Today the Supreme Court held in China Agritech, Inc. v. Resh (pdf) that the filing of a putative class action does not delay the time for others to file their own successive class action lawsuits. The decision should give businesses confidence that they will not face an endless series of class actions over the same conduct.
Yesterday, the Supreme Court handed down its decision in Epic Systems Corporation v. Lewis (pdf). Here is a piece that my colleague and I wrote for SCOTUSblog about the Court’s decision and its implications.
This morning I attended the oral argument in China Agritech, Inc. v. Resh. The case arises against the backdrop of the long-standing rule declared in American Pipe and Construction Co. v. Utah (1974) that the filing of a putative class action tolls the time for absent class members to bring individual claims while the case remains pending as a potential class action. The question in China Agritech is whether American Pipe’s equitable tolling rule applies beyond the context of individual actions and also allows absent class members to file a successive putative class action after the statute of limitations period has run.
Last Friday, a panel of the D.C. Circuit issued its decision in ACA International v. FCC (pdf). The decision, which arrived nearly 17 months after the oral argument, struck down key elements of the FCC’s controversial 2015 Declaratory Ruling and Order interpreting the Telephone Consumer Protection Act (TCPA).
Here are the key takeaways from the decision:
- The court held that the FCC’s broad definition of an automatic telephone dialing system (ATDS), which threatened to include all smartphones, is arbitrary and capricious, and required the FCC to reconsider its definition.
- The court overturned the FCC’s conclusion that a caller could be subjected to liability for calls placed or text messages sent to a phone number that had been reassigned after a “safe harbor” of a single errant call or text. Because the “safe harbor” ruling was arbitrary and capricious, the court concluded that the FCC was required to reexamine whether a caller should be liable for any calls or texts to reassigned numbers.
- The panel sustained the FCC’s rule authorizing consumers to retract their consent to receive autodialed calls or text messages through “any reasonable means.” But the panel decision notes that the FCC’s rule doesn’t speak to situations where parties have contractually agreed to a specific method of revocation.
Unless the FCC seeks further appellate review (which seems unlikely), the agency will be reconsidering the autodialer and reassigned-number issues. Notably, the composition of the FCC has changed since the 2015 order; the chairman of the FCC is Commissioner Ajit Pai, who dissented from the 2015 ruling.
We summarize the decision in detail below. In the meantime, we expect businesses facing TCPA litigation to take at least three possible approaches.
First, the D.C. Circuit’s decision reopens a number of questions that plaintiffs have argued were resolved by the FCC’s 2015 ruling, and parties will seek to litigate those issues.
Second, the FCC will have something new to say on each of the issues remanded to it by the D.C. Circuit, and businesses and trade associations will doubtless want to participate in that regulatory discussion—especially given their extensive experience on the receiving end of TCPA lawsuits.
Third, and relatedly, a number of courts will surely find it more efficient to wait for the FCC’s pronouncements on these issues before allowing TCPA litigation to proceed.
Another Ninth Circuit panel has roiled the class certification waters, this time rejecting a class action settlement because the district court did not conduct a meaningful analysis of predominance.
As we have noted before, the tolling rule created by the Supreme Court in the American Pipe case–which tolls the statute of limitations for absent class members when a class action is filed–generates vigorous disputes over when stale or successive claims will be allowed. The Seventh Circuit recently considered one such dispute in Collins v. Village of Palatine, holding that the statute of limitations is not tolled during the pendency of an ultimately successful appeal from the dismissal of a putative class action that had not been certified.
The anti-arbitration rule issued by the Consumer Financial Protection Bureau in July is now just one short step away from elimination.
The Senate tonight voted 51-50 (with Vice President Pence casting the deciding vote) to invalidate the CFPB’s rule under the Congressional Review Act (“CRA”). That vote follows the House of Representatives’ disapproval of the rule in July.
The last remaining step is the President’s signature on the legislation, which seems highly likely given the Administration’s statement today (pdf) urging the Senate to invalidate the rule.
The President’s approval will trigger two provisions of the CRA.
First, the rule “shall not take effect (or continue)” (5 U.S.C. § 801(b)(1)). In other words, the rule no longer has the force of law and businesses are no longer required to comply with its terms.
Second, the CFPB may neither re-issue the rule “in substantially the same form” nor issue a new rule that is “substantially the same” as the invalidated rule—unless Congress enacts new legislation “specifically authoriz[ing]” such a rule (5 U.S.C. § 801(b)(2)). The scope of this “substantially the same” standard has not been addressed by the courts, but it seems clear that at the very minimum the Bureau cannot issue (a) a new rule banning class action waivers; (b) an express ban of pre-dispute arbitration clauses; (c) a rule that has the practical effect of eliminating pre-dispute arbitration clauses; or (d) any other rule that imposes similar burdens on the use of arbitration.
Invalidation of the rule under the CRA also will moot the pending broad-based industry lawsuit against the CFPB challenging the legality of the regulation. (Mayer Brown represents the plaintiffs in the litigation).
The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.
As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).
The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.
We have repeatedly discussed in this space the ongoing debate among the federal courts about ascertainability—a red-hot topic in class action litigation these days. (For a more detailed look at our views on the ascertainability doctrine, see the amicus brief (pdf) that we filed on behalf of the National Association of Manufacturers in support of a pending cert petition.) That topic—and the debate among the lower courts—shows no sign of slowing down, as evidenced by new decisions issued by the Second, Sixth, and Third Circuits over the past two months. The central takeaway from these decisions is that while ascertainability is not a panacea for defendants facing consumer class actions, the doctrine (or variations on the ascertainability theme) should help defeat class actions in many circuits when class members cannot be identified without individualized inquiries.
Today, in CalPERS v. ANZ Securities, Inc. (pdf), the Supreme Court recognized a crucial limitation on the doctrine that allows a class action to toll the deadline for absent class members to bring their own separate individual suits. We’ve been following this issue in the CalPERS appeal for some time. (See our previous reports on this appeal.)
In a 5-4 decision authored by Justice Kennedy, the Court held that the American Pipe tolling doctrine does not apply to statutes of repose. As a result, the three-year statute of repose in the Securities Act of 1933 barred a suit that CalPERS had filed against the underwriters for certain Lehman Brothers debt securities more than three years after the securities were issued, but while a timely class action bringing similar claims was pending.