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Class Action Countermeasures

Discussions of the Strategic Considerations Involved In Class Action Defense

Working 9 to 5 and Proving It

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Below is an update from Chelli D. Robinson, Jill Crawley Griset, and Anne Bentley McCray on the state of discovery in FLSA class actions.  We’re grateful for the opportunity to post it here.  For more information on McGuireWoods’ team of discovery lawyers, please visit the Discovery Counsel Services profile.

Class action lawsuits under the Fair Labor Standards Act (FLSA) involve unique discovery issues.  Plaintiffs in these suits often propound burdensome discovery requests seeking login and logoff records from numerous applications and devices, emails and other records in an effort to purportedly reconstruct each workday of every employee over a period of years.

A number of courts have addressed these voluminous discovery requests in FLSA matters in favor of more reasonable solutions.  The analysis necessarily begins with the new language of Federal Rule of Civil Procedure 26(b)(1), providing that “[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.”  FLSA plaintiffs must keep their timekeeping records requests proportional to the overall recovery in the matter.

Indeed, even before the language was amended in Rule 26 to highlight the need for proportionality, one court required the parties in an FLSA claim to meet and confer on the “likely range of provable damages that foreseeably could be awarded if Plaintiffs prevail at trial” before the court would address whether discovery requests were overly burdensome.  Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354, 364 (D. Md. 2008).  The court highlighted that discovery should be proportional to the overall amount in controversy, noting the “nature of this FLSA wage and hour case, the few number of named Plaintiffs and the relatively modest amounts of wages claimed for each.”   Although plaintiffs often seek every source of data possible for recreating the work history for each plaintiff, this is rarely necessary or proportional, nor is it even feasible.

Also contemplating the burden of class FLSA discovery, another court refused to certify a class because the discovery sought by plaintiffs to prove the overtime claims of each class member was unduly burdensome and highlighted the differences of each class member.  See Williams v. Accredited Home Lenders, Inc., No. 1:05CV1681, 2006 WL 2085312, *5 (N.D. Ga. July 25, 2006).  The Williams court stated that proving overtime claims by “computer activity reports, date and time stamped email, and phone records” for “hundreds of loan officers for every day for a two year period” was “utterly unmanageable”:

The cost to the parties of the discovery required to prepare for this is mind-boggling. The waste of scarce judicial resources of conducting such a trial would be unconscionable.

Although analyzing the issue in the class certification context, the Williams court recognized the impossibility of recreating an employee’s day through such overbroad discovery requests.  Likewise, in Vangelakos v. Wells Fargo Bank, No. 1:13-cv-06574-PKC, slip op. at 2 (S.D.N.Y. Feb. 4, 2014), the court found that “it is not necessary to reconstruct the work-life of each plaintiff on each day of employment in order to prosecute or defend a FLSA case.”

Unfortunately, some courts have allowed broad discovery.  In Krouse v. Ply Gem Pac. Windows Corp., 803 F. Supp. 2d 1220, 1230 (D. Or. 2011), the court allowed discovery of all contact information for any customers serviced by the plaintiff for a two-year period.  And, in Gillam v. Addicts Rehab. Ctr. Fund, No. 05 Civ. 3452, 2006 WL 228874, *2 (Jan. 26, 2006), the court granted a motion to compel production of electronic payroll discs even where sensitive, non-plaintiff information would be divulged.

With any luck, the new language in the Federal Rules will help FLSA defendants fend off burdensome requests for login/logoff records and email data. At a minimum, defendants may be able to successfully negotiate a sampling approach for certain sets of data, if it is reasonably accessible and proportional.

Tracking the Elusive Consumer Data Breach Class Action

Posted in Uncategorized

The following post, written by Senior Counsel Andrew Phillips, was first published on McGuireWoods’s Password Protected blog.  We jumped at the chance to reprint it here.

