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Class Action Countermeasures

Discussions of the Strategic Considerations Involved In Class Action Defense

Never Assume Numerosity – 2014 Edition Take 2

Posted in Certification

Rebecca Mullis attended an online program for Medical Diagnostic Sonography through Mountain State University. The program required her to attend a clinical externship to graduate, but there were no externship sites within a three-hour drive for her. So she sued the university on behalf of students like herself, whom she was sure (or her lawyers were) numbered in the hundreds.

In its opinion denying certification in Mullis v. Mountain State Univ., Inc., No. 5:12–3158, 2014 U.S. Dist. LEXIS 40686 (S.D. W. Va. Mar. 27, 2014), the court disagreed. Its primary issue was that she had not offered any real evidence to support her guesses about numerosity.

Plaintiff’s mere speculation does not meet her burden, and she has provided no meaningful evidence that refutes the evidentiary support for a much more modest estimation of the size of the proposed class. Conclusory and speculative allegations as to the size of the class are insufficient to establish numerosity.

But the court went further, conducting a true “deep dive” into the numerosity requirement. Among the counter-intuitive (but still legally sound) points the court made about numerosity:

  • Identifying every class member may mean joinder is practicable. “Having access to this contact information, as plaintiff assures the court defendant does, means that each individual can be contacted to determine their interests in the litigation, their desire or lack thereof to join a class action, or their wish to bring an individual action.”
  • Larger damages may mean joinder is practicable. “Another critical consideration affecting the practicability of joinder is the ability and willingness of individual class members to bring individual actions. Perhaps most important to this inquiry is the size of the individual claims, because “small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.” A direct corollary to this notion is that joinder is more likely practicable when individual recoveries are substantial.”

This opinion is an excellent one for defense lawyers to study. In addition to offering a primer on the numerosity requirement, it also suggests a number of less-obvious but still valid arguments against certification.

Tall People and Class Actions

Posted in Scholarship

April Fool’s–a day that one cannot trust what one reads on the Web, is fortunately over. So, please rest assured that Rutgers law student Brandon Riley’s note We’re Cramped as Hell, and We Won’t Take It Anymore: Plotting a Class Action Disability Claim on Behalf of the Very Tall against Air Carriers for a Failure to Accomodate, 44 Rutgers L.J. 123 (2013), is an actual publication with an actual argument. Riley plots out how one might bring a class action on behalf of very tall people (defined, via statistical analysis, as anyone taller than six foot three) under Rule 23(b)(2). The injunction would be preferential seating in the exit row. Interestingly, he concludes that the real difficulty will not be Rule 23, but instead the underlying substantive law:

Likely the biggest hurdle to overcome, in my view, will be the court’s raised eyebrow and dubious disposition to the assertion that folks over six foot three are in any way “disabled.” As demonstrated, however, there is a case to be made, but fitting such an argument into the rubric of the Americans with Disabilities Act will be challenging. If anything, the argument serves to underscore the legal mountains folks who are discriminated against must move in order to assert their rights.

I’ll let you read the Note itself with only two further comments:

  1. The Note does a nice job of laying out how one can plan out a class action complaint; which is useful for both plaintiffs’ and defense attorneys.
  2. At six foot five, this may be one of the few class actions I can really get behind.


Typicality Applies to Relief, Too – Ubaldi v. SLM Corp.

Posted in Certification

In Ubaldi v. SLM Corp., No. 11-01320, 2014 U.S. Dist. LEXIS 38587 (N.D. Cal. Mar. 24, 2014), the plaintiffs sued student-loan institution Sallie Mae for allegedly imposing unenforceable choice-of-law provisions on some of its borrowers, as well as charging improper late fees and "usurious" interest.

The trial court denied certification on a number of grounds, including problems with the class definition and individualized issues that predominated. But I want to focus in on another of its reasons: the often-underused typicality requirement.

The defendant argued that at least one of the named plaintiffs (Chanee Thurston) was not typical of the subclass she sought to represent (the "Usury Subclass") because the interest on her loans was not usurious. (One loan was arbitrable, and so excluded from the class; another was below the cutoff; and the named plaintiff had paid nothing on the remaining loans.)

The plaintiffs responded by arguing that the unpaid loans made Ms. Thurston typical because she sought declaratory relief that the interest rates were excessive. The court, however, was not convinced. As it ruled:

Not only must Thurston be a member of the Usury subclass to satisfy the typicality requirement, but her claims must be "reasonably coextensive" with those of absent class members. Because Thurston only has a claim for declaratory relief for usury, her claim is not reasonably coextensive with any class members who paid usurious interest and would have damages.

