Hundreds of lower courts have interpreted and applied the Supreme Court’s decision in Spokeo, Inc. v. Robins over the past ten months. We will provide a more comprehensive report on the post-Spokeo landscape in the near future, but the overarching takeaway is that the majority of federal courts of appeals have faithfully applied Spokeo’s core holdings that “Article III standing requires a concrete injury even in the context of a statutory violation,” and that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Nonetheless, a handful of other decisions have been receptive to arguments by the plaintiffs’ bar that Spokeo did not make a difference in the law of standing, and that the bare allegation that a statutory right has been violated, without more, remains enough to open the federal courthouse doors to “no-injury” class actions.

Two recent decisions by the Seventh and Third Circuits illustrate these contrasting approaches.

Continue Reading Two Recent Appellate Decisions Illustrate Divergent Approaches To Spokeo

As we’ve noted in this space before, one of the most persistent efforts to undermine the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion—which held that the Federal Arbitration Act (FAA) generally requires enforcing arbitration agreements that waive class or collective proceedings—has been spearheaded by the National Labor Relations Board. In 2012, the Board concluded in the D.R. Horton case (pdf) that Section 7 of the National Labor Relations Act (NLRA), which protects the ability of employees to engage in “concerted activities” (for example, union organizing), supersedes the Supreme Court’s interpretation of the FAA in Concepcion and its progeny and requires that employees be allowed to bring class actions (either in court or in arbitration).

Until recently, the D.R. Horton rule had been rejected by every appellate court to consider it—the Second Circuit, Fifth Circuit, and Eighth Circuit as well as the California and Nevada Supreme Courts—not to mention numerous federal district courts. But last year, the Seventh Circuit and Ninth Circuit parted ways with this consensus, agreeing with the Board and concluding that (at least in some circumstances) agreements between employers and employees to arbitrate their disputes on an individual basis are unenforceable.

This circuit split all but guaranteed that the Supreme Court would need to step in, and sure enough, last Friday, the Court granted certiorari in three cases involving the validity of the D.R. Horton rule. (We drafted amicus briefs for the U.S. Chamber of Commerce in each case). One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.

Continue Reading Supreme Court Will Review NLRB’s Anti-Arbitration D.R. Horton Rule

Can you have a class action if class members can’t reliably be found? That question is at the heart of the debate over ascertainability—one that has divided the federal courts. Earlier this week, the Ninth Circuit weighed in, holding in Briseno v. ConAgra Foods, Inc. (pdf) that plaintiffs need not demonstrate “an administratively feasible way to identify class members [as] a prerequisite to class certification.”

That conclusion is disappointing.

Continue Reading Ninth Circuit rejects meaningful ascertainability requirement for class certification, cementing deep circuit split

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

What’s the difference between claiming that a food product is improperly certified as organic and claiming that the producer was properly certified but the product isn’t really organic? A unanimous California Supreme Court held in Quesada v. Herb Thyme Farms, Inc. (pdf) that state courts and juries should figure out the answer.  That ruling opens the door to state-law actions that challenge food producers’ compliance with the federal organic food product certification and labeling scheme, so long as the claims don’t take issue with the original certification decision.  The decision revived a consumer class action alleging that a food producer—though properly certified to use the “organic” label—intentionally misapplied that label to products containing conventionally produced herbs from one of its noncertified facilities.

Drawing an exquisitely fine line, the California Supreme Court held that preemption extends only to “matters related to certifying production as organic” and left “untouched enforcement against abuse of the label ‘organic.’”  The court concluded that state lawsuits alleging intentional misuse of an organic label were not preempted because (in the California court’s view) lawsuits of that kind would help rather than hinder Congress’s objective.

