The class action plaintiffs’ bar celebrated yesterday’s Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo (pdf), rejecting Tyson’s challenge to class certification. One lawyer called it “a huge David v. Goliath victory.”

But when plaintiffs’ lawyers wake up this morning and focus on the details of the Court’s opinion, they are in for a serious post-celebration hangover.

The Court’s reasoning for the first time maps a clear route for defendants to use in challenging plaintiffs’ use of statistical evidence in class actions. It also provides important guidance for defendants about preserving the ability to challenge plaintiffs’ reliance on statistics.

Continue Reading What does Tyson Foods, Inc. v. Bouaphakeo mean for class actions?

Under Federal Rule of Civil Procedure 23(b)(3), a court may certify a suit for damages as a class action when “there are questions of law or fact common to the class” that “predominate over any questions affecting only individual members.” Similar certification standards apply when a plaintiff seeks to certify a collective action under the Fair Labor Standards Act (FLSA). Yesterday, in its highly anticipated decision in Tyson Foods, Inc. v. Bouaphakeo (pdf), the Supreme Court affirmed the certification of an FLSA collective action where the evidence tying class members together was a study of a representative sample of similarly situated workers.

Continue Reading Supreme Court affirms certification of FLSA collective action in Tyson Foods, Inc. v. Bouaphakeo

iStock_000027020861_DoubleWe’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.

Continue Reading Second Circuit holds that class action seeking “meaningless” relief shouldn’t be certified

The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions. Continue Reading Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely

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.

For additional details, please see the report by my colleagues Mark Ter Molen, Evan Tager, and Sarah Reynolds.

Concept-Changes_Hughway_Sign_44809020Rule 23 may be in for some major changes. The Advisory Committee has commissioned a Rule 23 subcommittee to investigate possible revisions to the class action rules. That subcommittee issued a report (pdf) discussing its progress, and recently has been conducting a “listening tour” of sorts regarding potential rule changes.

Our initial view is that the business community should have serious concerns about the approach that at least some members of the subcommittee appear to be taking, as several proposals are aimed at rolling back judicial decisions—including Supreme Court decisions—that are critical to ensuring that class actions satisfy the requirements of due process.

Here are ten things you need to know from the subcommittee’s report.

Continue Reading Ten Things Class Action Practitioners Need To Know About Potential Amendments To Federal Rule Of Civil Procedure 23

court-gavelToday, the Supreme Court granted review in what may be a major decision on the standards for class certification, Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.

Continue Reading Supreme Court to Revisit Class-Certification Standards in Tyson Foods, Inc. v. Bouaphakeo

330px-Supreme_Court_Front_DuskThe Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.

Continue Reading Supreme Court To Decide Whether To Hear Four High-Stakes Cases Asking When A Suit May Be Litigated As A Class Action

[Editors’ note:  Today we’re featuring a guest post by Tim Fielden, who is in-house counsel at Microsoft.  His post spotlights an emerging—and important—issue in class-action litigation.]

In two recent decisions, the Ninth Circuit has carved out a new path for plaintiffs seeking immediate review of the denial of class certification: voluntarily dismiss the complaint under Rule 41(a), appeal from the final judgment, and challenge the class certification denial on appeal. If this tactic gains currency, plaintiffs (but not defendants) will have the right to an immediate appeal from any adverse class certification ruling. But at least four circuits have rejected this tactic, and the maneuver contravenes a unanimous Supreme Court decision limiting review of class decisions. As a result, defendants have reason to hope that these Ninth Circuit decisions will have limited and short-lived impact.

Background

Plaintiffs have long sought early review of class certification denials without the bother of pursuing their individual claims to judgment on the merits. But in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), the Supreme Court rejected arguments that an order denying class certification should be immediately appealable, either as a final “collateral order” or because the denial of certification signals the “death knell” for the case when plaintiffs decide not to proceed to an appealable final judgment. The Court explained that because only Congress may expand the grounds for appellate review, “the fact that an interlocutory order may induce a party to abandon his claim before final judgment is not a sufficient reason for considering it a ‘final decision’ within the meaning of § 1291.” Id. at 477. And the Court added that the death knell doctrine unfairly “operates only in favor of plaintiffs [by giving them an immediate right to appeal] even though the class issue … will often be of critical importance to defendants as well.” Id. at 476.

As a result, plaintiffs for years had only limited routes to immediate review after a denial of class certification. Absent the district court’s certification of the decision for review under 28 U.S.C. § 1292(b) or the court of appeals’ acceptance of mandamus review, a plaintiff could obtain review of a class certification denial only by taking her individual case to trial and then appealing from the judgment on the merits. In 1998, Congress created a new avenue to review, amending Rule 23 to allow parties to file a petition seeking permission for an immediate appeal of adverse class decisions, which the courts of appeals could grant or deny at their discretion.

The Ninth Circuit’s End Run Around Rule 23(f)

In Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014), the Ninth Circuit opened a new route for plaintiffs seeking interlocutory review of the denial of class certification. In Berger, the plaintiff chose not to seek Rule 23(f) review, which the Ninth Circuit could have exercised its discretion to deny. Instead, he voluntarily dismissed his case and appealed from the final judgment. In essence, he made good on the “death knell” threat from Coopers & Lybrand: he ended his case in response to the class certification order. Ignoring Coopers & Lybrand, the Berger panel held that the Rule 41 dismissal was sufficiently adverse to the plaintiff’s interests to create appellate jurisdiction, because Berger dismissed his individual claims with prejudice without settling. Id. at 1066.

