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Cutting-Edge Issues in Class Action Law and Policy

U.S. Chamber of Commerce Files Amicus Brief On Arbitration Issues In Key California Supreme Court Case

By Archis A. Parasharami on Posted in Arbitration

In the wake of AT&T Mobility LLC v. Concepcion, the California Supreme Court granted review in three cases involving significant arbitration issues, including key questions about whether the Federal Arbitration Act preempts California law concerning the enforceability of arbitration agreements.

My colleagues and I have filed amicus briefs on behalf of the Chamber of Commerce of the United States in all three cases, the most recent of which is Iskanian v. CLS Transportation, No. S204032.

In Iskanian, the Second District of the California Court of Appeal had affirmed an order compelling individual arbitration in a putative class/representative action alleging, among other things, that the defendant had failed to pay overtime and provide required meal and rest breaks. For more background on the grant of review and the decision below, please see our prior blog post here.

The Chamber’s amicus brief (pdf) to the California Supreme Court explains why the court of appeal was correct.

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Eighth Circuit Holds that a Plaintiff who Settles Individual Claims Lacks Standing to Challenge Denial of Class Certification

By Kevin Ranlett on Posted in Appeals, Class Certification

Here’s a common scenario:  After unsuccessfully moving for class certification and having a petition for review under Federal Rule of Civil Procedure 23(f) rebuffed, the plaintiff wants to take another shot at an appeal.  Can the plaintiff simply settle his individual claims—subject to his right to appeal the denial of class certification—so that he has a dismissal giving him an automatic right to an immediate appeal?

If you’re in the Third, Seventh, Eighth, or Ninth Circuit, the answer is no. Each of these courts have held that they lack jurisdiction over the appeal of a would-be class representative following such a settlement.

The most recent of these decisions is the  Eight Circuit’s opinion in Ruppert v. Principal Life Ins. Co. (pdf), No. 11-2554 (8th Cir. Feb. 13, 2013), which involved an ERISA claim by the plaintiff against his insurer. The district court denied class certification for lack of commonality and typicality. And the Eighth Circuit denied a Rule 23(f) petition for review. So the plaintiff next tried entering into a settlement, accepting $80,000 in exchange for a dismissal of his individual claims. In the agreement, the plaintiff reserved the right to appeal the denial of class certification and, if the Eighth Circuit were to reverse, to seek a share of any recovery to the class. The Eighth Circuit dismissed the appeal for lack of appellate jurisdiction.

The Eighth Circuit held that there was no final judgment because the settlement “allows for [the plaintiff’s] individual claims to spring back to life.” The Third, Seventh, and Ninth Circuits have also dismissed appeals for lack of finality, concluding that such settlements are impermissible attempts to manufacture appellate jurisdiction. See India Breweries, Inc. v. Miller Brewing Co., 612 F.3d 651, 656-57 (7th Cir. 2010); Fed. Home Loan Mortg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 440 (3d Cir. 2003); Dannenberg v. Software Toolworks, Inc., 16 F.3d 1073, 1076 (9th Cir. 1994). By contrast, the Second Circuit deems a decision to be final, despite the plaintiff’s ability to reassert a dismissed claim on remand, if the “plaintiff’s ability to reassert a claim is made conditional on obtaining a reversal” on appeal. Purdy v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003).

The Eight Circuit also held that the settlement of the plaintiff’s individual claims deprived him of standing to appeal the denial of class certification. The Eighth Circuit acknowledged that the Supreme Court has held that a would-be class representative has standing to challenge the denial of class certification even if his individual claims are involuntarily extinguished. See United States Parole Comm’n v. Geraghty, 445 U.S. 388, 404 (1980). But when the claims are voluntarily settled—even under terms that give the plaintiff a stake in the class recovery—the case is moot. In so holding, the Eighth Circuit sided with the Fourth Circuit and rejected the position of the D.C. Circuit. Compare Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011) with Richards v. Delta Air Lines, Inc., 453 F.3d 525, 529 (D.C. Cir. 2006).  (The fact that the D.C. Circuit’s decision rests on an application of Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980)—which the Supreme Court recently suggested might no longer be good law—suggests that the Eighth Circuit has the better side of this split.)

Although Ruppert deepens two preexisting circuit splits, the court’s docket suggests that the plaintiff is not seeking further review.  Accordingly, unless and until the Supreme Court decides the issue, if you’re a class-action defendant and the plaintiff comes to you with a proposal for one of these settlements, consult the law of the relevant circuit before deciding whether the offer is too good to pass up.

