We’re big fans of filing an early motion to strike class allegations when it’s apparent from the pleadings that the class definition is fatally flawed. Why should a defendant be forced to submit to the wringer of class discovery before taking a swing at defeating class certification? A recent case involving Office Depot illustrates the successful use of that strategy.

In Lindsay Transmission LLC v. Office Depot Inc. (pdf) (E.D. Mo.), the plaintiff alleged that an Office Depot store had faxed him an advertisement in violation of the Telephone Consumer Protection Act (“TCPA”). The complaint demanded statutory damages on behalf of a putative nationwide class of fax recipients. Once the case entered the discovery phase, the plaintiff (predictably) sought broad discovery. Among other things, the plaintiff requested information regarding every advertising fax any Office Depot employee had sent since 2006, including the contents of each fax, the sending and receiving telephone numbers, and the make and serial number of the sending device. Office Depot calculated that interviewing store managers to compile the information would take at least 2,000 hours. And that was just one of the plaintiffs’ discovery requests.

As the parties fought over the discovery, Office Depot moved to strike the class allegations, arguing that the class defined in the complaint was an improper “fail-safe” class. A “fail-safe” class is one in which a person’s membership in the putative class turns on the merits of that person’s underlying claim. (These classes are called “fail-safe” because if a person’s claim fails on the merits, he or she no longer satisfies the class definition and thus is excluded from the class and not bound by the adverse judgment—a no-lose proposition. For more on fail-safe classes, please see our article (pdf) on how to remove such class actions to federal court.) The putative class excluded fax recipients who had consented to receiving the fax or who had an established business relationship with Office Depot—circumstances that would be defenses to a TCPA claim.

In response, the plaintiff argued that the motion was premature and that the propriety of class certification should await the conclusion of class discovery and the plaintiff’s motion to certify the class. And the plaintiff also noted that some courts had certified similarly defined classes in other TCPA cases.

The court rejected both arguments. It first noted that Rule 23 authorizes pre-discovery motions to strike class allegations by specifying that courts should “determine by order whether to certify the class as a class action” “at an early practicable time.” And the court agreed that the class defined in the complaint was a fail-safe class. The court recognized the existence of earlier cases certifying seemingly similar classes, but explained that they involved situations in which the challenged faxes or telephone calls had been sent by a third party who didn’t get consent from or have relationships with any of the recipients. In those cases, it would be possible to identify class members without evaluating the merits of the claims by simply looking at the caller’s or sender’s records of calls or faxes. By contrast, in this case, the challenged faxes allegedly were sent by Office Depot—which would have received consent from at least some putative class members or have an existing relationship with them—and thus individualized inquiries into each fax would be needed to determine class membership. The court therefore struck the class allegations—thus mooting the class discovery propounded by the plaintiff.

Lindsay is a reminder that an early motion to strike class allegations can be highly effective. Much of the pain that defendants face in class actions—and thus much of the corresponding settlement leverage that plaintiffs often have—comes from expensive class and pre-trial discovery. Even if the motion to strike ultimately is denied, the defendant might be able to narrow the class or at least send an early message that the class is flawed and should be closely scrutinized at the class-certification stage.

Plaintiffs who wish to bring product-liability and consumer-fraud class actions against businesses often overreach when defining the proposed class in order to raise the stakes—and hence the settlement pressure—on the defendant.  A recent unpublished decision by the Eleventh Circuit, Walewski v. Zenimax Media, Inc. (pdf), No. 12-11843, is yet another example of the growing consensus rejecting these overly broad putative classes.

In Walewski, a Florida purchaser of a fantasy video game (Elder Scrolls IV: Oblivion) alleged that after he had played the game for 450 hours, a software defect prevented him from “cast[ing] spells,” “open[ing] doors and gates,” or taking other in-game actions.  In response, the disappointed wizard conjured a class-action lawsuit in federal court, in which he purported to sue on behalf of all purchasers nationwide.  In an attempt to cloak the individualized nature of the claims and defenses implicated by his allegations, he argued that the company’s failure to disclose the alleged glitch gives every purchaser a fraud claim for having overpaid for the game, even if the glitch never manifested in that customer’s game.  And by suing only under the law of Maryland—the state in which the game manufacturer is located—he sought to sidestep the numerous individualized issues that would be raised by the varying consumer-protection laws of the other 49 states.

Members of the plaintiffs’ bar often try these tactics when bringing consumer class actions against manufacturers.  But an increasing number of courts are rejecting them—with last year’s landmark Ninth Circuit decision in Mazza v. American Honda Motor Co.(pdf), which was briefed and argued by my colleague Don Falk, being a prime example.  (Here is our report on Mazza.)  The Eleventh Circuit is now part of that chorus.

In Walewski, the Eleventh Circuit affirmed the district court’s denial of class certification, pointing out several defects in the class action.  For example, the attempt to apply Maryland law nationwide failed as to the named plaintiff himself:  Because the plaintiff was a Florida resident who purchased and played the game in Florida (and thus would have been exposed to the alleged misrepresentations and injury there), the court held that Florida law governs his claims.  Similarly, the court determined, the varying laws of all 50 states would govern the laws of the putative class members from those states, which precludes the plaintiff from showing (as he must under Rule 23(b)(3)) that common issues predominate over individualized ones.  In addition, the class definition was overbroad because it included purchasers who (for a number of different reasons) had not experienced the claimed defect or been exposed to the alleged misrepresentations.

Together with Mazza, Walewski is a powerful antidote to the curse of nationwide class actions seeking application of the law of the state of the defendant’s place of business.  And it likewise should help in defending against the dark art of recharacterizing inherently individualized product-liability and warranty claims as false-advertising claims for loss in the economic value of the product.

The Ninth Circuit’s recent decision in a TCPA case—Meyer v. Portfolio Recovery Associates (pdf)—involves several interesting issues for class-action practitioners even outside the TCPA setting.

First, a bit of background. In Meyer, the plaintiff sued a debt collector under the TCPA, alleging that it used an autodialer to call his cell phone number impermissibly. The plaintiff sought statutory damages and injunctive relief on behalf of a putative class of all California residents whom the defendant had called at cell phone numbers that had not been provided as part of the transaction giving rise to the debt in question. The district court certified the class under Federal Rule of Civil Procedure 23(b)(2) for the limited purpose of entering a preliminary injunction against the challenged conduct. The Ninth Circuit affirmed.

Setting aside the TCPA issues—which will be addressed in a subsequent post—the Ninth Circuit’s decision contains several holdings that should be of interest (and concern) to class-action defendants more broadly:

Continue Reading Ninth Circuit Upholds “Provisional” Class Certification for Entry of a Preliminary Injunction in TCPA Class Action