(Emphasis added.) In other words, if the relief a plaintiff seeks is substantially different from the majority of the proposed class, she is not typical of the class. Given the difficulties plaintiffs’ counsel often have finding issue-free representatives, this is a particular issue that defendants would do well to look harder at.

Securities Certification Requires Actual Evidence – In re Kosmos Energy

Posted in Certification

 For some time, academics have been decrying the demise of the class action, arguing that the Supreme Court’s precedent makes it harder than ever to certify a class under Rule 23. And yet, as one practitioner I know observed, plaintiffs keep filing the things. And quite a few courts keep certifying them.

Now, however, at least one federal district court appears to be listening to the academy.

The case, In re Kosmos Energy Ltd. Secs. Litig., No. 3:12-CV-373-B, 2014 U.S. Dist. LEXIS 36365 (N.D. Tex. Mar. 19, 2014), appears to be an unremarkable stock-drop case, the exact kind that is often considered easy to certify. And that’s exactly what plaintiffs argued.

The court, however, disagreed vehemently. In an opinion that cites liberally to Dean Robert Klonoff’s article The Decline of Class Actions, it refused to certify the class because the plaintiffs did not meet their burden of proof for Rule 23. As the court explained the standard:

"The culmination of the movement by courts–away from a presumptively pro-plaintiff view to the more restrictive approach today–was most recently summed up by the Supreme Court in its 2013 opinion, Comcast v. Behrend. In Comcast, the Supreme Court, re-stated–its now firmly entrenched view–that a plaintiff seeking class certification "’must affirmatively demonstrates his compliance’" with Rule 23(a) by showing that "’there are in fact sufficiently numerous parties, common questions of law or fact,’ typicality of claims or defenses, and adequacy of representation." …

Going forward, the clear directive to plaintiffs seeking class certification–in any type of case–is that they will face a rigorous analysis by the federal courts, will not be afforded favorable presumptions from the pleadings or otherwise and must be prepared to prove with facts–and by a preponderance of the evidence–their compliance with the requirements of Rule 23

(Italics in original, bold added.) Specifically, the court found that the plaintiff in this case had not proven either adequacy or predominance. In finding that plaintiffs had not shown that they were adequate, the court cited Professor Mullenix’s decade-old article Taking Adequacy Seriously, and then offered a rigorous analysis of the declaration offered by the lead plaintiff’s representative:

To elaborate, the Saville Declaration makes a number of conclusory pronouncements, such as the following: "I have participated in the Plan’s decision-making with respect to litigation matters, and have participated in supervising outside legal counsel in the Plan’s pending litigation." The Declaration’s explanation as to how Saville is actually participating in decision-making and supervising counsel is scant at best. In paragraph five–the paragraph containing the most detail in the eight paragraph sworn statement–the Declaration claims that Saville "received and reviewed" reports and correspondence, "supervised"discovery preservation, "reviewed pleadings" and "consulted with lawyers." But this type of generic detail is really no detail at all, for it provides naught by which to assess Saville’s credibility, her knowledge about the underlying facts of the case, or how much of what she has stated may have been prompted by counsel. Indeed, any potential class representative in any securities case could make almost identical assertions.

(Italics in original, bold added.)

Similarly, the court was unconvinced by the plaintiffs’ arguments (which appeared to largely center on defendant’s conduct and the presumed materiality of certain statements) that common issues predominated:

That Lead Plaintiff’s submissions are akin to no evidence at all, under Comcast, ought to end the Court’s predominance inquiry here. Indeed, the Plan makes no effort to argue that its "proof" demonstrates predominance. Instead, its position appears to be that such proof is unnecessary. In essence, the Plan asks the Court to presume that the proposed class is certifiable simply because of the securities law provisions pursuant to which this case was filed. Relying on this ill-founded assumption, the Plan assures the Court that "common proof regarding [the essential issues in this case] will be offered on a uniform, Class-wide basis.

(Italics in original, bold added.)  As a result, the court refused to certify a class, based almost entirely on its conclusion that the plaintiff had not offered sufficient evidence to justify certification.

Coupled with Judge Posner’s recent opinion in Parko v. Shell Oil Co., In re Kosmos Energy offers a clear takeaway: in 2014, class certification requires an actual evidentiary showing.

An Introductory History of the Class Action – What Goes Around Comes Around

Posted in Scholarship

Loyola of Los Angeles professor Georgene Vairo wrote a piece called What Goes Around, Comes Around: From the Rector of Barkway to Knowles for the Review of Litigation.