The federal Organic Foods Production Act of 1990 (OFPA) creates a uniform, federal definition of the term “organic” and gives the U.S. Department of Agriculture exclusive authority to elucidate the labeling standard and to certify producers as qualifying to label food as “organic.”  The USDA may approve a state agency to carry out the certification function and impose more stringent state substantive standards. The California Department of Food and Agriculture has been approved for both of these roles. The OFPA and its California counterpart both provide for administrative enforcement of the regulations, including processes for consumer complaints to the relevant agency.

In Quesada, the plaintiff sued Herb Thyme Farms under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA), alleging that Herb Thyme applied a “Fresh Organic” label to conventionally produced herbs and to a mixture of organic and conventional herbs.  Herb Thyme has an organic farm that has been certified to use the “organic” label, but also operates conventional, nonorganic farms.

The California Supreme Court held that the federal OFPA did not preempt Quesada’s state-law claims.  First, the court held that, because the pertinent provisions of OFPA do not reference enforcement, the statute expressly preempts state law only as to the definition of “organic” and the process for certifying that a grower’s methods of production entitle it to use the “organic” label.  The California court relied on the fact that the mislabeling claims did not address the certification or compliance of Herb Thyme’s organic facility, but only challenged the use of the “organic” label for Herb Thyme products that contained (or consisted solely of) herbs that were not produced at the certified farm.  The federal certification standards also address the procedures to be followed where a producer has both organic and conventional facilities, but the California Supreme Court found that regulation insufficient to bring the case within the OFPA’s preemptive scope.

Second, the California court concluded that Quesada’s claims were not impliedly preempted because they did not pose an obstacle to the uniform federal regulatory scheme, but rather furthered the purpose of that scheme. In the court’s view, once the regulators decide whether a producer or product meets the standards in the first instance, private plaintiffs may enlist state-law theories to enforce the producer’s later compliance with the labeling requirements. According to the court, allowing plaintiffs to use state statutory and common law to enforce the OFPA would “affirmatively further the purposes of the Act”—the more enforcement, the merrier.

By allowing a private plaintiff to pursue a state-law misrepresentation theory to police compliance with OFPA labeling standards, Quesada conflicts with the Eighth Circuit’s decision in  In re Aurora Dairy Corp. Organic Milk Marketing & Sales Practices Litigation.  The Eighth Circuit held in Aurora Dairy that claims alleging that “milk [was sold] as organic when in fact it was not organic are preempted because they conflict with the OFPA.” As the court of appeals put it, “compliance and certification cannot be separate requirements.” While the plaintiffs in Aurora Dairy could not sue over the use of the “organic” label, they could challenge related assertions and omissions about the way the cows were raised and fed, including affirmative claims that the cows were antibiotic- and hormone-free.

The California Supreme Court tried to avoid the conflict by asserting that the plaintiffs in Aurora Dairy were challenging the certification process itself.  But that is not what the Aurora court said; moreover, the claims it allowed were based on representations that did not use the word “organic.”

Although the Quesada decision is limited on its face to claims involving fraudulent or intentional substitution of uncertified products for certified ones, that restriction may provide only modest comfort to defendants. Plaintiffs’ counsel can manipulate the allegations in their complaints with relative ease, particularly under the elastic standards of the UCL and CLRA.  And the California Supreme Court opinion reflects hostility to federal preemption, suggesting that state lawsuits serve the purposes of an otherwise uniform federal regulatory scheme merely by increasing the volume of litigation, and that the so-called presumption against preemption may be dispositive even in an area like food safety, where the  federal government has been heavily involved for more than 100 years. .

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.

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.

Over the past few years, a number of plaintiffs’ lawyers have attempted—with some success—to circumvent the “mass action” provisions in the Class Action Fairness Act of 2005 (“CAFA”), which allow defendants to remove to federal court certain cases raising “claims of 100 or more persons that are proposed to be tried jointly.” 28 U.S.C. § 1332(d)(11)(B)(i).  Although these lawyers represent 100-plus clients with substantively identical claims, they subdivide their mass actions into multiple parallel cases, often with just under 100 plaintiffs each.  And to avoid the “proposed to be tried jointly” language of CAFA, they remain coy about—or sometimes deny—any intention to try the cases jointly.  Instead, they toe up to the joint trial line by seeking to have the cases treated together for as many purposes as possible short of directly calling for a joint trial.  But an en banc decision by the Ninth Circuit earlier this week represents a welcome step towards limiting such efforts to evade federal jurisdiction.