Fourth Circuit Nixes Requirement that All Defendants Physically Sign Notice of Removal To Federal Court

By Kevin Ranlett on Posted in Motions Practice

The Fourth Circuit recently weighed in on a technical question involving the process for removing a case against multiple defendants to federal court—namely, whether every defendant must actually sign the notice of removal. The Fourth Circuit concluded that “[w]e can see no policy reason why removal in a multiple-defendant case cannot be accomplished by the filing of one paper signed by at least one attorney, representing that all defendants have consented to the removal.” Mayo v. Bd. of Educ., Nos. 11-1816, 11-2037 (4th Cir. Apr. 11, 2013).

The Fourth Circuit is correct. That said, at least some courts are apparently willing to impose pointless technical requirements despite the lack of justification. The fact that there’s a circuit split on this issue is a perfect example. In the wrong court, the failure to get all defendants in a multi-defendant case to confirm their consent to removal in the correct way can open a trapdoor through which the case will fall back into state court.

In most class actions, this issue does not arise because the Class Action Fairness Act (CAFA) allows a single defendant to remove a qualifying class or mass action even without the other defendants’ consent. 28 U.S.C. § 1453(b). But CAFA isn’t always the basis for removal. Perhaps the lawsuit involves a federal question or satisfies the test for classic diversity jurisdiction, but doesn’t satisfy CAFA’s definition of a class or mass action or its $5 million amount-in-controversy requirement (or the defendant doesn’t want to have to demonstrate that at least $5 million is at stake). Or perhaps the class action falls into CAFA’s local-controversy or home-state exception. If so, the notice of removal must satisfy the requirement in 28 U.S.C. § 1446(b)(2) that “all defendants who have been properly joined and served must join in or consent to the removal of the action.” And typically that joinder or consent must be done no later than 30 days after the last-served defendant received the complaint. Id. § 1446(b)(2)(B)-(C).

Unfortunately, the removal statute doesn’t outline in detail how each defendant’s “consent” must be indicated. The Sixth and Ninth Circuits—now joined by the Fourth Circuit—agree that it’s enough for the filing defendant’s attorney to confirm in the notice of removal that all defendants consent. See Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208, 1225 (9th Cir. 2009); Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195, 201-02 (6th Cir. 2004). That rule makes perfect sense; Rule 11 and ethics rules make the signing attorney accountable for the truth of the representation that all defendants join in the removal.

But the Seventh Circuit some years ago adopted an apparently bright-line rule that “[a] petition for removal is deficient” unless “all served defendants * * * support the petition in writing, i.e., sign it.” Gossmeyer v. McDonald, 128 F.3d 481, 489 (7th Cir. 1997). And although the Fifth and Eighth Circuits don’t require every defendant to sign the notice of removal, they do call for “some timely filed written indication from each served defendant * * * that it has actually consented to” the removal. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 n.11 (5th Cir. 1988); see also Pritchett v. Cottrell, Inc., 512 F.3d 1057, 1062 (8th Cir. 2008).

It’s difficult to imagine the need for that requirement. How often is there such a severe miscommunication between defendants that the lawyer filing the notice of removal mistakenly certifies that a defendant that prefers to stay in state court consents to removal? And of that tiny fraction of cases, in how many are the defendants that prefer to remain in state court so helpless or oblivious to the filing of the notice of removal that they can’t file an objection? Given the extreme remoteness of the risk of wrongful removal, it’s hard to see why courts should adopt a prophylactic rule requiring all defendants to sign the notice of removal or to file a written consent in order for a removal to be valid.

After all, that prophylactic rule isn’t costless. Just ask a defendant that is facing a motion to remand on the ground that not every co-defendant signed the notice of removal or filed a joiner within the 30-day limit. That’s what happened in Mayo—although the defendant school board certified in its notice of removal that it had consulted with its co-defendant, a union, and obtained its consent to removal, the union hadn’t also contemporaneously filed a separate joinder in the removal. Instead, the union simply dropped a footnote confirming the school board’s representation in its first substantive filing in federal court. Thankfully, the courts in that case saw reason and denied the motion to remand. But not every court would have done so—even though there is no doubt that all defendants in fact consented to removal.

A lot of money gets wasting litigating over senseless technicalities. The amount of time and effort that has been wasted in litigating the validity of removals because of the everyone-must-sign rule that a few circuits have adopted is just more money down the drain. Congress fixed some ambiguities in the removal statutes in the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (pdf). Assuming that the Supreme Court doesn’t eventually resolve this issue, it is worth putting on the wish list for the next time Congress amends these statutes.

