On November 1, 2018, the U.S. District Court for the Northern District of California published updated procedural guidance for class action settlements (the “Guidance”). While the court made changes to align its rules with the December 1, 2018 amendments to Federal Rule of Civil Procedure 23, the court also sought to provide better information for parties and courts in negotiating and approving settlements. It became the first federal district court to require parties to class action settlements to publicly disclose a broad range of detailed settlement information. The following is an overview of key changes.
Kevin Ranlett is a partner in the firm's Supreme Court & Appellate and Consumer Litigation & Class Actions practices. He has defended businesses in numerous complex class and representative actions in state and federal courts across the country and in proceedings before the American Arbitration Association. In addition to drafting critical trial motions, Kevin has a substantial appellate practice. He has written merits or amicus briefs in appeals involving issues of class certification, arbitration, securities law, federal preemption, the Alien Tort Statute, punitive damages, and employment discrimination. He also advises businesses in drafting and enforcing consumer and employee arbitration agreements.
On December 1, 2018, the amendments to the Federal Rule of Civil Procedure 23 took effect. These amendments primarily alter rules governing federal class action notice, settlement, and appeal. The following is an overview of key changes.
The key question in many Telephone Consumer Protection Act lawsuits is whether the equipment used to call the plaintiff constitutes an autodialer—that is, an “automatic telephone dialing system” or ATDS—within the meaning of the statute. TCPA practitioners have been awaiting the FCC’s guidance regarding the definition of an autodialer. Last spring, the D.C. Circuit set aside the FCC’s expansive definition of that term as arbitrary and capricious. (See our report on the D.C. Circuit’s ruling in ACA International.) Since then, the FCC has been working on its new definition.
The Ninth Circuit apparently couldn’t wait. In Marks v. Crunch San Diego, LLC (pdf), a Ninth Circuit panel held that an ATDS is any “device that stores telephone numbers to be called,” “whether or not the numbers were not generated by a random or sequential number generator.”
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.
Good news for businesses that use fax machines to communicate with customers: A panel of the D.C. Circuit has just struck down the FCC’s 2014 order mandating that even faxes requested by the recipient that contain advertising material include a special opt-out notice. The decision issued today in Bais Yaakov of Spring Valley v. FCC, No. 14-1234 (D.C. Cir. Mar. 31, 2017), is available here (pdf).
Today, a panel of the D.C. Circuit—composed of Judges Srinivasan and Pillard and Senior Judge Edwards—heard argument in ACA International v. FCC, the consolidated appeals from the FCC’s 2015 Declaratory Ruling and Order, which greatly expanded the reach of the Telephone Consumer Protection Act (“TCPA”). (An audio recording of the argument is here, and Kevin attended the argument.) The case has been closely watched, and a number of TCPA class actions around the country have been stayed to await the D.C. Circuit’s decision. More detail is below the fold, but here are our quick impressions from the argument:
- The panel asked tough questions of lawyers for both sides in an argument that went two full hours over the allotted 40 minutes.
- The panel focused most of its attention on the FCC’s new—and far-reaching—definition of an automatic telephone dialing system (ATDS, or “autodialer”). All three judges expressed discomfort with the fact that the FCC’s new definition could be read to cover smartphones.
- Judge Edwards repeatedly voiced criticisms of the FCC’s expansive readings of the TCPA across the board, and may be inclined to vacate large portions of the FCC’s Declaratory Ruling.
- Judge Pillard seemed the most receptive to the FCC’s arguments.
- Judges Srinivasan was the hardest to read, but it seems possible that he might join Judge Edwards in setting aside major portions of the FCC’s Declaratory Ruling.
A unanimous panel of the Fourth Circuit has held Del Webb Communities, Inc. v. Carlson that the question whether an arbitration agreement authorizes class-wide arbitration is for the courts, not an arbitrator, to decide—unless the agreement clearly and unmistakably delegates that issue to the arbitrator. In so holding, the Fourth Circuit aligned itself with decisions of the Third and Sixth Circuits. As we discuss below, the decision benefits businesses that seek to enforce individual arbitration when the arbitration agreement does not expressly authorize class arbitration: If the important question of the availability of class-wide arbitration was assigned to an arbitrator, meaningful judicial review of that decision would not be available.
Although the Class Action Fairness Act of 2005 (CAFA) permits most significant class actions to be heard in federal court, the law requires district courts to remand so-called “local controversies” to state court. A “local controversy” is a class action in which “greater than two-thirds of the members of the proposed classes” are “citizens” of the forum state and at least one defendant “from whom significant relief is sought” and whose “alleged conduct forms a significant basis for the claims asserted” is also a “citizen” of that state. 28 U.S.C. §1332(d)(4).
In an effort to come within this exception, plaintiffs’ lawyers sometimes will limit the putative class to citizens of a particular state and will attempt to portray an in-state defendant as a significant player in the alleged wrong.
Defendants have multiple strategies for resisting these attempts to evade federal jurisdiction. For example, sometimes the in-state defendant is merely a bit player rather than a “significant” one. Federal courts have made clear that CAFA’s “local controversy” exception bars the old tactic of defeating diversity jurisdiction by adding a minor local defendant to destroy complete diversity.
The Tenth Circuit’s recent decision in Reece v. AES Corp. makes clear that plaintiffs must also be held to their burden of proving that greater than two-thirds of the class members are actually citizens of the forum state. Reece involves a class action challenging the manner in which fracking waste was disposed. Although the plaintiffs suggested that the putative class consisted primarily of Oklahoma landowners, the Tenth Circuit pointed out that not all landowners are necessarily citizens—particularly because many putative class members would have become citizens of other states during the 20-year class period. The court also criticized the plaintiffs for failing to submit the data underlying their assertions that the landowners actually lived in Oklahoma.
We’ve often argued that when the principal rationale for approving a low-value class settlement is that the claims are weak, that is a signal that the case should not have been filed as a class action in the first place. The Second Circuit recently reached that exact conclusion when considering a proposed class settlement in a Fair Debt Collection Practices Act (FDCPA) case, holding that the putative class couldn’t be certified and that the FDCPA claims should be dismissed.
The Eighth Circuit recently issued a decision reversing class certification for lack of commonality.
In Smith v. ConocoPhillips Pipe Line Co., the Eighth Circuit considered a class action proceeding on a nuisance theory against the owner of a pipeline. The plaintiffs, who owned property near the pipeline and were suing on behalf of a class of landowners, contended that the pipeline was a nuisance because they feared environmental contamination. After the district court certified the class, the Eighth Circuit granted a petition for review and reversed.
The Eighth Circuit explained that without evidence of contamination, “the putative class fear of contamination … is not a sufficient injury to support a claim for common law nuisance….” And the plaintiff landowners could not bridge the gap by pointing to evidence that other landowners allegedly had experienced actual contamination. The putative class, the court explained, had not experienced the requisite common interest.