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Class Action Countermeasures

Discussions of the Strategic Considerations Involved In Class Action Defense

Structuring a Settlement After Asserting Class Members Did Not Suffer Any Concrete Injury

Posted in Settlement

Frequently, a class action complaint will set forth an elaborate theory of why the defendant’s actions were negligent or wrongful, but fall short when trying to identify how that conduct has harmed the class members.  This kind of complaint invites a motion to dismiss on the grounds that the plaintiff has failed to demonstrate constitutional standing by identifying a “concrete, particularized, and actual or imminent” injury traceable to the defendant’s actions.

When these motions are successful, it’s a great day for the defense, but court dockets are littered with denied (or simply undecided) Rule 12(b)(6) motions challenging a plaintiff’s constitutional standing.  In those cases, negotiating a settlement may become the most prudent course of action.  And at that point, that motion to dismiss brief that you stayed up late drafting last spring can become an obstacle to structuring a lasting settlement in autumn—particularly when there’s a shortage of claimants who can sufficiently document damages to obtain relief from a compensatory settlement fund.

So how do parties structure a settlement that will avoid the objectors’ wrath after the defendant is already on record arguing that the class members haven’t suffered any real injury?  The traditional method has been to establish a cy pres award that will distribute residual funds to a charity related to the subject matter of the action or a legal services organization.  Of course, these awards have met their share of criticism in recent years.

Notably, another tool settling parties have embraced is structuring settlements in a manner that provides alternative benefits directly to class members in addition to the traditional compensatory fund.

This has recently popped up in the data breach class action context, where consumers allege their personal information was stolen after making a credit card purchase from the defendant-retailer.  These claims frequently prompt a “no concrete injury” argument, particularly when the putative class representative’s financial institution has already reimbursed any fraudulent charges made on the card.

Thus, when one of these cases settles, the parties may opt to establish additional remedies for class members above and beyond the traditional fund to reimburse any documented out-of-pocket losses.  This was the case in both In re: The Home Depot, Inc., Customer Data Security Breach Litigation, No. 1:14-md-02583-TWT (N.D. Ga.) and In re: Target Corporation Customer Data Security Breach Litigation, No. 1:14-md-2522-PAM (D. Minn).

By way of example, the settlement in the Home Depot class action established a fund dedicated to providing several months of identity protection services to anyone whose data was compromised by the security breach.  Accordingly, any class member who did not suffer out-of-pocket losses, or could not sufficiently document them, was still eligible to receive a tangible benefit.

These types of settlements may also include other forward-looking commitments by the defendant such as establishing information security officers at the executive level, maintaining a written information security program, performing routine data risk assessments, providing security training to employees, and upgrading card-payment technology.

The upshot of these multi-faceted settlements is that even if class members have difficulty demonstrating out-of-pocket losses to make a claim on the fund, they still receive benefits in the form of identity protection and credit monitoring services, which may serve to head off potential objectors.  While objections to the measures of relief afforded by settlements will undoubtedly continue to surface, parties have emphasized these extra benefits when responding to objectors in successful motions for final approval of settlement.

This settlement tool, increasingly common in data breach class actions, merits consideration in settling other types of class actions in which the defendant has previously argued that the plaintiffs have failed to show a concrete, particularized, and actual or imminent injury.


Defying Expectations, Supreme Court’s Tyson Decision Avoids “Broad and Categorical Rules” on Use of Statistical Evidence in Class Actions

Posted in Uncategorized

Expectations were high in the class action world for the Supreme Court’s recent decision in Tyson Foods, Inc. v. Bouaphakeo.  At first blush, however, Tyson seems to be neither the test case nor the blockbuster decision that many expected it to be, leaving important questions about predominance of class issues and individual proof of injury for another day.

The Court’s deferral of these questions can be chalked up, at least in part, to the nature of the case itself, in which employees at a pork processing plant in Iowa claimed they had not received overtime pay for time spent “donning and doffing” protective equipment for their jobs, in violation of the federal Fair Labor Standards Act of 1938 (FLSA) and Iowa state law.  After trial, a jury returned a $2.9 million lump-sum verdict for the plaintiff classes.