Following the Seventh Circuit’s recent decision in Lewert v. P.F. Chang’s China Bistro, Inc., 2016 U.S. App. LEXIS 6766 (7th Cir. Ill. Apr. 14, 2016), many commentators quickly pronounced the Seventh Circuit fertile territory for consumer data breach class actions.  But, suggesting that such claims will thrive in the Seventh Circuit is a lot like saying the Sasquatch thrives in the Pacific Northwest.  Maybe, but the evidence is, at best, grainy and inconclusive.

The Significance and Insignificance of Lewert 

Last month in Lewert, the Seventh Circuit reversed the trial court’s dismissal of a putative class action brought by alleged victims of a 2014 data breach.  For those following data breach jurisprudence, the Seventh Circuit’s conclusion was hardly a surprise.  Just last July, the Seventh Circuit became the first federal court of appeals to find standing among data breach victims absent a showing of identity theft or unreimbursed fraud.  Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015).  In Remijas, the Court held that Article III’s “concrete and particularized injury” requirement was met by “the increased risk of fraudulent credit- or debit-card charges, and the increased risk of identity theft,” “time and money the class members predictably spent resolving fraudulent charges,” and “time and money customers spent protecting against future identity theft.”  P.F. Chang’s attempted to distinguish Remijas, arguing that the nature of its breach created less risk of identity theft than in Remijas.  Unlike Neiman Marcus, P.F. Chang’s also disputed that the named Plaintiffs’ data had been compromised.  The Seventh Circuit brushed aside these distinctions as immaterial at the pleading stage where Plaintiffs’ allegations are presumed true.

As a threshold matter, Lewert did not really change anything within the Seventh Circuit.   Indeed, the most notable aspect of Lewert may be how closely it hewed to last year’s Remijas decision.  The Seventh Circuit still believes that allegations of a payment card data breach can constitute a “certainly impending future harm” sufficient to satisfy the U.S. Supreme Court’s standing analysis in Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1147, 185 L. Ed. 2d 264 (2013).  And, it believes that certain victim activities following a payment card data breach – such as purchasing credit monitoring or expending time and resources to guard against identity theft – constitute “present injuries” for Article III purposes.  However, the Court remained “skeptical” of Plaintiffs’ more creative standing theories, like Plaintiffs’ claim that they would not have dined at P.F. Chang’s had they known of its poor data security or that Plaintiffs’ had a property right in their personally identifiable data.

So, is Lewert a positive development for future retail data breach plaintiffs?  Sure, to a point – it reaffirmed the Seventh Circuit’s divergence from the majority of post-Clapper data breach decisions which have held that absent allegations of actual identity theft or other fraud, the increased risk of such harm alone is insufficient to satisfy Article III standing. Continue Reading

Supreme Court: Plaintiff Alleging Statutory Procedural Right Violation Must Show Concrete Injury

Posted in Uncategorized

On May 16, 2016, the U.S. Supreme Court held in Spokeo, Inc. v. Robins that a bare procedural violation of a statutory requirement, divorced from any concrete harm, does not establish the injury-in-fact necessary to maintain a lawsuit in federal court.  The Court acknowledged, however, that an alleged violation of a procedural statutory right could establish the requisite concrete injury if the violation creates “a risk of real harm.”

The Supreme Court’s ruling has been much anticipated by both sides of the class-action bar. All interested parties must continue to watch and wait, it appears, as the Ninth Circuit will now consider on remand whether the risks created by the alleged violations in this case are sufficient to make the harm to the plaintiff “concrete.”

Plaintiff Thomas Robins alleged that defendant Spokeo, Inc. compiled a personal information report on him that contained inaccurate information—wrongly listing him as married, affluent, and holding a graduate degree. According to the plaintiff, that misinformation violated several provisions of the Fair Credit Reporting Act (FCRA), including a requirement to follow reasonable procedures to assure maximum possible accuracy of consumer reports.