Professor Vairo’s piece makes two overall arguments: (1) the class action is a political, rather than procedural, problem; and (2) the recurring debates over use of the device will continue to "come around" until the Supreme Court decisively resolves the question of how preclusive a class action is supposed to be. The piece aims to be a comprehensive historical overview of the class action, from its medieval roots to the current debates over CAFA. But, in general, it tends to fall short. I think this is for several reasons:


  • It’s a doctrinal rather than historical analysis. Unlike the excellent Sturm und Drang, which makes several of the same points, What Goes Around largely confines itself to discussing a few cases, which is a difficult way to show how historical trends operate in an area as diverse as class action litigation.
  • It suffers from Supreme Court bias. With only a few exceptions (specifically, the discussions of the the 1966, 1998, and 2003 Rule 23 Amendments, a brief discussion of Agent Orange and In re Rhone-Poulenc Rorer, and a discussion of CAFA, the article is primarily concerned with how the Supreme Court has handled class actions over the years. No question, when the Court speaks, people listen. But there are vigorous debates at the trial and appellate levels that rarely, if ever, percolate up through the certiorari system. What Goes Around leaves those issues aside.


I may be overly critical. The article does provide a nice overview of several of the larger issues in class-action practice. I’d happily hand it to a new associate to give them idea of some of the recurring issues in class action practice. I just wish someone with Professor Vairo’s clearly accomplished CV had offered more new material, instead of rehashing many of the same approaches the academy has already made.

The typicality burden – Henke v. Arco Midcon, L.L.C.

Posted in Certification

Class action lawyers are well aware that the burden to affirmatively demonstrate compliance with Rule 23 rests on the plaintiffs. Over the years, courts have elaborated somewhat on the burdens plaintiffs must meet for numerosity and commonality, but have remained somewhat vaguer when it comes to typicality.

Last week, a trial court in the Eastern District of Missouri took a leap into that void in Henke v. Arco Midcon, L.L.C., No. 4:10CV86, 2014 U.S. Dist. LEXIS 31810 (E.D. Mo. Mar. 12, 2014). Henke was an environmental class action alleging groundwater contamination from leaks from an oil pipeline. There were a number of problems with the proposed class, but among the, the court found that the named plaintiffs were not typical. In addition to reviewing the evidence that the defendants provided of the plaintiffs’ unique circumstances, the court also took the plaintiffs to task for not meeting their burden in the first place. And what did that burden look like?

Plaintiffs also offer no basis for comparison of their claims across the class – only conclusory allegations that assume prospective class members are similar. There is no specific comparison of Plaintiffs to any prospective class member in terms of their use or ownership of the land, the circumstances surrounding their grievances, or the relief they may seek.

(Emphasis added.)

Given that plaintiffs’ class certification briefs can often be maddeningly vague, this statement of the typicality inquiry is an extremely useful one for defendants. If the plaintiffs have not offered evidence that shows that they’re similar, they may not be able to show typicality at all. It is not enough to assert the same claims, the plaintiffs must share similar circumstances. If they cannot offer evidence they do, they cannot meet their burden.

Law, Facts, & Hostile Judges

Posted in Scholarship, Strategy

 As it turns out, Chicago poet and journalist Carl Sandburg is one of–if not the–first person to be credited with an old piece of advice for lawyers:

If the facts are against you, argue the law. If the law is against you, argue the facts. If the law and the facts are against you, pound the table and yell like hell.

As well as sourcing Sandburg’s quote, in his article for the journal American Politics Research, Law, Fact, and the Threat of Reversal From Above, University of Alabama professor Joseph L. Smith uses the latest in computer content analysis (basically, the use of algorithms to categorize writing based on important recurring terms) to examine administrative law opinions from 1925-2002 to test that advice. More specifically, Professor Smith tested whether judges felt more constrained by the facts of a case or the legal standard governing it. His conclusion:

The more a case focuses on factual matters, the more magnified is the effect of the judges’ preferences. Increased focus on legal standards dampens the effect of policy preferences. When cases turn on factual matters, variation in judges’ policy preferences generates wide variation in outcomes.

This will hardly surprise any litigator who has ever read an adverse opinion while shaking their head at the factual findings: law tends to be easy to look up; facts take on many shadings over the course of briefing. What Professor Smith does is to turn this general observation into concrete advice based on statistical analysis. To wit:

The results presented here suggest an addendum to Sandberg’s aphorism: “If the judge is with you, argue the facts. If the judge is against you, argue the law.” The effect of judges’ policy preferences is magnified in disputes that focus on factual matters, and dampened in disputes that focus on legal standards. The most plausible explanation for these results is that law constrains judges indirectly: judges believe cases decided on facts are less likely to be reviewed by higher courts, and therefore see in factual cases opportunities to indulge their policy goals with little fear of reversal. A slightly different explanation would be that judges may be emphasizing the factual elements of disputes whose outcomes match their policy goals and manipulating the contents of these opinions to make the cases look like they were about facts.