The ensuing appeal challenged both class certification and the plaintiffs’ use of “representative evidence” at trial. In the absence of any company records of actual donning and doffing time, the plaintiffs offered statistical averages of such time for employees in the “fabrication” and “kill” departments of the plant.  The plaintiffs’ expert (who notably was not challenged under Daubert in the district court) derived his averages from a sample set of employee timesheets and videotaped observations of actual donning, doffing, and walking by plant employees.  A split panel of the U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s certification decisions and the jury’s verdict, and the case moved to the Supreme Court, where dozens of amicus curiae briefs swelled the case’s docket.

The decision, with Justice Kennedy writing for a six-Justice majority, appeared to belie recent speculation about the effect of Justice Scalia’s passing on the case’s outcome.  The late Justice’s jurisprudence, in particular his 2013 majority opinion in Comcast Corp. v. Behrend, found voice in Justice Thomas’s dissenting opinion, which was joined only by Justice Alito.

The majority’s opinion resisted the call to take a hard-and-fast stance on the plaintiffs’ use of representative evidence (emphasis added):

[P]etitioner and various of its amici maintain that the Court should announce a broad rule against the use in class actions of what the parties call representative evidence. A categorical exclusion of that sort, however, would make little sense. A representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes—be it a class or individual action—but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action.

Doubling down on the point, the Court emphasized that its 2011 decision in Wal-Mart Stores, Inc. v. Dukes “does not stand for the broad proposition that a representative sample is an impermissible means of establishing class-wide liability.”

The upshot: statistical evidence is no more or less permissible in the class context than in an individual action, and its utility in establishing the predominance of class issues, and later proving class-wide liability and damages, will depend on the facts, circumstances, and causes of action in each individual case.

But what about uninjured class members—employees whose hours, even including the average donning and doffing time for their department, did not exceed 40 hours per week, and who therefore were owed no overtime? Wouldn’t statistical averaging sweep them in even though they might not deserve any compensation?

The jury’s lump-sum verdict, which awarded plaintiffs less than their full measure of damages (calculated by their experts to be approximately $6.7 million), provides no answers to these questions, but instead poses additional, equally thorny questions. To whom, exactly, did the jury intend to award damages, and to what extent?  How did the jury interpret and employ the plaintiffs’ representative evidence, if at all, in reaching their damages figure?  And how should the district court allocate the $2.9 million award to ensure that only those class members who suffered injury are compensated?

Acknowledging that “the question whether uninjured class members may recover is one of great importance,” the Court nevertheless determined that it was not “a question yet fairly presented by this case, because the damages award has not yet been disbursed, nor does the record indicate how it will be disbursed.” Consequently, the Court remanded the case to the district court to make those determinations.

Chief Justice Roberts’s concurrence, joined in part by Justice Alito, provided precisely the gloss on the majority opinion that some expected to be the majority opinion in this case.  Framing the issue of uninjured class members in terms of the judiciary’s Constitutional role, his concurrence urged that “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.”  Anticipating the difficulties facing the district court on remand, the Chief Justice emphasized that “if there is no way to ensure that the jury’s damages award goes only to injured class members, that award cannot stand.”

The message? Stay tuned to see how the district court parses—and parcels—out the jury’s damages award and, in the meantime, don’t expect any “broad and categorical rules governing the use of representative and statistical evidence in class actions.”

A few administrative items …

Posted in Admin

I know that posting has not been frequent to the blog lately.  A number of outside projects have interfered with the time I usually set aside for this.  I’ll make a few announcements about those in the coming weeks, but for now, I wanted to let you know two thing:

First, we will have new contributors and editors on Class Action Countermeasures.  So please join me in welcoming our new editors, R. Locke Beatty and Matthew Reynolds.  Locke and Matt, both excellent class action lawyers in their own right, will be handling much of the day-to-day coordinating of the blog as we go forward and expand our coverage.  I will still try to post regularly (I’m hoping once a week), but this should avoid the longer dry spells that have been occurring lately.

Second, I will be co-presenting a webinar on Defeating Class Claims by Attacking the Pleadings and Leveraging Other Early Dispositive Motions tomorrow at 1 PM.  Strafford has assembled a great panel for the webinar, and there is still time to sign up, so hope to see you there.