The Supreme Court vacated the Ninth Circuit’s prior ruling that the plaintiff had established standing simply by alleging the defendant violated his individualized statutory rights under the FCRA. The law requires that an injury-in-fact be both concrete and particularized to support Article III standing, and the six-Justice majority of the Supreme Court held that the Ninth Circuit’s analysis focused solely on the “particularized” component, thus failing to determine whether the harm was “concrete.”

So what harms are “concrete”? The Supreme Court’s ruling does not preclude the possibility that the violation of a statutory procedural right could constitute an injury-in-fact—provided that it leads to concrete harm.  The Court emphasized that harm need not be “tangible” in order to be concrete, and that the risk of real harm may be sufficient to establish concreteness.

But what does “concrete” mean in this context? The Supreme Court left this issue to the Ninth Circuit to resolve, directing it to consider on remand “whether the particular procedural violations alleged in this case entail a degree of risk sufficient to meet the concreteness requirement.”  The Supreme Court provided further guidance by noting that a report containing an incorrect zip code, while undoubtedly inaccurate, may not create the risk of any real harm.

Under the facts alleged and the statute at issue, the steps of the Ninth Circuit’s analysis on remand seem fairly predictable. (Indeed, Justice Ginsburg’s dissent, joined by Justice Sotomayor, considered the analysis to be so straightforward that it did not require remand.)  The Ninth Circuit will likely examine the type of allegedly inaccurate information in the plaintiff’s personal report, and then determine whether it could create a risk of harm to the plaintiff.

The effect of this decision on class-action standing jurisprudence going forward is more difficult to ascertain, and will almost certainly be context-dependent. Some statutory procedural violations may readily suggest an ensuing risk of harm to the plaintiff.  On the other hand, plaintiffs bringing putative class actions arising from technical violations of a statute (e.g., noncompliance with the font-size requirements of the FCRA, or the inclusion of a reference number on the outside envelope of a debt collection letter under the Fair Debt Collection Practices Act) may have a bit more work to do in their pleadings to try to show a concrete harm.

 

CFPB Proposes New Rule Against Mandatory Arbitration Clauses That Preclude Participation in Class Action Suits

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Today the Consumer Financial Protection Bureau announced that it is issuing and seeking public comment on new proposed regulations that would prohibit providers of certain consumer financial products and services from including mandatory arbitration clauses that preclude class-action lawsuits in their consumer contracts.

The proposed rules, which were authorized by Section 1028 of the Dodd-Frank Act, come a little over a year after the CFPB released a lengthy study on the use of such arbitration clauses, and a little over six months after the CFPB issued a press release criticizing their use and announcing its intent to consider such rules.

In addition to curbing the future use of “no-class-action” arbitration clauses, the new rules would require covered entities that employ arbitration clauses to submit records relating to arbitral proceedings to the CFPB, which proposes to monitor and publish information about such proceedings.

The proposed rules and their “supplementary information” weigh in at more than 350 pages, but here are some highlights:

Who would be affected?  The CFPB’s summary of its proposed rules explains that the proposal would apply to certain product and service providers “in the core consumer financial markets of lending money, storing money, and moving or exchanging money, including most providers” involved in:

  • consumer credit services,
  • automobile leasing,
  • debt relief and foreclosure assistance services,
  • consumer credit reporting,
  • savings accounts and electronic fund transfer accounts and activities,
  • payment processing, check cashing, and funds transmission/exchange services, and
  • debt collection activities.

When would the new proposed rules take effect?  Not any time soon—the prohibition on “no-class-action” arbitration clauses would apply only to agreements entered into more than 180 days after the date on which these proposed rules become effective, and the CFPB is proposing that the effective date be 30 days after a final rule is published in the Federal Register.  Also taking into consideration the 90-day period for comments on the proposed rule, a final rule likely would not come into force until the middle of next year, at the earliest.

How can I provide the CFPB feedback on the proposed rules?  Comments must be in writing and received by the CFPB within 90 days after the proposed rule is published in the Federal Register.  Comments can be submitted by email, over the Internet, or by mail or courier.

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.