Unlike in Berger, the plaintiffs in Baker v. Microsoft Corp., 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), sought Rule 23(f) review of the district court’s order striking class allegations, but the Ninth Circuit denied review. Months later, plaintiffs voluntarily dismissed, declaring their intent to seek review of the order striking class allegations. Before the decision in Berger, Microsoft asked the Ninth Circuit to dismiss, relying on Coopers & Lybrand and a Ninth Circuit opinion dismissing an appeal from a Rule 41(b) dismissal after the denial of class certification. In the meantime, Berger was decided. And the Baker panel, following Berger, decided that it had jurisdiction over the appeal. Neither the Baker nor Berger panels mentioned the previous (and conflicting) Ninth Circuit decision.

The Conflicts

There is a strong possibility that the panel decisions in Baker and Berger are not the end of the story.

In Baker, Microsoft has filed a petition for en banc review (pdf), arguing that, among other things, Berger and Baker conflict with Coopers & Lybrand and at least one prior Ninth Circuit opinion.

The petition also notes the existence of a long-standing circuit split on this issue. A 25-year-old Second Circuit decision reached the same result as Berger and Baker. See Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990). But at least four other circuits have rejected this approach to seeking appellate review of the denial of class certification. Most recently, in Camesi v. University of Pittsburgh Medical Center, 729 F.3d 239 (3d Cir. 2013), the Third Circuit held that it lacked appellate jurisdiction when workers dismissed their individual complaints with prejudice in an attempt to appeal the district court’s ruling decertifying their collective actions. The Third Circuit rejected their “procedural sleight of hand to bring about finality,” and held that “voluntary dismissals … constitute impermissible attempts to manufacture finality[.]” Id. at 245. The Fourth, Eighth, and Tenth Circuits agree that they lack jurisdiction over such an appeal. See Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011); Telco Grp., Inc. v. AmeriTrade, Inc., 552 F.3d 893, 893-94 (8th Cir. 2009) (per curiam); Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 800-02 (10th Cir. 1980).

This conflict provides reason to believe that the Ninth Circuit should grant rehearing en banc. Businesses should watch further proceedings in Baker closely.

The first bill signed by Oregon Governor Kate Brown—H.B. 2700 (pdf)—changes the rules for handling payment of damages awards in class actions in Oregon state courts. Effective immediately, including for pending actions, the new law attempts to redirect unclaimed damages under class-action settlements or judgments to the state bar’s legal aid program and to charities picked by the judge presiding over each case. In other words, Oregon has effectively mandated cy pres in every class action. (We’ve repeatedly covered—and criticized—the use of cy pres awards in class actions.)

Among other things, the new law amends Oregon Rule of Civil Procedure 32, which governs class actions in state court, to add a new subsection addressing the payment of damages in accordance with “the settlement or judgment in a class action.” The court is authorized to approve a “process” for making payments that “may include the use of claim forms.” But “any amount awarded as damages” that the court finds either hasn’t been timely claimed by class members or simply “is not practicable” to pay to class members must be distributed in the following fashion:

  • “At least 50 percent of the amount not paid to class members” must be given “to the Oregon State Bar for the funding of legal services provided through the Legal Services Program.”
  • “The remainder of the amount not paid to class members” must be given to “any entity” chosen by the court “for purposes” that are “directly related to the class action or directly beneficial to the interests of class members.”

Before enactment of this law, damages in class actions that could not be paid to class members either reverted to the defendant or—in the context of some class-action settlements—were given to a charity picked by the parties and approved by the court.

Proponents of cy pres awards often contend that class members who can’t be paid their damages are better served by a donation to a charity whose mission is related in some fashion to the goals of the class-action lawsuit. Proponents also contend that forcing defendants to pay the full amount of damages they theoretically would owe if liability were established as to all class members—and then all class members actually claimed payments—would better deter future wrongdoing.

More cynical observers of class actions note that cy pres awards are often used by class counsel to puff up the amount of money purportedly recovered in the case in order to justify a higher fee award. Sometimes the recipient of cy pres largesse is picked simply to curry favor with a judge being asked to approve the settlement—for example, a donation to the law school clinic at the judge’s alma mater. And in every case, the use of cy pres eliminates the incentive for class counsel to ensure that class members—the ostensibly injured parties—get the individualized compensation they have been awarded. And while some federal courts have begun to pay closer attention to whether class members actually recover under class settlements, this law encourages Oregon state court judges to ignore that question.

Even worse, the potential of a cy pres award sometimes is used to justify the certification of particularly dubious class actions. For example, take a putative class whose members can’t be identified. Class certification should be denied because the class isn’t ascertainable. But if cy pres were mandatory, the would-be class counsel can always say “so what—let’s just figure out the defendant’s aggregate liability, pay the handful of class members we can identify, and then give the rest away in cy pres in order to punish the defendant.” And never mind, of course, that this procedure would deprive the defendant of the right to cross-examine absent class members or assert individualized defenses. Indeed, there are strong arguments that the use of cy pres—particularly in a litigated case where the defendant has not agreed to it—is unconstitutional (pdf).

Chief Justice Roberts has said that the U.S. Supreme Court might be interested in hearing a case that presents appropriate questions about the use of cy pres awards in class-action settlements in federal court. Of course, if the case arises in federal court, those questions might be framed in terms of Federal Rule of Civil Procedure 23(e), which tasks federal judges with assessing the fairness of class settlements. If the case arises from the Oregon courts—which may be a possibility thanks to H.B. 2700—more fundamental questions of due process would be raised, with potentially much larger ramifications for class-action litigation.