Justice Scalia’s Death Could Affect Outcomes in Class Action Cases

Posted in Uncategorized

Justice Scalia’s death has resulted in a predictable torrent of analyses of how his absence from the court will affect different facets of the law.  Below is a trenchant analysis from McGuireWoods’s own Samantha Thompson, which originally appeared on the blog  Subject to Inquiry.

Justice Scalia was a reliably consistent critic of federal class actions, including voting to enforce contract terms requiring arbitration, to require greater precision by plaintiffs in stating their claims, and authoring a new, tougher requirement for “commonality” under Rule 23(a)(2).

Three class action cases pending before the Supreme Court may be impacted by his absence.

In the first, Microsoft Corp. v. Baker, the court must decide whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.

In Microsoft, the plaintiffs brought a class action suit against Microsoft Corporation alleging that a defect in the Xbox 360 gaming system rendered it useless.  The District Court found that because only .4 percent of the consoles contained this issue, a class action could not be certified.  The parties then stipulated to a dismissal with prejudice, which was subsequently granted by the District Court.  Plaintiffs then appealed the decision to the Ninth Circuit, who held that the District Court misapplied applicable law and reversed.

On January 15, 2016, the Supreme Court granted certiorari on the question of whether a Court of Appeals has jurisdiction to review an order denying class certification after the plaintiffs have dismissed their claims with prejudice. Argument has not yet been scheduled.

In the second, Spokeo v. Robins, the court must decide whether a plaintiff who suffered no concrete harm (and would therefore not have standing), can still sue based solely on the violation of a federal statute. The plaintiff alleges that an Internet search engine published inaccurate information about him in violation of the Fair Credit Reporting Act.   Although not a class action, Spokeo’s outcome will likely impact the likelihood of plaintiffs’ attorneys filing similar claims on behalf of a plaintiff class in the future.

The Ninth Circuit held that the plaintiff did have standing to sue, and defendants successfully petitioned for Supreme Court review. The court heard argument on November 2, 2015.

The third, Tyson Foods v. Bouphakeo, involves the certification of a class under the Fair Labor Standards Act regarding overtime pay. In it, the Supreme Court will consider (1) whether differences among individual class members can prevent class certification when liability and damages are determined using techniques that presume all class members are identical to the average observed in a sample; and (2) whether a class action may be certified or maintained when the class contains hundreds of members who were not injured and have no legal right to any damages.

A District Court jury awarded the plaintiffs $5.8 million, and Tyson Foods appealed to the Eighth Circuit, where it lost on a two-to-one vote. Tyson Foods successfully petitioned for Supreme Court review, and argument was heard on November 10, 2015.

Justice Scalia was a leading voice in narrowing the scope of class actions, and often on critical, 5-4 decisions. His absence from the court will certainly shift the balance.  Exactly how far remains to be seen.

Campbell-Ewald Co. v. Gomez – Court Leaves Mootness Question Open

Posted in Motions Practice

As you probably know, on Wednesday, the Supreme Court finally issued its long-awaited opinion in Campbell-Ewald Co. v. Gomez.  Tammy Adkins & Helen Arnold of McGuireWoods’s Chicago office wrote up an excellent summary, which I’m quoting below:

On January 20th, 2016, in Campbell-Ewald Co. v. Gomez, a case closely watched by both sides of the class action bar, the U.S. Supreme Court ruled in an opinion authored by Justice Ruth Bader Ginsberg that an unaccepted Rule 68 offer of judgment did not moot the Telephone Consumer Protection Act (TCPA) putative class action brought by plaintiff Jose Gomez.

Defendant Campbell-Ewald, a contractor and advertising partner for the U.S Navy, allegedly sent the plaintiff unsolicited marketing text messages urging him to join the U.S. Navy. Plaintiff Gomez sued on behalf of himself and a nationwide class under the TCPA. He sought treble statutory damages, costs and attorney’s fees, as well as an injunction against Campbell-Ewald’s unsolicited messaging.

Campbell-Ewald extended to the plaintiff a Rule 68 settlement offer of $1,503 per text message, satisfying his treble damages claim. The plaintiff let the offer lapse without accepting it. Campbell-Ewald then filed a motion to dismiss Gomez’s claims, based on the offer of settlement, arguing that there was no longer a case or controversy as required for federal jurisdiction.

