Class action lawsuits in 2012 reshaped American commerce on several fronts at once. Merchants reached a proposed $7.25 billion antitrust settlement with Visa and Mastercard, BP announced an uncapped roughly $7.8 billion economic settlement over the Deepwater Horizon spill, GlaxoSmithKline paid $3 billion in what was then the largest healthcare fraud resolution in U.S. history, and more than 4,500 retired players formally consolidated their concussion claims against the NFL. Securities class actions produced $2.9 billion in approved settlements, and the Supreme Court heard arguments in two cases that would tighten the rules for certifying a class.
Merchants v. Visa and Mastercard: $7.25 Billion
The largest class action settlement announced in 2012 came out of In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. Roughly 12 million American merchants alleged that Visa, Mastercard, and several large banks had conspired to inflate “swipe fees” through mandatory minimums and rules preventing merchants from steering customers toward cheaper payment methods. The proposed $7.25 billion deal was the largest private antitrust settlement in the history of the Sherman Act at the time it was announced.
The structure combined a cash fund of roughly $6.05 billion for past damages with an estimated $1.2 billion in relief from a temporary eight-month reduction in interchange fees. Merchants also gained the right, beginning in January 2013, to impose surcharges of up to four percent on credit card transactions, subject to state law. Judge John Gleeson of the Eastern District of New York granted final approval on December 13, 2013. Target, Walmart, and the National Retail Federation, representing about 19 percent of total card transaction volume, opposed the deal, and the Second Circuit later reversed it. A renegotiated $5.5 billion agreement was approved in 2019 and unanimously upheld by the Second Circuit in March 2023.
BP Deepwater Horizon Economic Settlement
In March 2012, BP reached a proposed class action settlement with approximately 130,000 individual plaintiffs and businesses harmed by the 2010 Gulf of Mexico oil spill. The Plaintiffs’ Steering Committee valued the deal at $7.8 billion and stated it would be “fully funded by BP, with no cap on the amount BP will pay,” drawing on a $20 billion escrow account BP had previously established. The settlement covered economic and property damage claims but excluded those of federal, state, and local governments. Its announcement postponed a trial scheduled to begin on March 5, 2012, before Judge Carl Barbier in the Federal District Court in New Orleans. A separate Medical Benefits Class Action Settlement addressed health claims by cleanup workers and Gulf Coast residents.
Pharmaceutical Fraud: GSK, Abbott, and Amgen
Three drug companies resolved major fraud cases in 2012. GlaxoSmithKline paid $3 billion, then the largest U.S. healthcare fraud settlement on record. The company pleaded guilty to promoting Paxil and Wellbutrin for unapproved uses, including in children and adolescents, and to failing to report safety data on the diabetes drug Avandia to the FDA. The resolution covered roughly ten drugs in total, including Advair, Lamictal, and Zofran, and combined $2 billion in civil liabilities under the False Claims Act with $1 billion in criminal fines.
Abbott Laboratories paid approximately $1.5 billion over Depakote. Prosecutors alleged Abbott maintained a specialized sales force to push the seizure drug to nursing homes for managing agitation in elderly dementia patients despite no evidence supporting that use, and promoted it in combination with antipsychotics for schizophrenia without clinical trial support.
Amgen agreed to pay $762 million over the anemia drug Aranesp and other products. The government charged that Amgen promoted an unapproved dosing schedule for Aranesp and paid kickbacks to healthcare providers.
Antitrust Class Actions
LIBOR Rate-Rigging
The LIBOR manipulation scandal broke open in 2012 when Barclays admitted to U.S. and U.K. regulators that it had rigged LIBOR and Euribor submissions, resulting in more than $400 million in combined fines from the CFTC, the Department of Justice, and the U.K. Financial Services Authority. The civil class action side had already been consolidated as In re Libor-Based Financial Instruments Antitrust Litigation (MDL 11-md-02262) in the Southern District of New York before Judge Naomi Reice Buchwald. The MDL grew to encompass more than 30 cases naming 16 global banks, including Deutsche Bank, JPMorgan Chase, Bank of America, UBS, Credit Suisse, and Barclays, alleging collusion to suppress LIBOR between 2003 and 2011.
