There are several practices in class action litigation that really only work if you squint real hard and accept that, as a practical if not a doctrinal matter, class actions are just “different” than other litigation. These practices tend to go unchallenged until someone without a vested interest in the current system points out that, once you stop squinting like that, it’s pretty clear the practice in question doesn’t hold up to legal scrutiny. These include the circular nature of damages in securities class actions, the basis for employing cy pres relief in class settlements, and now, thanks to a recent article by Professor Erin L. Sheley of Calgary School of Law and professional gadfly Ted Frank of the Center for Class Action Fairness, the use of prospective injunctive relief in consumer-fraud class actions. [Disclosure: Ted and I used to be colleagues, and I have occasionally worked pro bono for the Center and its clients.]
As Sheley and Frank put the central problem:
Injunctive relief can be broadly categorized as being either retrospective or prospective depending upon whether the injunction serves to cure a wrong in past transactions, or affects future relationships between a defendant and its customers. Courts generally ignore this distinction but, as we will show, much is at stake in it. Unlike retrospective injunctive relief, which ostensibly benefits members of the plaintiff class (for example, an automobile recall to fix a defect), prospective relief does nothing to directly benefit actual plaintiffs or to redress their alleged injuries.
Sheley and Frank’s challenge to this practice has two prongs. First, they attack the courts’ expertise at enforcing injunctive settlements, drawing on a number of recent high-profile class acton settlements. They then look at the possible ways in which prospective injunctive relief would violate existing legal rules, including:
- the fact that prospective relief settlements often preclude claims that haven’t arisen yet;
- the settlements may violate counsel’s fiduciary duty to various class members; and
- the standing problems that arise when you provide injunctive relief prohibiting future conduct to remedy past violations.
Sheley and Frank’s arguments are a mixed blessing to defendants. After all, they are primarily aimed at the validity of settlements, which class action defendants are parties to. So, an in-house counsel might ask, why would we want to cut off access to a perfectly useful tool for ridding ourselves of low-value cases?
The answer is that what Sheley and Frank have provided, albeit indirectly, is a good blueprint for fighting class actions where the plaintiff asks for prospective injunctive relief in the complaint. These kinds of complaints are not rare: plaintiffs often ask for prospective injunctive relief as one of their remedies, even in cases like consumer fraud. The reasons for these requests are various: sometimes plaintiffs are trying to set up a settlement like the ones described above; sometimes, it’s just been a long time since they’ve actually looked at remedies law; and sometimes they have a weak case but this hook would allow a sympathetic judge to deny a motion to dismiss. Regardless, Sheley and Frank’s analysis of prospective injunctive relief will provide several powerful arguments against these kinds of class actions.