In the majority opinion, the Court found that an unaccepted settlement offer cannot moot a complaint. Under basic contract law, the Court held that in this circumstance, there is no offer and no acceptance, and therefore the offer can have no effect on the plaintiff’s claim, aside from Rule 68’s penalty of stopping the clock on costs. The Court stated: “We hold today … that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”

The Court further stated that Article III requires only a case or controversy, and the case does not become moot so long as the parties have a concrete interest, however small, in the litigation. According to the Court, a case becomes moot only “when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Because the plaintiff rejected the defendant’s settlement offer, and the offer itself did not admit liability, “Gomez gained no entitlement to the relief Campbell previously offered.”

Although the Court’s majority opinion seemingly holds that defendants cannot strategically moot class action claims by offering the named plaintiff all of his or her requested relief, the Court expressly left open the question of whether the result would be different if the defendant were to deposit the full amount of the plaintiff’s individual claim in an account payable to the plaintiff and the court entered judgment for the plaintiff in that amount. Moreover, the concurring and dissenting opinions indicated other possible ways that the case could have come out differently if the facts were different – such as if the defendant had deposited the funds with the court or if the defendant had admitted its liability in the settlement offer. These questions leave the door open to other possible outcomes, and therefore, we will likely continue to see variations of this case in the future.

Justice Ginsburg’s majority opinion was joined by Justices Anthony Kennedy, Stephen Breyer, Elena Kagan and Sonia Sotomayor. Justice Clarence Thomas concurred in the judgment, and filed his own concurrence. Chief Justice Robert G. Roberts authored a dissenting opinion, which was joined by Justices Antonin Scalia and Samuel Alito. Justice Alito also filed a separate dissenting opinion.

A few other thoughts about the opinion:

  • The logic here is completely Justice Kagan’s from her dissent in Symczyk.  In fact, Justice Ginsburg’s opinion explicitly adopts her reasoning there.
  • Because the court relied on Justice Kagan’s logic, it did nothing to resurrect the entity theory of class actions.  It appears that the “class as pre-certification entity” is still a dead letter in the Roberts Court.
  • I’m a little surprised that the Court did not resolve the mootness question once and for all, but it makes sense they would avoid controversial decisions when they had an easy basis for decision.
  • But that means it’s time to watch for “escrow pickoffs,” a tactic first raised in oral argument and mentioned again in the opinions.  Basically, a defendant can tender complete payment to an account with the plaintiff’s name on it, or to the court.  At that point, it’s unclear whether there is still complete adversity.
  • This will not have a huge effect on day to day practice.  Only the Seventh Circuit had really smiled on the Rule 68 offer of judgment as a mootness tactic (in Damasco), and it reversed itself recently.  And, even in the Seventh Circuit, actual mooting of claims was comparatively rare.
  • The Court did not rule on the use of a Rule 68 offer to limit costs in a class action.  That still remains a valid and potentially powerful tool for defendants to use.

So, the main takeaway here is that the Court has offered some guidance on mooting class actions, but has not yet closed off the strategy entirely.


NOTE – This post was edited to fix a few typos.

The Ten Most Significant Class Action Cases of 2015

Posted in Certification

Some years are exciting in class action practice; others are tamer. In general, in any established area of the law, precedent accumulates only incrementally. And, with the modern Rule 23 entering its 50th anniversary year, it makes sense that this might be one of the years that would demonstrate that principle. There were no stunning reversals or announcements of new law this year. The Supreme Court cases promising fireworks this term were argued in 2015, but decisions held until 2016. So this year’s ten most important cases were mostly building blocks adding to pre-existing trends in the law. As a result, this list may feel a little arbitrary, and there are good arguments for looking at other cases as significant as well. Nonetheless, here are ten cases from this year you’re likeliest to see cited in various forms.

DirecTV, Inc. v. Imburgia (S.Ct. 2015).  In the wake of Concepcion, several state courts—most notably California—have sought additional ways to limit the use of class action waivers in arbitration agreements. California tried to hold that a class arbitration waiver was unenforceable; Justice Breyer, writing for a 6-judge majority, held that the Federal Arbitration Act preempted the lower court’s decision.

Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015). Ascertainability is becoming one of the primary battlegrounds in class certification fights. And this is one of the first counterattacks to the Third Circuit’s aggressive holdings on ascertainability. In this opinion, the Seventh Circuit affirmed the lower court’s certification of a food labeling class, holding that ascertainability does not require an administratively feasible method of identifying a proposed class, just an objective one. Expect to see this cited in class cert reply briefs for some time to come.

Neale v. Volvo N. Am. LLC, 794 F.3d 353 (3d Cir 2015). One of the frustrating things about “no-injury” cases is the way in which they conflate a number of different Rule 23 issues. In Neale, the lower court granted certification in a case alleging that certain Volvos had a sunroof drainage defect. The defendant appealed, arguing in part that the class lacked standing because many of the class members had experienced no problems with their sunroofs.  The Third Circuit vacated and remanded, clarifying that, while the case before it presented numerous predominance problems, so long as the named plaintiff has a valid claim, Article III standing is met.

Johnson v. Nextel Communications, Inc., 780 F.3d 128, 146 (2d Cir. 2015). In vacating the certification of a labor negotiation class, the Second Circuit reaffirmed the problem of state law variations in strong terms: “Once it is established that the substantive law of each class member’s state will apply to his or her claims, the case for finding the predominance of common issues and the superiority of trying this case as a class action diminishes to the vanishing point.”

Remijas v. Neiman Marcus Group, 794 F.3d 688 (7th Cir 2015).  The plaintiffs sued Neiman Marcus, alleging that its susceptibility to hackers had caused them some form of unspecified future harm. The lower court dismissed the case, holding the plaintiffs lacked Article III standing. The Seventh Circuit reversed, holding that “injuries associated with resolving fraudulent charges and protecting oneself against future identity theft” provided injury concrete enough for standing. At the time, it was heralded as a case that would enable data-breach class actions. Little so far has changed that analysis.

In re BankAmerica Corp. Secs. Litig., 775 F.3d 1060 (8th Cir. 2015). The Eighth Circuit reversed a settlement with a significant cy pres component. In doing so, it held that cy pres must be used as a last resort, and the money must go to something that will provide an actual indirect benefit to the class. In the continued fight over the propriety of cy pres relief, this stands out as a particularly sharp declaration of principle.

Allen v Bedolla, 787 F.3d 1218 (9th Cir 2015). The Ninth Circuit vacated a settlement in keeping with its “high procedural standard for review of class action settlements negotiated without a certified class.” It appeared particularly concerned about the possibility of collusion. Its analysis of the nuances district courts must watch is particularly important.

Reyes v. Dollar Tree Stores, Inc., 781 F.3d 1185 (9th Cir. 2015). The Ninth Circuit reversed a remand under CAFA, holding that certification of class worth more than $5 million was ground for re-removal. In other words, it doesn’t matter how far plaintiffs can push a case in state court, if it belongs in federal court, it should wind up there.

Graham v. R.J .Reynolds Tobacco Co., 782 F.3d 1261 (11th Cir. 2015). Ever since the Florida Supreme Court affirmed certification of the Engle tobacco litigation, the federal courts have struggled with how to implement the Florida jury verdict (that “all cigarettes are inherently defective and that every cigarette sale is an inherently negligent act”) consistent with due process. In rejecting the district court’s verdict for the jury in one of the Engle progeny cases on obstacle preemption grounds, the Eleventh Circuit showed just how difficult it is to transform vague classwide findings into actual money for class members.

Pagliaroni v. Mastic Home Exteriors, Inc., 2015 U.S. Dist. LEXIS 126543 (D. Mass. Sep. 22, 2015). More and more defendants are challenging no-injury class actions on typicality grounds. After all, if the named plaintiff suffered an actual loss, but most of the class did not, it should be obvious why the named plaintiff is atypical. In denying certification of a proposed class of homeowners who alleged a latent defect in their decks, the District of Massachusetts showed that the typicality challenge is gaining traction.

Correction: I originally had the wrong procedural posture for Neale in this post, a dumb error.  Thanks to Matthew Mendelsohn of @MendelsohnLaw for spotting it.  The error has been corrected.

