Here’s the situation: You’re facing a class action in federal court in which the plaintiffs define the putative class so broadly as to encompass many people who weren’t injured by the alleged wrongdoing. For example, consider a false-advertising class action on behalf of “all purchasers” of a product that the vast majority of purchasers would have used without any problem whatsoever, meaning that the alleged rarely occurring (or entirely hypothetical) defect that the defendant failed to disclose makes no difference to them. What’s the best way to attack this weakness in the complaint?
One option would be to characterize the problem as a lack of Article III standing. Article III allows courts to hear a case only if the plaintiff has suffered an injury in fact that is fairly traceable to the defendant’s conduct and that could be redressed by a favorable decision from the court. In our hypo, the defendant could move to strike the class allegations on the ground that virtually all of the alleged class members lack standing.
This approach, however, has potential pitfalls. For example, some courts have held that Article III requires merely that the named plaintiffs have standing, a rule that (as plaintiffs argue with some success) allows a class action to go forward even though the putative class includes people who themselves lack standing and thus could not bring their own individual actions. See, e.g., Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011). But see, e.g., Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010); Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir. 2006). In the wrong jurisdiction, the court will simply deny the motion to strike as foreclosed by circuit precedent.
To avoid this difficulty, the defendant can move to strike the class allegations, using the fact that most class members are uninjured to challenge commonality, typicality, adequacy, and predominance. Of course, because courts are divided over the standing issue, that issue is ripe for eventual Supreme Court review. Defendants therefore should consider raising the standing defect in the alternative in order to preserve the issue (though insofar as standing is jurisdictional, it should be possible to raise it at any time even if it has not been raised before).
But what if the named plaintiffs themselves appear to be uninjured because they didn’t experience the alleged product defect either? The defendant could challenge their standing in a motion to dismiss for lack of subject matter jurisdiction. But there is a risk to doing so. Some federal courts believe that the proper course when the named plaintiffs lack standing is to remand the case to state court, where laxer concepts of standing, more lenient class-certification standards, and antipathy toward out-of-state businesses may hamstring the defendant’s ability to defend itself. To make matters worse, the Tenth Circuit recently held that a district court decision remanding a class action to state court for lack of “standing” is non-reviewable under 28 U.S.C. § 1447(d). See Hill v. Vanderbilt Capital Advisors LLC (pdf), No. 11-2213 (10th Cir. Dec. 27, 2012). Accordingly, unless there is clear Circuit precedent indicating that the district court should not remand in this situation or the state court to which the case would be remanded is not hostile to business defendants, companies confronted with such a dilemma may be better served challenging the merits of the plaintiffs’ claims rather than their standing to assert them.