class-action claims.

Elizabeth Frazier filed a five-count class action case arising out of her treatment during a four day stay at Alden of Waterford, a long-term care facility in Aurora, Illinois. Despite the absence of any significant injury or loss, Frazier and her law firms sought to extract significant sums from Alden by leveraging Frazier’s claims across a class of thousands of current and former residents. The case, as originally filed, detailed at length alleged staffing deficiencies and citations from the Illinois Department of Public Health in an attempt to portray the facility in the worst possible light. But Frazier did not connect these allegations to her specific circumstances. Instead, she claimed she was entitled to recover the difference between the value of care she believed she was promised and the value of the care she was actually given during her four-day stay. This contract damage theory was interposed by Frazier to avoid the growing reluctance of Illinois courts to grant class certification in personal injury cases. It has become a common strategy adopted by class action counsel.

The case was a high-risk proposition for several reasons. First, to the extent that the case was permitted to proceed to discovery, the expense would have been enormous. Just the costs of producing all documents and electronic data would have been daunting. Second, the discovery process itself would have generated additional plaintiffs and additional claims and hence additional pressure on the defendants. And third, liability to a class of thousands would have been a serious financial blow. The class claims exceeded $100,000,000.

The Court’s decision is notable not for any dramatic new reading of the law; instead, its importance lies with what it does in the aggregate – namely, telling class plaintiffs and their counsel that strict pleading requirements will govern class actions and that such cases will not be permitted to go forward unless the complaint is firmly grounded in the principles of specific fact pleading, contains precise descriptions of loss, and articulates specific loss causation. What the Court clearly rejected is the tactic of making extreme allegations, vaguely attaching a plaintiff to the case, and attempting to extract from defendants significant sums in the face of potential class liability.

To read the judge's opinion, please see the Related Files link.