On the criminal side, UBS Securities Japan pleaded guilty to wire fraud and paid a $100 million fine, and its parent entered a non-prosecution agreement carrying a $400 million penalty. The Royal Bank of Scotland’s Japanese subsidiary signed a plea agreement for $50 million, with the parent separately paying $325 million to the CFTC for manipulating Yen and Swiss Franc LIBOR.
E-Books
In April 2012, the Department of Justice sued Apple and five major publishers, Penguin, Macmillan, Hachette, HarperCollins, and Simon & Schuster, alleging a conspiracy to eliminate retail price competition for e-books. HarperCollins, Hachette, and Simon & Schuster settled with the DOJ on the day the suit was filed. Penguin settled in December 2012 and Macmillan in February 2013. Apple refused to settle, went to trial in June 2013 before Judge Denise Cote, and was found liable under the Sherman Act. Apple ultimately paid $400 million to a class of e-book purchasers and 33 state attorneys general, and the publishers collectively paid $166 million, bringing total consumer recovery to $566 million.
LCD Panels
In July 2012, Judge Susan Illston in San Francisco granted preliminary approval to a settlement exceeding $1 billion in the LCD price-fixing class action. Ten Asia-based manufacturers, including Toshiba, LG, and AU Optronics, were accused of conspiring to fix liquid crystal display prices from the 1990s through 2006 by holding secret “crystal meetings” in hotels and bars in Taiwan. The case followed a DOJ investigation that produced criminal prosecutions of industry executives.
DRAM
The long-running In re Dynamic Random Access Memory (DRAM) Antitrust Litigation in the Northern District of California also reached resolution around this period. Samsung, Hitachi, Infineon, Toshiba, and Mitsubishi were accused of fixing memory chip prices sold in the United States between 1998 and 2002. Settlements totaled over $310 million, with a $10 minimum payout for eligible claimants who purchased DRAM or devices containing it during the conspiracy period. None of the manufacturers admitted wrongdoing.
NFL Concussion MDL
On January 31, 2012, In re National Football League Players’ Concussion Injury Litigation was formally filed in the Eastern District of Pennsylvania before Judge Anita B. Brody. More than 4,500 retired players, family members, and representatives sued the NFL and helmet manufacturer Riddell, alleging the league had been negligent and had actively concealed what it knew about the long-term risks of concussions since at least the 1950s. The players sought compensation for conditions including chronic traumatic encephalopathy (CTE), early-onset dementia, Parkinson’s disease, and ALS.
The NFL moved to dismiss on August 30, 2012, and the case then moved toward mediation. An initial term sheet followed in August 2013, and a final settlement, estimated at roughly $1 billion, was entered in May 2015. The Third Circuit affirmed in April 2016. As of January 2022, the NFL had paid out more than $800 million in claims. Race-based adjustments in neurological testing that affected compensation eligibility were eliminated through court-approved modifications in 2023.
Toyota Unintended Acceleration
On December 28, 2012, a federal court in Santa Ana, California, granted preliminary approval to a class action settlement worth up to $1.4 billion over claims that certain Toyota, Lexus, and Scion vehicles suffered unintended acceleration defects. The litigation followed the recall of approximately eight million vehicles for floor mat and sticky pedal issues. Under the settlement, $250 million was set aside for owners who had sold affected vehicles during a specified period, another $250 million for owners whose vehicles could not receive a brake-override system, and additional funds covered an expanded customer support program and installation of brake-override systems on 3.2 million vehicles. Toyota did not admit wrongdoing and maintained that most incidents resulted from driver error. Judge James V. Selna presided.
Securities Fraud Mega-Settlements
Securities fraud class actions produced an unusual concentration of large approvals in 2012. Cornerstone Research counted 53 securities settlements receiving final approval during the year, a 14-year low in volume, but the total dollar value reached $2.9 billion, more than double the 2011 figure. Six mega-settlements over $100 million each accounted for nearly 75 percent of the total.