In-House Counsel Predictions of Class Action Trends

By Kevin Ranlett on Posted in Class Action Trends

Carlton Fields recently published a survey (pdf) of 368 general counsel and other in-house counsel at major companies across more than 25 industries regarding the class actions they faced in 2012 and their expectations for 2013. A number of the findings were quite interesting:

  • In-house counsel reported that their companies spent $2.1 billion on class actions in 2012, a slight decline from 2011. Per-company spending, however, varied widely, with some companies spending $100 million a year and some as little as $180,000. The per-company average was $3.19 million.
  • In 2012, the typical class action cost $671,100 annually, a 14% drop from the $776,500 spent per case annually in 2011.
  • Half of major companies currently face one or more class actions. On average, companies were targeted by 5.1 class actions in 2012, a 16% increase from the 4.4 class actions per company in 2011. But survey respondents expect to face an average of only 4.6 class actions in 2013.
  • Consumer-fraud and labor-and-employment class actions account for more than half of all class actions. Other types of class actions included securities (10%), product liability (9%), antitrust (7%), and intellectual property (1%).
  • In 2013, in-house counsel expect to face many new consumer-fraud class actions, with allegations involving data security, food safety and labeling, and wireless and other technologies.
  • In addition, 9% of companies are expecting health-care class actions, and 6% expect environmental class actions.

Do Plaintiffs Have Standing To Sue Over Alleged Reduction In The Value Of Their Personal Data?

By John Nadolenco on Posted in Class Action Trends, Motions Practice

A key question in many privacy class actions is whether the plaintiff has suffered an injury sufficient to confer Article III standing. Quite a number of these actions have been dismissed for lack of standing. The plaintiffs’ bar therefore has been brainstorming new theories of injury in the hope that one of them will be deemed sufficient to allow the case to remain in court (and open the door to expensive discovery). A recent order by Judge White of the Northern District of California in Yunker v. Pandora Media, Inc. addresses—and rejects—some of these theories.

The lawsuit involves Pandora’s mobile app, which provides music-streaming services to wireless devices. The plaintiff alleges that, although Pandora tells users that it will sell information to advertisers only after that information has been stripped of identifying details, in fact the company also sells personally identifiable information such as the user’s age, gender, and location—which, the plaintiff says, violates federal and state law.

As is now routine in privacy class actions, the first question was whether the plaintiff has standing to sue in the first place. Judge White batted down each of the plaintiffs’ arguments.

First, the plaintiff argued that because Pandora allegedly sold the plaintiff’s personally identifiable information, that information is now less valuable. Judge White pointed out that this theory has been rejected five times by federal judges in California alone because of the highly speculative nature of this alleged harm. In addition, although the plaintiff had alleged that he “paid” for the Pandora app with his personal information (the app is available for free), he hasn’t alleged that he otherwise had “attempted to sell” that information, that he “would do so in the future,” or that he either was “foreclosed from entering into” any other transaction involving his information or even would have chosen not to use Pandora’s app if he had “known how Pandora would use his” information.

Second, the plaintiff alleged that the manner in which the Pandora app allegedly collected his information by installing “third-party advertising libraries” on his phone decreased its usable memory. Judge White acknowledged that an alleged decrease in device “performance” could be an injury conferring standing. But Judge White explained that the plaintiff had failed to allege any such problems, that he paid money for the app, or even that he would not have downloaded it if he had known that it used slightly more memory because it used these libraries.

Third, the plaintiff argued that the sale of information about him could subject him to future harm (such as identity theft). The plaintiff pointed out that, in Krottner v. Starbucks Corp., the Ninth Circuit had indicated that a future harm like identity theft could confer standing. But Judge White explained that Krottner involved very different facts—a laptop containing individuals’ financial information had been stolen, and a plaintiff alleged that she actually was the victim of identity theft. Judge White pointedly observed that the plaintiff here alleged nothing of the sort.

Having rejected these theories of standing, Judge White dismissed a number of the plaintiff’s claims. (He also concluded that many of them failed on the merits.) Nonetheless, Judge White granted the plaintiff leave to amend (not a big surprise, as such leave is freely given by most federal courts).

In sum, Yunker confirms that challenges to Article III standing remain a major arrow in the quiver of companies facing privacy class actions.