Highlights from the ABA Institute on Class Actions

Posted in Uncategorized
Last week I had the good fortune to attend the ABA’s Institute on Class Actions in New Orleans.  It’s usually a great combination of legal talent, and it’s noted for the depth and quality of its panels.  Among this year’s highlights:
  • Professors Coffee & Lahav‘s annual review of class action trends. A few years ago, I panned the memo they used in 2012 as overly inclusive and out of date. I’m happy to say that both this year’s memo and presentation were tightly focused on events from 2014 and 2015, with only a few additional cases discussed for necessary context.  In particular, Professor Coffee’s discussion of fee-shifting and Professor Lahav’s update on commonality were very useful. Hopefully, they’ll make the paper available on SSRN.
  • An excellent panel, hosted by Fredrick Burnside and including appellate lawyer Ben Gould, discussed a recent tactic by plaintiffs in the 2d and 9th Circuits to secure appellate review of a class action denial: the losing plaintiff can just dismiss her case with prejudice, and then appeal the dismissal.  (Previously.)  Microsoft, at least, has appealed the question of whether plaintiffs can do this to the Supreme Court. Given some of the more interesting questions the tactic raises (most importantly: if the court reverses the denial of certification, who represents the class on remand?) it will be interesting to see if the Court takes it up.
  • Another excellent panel on Campbell-Ewald Corp. v. Gomez featured, among other things, Deepak Gupta graciously eating crow over his recent (pre-argument) prediction that this case would be an easy win for the plaintiffs, and a very interesting discussion about whether the “right to aggregate” is part of the relief that a plaintiff seeks in a class action.
  • There were also quality panels on the role of compensation in class actions, the surprising rise of the class action trial, and the question of whether the Supreme Court’s class action jurisprudence really matters at the trial court level.  All provided excellent food for thought, and will likely fuel more posts in the next few months.