(Emphasis added.)  One can take Professor Smith’s advice even further. When faced with a results-oriented judge, it may be even more important to develop as sound a factual record as possible. After all, the less ground one can give the judge to shade the facts, the harder it will be to rule against you. The article is well worth a read.

Typicality, Adequacy, and the Motion to Deny – Labou v. Cellco Partnership

Posted in Motions Practice

In Labou v. Cellco Partnership, No. 2:13-cv-00844-MCE-EFB, 2014 U.S. Dist. LEXIS 26974 (E.D. Cal. Mar. 3, 2014), the named plaintiff sued cell phone company Verizon. She alleged that Verizon had used an automatic dialer to call her cell phone in an attempt to get her former brother-in-law to pay his cell phone bill, a practice that allegedly violated the Telephone Consumer Protection Act (TCPA). And she sought to certify a class of everyone else Verizon had contacted with an automatic dialer.

There was a twist: the TCPA does not prohibit collection calls so long as the recipient is not being charged. Verizon did not charge its customers for these auto-dialed calls, so the only people actually harmed were those very few–like Ms. Labou–who were not Verizon customers but were contacted anyway.

So Verizon decided not to waste time: it filed a motion to deny certification, on the grounds that Ms. Labou–a non-customer who nonetheless received a Verizon collection call–was not typical or adequate of the proposed class. (In addition to her unique damages, she also had not signed the arbitration agreement other Verizon customers had.)

The plaintiff tried to argue that the motion was premature, but the court was having none of that argument. It found that Ms. Labou was not typical of the proposed class:

To meet the requirements of a class, not only must the claims arise out of the same course of conduct, but also such claims must contain similar legal arguments to prove Defendants’ liability. … As the TCPA permits collection calls so long as the recipient is not being charged, Plaintiff’s circumstance of being a non-customer with a non-Verizon issued phone is atypical from the class of Verizon customers. Verizon customers have written contracts containing provisions both for automated calls upon prior written consent and for arbitration. No amount of discovery can erase these plain distinctions between Plaintiff and Verizon customers. Plaintiff’s claims are therefore not typical of the class as a whole. 

(Emphasis added, internal citation omitted.) It also found that, based on Verizon’s argument, she was not an adequate class representative:

However, Verizon need not provide evidence to prove that Plaintiff’s claim is inadequate. To the contrary, even under a motion to deny class certification, it is Plaintiff who bears the burden of showing she is an adequate representative. Plaintiff’s contention that she is an adequate representative simply because she pled she is an adequate representative falls short of that burden.

(Emphasis added, internal citation omitted.)

So what’s the takeaway here? If the plaintiff is in a plainly unique situation, it may well be worth filing a motion to deny certification immediately (particularly in the Ninth Circuit). It is unlikely that the plaintiff (who is in control of the facts of her own claims) will be able to fix this kind of problem by asking for discovery. And a successful motion may save a great deal of money in discovery costs. 

Guest Post – The Opt-Out Refund

Posted in Settlement

I don’t usually do guest posts–Class Action Countermeasures is largely a solo proprietorship–but Adam Schulman of the Center for Class Action Fairness spotted a new settlement tactic out in the wild that proved interesting enough to justify an exception. [Inevitable disclosure, since I have done some work for the Center, I have worked with Adam before.]  So, without further ado, Adam:

The Opt-Out Refund

As an attorney with the Center for Class Action Fairness, I spend a good deal of time evaluating prospective class action settlements for defciencies. (Disclaimer: I write this blog post only in my individual capacity, not as a representative CCAF), Recently, I stumbled upon a very unique provision in the settlement of the Publication Paper Antitrust Litigation that I wanted to call attention to. The structure of the settlement itself was routine, establishing an $8 million common fund for direct purchasers of publication paper.

But it added something very different to that usual framework.

As the Class Notice details,

If a Class Member elects to exclude itself from the Settlement… the Settlement Fund will be reduced by 75% of the amount of money that Class Member would have received had it filed a valid Claim Form.