Article on Alien Tort Statute after Kiobel

By Kevin Ranlett on Posted in Class Action Trends, U.S. Supreme Court

We’ve previously discussed the Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum. The American Lawyer Litigation Daily has just published a column by my colleague, Andy Pincus, responding to another columnist’s lament that Kiobel has rendered claims under the Alien Tort Statute “a zombie doctrine—not quite alive and not quite dead.”  Andy provides a dose of reality about the history of ATS litigation in the United States, and explains why private litigation is not the most productive way to respond to human rights concerns.  Both columns are well worth reading to get a sense of the debate over Kiobel’s ramifications.

Webinar on Arbitration And Class Actions Two Years After Concepcion

By Archis A. Parasharami on Posted in Arbitration, U.S. Supreme Court

Last Saturday marked the two-year anniversary of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, a decision that has had an enormous impact on the world of class-action litigation.  To date, Concepcion has been cited in over 650 decisions, and (for the most part) has been applied broadly to enforce agreements to arbitrate on an individual basis.

On Wednesday (May 1), my colleagues Andy Pincus and Evan Tager will join me in presenting a one-hour webinar on arbitration and class actions after Concepcion.  The three of us represented AT&T before the Supreme Court in Concepcion, and have helped a number of businesses draft arbitration provisions and enforce them since Concepcion.  

The webinar is open to clients of the firm and other members of the business community; we’d be delighted to have any such blog readers attend.  For more information and/or to register, please see this web page.  

 

U.S. Seeks Supreme Court Review of Noel Canning v. NLRB in an Effort to Rehabilitate Recess Appointments to NLRB (and CFPB)

By Kevin Ranlett on Posted in Employment, U.S. Supreme Court

We’ve previously written about the D.C. Circuit’s decision in Noel Canning v. NLRB, which held that President Obama’s three recess appointments in 2012 to the National Labor Relations Board (NLRB) are unconstitutional. The Solicitor General has just filed a petition for certiorari, asking the Supreme Court to review the D.C. Circuit’s decision.

The Obama administration’s decision to seek Supreme Court in Noel Canning is unsurprising. By invalidating the recess appointments to the NLRB, the D.C. Circuit’s decision undermines every action by the NLRB since those appointments were made on January 4, 2012. The decision also casts a dark shadow over actions since that date by the Consumer Financial Protection Bureau (CFPB), because the CFPB’s director (Richard Cordray) received a recess appointment at the same time as the three NLRB members whose appointments are at issue in Noel Canning. For more details, please see our report on the D.C. Circuit’s decision in Noel Canning.

Barring extensions, the opposition to the certiorari petition is due May 28, 2013. Because of the timing of the filing of the petition, the Supreme Court ordinarily would not consider whether to grant review until after the summer recess, during the Court’s first conference in late September 2013. It is possible that the response to the petition could be filed early, however, in order to enable the Court to make the certiorari decision before its summer break.

UPDATE (4/29/13):  According to an article in Reuters, Noel Canning won’t oppose Supreme Court review:

Gary Lofland, the Seattle attorney representing Noel Canning, said they would encourage the court to take the case.
“We believe that it’s important that the court resolve this issue because it provides a better certainty to the business community,” Lofland said in an interview.

Hat tip: Volokh Conspiracy.

 

Upcoming Teleconference on E-Discovery in Class Actions

By Kevin Ranlett on Posted in Motions Practice

On May 2, at noon EST, my colleagues Anthony Diana (the co-chair of the firm’s E-Discovery and Records Management practice) and Therese Craparo (a counsel in that practice) and I will be presenting the first in a series of four teleconferences on e-discovery. This teleconference will focus on the unique challenges that class actions pose for collecting, preserving, and producing electronically stored information, and how companies can strike the right balance between risk mitigation and cost control. Please join us!  The teleconference is open to clients and friends of the firm.

For registration information, please see the web page for the teleconference.

Nip A Class Action In The Bud By Moving To Strike the Class Allegations

By Kevin Ranlett on Posted in Class Certification, Motions Practice

One of the reasons that companies hate class actions is that, win or lose, the defense costs are often enormous. Usually, it’s discovery that leads to eye-popping numbers on the bills—whether from law firms themselves, contract attorneys, or e-discovery vendors. But defendants have an often overlooked tool for attempting to avoid costs related to discovery—the pre-discovery motion to strike class allegations.

My recent article, Control Class Action Costs by Filing an Early Motion to Strike the Class Allegations (pdf), explains the authority for such motions and the types of arguments that tend to work best for attacking the class allegations on the pleadings.  Thanks to Bloomberg BNA Class Action Litigation Report for publishing the article.