The New New Proposed Amendments to Rule 23

Posted in Certification, Uncategorized
Warning: This is another “amending Rule 23 post.”  Regular discussion of actual class action litigation will recommence on Thursday.  While I assisted Lawyers for Civil Justice with its response to the Subcommittee’s proposals, the following is only my personal opinion.
Last week, the Rule 23 Subcommittee released its latest draft proposal for amending Rule 23.  (2015-1105 Rule 23 Subcommittee Report)
The Subcommittee has abandoned (or in a few cases, placed “on hold”) several of its proposed amendments.  Among them:
  • There is no longer an attempt to amend Rule 23(c)(4) to specify that it trumps Rule 23(b)(3).
  • There is no longer any attempt to enshrine cy pres relief in Rule 23.
  • The attempt to add an explicit ascertainability requirement has been placed on hold.
  • The attempt to except Rule 23 from the Rule 68 offer of judgment has been placed on hold.
For the most part, this set of developments is good news.  The Rule 23(c)(4) proposal would have significantly changed certification practice, and would have undermined one of the fundamental methods of protecting due process in an opt-out class action.  Enshrining cy pres relief in the Rule would very likely have violated the Rules Enabling Act, a risk that would not have justified the additional flexibility the amendment might have offered to settling parties.  And, while I still believe that the ascertainability requirement should be explicit rather than implicit, the “minimalist approach the Subcommittee had had proposed (which would have reduced a judicially-recognized “threshold requirement” to an optional “management tool”) is no longer a danger.  I’m personally happy to maintain a strong implicit requirement rather than a watered-down “explicit” provision.  And the Rule 68 offer issue will be decided this year by the Supreme Court.
So what does that leave?  The following six proposals, some of which are new:
1.   “Frontloading.”  The Subcommittee defines “frontloading” as “ provid[ing] [relevant]{sufficient} information about the proposed settlement” at the preliminary evaluation stage.  The Subcommittee has eliminated its “laundry list,” which leaves a fairly vague standard that, hopefully, courts can fill in.  (Careful readers will note that the last time I wrote about this, I complained about the laundry list.  And all I can say is, yes, I know.  I’m still ambivalent about whether the better response to strategic lawyering is a list of factors or a vaguer standard.  Looks like we’ll find out.)
2.   Excluding “preliminary approvals” of class certification and orders regarding notice to the class about possible settlements from immediate appeal under Rule 23(f).  I’m presuming this is an attempt to reduce appeals by “bad” objectors looking for a payoff to leave.  (It might also reduce appeals of denials of preliminary approval.)  I personally haven’t experienced this tactic in either form, but I’m hard-pressed to see how it could be abused.
3.   Clarifying Rule 23(c)(2)(B) to state that Rule 23(e)(1) notice triggers the opt-out period.  The Subcommittee’s justification here is that this will reduce repeated notices to the class.  Assuming that “front-loading” includes full information about both the relief the class members will receive and the fees their counsel are taking, I don’t see an issue here.  But starting the clock on opt-outs (and, presumably, objections) without full information could encourage further abusive settlement practices.
4.   Notice to unnamed class members.  This is the “email”/“appropriate technology” provision.  As I’ve said before, you’d pretty much need to be a Luddite to not want to reduce notice costs with reliable technology.
5.   Handling objections by class members to proposed settlements.  The Subcommittee proposes a two-part addition to Rule 23(e): proposed Rule 23(e)(5)(A) would require objectors to state the grounds of their objection; proposed Rule 23(e)(5)(B) would require court approval of any withdrawn objection, and disclosure of any side payments.  (There are some variations in the proposed language, but this is the gist.)  So we’re really talking about front-loading objections like we do settlements, and adding transparency to the process.  Good ideas both.
6.   Criteria for judicial approval of class-action settlements.   The Subcommittee would replace the infamous “fair, reasonable, and adequate” with either language allowing the court to disapprove the settlement for any reason, or language further specifying the factors the court must find to approve a settlement.  While I’m confident these provisions by themselves won’t eliminate abusive settlements, they will at least provide more guidance to the courts.  More importantly, I don’t see the provisions doing much harm.  (I do worry a little, in the second alternative, about providing a “catch all” for the court to come up with new reasons for justifying settlements, unless the Rule makes very clear that you still have to find the other mandatory factors.)
Finally, the Subcommittee is submitting without endorsing a proposal for a Rule 23(b)(4) that would allow courts to ignore predominance when certifying settlement classes.  The Subcommittee notes that it was advised to leave this issue alone, advice I wholeheartedly agree with.
It’s possible to notice two trends here.  First, the “big” “sexy” Rule 23 ideas are rapidly getting winnowed out of these proposals, most likely because there is little if any area of agreement between plaintiffs’ and defense counsel on which ones will work in practice.  Second, what are left are largely technical, largely incremental reforms.  That’s for the good, I believe.  Trying for sweeping reforms is certainly tempting (hey, I recommended my own), but it’s far better to reflect the trends in litigation, rather than set them.

Gomez is not the slam-dunk you think it is

Posted in Certification
It’s rapidly becoming conventional wisdom that Campbell-Ewald Co. v. Gomez (argued yesterday) is going to be a win for the plaintiffs.  Respected academics like Robert Klonoff have stated it, and respected reporters like Perry Cooper have quoted respected plaintiffs’ counsel like Deepak Gupta to the same effect.  But, dig a little deeper into the arguments they’re all using to justify their predictions, and it’s not quite as clear that Gomez will be decided in favor of the plaintiff.  Those arguments are:
The Court has no way to counter Justice Kagan’s dissent.  In a blunt dissent in Genesis Healthcare v. Symczyk, Justice Kagan argued that the majority had gotten it wrong: a withdrawn Rule 68 offer would not moot a class action because a withdrawn offer can’t moot anything.  It was a good argument, but there are two reasons it won’t apply in this case.  First, it didn’t convince five Justices last time.  Second, Campbell-Ewald  also made a non-Rule 68 settlement offer for full individual relief.  So yes, one of the five Justices in the majority might buy into the dissent’s logic, but that logic would not apply to the (non-withdrawn) settlement offer.  The Court will still have to confront the question of what happens when full relief is offered to an individual plaintiff.  (And, indeed, at argument, this question came up.)
The Seventh Circuit has reversed itself.  It’s assumed that the Court granted certiorari because of the apparent circuit split between the Seventh Circuit and the remainder of the appellate courts to rule on the issue.  The Seventh Circuit’s recent reversal might be a reason not to grant cert, but unless you believe that the Court is solely looking at whether the appellate courts are in consensus, it’s not a persuasive reason to overrule previous precedent.  Moreover, Justice Easterbrook’s opinion uses Justice Kagan’s logic, meaning that it doesn’t apply to the non-Rule 68 offer.
Rule 68 is a class action killer.  This is the argument that gets trotted out most often.  Professor Klonoff puts it best:
Acceptance of Campbell-Ewald’s position would enable defendants in putative class actions to engage in gamesmanship by relying on unaccepted offers of judgment to derail putative class actions.
This is, of course, plaintiff’s argument in Gomez.  But claiming that the Court will buy the argument because the argument is self-evident is simply begging the question.  Five Justices rejected this argument in Genesis Healthcare.  There is no reliable evidence that any of them have changed their minds.  (Nor is there persuasive evidence that the four justices in the minority believe it.  At argument, Justice Kagan in particular was very intent on putting the policy arguments to the side.)  And the Court has, in the last five years, proven remarkably resistant to the argument that any particular ruling will kill the class action.
This hardly means that Gomez will be a slam-dunk for the defendants.  Predicting Supreme Court opinions ahead of time is like reading tea leaves in a cup of coffee.  But let’s be rigorous here.