That en banc decision springs from a pair of cases we discussed last December: Romo v. Teva Phamaceuticals USA, Inc., and its companion case, Corber v. Xanodyne Pharmaceuticals, Inc.—in which a divided panel approved the remand of 40 just-under-100-plaintiff cases as to which plaintiffs had invoked a California state-law procedure that allows for coordination of complex civil actions “for all purposes.”  Although the plaintiffs did not limit their coordination request to pretrial proceedings, the panel majority held that that the plaintiffs’ request was insufficient to trigger removal, effectively requiring that plaintiffs expressly request a single joint trial before defendants may remove a mass action under CAFA.  Judge Gould dissented; in his view, the practical result of plaintiffs’ proposal for coordination was dispositive—rather than whether plaintiffs had used the magic words of asking for a joint trial.

As we noted in a blog post last February, the Ninth Circuit had granted rehearing en banc in both Romo and Corber to resolve the circuit split that the panel had created with the Seventh Circuit’s decision in In re Abbott Laboratories, Inc. and the Eighth Circuit’s decision in Atwell v. Boston Scientific Corp.

This week, the en banc Court (pdf)—adopting a pragmatic approach to what counts as a “joint trial” for purposes of CAFA—held that the defendants had properly removed the cases.  Writing for the Court this time, Judge Gould agreed with the Seventh and Eighth Circuits that a proposal for a joint trial may be made implicitly as well as explicitly.  The Court explained that although a rule requiring the plaintiffs to invoke the magic words “joint trial” “would be easy to administer,” the problem with that rule is that it “would ignore the real substance” of plaintiffs’ proposals and how the mass actions were likely to be litigated in practice.  And the Court observed that, as a practical matter, plaintiffs’ request to coordinate all of the cases “for all purposes”—and their arguments before the state court that coordination was needed to avoid “the danger of inconsistent judgments and conflicting determinations of liability”—was a request for a joint trial.

That holding is good news for defendants facing mass actions in the Ninth Circuit.  That said, we would have liked to see the Ninth Circuit go further to curb the attempts by plaintiffs’ lawyers to circumvent CAFA.  Amici argued in Romo/Corber—as we have also contended—that the Supreme Court’s admonition in Standard Fire Insurance Co. v. Knowles not to “exalt form over substance” in assessing CAFA jurisdiction forecloses plaintiffs’ lawyers from gerrymandering their 100-plus clients into parallel smaller actions.

Equally troubling, the Ninth Circuit left open the possibility that plaintiffs may be able to evade CAFA by asserting that their request for coordination is “intended to be solely for pre-trial purposes.”  In our view, that distinction is likely to prove illusory in practice:  Even if plaintiffs never formally move to coordinate or consolidate parallel cases all the way through trial, the cases would still effectively be tried jointly because the judgment in the first action might well have preclusive effect on the trials in any subsequent actions, which surely would be presided over by the same judge and involve similar witnesses and evidence.  As the Seventh and Eighth Circuits have made clear in Abbott Labs and Atwell, even a single-plaintiff trial may qualify as a joint trial if the intent is to use it as a bellwether trial on liability or for preclusive effect in subsequent trials.

The fight over this issue is far from over:  Plaintiffs’ lawyers will continue to subdivide their mass actions artificially to avoid federal jurisdiction, and defendants will seek to convince federal courts that such slicing-and-dicing is improper under CAFA.  Nonetheless, the Ninth Circuit’s willingness to take—as the court of appeals itself said—a more “realistic” view of mass actions is a step in the right direction.