The largest was the WorldCom, Inc. securities litigation, approved at approximately $6.19 billion in the Southern District of New York. Other 2012-approved settlements included the IPO Securities Litigation master case at roughly $586 million, Merrill Lynch Mortgage Investors, Inc. at $315 million, Bear Stearns Companies, Inc. at approximately $295 million, BNY Mellon, N.A. at $280 million, and Motorola, Inc. at $200 million. The AIG securities class action received final approval in February 2012 at $725 million.
New filings ran in the opposite direction. Only 156 new securities cases were filed in 2012, down from 188 in 2011 and below the historical average of 193. The fourth quarter saw just 25 new cases. Life sciences companies drew 27 filings, natural resources companies 16. Filings against non-U.S. companies fell from 68 in 2011 to 26, with the drop concentrated in cases against China-based issuers. The Southern District of New York handled about 28 percent of new filings.
Consumer and Data Breach Filings
Consumer class actions targeting food and beverage companies surged in 2012, with 102 federal filings during the year. Several were consolidated into multidistrict litigation, including cases challenging the marketing of Simply Orange and Tropicana orange juices (both established as MDLs in June 2012) and a case against Frito-Lay over “all natural” labeling claims (consolidated in December 2012).
Data breach litigation was still an emerging area. A class action filed against LinkedIn in 2012 followed the theft and publication of 6.5 million user passwords on a Russian hacker site. The suit alleged LinkedIn had failed to adequately protect personal information in violation of its own privacy policy. LinkedIn eventually settled for $1.25 million in 2015.
Supreme Court Arguments on Class Certification
Two cases argued on November 5, 2012, would reshape class certification. In Comcast Corp. v. Behrend, decided the following March by a 5–4 vote, Justice Scalia’s majority opinion held that a class of cable subscribers had been improperly certified under Rule 23(b)(3) because the plaintiffs’ damages model did not isolate harm caused by the single antitrust theory the trial court had accepted. Courts, the Court said, must engage in a “rigorous analysis” of damages evidence at the certification stage even when doing so overlaps with the merits.
In Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, decided in February 2013 by a 6–3 vote, Justice Ginsburg’s majority opinion held that securities fraud plaintiffs invoking the fraud-on-the-market presumption of reliance did not need to prove materiality of alleged misstatements before certification. Because materiality is judged from the perspective of a reasonable investor, it is a common question, and requiring proof at certification would “put the cart before the horse.” Justice Thomas dissented, warning of settlement pressure. Justice Alito concurred but urged the Court to reconsider the fraud-on-the-market presumption itself.
Both rulings built on the prior term’s Wal-Mart Stores, Inc. v. Dukes. The 2012 Carlton Fields Class Action Survey found that 27 percent of corporate counsel identified Dukes as the most influential recent ruling, and 21 percent pointed to AT&T Mobility v. Concepcion, which had been cited 215 times by January 2012 and prompted widespread adoption of mandatory arbitration clauses with class action waivers.
Defense Spending and Docket Volume
Class actions were an expensive line item for corporate America in 2012. The Carlton Fields survey, based on interviews with 322 corporate legal departments, found U.S. corporations spent over $2 billion a year defending class actions, more than 10 percent of total litigation budgets. The average company faced 4.4 class action matters in 2011, projected to rise to 5.4 in 2012. Labor and employment disputes accounted for 27 percent of matters and spending, consumer fraud 24 percent, and securities litigation 13 percent.
Wage and hour collective actions under the Fair Labor Standards Act continued to outpace all other private employment class actions combined. The Seyfarth Shaw annual report, which analyzed 976 federal and state class action decisions, observed that the plaintiffs’ bar was shifting away from nationwide mega-cases toward smaller, regional class actions after Dukes. One notable employment settlement during the year was a $20.9 million deal involving Rite Aid, which resolved FLSA claims by assistant store managers and co-managers who alleged they had been improperly classified as exempt from overtime.