The Next Decade of Class Actions

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A few years ago, I complained that class action scholarship was on the decline, and could improve from, among other things, digging into the actual caselaw out there, and making hard, falsifiable predictions about where the law is headed.

I have no illusions that Professor Robert Klonoff hangs on my every word about legal scholarship.  After all, he’s too busy practicing it himself.  But one of the things that makes him one of my favorite academics (even though I don’t always agree with him) is that he’s one of the few doing what feels like real academic work.

Take his latest working paper, to be published by the Emory Law Journal next year: Class Actions in 2025: A Prognosis.  This is an ambitious, meaty article.  It’s newsworthy in part because it contains the current reporter for the Rule 23 Subcommittee predicting no structural changes to Rule 23.  But it’s worth reading for a far more interesting reason than that: this is the only class action article I can recall that makes actual, concrete predictions about where the law is headed.  [Disclosure: Professor Klonoff gave my first book, The Class Action Playbook, a very nice blurb back in the day.]

So what are Professor Klonoff’s big predictions?  In his words:

Securities class actions will continue to flourish, but consumer, employment, and personal injury class actions will continue to decline.

The Supreme Court will curtail the ability of plaintiffs to establish liability or damages through expert statistical sampling (referred to frequently as “trial by formula”).

The “ascertainability” requirement imposed by the Third Circuit will be repudiated by the Supreme Court or by the Third Circuit itself.

The Supreme Court will conclude, as have numerous circuits, that an unaccepted offer of judgment to a class representative pursuant to Federal Rule of Civil Procedure 68 is a legal nullity and does not moot the individual’s claim or the putative class action.

Defendants will advance several arguments against class certification that, until now, have had only limited success. These will include expansive applications of Rule 23’s typicality, predominance, and superiority requirements. Although defendants will not be fully successful with these arguments, they will succeed in erecting some additional barriers to class certification.

During the next decade, courts addressing class certification and the fairness of settlements will give greater weight to allegations of unethical behavior by class counsel and by counsel representing objectors to settlements.

The future of class actions will ultimately lie in the hands of a small number of appellate court judges who have a special interest and expertise in aggregate litigation.

He also predicts, in more general terms, that more class actions will go to trial.

Some of Professor Klonoff’s predictions already seem a little shortsighted.  For example, he predicts that “no injury” class actions may disappear as a result of legislation like HR 1927, despite the fact that the bill looks unlikely to make it through the Senate as currently constituted.  Similarly, he predicts that consumer and labor class actions will decline because of the ubiquity of arbitration clauses, which seems not take into account the active role the CFPB has taken in policing class-action arbitration.  (I say “seems” because he takes the slightly longer view on how credible those regulations may prove to be.)

But it’s not the specific win-loss record he accumulates that makes this article worthwhile.  Instead, it is the fact that Professor Klonoff shows his work, using current caselaw.  You can disagree with his prognosis (and, on certain specific predictions, I do), but it is grounded in the actual state of the law, rather than what he wishes class action law looked like.  And that makes him valuable reading for both the academic and the practitioner.