The settlement agreement itself refers to this as an "Opt Out Refund." In multiple years of in depth analysis of class action settlements, I’ve never seen a provision like this. The most comparable term that would be fairly standard is a "walk-away" provision, whereby the defendant reserves the right to terminate an agreement if the number of opt-outs exceed a certain level

One may ask, is this novel "Opt Out Refund" provision a positive or a negative development? My answer is that it very positive, it is good for absent class members, it is good for defendants, and it is good for class counsel who are willing to wager that they have arrived at a fair and adequate settlement. I like it because it makes the opt-out right of absent class members mean something. It attaches actual consequences and weight to the decision to opt out. It allows absent class members to affirmatively register their dissent. One reason that people sometimes opt out of settlements is that they want to disavow any participation in the action, and disavow that allegations that the representative plaintiffs purport to bring on their behalf. This provisions allows them to in effect give their award back to the defendants. I think it’s brilliant.

But this provision isn’t just good for class members, it’s good for defendants. There’s a commonality of interest between the individual opt out and the defendant with this type of provision, because parallel to opt-out who wants to disavow the allegations of the settlement, it allows defendants to say, "No. We believe our customers, clients, employees, etc don’t subscribe to these claims. We think they’ll opt out."

A skeptic may rejoin, "but the garden variety consumer class action sees very minimal exercise of opt outs, so it really doesn’t matter if you offer class members this option." The premise is correct, class members very rarely exercise their right to opt out. But on the other hand, if you had this type of opt-out empowerment in a settlement, you may well see opt-out rates climb.

Because I always analyze settlements through the lens of absent class member rights, I can see the potential counter-argument that an opt-out refund means class members aren’t getting firm notice as to the total amount in the settlement fund. But, I don’t think this argument ultimately carries the day for two reasons. Firstly, in this type of common-fund claims made settlement, class members won’t know what their individual claim will be worth even if they did know the precise aggregate value of the fund. This is because how many individuals will submit claims is an unknown variable in and of itself. Second, notice arguments have much more force when information is available to the settling parties, yet they choose to withhold it. As the Ninth Circuit explained recently in Dennis v. Kellogg, 697 F.3d 858 (9th Cir. 2012), "just trust us" is not an acceptable legal principle for class counsel to rely upon.

It is a credit to class counsel (Cohen, Milstein, Toll & Sellers among others) in this Publication Paper case that they would wager their end fee award on having achieved a good result for class members. That is how the system is supposed to work.

In conclusion, I view the "Opt Out Refund" as an innovative means to give opt-out rights greater active meaning, while at the same time achieving a synergy with defendants’ interests in paying less money. I don’t think the federal rules of civil procedure require this extra punch added to the right of opt-out, but it strikes me as a clever idea and a very positive development for the law of class action settlements 

Never Assume Numerosity – 2014 edition

Posted in Certification

This week, we get our yearly reminder not to take the humble numerosity requirement for granted. In Spread Enterprises, Inc. v. First Data Merchant Services Corp., No. 11-CV-4743, 2014 U.S. Dist. LEXIS 22972 (E.D.N.Y. Feb. 22, 2014), the named plaintiff–a prepaid phone minutes company–sued a bank and a credit card payment processor for charging "excessive" fees for certain transactions on one of the processing platforms.

When the plaintiff moved for class certification, the defendants opposed on numerous grounds, including challenging commonality and predominance. They also argued that the definitions of each subclass, each of which referred to merchants who "were charged excessive fees," were impermissible, fail-safe definitions.

The court agreed that the definitions were fail-safes, but did not find that to be a fatal problem with the class. Instead, it rewrote the class definition to focus on the fees charged rather than their "excessive" nature.

But then the court found that the plaintiff could not demonstrate numerosity, because the evidence it had offered in support of these rewritten classes was too "speculative."

[T]he Plaintiff in this case attempts to establish numerosity through evidence that is over-inclusive and which does not acknowledge that many of the Merchants that the Plaintiff assumes would be Class members might not actually share the Plaintiff’s breach of contract claim for the host of reasons articulated above. Instead, in order to demonstrate numerosity, the Plaintiff needed to proffer evidence showing that a sufficient number of other Merchants (1) had Merchant Processing Agreements substantively the same as the Plaintiff’s Subject Agreement and (2) experienced an injury similar to the Plaintiff’s alleged injury while using the Omaha Platform. As the Plaintiff has not done so here, the Plaintiff has not established the necessary element of numerosity.

(Emphasis added)  The court also that the proposed classes could not demonstrate commonality or predominance because of the variations in contracts different class members signed. But the real takeaway here is that, in the realm of Rule 23 arguments, there is an implicit hierarchy. Ascertainability arguments are appealing because they are easy to grasp and usually require looking only at the class definition, but they do not require evidence. Where possible, the defendants should focus in on those requirements that do require evidence, because they are harder to fix on the fly. Courts will sometimes rewrite a class definition to fix a proposed class; they will rarely give the plaintiffs a second chance to establish a Rule 23(a) requirement.